Kingwisoft Technology Group Company Limited - Proxy Solicitation & Information Statement 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) 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.

==> picture [145 x 82] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) (Stock code: 8295)

CONTINUING CONNECTED TRANSACTION – INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent Financial Adviser to the IBC and the Independent Shareholders

A notice convening the extraordinary general meeting of the Company (“ EGM ”) to be held at Suite 601, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong on Monday, 21 March 2016 at 10:00 a.m. is set out on pages 48 to 49 of this circular. A form of proxy for use at the EGM is enclosed with this circular. Whether or not you intend to attend the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Hong Kong branch share registrar and transfer office of the Company, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting should you so wish.

This circular will remain on the website of the Growth Enterprise Market (“ GEM ”) of the Stock Exchange at www.hkgem.com on the “Latest Company Announcements” page for at least seven days from the date of its posting and on the website of the Company at www.asiancapital.com.hk.

4 March 2016

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

– i –

	Page
CHARACTERISTICS OF GEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	i
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
LETTER FROM THE IBC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . .	17
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	48

– ii –

DEFINITIONS

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

“Adjusted Asset Value”

the benchmark price mutually agreed by Asian Capital (Corporate Finance) and Zhongzhi Capital, representing the average of the sum of (i) asset value of an Asset determined by reference to the closing price of the Asset as at the date of the IAM Agreement; and (ii) cost of the Asset as provided and confirmed by Zhongzhi Capital (the aggregate cost of the Investment Portfolio amounted to approximately HK$1.4 billion and the aggregate Adjusted Asset Value of the Investment Portfolio amounted to approximately HK$2.7 billion as at the date of the IAM Agreement)

“Allied Target”

Allied Target Holdings Limited, a company incorporated in Hong Kong which is an investment holding company owned as to 70% by Mr. Yeung and 30% by Phillip Capital

“Announcements”

the announcement of the Company dated 2 February 2016 in relation to, among other things, the entering into of the IAM Agreement and the clarification announcement of the Company dated 16 February 2016

“Annual Caps”

the maximum remuneration payable to the Group by Zhongzhi Capital for the relevant period in terms of management fee and performance fee under the IAM Agreement, details of which are set out in the paragraph headed “Proposed Annual Caps” under the section headed “IAM Agreement” in the letter from the Board of this circular

“Asian Capital (Corporate Finance)”

Asian Capital (Corporate Finance) Limited, a licensed corporation under the SFO to carry on type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities and a wholly-owned subsidiary of the Company

“Asset”

any listed securities contained in the Investment Portfolio, or such other shares as the parties to the IAM Agreement may agree from time to time

– 1 –

DEFINITIONS

“associate(s)” has the same meaning ascribed to it under the GEM Listing Rules
“Board” the board of Directors
“Business Day(s)” a day (other than Saturday) on which banks in both Hong Kong and the PRC are generally open for business
“Commencement Date” the date on which all the Conditions Precedent have been satisfied
“Company” Asian Capital Holdings Limited, a company incorporated in the Cayman Islands with limited liability and the Shares of which are listed on GEM (Stock code: 8295)
“Conditions Precedent” the conditions precedent to the IAM Agreement, details of which are set out in the paragraph headed “Principal terms – Conditions Precedent” under the section headed “IAM AGREEMENT” in the letter from the Board of this circular
“connected person(s)” has the same meaning ascribed to it under the GEM Listing Rules
“Director(s)” the director(s) of the Company
“EGM”
the extraordinary general meeting of the Company to be convened for the purpose of considering, and if thought fit, approving, inter alia , the IAM Agreement and the proposed Annual Caps
“GEM” the Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules”
the Rules Governing the Listing of Securities on GEM
“Group” the Company and its subsidiaries
“HK$”
Hong Kong dollar, the lawful currency of Hong Kong
“HKIFA”
the Hong Kong Investment Funds Association, a nonprofit-making industry organisation that represents the fund management industry of Hong Kong and was incorporated in 1986 as a company limited by guarantee

– 2 –

DEFINITIONS

“Hong Kong”

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

“IAM Agreement”

the investment advisory and management agreement dated 2 February 2016 entered into between Zhongzhi Capital and Asian Capital (Corporate Finance)

“IBC”
the independent board committee of the Company comprising all the independent non-executive Directors, namely Mr. Chan Kai Nang, Mr. Tsui Pui Yan and Mr. Yi Xiqun, which has been established to advise the Independent Shareholders in respect of the IAM Agreement and the proposed Annual Caps
“Independent Financial Adviser” Investec Capital Asia Limited, a corporation licensed to conduct type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO, and is the independent financial adviser appointed to advise the IBC and the Shareholders in respect of the IAM Agreement and the proposed Annual Caps
“Independent Shareholder(s)”
the Shareholder(s) who are not materially interested in the IAM Agreement and are not required to abstain from voting at the EGM
“Investment Portfolio” the portfolio of Asset under the IAM Agreement, the market value of which amounting to approximately HK$4 billion as at the date of the IAM Agreement
“January Circular”
the circular dated 28 January 2016 issued by the Company in relation to, among other things, the Subscription Agreement and the New Shares Placing Agreement
“Jinhui”
Jinhui Capital Company Limited, a company incorporated in the British Virgin Islands with limited liability and is wholly-owned by Zhongzhi Capital
“Kang Bang”
Kang Bang Qi Hui (HK) Company Limited, a company incorporated in Hong Kong with limited liability and is wholly-owned by Zhongzhi Capital

– 3 –

DEFINITIONS

“Latest Practicable Date”
“Licensing Conditions”
1 March 2016, being the latest practicable date for the purpose of ascertaining certain information for inclusion in this circular
the conditions imposed on the SFC Licence in respect of type 9 (asset management) regulated activity held by Asian Capital (Corporate Finance), which includes the followings:–
(a) the licensee shall not conduct business involving the discretionary management of any collective investment scheme. The term “collective investment scheme” is as defined under the SFO; and
(b) the licensee shall not provide a service of managing a portfolio of futures contracts for another person
“Master Link”
“Mr. Yeung”
“New Shares Placing”
“New Shares Placing Agreement”
“New Shares Placing Completion”
“Phillip Capital”
Master Link Assets Limited, a company incorporated in the British Virgin Islands with limited liability whose entire issued share capital is beneficially owned by Mr. Yeung
Mr. Yeung Kai Cheung Patrick, the Executive Chairman of the Company and an executive Director
the placing of an aggregate of 400,000,000 new Shares pursuant to the terms of the New Shares Placing Agreement
the placing agreement dated 5 January 2016 entered into between the Company and Haitong International Securities Company Limited in relation to the New Shares Placing, details of which are disclosed in the January Circular
completion of the New Shares Placing pursuant to the New Shares Placing Agreement

Phillip Capital (HK) Limited, a company incorporated in Hong Kong, which is an investment holding company owned as to 85% by Mr. Lim Hua Min

– 4 –

DEFINITIONS

“PRC” the People’s Republic of China but excluding, for the purposes of this circular, Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan
“RMB”

Renminbi, the lawful currency of the PRC

“SFC”
the Securities and Futures Commission of Hong Kong
“SFC Licence”
the SFC licence issued or given to and maintained by Asian Capital (Corporate Finance)
“SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company
“Share Purchase” the purchase of an aggregate of 648,345,791 Shares by Jinhui and Kang Bang pursuant to the Share Purchase Agreement
“Share Purchase Agreement”

the share purchase agreement dated 28 October 2015 entered into among Master Link, Allied Target, Phillip Capital, Jinhui, Kang Bang, Mr. Yeung and Zhongzhi Capital in respect of the Share Purchase (as amended and supplemented by the supplemental share purchase agreement dated 5 January 2016), details of which are disclosed in the January Circular

“Share Purchase Completion”
completion of the Share Purchase pursuant to the Share Purchase Agreement
“Shareholder(s)”

holder(s) of the Share(s)

“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“Subscription”

the subscription of an aggregate of 1,630,756,836 new Shares by Jinhui and Kang Bang pursuant to the Subscription Agreement

– 5 –

DEFINITIONS

“Subscription Agreement”

the subscription agreement dated 28 October 2015 entered into among the Company, Jinhui and Kang Bang in respect of the Subscription (as amended and supplemented by the supplemental subscription agreement dated 5 January 2016), details of which are disclosed in the January Circular

“Subscription Completion” completion of the Subscription pursuant to the Subscription Agreement
“Total Asset Value”
aggregate asset value of each Asset as at each Valuation Date, determined by reference to the average closing market price of each Asset as quoted on the relevant stock exchange of the last trading day of each of the three calendar months of that quarter
“US$”
U.S. Dollar, the lawful currency of the United States of America
“Valuation Date” the last day of each quarter of every calendar year, being 31 March, 30 June, 30 September and 31 December; and if such date is not a Business Day, the preceding Business Day
“Zhong Hai Sheng Rong” 中海晟融(北京)資本管理有限公司 (Zhong Hai Sheng Rong (Beijing) Capital Management Company Limited*), a company incorporated in the PRC with limited liability and is wholly-owned by Mr. Xie Zhikun
“Zhongzhi Capital” 中植資本管理有限公司 (Zhongzhi Capital Group), a company incorporated in the PRC with limited liability and is owned as to 95% by Zhong Hai Sheng Rong and as to 5% by 北京中海聚融投資管理有限公司 (Beijing Zhong Hai Ju Rong Investment Management Company Limited), respectively
“Zhongzhi Capital”

“%”

per cent

Certain amounts and percentages figures included in this circular are subject to rounding adjustments.

Unless the context requires otherwise, translation of RMB into HK$ is made in this circular, for illustration purpose only, at the rate of approximately RMB1 = HK$1.18.

For identification purpose only

– 6 –

LETTER FROM THE BOARD

==> picture [145 x 81] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 8295)

Executive Directors: Mr. YEUNG Kai Cheung Patrick (Executive Chairman) Mr. CHAN Hok Leung

Registered office: P.O. Box 309, Ugland House Grand Cayman, KY1-1104 Cayman Islands

Non-executive Director: Mr. XIN Luo Lin (Honorary Chairman) Independent non-executive Directors: Mr. CHAN Kai Nang Mr. TSUI Pui Yan Mr. YI Xiqun

Head office and principal place of business in Hong Kong: Suite 601, Bank of America Tower 12 Harcourt Road Central, Hong Kong

4 March 2016

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTION – INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

References are made to (i) the Announcements in respect of the IAM Agreement; and (ii) the joint announcement dated 24 February 2016 issued by the Company and Jinhui in relation to, among other things, the Share Purchase Completion and the Subscription Completion.

On 2 February 2016, Asian Capital (Corporate Finance) entered into the IAM Agreement with Zhongzhi Capital, pursuant to which Asian Capital (Corporate Finance) is conditionally appointed as an investment manager of Zhongzhi Capital for managing the Investment Portfolio. The IAM Agreement is conditional upon the Conditions Precedent having been fulfilled.

