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 adviser.

If you have sold or transferre d all your shares in Inspur International Limited, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser(s) or the transferee(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).

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

**INSPUR INTERNATIONAL LIMITED 浪潮國際有限公司[*]**

(Incorporated in the Cayman Islands with limited liability)

(Stock Code:596)

RENEWAL AND INTEGRATION OF CONTINUING CONNECTED TRANSACTIONS

Independent financial adviser to the independent board committee and the independent shareholders of the Company

The notice convening an extraordinary general meeting (“ EGM ”) of Inspur International Limited (the “ Company ”) to be held at Hong Kong International Trade & Exhibition Centre, Meeting Room 5, 7th Floor, 1 Trademart Drive, Kwoloon Bay, Kowloon, Hong Kong at 10:00 a.m. on Monday, 16 March 2009 is set out on pages 46 to 47 of this circular. Shareholders of the Company are advised to read the notice and complete and return the form of proxy for use at the EGM enclosed with this circular in accordance with the instructions printed thereon.

A form of proxy for the EGM is enclosed with this circular. Whether you are able to attend or not, please complete and return the enclosed form of proxy to the branch share registrar of the Company, Computershare Hong Kong Investor Services Limited, Rooms 1806-1807, 18th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. The completion and delivery of a form of proxy will not preclude you from attending and voting at the EGM in person.

* For identification purpose only

27 February 2009

			Page
Definitions . . . . . . . . . . . . . . . . . . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Introduction . . . . . . . . . . . . . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Background of the Continuing Connected Transactions . . . . . . . . . . . . . . . . . . . . . . . . . .			6
New Framework Agreement . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Original and Proposed Annual Caps	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Reasons for and Benefits of Entering	into New Framework Agreement . . . . . . . . . . . . . .		17
Implication under the Listing Rules	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
EGM . . . . . . . . . . . . . . . . . . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Recommendations . . . . . . . . . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Additional Information . . . . . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			21
Letter of advice from AsiaVest Partners		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Appendix — General Information . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	40
Notice of Extraordinary General Meeting		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	46

— i —

DEFINITIONS

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

“2006 Circular” the circular of the Company dated 22 September 2006 in relation to, among others, continuing connected transactions of the Company
“2007 Circular” the circular of the Company dated 27 November 2007 in relation to, among others, continuing connected transactions of the Company
“2007 Announcement” the announcement of the Company dated 12 November 2007 in relation to, among others, continuing connected transactions of the Company
“2008 Circular” the circular of the Company dated 11 April 2008 in relation to, among others, continuing connected transactions of the Company
“AsiaVest Partners” AsiaVest Partners Limited, a licensed corporation to carry out type 6 regulated activity under the SFO, being the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders on the fairness and reasonableness of the New Framework Agreement and the proposed Caps and the transactions contemplated thereunder
“associate(s)” has the meaning ascribed to it under the Listing Rules “Board” the board of Directors “Caps” the annual caps of the Continuing Connected Transactions to be entered into by the relevant parties for the three financial years ending 31 December 2011 under the following categories: Supply Transactions, Selling Agency Transactions (value of transactions), Selling Agency Transactions (related commission), Purchase Transactions, Common Services Transactions and Processing Transactions
“Common Services Transactions” the transactions in relation to provision of the services in respect of use of premises, water, electricity, heating and motor vehicles by the Inspur Group to the Group
“Company” Inspur International Limited, an exempted company incorporated in the Cayman Islands with limited liability, the ordinary shares of which are listed on the main board of the Stock Exchange

— 1 —

DEFINITIONS

“connected person(s)” has the meaning ascribed to it under the Listing Rules
“Continuing Connected the continuing connected transactions of the Company under Transactions” the New Framework Agreement, including the Supply Transactions, Selling Agency Transactions, Purchase Transactions, Common Services Transactions and Processing Transactions
“Director(s)” the director(s) of the Company

“EGM” the extraordinary general meeting of the Company to be convened and held for the approving, amongst other things, the New Framework Agreement and transactions contemplated thereunder “GEM Listing Rules” Rules Governing the Listing of Securities of the Growth Enterprise Market of the Stock Exchange “Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

“Independent Board committee” an independent board committee, comprising Mr. Meng Xiang Xu, Mr. Liu Ping Yuan and Mr. Wong Lit Chor, Alexis all being the independent non-executive Directors, to advise the Independent shareholders as to the fairness and reasonableness of the New Framework Agreement and the Caps

“Independent Shareholders” Shareholders other than IPG, its ultimate beneficial owners and their respective associates
“Inspur Business” Shandong Inspur Business System Company Limited* (山東浪潮商用系統有限公司), a domestic limited liability company established under the laws of the PRC, a wholly owned subsidiary of the Company
“Inspur Cheeloo” Inspur Cheeloosoft Company Limited* (浪潮齊魯軟件產業有限公司), a company incorporated in the PRC, a wholly owned subsidiary of IPG

“Inspur Communication” Inspur Communication Information System Limited (浪潮通信信息系統有限公司), a domestic limited liability company established under the laws of the PRC, a wholly owned subsidiary of the Company

— 2 —

DEFINITIONS

“Inspur Fangzhi” Jinan Inspur Fangzhi Information Technology Limited* (濟南浪潮方智信息技術有限公司), a domestic limited liability company established under the laws of the PRC, a non-wholly owned subsidiary of the Company

“Inspur Group” IPG and its subsidiaries

“IPG”

Inspur Group Limited* (浪潮集團有限公司), which is a company incorporated in the PRC and through its wholly owned subsidiary, Inspur Electronics (HK) Limited, being the controlling shareholder of the Company, interested in approximately 43.66% of the existing issued ordinary shares of the Company

“Inspur Genersoft” Inspur Group Shandong Genersoft Software Incorporation* (浪潮集團山東通用軟件有限公司), a domestic limited liability company established under the laws of the PRC and a wholly owned subsidiary of the Company

“Latest Practicable Date” 25 February 2009, being the latest practicable date prior to printing of this circular for ascertaining certain information contained herein
“Listing Rules” Rules Governing the Listing of Securities on the Stock Exchange

“New Framework Agreement” the conditional agreement dated 12 January 2009 between the Company and IPG in relation to Continuing Connected Transactions

“PRC” the People’s Republic of China
“Preferred Shares” 234,279,559 series A senior redeemable convertible voting preferred shares of HK$0.01 each in the share capital of the Company attached with rights of conversion to 1,171,397,795 Shares
“Processing Transactions” transactions in relation to the provision of procurement of raw materials for and assembling and manufacturing of tax-collection cashier machines by Inspur Cheeloo to Inspur Business under the New Framework Agreement

“Purchase Transactions”

transactions in relation to purchase of IT products by the Group from the Inspur Group under the New Framework Agreement

“Selling Agency Transactions”

transactions in relation to sale of various IT service products by the Group to the Inspur Group which is acting as selling agent of the Group under the New Framework Agreement

— 3 —

	DEFINITIONS
“SFO”	Securities and Futures Ordinance (chapter 571 of the laws of
	Hong Kong)
“Shandong Inspur”	Shandong Inspur Cheeloosoft Company Ltd* (山東浪潮齊魯
	軟件產業股份有限公司), a company established in the PRC
	and of which the issued A shares are listed on the Shanghai
	Stock Exchange and a subsidiary of IPG
“Share(s)”	ordinary share(s) of HK$0.002 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of the Share(s) and the Preferred Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Supply Transactions”	transactions in relation to supply and provision of products
	and services by the Group to the Inspur Group under the New
	Framework Agreement
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC
“%”	per cent

The English translation of Chinese names or words in this circular is included for information purpose only, and should not be regarded as the official English translation of such Chinese names or words.

— 4 —

LETTER FROM THE BOARD

**INSPUR INTERNATIONAL LIMITED 浪潮國際有限公司[*]**

(Incorporated in the Cayman Islands with limited liability)

(Stock Code:596)

Executive Directors: Mr. Sun Pishu ( Chairman ) Mr. Zhang Lei Mr. Wang Miao Mr. Leung Chi Ho

Non-executive Director: Mr. Xin Wei Hua

Independent Non-executive Directors:

Mr. Meng Xiang Xu Mr. Liu Ping Yuan Mr. Wong Lit Chor, Alexis

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

Head office and principal place of business in Hong Kong:

Room 726 Nan Fung Commercial Centre 19 Lam Lok Street Kowloon Bay Kowloon Hong Kong

27 February 2009

To the Shareholders

Dear Sir or Madam,

RENEWAL AND INTEGRATION OF CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

On 12 January 2009, the Company announced that on 12 January 2009, it has entered into the New Framework Agreement with IPG in relation to the renewal and integration of the Continuing Connected Transactions for the three financial years ending 31 December 2011 which is subject to the approval of the Independent Shareholders at the EGM.

The purpose of this circular is to provide you with further information relating to: (i) the New Framework Agreement; (ii) the relevant Caps; (iii) the recommendation from the Independent Board Committee; (iv) the letter of advice from AsiaVest Partners to the Independent Board Committee and the Independent Shareholders; and (v) the notice convening the EGM.

— 5 —

LETTER FROM THE BOARD

BACKGROUND OF THE CONTINUING CONNECTED TRANSACTIONS

Reference is made to the Company’s announcements dated 1 September 2006 and 15 September 2006 and the Company’s circular dated 22 September 2006 regarding the Company’s continuing connected transactions with the Inspur Group. On 9 October 2006, the Company has obtained the approval of the independent shareholders’ approval for the said continuing connected transactions and the annual caps assigned to the transactions for the relevant financial years. On 12 January 2009, the Company has entered into the New Framework Agreement with IPG in respect of the Continuing Connected Transactions for the three financial years ending 31 December 2011 and will ask for the Independent Shareholders’ approval of the New Framework Agreement and the related annual Caps.

