Nanjing Panda Electronics Company Limited - Proxy Solicitation & Information Statement 2014

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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AMENDMENTS TO THE ARTICLES OF ASSOCIATION, ADOPTION OF NEW SHAREHOLDERS’ RETURN PLAN, ADOPTION OF NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER AND REVISION OF ANNUAL CAPS OF THE EXISTING CONTINUING CONNECTED TRANSACTIONS

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders of Nanjing Panda Electronics Company Limited

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Capitalised terms used in this cover page shall have the same meanings as those defined in this circular.

A letter from the Board is set out on pages 1 to 20 of this circular. A letter from the Independent Board Committee is set out on page 21 of this circular. A letter from Wallbanck Brothers containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 22 to 35 of this circular. A notice convening the EGM was despatched to the Shareholders on 28 January 2014. Please refer to the announcement of the Company dated 22 January 2014 for details of the EGM which is to be held at the Company’s Conference Room, 301 Zhongshan Road East, Nanjing, the People’s Republic of China on Wednesday, 12 March 2014 at 9:30 a.m. The Proxy Forms were despatched to the Shareholders on 28 January 2014. Whether or not you are able to attend and vote at the EGM, please complete and return the Proxy Form in accordance with the instructions printed thereon to the office of the Company as soon as possible and in any event not less than 24 hours before the time of the EGM or any adjournment thereof. Completion and return of the Proxy Form will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

24 February 2014

CONTENTS

			Page
DEFINITIONS. . . . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			1
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . . .			21
LETTER FROM WALLBANCK BROTHERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			22
APPENDIX I	—	GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
APPENDIX II	—	PROPOSED AMENDMENTS TO THE ARTICLES
		OF ASSOCIATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	44
APPENDIX III	—	PROPOSED NEW SHAREHOLDERS’ RETURN PLAN. . . . . . .	53
APPENDIX IV	—	PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING
		SHAREHOLDER AND DE FACTO CONTROLLER. . . . . . . .	60
APPENDIX V	—	EMERGENCY RESPONSE PLAN FOR RISKS IN
		DEPOSITS IN CEC FINANCE. . . . . . . . . . . . . . . . . . . . . . . . . .	73

— i —

DEFINITIONS

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

“2012 Notice” “Notice Regarding Further Implementation of Cash Dividends Distribution of Listed Companies” (《關於進一步落實上市公司現金分紅有關事項的通知》) promulgated by the CSRC (Zheng Jian Fa [2012] No.37); “Articles of Association” the existing articles of association of the Company; “Board” the board of Directors; “Business Days” any day on which the Stock Exchange is open for the business of dealing in securities; “CBRC” China Banking Regulatory Commission; “CEC” China Electronics Corporation ( 中國電子信息產業集團有限公司 ), the ultimate controller of the Company; “CEC Finance” China Electronics Financial Co., Ltd ( 中國電子財務有限責任公司 ), a company incorporated in the PRC and a non-banking financial institute of CEC owned as to 41.9654% and 25.1293% by CEC and NEIIC respectively;

“Company” Nanjing Panda Electronics Company Limited, a joint stock company incorporated in the PRC with limited liability;
“connected person(s)” has the meaning ascribed to it under the Listing Rules; “CSRC” China Securities Regulatory Commission; “Director(s)” the Directors of the Company;

“EGM” the extraordinary general meeting of the Company to be convened and held on Wednesday, 12 March 2014 for the purposes of considering and, if thought fit, approving, inter alia, amendments to the Articles of Association, adoption of the new Shareholders’ Return Plan, adoption of the new Code of Conduct for Controlling Shareholder and De Facto Controller and the revised annual caps of the Existing Continuing Connected Transactions;

“Existing Annual Cap(s)” the maximum aggregate annual value of the Existing Continuing Connected Transactions;

— ii —

DEFINITIONS

“Existing Continuing	the continuing connected transactions in respect of (i) deposit services;
Connected Transactions”	and (ii) loan and other credit finance services between the Group and
	CEC Finance pursuant to the Financial Services Agreement;
“Financial Services	the continuing connected transaction agreement entered into between
Agreement”	the Company and CEC Finance on 26 October 2012, for a term of
	three years commencing from 21 December 2012 and expiring on
	20 December 2015, details of which are set out in the Company’s
	announcement and circular dated 26 October 2012 and 6 December
	2012 respectively;
“Group”	the Company and its subsidiaries;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;
‘’Hong Kong’’	Hong Kong Special Administration Region of the PRC;
“Independent Board	an independent committee of the Board comprising all independent
Committee”	non-executive Directors, namely Ms. Zhang Xiuhua, Ms. Liu Danping
	and Mr. Chu Wai Tsun, Vincent;
“Independent Shareholders”	Shareholders other than CEC and its associates, PEGL and its
	associates;
“Latest Practicable Date”	24 February 2014, being the latest practicable date prior to the printing
	of this circular for ascertaining certain information contained herein;
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
	(as amended from time to time);
“Mr. Deng”	Mr. Deng Weiming, a non-executive Director;
“Mr. Hsuan”	Mr. Jason Hsuan, a non-executive Director;
“Mr. Lai”	Mr. Lai Weide, an executive Director;
“Mr. Lu”	Mr. Lu Qing, a non-executive Director;
“Mr. Xu”	Mr. Xu Guofei, an executive Director;

— iii —

DEFINITIONS

“NEIIC”	Nanjing Electronics Information Industrial Corporation (南京中電熊
	貓信息產業集團有限公司), the controlling shareholder of PEGL and
	directly holding 4.29% equity interest in the Company;
“New Code of Conduct	the Code of Conduct for Controlling Shareholder and De Facto
for Controlling Shareholder	Controller, details of which are set out in Appendix IV of this circular;
and De Facto Controller”
“New Shareholders’	the shareholders’ return plan, details of which are set out in Appendix
Return Plan”	III of this circular;
“Original Shareholders’	the shareholders’ return plan adopted by the Company on 21
Return Plan”	December 2012;
“PEGL”	Panda Electronics Group Limited (熊猫電子集團有限公司), the
	controlling Shareholder of the Company holding approximately
	36.63% of the total issued share capital of the Company as at the
	Latest Practicable Date;
“PRC”	the People’s Republic of China (for the purpose of this circular,
	excluding Hong Kong, Macau and Taiwan);
“PRC Lawyer”	Yongheng Partners (江蘇永衡昭輝律師事務所);
“Proxy Form”	the form of proxy for use at the EGM;
“Regulatory Guidance No. 3”	the “Listed Companies Regulatory Guidance No. 3 — Cash Dividends
	Distribution of Listed Companies” (《上市公司監管指引第3號 — 上
	市公司現金分紅》) promulgated by the CSRC;
“Revised Annual Cap(s)”	the proposed revision of the annual caps of the Existing Continuing
	Connected Transactions pursuant to the Supplemental Agreement;
“Revised Continuing	the Existing Continuing Connected Transactions as amended and
Connected Transactions”	supplemented by the Supplemental Agreement, details of which are set
	out in the section headed “Particulars of the Supplemental Agreement”
	in this circular;
“RMB”	Renminbi, the lawful currency of the PRC;