– 7 –

LETTER FROM THE BOARD

The purpose of this circular is to provide the Shareholders with further details of, among other things, (i) the IAM Agreement; (ii) the letter from the IBC to the Independent Shareholders; (iii) the letter of advice from the Independent Financial Adviser to the IBC and the Independent Shareholders; and (iv) the notice convening the EGM.

IAM AGREEMENT

Asian Capital (Corporate Finance), a wholly-owned subsidiary of the Company, entered into the IAM Agreement with Zhongzhi Capital on 2 February 2016, pursuant to which Asian Capital (Corporate Finance) is conditionally appointed as an investment manager of Zhongzhi Capital for managing the Investment Portfolio.

Principal terms

The principal terms of the IAM Agreement include:

Conditions Precedent:

The IAM Agreement is conditional upon the following conditions precedent having been fulfilled:

(a) the Share Purchase Completion and Subscription Completion having taken place; and
(b) the issue of announcement by the Company and the passing of all relevant resolutions in relation to the IAM Agreement at the EGM.

As at the Latest Practicable Date, Condition Precedent (a) above has been fulfilled.

Term of appointment:

Commencing on the date on which all the Conditions Precedent are satisfied and expiring on 31 March 2018 and is renewable on mutual agreement in writing between Zhongzhi Capital and Asian Capital (Corporate Finance) subject to compliance with the applicable GEM Listing Rules unless terminated pursuant to the terms of the IAM Agreement.

Scope of services:

Asian Capital (Corporate Finance) shall provide investment advice and investment management services in managing the Investment Portfolio (including but not limited to identifying and evaluating investment and divesting opportunities, advising, implementing and monitoring investments) to Zhongzhi Capital.

– 8 –

LETTER FROM THE BOARD

Remuneration:

Asian Capital (Corporate Finance) will be entitled to either (a) management fee; or (b) performance fee, but not both, according to the following:

(a) Management fee

A quarterly management fee, which is payable in arrears within 90 days after the end of each calendar year shall be calculated in accordance with the formula below:

Management fee = V x R x 3/12

V: Total Asset Value (as at each Valuation Date)
R: Rate of the management fee, which is equivalent to (i) 0.5% per annum if the Licensing Conditions have not been withdrawn by the SFC during the term of the IAM Agreement; or (ii) 1.0% per annum if the Licensing Conditions have been withdrawn by the SFC during the term of the IAM Agreement and commencing from the date thereof

(b) Performance fee

In the event there is any disposal of an Asset by Zhongzhi Capital during the term of the IAM Agreement, a performance fee, which shall be payable within 90 days after the receipt of the amount realised from such disposal by Zhongzhi Capital, calculated in accordance with the formula below:

Performance fee = (P2 - P1 - C) x F

P1: Adjusted Asset Value in respect of the Asset
P2: Gross amount realised from the disposal of the Asset
C: Relevant tax liability arising therefrom
F: Rate of the performance fee, which is equivalent to 30%

If the calculation for the performance fee produces a negative figure, no performance fee shall be payable by Zhongzhi Capital.

– 9 –

LETTER FROM THE BOARD

Determination of the remuneration

The total remuneration accrued by Zhongzhi Capital to Asian Capital (Corporate Finance) during a particular calendar year shall represent:

(i) the performance fee, if the performance fee is higher than the management fee; or
(ii) the management fee, if the management fee is no less than the performance fee.

The total remuneration under the IAM Agreement, including the management fee and the performance fee, were determined after arm’s length negotiations between Zhongzhi Capital and Asian Capital (Corporate Finance) with reference to the terms of investment management service (including the relevant remuneration packages) of other listed companies in Hong Kong. The terms of investment management service of these listed companies typically have (i) management fee which ranged from 1.5% to 2% of the asset value of the portfolio per annum; and (ii) performance fee which ranged from 10% to 20% of the investment return by comparing to the benchmark value of the assets in the portfolio. Moreover, Zhongzhi Capital and Asian Capital (Corporate Finance) also considered (i) the anticipated size of the Investment Portfolio, associated costs and expenses involved for the provision of advisory and asset management services; (ii) the duties and responsibilities of Asian Capital (Corporate Finance) under the IAM Agreement; (iii) the Licensing Conditions; and (iv) the fact that only one of the fees (management fee or performance fee), but not both, will be accrued under the IAM Agreement.

The Group has recently employed Mr. Alfred Lim, who was a type 9 (asset management) responsible officer possessing over 25 years of experience in the asset management industry and investment field, to supervise the growing asset management business of the Group. It is expected that Mr. Alfred Lim, together with the Group’s existing and expanding team, will monitor the asset management services pursuant to the internal control policy and ensure that the remuneration policy as set out in the IAM Agreement will be consistently applied throughout the term of the IAM Agreement. Moreover, the audit committee of the Board will regularly review the relevant internal control procedures when performing annual review of the continuing connected transactions before making its confirmations pursuant to the GEM Listing Rules.

Having considered the above, the Directors are of the view that the terms of the IAM Agreement, including the relevant remuneration, are on normal commercial terms and in the interest of the Shareholders as a whole.

Historical transaction amounts

There was no historical transaction amount between the Group and Zhongzhi Capital in relation to the provision of investment advisory and management services during the three years ended 31 December 2014 and up to the Latest Practicable Date.

– 10 –

LETTER FROM THE BOARD

Proposed Annual Caps

It is proposed that the Annual Caps for the following periods will be limited to as follow:

	Proposed
Period covered	Annual Cap
	HK$
Commencement Date to 31 March 2016 (Note)	150,000,000
1 April 2016 to 31 March 2017	250,000,000
1 April 2017 to 31 March 2018	250,000,000

Note: Assuming the IAM Agreement will become unconditional before 31 March 2016.

In the event that the aggregate annual management fee and performance fee payable to the Group by Zhongzhi Capital under the IAM Agreement exceeds the respective proposed Annual Cap for any of the periods stated above, the Company will comply with all the relevant requirements of Chapter 20 of the GEM Listing Rules as and when necessary.

Basis of determination of the Annual Caps

The proposed Annual Caps were determined based on the expected remuneration (taking into account the anticipated tax obligations on disposal of the Investment Portfolio) under the IAM Agreement and assuming the market value of the Assets will remain at similar level from the Commencement Date to 31 March 2018. The Annual Cap for the period from the Commencement Date to 31 March 2016 was determined having considered (i) there was an initial gap of approximately HK$1.3 billion between the Adjusted Asset Value and the market value of the Investment Portfolio as at the date of the IAM Agreement; (ii) the stock markets have been extremely volatile since 1 January 2016 and there is a possibility that a substantial amount (up to 40%) of the Asset initially contained in the Investment Portfolio may be realized upon commencement of service under the IAM Agreement; and (iii) there is a possibility that the market value of the Investment Portfolio may fluctuate significantly from the date of the IAM Agreement to 31 March 2016 amid the said extremely volatile stock markets. These factors may all give rise to a significant performance fee (net of relevant tax of liability of 20%) even in the short period to 31 March 2016.

The proposed Annual Caps for the periods from 1 April 2016 to 31 March 2017 and 1 April 2017 to 31 March 2018 were determined based on (i) some of the Assets (not less than 60%) initially contained in the Investment Portfolio, of which the market value is approximately HK$1.3 billion higher than the Adjusted Asset Value as at the date of the IAM Agreement, may be realized during the two periods; (ii) it is expected that Asian Capital (Corporate Finance) will manage the Assets with average market value close to HK$4.0 billion; and (iii) it is further expected that there will be investment returns (anticipated to be not less than 8%) to the Investment Portfolio through the services to be provided under the IAM Agreement.

– 11 –

LETTER FROM THE BOARD

Reasons for entering into the IAM Agreement

The Group, through Asian Capital (Corporate Finance), is licensed to carry on type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO.

As disclosed in the January Circular, Asian Capital (Corporate Finance) intended to activate its type 9 (asset management) regulated activity to offer more comprehensive services to its clients. The Group has recently employed Mr. Alfred Lim, who, together with the existing and expanding team of Asian Capital (Corporate Finance), will enable Asian Capital (Corporate Finance) to carry out the asset management services. With new capital from the Subscription and the New Shares Placing and leveraging upon the strength of Zhongzhi Capital in the businesses of asset management and investment, the Board believes that the Group will be able to also engage in these lines of businesses to expand and diversify its income stream for the benefit of the Company and its Shareholders as a whole.

The Directors (including the independent non-executive Directors) consider that the terms of the IAM Agreement are on normal commercial terms, in the ordinary and usual course of business of the Group, fair and reasonable and are in the interests of the Company and the Shareholders as a whole, and that the proposed Annual Caps are fair and reasonable.

Apart from the asset management business under the IAM Agreement, after the Subscription Completion and New Shares Placing Completion which took place on 24 February 2016, the Group will continue to develop the corporate finance activities, underwriting business, securities investments as well as money lending business and explore the possibility of expansion of investment including mergers and acquisitions as well as asset management business to jurisdictions other than Hong Kong. It is intended that the aggregate net proceeds from the Subscription and the New Shares Placing will be applied in (i) underwriting business; (ii) money lending business; (iii) proprietary investment business; (iv) asset management business; and (v) business expansion, details of which are set out in the section headed “Letter from the Board – Reasons for and benefits of the Subscription and the New Shares Placing – Intended use of proceeds of the Subscription and the New Shares Placing” in the January Circular. With these development plans moving ahead together with the Group’s existing businesses, the Group plans to reduce the level of reliance on the IAM Agreement. The Board expects that, since the Group will not solely be reliant on any particular line of the business, the Group’s overall performance will benefit from a balanced mix of revenue in the future.

INFORMATION ON THE PARTIES

The Group

– 12 –

LETTER FROM THE BOARD

Asian Capital (Corporate Finance) is a corporation licensed to carry on type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO. Based on its qualification as a Qualified Foreign Limited Partnership, Asian Capital (Corporate Finance) is in the process of applying for and setting up a wholly-owned foreign funded equity investment management enterprise in Qianhai, Shenzhen, the PRC.

Zhongzhi Capital

Zhongzhi Capital is owned as to 95% by Zhong Hai Sheng Rong and as to 5% by 北京中海聚融投資管理有限公司 (Beijing Zhong Hai Ju Rong Investment Management Company Limited), respectively. The ultimate parent company of Zhong Hai Sheng Rong is Zhonghai Sheng Feng (Beijing) Capital Management Limited Company (中海晟豐(北京)資本管理有限公司) and the ultimate beneficial owner of which is Mr. Xie Zhikun. Zhongzhi Capital was founded in 2011 with a registered capital of RMB1 billion. Zhongzhi Capital is one of the leading investment managers in China which focuses on acquisition and investment in industry leading enterprises and listed companies and is one of the largest industry consolidation funds in China. Based on its excellent performance, it was awarded by the CV Awards (投中創新榜), issued by China Venture Investment Consulting Group (投中集團), an investment consulting company in the PRC which provides information, data and intelligence relating to the capital markets, as the China’s top ten most active Chinese private equity investment institution in 2015, China’s top ten venture capital and private equity investment institution with the best investment returns in 2015 and China’s top ten most innovative Chinese private equity investment institution, venture capital and private equity investment institution in 2015. Zhongzhi Capital’s key services include private equity investments in the primary market, private placement, mergers and acquisitions of overseas business and funds and merger and acquisition consulting etc. The business partners it works with are ranging from top-tier domestic industry leaders and the world’s leading professional institutions.