Continuing connected transactions with the Inspur Group set out in the 2006 Circular

The independent shareholders have approved the following continuing connected transactions with the relevant cap amounts as below:

		Annual cap for	Annual cap for	the year	ending
	Particulars of the continuing connected	31 December		(HK$ million)
	transactions	2006	2007	2008	2009
1	Supply of computer products by the Group to	198	296	394	—
	the Inspur Group for overseas export (Master
	Supply Agreement)
2	Provision of IT services by the Group to the	2	4	6	—
	Inspur Group (Master Services Agreement)
3	Purchase of computer hardware and software	40	60	100	—
	products by the Group from the Inspur Group
	(Master Purchase Agreement)
4	Sale of products by the Inspur Group on	30.3	60.6	90.9	—
	behalf of the Group under selling agency
	agreement. (Selling Agency Agreement)
5	Payment of selling agency commission by the	0.3	0.6	0.9	—
	Group to the Inspur Group under selling
	agency agreement (Selling Agency Agreement)
6	Overseas sourcing of computer components by	150	180	200	300
	the Group for the Inspur Group (Sourcing
	Agent Agreement)

— 6 —

LETTER FROM THE BOARD

In respect of the above continuing connected transactions (the “ subject transactions ”) under item numbers 1, 2, 3, 4 and 5, the related agreements and the related annual caps have expired on 31 December 2008, the related parties have continued the subject transactions since 1 January 2009. The amounts of the subject transactions with members of the Inspur Group from 1 January 2009 to the Latest Practicable Date are aggregated under the two categories of cash inflow and cash outflow as follows:

Transactions under Transaction (HK$ Cash Inflow 1 Master Supply Agreement 2 Master Services Agreement 4 Selling Agency Agreement — sale of products Cash Outflow 3 Master Purchase Agreement 5 Selling Agency Agreement — commission payment	Amount million) 7.04 — 0.55
	7.59
	0.22 0.01
	0.23

Both transaction amounts aggregated under cash inflow and cash outflow are below the threshold under Rule 14A.34 of the Listing Rules. The Group will ensure that the aggregate of the amounts of the subject transactions will not exceed the threshold under Rule 14A.34 of the Listing Rules prior to the obtaining of the Independent Shareholders’ approval of the New Framework Agreement. In addition, upon obtaining of the said Independent Shareholders’ approval, the agreement for the above continuing connected transactions under item 6 will be terminated and replaced by the New Framework Agreement.

Continuing connected transactions with the Inspur Group set out in the 2007 Circular and the 2007 Announcement

The Group acquired Inspur Communication as a subsidiary of the Group in 2007 and the previous transactions that IPG has procured its subsidiary namely, Shandong Inspur, to subcontract its software development and maintenance business to Inspur Communication, have become continuing connected transactions of the Company upon the completion of the said acquisition in 2007. The details of the said continuing connected transactions and the related annual caps as approved by the independent shareholders for the three years ending 31 December 2010 are set out as below:

Particulars of the continuing Annual cap for the years ending 31 December connected transactions 2008 2009 2010 Sale of software and related services RMB15,000,000 RMB15,000,000 RMB15,000,000 (under the subcontracting of (HK$15,300,000) (HK$15,300,000) (HK$15,300,000) software business and maintenance business) by Inspur Communication to Shandong Inspur Aggregate of payments by the Group RMB6,875,000 RMB7,875,000 RMB8,875,000 (note) (HK$7,000,000) (HK$8,100,000) (HK$9,100,000)

— 7 —

LETTER FROM THE BOARD

Note: The annual cap amounts were set for internal control purpose and they were not required to be approved by the independent shareholders as the relevant amounts fell within the de minimis threshold under Rule 20.34 of the GEM Listing Rules and the relevant transactions were exempt from independent shareholders’ approval requirements. The breakdown of the annual caps for the aggregate of the payments set out in the 2007 Announcement are as follows:

Annual payment amount relating to the following: Annual cap for the 2008 Related commission paid by Inspur Communication to Shandong Inspur 75,000 Purchase of computer machines by Inspur Communication from a subsidiary of the Inspur Group 5,000,000 Sharing of resources by Inspur Communication with the Inspur Group 1,800,000 Total 6,875,000	years ending 31 December (RMB) 2009 2010 75,000 75,000 6,000,000 7,000,000 1,800,000 1,800,000 7,875,000 8,875,000	years ending 31 December (RMB) 2009 2010 75,000 75,000 6,000,000 7,000,000 1,800,000 1,800,000 7,875,000 8,875,000
		8,875,000

Upon obtaining of the Independent Shareholders’ approval of the New Framework Agreement, the agreements for the above continuing connected transactions will be terminated and replaced by the New Framework Agreement.

Continuing connected transactions with the Inspur Group set out in the 2008 Circular

Upon the completion of two acquisitions, Inspur Genersoft and Inspur Business became subsidiaries of the Group in 2008 and the following continuing connected transactions have become continuing connected transactions of the Company with the relevant annual caps as approved by the independent shareholders:

	Annual	cap for the years	ending
		31 December
		(RMB million)
	2008	2009	2010
Supply of software products by Inspur Genersoft
to the Inspur Group (Master Agreement )	12	15	18
Purchase of computer products by Inspur
Genersoft from the Inspur Group (Master
Agreement)	35	38	40
Provision of common services by the Inspur Group
to Inspur Genersoft (Master Agreement)	1.8	2.0	2.2
Value of raw materials and processing fees
payable by Inspur Business to Inspur Cheeloo in
respect of the processing of tax-collection
cashier machines (Processing Agreement)	100	150	200

— 8 —

LETTER FROM THE BOARD

NEW FRAMEWORK AGREEMENT

Through a series of acquisition completed in the years of 2007 and 2008, the Group has acquired from the Inspur Group and its associates the IT service business covering taxation, finance, ERP, telecommunication and e-government sectors and has engaged in various continuing connected transactions with IPG and its subsidiaries. The Group has recently successfully transformed from an entity engaged in distribution in IT products into an integrated IT service provider with services covering taxation, finance, ERP, telecommunication, software outsourcing and e-government sectors.

In view of the expiry of certain annual caps of continuing connected transactions at the end of year 2008 and successful transformation of the Group into an integrated IT service provider, the Group proposes to integrate the current continuing connected transactions with the Inspur Group under five categories of activities which are in line with the current business model of the Group. In this respect the Company entered into the New Framework Agreement with IPG on 12 January 2009 with the major terms set out as below:

Date:		12 January 2009
Parties:		Company (representing the Company and its subsidiaries); and IPG
		(representing IPG and its subsidiaries).
Condition	Precedent:	The New Framework Agreement is conditional upon	the obtaining
		of the approval of the Independent Shareholders	of the New
		Framework Agreement and the transactions	contemplated
		thereunder and the annual caps of the Continuing Connected
		Transactions on or before 31 March 2009 (or any other later date as
		agreed by the parties).
Term:		From the date of the fulfillment of the above condition precedent
		to 31 December 2011 unless terminated earlier	by written
		agreement of both parties.

Supply Transactions

Types of products and services

The members of the Group will supply and provide the members of the Inspur Group with various IT products and IT services from time to time including without limitation the following three types of products and services:

(i) Computer products and components including without limitation CPU, integrated circuit, computer mainboards where the Group is acting as the sourcing agent of the Inspur Group for overseas products and components;

— 9 —

LETTER FROM THE BOARD

(ii) IT hardware products including without limitation personal computers and computer components designed, developed or otherwise processed by the Group for the purpose of overseas export; and
(iii) IT services without limitation the services related to the development of cards used in personal computers and electronic products, outsourced software, ERP software and those software developed by the Group.

Pricing and other terms

(i) Sourcing of overseas products for the Inspur Group

The Inspur Group will pay a premium of not less than 1.5% above the purchase price paid by the Group, without taking into account of rebates received from the suppliers, for all computer components sourced overseas by the Group on their behalf.

(ii) Provision of IT products and services

The members of the Group will supply various IT products and IT services to the members of the Inspur Group during the term of the New Framework Agreement. The actual quantity, specification, delivery date and price of the IT products and the amount of fees and detailed terms and conditions of the IT services to be provided by the members of the Group will be subject to the individual orders placed by the members of the Inspur Group with the relevant members of the Group. The parties have acknowledged that under the New Framework Agreement that

(a) the price per unit of the IT products and the service fees of the IT services to be supplied or provided by a relevant member of the Group will be agreed between the parties by reference to, among other factors, the then prevailing market rates of such IT products and IT services; and
(b) the Group shall not be obliged to accept any terms and conditions for the supply or provision of the IT products and IT services which are less favourable than those agreed between any member of the Group and its independent third party customers for the IT products and IT services.

Payment terms

The Group will give two-month credit period for the Inspur Group to settle by cash the amount of the IT products after delivery and the service fees of the IT services after completion of the performance of the services.

— 10 —

LETTER FROM THE BOARD

2. Selling Agency Transactions

The Group appoints the Inspur Group as its selling agent in respect of various IT service products (including supply of IT products together with related services in both software development and software maintenance) of the Group (such as e-government service products, ERP software, finance software, communication software and other similar products). Some of the business may be generated from public tenders made by the Inspur Group. The Group will be involved in participation in negotiation and finalization of the terms of supply of IT products and related services to the ultimate third party customers and to ensure that the supply of IT products and related services is on normal commercial terms. The members of the Inspur Group will place orders to the relevant members of the Group for supply of the products (together with related services) from time to time. After acceptance of the orders by the Group, the Group will directly provide the products and related services to the customers. After the delivery of the products and completion of the performance of the services to the customers, the relevant members of the Inspur Group will issue sales invoices to the customers and the relevant members of Group will issue sales invoice to the Inspur Group for settlement by cash of the price of the products and services fees.

The Group will pay selling agency commission of not more than 1% (calculated on the price of the relevant products) to the Inspur Group. The Inspur Group will deduct the related commission from the price received from the customers and pay back the net proceeds to the Group within seven days.

3. Purchase Transactions

Types of products

The Group will purchase from the Inspur Group various IT products from time to time including without limitation the following two types of products:

(i) computer software and hardware products (including personal computers and servers under the brand name of “Inspur”); and
(ii) computer components which mainly are used for assembly of computers for overseas market.

— 11 —

LETTER FROM THE BOARD

Pricing

The members of the Group will purchase the computer products and components from the members of the Inspur Group during the term of the New Framework Agreement. The actual quantity, specification, delivery date and price of such products to be provided by the members of the Inspur Group will be subject to the individual orders placed by the members of the Group with the relevant member of the Inspur Group. The parties have acknowledged that under the New Framework Agreement,

(a) the price per unit of the computer products and components to be supplied by a relevant member of the Inspur Group will be agreed between the parties by reference to, among other factors, the then prevailing market prices of such products at the relevant time; and
(b) the Group shall not be obliged to accept any terms and conditions for the purchase of the computer products and components which are less favourable than those agreed between any member of the Inspur Group and its independent third party customers which purchase the computer products and components from the Inspur Group.

Payment terms

The Inspur Group will give two-month credit period for the Group to settle by cash the price of the products after delivery. The Group will make the payment out of the Group’s internal resources.

Common Services Transactions

The Inspur Group will provide services in respect of use of premises, water, electricity, heating and motor vehicles (“common services”) to various members of the Group at fees determined on normal commercial terms and by arm’s length negotiation, or on terms no less favourable to the Group than terms available to or from other parties (based on services of same category). In general, the above fees will be billed on a monthly basis and will be satisfied by cash out of the internal resources of the Group.