— iv —

DEFINITIONS

“SASAC” State-owned Assets Supervision and Administration Commission of the State Council; “SFO” The Securities and Futures Ordinance (Chapter 571 of Laws of Hong Kong); “Shareholder(s)” holder(s) of the share(s) of the Company; “Stock Exchange” The Stock Exchange of Hong Kong Limited; “Supplemental Agreement” the supplemental agreement to the Financial Services Agreement; “Wallbanck Brothers” Wallbanck Brothers Securities (Hong Kong) Limited, a licensed corporation to carry out type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities as defined under SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Revised Continuing Connected Transactions; “%” percentage.

The English names of the PRC established companies/ entities in this circular are only translations of their official Chinese names. In case of inconsistency, the Chinese names prevail.

— v —

LETTER FROM THE BOARD

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Executive Directors

Mr. Lai Weide (Chairman) Mr. Xu Guofei

Non-executive Directors

Mr. Deng Weiming Mr. Lu Qing Mr. Xia Dechuan Mr. Jason Hsuan

Independent non-executive Directors

Registered Address:

Level 1-2, Block 5, North Wing, Nanjing High and New Technology Development Zone, Nanjing, the PRC

Office Address: 301 Zhongshan Road East, Nanjing, the PRC Postal Code: 210002

Ms. Zhang Xiuhua Ms. Liu Danping Mr. Chu Wai Tsun, Vincent

24 February 2014

To the Shareholders

Dear Sir or Madam,

AMENDMENTS TO THE ARTICLES OF ASSOCIATION, ADOPTION OF NEW SHAREHOLDERS’ RETURN PLAN, ADOPTION OF NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER AND REVISION OF ANNUAL CAPS OF THE EXISTING CONTINUING CONNECTED TRANSACTIONS

I. INTRODUCTION

Reference is made to the announcements issued by the Company dated 21 January 2014 in relation to the revision of annual caps of the Existing Continuing Connected Transactions and 22 January 2014 in relation to the proposed amendments to the Articles of Association, the proposed adoption of the New Shareholders’ Return Plan and the proposed adoption of the New Code of Conduct for Controlling Shareholder and De Facto Controller, which are subject to the approval of Shareholders at the EGM.

— 1 —

LETTER FROM THE BOARD

The purpose of this circular is to provide you with details of (i) the proposed amendments to the Articles of Association; (ii) the proposed adoption of the New Shareholders’ Return Plan; (iii) the proposed adoption of the New Code of Conduct for Controlling Shareholder and De Facto Controller; (iv) the revision of annual caps of the Existing Continuing Connected Transactions; (v) a letter from Wallbanck Brothers to the Independent Board Committee and the Independent Shareholders containing its advice on the revision of annual caps of the Existing Continuing Connected Transactions; and (vi) a letter from the Independent Board Committee with its recommendations on the revision of annual caps of the Existing Continuing Connected Transactions to the Independent Shareholders.

II. AMENDMENTS TO THE ARTICLES OF ASSOCIATION

In order to further improve and perfect the decision-making procedure and supervision mechanism for profit distribution of the Company, ensure the continuity and stability of profit distribution policies, strengthening the rationality, stability and transparency of cash dividend policy, actively reward its investors, steer investors towards long-term and reasonable investment, according to the requirement of the 2012 Notice and the Regulatory Guidance No. 3 promulgated by the CSRC, the Board has made amendments to the relevant decision-making procedures and policies for profit distribution in the Articles of Association.

The proposed amendments to the Articles of Association are subject to the approval of the Shareholders by way of passing a special resolution at the EGM. The unofficial English translation of the proposed amendments to the Articles of Association is set out in Appendix II to this circular.

The Board confirms that the proposed amendments to the Articles of Association conforms with the requirements of Appendix 3 and the applicable requirements set out in Part D of Appendix 13 of the Listing Rules.

III. ADOPTION OF NEW SHAREHOLDERS’ RETURN PLAN

Reference is made to the Original Shareholders’ Return Plan. For details, please refer to the announcements of the Company dated 24 August 2012 and 21 December 2012 and the circular of the Company dated 6 December 2012. In order to comply with the 2012 Notice and the Regulatory Guidance No.3, the Board also proposes to formulate the New Shareholders’ Return Plan based on the Original Shareholders’ Return Plan.

The proposed New Shareholders’ Return Plan is subject to the approval of the Shareholders by way of passing an ordinary resolution at the EGM. The unofficial English translation of the proposed New Shareholders’ Return Plan is set out in Appendix III to this circular.

— 2 —

LETTER FROM THE BOARD

IV. ADOPTION OF NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

In order to further regulate the behavior of the controlling shareholder and de facto controller of the Company and protect the interests of shareholders (in particular the minority shareholders) from being infringed, the Board proposes to formulate the New Code of Conduct for Controlling Shareholder and De Facto Controller.

The proposed New Code of Conduct for Controlling Shareholder and De Facto Controller is subject to the approval of the Shareholders by way of passing an ordinary resolution at the EGM. The unofficial English translation of the proposed New Code of Conduct for Controlling Shareholder and De Facto Controller is set out in Appendix IV to this circular.

V. REVISION OF ANNUAL CAPS OF THE EXISTING CONTINUING CONNECTED TRANSACTIONS

Background information

Reference is made to the announcement and circular of the Company dated 26 October 2012 and 6 December 2012 respectively, in relation to, among other matters, the Existing Continuing Connected Transactions, of which the term of the existing Financial Services Agreement entered into between the Company and CEC Finance is three years from 21 December 2012 to 20 December 2015.