RELATIONSHIP BETWEEN THE PARTIES TO THE IAM AGREEMENT

As at the Latest Practicable Date, Jinhui and Kang Bang are the controlling Shareholders interested in a total of 2,279,102,627 Shares, representing approximately 64.78% of the issued share capital of the Company.

Jinhui and Kang Bang are wholly-owned subsidiaries of Zhongzhi Capital. Accordingly, Zhongzhi Capital is a connected person of the Company and the transactions contemplated under the IAM Agreement will constitute continuing connected transactions of the Company under Chapter 20 of the GEM Listing Rules.

LISTING RULES IMPLICATIONS

As the applicable percentage ratios in respect of the proposed Annual Caps exceed 25% and the proposed Annual Caps are more than HK$10,000,000, the transactions contemplated under the IAM Agreement are subject to the reporting, announcement, Independent Shareholders’ approval and annual review requirements under Chapter 20 of the GEM Listing Rules.

– 13 –

LETTER FROM THE BOARD

Since the IAM Agreement is conditional upon the Share Purchase Completion and the Subscription Completion and Master Link and Allied Target were the vendors under the Share Purchase Agreement, Mr. Yeung was deemed to have material interests in the transactions contemplated under the IAM Agreement as at the date of the IAM Agreement. Save for Mr. Yeung who had abstained from voting on the relevant Board resolution to approve the IAM Agreement and the proposed Annual Caps, no Directors were required to abstain from voting on the aforementioned Board resolution.

Jinhui and Kang Bang are wholly-owned subsidiaries of Zhongzhi Capital. Accordingly, Jinhui, Kang Bang and their respective associates are considered to have material interests in the transactions contemplated under the IAM Agreement and shall abstain from voting at the EGM. Since the Share Purchase Completion and the Subscription Completion have already taken place on 24 February 2016, Master Link and Allied Target no longer have any material interests in the transactions contemplated under the IAM Agreement. As such, other than Jinhui, Kang Bang and their respective associates, no Shareholders are required to abstain from voting on the resolution approving the IAM Agreement and the proposed Annual Caps at the EGM.

EGM

The EGM will be convened for the Independent Shareholders to consider and, if thought fit, to pass an ordinary resolution to approve by poll the IAM Agreement and all other transactions contemplated thereunder as well as the proposed Annual Caps. A notice convening the EGM to be held at Suite 601, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong on Monday, 21 March 2016 at 10:00 a.m. is set out on pages 48 to 49 of this circular.

A form of proxy for use at the EGM is enclosed herewith. Whether or not you intend to attend the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Hong Kong branch share registrar and transfer office of the Company, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting should you so wish.

RECOMMENDATIONS

Your attention is drawn to the letters from the IBC and the Independent Financial Adviser on page 16 and pages 17 to 41 of this circular. As set out in the letter from the IBC, members of the IBC, having taken into account and based on the recommendation of the Independent Financial Adviser, consider that the terms of the IAM Agreement and the proposed Annual Caps are fair and reasonable so far as the interests of the Independent Shareholders are concerned and that the entering into of the IAM Agreement is in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that all Independent Shareholders should vote in favour of the resolution to be proposed at the EGM to approve the IAM Agreement and the proposed Annual Caps.

– 14 –

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

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

Yours faithfully,

By order of the Board Asian Capital Holdings Limited LI Pui Yee

Company Secretary

– 15 –

LETTER FROM THE IBC

==> picture [145 x 81] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) (Stock code: 8295)

4 March 2016

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTION – INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

We refer to the circular dated 4 March 2016 issued by the Company (the “ Circular ”) of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein, unless the context otherwise requires.

We have been appointed as members of the IBC to advise the Independent Shareholders in respect of the IAM Agreement and the proposed Annual Caps, details of which are set out in the letter from the Board in the Circular. Investec Capital Asia Limited has been appointed to advise the IBC and the Independent Shareholders in respect of the IAM Agreement and the proposed Annual Caps.

We wish to draw your attention to the letter from the Board set out on pages 7 to 15 of the Circular which contains, inter alia , information about the terms of the IAM Agreement and the proposed Annual Caps and the letter from the Independent Financial Adviser to the IBC and the Independent Shareholders set out on pages 17 to 41 of the Circular which contains its advice in respect of the terms of the IAM Agreement and the proposed Annual Caps. Having considered the terms of the IAM Agreement and taking into account the advice from the Independent Financial Adviser, we concur with the views of the Independent Financial Adviser and consider that the IAM Agreement is on normal commercial terms and in the ordinary and usual course of business of the Group. We also consider that the terms of the IAM Agreement and the proposed Annual Caps are fair and reasonable so far as the interests of the Independent Shareholders are concerned and that the entering into of the IAM Agreement is in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the IAM Agreement and the proposed Annual Caps.

Yours faithfully, For and on behalf of the IBC

Mr. CHAN Kai Nang Independent non-executive Director

Mr. TSUI Pui Yan Independent non-executive Director

Mr. YI Xiqun Independent non-executive Director

– 16 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the text of a letter of advice from Investec Capital Asia Limited to the IBC and the Independent Shareholders in respect of the IAM Agreement and the transactions contemplated thereunder which has been prepared for the purpose of inclusion in this circular.

Investec Capital Asia Limited

3609, 36/F, Two International Finance Centre 8 Finance Street, Central, Hong Kong 香港中環金融街8號國際金融中心二期36樓3609室 Tel/電話: (852) 3187 5000

4 March 2016

To: The IBC and the Independent Shareholders of Asian Capital Holdings Limited

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTION IN RELATION TO THE IAM AGREEMENT

A. INTRODUCTION

We refer to our appointment as the independent financial adviser to the IBC and the Independent Shareholders in respect of the continuing connected transaction in relation to the IAM Agreement, details of which are set out in the circular of the Company dated 4 March 2016 (the “ Circular ”), of which this letter forms part. This letter contains our advice to the IBC and the Independent Shareholders as to whether the terms of continuing connected transaction (together with the proposed Annual Caps) are (i) conducted under normal commercial terms and in the usual course of business; (ii) fair and reasonable so far as the Independent Shareholders are concerned and as to voting in respect of the relevant resolution at the EGM; and (iii) in the interests of the Company and the Shareholders as a whole. Unless otherwise stated, terms defined in the Circular have the same meanings in this letter.

As stated in the Circular, on 2 February 2016, Asian Capital (Corporate Finance), a wholly-owned subsidiary of the Company, entered into the IAM Agreement with Zhongzhi Capital, pursuant to which Asian Capital (Corporate Finance) is conditionally appointed as an investment manager of Zhongzhi Capital for managing the Investment Portfolio. The IAM Agreement is conditional upon the fulfillment of the Conditions Precedent.

Jinhui and Kang Bang are wholly-owned subsidiaries of Zhongzhi Capital. With Zhongzhi Capital being a connected person of the Company, transactions contemplated under the IAM Agreement constitutes continuing connected transactions of the Company under Chapter 20 of the GEM Listing Rules. As the applicable percentage ratios in respect of the proposed Annual Caps exceed 25% and the proposed Annual Caps are more than HK$10,000,000, the transactions contemplated under the IAM Agreement are non-exempt continuing connected transactions and subject to the reporting, announcement, Independent Shareholders’ approval and the annual review requirements under Chapter 20 of the GEM Listing Rules.

– 17 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

B. THE IBC

The IBC, comprising all the independent non-executive Directors, namely Mr. Chan Kai Nang, Mr. Tsui Pui Yan and Mr. Yi Xiqun, has been established to advise the Independent Shareholders as to the continuing connected transaction. As the Independent Financial Adviser to the IBC and Independent Shareholders, our role is to give an independent opinion to the IBC and the Independent Shareholders as to whether the transaction contemplated under the IAM Agreement and the proposed Annual Caps are on normal commercial terms, in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole, whether the terms of the IAM Agreement and the proposed Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned and as to voting in respect of the relevant resolution at the EGM.

We also act as independent financial adviser to the independent board committee and independent shareholders of the Company in relation to mandatory unconditional cash offers of the shares and options of the Company. Under this engagement, we provided independent advisory services to the IBC and Independent Shareholders of the Company pursuant to the GEM Listing Rules, and received a normal advisory fee from the Company for such services. Notwithstanding our relationship with the Company due to the said engagement, we have assessed that such relationship would not affect our independence in providing the advice to the IBC and the Independent Shareholders regarding the IAM Agreement and the proposed Annual Caps.

As at the Latest Practicable Date, we were independent from and not connected with the Group pursuant to Rule 17.96 of the GEM Listing Rules, and accordingly, qualified to give independent advice to the IBC and the Independent Shareholders regarding the IAM Agreement and the proposed Annual Caps. Apart from the normal advisory fee payable to us in connection with our appointment as the Independent Financial Adviser, no arrangement exists whereby we shall receive any other fees or benefits from the Company.

C. BASIS OF OUR OPINION

In formulating our advice, we have relied solely on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Group and/or the Directors. We have assumed that all such statements, information, opinions and representations contained or referred to in the Circular or otherwise provided or made or given by the Group and/or the Directors and/or its senior management staff (the “ Management ”) and for which it is/they are solely responsible were true and accurate and valid at the time they were made and given and continue to be true and valid as at the date of the Circular. We have assumed that all the opinions and representations made or provided by the Directors and/or the Management contained in the Circular have been reasonably made after due and careful enquiry. We have also sought and obtained confirmation from the Company and/or the Directors and/or the Management that no material facts have been omitted from the information provided and referred to in the Circular.

– 18 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We consider that we have reviewed all information and documents which are made available to us to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our advice. We have no reason to doubt the truth, accuracy and completeness of the statements, information, opinions and representations provided to us by the Group and/or the Directors and/or its Management and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out any independent verification of the information provided, nor have we conducted any independent investigation into the businesses and affairs of the Group, Zhongzhi Capital, Jinhui and Kang Bang or their respective affiliates.