5. Processing Transactions

Inspur Business has appointed Inspur Cheeloo (a subsidiary of IPG) to provide services of procurement of raw materials for and assembling and manufacturing of tax-collection cashier machines at processing fee calculated at 5% of the value of the raw materials and the said rate is comparable to the rates in the market. In general, Inspur Business will pay the price of the tax-collection cashier machines (including the related processing fees) within 30 days after receipt of the goods by cash out of its own internal resources.

— 12 —

LETTER FROM THE BOARD

ORIGINAL AND PROPOSED ANNUAL CAPS

The Company proposes to seek the Independent Shareholders’ approval of the following amounts of the annual caps (“ Caps ”) in respect of the Continuing Connected Transactions (including the Supply Transactions, Selling Agency Transactions, Purchase Transactions, Common Services Transactions and Processing Transactions) for the three years ending 31 December 2011:

Annual Cap Proposed	Year ending	Year ending	Year ending
	31/12/2009	31/12/2010	31/12/2011
	(HK$)	(HK$)	(HK$)
Supply Transactions	400,000,000	460,000,000	530,000,000
Selling Agency Transactions
- value of transactions	108,000,000	125,000,000	145,000,000
- related commission	1,080,000	1,250,000	1,450,000
Purchase Transactions	132,000,000	145,000,000	160,000,000
Common Services Transactions	7,700,000	8,470,000	9,317,000
Processing Transactions (Note 1)	166,666,666	222,222,222	277,777,777
	(RMB150,000,000)	(RMB200,000,000)	(RMB250,000,000)

Note 1: The annual caps for Processing Transactions are denominated in RMB and the amounts have been translated into HK$ at the exchange rate of HK$1=RMB0.9 for illustration purpose. These annual caps include the value of raw materials and the 5% processing fees.
2: All the above cap amounts do not include any tax and duty (such as VAT).

The factors which have been taken into account by the Company for determination of above the proposed annual caps are: (a) recent historical amounts (details are set out below); and (b) expected average annual growth rates of the relevant transactions and the expected average annual growth rates are: (i) Supply Transactions (15%); (ii) Selling Agency Transactions (15%); (iii) Purchase Transactions (10%); (iv) Common Services Transactions (10%); and (v) Processing Transactions (29.15%). For the Common Services Transactions, additional premises will be rented from the Inspur Group in 2009 as additional departments of the Group will also move to the premises provided by the Inspur Group which is one of the reasons for the increase in the proposed annual cap amount in the year 2009 as compared with the approved cap amount in 2008.

— 13 —

LETTER FROM THE BOARD

The annual caps approved by the Independent Shareholders in respect of the Continuing Connected Transactions are set out as below (with the historical amounts set out in brackets):

(A) Supply Transactions

	Year ended	Year ended	Year ended	Year ending	Year ending
	31/12/2006	31/12/2007	31/12/2008	31/12/2009	31/12/2010
	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)
Supply of computer products from the	198,000	296,000	394,000	—	—
Group to the Inspur Group (including	(147,000)	(275,000)	(188,000)
those for export market) (details set			(Note 1)
out in the 2006 Circular)
Provision of IT services from the Group	2,000	4,000	6,000	—	—
to the Inspur Group (including for	(1,140)	(3,910)	(5,004)
export market) (details set out in the			(Note 1)
2006 Circular)
Supply of computer components where	150,000	180,000	200,000	300,000	—
the Group acting as sourcing agent of	(128,000)	(174,000)	(168,000)
the Inspur Group (details set out in			(Note 1)
the 2006 Circular)
Selling of software products from the	—	—	13,333	16,666	20,000
Group to the Inspur Group (details set			(Note 2)	(Note 2)	(Note 2)
out in the 2008 Circular)			(6,178)
			(Note 1)
Total	350,000	480,000	613,333	316,666	20,000
	(276,140)	(452,910)	(367,182)
			(Note 1)

Notes:

(1) Unaudited figures for the year ended 31 December 2008.
(2) The annual caps approved by the independent shareholders in 2008 in relation to the selling of software products from the Group to the Inspur Group are denominated in RMB and are RMB12 million, RMB 15 million and RMB 18 million for the three years ending 31 December 2010 respectively. The amounts are translated into HK$ at the exchange rate of HK$1=RMB0.9 for illustration purpose.

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LETTER FROM THE BOARD

(B) Selling Agency Transactions

	Year ended	Year ended	Year ended	Year ending	Year ending
	31/12/2006	31/12/2007	31/12/2008	31/12/2009	31/12/2010
	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)
Sale of computer software products by	30,300	60,600	90,900	—	—
the Inspur Group (acting as selling	(1,127)	(14,080)	(84,544)
agent of the Group) to the customers			(Note 1)
on behalf of the Group
Payment of related commission to the	300	600	900
Inspur Group (details set out in the	(12)	(100)	(713)
2006 Circular)			(Note 1)
Sale of various IT products and IT			16,667	16,667	16,667
services by the Group to the Inspur			(16,247)
Group under subcontracting			(Notes 1, 2)
arrangement of software development
and maintenance business (details set
out in the 2007 Circular)
Payment of related commission to the			83	83	83
Inspur Group (details set out in the			(81)
2007 Announcement)			(Notes 1, 3)
Total (including value of the relevant	30,300	60,600	107,567	16,667	16,667
transactions but not including	(1,127)	(14,080)	(100,791)
commission payments)			(Note 1)

Notes:

(1) Unaudited figures for the year ended 31 December 2008.
(2) The annual caps approved by the independent shareholders in 2007 in relation to selling of various IT products and IT services by the Group to Inspur Group under subcontracting arrangement of software development and maintenance business are denominated in RMB and are RMB15 million for each of the three years ending 31 December 2010. The amounts are translated into HK$ at the exchange rate of HK$1=RMB0.9 for illustration purpose.
(3) The cap amounts are denominated in RMB and are RMB75,000 for each of the three years ending 31 December 2010 and details are set in the note in page 8 of this circular. The amounts are related into HK$ at the exchange rate of HK$ = RMB0.9 for illustration purpose.

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LETTER FROM THE BOARD

(C) Purchase Transactions

	Year ended	Year ended	Year ended	Year ending	Year ending
	31/12/2006	31/12/2007	31/12/2008	31/12/2009	31/12/2010
	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)
Purchase of computer hardware and	40,000	60,000	100,000	—	—
software products by the Group from	(22,330)	(58,870)	(89,236)
the Inspur Group (details set out in			(Note 1)
the 2006 Circular)
Purchase of computers by the Group	—	—	5,100	6,100	7,200
from the Inspur Group (Note 2)			(5,096)
(details set out in the 2007			(Note 1)
Announcement)
Purchase of computers and servers by	—	—	38,888	42,222	44,444
Inspur Genersoft from the Inspur			(Note 3)
Group (details set out in the 2008			(20,612)
Circular)			(Note 1)
Total	40,000	60,000	138,888	48,322	51,644
	(22,330)	(58,870)	(114,944)
			(Note 1)

Note:

(1) Unaudited figures for the year ended 31 December 2008.
(2) The annual cap amounts were set for internal control purpose and they were not required to be approved by the independent shareholders as the amounts fell within the de minimis threshold under Rule 20.34 of the GEM Listing Rules and the relevant transactions were exempt from independent shareholders’ approval requirements.
(3) The annual caps approved by the independent shareholders in 2008 in relation to the purchase of computers and servers by Inspur Genersoft from the Inspur Group are denominated in RMB and are RMB35 million, RMB 38 million and RMB 40 million for the three years ending 31 December 2010 respectively. The amounts are translated into HK$ at the exchange rate of HK$1=RMB0.9 for illustration purpose.

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LETTER FROM THE BOARD

(D) Common Services Transactions

	Year ended	Year ended	Year ended
	31/12/2008	31/12/2009	31/12/2010
	(RMB)	(RMB)	(RMB)
Provision of the common services by	1,800,000	1,800,000	1,800,000
the Inspur Group to Inspur	(1,920,036)
Communication (details set out in	(Note 1)
the 2007 Announcement) (Note 2)
Provision of common services by the	1,800,000	2,000,000	2,200,000
Inspur Group to Inspur Genersoft	(969,091)
(details set out in the 2008 Circular)	(Note 3)
Total	3,600,000	3,800,000	4,000,000
	(2,889,127)

Note:

(1) This is unaudited figure for the year ended 31 December 2008. Although the annual cap amount for the year ended 31 December 2008 appears to be exceeded, the transaction amount still fell within the de minimis threshold under Rule 14A.34 of the Listing Rules. The Company will comply with the requirements of Rule 14A.40 of the Listing Rules whenever applicable.
(2) The annual cap amounts were set for internal control purpose and they were not required to be approved by the independent shareholders as the amounts fell within the de minimis threshold under Rule 20.34 of the GEM Listing Rules and the relevant transactions were exempt from independent shareholders’ approval requirements.
(3) The figure refers to the period from 31 March 2008 (date of completion of acquisition of further 21.26% equity interest in Inspur Genersoft) to 31 December 2008.

(E) Processing Transactions

	Year ended	Year ended	Year ended
	31/12/2008	31/12/2009	31/12/2010
	(RMB’000)	(RMB’000)	(RMB’000)
Manufacture of tax-collection cashier	100,000	150,000	200,000
machines by Inspur Cheeloo for Inspur	(89,970)
Business (details set out in the 2008	(Note 1)
Circular)

Note 1: the figure refers to the period from 31 March 2008 (date of completion of acquisition of Inspur Business) to 31 December 2008.

REASONS FOR AND BENEFITS OF ENTERING INTO NEW FRAMEWORK AGREEMENT

By entering into New Framework Agreement, the Group can continue to derive benefits from the Continuing Connected Transactions which can capture the synergic advantages of both the Group and

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LETTER FROM THE BOARD

the Inspur Group (including the established worldwide client network of the Inspur Group). On the other hand, the New Framework Agreement is prepared on the integration of the existing Continuing Connected Transactions between various members of the Group and various members of the Inspur Group under the new business model adopted by the Group. Through integration, it can establish a uniform framework governing the Continuing Connected Transactions so that it can facilitate the compliance with Listing Rules and improve both the effectiveness and the efficiency in implementation of compliance measures.

The Directors consider that the Continuing Connected Transactions (including the related Caps) under the New Framework Agreement are on normal commercial terms and entered into in the ordinary and usual course of business of the Group and are fair and reasonable. In view of the above reasons, the Directors are of the view that the Continuing Connected Transactions are in the interests of the Company and the Shareholders as a whole.