Due to the reasons set out under the paragraph headed “Reasons for revising the Existing Annual Caps” under the section headed “Particulars of the Supplemental Agreement” below, the Company entered into the Supplemental Agreement with CEC Finance on 21 January 2014 to increase relevant existing annual caps. Other than the stipulation of the Supplemental Agreement, all other terms and conditions under the Existing Continuing Connected Transactions remain effective and unchanged.

— 3 —

LETTER FROM THE BOARD

Existing and proposed annual caps

The table below sets forth two Existing Annual Caps and Revised Annual Caps of the Existing Continuing Connected Transactions under the Financial Services Agreement and the Supplemental Agreement respectively entered into between the Company and CEC Finance:

	Annual Caps
Financial Services Agreement/	(For the period ended 20 December 2015)
Supplemental Agreement	Existing	Revised
	(RMB’000)	(RMB’000)
Deposit services	200,000	500,000
Loan, loan guarantee and
other credit financing services	300,000	600,000

Particulars of the supplemental agreement

The Supplemental Agreement and the Revised Annual Caps are conditional upon Independent Shareholders’ approval at the EGM to be convened, details of which are set out below:

Contract:

the Supplemental Agreement to the Financial Services Agreement for the financial services provided by CEC Finance to the Group

Date: 21 January 2014
Term:

From date of approval by Independent Shareholders at the EGM to 20 December 2015

Parties: (1) The Company
(2) CEC Finance
Major Terms of the (a) Deposit services Supplemental Agreement:

The maximum daily deposit amount (including accrued interest) placed by the Group with CEC Finance during the term of the Financial Services Agreement is increased to not more than RMB500,000,000.00.

— 4 —

LETTER FROM THE BOARD

(b) Loan Services

The maximum daily balance for loan, loan guarantee and other credit financing services to be provided by CEC Finance to the Group during the term of the Financial Services Agreement is increased to not more than RMB600,000,000.00.

Reasons for revising (1) Impact of market environment the Existing Annual Caps:
(a) Interest rate liberalization

Recently, the People’s Bank of China promoted interest rate liberalization. Thus, financial institutions were allowed to determine their own interest rate on loan in accordance with business principles, and loan costs were subject to increased possibility of fluctuation and increased uncertainties.

The Group will increase the credit line with CEC Finance to diversify and avoid the resulting impact.

(b) Large uncertainties in liquidity

Since the existing monetary policy is more prudent with the approval of financing and there are large uncertainties in liquidity, which is mainly reflected by the continuous implementation of prudent and steady monetary policies by the People’s Bank of China, tightening of credit lines of commercial banks, general rise of 10% in interest rate on loan and higher financing costs, it is expected that the aforesaid situation may continue and no remission has shown in the short term.

CEC Finance serves the members of the Group and is a stable financing channel. The Group will increase the credit line with CEC Finance to ensure obtaining stable and reliable financing channel and credit line.

— 5 —

LETTER FROM THE BOARD

(2) Preferential charge
(a) Pursuant to the Financial Services Agreement, CEC Finance will provide deposit and loan interest rate concessions and preferential charge of various financial services to its maximum capacity subject to relevant policies, laws and regulations.
(b) Pursuant to the Financial Services Agreement, CEC Finance exempts the Group from charges against fund remittance and transfer in relation to fund settlement with CEC Finance.
(c) In addition, the Company’s loans with CEC Finance are unsecured loans which do not require third party guarantee.
(d) CEC Finance will provide good and convenient services; the Group will continue to increase the settlement size with CEC Finance. With the increase in the Group’s business in fund settlement with CEC Finance, the Group is able to save considerable financial expenses.
(3) Basis for determining the maximum deposit amount

The Company will revise the annual caps for deposit service to RMB500,000,000, which is determined based on the cash and bank deposits amount of the Company from 31 December 2011 to 30 September 2013 (please refer to the subsection of “Historical data” of this section below for details), and business development trends of the Company for the coming two years.

In respect of the present operations of the Company, the Company will increase the settlement size with CEC Finance to save financial expenses.

— 6 —

LETTER FROM THE BOARD

Reference is also made to the announcements of the Company dated 8 November 2012 and 1 July 2013 and the circular dated 7 December 2012, in relation to the issue of 258,823,529 A Shares by the Company by way of non-public issuance of A Shares in June 2013 (“ Non-public Issuance of A Shares ”), and to the announcements of the Company dated 26 December 2012, 8 January 2013, 1 April 2013, 19 April 2013, 5 June 2013, 8 August 2013, 26 September 2013, 16 October 2013 and 9 December 2013, and the circular dated 4 September 2013 of the Company (“ Announcements and Circulars in relation to Non-public Issuance of A Shares ”).

As disclosed in the Announcements and Circulars in relation to Non-public Issuance of A Shares, the construction period of the investment projects to be financed by the proceeds raised from Non-public Issuance of A Shares (“ Proceeds Investment Projects ”) is expected to be 24 months. Production of the Proceeds Investment Projects is expected to generate approximately RMB2,450,000,000 in annual revenue of the Group. As the Company has invested in the Proceeds Investment Projects using other internal capital resources prior to the completion of the Non-public Issuance of A Shares, implementation of the Proceeds Investment Projects may take place earlier than scheduled, and revenue may be generated as early as in the second half of 2014. The Group’s business in fund settlement is therefore expected to increase in the coming two years. The Group will settle the funds generated from the Proceeds Investment Projects with commercial banks in the PRC, including CEC Finance, and the Group’s settlement size with CEC Finance will thereby increase.

With reference to the annual revenue of RMB 2,450,000,000 expected to generate from the Proceeds Investment Projects, the Group intends to deposit approximately 20% of its fund with CEC Finance and the remaining approximately 80% of its fund will be deposited with other commercial banks in the PRC. The maximum daily deposit amount placed by the Group with CEC Finance during the term of the Financial Services Agreement in any event shall not exceed RMB500,000,000.

— 7 —

LETTER FROM THE BOARD

For this, where the Group intends to place deposit with CEC Finance, it will review the status of deposits of the Group before placing such deposit with CEC Finance. Further, the chief financial officers will monitor the status of deposits of the Group and to make the necessary adjustment whenever there is any change of status of deposits placed by the Group with other commercial banks in the PRC.