D. PRINCIPAL FACTORS CONSIDERED

In formulating our opinion regarding the IAM Agreement and the transactions contemplated thereunder, we have taken into consideration the following principal factors:

1. Background information

i. Information on the Group

The Company was incorporated in the Cayman Islands as an exempted company with limited liability and its Shares are listed on GEM. The principal activity of the Company is investment holding and its subsidiaries are principally engaged in the provision of corporate advisory services and related activities, investment in various types of assets as well as money lending and asset management. Asian Capital (Corporate Finance) is a corporation licensed to carry on type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO. Based on its qualification as a Qualified Foreign Limited Partnership, Asian Capital (Corporate Finance) is in the process of applying for and setting up a wholly-owned foreign funded equity investment management enterprise in Qianhai, Shenzhen, the PRC.

– 19 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

ii. Historical financial performance of the Group

Set out below is a summary of the Group’s consolidated statements of income for the year ended 31 December 2014 and 2013 as extracted from the 2014 annual report of the Company (the “ 2014 Annual Report ”) and the unaudited financials for the 12 months ended 31 December 2015 from the 2015 second interim report of the Company (the “ 2015 Second Interim Report ”, published by the Company:

			For the
			12 months
	For the year ended		ended
	31 December		31 December
	2013	2014	2015
	Approximately Approximately		Approximately
	HK$’000	HK$’000	HK$’000
	(Audited)	(Audited)	(Unaudited)
Revenue	31,638	24,937	32,265
– Corporate advisory income	27,094	24,771	30,110
– Placing and underwriting
service income/arrangement
fee	4,346	126	2,155
– Securities dealing
commission	198	40	–
Profit/(Loss) before tax	10,920	(2,116)	8,447
Profit/(Loss) for the period/year
attributable to owners
of the Company	8,635	(1,331)	6,751

For the two years ended 31 December 2013 and 2014

The Group recorded revenue of approximately HK$24.9 million for the year ended 31 December 2014, representing a decrease of approximately 21.2% from approximately HK$31.6 million for the year ended 31 December 2013. Revenue was mainly attributable to income from the Group’s corporate advisory service of approximately HK$24.8 million, representing approximately 99.3% of the Group’s revenue for the year ended 31 December 2014. Revenue for the year ended 31 December 2014 from placing and underwriting service/arrangement fee amounted to approximately HK$0.1 million, representing approximately 0.5% of the Group’s revenue, as compared to revenue from placing and underwriting service of approximately HK$4.3 million, representing approximately 13.7% of the Group’s revenue for the year ended 31 December 2013. Revenue from securities dealing commission contributed approximately HK$0.04 million, representing approximately 0.2% of the Group’s revenue for the year ended 31 December 2014, decreasing from approximately HK$0.2 million for the year ended 31 December 2013.

– 20 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The net loss of the Group amounted to approximately HK$1.3 million for the year ended 31 December 2014 as compared to a net profit of approximately HK$8.6 million for the year ended 31 December 2013. Such significant reversal in the Group’s profitability is mainly attributed to the lack of milestone achievements in distressed asset recovery and listings assignments in 2014. In the absence of such assignments and listings in 2014, profitability of the Group was significantly impacted.

For the 12 months ended 31 December 2015

For the 12 months ended 31 December 2015 the Group generated revenue of approximately HK$32.3 million; representing an increase of approximately 29.4% from approximately HK24.9 million for the year ended 31 December 2014 which was mainly driven by all round increases in corporate advisory income and placing income; whilst operating expenses were contained at a modest period-on-period increase of 5.2% at approximately HK$27.9 million. The resultant pre-tax profit for the 12 months ended 31 December 2015 was approximately HK$8.4 million, compared to a pre-tax loss of approximately HK$2.1 million for the corresponding 12 months period in 2014.

iii. Historical financial position of the Group

Set out below are the consolidated financial positions of the Group as at 31 December 2014 and 2015 as extracted from the 2014 Annual Report and the 2015 Second Interim Report:

Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities Net current assets Net assets/Total equity Net Asset Value (the “NAV”) per Share attributable to owners of the Company (Note)	As at 31 December 2014 2015 Approximately Approximately HK$’000 HK$’000 (audited) (unaudited) 4,351 3,710 132,449 205,779 136,800 209,489 – – 6,374 71,328 6,374 71,328 126,075 134,451 130,426 138,161 HK$0.09 HK$0.10	As at 31 December 2014 2015 Approximately Approximately HK$’000 HK$’000 (audited) (unaudited) 4,351 3,710 132,449 205,779 136,800 209,489 – – 6,374 71,328 6,374 71,328 126,075 134,451 130,426 138,161 HK$0.09 HK$0.10
		209,489

		– 71,328
		71,328

		134,451

		138,161 HK$0.10

Note: The NAV per Share attributable to owners of the Company is calculated based on the Shares in issue as at the end of the respective period/year

– 21 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Financial positions of the Group as at 31 December 2014 and 2015

As set out in the 2015 Second Interim Report, non-current assets of the Group was approximately HK$3.7 million, representing a drop of approximately 14.7% from approximately HK$4.4 million as at 31 December 2014. In relation to the current assets of the Group, the Group aggregated current assets valued at approximately HK$205.8 million as at 31 December 2015, representing an increase of approximately 55.4%. Such increase was mainly attributable to increased amount of cash held by the Company on behalf of its clients. These cash are held and maintained segregated trust accounts with a licensed bank arising from the Company’s normal course of business.

The Group did not record any non-current liabilities as at 31 December 2014 and 2015, while total liabilities as at 31 December 2015 amounted to approximately HK$71.3 million, as compared to total liabilities of approximately HK$6.4 million as at 31 December 2014, representing an increase of approximately HK$64.9 million. Such change was mainly attributable to a significant change in trade payables due to increased client cash holdings in segregated trust accounts. This was reflected in similar magnitude increase in the Company’s current asset and as a result, the change in net assets has been moderate, increasing mildly from approximately HK$130.4 million as at 31 December 2014 to approximately HK$138.2 million as at 31 December 2015.

2. Information on Zhongzhi Capital

Zhongzhi Capital is owned as to 95% by Zhong Hai Sheng Rong and as to 5% by 北京中海聚融投資管理有限公司 (Beijing Zhong Hai Ju Rong Investment Management Company Limited), respectively. The ultimate parent company of Zhong Hai Sheng Rong is Zhonghai Sheng Feng (Beijing) Capital Management Limited Company (中海晟豐(北京)資本管理有限公司) and the ultimate beneficial owner of which is Mr. Xie Zhikun. Zhongzhi Capital was founded in 2011 with a registered capital of RMB1 billion. Zhongzhi Capital is one of the leading investment managers in China which focuses on acquisition and investment in industry leading enterprises and listed companies and is one of the largest industry consolidation funds in China. Based on its excellent performance, it was awarded by the CV Awards (投中創新榜), issued by China Venture Investment Consulting Group (投中集團), an investment consulting company in the PRC which provides information, data and intelligence relating to the capital markets, as the China’s top ten most active Chinese private equity investment institution in 2015, China’s top ten venture capital and private equity investment institution with the best investment returns in 2015 and China’s top ten most innovative Chinese private equity investment institution, venture capital and private equity investment institution in 2015. Zhongzhi Capital’s key services include private equity investments in the primary market, private placement, mergers and acquisitions of overseas business and funds and merger and acquisition consulting etc. The business partners it works with range are ranging from top-tier domestic industry leaders and the world’s leading professional institutions.

– 22 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Reasons for and benefits of the IAM Agreement

==> picture [356 x 168] intentionally omitted <==

----- Start of picture text -----

17,682
18,000
16,007
16,000
14,000 12,587
12,000 10,091 (CAGR:
9,038 15.76%)
10,000 8,507
8,000
6,000
4,000
2,000
-
2009 2010 2011 2012 2013 2014
Combined Fund Management Business
HK$ bn
----- End of picture text -----

Source: SFC’s Fund Management Activities Survey 2013 and 2014

According to the Fund Management Activities Survey 2013 and 2014 published by the SFC, we understand that the fund management business in Hong Kong grew from approximately HK$8.5 trillion in 2009 to approximately HK$17.7 trillion in 2014, and the number of corporations licensed for asset management topped 1000 in 2014, with a compound annual growth rate of approximately 15.76%. Funds from overseas investors have also been on the rise, growing from approximately HK$6.8 trillion in 2010 to approximately HK$12.8 trillion in 2014, which accounted for over 70% to the fund management business in Hong Kong in 2014. To further cement Hong Kong’s position as asset management centre, new initiatives such as improved connectivity between Hong Kong and the PRC capital markets, mutual recognition of funds arrangements, promotion of ETF trades via waived stamp duty were implemented. To ensure the reliable supply of talent into the industry, the Hong Kong Government has further earmarked HK$100.0 million to enhance training for asset and wealth management and the insurance sectors. By many metrics, Hong Kong’s fund management industry is in robust health. The city regularly tops lists of Asian investment management and financial centres, and also ranks highly in global terms. In these uncertain times, it continues to attract investor interest. Gross equity fund sales rose 55% in the first half of 2015 to over US$30 billion, and the same funds lured nearly US$7 billion in net inflows, up 60% from the same period the previous year. Hong Kong remains the preferred gateway to Mainland China, and indeed the region.

– 23 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Equity fund inflows

==> picture [372 x 331] intentionally omitted <==

----- Start of picture text -----

2011(Jan-Nov) USD572 million
2012(Jan-Nov) USD1.2 billion
2013 USD4.6 billion
2014 USD6.9 billion
2015(H1) USD6.7 billion
- 2 4 6 8
Billions
Gross fund sales
2011 USD37.4 billion
2012(Jan-Nov) USD51.4 billion
2013 USD71.1 billion
2014 USD77.7 billion
0 20 40 60 80 100
Billions
----- End of picture text -----

Source: HKIFA

Over the past decade, investment management has been regarded as one of the key growth sectors within Hong Kong’s financial services. This will continue to be the trend if a more focused effort is made to maintain the territory’s position as Asia’s investment management hub, leveraging its free flow of capital and growing links with the Mainland. In the Greater China area there is a lot more wealth generation and larger pockets of wealth than other parts of Asia, and some of the larger institutional investors in the region are in closer proximity to Hong Kong than anywhere else. Hence, Hong Kong’s prospect for further development in the investment and asset management industry is highly promising.

Despite holding the SFC license for Type 9 (Asset Management) regulated activity by its subsidiary, Asian Capital (Corporate Finance), the Group has not been engaged in any substantial business activity to generate any meaningful revenue with respect to this business segment in recent years. Moreover, the current license held by Asian Capital (Corporate Finance) is subject to the following Licensing Conditions:

the licensee shall not provide a service of managing a portfolio of futures contracts for another person; and
the licensee shall not conduct business involving the discretionary management of any collective investment scheme. The term “collective investment scheme” is as defined under the SFO

– 24 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

It is expected that there will be a significant increase in this business segment for the Group upon the entering into the IAM Agreement given the fact that the size of the Investment Portfolio (approximately HK$4 billion as at the date of the IAM Agreement) and the relevant revenue stream associated with managing such portfolio derived from the transactions contemplated under the IAM Agreement will be a major growth driver and contributor to the Group’s revenue base in the future. The Group is also planning to apply to the SFC to lift such aforementioned Licensing Conditions in order to allow for further business development in this area.