IMPLICATION UNDER THE LISTING RULES

IPG is a company established in the PRC and through its wholly owned subsidiary, Inspur Electronics (HK) Limited, being the controlling shareholder of the Company, is interested in approximately 43.66% of the issued share capital of the Company. Under the Listing Rules, IPG is a connected person of the Company and the transactions contemplated under the New Framework Agreement constitute continuing connected transactions of the Company. IPG’s principal activity is investment holding. It is beneficially owned as to approximately 38.88% by 山東省國有資產控股公司 (Shandong State-owned Asset Investment Holdings Co., Ltd, of which the main activity is the management of state-owned assets), approximately 19.99% by 英大國際信託有限責任公司 (Yingda International Trust Co., Ltd, of which the main activity is investment as trustees), approximately 16.13% by 濟南裕澤資訊科技有限公司 (Jinan Yuze Information Technology Limited, of which the main activity is investment holding) and 25% by 山東德盛資訊科技發展有限公司 (Shandong Desheng Information Technology Limited, of which the main activity is investment holding). For the calculation of the relevant percentage ratios under the Listing Rules, in view of the fact that the counterparties of the Continuing Connected Transactions are of the same group of companies (i.e. members of the Inspur Group), the annual cap amounts for the Supply Transactions and Selling Agency Transactions (value of transactions) are aggregated together as they involve cash inflow from the Group while the annual cap amounts of the Purchase Transactions, Common Services Transactions, Processing Transactions and Selling Agency Transactions (commission payments) are aggregated together as they involve cash outflow to the Group. As the aggregate of the annual amounts of the Continuing Connected Transactions under the New Framework Agreement are expected to exceed the thresholds set out in Rule 14A.34 of the Listing Rules, the Continuing Connected Transactions will be subject to the reporting, announcement and Independent Shareholders’ approval requirements pursuant to Rules 14A.35 of the Listing Rules. IPG, its ultimate beneficial owners and their respective associates will abstain from voting in the EGM to be convened for the approval of the above Continuing Connected Transactions.

The Company will seek the approval by the Independent Shareholders by way of a poll in the EGM of the New Framework Agreement and the proposed Caps.

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LETTER FROM THE BOARD

Independent Board Committee comprising the independent non-executive Directors has been formed to advise the Independent Shareholders on the terms of the New Framework Agreement and AsiaVest Partners has been appointed as an independent financial adviser to advise the Independent Board Committee in respect of the terms of the New Framework Agreement and the proposed Caps.

EGM

Set out on pages 46 to 47 of this circular is a notice convening the EGM which will be held at Hong Kong International Trade & Exhibition Centre, Meeting Room 5, 7th Floor, 1 Trademart Drive, Kowloon Bay, Kowloon, Hong Kong at 10:00 a.m. on Monday, 16 March 2009 at which resolution will be proposed to approve the New Framework Agreement and the proposed Caps.

The New Framework Agreement is subject to, among other things, the approval by the Independent Shareholders at the EGM to be taken by way of a poll. IPG (including its ultimate beneficial owners and their respective associates) shall abstain from voting for the relevant resolution at the EGM due to their interest in the concerned transactions. Other than the above, no other Shareholders have material interest in the above transactions and will abstain from voting at the EGM. As at the Latest Practicable Date, IPG (including its ultimate beneficial owners and their respective associates) controls or is entitled to control over the entire voting right in respect of their Shares. Therefore, a total of 1,354,390,000 Shares (representing approximately 43.66% of the issued share capital of the Company and approximately 31.69% of the total voting rights of the holders of the Shares and Preferred Shares) shall abstain from voting at the EGM. There is (i) no voting trust or other agreement or arrangement or understanding entered into by or binding upon IPG (including its ultimate beneficial owners and their respective associates); and (ii) no obligation or entitlement of IPG (including its ultimate beneficial owners and their respective associates) as at the Latest Practicable Date, whereby it has or may have temporarily or permanently passed control over the exercise of the voting right in respect of its Shares to a third party, either generally or on a case-by-case basis.

A form of proxy for the EGM is enclosed. Whether or not you propose to attend the EGM, you are requested to complete the form of proxy and return the same to Computershare Hong Kong Investor Services Limited, the Company’s branch share registrar in Hong Kong, at Rooms 1806-1807 18th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong in accordance with the instructions printed thereon not less than 48 hours before the time appointed for the meeting (or any adjourned meeting). Completion and delivery of the form of proxy will not preclude you from attending and voting at the meeting (or any adjourned meeting) if you so wish.

RECOMMENDATIONS

The Independent Board Committee has been established to advise the Independent Shareholders whether the terms of the New Framework Agreement and the proposed Caps are fair and reasonable so far as the Shareholders are concerned and AsiaVest Partners has been appointed to advise the Independent Board Committee and the Independent Shareholders in that connection.

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LETTER FROM THE BOARD

The text of AsiaVest Partners containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 22 to 39 of this circular and the text of the letter from the Independent Board Committee to the Independent Shareholders is set out on page 21 of this circular.

The Independent Board Committee, having taken into account the advice of AsiaVest Partners, is of the opinion that the terms of the New Framework Agreement and the proposed Caps to be fair and reasonable and are in the interests of the Company and the Shareholders as a whole and recommends the Independent Shareholders to vote in favour of the relevant resolution to be proposed at EGM.

The Board considers that the entering into the New Framework Agreement and the approval of proposed Caps are in the interests of the Company and the Shareholders as a whole and recommends the Independent Shareholders to vote in favour of the resolution to be proposed at EGM.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendix to this circular.

By Order of the Board Inspur International Limited Sun Pishu Chairman

— 20 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

**INSPUR INTERNATIONAL LIMITED 浪潮國際有限公司[*]**

(Incorporated in the Cayman Islands with limited liability)

(Stock Code:596)

27 February 2009

To the Independent Shareholders

Dear Sir or Madam,

RENEWAL AND INTEGRATION OF CONTINUING CONNECTED TRANSACTIONS

We refer to the circular dated 27 February 2009 issued by the Company (the “Circular”), of which this letter forms part. Terms used in this letter shall bear the same meanings as given to them in the Circular unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to consider the New Framework Agreement and the proposed Caps and to advise the Independent Shareholders as to the fairness and reasonableness of the aforesaid matters, and to recommend how the Independent Shareholders should vote at the EGM. AsiaVest Partners has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

We wish to draw your attention to the letter from the Board, as set out on pages 5 to 20 of the Circular, and the letter of advice from AsiaVest Partners to the Independent Board Committee and the Independent Shareholders which contains its advice to us in respect of the New Framework Agreement and the proposed Caps, as set out on pages 22 to 39 of the Circular.

Having taken into account of the advice of AsiaVest Partners, we consider that (i) the New Framework Agreement is carried out in the ordinary and usual course of the Group’s business, based on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as whole, and (ii) the terms of the New Framework Agreement, including the proposed Caps, are fair and reasonable and are in the interests of the Company and the Shareholders as whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the New Framework Agreement and the proposed Caps.

Yours faithfully, the Independent Board Committee

Meng Xiang Xu Independent non-executive Director

Liu Ping Yuan Independent non-executive Director

Wong Lit Chor, Alexis Independent non-executive Director

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

The following is the text of a letter of advice from AsiaVest Partners to the Independent Board Committee and the Independent Shareholders in respect of the New Framework Agreement, and is prepared for inclusion in this circular.

AsiaVest Partners Limited

2605 Universal Trade Centre 3 Arbuthnot Road Central, Hong Kong

27 February 2009

The Independent Board Committee and the Independent Shareholders

Inspur International Limited

Room 726, Nan Fung Commercial Centre 19 Lam Lok Street, Kowloon Bay Kowloon, Hong Kong

Dear Sirs,

RENEWAL AND INTEGRATION OF CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the fairness and reasonableness of the terms of the New Framework Agreement, details of which are set out in this circular (the “Circular”), of which this letter forms a part. We have been retained by the Company to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the New Framework Agreement (i) are in the ordinary and usual course of business of the Group, (ii) are based on normal commercial terms and are fair and reasonable, and (iii) are in the interests of the Company and its Shareholders as a whole, and to advise the Independent Shareholders on how to vote. Unless the context otherwise requires, terms used in this letter shall have the same meaning as those defined in the Circular.

The Independent Board Committee, comprising Mr. Meng Xiang Xu, Mr. Liu Ping Yuan and Mr. Wong Lit Chor, Alexis, all being independent non-executive Directors, has been established to consider the terms of the New Framework Agreement and the Caps, and to advise the Independent Shareholders on whether the New Framework Agreement and the Caps are fair and reasonable.

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

BASIS OF OUR OPINION

In formulating our opinion and advice, we have relied upon accuracy of the information and representations contained in this circular and information provided to us by the Company and the Directors, for which they are solely responsible. We have assumed that all statements, information and representations made or referred to in the Circular and all information and representations which have been provided by the Company and the Directors, for which they are solely and wholly responsible, were true at the time they were made and continue to be true as at the date hereof. We have also assumed that all statements of belief, opinion and intention made by the Directors in this circular were reasonably made after due and careful enquiry and were 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 have been confirmed by the Directors that no material facts and representations the omission of which would make any statement in this circular, including this letter, misleading. We have not, however, conducted any independent in-depth investigation into the business affairs, financial position or future prospects of the Group, nor have we carried out any independent verification of the information provided by the Directors and management of the Company. We consider that we have reviewed sufficient information to reach an informed view and to justify reliance on the accuracy of the information and representations contained in this circular and to provide a reasonable basis for our recommendation regarding the Agreements.

PRINCIPAL FACTORS CONSIDERED

In giving our recommendation to the Independent Board Committee and the Independent Shareholders in respect of the fairness and reasonableness of the terms of the Agreements, we have taken into consideration the following factors and reasons:

I. Background and Reasons

The New Framework Agreement actually covers:

(1) 6 continuing connected transactions approved by independent shareholders in October 2006. Reference is made to the 2006 Circular;
(2) 1 continuing connected transactions required independent shareholders’ approval in relation to sales of software and related services by Inspur Communication, which was acquired by the Group in November 2007. Approval has been sought from independent shareholders in December 2007 for the Group to carry out this continuing connected transaction for a three years period ending on 31 December 2010. There were certain other continuing connected transactions between Inspur Communication and Inspur Group with their transaction amounts falling within the de minimis threshold under Rule 14A.34 of the Listing Rules or where applicable Rule 20.34 of the GEM Listing Rules and therefore exempt from independent shareholders’ approval. Reference is made to the 2007 Announcement and 2007 Circular; and

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

(3) 4 continuing connected transactions required independent shareholders’ approval carried out by Inspur Genersoft and Inspur Business, both of which were acquired by the Group in 2008. Approvals have been sought from independent shareholders in April 2008 for the Group to carry out these continuing connected transactions for a three years period ending on 31 December 2010. References are made to the 2008 Circular.