CEC Finance will provide monthly financial reports to the Company and regularly provide its audited risk assessment report on its operational situation and risk control and prevention. The financial department of the Company will analyze the financial and operational situations of CEC Finance, estimating the ratio for the deposit placed with CEC Finance and liaise with CEC Finance regularly to monitor the operational situation of CEC Finance.

For deposit services and fund settlement business with CEC Finance under the Financial Services Agreement and the Supplemental Agreement, the Company carried out sufficient test and formulated a series of normative documents, defining the process of deposit and settlement business and establishing risk prevention plans as follows:

(a) Pursuant to the current actual situation of the cash and bank deposits and the business development trends for the coming two years, the Company cautiously and reasonably determined the annual caps of deposit services. The Board and independent Directors reviewed the basic information, business license, finance license, audit report and risk evaluation report of CEC Finance; requested the Company to carry out finance business with CEC Finance in accordance with the requirements of the rules of stock trading of the stock exchanges of the places of listing of the Company, the Guidelines of the Shanghai Stock Exchange on Connected Transactions of Listed Companies, System of Related Party Transactions Management of the Company (《南京熊猫電子股份有限公司關聯交易管理制度》) etc.; requested the relevant personnel of CEC Finance to regulate behaviors to protect the legal interest of the Company and all shareholders in accordance with the requirements of the Guidelines for the Conduct of the Controlling Shareholder and Beneficial Controller of a Company Listed on the Shanghai Stock Exchange and the new Code of Conduct for Controlling Shareholder and De Facto Controller (see the section of “Adoption of New Code of Conduct for Controlling Shareholder and De Facto Controller” above).

— 8 —

LETTER FROM THE BOARD

(b) Based on the requirements of applicable laws, regulations and accounting standards, the Company’s internal finance management regulations regulate the management of funds, accounting systems and controls, and monitoring and control procedures of the Company. The Company also formulated new Code of Conduct for Controlling Shareholder and De Facto Controller (see the section of “IV. Adoption of New Code of Conduct for Controlling Shareholder and De Facto Controller” above) to define the code of conduct for the controlling shareholder, de facto controller and related parties of the Company; formulated the Emergency Response Plan for Risks in Deposits in China Electronics Financial Co., Ltd. (for details, please refer to the Emergency Response Plan for Risks in Deposits in China Electronics Financial Co., Ltd (《在中國電子財務有限責任公司存款風險應急處置預案》) published by the Company on the website of the Shanghai Stock Exchange on 23 January 2014, the full text of which is set out in Appendix V to this circular for reference purposes) to define procedures and measures for handling risks in deposit and settlement business with CEC Finance.

— 9 —

LETTER FROM THE BOARD

(c) The Company will continue to refine and perfect its legal entity governance structures in accordance with the latest changes to applicable laws and regulations. The Company regularly reviews and updates its corporate governance rules regarding the audit committee, remuneration and evaluation committee, nomination committee, independent non-executive directors, and the work of the secretary to the Board pursuant to the requirements of the CSRC, the Securities and Futures Commission of Hong Kong, the Stock Exchange and other regulatory authorities.

The internal control regulations of the Company regulate the daily operations of the Company through monitoring of operations, audit systems, investment appraisal systems, and supervision, and are reviewed and updated annually. The Company will continue to regulate connected transactions, increase transparency, enhance supervision of senior management, and regulate the behaviors of substantial shareholders and de facto controllers. It will further develop the function of the Audit Committee and internal audit organization, and monitor and examine connected transactions throughout the process. Currently, the fund management and control of the Company is good.

— 10 —

LETTER FROM THE BOARD

7. Pricing basis:

Pursuant to the Financial Services Agreement, the fees and charges payable by the Group to CEC Finance or interest receivable by the Group from CEC Finance shall be determined according to the following basis:

(1) Deposit services

The People’s Bank of China stipulates the official interest rates of bank deposit and loan. Commercial banks in the PRC and CEC Finance both execute the official interest rates stipulated by the People’s Bank of China.

Since 8 June 2012, the upper limit of the floating range of deposit interest rates of financial institutions in the PRC was revised to 1.1 times of the benchmark interest rate. Within the legal range (i.e. 1.1 times of the benchmark interest rate), each financial institution determines the floating range on its own.

Pursuant to the Financial Services Agreement and the Supplemental Agreement, CEC Finance shall calculate and pay deposit interest which are not lower than that offered by domestic commercial banks during the same period. In the event the valid agreements entered between the Company and domestic commercial banks stipulate more preferential deposit interest rate and/ or relevant charges than those of CEC Finance for similar businesses, CEC Finance shall adjust its deposit interest rate and/or relevant charges under the Financial Services Agreement and the Supplemental Agreement to an equivalent or more preferential level as requested by the Company.

Pursuant to the Financial Services Agreement and the Supplemental Agreement, CEC Finance shall calculate deposit interests by way of the Accumulated Interest Method and shall pay interest on a quarterly basis.

— 11 —

LETTER FROM THE BOARD

(2) Loan, loan guarantee and other credit financing services

The interest rate on loan shall not be higher than that offered by other commercial banks in PRC for loans of the same type during the same period.

The fees payable by the Group to CEC Finance for guarantees for loans taken out by the Company and its subsidiaries from third parties shall not be higher than the guarantee fees charged by other commercial banks in the PRC during the same period.

(3) If during the term of the Financial Services Agreement, the valid agreements entered between the Group and domestic commercial banks stipulate more preferential deposit and loan interest rate and/or relevant charges for deposit services, loan, loan guarantee services and other credit financing services than those of CEC Finance, CEC Finance shall adjust the aforementioned deposit and loan interest rate and/or relevant charges under the Financial Services Agreement to the equivalent or more preferential level pursuant to the requirements of the Group.

— 12 —

LETTER FROM THE BOARD

8. Historical data:

The cash and bank deposits and short term loans of the Company since 2011 are as follows:

	30	30	31	31
	September	June	December	December
	2013	2013	2012	2011
	(unaudited)	(unaudited)	(audited)	(audited)
Cash and bank deposits
(less raised proceeds)
(RMB’000)	278,055	467,088	590,800	446,889
Short term loans
(RMB’000)	449,000	585,000	360,000	358,308

Notes:

From 31 December 2011 to 30 September 2013, the Company’s short term loans maintained in the range of RMB350 million — RMB600 million. Since the interest rate on loan of CEC Finance is not higher than that offered by commercial banks, the Company will reduce the loan size with commercial banks and increase the same with CEC Finance.
From 31 December 2011 to 30 September 2013, the Company’s cash and bank deposits (less proceeds raised in June 2013) maintained in the range of RMB270 million — RMB600 million. Since CEC Finance provides interest rate concessions, the Company will increase the settlement size with CEC Finance. Meanwhile, based on the actual situation, the Company will retain a portion of fund settlement with commercial banks.