Due to the growth potential of investment and asset management related business, we believe that the entering into the IAM Agreement would be beneficial to the Company as it would allow the Group to develop such business from its current small base. As set out in the announcement of the Company dated 2 February, Asian Capital (Corporate Finance) intended to activate its type 9 (asset management) regulated activity to offer more comprehensive services to its clients. The Group has recently employed Mr Alfred Lim, who was a type 9 (asset management) responsible officer possessing over 25 years of experience in the asset management industry and investment field. Together with the existing and expanding team, such addition to the Group will enable Asian Capital (Corporate Finance) to carry out the asset management services to take advantage of the future opportunities in this business segment. In this connection, we have discussed with the Management the internal control related to monitoring the asset management services to ensure the remuneration policy as set out in the IAM Agreement to be consistently applied throughout the term of the IAM Agreement. We understand from our discussion with the Management that (a) the Group’s asset management team will hold regular monthly investment committee meeting to assess market conditions, analyse the value of the Investment Portfolio at the end of each month and review and report on the Investment Portfolio performance; (b) the internal audit of the Company will conduct internal audit on the Investment Portfolio, including the calculation of management fee and performance fee on a quarterly basis; and (c) the audit committee of the Board will also on a quarterly basis review the on the performance of the Investment Portfolio, including the calculation of management fee and performance fee. In addition, we also understand that audit committee of the Board will regularly review the internal control procedures when performing annual review of the continuing connected transactions before making its confirmations pursuant to the GEM Listing Rules. In addition to our discussion with the Management, we have reviewed the operational procedures and internal control policies guideline of Asian Capital (Corporate Finance) along with the curriculum vitae of Mr. Alfred Lim. We also interviewed the Management and based on our work done, we are of the view that the Group will have sufficient and effective internal control procedure to ensure the pricing terms of the IAM Agreement are on normal commercial terms.

As stated in the Circular, we further note that Zhongzhi Capital is one of the leading investment managers in China which focuses on acquisition and investment in industry leading enterprises and listed companies and is one of the largest industry consolidation funds in China, and it was awarded as the China’s top ten most active Chinese private equity investment institution in 2015, China’s top ten venture capital and private equity investment institution with the best investment returns in 2015 and China’s top ten most innovative Chinese private

– 25 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

equity investment institution, venture capital and private equity investment institution in 2015. We understand from our discussion with the Company that Zhongzhi Capital and the business partners it works with range from top-tier domestic industry leaders and the world’s leading professional institutions. Due to its extensive experience, strong expertise and wide business network, the Company considers that it is beneficial to leverage upon the strength of Zhongzhi Capital in the businesses of asset management and investment; the Board believes that the Group will be able to engage further in these lines of businesses to expand and diversify its income stream for the benefit of the Company and its Shareholders as a whole. Specifically, it is noted that with new capital from the Subscription and the New Shares Placing, the Group will leverage on Zhongzhi Capital’s competitive strength in proprietary investment business to expand its proprietary investment business with a view to supporting and enlarging the scope of its underwriting and advising businesses to complement the overall business scope.

We understand from the Company that the Group has been actively looking for opportunities to establish an asset management platform with its type 9 (asset management) regulated activity license. Asset management business and proprietary investment business will complement each other in different aspects and could enhance the overall business synergies of the Group. As Zhongzhi Capital is a leading investment manager in the PRC, the Group intends to actively explore co-operation opportunities in this area. It is expected that approximately 10% of the aggregate net proceeds of the Subscription and the New Shares Placing will be applied towards financing the asset management business. On this basis, we believe that entering into the IAM Agreement adhere to the business plan of the Group and facilitate building the track record capability of the Group, which may, in turn, positively affect the Group’s future business.

Having considered (i) the current business and financial position of the Group; (ii) the industry environment and market prospects of asset management business; (iii) the fact that the Group has not been leveraging its type 9 (asset management) regulated activities license in generating meaningful revenue from asset management related business; (iv) Zhongzhi Capital’s extensive experience as an investment manager, strong expertise and wide business network; and (v) the reasons for and benefits of entering into the IAM Agreement as set out above, we concur with the Directors’ view that the entering into the IAM Agreement (a) is fair and reasonable; (b) will enable the Group to develop a business complementary to its existing business; and (c) is in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole.

4. Principal terms of the IAM Agreement

– 26 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The principal terms of the IAM Agreement are set out below:

Principal terms

The principal terms of the IAM Agreement include:

Conditions Precedent:

The IAM Agreement is conditional upon the following Conditions Precedent having been fulfilled:

(a) the Share Purchase Completion and Subscription Completion having taken place; and
(b) the issue of announcement by the Company and the passing of all relevant resolutions in relation to the IAM Agreement at the EGM.

As at the Latest Practicable Date, the Condition Precedent (a) has been fulfilled.

Term of appointment:

Scope of services:

Remuneration:

Asian Capital (Corporate Finance) will be entitled to either (a) management fee; or (b) performance fee, but not both, according to the following:

(a) Management fee

a quarterly management fee, which is payable in arrears within 90 days after the end of each calendar year shall be calculated in accordance with the formula below:

Management fee = V x R x 3/12

– 27 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

V: Total Asset Value (as at each Valuation Date)
R: Rate of the management fee, which is equivalent to (i) 0.5% per annum if the Licensing Conditions have not been withdrawn by the SFC during the term of the IAM Agreement; or (ii) 1.0% per annum if the Licensing Conditions have been withdrawn by the SFC during the term of the IAM Agreement and commencing from the date thereof

(b) Performance fee

Performance fee = (P2 – P1 – C) x F

P1: Adjusted Asset Value in respect of the Asset
P2: Gross amount realised from the disposal of the Asset
C: Relevant tax liability arising therefrom
F: Rate of the performance fee, which is equivalent to 30%

If the calculation for the performance fee produces a negative figure, no performance fee shall be payable by Zhongzhi Capital.

Determination of the remuneration (the “Remuneration Package”)

The total remuneration accrued by Zhongzhi Capital to Asian Capital (Corporate Finance) during a particular calendar year shall represent:

(i) The performance fee, if the performance fee is higher than the management fee; or
(ii) The management fee, if the management fee is no less than the performance fee.

– 28 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to the Letter from the Board the total remuneration under the IAM Agreement, including the management fee and the performance fee, were determined after arm’s length negotiations between Zhongzhi Capital and Asian Capital (Corporate Finance) with reference to the terms of investment management service (including the relevant remuneration packages) of other listed companies in Hong Kong. The terms of investment management service of these listed companies typically have (i) management fee which ranged from 1.5% to 2% of the asset value of the portfolio per annum; and (ii) performance fee which ranged from 10% to 20% of investment return by comparing to the benchmark value of the assets in the portfolio. Moreover, Zhongzhi Capital and Asian Capital (Corporate Finance) also considered (i) the anticipated size of the Investment Portfolio, associated costs and expenses involved for the provision of advisory and asset management services; (ii) the duties and responsibilities of Asian Capital (Corporate Finance) under the IAM Agreement; (iii) the Licensing Conditions; and (iv) the fact that only one of the fees (management fee or performance fee), but not both, will be accrued under the IAM Agreement.

5. Analysis of the principal terms of the IAM Agreement

To determine whether or not the proposed terms of the IAM Agreement are comparable to those remuneration packages charged by other companies with investment management business whose shares are listed on the Stock Exchange, we have performed the following work and analysis.

Based on publicly available information we have identified, to the best of our knowledge, 10 transactions, details of which are made reference to primarily the continuing connected transactions announcements from 28 December 2012 up to the date of the IAM Agreement (which spans slightly over three years) in relation to the appointment of the investment managers and/or latest annual reports of investment companies listed under Chapter 21 of the Listing Rules on the Main Board of the Stock Exchange (“ Chapter 21 Companies ”) relating to entering into investment management service agreements with their remuneration packages (the “ Market Comparables ”). Based on (i) our criteria that the selections involve Chapter 21 Companies which engage in similar investment management business of investing in securities to earn fee income; (ii) our criteria that the remuneration packages must consist of a management fee and a performance fee structure; (iii) our inclusion of all Chapter 21 Companies regardless of their net asset value or nature of investment; and (iv) our view that the selections represent a complete list based on our criteria and the review of the publicly available information disclosed the website of the Stock Exchange on a best effort basis, we consider that the Market Comparables, which have remuneration packages arrangement with investment managers similar to that of the IAM Agreement, are appropriate, fair and representative samples for us to help assess the fairness and reasonableness of the

– 29 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Remuneration Package under the IAM Agreement. Details of the Market Comparables as extracted from the information disclosed in the relevant announcements and/or annual reports are summarised as follow:

Full year management fee given to the respective investment manager as a percentage to the net asset value (Note 1)

Company Name (Stock Code) Management Fee Performance Fee net (Note China Assets (Holdings) The aggregate of: Return on net assets: 0.8% Limited (170) (i) 2.75% per annum on the – On the first 10%: Nil aggregate cost to the Company of the – On the next 10%: 15% × investments (less any (net profit after tax minus provisions in respect 10% of net assets) thereof) held by it from time to time; and – On the excess over 20%: 20% × (net profit after (ii) 1% per annum on the tax minus 20% of net value of the un-invested assets); and an additional net assets of the performance bonus company. equivalent to 20% of the net capital gains of the company if the net asset value as at a quarter day would be equal to or greater than 100% of the aggregate of the original subscription price of all shares in the company which then remain outstanding

– 30 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Company Name (Stock Code)

Performance Fee

Management Fee

China Merchants China Direct The aggregate of: 8% of the amount by which Investments Limited (133) the net asset value as at the (a) on the invested portion of end of the relevant financial the assets of the group year (as adjusted) exceeds the represented by unlisted high watermark provision securities or interests: 2.25% of the book value (net of taxes); (b) on the invested portion of the assets of the group represented by securities listed on a recognised stock exchange:

Full year management fee given to the respective investment manager as a percentage to the net asset value (Note 1)

1.59%

(i) during the lockup period following listing: 2.25% of the book value (net of taxes);
(ii) for the one year after the lockup period lapses: 1.75% of the book value (net of taxes);
(iii) thereafter: 1.50% of the book value (net of taxes); and
(iv) in respect of listed securities purchased from the secondary market: 1.50% of the book value (net of taxes); and

– 31 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Company Name (Stock Code) Management Fee

Performance Fee

Full year management fee given to the respective investment manager as a percentage to the net asset value (Note 1)