By entering into New Framework Agreement, the Group can continue to derive benefits from the Continuing Connected Transactions which can capture the synergic advantages of both the Group and the Inspur Group (including the established worldwide client network of Inspur Group). On the other hand, the New Framework Agreement is prepared on the integration of the existing continuing connected transactions between various members of the Group and various members of the Inspur Group under the new business model adopted by the Group. Through integration, it can establish a uniform framework governing the Continuing Connected Transactions so that it can facilitate the compliance with Listing Rules and improve both the effectiveness and the efficiency in implementation of compliance measures.

The Directors consider that the Continuing Connected Transactions (including the Caps) under the New Framework Agreement are on normal commercial terms and entered into in the ordinary and usual course of business of the Group and are fair and reasonable. In view of the above reasons, the Directors are of the view that the Continuing Connected Transactions are in the interests of the Company and the Shareholders as a whole.

Further, the factors which have been taken into account by the Company for determination of above the Caps mainly include (a) the historical amounts and annual growth rates of the Continuing Connected Transactions and (b) the average annual industry growth rate of approximately 15% which is based on an independent industry research report conducted by a renowned market research company, CCID Consulting Company Limited, on the IT industry in the PRC for the year 2007 and 2008.

We have noted that the historical annual growth rates of most of the Continuing Connected Transactions are significantly higher than that the average annual industry growth rate of approximately 15% and that the Company generally uses 7% to 16% as the rates in estimating the Caps of Supply, Sales Agency and Purchase Transactions. The management confirms that lower rates are used as result of giving due consideration to the recent deteriorating and volatile macro-economic environment.

The management further advises that higher rates are used in estimating the Caps for the Processing Transactions since the use of tax-collection cashier machines is strongly advocated by the PRC Government and therefore the demand for the tax-collection cashier machines in the PRC maintains to be at a high level. For the Common Services Transactions, additional premises will be rented from the Inspur Group in 2009 as additional departments of the Group will also move to the premises provided by Inspur Group which is one of the reasons for the increase in the proposed annual cap amount in the year 2009 as compared with the approved cap amount in 2008.

Having consider:

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

(1) the nature of the Transactions falls within the principal business of the Group;
(2) the long term business relationship with the Inspur Group;
(3) the Transactions are of revenue nature which will generate income to the Group should they become materialized; and
(4) the Caps for the Continuing Connected Transactions are considered fair and reasonable,

we concur with the views of the Directors that the Agreements were entered in the ordinary and usual course of business of the Group and the Continuing Connected Transactions are in the interests of the Company and the Shareholders as a whole.

II. The New Framework Agreement

Date: 12 January 2009 Parties: Company (representing the Company and its subsidiaries); and IPG (representing IPG and its subsidiaries). Condition Precedent: The New Framework Agreement is conditional upon the obtaining of the approval of the Independent Shareholders of the New Framework Agreement and the transactions contemplated thereunder and the annual caps of the Continuing Connected Transactions on or before 31 March 2009 (or any other later date as agreed by the parties). Term: From the date of the fulfillment of the above condition precedent to 31 December 2011 unless terminated earlier by written agreement of both parties.

1. Supply Transactions

Types of products and services

The members of the Group will supply and provide the members of Inspur Group with various IT products and IT services from time to time including without limitation the following three types of products and services:

(i) Computer products and components including without limitation CPU, integrated circuit, computer mainboards where the Group is acting as the sourcing agent of the Inspur Group for overseas products and components;
(ii) IT hardware products including without limitation personal computers and computer components designed, developed or otherwise processed by the Group for the purpose of overseas export; and
(iii) IT services including without limitation the services related to the development of cards used in personal computers and electronic products, sourced software, ERP software and those software developed by the Group.

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

Pricing and other terms

(i) Sourcing of overseas products for Inspur Group

(ii) Provision of IT products and services

The members of the Group will supply various IT products and IT services to the members of the Inspur Group during the term of the New Framework Agreement. The actual quantity, specification, delivery date and price of the IT products and the amount of fees and detailed terms and conditions of the IT services to be provided by the members of the Group will be subject to the individual orders places by the members of the Inspur Group with the relevant members of the Group. The parties have acknowledged that under the New Framework Agreement that:

(a) the price per unit of the IT products and the service fees of the IT services to be supplied or provided by a relevant member of the Group will be agreed between the parties by reference to, among other factors, the then prevailing market rates of such IT products and IT services; and
(b) the Group shall not be obliged to accept any terms and conditions for the supply or provision of the IT products and IT services which are less favourable than those agreed between any member of the Group and its independent third party customers for the IT products and IT services.

Payment terms

Our works and opinion

The Supply Transaction

Since the Supply Transactions are in the ordinary and usual course of business of the Group and will provide further revenue to the Group, we believe that the entering into the Supply Transactions would be beneficial to the Company and its Shareholders as a whole.

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

We have reviewed the terms of the Supply Transactions and noted that the credit period has been extended from the previously one-month to two-month as stipulated in the New Framework Agreement. As advised by the Directors, a two-month credit period is in line with the average creditor period granted to other independent customers. We have reviewed the payment terms of other independent customers and observed that creditor periods of these independent customers deviate from 1 months to 3 months. We believe that as a two-month credit period is not uncommon in the business environment of the PRC and such credit period falls within the range of the credit period granted to other independent customers, such change of credit period shall be fair and reasonable.

We have reviewed the order/contracts of certain historical Supply Transactions carried out between the Group and Inspur Group and quotation of similar products from other third parties suppliers, and compared the gross profit margin of similar products or services suppliers in the market. From the order/contracts and other relevant documents as stated above, we conclude that price per unit of the IT products and the service fees of the IT services to be supplied or provided by a relevant member of the Group to Inspur Group is no less favourable than those agreed with independent third party customers.

In view of the above, we are of the opinion that the terms of Supply Transactions are fair and reasonable and are in the interests of the Company and its Shareholders as a whole.

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

Annual Caps

Set out below are the proposed Caps in respect of the Supply Transactions:

Historical Annual Cap

	Historical Annual	Historical Annual	Cap
	(Historical transacted		amount)	Proposed Annual		Cap
	Year ended	Year ended	Year ended	Year ending	Year ending	Year ending
	31/12/2006	31/12/2007	31/12/2008	31/12/2009	31/12/2010	31/12/2011
	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)
Supply of computer	198,000	296,000	394,000
products from the Group	(147,000)	(275,000)	(188,000)
to the Inspur Group			(note 1)
(including those for
export market) (details
set out in the 2006
Circular)
Provision of IT services	2,000	4,000	6,000
from the Group to the	(1,140)	(3,910)	(5,004)
Inspur Group (including			(note 1)
for export market)
(details set out in the
2006 Circular)
Supply of computer	150,000	180,000	200,000
components where the	(128,000)	(174,000)	(168,000)
Group acting as			(note 1)
sourcing agent of Inspur
Group (details set out in
the 2006 Circular)
Selling of software	N/A	N/A	13,333
products from the Group	(9,890)	(10,730)	(note 2)
to the Inspur Group			(6,178)
(details set out in the			(note 1)
2008 Circular)
Total transacted amount	(286,030)	(463,640)	(367,182)	400,000	460,000		530,000
Percentage increment		62%	(21%)	9%	15%		15%

Notes:

Unaudited figures for the year ended 31 December 2008.

The annual caps approved by the Independent Shareholders in 2008 in relation to the selling of software products from the Group to the Inspur Group are denominated in RMB and are RMB12 million, RMB15 million and RMB18 million for the three years ending 31 December 2010 respectively. The amounts are translated into HK$ at the exchange rate of HK$1=RMB0.9 for illustration purpose.

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

We have reviewed and discussed with the management the projected Caps (including its basis) provided by the Group in connection with the Supply Transactions and been advised that the Caps for the 3 years ended 31 December 2011 are mainly based on (a) the historical amounts (details are set out above) and their annual growth rate; (b) the general IT industry growth rates in the PRC of approximately 15% for the year 2007 and 2008; and (c) the recent deteriorating and volatile macro-economic environment. We are of the opinion that the factors taken into consideration by the management in estimating the Caps are fair and reasonable.

We have observed that the average growth rate of historical transaction amount of the Supply Transactions for the two years ended 31 December 2008 is approximately 41.5%, comprising a sharp jump of approximately 62% in 2007 and a drop of approximately 21% in 2008. As advised by the Directors, the drop in the transaction amount in 2008 was mainly due to the global economic downturn in the fourth quarter of 2008. The Directors expect that such difficult economic condition will still last for a certain time in 2009. Therefore, the Company uses a lower percentage (9%) as compared to the expected average annual industry growth rates of of 15% in forecasting the Caps for 2009. We also note that the Caps for the years 2010 and 2011 are projected at the expected average annual industry growth rates of 15%.

Based on the above, we consider the proposed Caps for the three years from 2009 to 2011 which are projected based on 9% to 15% growth rate are fair and reasonable.

2. Selling Agency Transactions

The Group will pay selling agency commission of not more than 1% (calculated on the price of the relevant products) to the Inspur Group. The Inspur Group will deduct the related commission from the price received from the clients and pay back the net proceeds to the Group within seven days.

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

Our works and opinion

The Selling Agency Transactions

We have discussed the trading arrangement of the Selling Agency Transactions and been given the understanding that since most of the ultimate customers of the Selling Agency Transactions belong to Inspur Group, which has possessed the relevant certificates or qualifications in the PRC in carrying out services under the Selling Agency Transactions, these are the reasons why Inspur Group acts as a referring agent in the Selling Agency Transactions and receives a commission income accordingly. We are of the opinion that the trading arrangement of the Selling Agency Transactions does reflect the general business practices in the PRC as a result of arm’s length negotiation. The management further advises that apart from Inspur Group, the Group does not rely on any other agents in referring similar transactions under the Selling Agency Transactions.

We have reviewed invoices and tender documents in relation to certain Selling Agency Transactions. We note that (a) save for the selling agency commission, the transaction amount charged to ultimate customers of the Inspur Group is the same as that charged to Inspur Group by the Group; (b) the selling agency commission of these transactions under our review is not more than 1%; and (c) the payment term is within seven days of receipt of payment by Inspur Group. We believe that the rate of commission and payment term is in line with previous business practices of the Group and is fair and reasonable.

In view of the above, we are of the opinion that the terms of the Selling Agency Transactions are fair and reasonable.