— 13 —

LETTER FROM THE BOARD

Deposit balance and balance of loan, loan guarantee and other credit financing services provided by CEC Finance and actually used by the Company are as follows:

	30	30	31
	September	June	December
	2013	2013	2012
	(unaudited)	(unaudited)	(audited)
Deposit Balance_(RMB’000)_	57,960	45,900	173,900
Balance of loan,
loan guarantee and other
credit financing services
(RMB’000)	109,138	145,000	0

Revised Annual Caps:

The Board proposes to increase the annual caps as follows:

(1) Deposit balance

Based on the actual situation, the Group will place its cash with commercial banks in the PRC including CEC Finance. The daily maximum balance of the Group’s deposits with CEC Finance shall be raised to RMB500,000,000.00, which is determined with reference to the aforementioned historical data and future development needs of the Company;

(2) Loan, loan guarantee and other credit financing services

The maximum daily balance for loan, loan guarantee and other credit financing services to be provided by CEC Finance to the Group during the term of the Supplemental Agreement to the Financial Services Agreement shall be raised to RMB600,000,000.00, which is determined with reference to the aforementioned historical data and future development needs of the Company.

— 14 —

LETTER FROM THE BOARD

Reasons for and benefits of entering into the supplemental agreement

The reasons for and benefits of entering into the Supplemental Agreement are set out under the paragraph headed “Reasons for revising the Existing Annual Caps” under the section headed “Particulars of the Supplemental Agreement” above.

Taking into account the above reasons, the Directors (of which the independent non-executive Directors will express their opinions on the Revised Continuing Connected Transactions to Independent Shareholders after receiving advice from Wallbanck Brothers) are of the view that the increase in the Existing Annual Caps for implementing the Revised Continuing Connected Transactions satisfies the Group’s operation demands and is in the interest of the Group, and the terms of the Supplemental Agreement are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Requirements under the listing rules

As at the date of this circular, PEGL is a shareholder of the Company, holding approximately 36.63% of the total issued share capital of the Company, while NEIIC holds 56.85% equity interest in PEGL, the controlling shareholder of the Company, and is therefore the controlling shareholder of PEGL. In addition, NEIIC holds approximately 4.29% of the total issued share capital of the Company. CEC is the ultimate controlling shareholder of the Company and holds 70% of the issued share capital of NEIIC. Furthermore, CEC Finance is directly owned by CEC and NEIIC as to 41.9654% and 25.1293% respectively. Therefore, CEC Finance is a connected person of the Company and the transactions contemplated under the Supplemental Agreement constitute continuing connected transactions of the Company under Rule 14A of the Listing Rules.

In accordance with Rule 14A.36 of the Listing Rules, the Company shall re-comply with the requirements under Rules 14A.35(3) and (4) of the Listing Rules in respect of the Revised Annual Caps.

Deposit services

As the applicable percentage ratios of the deposit transaction contemplated under the Supplemental Agreement exceed 5% but do not exceed 25%, such transaction constitutes a discloseable transaction subject to the reporting and announcement requirements under the Listing Rules. In addition, as the applicable percentage ratios of the deposit transaction contemplated under the Supplemental Agreement exceed 5%, and the relevant annual consideration is more than HK$10,000,000.00, such transaction is subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

Loan and loan guarantee services

As the provision of loan and loan guarantee services by CEC Finance to the Company is for the benefit of the Group on normal commercial terms where no security over the assets of the Company will be granted to CEC Finance in respect of such services, the continuing connected transactions involving the provision of loan and loan guarantee services are exempt from the reporting, announcement and Independent Shareholders’ approval requirements under Rule 14A.65(4) of the Listing Rules. However, for the sake of good corporate governance, the Board will submit the new proposed annual caps of loan, loan guarantee and other credit financing services to the EGM for the Independent Shareholders’ approval.

Settlement services

CEC Finance will not charge the Company any fees for the fund settlement of the Group with CEC Finance, and as such, the continuing connected transactions involving the provision of the said services are exempt from the reporting, announcement and Independent Shareholders’ approval requirements.

Other financial services

As at the date of this circular, the Company has not entered into any separate agreements with CEC Finance for the provision of other financial services. The Company will comply with the applicable notification, disclosure and/or Shareholders’ approval requirements under the Listing Rules in the event that it enters into any such separate agreements with CEC Finance.

For the sake of good corporate governance, the Board will submit the Supplemental Agreement and the new proposed annual caps of (i) deposit services and (ii) loan, loan guarantee and other credit financing services to the EGM for the Independent Shareholders’ approval. The Company shall only proceed with the Supplemental Agreement and the new proposed annual caps of (i) deposit services and (ii) loan, loan guarantee and other credit financing services upon obtaining Independent Shareholders’ approval.

Information on the parties

The Group is principally engaged in the development, manufacture and sale of electronic equipment products and consumer electronic products as well as electronic manufacturing services.

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LETTER FROM THE BOARD

The predecessor of CEC Finance is China Information Trust Investment Corporation, which was approved by the People’s Bank of China on 15 March 1988 and registered with the State Administration for Industry and Commerce on 21 April 1988. China Information Trust Investment Corporation was a national non-banking financial institution under the direct governance of the Ministry of Electronics Industry with its business operations subject to the leadership, administration, supervision, coordination and audit by the People’s Bank of China and the State Administration of Foreign Exchange.

On 6 November 2000, as approved by People’s Bank of China, China Information Trust Investment Corporation was reorganized into a corporate group finance company and was renamed as CEC Finance which was officially put into operation in 2001. CEC Finance has a registered capital of RMB1,750,943,000. CEC holds 41.9654% equity interest in CEC Finance and is the largest shareholder and ultimate controller of CEC Finance.