Note: the book value (net of taxes) of unlisted securities or interests mentioned above is based on fair value; whilst the book value (net of taxes) of listed securities mentioned above is based on mark to market value. DT Capital Limited (356) 1.5% per annum of the gross 15% on the amount of audited 0.68% net asset value, calculated as consolidated net asset value of the arithmetical average of the the company (calculated as at published gross net asset value the end of each respective on the last day of each financial year) exceeding the calendar month during each high watermark as at the relevant year relevant financial year, subject to adjustments by disregarding the effects of any new issue of securities or distribution on the gross net asset value

– 32 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Full year management fee given to the respective investment manager as a percentage to the net asset value (Note 1)

Company Name

(Stock Code)

Performance Fee

(Stock Code) Management Fee Performance Fee net (Note
Huge China Holdings 1.5% per annum on the net 10% of the audited net profit 1.93% Limited (428) asset value as per the of the company in the management account of the financial year and for the company in the preceding purpose of calculating the month and payable by the audited net profit of the company monthly in advance financial year;
(i) any audited net loss of the company in any financial year commencing 1 January 2013 shall be carried forward and set off against the audited net profit of the company in subsequent financial years, and;
(ii) the audited net profit of the financial year shall be calculated before accrual of any incentive fee that will be payable

SHK Hong Kong Industries	0.375% per quarter (equivalent	20% of the amount by which	1.48%
Limited (666)	to 1.5% per annum) of the	the audited net asset value of
	gross net asset value,	each year ended 31 December
	calculated as the arithmetical	exceeds the high watermark as
	average of the published gross	at the relevant financial year
	net asset value on the last day
	of each calendar month during
	each relevant quarter, and
	payable quarterly in arrears
UBA Investments Limited	1.5% per annum of the net	20% of the net profit of the	1.23%
(768)	asset value of the company as	company before taxation and
	at the immediately preceding	before deduction of the
	valuation date	management fee payable

– 33 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Full year
			management fee
			given to the
			respective
			investment
			manager as a
Company Name			percentage to the
(Stock Code)	Management Fee	Performance Fee	net asset value
			(Note 1)
Shanghai International	0.5% per quarter (equivalent to	20% of the amount by which	2.15%
Shanghai Growth Investment	2.0% per annum) of the net	the net asset value as at 31
Limited (770)	asset value calculated before	December in the calculation
	deduction of the fees payable	year exceeds the high
	to the investment manager and	watermark
	the company’s investment
	adviser and custodian for that
	quarter
Eagle Ride Investment	2% per annum of the net asset	15% per annum of any net	N/A_(Note 2)_
Holdings Limited (901)	value as at each valuation date	appreciation in the net asset
	and no management fee is	value at the relevant
	payable on the uninvested	performance fee valuation date
	portion of the company’s	above the high watermark
	assets and such portion shall
	be excluded from the net asset
	value when calculating the
	management fee
OP Financial Investments	1.5% per annum of the net	10% of the appreciation in the	1.54%
Limited (1140)	asset value as at the	net asset value per share
	immediately preceding	calculated as at the relevant
	valuation date	performance fee valuation date
		over the base net asset value
		per share, subject to a high
		watermark provision

– 34 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Full year management fee given to the respective investment manager as a Company Name percentage to the (Stock Code) Management Fee Performance Fee net asset value (Note 1) Prosperity Investment Fixed amount of HK$600,000 if any and at such amount as 1.31% Holdings Limited (310) per month (amounting to the Board may at its discretion 7,200,000) determine, provided that no such bonus shall be payable unless the Adjusted NAV as at the end of each Financial Year exceeds the higher of:

(i) the Net Asset Value for the year ending 31 December 2015; and (ii) the Adjusted NAV of the most recent Financial Year after year 2015 for which the Investment Manager is paid a discretionary bonus. The amount of such bonus shall not in any event exceed 5% of such excess.

– 35 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Full year management fee given to the respective investment manager as a percentage to the net asset value (Note 1)

Company Name (Stock Code)

Performance Fee

(Stock Code) Management Fee Performance Fee net asset value (Note 1) Min 0.68% Max 2.15% Mean 1.41% Asian Capital A management fee of: Any disposal of an Asset by (i) 0.5% under (Corporate Finance) Zhongzhi Capital during the Licensing (i) 0.5% per annum if term of the IAM Agreement, a Restrictions Licensing Conditions performance fee will be have not been withdrawn calculated at a rate of 30% (ii) 1.0% without by the SFC during the Licensing term of the IAM Restrictions Agreement, or (Note 3) (ii) 1.0% per annum if the Licensing Conditions have been withdrawn by the SFC during the term of the IAM Agreement and commencing from the date thereof

Note 1: The figures are referenced to the latest annual reports of the Comparable Companies, i.e. annual management fee provided to the respective investment manager as a percentage of the audited net asset value

Note 2: The management fee given to the investment manager is not on an annual basis

Note 3: The management fee given to the investment manager is not based on Company’s NAV since it is not a Chapter 21 company and its NAV isn’t representative; instead, the fee rate is based on the IAM which is in turn made reference to the valuation of the Investment Portfolio

The Management Fee

As noted from the Market Comparables, the management fees given to their respective investment managers, which are converted as percentage of the respective net asset value as at the latest financial year end, ranges from approximately 0.68% to 2.15% with a mean of approximately 1.41%. We also observed a slightly below-market-average management fee rate for the IAM Agreement. We understand from the Company that the lower bound of 0.5% is set mainly to cover the cost of service provision and operation by Asian Capital (Corporate Finance), for delivering non-discretionary portfolio management. We have also checked with other investment managers and understand that it is of industry norm to charge similar level of management fee for non-discretionary investment agreement. As a result, we are of the view

– 36 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

that the lower bound of the management fee has been set at a reasonable level. We understand that the removal of the Licensing Conditions would entitle Asian Capital (Corporate Finance) to a higher rate at 1% from 0.5% as it extends its service from investment advisory to full discretionary execution and handling of the Investment Portfolio which we understand from market practice warrants a higher management fee, and this rate is within range of the Market Comparables. Considering the asset management business is a somewhat new venture for Asian Capital (Corporate Finance), we believe the management fee has been set at a fair and reasonable level.

The Performance Fee

Based on the Market Comparables and the quote from other investment management companies, we understand that the performance fee rate, depending on factors such as active management strategy/track record performance/investment sophistication, can range generally from 5-20% in terms of annual performance which is typically measured at the net gain realized or NAV appreciation. Despite having an above-market-average performance fee rate, we are of the view that the 30% performance fee rate is fair as the Remuneration Package overall compensates the below-average management fee rate. Such structure would justify the lower management fee rate of the Remuneration package. The basis and the value at which the performance fee is being calculated is deemed to be fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

Our Views

Proposed Annual Caps

	Proposed
Period covered	Annual Cap
	HK$
Commencement Date to 31 March 2016 (Note)	150,000,000
1 April 2016 to 31 March 2017	250,000,000
1 April 2017 to 31 March 2018	250,000,000

Note: Assuming the IAM Agreement will become unconditional before 31 March 2016.

We understand from the Company that the proposed Annual Caps for the transactions contemplated under the IAM Agreement are determined after taking into account the following factors:

(i) the gap between aggregate Adjusted Asset Value and the market value of the Investment Portfolio under the IAM Agreement;
(ii) the recent volatility in the global stock markets; and
(iii) the anticipated tax obligations on disposal of the Investment Portfolio

As such business is new to Asian Capital (Corporate Finance) and has no historical transaction amount between the Group and Zhongzhi Capital in relation to the provision of investment advisory and management services, in considering the fairness and reasonableness

– 37 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

for the proposed Annual Caps, we have discussed with the Company the assumptions and bases of deriving the expected transaction value in determining the proposed Annual Caps. We noticed that the total proposed Annual Caps amounts are primarily the performance fee derived, based on the current fee structure, taking into account the IAM Agreement valuation of the Investment Portfolio and the aggregate Adjusted Asset Value, while accounting for certain headroom due to volatility in the A share market. Based on the formula for calculating the performance fee, we understand that it is mainly 30% of the after-tax difference of the net gain between the gross amount realised from disposal of asset under the Investment Portfolio and the Adjusted Asset Value of the asset subject to disposal which can be seen as the benchmark base. As we have limited knowledge on the actual, future disposal value of the asset under the Investment Portfolio, which can be higher or lower than that as at the date of the IAM Agreement, we can only make assumptions based on existing known information.

Based on the figures as disclosed in the Circular, such sums of the proposed Annual Caps is approximately the expected total Performance fee to be earned over the period till financial year end of 2018 based on the performance fee as set out above; where P2 is based on the Investment Portfolio valuation as at the date of the IAM Agreement subject to potential upside volatility of the A share market, P1 being the aggregate Adjusted Asset Value, as well as C being the relevant tax of liability of 20%. As for the volatility in the A share market, we observed that the Shanghai Composite Index fluctuated between 1,950.01 index points and 5,166.35 index points from 16 February 2013 to the Latest Practicable Date, while the Shenzhen Stock Exchange Composite Index fluctuated between 734.28 index points and 3,410.66 within the same period such high volatility means the market value of the Asset may be potentially higher, which means the potential gross amount realised from the disposal of the Asset would also be potentially higher, which, according to the performance fee formula above, would result in an increase in the potential performance fee (if all other factors remain the same) and hence higher proposed Annual Caps. We understand that the management is expecting an average return on the Asset of no less than 8% per annum, where such expectation was built on the foundation where annual historical performance of the average of the Shanghai Composite and the Shenzhen composite over the past 10 years ending 31 December 2015 has been around 8%. We have independently checked the index cumulative annual growth rate for index performance over the last ten years from 2005 and arrived at the same figure.

We have discussed with the management of the Company and understand the relatively high cap of HK$150,000,000 for the first period which ends on March 31, 2016 (which is approximately one month from the date of this Circular) is due to (i) the intention of Asian Capital (Corporate Finance) to allow for flexibility in its asset disposal strategy considering the aforementioned recent fluctuations observed in the A-share market (ii) concentration in certain assets under the Investment Portfolio; (iii) potential block trade size that may be required thereby achieving sizeable disposal within a short period of time in light of recent market volatility. In connection to above, we have (i) reviewed the composition of the Investment Portfolio provided by the Company, including the size, concentration and value of certain assets; (ii) discussed with the management of the Company with respect to the disposal strategy of the asset for each year of the Proposed Annual Cap; and (iii) considered the recent volatility in the A share market. Another reason for the larger buffer in the cap for each period is that potential disposal/profit realization not happening in one period will not be carried forward to the next, hence we believe there is good reason to having a larger buffer on the caps to maintain the required flexibility for asset disposal by Asian Capital (Corporate Finance).