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

Annual Caps

Set out below are the proposed Caps in respect of the Selling Agency Transactions:

	Historical Annual	Historical Annual	Cap
	(Historical transacted		amount)			Proposed Annual Cap
	Year ended	Year ended	Year ended			Year ending	Year ending	Year ending
	31/12/2006	31/12/2007	31/12/2008			31/12/2009	31/12/2010	31/12/2011
	(HK$’000)	(HK$’000)	(HK$’000)			(HK$’000)	(HK$’000)	(HK$’000)
Sale of computer software	30,300	60,600		90,900
products by Inspur Group	(1,127)	(14,080)		(84,544)
(acting as selling agent of			_(note _		1)
the Group) to the
customers on behalf of the
Group
Payment of related	300	600			900
commission to Inspur	(12)	(100)		(713)
Group (details set out in			_(note _		1)
the 2006 Circular)
Sale of various IT products	N/A	N/A		16,667
and IT services by the			_(Note _		2)
Group to Inspur Group	(19,007)	(9,815)		(16,247)
under subcontracting			_(note _		1)
arrangement of software
development and
maintenance business
(details set out in the
2007 Circular)
Payment of related					83
commission to the Inspur					(81)
Group (details set out in			_(Notes _		1, 3)
the 2007 Announcement)
Total transacted amount	(20,134)	(23,895)		(100,791)		108,000	125,000	145,000
(including value of the			_(note _		1)
relevant transactions and
not including commission
payments)
Percentage increment		19%		322%		7%	16%	16%
Related Commission (1%)						1,080	1,250	1,450

Notes:

(1) Unaudited figures for the year ended 31 December 2008.
(2) The annual caps approved by the Independent Shareholders in 2007 in relation to selling of various IT products and IT services by the Group to Inspur Group under subcontracting arrangement of software development and maintenance business are denominated in RMB and are RMB15 million for each of the three years ending 31 December 2010. The amounts are translated into HK$ at the exchange rate of HK$1=RMB0.9 for illustration purpose.
(3) The cap amounts are denominated in RMB and are RMB75,000 for each of the three years ending 31 December 2010 and details are set in the note in page 8 of this circular. The amounts are related into HK$ at the exchange rate of HK$ = RMB0.9 for illustration purpose.

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

We have reviewed and discussed with the management the projected Cap (including its basis) provided by the Group in connection with the Selling Agency Transactions and been advised that the Caps for the 3 years ended 31 December 2011 are mainly based on (a) the historical amounts (details are set out above) and their annual growth rates; (b) the general IT industry growth rates in the PRC of approximately 15% for the year 2007 and 2008; and (c) the recent deteriorating and volatile macro-economic environment. We are of the opinion that the factors taken into consideration by the management in estimating the Caps are fair and reasonable.

We have observed that the actual transacted amounts in 2006 and 2007 were relatively low since the Group just commenced this new business segment in 2006 as advised by the management of the Company. Significant improvement was observed in 2008 owing to the sale of computer software products by Inspur Group to its customers on behalf of the Group. As advised by the Directors, the Group expect that the business volume in this segment needs to consolidate in 2009 and thus the Directors only proposes a Cap which is at the same level as that in 2008. We also note that the Caps for the years 2010 and 2011 are projected at a rate of 16% which is just 1% above the expected average annual industry growth rates of 15% simply owing to the effect rounding up the Caps figures.

Based on the above, we consider the proposed Caps of the Selling Agency Transactions and related commission for the three years from 2009 to 2011 which are projected based on 7% to 16% growth rate are fair and reasonable.

3. Purchase Transactions

Types of products

The Group will purchase from the Inspur Group various IT products from time to time including without limitation the following two types of products:

(i) computer software and hardware products (including personal computers and servers under the brand name of “Inspur”); and
(ii) computer components which mainly are used for assembly of computers for overseas market.

Pricing

The members of the Group will purchase the computer products and components from the members of the Inspur Group during the term of the New Framework Agreement. The actual quantity, specification, delivery date and price of such products to be provided by the members of the Inspur Group will be subject to the individual orders places by the members of the Group with the relevant members of the Inspur Group. The parties have acknowledged that under the New Framework Agreement that:

(a) the price per unit of the computer products and components to be supplied by a relevant member of the Inspur Group will be agreed between the parties by reference to, among other factors, the then prevailing market prices of such products at the relevant time; and

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

(b) the Group shall not be obliged to accept any terms and conditions for the purchase of the computer products and components which are less favourable than those agreed between any member of the Inspur Group and its independent third party purchasers for the computer products and components.

Payment terms

The Inspur Group will give two-month credit period for the Group to settle by cash the price of the products after delivery. The Group will make the payment out of the Group’s internal resources.

Our works and opinion

The Purchase Transactions

We have reviewed the order/contracts of certain historical Purchase Transactions carried out between the Group and Inspur Group and the order/contracts of similar IT products or services provided by the Inspur Group to other third parties customers. We note that the terms and conditions for the purchases of the computer products and components supplied by Inspur Group was not less favourable than those agreed between any member of the Inspur Group and its independent third party purchasers. We have also compared the purchasing prices of certain products under the historical Purchase Transactions with the quotation of independent third party suppliers and noted that the price of products provided by Inspur Group is not less favourable than that supplied by independent third party suppliers.

In view of the above, we are of the opinion that the terms of Purchase Transactions are fair and reasonable.

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

Annual Caps

Set out below are the proposed Caps in respect of the Purchase Transactions:

Historical Annual Cap

	Historical Annual	Historical Annual	Cap
	(Historical transacted		amount)	Proposed Annual		Cap
	Year ended	Year ended	Year ended	Year ending	Year ending	Year ending
	31/12/2006	31/12/2007	31/12/2008	31/12/2009	31/12/2010	31/12/2011
	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)
Purchase of computer	40,000	60,000	100,000
hardware and software	(22,330)	(58,870)	(89,236)
products by the Group			(note 1)
from Inspur Group
(details set out in the
2006 Circular)
Purchase of computers by	N/A	N/A	5,100
the Group from Inspur	(3,489)	(3,780)	(5,096)
Group (note 2) (details			(note 1)
set out in the 2007
announcement)
Purchase of computers and	N/A	N/A	38,888
servers by Inspur	(20,270)	(32,190)	(note 3)
Genersoft from Inspur			(20,612)
Group (details set out in			(note 1)
the 2008 Circular)
Total transacted amount	(46,089)	(94,840)	(114,944)	132,000	145,000		160,000
			(note 1)
Percentage increment		106%	21%	15%	10%		10%

Note:

(1) Unaudited figures for the year ended 31 December 2008.
(2) The annual cap amounts were set for internal control purpose and they were not required to be approved by the Independent Shareholders as the amounts fell within the de minimis threshold under Rule 20.34 of the GEM Listing Rules and the relevant transactions were exempt from independent shareholders’ approval requirements.
(3) The annual caps approved by the Independent Shareholders in 2008 in relation to the purchase of computers and servers by Inspur Genersoft from Inspur Group are denominated in RMB and are RMB35 million, RMB38 million and RMB40 milllion for the three years ending 31 December 2010 respectively. The amounts are translated into HK$ at the exchange rate of HK$1=RMB0.9 for illustration purpose.

We have reviewed and discussed with the management the projected Caps (including its basis) provided by the Group in connection with the Purchase Transactions and been advised that the Caps for the 3 years ended 31 December 2011 are mainly based on (a) the historical amounts (details are

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

set out above) and their annual growth rate; (b) the general IT industry growth rates in the PRC of approximately 15% for the year 2007 and 2008; and (c) the recent deteriorating and volatile macro-economic environment. We are of the opinion that factors taken into consideration by the management in estimating the Caps are fair and reasonable.

We have observed that the transacted amount of the Purchase Transactions increased significantly in 2007 while increased at a lower rate in 2008. As advised by the Directors, the Company expects that the business volume in this segment will still maintain a higher growth given the high growth rate in previous years and thus the Directors propose the Cap for year 2009 at 15% growth rate. We also note that the Caps for the years 2010 and 2011 are projected at a growth rate 10%. The management advises that a lower rate is used because the Company expected that the future demand for computer hardware and servers which are the main products purchased from the Inspur Group may just remain stable or grow at a lower rate.

Based on the above, we consider the proposed Caps of the Purchase Transactions for the three years from 2009 to 2011 which are projected based on 10% to 15% growth rate are fair and reasonable.

4. Common Services Transactions

Inspur Group will provide services in respect of use of premises, water, electricity, heating and motor vehicles (“common services”) to various members of the Group at fees determined on normal commercial terms and by arm’s length negotiation, or on terms no less favourable to the Group than terms available to or from other parties (based on services of same category). In general, the above fees will be billed on a monthly basis and will be satisfied by cash out of the internal resources of the Group.

Our works and opinion

The Common Services Transactions

As advised by the management, the Common Services Transactions consist two main categories, namely, rental payment and utilities reimbursement. We have reviewed certain billing from the Inspur Group in respect of utilities and been satisfied that such billing only represents a reimbursement of utilities charges by public utilities company in the PRC, without any mark up thereon. We have also reviewed certain billing from Inspur Group to other third parties occupant and noted that the rental charges to the Group are not higher than that charged to other third parties occupants. We have compared the rental charged by Inspur Group to certain rental charges in nearby properties owned by independent third parties and noted that the rental charged by Inspur Group is not less favourable than that asked for by independent third parties landlords.

We have also noted that settlement of the Common Services Transactions is made in arrears on a monthly basis which is in line with the New Framework Agreement. As such in arrears monthly settlement basis is in line with the monthly payment practices as required by public utilities companies and is not less favourable than the payment terms as required by independent third party landlords, we are of the view that such payment term is fair and reasonable.

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

In view of the above, we are of the opinion that the terms of Common Services Transactions are fair and reasonable.

Annual Caps

Set out below are the proposed Caps in respect of the Common Services Transactions:

Historical Annual Cap (Historical transacted amount) Proposed Annual Cap Year ended Year ending Year ending Year ending 31/12/2008 31/12/2009 31/12/2010 31/12/2011 (RMB) Provision of the common 1,800,000 services by the Inspur (1,920,036) Group to Inspur (note 1, 3) Communication (details set out in the 2007 Announcement) (note 2) Provision of common 1,800,000 services by the Inspur (969,091) Group to Inspur (note 1, 4) Genersoft (details set out in the 2008 Circular) Total transacted amount (RMB2,889,127) HK$7,700,000 HK$8,470,000 HK$9,317,000 (HK$3,210,141) Percentage increment 140% 10% 10%

Notes:

(1) Unaudited figures for the year ended 31 December 2008.
(2) The annual cap amounts were set for internal control purpose and they were not required to be approved by the Independent Shareholders as the amounts fell within the de minimis threshold under Rule 20.34 of the GEM Listing Rules and the relevant transactions were exempt from independent shareholders’ approval requirements.
(3) As advised by the Company, all the Common Services Transactions reported above were exempted from the requirement Shareholders approval under the requirements of Chapter 20 of the GEM Listing Rules. Therefore, the annual Caps indicated above were for administrative reason only. Even though the actual transaction amount exceeded the annual Caps, such amount was still below the threshold as indicated under Rule 14A.34 of the Listing Rules.
(4) The figure refers to the period from 31 March 2008 (date of completion of acquisition of further 21.26% equity interest in Inspur Group) to 31 December 2008.