CEC Finance holds a corporate business licence with registration number 100000000007843 (4-1), with its operating range including:

(i) provision of financial and financing advisory services,
(ii) credit verification and consulting agency services,
(iii) provision of assistance to member companies in receipt and payment of transaction proceeds;
(iv) provision of guarantees to member companies;
(v) dealing with commissioned loans and entrusted investments between member companies;
(vi) provision of bill acceptance and bill discount services to member companies;
(vii) provision of intra-group transfer and settlement services to member companies and liquidation planning;

(viii) provision of deposit services to member companies;

(ix) provision of loans and finance leasing services to member companies;
(x) interbank lending and borrowing;

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LETTER FROM THE BOARD

(xi) issuing bonds;
(xii) underwriting corporate bonds of member companies;
(xiii) portfolio investment, with investment range limited to government bonds in the interbank market, central bank bills, financial bonds, short-term financing bonds, corporate bonds, money market funds,and purchase of new shares.

In addition, CEC Finance holds a financial institution licence (金融機搆法人許可證) with licence number L0014H211000001.

As at the Latest Practicable Date, PEGL is a shareholder of the Company, holding approximately 36.63% of the total issued share capital of the Company, while NEIIC holds 56.85% equity interest in PEGL, the controlling shareholder of the Company, and is therefore the controlling shareholder of PEGL. In addition, NEIIC holds approximately 4.29% of the total issued share capital of the Company. CEC is the ultimate controlling shareholder of the Company and holds 70% of the issued share capital of NEIIC. Furthermore, CEC Finance is owned directly by CEC and NEIIC as to 41.9654% and 25.1293% respectively. CEC Finance is a connected person of the Company accordingly.

VI. THE EGM

A notice convening the EGM was despatched to the Shareholders on 28 January 2014. Please refer to the announcement of the Company dated 22 January 2014 for details of the EGM which is to be held at the Company’s Conference Room, 301 Zhongshan Road East, Nanjing, the People’s Republic of China on Wednesday, 12 March 2014 at 9:30 a.m. The register of members relating to H-shares of the Company will be closed from 8 February 2014 to 12 March 2014, both days inclusive, during which period no transfer of H-shares of the Company will be registered. In order to attend the EGM, all transfers accompanied by the relevant share certificates must be lodged with the share registrar of the Company in Hong Kong, Hong Kong Registrars Limited, at 46th Floor, Hopewell Center, 183 Queen’s Road East, Hong Kong, no later than 4:00 p.m. on 7 February 2014.

Pursuant to Rule 14A.59(5) of the Listing Rules, any connected person with a material interest in any of the Continuing Connected Transactions, and any Shareholder with a material interest in the any of the Continuing Connected Transactions and its associates will not vote on such transaction.

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LETTER FROM THE BOARD

As disclosed in Appendix I to this circular, Mr. Lai holds offices in CEC and PEGL, Mr. Xu holds offices in NEIIC and PEGL, Mr. Deng and Mr. Lu hold offices in PEGL, and Mr. Hsuan holds an office in TPV Technology, and are all therefore connected persons of the Company and had abstained from voting on the relevant resolutions of the Board approving the Revised Continuing Connected Transactions.

Mr. Xu, who holds approximately 0.00028% of the total issued share capital of the Company, is a connected person of the Company. Mr. Xu holds offices in NEIIC and PEGL as disclosed in Appendix I to this circular. Therefore, CEC, NEIIC, PEGL and its associates and Mr. Xu will be required to abstain from voting in respect of the resolutions approving the Revised Continuing Connected Transactions. Save as disclosed above, no other associates of CEC, NEIIC or PEGL holds any shares in the Company and will be required to abstain from voting in respect of the resolutions approving the Revised Continuing Connected Transactions.

VII. PROXY ARRANGEMENT

The Proxy Forms were despatched to the Shareholders on 28 January 2014. Whether or not you intend to attend the EGM, you are requested to complete the Proxy Form in accordance with the instructions printed thereon and return the same to the office of the Company as soon as possible but in any event not less than 24 hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the Proxy Form will not preclude you from attending and voting at the EGM or any adjourned meeting should you so wish.

VIII. VOTING BY POLL

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by way of poll. The results of the poll will be published on the HKExnews website at www.hkexnews.hk and the Company’s website at www.panda.cn after the EGM as soon as possible.

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LETTER FROM THE BOARD

IX. RECOMMENDATION

The Directors (including the independent non-executive Directors) are of the opinion that the proposed amendments to the Articles of Association, adoption of the proposed New Shareholders’ Return Plan, adoption of the proposed New Code of Conduct for Controlling Shareholder and De Facto Controller and the revision of annual caps of the Existing Continuing Connected Transactions are all in the interests of the Company and the Shareholders. Accordingly, the Directors (including the independent non-executive Directors) recommend the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM.

The text of the letter from the Independent Board Committee is set out on page 21 of this circular. The text of the letter from Wallbanck Brothers containing its advice to the Independent Board Committee and the Independent Shareholders is set out on page 22 of this circular. Independent Shareholders are strongly recommended to read carefully these two letters for details of the advice.

X. ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular as required under the Listing Rules

By order of the Board

Nanjing Panda Electronics Company Limited Lai Weide Chairman

— 20 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter of recommendation from the Independent Board Committee to the Independent Shareholders which has been prepared for the purpose of inclusion in this circular.

==> picture [433 x 55] intentionally omitted <==

24 February 2014

To the Independent Shareholders

Dear Sir or Madam,

REVISION OF ANNUAL CAPS OF EXISTING CONTINUING CONNECTED TRANSACTIONS

We have been appointed as members of the Independent Board Committee to advise you in connection with the revision of annual caps of Existing Continuing Connected Transactions, details of which are set out in the Letter from the Board contained in the circular dated 24 February 2014 issued by the Company to the Shareholders (the “Circular”), of which this letter forms part. Unless specified otherwise, capitalized terms used herein shall have the same meanings as those defined in the Circular.

Having considered the terms of the Supplemental Agreement and the interests of the Company and the Shareholders as a whole so far as the Independent Shareholders are concerned and having considered the advice of Wallbanck Brothers and the principal factors and reasons taken into consideration by it in arriving at its advice as set out on pages 22 to 35 of the Circular, we are of the opinion that the terms of the Supplemental Agreement are fair and reasonable and the increase in the Existing Annual Caps for implementing the Revised Continuing Connected Transactions are in the interests of the Company and the Shareholders as a whole so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant ordinary resolutions to be proposed at the EGM.