– 38 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to the Letter from the Board, it is expected that Asian Capital (Corporate Finance) will manage Assets with average market value close to HK$4.0 billion. Assuming the above and based on the formula for calculating the performance fee, the potential total performance fee is estimated to be approximately HK$312.0 million[1] . We also understand from the Company that the Management has been in a search process of Asset takers and there is a possibility of a substantial amount (up to 40%) of the Assets initially contained in the Investment Portfolio that may be realized upon commencement of service. Accordingly, the relevant performance fee upon disposal is estimated to be approximately HK$124.8 million[2] . Considering (i) the above estimation; (ii) the actual performance fee depends on the specific securities to be disposed, their disposal price(s) and their respective relevant Adjusted Asset Value; (iii) the potential upside of the value of the Assets given recent market volatility; and (iv) our discussion with the management of the Company as mentioned in the previous paragraph, we are of the view that the cap of HK$150,000,000 for the first period ending on 31 March 2016 (which is approximately one month from the date of this Circular) is fair and reasonable.

With regards to the Annual Caps for 1 April 2016 to 31 March 2017 and 1 April 2017 to 31 March 2018, we have considered that (i) the aggregate level of the proposed Annual Caps up to 31 March 2018 of HK$650,000,000 (which is HK$150,000,000 + HK$250,000,000 + HK$250,000,000) would imply an approximately 35.2% increase in the aggregate market value of the Assets to approximately HK$5,400 million[3] ; (ii) we are of the view that an approximately 35.2% implied increase in market value of the Asset up to 31 March 2018 is not an unreasonable scenario given the volatility of the A share market; (iii) the proposed Annual Caps are evenly allocated in each of the period of 1 April 2016 to 31 March 2017 and 1 April 2017 to 31 March 2018 after deducting HK$150,000,000 for the first period from the aggregate level of the proposed Annual Caps of approximately HK$650 million; and (iv) a reason for the larger buffer in the cap for each period is that potential disposal/profit realisation not happening in one period will not be carried forward to the next, hence we believe there is good reason to having a larger buffer on the caps to maintain the required flexibility for asset disposal by Asian Capital (Corporate Finance), we are of the view that the proposed Annual Caps for 1 April 2016 to 31 March 2017 and 1 April 2017 to 31 March 2018 are fair and reasonable.

Having taken into account (i) the bases for determining the proposed Annual Caps for the transactions contemplated under the IAM Agreement for the aforementioned period; (ii) our relevant analysis and work performed as discussed above; and (iii) the audit committee of the Board will annually review the proposed Annual Caps for the continuing connected transactions, we concur with the Directors’ view that the proposed Annual Caps have been arrived at on a fair and reasonable basis.

1 Potential total performance fee using the formula (Performance fee = (P2 – P1 – C) x F) is calculated as follow: HK$(4.0 billion – 2.7 billion)x(1 – 20%) x 30% = HK$312.0 million

2 Relevant performance fee disposal is calculated as potential total performance fee x% disposed = HK$312.0 million x 40% = HK$124.8 million

3 Annual Caps due to Aggregate market value of assets potential appreciation calculated as follow: HK$(4.0 billion x (1+35.2%) – 2.7 billion – (4.0 billion x (1+35.2%) – 2.7 billion)x20%) x 30% = approximately HK$650 million

– 39 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In the event that the aggregate annual management fee and performance fee payable to the Group by Zhongzhi Capital under the IAM Agreement exceeds the respective proposed Annual Cap for any of the periods to 31 March 2016 and the two years ending 31 March 2018, the Company will comply with all the relevant requirements of Chapter 20 of the GEM Listing Rules as and when necessary.

Adjusted Asset Value

We understand that the Adjusted Asset Value is the average of the sum of (i) asset value of an Asset determined by reference to the closing price of the Asset as at the date of the IAM Agreement; and (ii) cost of the Asset as provided and confirmed by Zhongzhi Capital (the aggregate Adjusted Asset Value of the Investment Portfolio amounting to approximately HK$2.7 billion as at the date of the IAM Agreement). This value is set basically after commercial negotiations between the two parties as a cost benchmark of the Asset for managing the Investment Portfolio and more importantly, it is for calculating the performance fee to Asian Capital (Corporate Finance). We understand that the acquisition cost of certain assets under the Investment Portfolio (aggregate cost of asset amounted to approximately HK$1.4 billion as at the date of the IAM Agreement) was relatively low as compared to the current market value (valued at approximately HK$4 billion as at the date of the IAM Agreement) and taking into account the heavy-weight assets within the Investment Portfolio along with its China A Shares market, which is subject to high level of volatility, setting at the mid-point or average between the cost of the Asset under the Investment Portfolio and the closing price of the Asset as at the date of the IAM Agreement is considered fair and reasonable as the Investment Portfolio is already at a “net gain” position overall.

Having considered that (i) the management fee as a percentage of Net Asset Value falls within the range and is below the mean of the Market Comparables but higher than the minimum; (ii) different investment companies have their own strategy to derive management fee which could be influenced by other external factors which vary from companies to companies; (iii) the provision of investment management services by Asian Capital (Corporate Finance) is beneficial to Zhongzhi Capital’s investment strategy; (iv) the quote from other investment management companies are comparatively in line with the management fee, we are of the view that the management fee under the IAM Agreement is fair and reasonable and in the interests of the Company and Independent Shareholders as a whole.

The Remuneration Package

We are of the view that in order to provide a deeper investigation of the Remuneration Package, we have further studied the latest annual reports of the Market Comparables, and recognised that 10 of the Market Comparables. Their remuneration package share similar structure as the package in the IAM Agreement, which is often constructed including components like management fee and performance fee (or called incentive fee in some cases).

From the Market Comparables, we noticed that the management fee of IAM Agreement is slightly under market average; however this was compensated by the above-market-average performance fee rate. With the Remuneration Package being expressed as the higher of the two fees, namely the management fee and the performance fee, such package is in line with the packages offered in the Market Comparables.

– 40 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Therefore, we are of the view that the proposed Remuneration Package structure is broadly in line with market practice. Such structure is fair as it sets a floor to the fee protected by the management in the case of underperformance, but allows Asian Capital (Corporate Finance) to extract more from performance fee in the case of good performance. As such, they are on normal commercial terms, are in the ordinary and usual course of business of the Company and are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

6. Conditions of the proposed Annual Caps

There are certain conditions in respect of the proposed Annual Caps to the GEM Listing Rules, in particular, the restriction of the value of the transactions contemplated under the IAM Agreement by way of the annual cap for each of the two years ending 31 March 2018 and the annual review by the independent non-executive Directors of the terms of the IAM Agreement and the proposed Annual Caps not being exceeded, details of which must be included in the Company’s subsequent published annual reports and accounts. In addition, pursuant to the GEM Listing Rules, each year, the auditors of the Company must provide a letter to the Board confirming, among other things, that the transactions contemplated under the IAM Agreement are conducted in accordance with the IAM Agreement and that the annual caps have not been exceeded. Furthermore, pursuant to the GEM Listing Rules, the Company shall publish an announcement if it knows or has reason to believe that the independent non-executive Directors and/or its auditors will not be able to confirm the terms of the transactions contemplated under the IAM Agreement or the annual caps have not been exceeded.

E. RECOMMENDATION

Having considered the factors and reasons set out in this letter, we are of the opinion that (i) the entering into of the IAM Agreement is in the ordinary and usual course of business of the Group; (ii) the terms of the IAM Agreement and the transactions contemplated thereunder are fair and reasonable; (iii) the IAM Agreement are on normal commercial terms and in the interests of the Company and the Shareholders as a whole; and (iv) the proposed Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we would advise the IBC and the Independent Shareholders that the Independent Shareholders should vote in favor of the relevant ordinary resolution proposed at the EGM to approve the IAM Agreement and the proposed Annual Caps.

Yours faithfully For and on behalf of Investec Capital Asia Limited

Alexander Tai Managing Director Head of Corporate Finance

Mr. Alexander Tai of Investec Capital Asia Limited is a responsible officer of Type 1(dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO. He has been active in the field of corporate finance advisory for over 20 years, and has been involved in and completed various corporate finance advisory transactions.

– 41 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

A. Directors’ Interests

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by the Directors to be notified to the Company and the Stock Exchange, were as follows:

Long positions in the Shares and underlying Shares

			Number of		Approximate
			underlying		percentage of
			Shares		shareholding
		Number of	pursuant to	Aggregate	in the
Name of Director	Capacity	Shares held	share options	interest	Company
Mr. Yeung	Interest of	326,270,000	–	326,270,000	9.27%
	controlled	(Note 1)
	corporation
	Beneficial Owner	–	10,000,000	10,000,000	0.28%
			(Note 2)
Mr. Chan Hok	Beneficial Owner	7,300,000	10,000,000	17,300,000	0.49%
Leung			(Note 2)
Mr. Xin Luo Lin	Beneficial Owner	5,000,000	5,000,000	10,000,000	0.28%
			(Note 2)
Mr. Yi Xiqun	Beneficial Owner	6,000,000	–	6,000,000	0.17%
Mr. Tsui Pui Yan	Beneficial Owner	1,000,000	–	1,000,000	0.03%

– 42 –

GENERAL INFORMATION

APPENDIX

Notes:

These shares represent 326,270,000 Shares owned by Master Link which is wholly and beneficially owned by Mr. Yeung. By virtue of the SFO, Mr. Yeung is deemed to be interested in the 326,270,000 Shares held by Master Link.
These shares represent the underlying interest in Shares pursuant to the share options granted to the Directors by the Company under the pre-IPO share option scheme adopted by the Company on 7 June 2010.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short positions in any Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by the Directors to be notified to the Company and the Stock Exchange.