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

We have reviewed and discussed with the management the projected Cap (including its basis) provided by the Group in connection with the Common Services Transaction. As advised by the management, since the Group has acquired a number of new companies during the past two years, it is the objective of the Group to centralise the physical location of all the subsidiaries for the ease of management and administration by relocating, where possible, the subsidiaries to a premise of the Inspur Group in Jinan, the PRC. The management estimates that upon the completion of this relocating exercise, the Group together with its subsidiaries would occupy approximately 12,000 square meter of floor area in a premise provided by the Inspur Group. The project growth rate for years 2010 and 2011 is mainly based on the double digits gross domestic productivity growth rate of the PRC in recent years. We are of the opinion that factors taken into consideration by the management in estimating the Caps are fair and reasonable.

Having considered the above, we consider the proposed Caps of the Common Services Transactions for the three years from 2009 to 2011 are fair and reasonable.

5. Processing Transactions

Inspur Business has appointed Inspur Cheeloo (a subsidiary of the IPG) to provide services of procurement of raw materials of and assembling and manufacturing tax-collection cashier machines at processing fee calculated at 5% of the value of the raw materials and the said rate is comparable to the rates in the market. In general, Inspur Business will pay the price of the tax-collection cashier machines (including the related processing fees) within 30 days after receipt of the goods by cash out of its own internal resources.

Our works and opinion

The Processing Transactions

As advised by the Company, Inspur Cheeloo currently is the sole provider of such services to Inspur Business which is also the sole customer for such services to Inspur Cheeloo. In general, Inspur Business will pay the price of the tax-collection cashier machines (including the related processing fees) within 30 days after receipt of the goods. Also advised by the Company, the Company usually receives payment from its customers for the sale of the tax-collection cashier machines within 30 days upon delivery. In view that the settlement period for the payment from the customers for the sale of the tax-collection cashier machines is the same as the settlement period under the Processing Agreement, we consider the settlement terms under the Processing Agreement is fair and reasonable.

We are advised by the Directors that Inspur Business has been entrusting the procurement of raw materials and assembly and manufacture of the tax-collection cashier machines to Inspur Cheeloo since the commencement of the tax-collection cashier machines business. We are further advised by the Directors that, in the view that Inspur Cheeloo (i) has commenced tax-collection cashier machines business since April 2005; (ii) owns production facilities of computer terminal units; and (iii) has well established purchase channel with cost control measures in place in respect of the raw materials of tax-collection cashier machines, the Directors believe that through entrusting the procurement of raw materials and assembly and manufacture of the tax-collection cashier machines to Inspur Cheeloo, Inspur Business can secure the supply of tax collection cashier machines with effective control over cost and quality.

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

Given that the Group has only entered into the industry of tax-collection cashier machines in mid-February 2008 by acquiring Inspur Business and that the Group is yet to have a well established production facilities and supplier network base for raw materials of tax-collection cashier machines, we agree with the Directors that it will be more effective for the production and cost and quality control of tax-collection cashier machines to sustain the demand of the existing and new customers of Inpsur Business by taking the advantages of Inspur Cheeloo’s well-established production facilities, existing technical know-how, and extensive purchase channel for the raw material for the tax-collection cashier machines and thereby increasing the Group’s market competitiveness in the industry.

As advised by the Company, the processing fee in relevant transactions in the industry is in the range of 5% to 10% on the value of the raw materials. We have reviewed quotation in respect of processing fee from Independent Third Party to Inspur Business and noted that the processing fee which offered by Inspur Group is no less favorable than those offered by Independent Third Party. As such, we consider the processing fee calculated at 5% of the value of the raw materials under the Processing Agreement is fair and reasonable. We have also reviewed certain historical Processing Transactions and confirmed that the processing fee is 5% and payment term is within 30 days after receipt of the goods, which is in line with the New Framework Agreement.

Based on the above, we consider the terms of the Processing Transactions are fair and reasonable.

Annual Caps

Set out below are the proposed Caps in respect of the Processing Transactions:

	Historical
	Annual Cap
	(Historical
	transacted
	amount)	Proposed Annual		Cap
	Year ended	Year ended	Year ended	Year ended
	31/12/2008	31/12/2009	31/12/2010	31/12/2011
	(RMB’000)	(RMB’000)	(RMB’000)	(RMB’000)
Manufacture of tax-collection cashier	100,000	150,000	200,000	250,000
machines by Inspur Cheeloo for	(89,970)
Inspur Business (details set out	(note)
in the 2008 Circular)
Percentage increment		67%	33%	25%

Note: Unaudited figures for the year ended 31 December 2008.

We have reviewed and discussed with the management the projected Cap (including its basis) provided by the Group in connection with the Processing Transactions and been advised that the Caps for the 3 years ended 31 December 2011 are mainly based on (a) the historical amounts (details are set out above); (b) the expected growth rates of the sales of tax-collection cashier machines of over

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LETTER OF ADVICE FROM ASIAVEST PARTNERS

100% according to an independent industry research report conducted by a renowned market research company, CCID Consulting Company Limited, on the IT industry in the PRC; and (c) the actual manufacturing capacity of the Inspur Cheeloo. We are of the opinion that factors taken into consideration by the management in estimating the Caps are fair and reasonable.

We note that the Caps for years 2008 to 2010 were already approved by independent Shareholders in April 2008. We have observed that the Cap for 2008 has been utilized up to approximately 90%. Based on information provided by the management, we note that the use of the tax-collection cashier machines has been actively encouraged by the State Council of PRC in order to strengthen the tax control policy in PRC. Besides, as advised by the Company, (i) the State Administration of Taxation and the Ministry of Finance of PRC have launched a pilot scheme in mid 2004 to require tax-paying companies of substantial size in the retail, food and beverage, entertainment, service and transportation industry which have permanent places of business to purchase tax-collection cashier machines and such pilot scheme has been successful in several provinces in the PRC; and (ii) such tax-paying companies in certain cities will be required full installation of tax-collection cash machine by the end of the year 2009. The management confirms that in view of the expected stronger demand of tax-collection cashier machines in 2009, the Group uses a higher growth rate to project the Cap for 2009 while uses a decreasing growth rate for 2010 and 2011 after given due consideration to the manufacturing capacity of Inspur Cheeloo.

In view of the above, we consider the proposed Caps for the three years from 2009 to 2011 are fair and reasonable.

RECOMMENDATION

Having taken into account the rationale and consideration set out above, we are of the view that the New Framework Agreement are (i) carried out in the ordinary and usual course of the Group’s business; (ii) based on normal commercial terms and are fair and reasonable; and (iii) in the interests of the Company and the Shareholders as a whole. We are also of the view that the terms of the New Framework Agreement, including the proposed annual Caps, are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

On such basis, we advise (i) the Independent Board Committee to recommend the Independent Shareholders; and (ii) the Independent Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve the New Framework Agreement and the annual Caps thereunder.

Yours faithfully, For and on behalf of AsiaVest Partners Limited Raymond Lo CF Managing Partner

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

(a) Interests and short positions of the Directors and the chief executive of the Company in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”) contained in the Listing Rules, were as follows:

(i) Long positions in Shares

			Number	Percentage
Name	of Director	Type of interests	of Shares	of interests
Wang	Miao	Beneficial owner	75,000,000	2.42%

(ii) Long positions in underlying Shares of the Company

		Description	Number of
		of equity	underlying	Percentage
Name of Director	Type of interests	derivatives	Shares	of interests
		(Note 1)
Sun Pishu	Beneficial owner	share option	20,000,000	0.64%
Zhang Lei	Beneficial owner	share option	20,000,000	0.64%
Leung Chi Ho	Beneficial owner	share option	20,000,000	0.64%
Wang Miao	Beneficial owner	share option	20,000,000	0.64%
Xin Wei Hua	Beneficial owner	share option	20,000,000	0.64%

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GENERAL INFORMATION

APPENDIX

Note 1: The share options were granted under the pre-IPO share option scheme adopted by the Company on 8 April 2004 at a subscription price of HK$0.0648 per Share. Up to the Latest Practicable Date, none of the above share options had been exercised.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and the chief executive of the Company had or was deemed to have any interests or short positions in the Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) to be notified to the Company and the Stock Exchange pursuant to the Model Code.

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial Shareholders

So far as is known to the Directors and the chief executive, as at the Latest Practicable Date, the following person (not being Director or chief executive of the Company) had, or was deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

Long positions in Shares

			Approximate
		Number	percentage of
Name of Shareholders	Type of interests	of Shares	interests
Inspur Group Limited (Note 2)	Interest in a controlled	1,354,390,000	43.66%
	corporation
	(Note 1)
Inspur Electronics (HK) Limited	Beneficial owner	1,354,390,000	43.66%
(Note 3)

Note 1: Inspur Group Limited is taken to be interested in 1,354,390,000 Shares because it is being 100% shareholder in the issued share capital of Inspur Electronics (HK) Limited.
Note 2: Mr Sun Pishu and Mr Xin Wei Hua, who are directors of the Company, are also directors of Inspur Group Limited.
Note 3: Mr Sun Pishu, Mr Wang Miao and Mr Xin Wei Hua, who are directors of the Company, are also directors of Inspur Electronics (HK) Limited.

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APPENDIX

GENERAL INFORMATION

Long positions in series A senior redeemable convertible voting preferred shares of the Company

Number of Number of Approximate Preferred underlying percentage of Name of Shareholders Type of interests Shares Shares interests (Note 1) Microsoft Corporation Beneficial owner 234,279,559 1,171,397,795 100%

Note 1: Holder of each Preferred Share shall be entitled to have five votes on a show of hands or five votes for each Preferred Share as if each Preferred Share registered in its name in the register of members of the Company had been converted into five Shares at the time of any general meeting of the Company. Microsoft Corporation has agreed that in the event that it becomes entitled to exercise or control the exercise of more than 28% of the voting rights at general meetings of the Company (other than meeting of the holder(s) of Preferred Shares), it shall not and shall procure its nominee(s) not to exercise such portion of the voting rights attaching to the Preferred Shares and/or Shares in excess of 28% of the total voting rights at any general meeting of the Company. At the Latest Practicable Date, the above 1,171,397,795 underlying Shares represented approximately 27.41% of the issued share capital of the Company as enlarged by the full exercise of the conversation rights attaching to the Preferred Shares.