Yours faithfully,

For and on behalf of the

Independent Board Committee

Ms. Zhang Xiuhua Ms. Liu Danping Mr. Chu Wai Tsun, Vincent

Independent Non-executive Directors

— 21 —

LETTER FROM WALLBANCK BROTHERS

The following is the full text of a letter of advice from Wallbanck Brothers, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in connection with the Supplemental Agreement which has been prepared for the purpose of incorporation in this circular:

==> picture [181 x 80] intentionally omitted <==

1312, Tower 1, Lippo Centre, 89 Queensway, Central, Hong Kong

To: The independent board committee and
the independent shareholders
of Nanjing Panda Electronics Co. Ltd.

Dear Sirs,

REVISION OF ANNUAL CAPS OF THE EXISTING CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Revised Continuing Connected Transactions, details of which are indicated in the letter from the Board (the “ Board Letter ”) contained in the circular dated 24 February 2014 issued by the Company to the Shareholders (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

The term of the existing Financial Services Agreement (governing the Existing Continuing Connected Transactions) entered into between the Company and CEC Finance is three years from 21 December 2012 to 20 December 2015. On 21 January 2014, the Company entered into the Supplemental Agreement with CEC Finance to increase relevant existing annual caps. Other than the stipulation of the Supplemental Agreement, all other terms and conditions under the Existing Continuing Connected Transactions remain effective and unchanged.

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LETTER FROM WALLBANCK BROTHERS

In accordance with Rule 14A.36 of the Listing Rules, the Company shall comply with the requirements under Rules 14A.35(3) and (4) of the Listing Rules in respect of the Revised Annual Caps. As the applicable percentage ratios of the deposit transaction contemplated under the Supplemental Agreement exceed 5% but do not exceed 25%, such transaction constitutes a discloseable transaction subject to the reporting and announcement requirements under the Listing Rules. In addition, as the applicable percentage ratios of the deposit transaction contemplated under the Supplemental Agreement exceed 5%, and the relevant annual consideration is more than HK$10,000,000, such transaction is subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

An Independent Board Committee comprising of Ms. Zhang Xiuhua, Ms. Liu Danping and Mr. Chu Wai Tsun, Vincent (all being independent non-executive Directors) has been formed to advise the Independent Shareholders on (i) whether the terms of the Supplemental Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the entering into of the Revised Continuing Connected Transactions is in the interests of the Company and the Shareholders as a whole; and (iii) how the Independent Shareholders should vote in respect of the relevant resolution to approve the Supplemental Agreement (including the Revised Annual Caps) and the Revised Continuing Connected Transactions at the EGM. We, Wallbanck Brothers Securities (Hong Kong) Limited (“ Wallbanck Brothers ”), have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

BASIS OF OUR OPINION

In formulating our opinion and recommendations to the Independent Board Committee and the Independent Shareholders, we have relied on the accuracy of the information, opinions and representations provided to us by the Directors and management of the Company, and have assumed that all statements, information, opinions and representations contained or referred to in this Circular were true, accurate and not misleading or deceptive at the time when they were made and will continue to be accurate at the Latest Practicable Date. We have also assumed that all statements of belief, opinion and intention made by the Directors in this Circular were reasonably made after due enquiry. We have no reasons to doubt that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate, misleading or deceptive. We hold the view that we have received sufficient information to enable us to reach an informed view and to justify reliance on the accuracy of the information contained in this Circular to provide a reasonable basis for our opinions and recommendations. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this Circular, including this letter, 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, including this letter, misleading. We have not, however, carried out any independent verification of the information provided by the Directors and management of the Company, nor have we conducted an independent investigation into the business and affairs of the Company.

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LETTER FROM WALLBANCK BROTHERS

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the financial information provided by the Company, particularly, on the accuracy and reliability of financial statements and other financial data of the Company. We have not audited, compiled nor reviewed the said financial statements and financial data. We shall not express any opinion or any form of assurance on them. We have had no reason to doubt the truth and accuracy of the information provided to us by the Company. The Directors have also advised us that no material facts have been omitted from the information to reach an informed view, and we have no reason to suspect that any material information has been withheld. We have not carried out any feasibility study on any past, and forthcoming investment decision, opportunity or project undertaken or be undertaken by the Company. Our opinion has been formed on the assumption that any analysis, estimation, forecast, anticipation, condition and assumption provided by the Company are valid and sustainable. Our opinions shall not be constructed as to give any indication to the validity, sustainability and feasibility of any past, existing and forthcoming investment decision, opportunity or project undertaken or to be undertaken by the Company.

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have not considered the taxation implications on the Independent Shareholders arising from the proposed revised annual caps as these are particular to the individual circumstances of each Shareholder. It is emphasised that we will not accept responsibility for any tax effect on or liability of any person resulting from his or her decision to the proposed revised annual caps. In particular, the Independent Shareholders who are overseas residents or are subject to overseas taxation or Hong Kong taxation on securities dealings should consult their own tax positions, and if in any doubt, should consult their own professional advisers.

Our opinions are necessarily based upon the financial, economic, market, regulatory and other conditions as they existed on, and the facts, information, representations, and opinions made available to us as of, the Latest Practicable Date. We disclaim any undertaking or obligation to advise any person of any change in any fact or matter affecting the opinion expressed herein which may come or be brought to our attention before and after the EGM.

Our opinions are based on the Directors’ representation and confirmation that there are no undisclosed private agreements/arrangements or implied understanding with anyone concerning the proposed revised annual caps.

Our opinions are based on the Directors’ confirmation of receipt of our advice that the Directors and the management of the Company are responsible to take all reasonable steps to ensure that the information and representations provided in any press announcement, circular and prospectus concerning the proposed revised annual caps are true, accurate, complete and not misleading or deceptive, and that no material information or facts have been omitted or withheld.

Our opinions and their validity are subject to the views of the Board concerning the proposed revised annual caps.

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LETTER FROM WALLBANCK BROTHERS

We take no responsibility for the contents of the Board Letter, 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 letter.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Supplemental Agreement and the Revised Annual Caps, we have taken into consideration of the following principal factors and reasons:

Background

Information on the Group

According to the Board Letter, the Group is principally engaged in the development, manufacture and sale of electronic equipment products and consumer electronic products as well as electronic manufacturing services.