B. Substantial Shareholders’ Interests

As at the Latest Practicable Date, so far as was known to the Directors, the following persons (other than the Directors or chief executive of the Company) had, or were deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were recorded in the register required to be kept by the Company under Section 336 of the SFO, or who were directly or indirectly interested in 5% 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 the Shares

			Approximate
			percentage of
			shareholding
		Number of	in the
Name of Shareholder	Capacity	Shares held	Company
Master Link (Note 1)	Beneficial owner	326,270,000	9.27%
Jinhui (Note 2)	Beneficial owner	1,823,282,102	51.82%
Zhongzhi Capital (HK)	Interest of controlled	1,823,282,102	51.82%
Company Limited	corporation
(Note 2)
深圳前海中植金輝投資管理合	Interest of controlled	1,823,282,102	51.82%
夥企業(有限合夥)	corporation
(Notes 2 and 4)

– 43 –

GENERAL INFORMATION

APPENDIX

			Approximate
			percentage of
			shareholding
		Number of	in the
Name of Shareholder	Capacity	Shares held	Company
Kang Bang (Note 3)	Beneficial owner	455,820,525	12.96%
常州康邦齊輝投資中心(有限	Interest of controlled	455,820,525	12.96%
合夥) (Notes 3 and 4)	corporation
西藏康邦勝博投資有限公司	Interest of controlled	2,279,102,627	64.78%
(Note 4)	corporation
常州京江資本管理有限公司	Interest of controlled	2,279,102,627	64.78%
(Note 4)	corporation
Zhongzhi Capital	Interest of controlled	2,279,102,627	64.78%
(Note 4)	corporation
Zhong Hai Sheng Rong	Interest of controlled	2,279,102,627	64.78%
(Note 4)	corporation
中海晟豐(北京)資本管理有限	Interest of controlled	2,279,102,627	64.78%
公司_(Note 4)_	corporation
Mr. Xie Zhikun (Note 4)	Interest of controlled	2,279,102,627	64.78%
	corporation

Notes:

Master Link is an investment holding company, the entire issued share capital of which is wholly and beneficially owned by Mr. Yeung.
Jinhui is a wholly-owned subsidiary of Zhongzhi Capital (HK) Company Limited, which in turn is wholly-owned by 深圳前海中植金輝投資管理合夥企業(有限合夥). As such, each of Jinhui, Zhongzhi Capital (HK) Company Limited and 深圳前海中植金輝投資管理合夥企業(有限合夥) is deemed to be interested in the 1,823,282,102 Shares by virtue of the SFO.
Kang Bang is a wholly-owned subsidiary of 常州康邦齊輝投資中心(有限合夥). As such, each of Kang Bang and 常州康邦齊輝投資中心(有限合夥) is deemed to be interested in the 455,820,525 Shares by virtue of the SFO.
深圳前海中植金輝投資管理合夥企業(有限合夥) is owned as to 95% by 西藏康邦勝博投資有限公司 as limited partner and 5% by 常州京江資本管理有限公司 as general partner, and 常州康邦齊輝投資中心(有限合夥) is owned as to 99% by 常州京江資本管理有限公司 as limited partner and 1% by 西藏康邦勝博投資有限公司 as general partner. 西藏康邦勝博投資有限公司 and 常州京江資本管理有限公司 are wholly-owned subsidiaries of Zhongzhi Capital which in turn is owned as to 95% by Zhong Hai Sheng Rong. Zhong Hai Sheng Rong is owned as to 99.8% by 中海晟豐(北京)資本管理有限公司 which is wholly and beneficially owned by Mr. Xie Zhikun. As such, each of 西藏康邦勝博投資有限公司, 常州京江資本管理有限公司, Zhongzhi Capital, Zhong Hai Sheng Rong, 中海晟豐(北京)資本管理有限公司 and Mr. Xie Zhikun is deemed to be interested in an aggregate of 2,279,102,627 Shares held by Jinhui and Kang Bang by virtue of the SFO.

– 44 –

GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other person (other than the Directors and chief executive of the Company) who had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were recorded in the register required to be kept by the Company under Section 336 of the SFO, or who was directly or indirectly interested in 5% 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. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2014, being the date to which the latest published audited financial accounts of the Group were made up.

4. DIRECTORS’ SERVICE CONTRACTS

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

5. COMPETING INTERESTS

Mr. Xin Luo Lin, a non-executive director of the Company, currently serves as a non-executive director of Enerchina Holdings Limited (“ Enerchina ”) (Stock code: 622, listed on the Main Board of the Stock Exchange). Based on public information, Enerchina carries on activities including the provision of securities brokerage and provision of financial, consultancy and corporate financial advisory services, securities trading and investments and money lending that compete or are likely to compete with the businesses of the Group. Mr. Xin Luo Lin has a personal interest in 9,999,000 shares of Enerchina and share options granted by Enerchina to subscribe for 4,191,000 shares of Enerchina.

Mr. Yi Xiqun currently serves as an independent non-executive director of Industrial and Commercial Bank of China Limited (Stock code: 1398, listed on the Main Board of the Stock Exchange and the Shanghai Stock Exchange) and an independent director of China Merchants Securities Co., Ltd. (listed on the Shanghai Stock Exchange). Based on publicly available information, the aforementioned companies have subsidiaries in Hong Kong (i) licensed by the SFC to carry on investment banking and/or asset management activities; and/or (ii) engaging in banking business providing corporate/personal loans or is a money lender licensed under the Money Lenders Ordinance (Chapter 163 of the Laws of Hong Kong) which compete or are likely to compete with the businesses of the Group.

– 45 –

GENERAL INFORMATION

APPENDIX

Save as disclosed in the paragraph headed “Zhongzhi Capital” under the section headed “INFORMATION ON THE PARTIES” in the letter from the Board of this circular and disclosed above, the Directors are not aware of any business or interest of the Directors, the controlling Shareholders and their respective close associates (as defined under the GEM Listing Rules) that competes or may compete with the business of the Group nor any conflict of interest which any such person has or may have with the Group.

6. DIRECTORS’ INTERESTS IN ASSETS OF THE GROUP OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date, none of the Directors had any interests, direct or indirect, in any assets which had been, since 31 December 2014 (being the date to which the latest published audited accounts of the Group were made up), acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group. None of the Directors was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which was significant in relation to the business of the Group.

7. EXPERT’S QUALIFICATION AND CONSENT

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

Name

Qualification

Investec Capital Asia Limited

A corporation licensed to conduct type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO

As at the Latest Practicable Date, the above expert (i) did not have any shareholding directly or indirectly in any member of the Group or any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group; (ii) had no direct or indirect interest in any assets which had been, since 31 December 2014 (being the date to which the latest published audited accounts of the Group were made up), acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group; and (iii) has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and the reference to its name in the form and context in which it appears.

– 46 –

GENERAL INFORMATION

APPENDIX

8. GENERAL

(1) The Company’s registered office is P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The Company’s head office and principal place of business in Hong Kong is situated at Suite 601, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong.
(2) The Hong Kong branch share registrar and transfer office of the Company is Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(3) In the event of inconsistency, the English text of this circular shall prevail over the Chinese text.

9. DOCUMENT AVAILABLE FOR INSPECTION

A copy of the IAM Agreement will be available for inspection during normal business hours from 9:00 a.m. to 5:00 p.m. on any weekday (except public holidays) at the head office and principal place of business of the Company in Hong Kong at Suite 601, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong from the date of this circular up to and including the date of the EGM.

– 47 –

NOTICE OF EGM

==> picture [145 x 81] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) (Stock code: 8295)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the extraordinary general meeting (the “ EGM ”) of the shareholders of Asian Capital Holdings Limited (the “ Company ”) will be held at Suite 601, Bank of America Tower, 12 Harcourt Road, Central, Hong Kong on Monday, 21 March 2016 at 10:00 a.m. for the purpose of considering and, if thought fit, passing with or without amendments, the following ordinary resolution.

Unless otherwise indicated, capitalised terms used in this notice and the following resolution shall have the same meanings as those defined in the circular of the Company dated 4 March 2016 (the “ Circular ”) of which the notice convening the EGM forms part.

ORDINARY RESOLUTION

“ THAT

(a) the form and substance of the IAM Agreement (a copy of which has been tabled at the meeting marked “A” and signed by the chairman of the meeting for identification purpose) and the transactions contemplated thereunder be and are hereby approved, ratified and confirmed;
(b) the proposed Annual Caps, as described in the Circular, for the remuneration payable under the IAM Agreement be and are hereby approved, ratified and confirmed; and
(c) any one Director be and is hereby authorised to do all such acts and things, to execute all such documents or agreements or deeds on behalf of the Company and to do such other things and to take all such actions as he considers necessary, appropriate, desirable or expedient for the purposes of giving effect to or in connection with the IAM Agreement and the transactions contemplated thereunder and to agree to such variation, amendments or waiver of matters relating thereto as are, in the opinion of the Director, in the interests of the Company and its Shareholders as a whole.”

By order of the Board Asian Capital Holdings Limited LI Pui Yee

Company Secretary

Hong Kong, 4 March 2016

– 48 –

NOTICE OF EGM

Registered office: P.O. Box 309, Ugland House Grand Cayman, KY1-1104 Cayman Islands

Head office and principal place of business in Hong Kong: Suite 601, Bank of America Tower 12 Harcourt Road Central, Hong Kong

Notes:

A member of the Company entitled to attend and vote at the EGM convened by the above notice 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.
A form of proxy for use at the EGM is enclosed. Whether or not you intend to attend the EGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting should you so wish and in such event, the form of proxy shall be deemed to be revoked.
In order to be valid, the form of proxy together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority must be deposited at the office of the Hong Kong branch share registrar and transfer office of the Company, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof.
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 holders 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.

– 49 –

AI assistant

Kingwisoft Technology Group Company Limited — Proxy Solicitation & Information Statement 2016

51374_rns_2016-03-03_922dd306-3172-47d1-9c46-7feeff4fbbec.pdf

CONTINUING CONNECTED TRANSACTION – INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent Financial Adviser to the IBC and the Independent Shareholders

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

per cent

(Stock code: 8295)

CONTINUING CONNECTED TRANSACTION – INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

IAM AGREEMENT

Principal terms

LETTER FROM THE BOARD

Remuneration:

(a) Management fee

Management fee = V x R x 3/12

(b) Performance fee

Performance fee = (P2 - P1 - C) x F

Determination of the remuneration

Historical transaction amounts

Proposed Annual Caps

Note: Assuming the IAM Agreement will become unconditional before 31 March 2016.

Basis of determination of the Annual Caps

Reasons for entering into the IAM Agreement

INFORMATION ON THE PARTIES

The Group

LETTER FROM THE BOARD

Zhongzhi Capital

RELATIONSHIP BETWEEN THE PARTIES TO THE IAM AGREEMENT

LISTING RULES IMPLICATIONS

LETTER FROM THE BOARD

EGM

RECOMMENDATIONS

ADDITIONAL INFORMATION

LETTER FROM THE IBC

CONTINUING CONNECTED TRANSACTION – INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

CONTINUING CONNECTED TRANSACTION IN RELATION TO THE IAM AGREEMENT

A. INTRODUCTION

B. THE IBC

C. BASIS OF OUR OPINION

D. PRINCIPAL FACTORS CONSIDERED

1. Background information

i. Information on the Group

ii. Historical financial performance of the Group

For the two years ended 31 December 2013 and 2014

For the 12 months ended 31 December 2015

iii. Historical financial position of the Group

Financial positions of the Group as at 31 December 2014 and 2015

2. Information on Zhongzhi Capital

3. Reasons for and benefits of the IAM Agreement

Equity fund inflows

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Principal terms of the IAM Agreement

Principal terms

Conditions Precedent:

Scope of services:

Remuneration:

(a) Management fee

(b) Performance fee

Determination of the remuneration (the “Remuneration Package”)

5. Analysis of the principal terms of the IAM Agreement

Company Name (Stock Code)

Performance Fee

Management Fee

Performance Fee

Company Name

(Stock Code)

Performance Fee

Performance Fee

The Management Fee

The Performance Fee

Our Views

Proposed Annual Caps

Adjusted Asset Value

Kingwisoft Technology Group Company Limited Proxy Solicitation & Information Statement 2016