Long positions in members of the Group

			Approximate
			percentage of
			shareholding in
			the members of
Name of shareholders	Types of Interest	Equity interest held	the Group
Shandong Inspur Software	Beneficial owner	RMB7,000,000 in the registered	46.67%
Company Limited#		capital of Shandong Langchao
(山東浪潮齊魯軟件產業股		Electronic Business Software
份有限公司)		Company Limited#
Shanghai Huili Co. Ltd.#	Beneficial owner	RMB50,000 in the registered	10%
(上海滙力有限公司)		capital of Shanghai Guoqiang
		Genersoft Incorporation#
Wang Xingshan	Beneficial owner	RMB300,000 in the registered	10%
		capital of Inspur Guangdong
		Genersoft Technology
		Incorporation#
Webgroup Co.	Beneficial owner	US$14,504 in the registered	10.36%
		capital of Langchao Gaoyou
		(Shanghai) Services Incorporation#
		高優(上海)信息科技有限公司

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GENERAL INFORMATION

APPENDIX

			Approximate
			percentage of
			shareholding in
			the members of
Name of shareholders	Types of Interest	Equity interest held	the Group
Fang Wensheng	Beneficial owner	RMB225,000 in the registered	37.5%
		capital of Inspur Fangzhi
Bao Jianhua	Beneficial owner	RMB90,000 in the registered	15%
		capital of Inspur Fangzhi

# English names are for identification purpose only

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying Shares (including any interests in options in respect of such capital), which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was expected, directly or indirectly, to be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.

3. DIRECTORS’ OTHER INTEREST

As at the Latest Practicable Date, so far as the Directors are aware of, none of themselves or their respective associates had any interest in a business which competes or may compete with the business of the Group or any other conflicts of interest with the Group.

As at the Latest Practicable Date, none of the Directors has any interest, either direct or indirect, in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2007, being the date to which the latest published audited financial statements of the Company were made up.

There is no contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date in which any Director is materially interested and which is significant to the business of the Group.

4. SERVICE CONTRACTS

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

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 2007, being the date to which the latest audited financial statements of the Company were made up.

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GENERAL INFORMATION

APPENDIX

6. EXPERT

AsiaVest Partners has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and/or references to its name in the form and context in which they appear.

The following is the qualification of the expert who has provided its advice, which are contained in this circular:

Name

Qualification

AsiaVest Partners A licensed corporation to carry out type 6 (advising on corporate finance) of the regulated activity under the SFO

As at the Latest Practicable Date, AsiaVest Partners was not beneficially interested in the share capital of any member of the Group nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any Shares, convertible securities, warrants, options or derivatives which carry voting rights in any member of the Group nor did it have any interest, either direct or indirect, in any assets which have been, since the date to which the latest published audited financial statements of the Company were made up (i.e. 31 December 2007), acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group.

7. MISCELLANEOUS

(a) The registered office of the Company is at Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands, and the head office and principal place of business in Hong Kong of which is at Room 726, Nan Fung Commercial Centre, 19 Lam Lok Street, Kowloon Bay, Kowloon, Hong Kong.
(b) The principal share registrar and transfer office of the Company is Butterfield Fulcrum Group (Cayman) Limited at Butterfield House, 68 Fort Street, P.O. Box 705, George Town, Grand Cayman KY1-1107, Cayman Islands and the Hong Kong branch share registrar and transfer office of which is Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong
(c) The company secretary of the Company is Ms. Chan Wing who is an associate member of the Hong Kong Institute of Certified Public Accountants.
(d) The English text of this circular and the accompanying form of proxy shall prevail over their respective Chinese texts in case of inconsistency.

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GENERAL INFORMATION

APPENDIX

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the Company’s principal place of business in Hong Kong from the date of this circular up to and including the date of the EGM:

(i) New Framework Agreement;
(ii) the master agreement dated 10 March 2008 between IPG and Inspur Genersoft in relation to sale of software products, purchase of computer products and use of common services;
(iii) the processing agreement dated 10 March 2008 between Inspur Cheeloo and Inspur Business in relation to procurement of raw materials and assembly and manufacture of tax-collection cashier machines;
(iv) the master agreement dated 9 November 2007 between Inspur Communication and IPG in relation to sale of software and related services to Shandong Inspur, purchase of computing machines from a subsidiary of IPG and use of common services;
(v) the master purchase agreement dated 29 August 2006 between the Company and IPG in relation to purchase of computer hardware and software products by the Group from Inspur Group;
(vi) the master services agreement dated 29 August 2006 between the Company and IPG in relation to provision of IT services by the Group to the Inspur Group;
(vii) the master supply agreement dated 29 August 2006 between the Company and IPG in relation to supply of computer hardware products by the Group to Inspur Group;
(viii) the selling agency agreement dated 29 August 2006 between the Company and IPG in relation to sale of computer software products by the Inspur Group for and on behalf of the Group (varied by a supplemental agreement dated 15 September 2006) together with the aforesaid supplemental agreement; and
(ix) the sourcing agent agreement dated 29 August 2006 between the Company and IPG in relation to overseas sourcing of computer components by the Group.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

**INSPUR INTERNATIONAL LIMITED 浪潮國際有限公司[*]**

(Incorporated in the Cayman Islands with limited liability)

(Stock Code:596)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (“ EGM ”) of Inspur International Limited (the “Company” ) will be held at 10:00 a.m. on Monday, 16 March 2009 at Hong Kong International Trade & Exhibition Centre, Meeting Room 5, 7th Floor, 1 Trademart Drive, Kwoloon Bay, Kowloon, Hong Kong for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolution as ordinary resolution:

ORDINARY RESOLUTION

“THAT :

(a) the new framework agreement dated 12 January 2009 (the “Agreement” ) entered into between Inspur International Limited (the “ Company ”) and Inspur Group Limited (浪潮集團有限公司) (“ IPG ”) in relation to the continuing connected transactions between the Company and its subsidiaries of one part and IPG and its subsidiaries of another part (details of the Agreement are set out in the Company’s circular dated 27 February 2009 (the “ Circular ”), copies of the Agreement and the Circular have been tabled at the meeting and marked “A” and “B” initialled by the Chairman of EGM for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(b) the Caps (as defined and more particularly described in the Circular) be and are hereby approved and confirmed; and
(c) the directors of the Company be and are hereby authorized to do such acts and execute such other documents as they may consider necessary, desirable or expedient to carry out or give effect to or otherwise in connection with or in relation to the Agreement, the Caps and all transactions contemplated thereunder.”

By Order of the Board Inspur International Limited Sun Pishu

Chairman

Hong Kong, 27 February 2009

* For identification purpose only

— 46 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

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

Head office and Principal place of business in Hong Kong: Room 726

Nan Fung Commercial Centre 19 Lam Lok Street Kowloon Bay Kowloon Hong Kong

Notes:

A member entitled to attend and vote at the EGM is entitled to appoint one or more proxy to attend and, subject to the provisions of the articles of association of the Company, to vote on his behalf. A proxy need not be a member of the Company but must be present in person at the EGM to represent the member. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed.
In order to be valid, the form of proxy must be duly completed and signed in accordance with the instructions printed thereon and deposited together with a power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority, at the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1806-1807, 18th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the EGM or any adjournment thereof, should he so wish.
In the case of joint holders of shares, any one of such holders may vote at the EGM, either personally or by proxy, in respect of such share as if he was solely entitled thereto, but if more than one of such joint holder are present at the EGM personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such shares shall alone be entitled to vote in respect thereof.
The voting on the resolution at the EGM will be conducted by way of a poll.

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AI assistant

Inspur Digital Enterprise Technology Limited — Proxy Solicitation & Information Statement 2009

49324_rns_2009-02-26_63dd8994-15f4-41fd-87d7-cb6c2ba09f8b.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

INSPUR INTERNATIONAL LIMITED 浪潮國際有限公司[*]

RENEWAL AND INTEGRATION OF CONTINUING CONNECTED TRANSACTIONS

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

INSPUR INTERNATIONAL LIMITED 浪潮國際有限公司[*]

(Stock Code:596)

Independent Non-executive Directors:

To the Shareholders

RENEWAL AND INTEGRATION OF CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM THE BOARD

BACKGROUND OF THE CONTINUING CONNECTED TRANSACTIONS

Continuing connected transactions with the Inspur Group set out in the 2006 Circular

LETTER FROM THE BOARD

Continuing connected transactions with the Inspur Group set out in the 2007 Circular and the 2007 Announcement

LETTER FROM THE BOARD

Continuing connected transactions with the Inspur Group set out in the 2008 Circular

LETTER FROM THE BOARD

NEW FRAMEWORK AGREEMENT

Types of products and services

LETTER FROM THE BOARD

Pricing and other terms

(ii) Provision of IT products and services

Payment terms

LETTER FROM THE BOARD

2. Selling Agency Transactions

3. Purchase Transactions

Types of products

LETTER FROM THE BOARD

Pricing

Payment terms

5. Processing Transactions

LETTER FROM THE BOARD

ORIGINAL AND PROPOSED ANNUAL CAPS

LETTER FROM THE BOARD

(A) Supply Transactions

LETTER FROM THE BOARD

(B) Selling Agency Transactions

LETTER FROM THE BOARD

(C) Purchase Transactions

LETTER FROM THE BOARD

(D) Common Services Transactions

(E) Processing Transactions

REASONS FOR AND BENEFITS OF ENTERING INTO NEW FRAMEWORK AGREEMENT

LETTER FROM THE BOARD

IMPLICATION UNDER THE LISTING RULES

LETTER FROM THE BOARD

EGM

RECOMMENDATIONS

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

INSPUR INTERNATIONAL LIMITED 浪潮國際有限公司[*]

RENEWAL AND INTEGRATION OF CONTINUING CONNECTED TRANSACTIONS

LETTER OF ADVICE FROM ASIAVEST PARTNERS

AsiaVest Partners Limited

Inspur International Limited

RENEWAL AND INTEGRATION OF CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

LETTER OF ADVICE FROM ASIAVEST PARTNERS

BASIS OF OUR OPINION

PRINCIPAL FACTORS CONSIDERED

LETTER OF ADVICE FROM ASIAVEST PARTNERS

LETTER OF ADVICE FROM ASIAVEST PARTNERS

II. The New Framework Agreement

1. Supply Transactions

Types of products and services

Pricing and other terms

(ii) Provision of IT products and services

Payment terms

Our works and opinion

The Supply Transaction

LETTER OF ADVICE FROM ASIAVEST PARTNERS

Annual Caps

Historical Annual Cap

Inspur Digital Enterprise Technology Limited Proxy Solicitation & Information Statement 2009

**INSPUR INTERNATIONAL LIMITED 浪潮國際有限公司[*]**

**INSPUR INTERNATIONAL LIMITED 浪潮國際有限公司[*]**

**INSPUR INTERNATIONAL LIMITED 浪潮國際有限公司[*]**

**INSPUR INTERNATIONAL LIMITED 浪潮國際有限公司[*]**