Indicated below are the segmental information of the financial information on the Group for the six months ended 30 June 2013 and the two years ended 31 December 2012 as extracted from the interim report of the Company for the six months ended 30 June 2013 (the “ 2013 Interim Report ”) and the annual report of the Company for the year ended 31 December 2012 (the “ 2012 Annual Report ”):

		For the year	For the year
	For the six	ended	ended	% growth
	months ended	31 December	31 December	from 2011 to
	30 June 2013	2012	2011	2012
	RMB’000	RMB’000	RMB’000
Total turnover	919,163	2,396,126	2,115,641	13.26
Profit and total comprehensive
income for the period/year	84,612	136,023	116,095	17.17
	As at	As at	As at	% growth
	30 June	31 December	31 December	from 2011 to
	2013	2012	2011	2012
	RMB’000	RMB’000	RMB’000
Net assets	3,032,007	1,692,292	1,595,442	6.07
Cash and cash equivalents	1,672,292	378,040	343,783	9.96

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LETTER FROM WALLBANCK BROTHERS

The above table indicated that the Group’s turnover increased by approximately 13.26% from 2011 to 2012, as the Company recorded a substantial increase of approximately 17.17% in profit and comprehensive income from in 2012. As at 30 June 2013, net assets as increased to approximately RMB3,032 million and cash and cash equivalents was approximately RMB1,672 million. According to the representation by the Board, the substantial increase in cash and cash equivalents was the result of the non-public issuance of new A Shares to the target subscribers under the proposed placing.

Information on the CEC Finance

According to the Board Letter, the predecessor of CEC Finance is China Information Trust Investment Corporation, which was approved by the People’s Bank of China on 15 March 1988 and registered with the State Administration for Industry and Commerce on 21 April 1988. China Information Trust Investment Corporation was a national non-banking financial institution under the direct governance of the Ministry of Electronics Industry with its business operations subject to the leadership, administration, supervision, coordination and audit by the People’s Bank of China and the State Administration of Foreign Exchange.

According to the Board Letter, on 6 November 2000, as approved by People’s Bank of China, China Information Trust Investment Corporation was reorganized into a corporate group finance company and was renamed as CEC Finance which was officially put into operation in 2001. CEC Finance has a registered capital of RMB1,750,943,000. CEC holds 41.9654% equity interest in CEC Finance and is the largest shareholder and ultimate controller of CEC Finance.

According to the representation by the Board, CEC Finance not only provides good and convenient services, but also provides deposit and loan interest rate concessions and preferential charge of various financial services to its maximum capacity subject to relevant policies, laws and regulations.

According to the representation by the Board, CEC Finance also waives the Company from charges against fund remittance and transfer in relation to fund settlement with CEC Finance. To conclude, According to the representation by the Board, CEC Finance offered equal or even better deposits and other financial services comparing the services provided by other commercial banks. Therefore, the Company will continue to increase settlement size with CEC Finance by signing Financial Service Agreement and Supplemental Agreement (together with the Revised Annual Caps) with CEC Finance and the Company is able to save considerable financial expenses.

Other information on the CEC Finance are indicated in the section headed “Information on the parties” of the Board Letter.

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LETTER FROM WALLBANCK BROTHERS

Reasons for the entering into of the Supplemental Agreement

According to the Board Letter, the Directors hold the view that the reasons for entering into of the Supplemental Agreement includes (i) impact of market environment (including interest rate liberalization and large uncertainty in liquidity); and (ii) preferential charge. Details of the reasons for and benefits of entering into the Supplemental Agreement are indicated below:-

(i) Impact of capital market environment

(a) interest rate liberalization

The Group will increase the credit line with CEC Finance to diversity and avoid the resulting impact.

(b) large uncertainty in liquidity

(ii) Preferential charge

(a) Pursuant to the Financial Services Agreement, CEC Finance will provide deposit and loan interest rate concessions and preferential charge of various financial services to its maximum capacity subject to relevant policies, laws and regulations.
(b) Pursuant to the Financial Services Agreement, CEC Finance exempts the Group from charges against fund remittance and transfer in relation to fund settlement with CEC Finance.

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LETTER FROM WALLBANCK BROTHERS

(c) In addition, the Company’s loans with CEC Finance are unsecured loans which do not require third party guarantee.
(d) CEC Finance will provide good and convenient services; the Group will continue to increase settlement size with CEC Finance. With the increase in the Group’s business in fund settlement with CEC Finance, the Group is able to save considerable financial expenses.

(iii) Basis for determining the maximum deposit amount

The Company will revise the annual caps for deposit service to RMB500,000,000, which is determined based on the cash and bank deposits amount of the Company from 31 December 2011 to 30 September 2013 and business development trends of the Company for the coming two years.

In respect of the present operations of the Company, the Company will increase the settlement size with CEC Finance to save financial expenses.

Principal terms of the Supplemental Agreement

The tables below summarise the major terms of the Supplemental Agreement:

Date:

21 January 2014

Parties:

(i) The Company; and (ii) CEC Finance

Pricing policy

(i) Deposit services

— 28 —

LETTER FROM WALLBANCK BROTHERS

Pursuant to the Financial Services Agreement and the Supplemental Agreement. CEC Finance shall calculate and pay deposit interest which are not lower than that offered by other domestic commercial banks during the same period. In the even the valid agreements entered between the Company and domestic commercial banks stipulate more preferential deposit interest rate and/or relevant charges than those of CEC Finance for similar business, CEC Finance shall adjust its deposit interest rate and/or relevant charges under the Financial Services Agreement and the Supplemental Agreement to an equivalent or more preferential level as requested by the Company.

Pursuant to the Financial Services Agreement and the Supplemental Agreement. CEC Finance shall calculate deposit interests by way of the Accumulated Interest Method and shall pay interest on a quarterly basis.

(ii) Loan, loan guarantee and other credit financing services

The interest rate on loan shall not be higher than that offered by other commercial banks in PRC for loans of the same type during the same period.

(iii) If during the term of the Financial Services Agreement, the valid agreements entered between the Group and domestic commercial banks stipulate more preferential deposit and loan interest rate and/or relevant charges for deposit services, loan, loan guarantee services and other credit financing services than those of CEC Finance, CEC Finance shall adjust the aforementioned deposit and loan interest rate and/or relevant charges under the Financial Services Agreement to the equivalent or more preferential level pursuant to the requirements of the Group.

— 29 —

LETTER FROM WALLBANCK BROTHERS

Revised Annual Caps:

The Board proposes to increase the annual cap as follows:

Deposit balance:

The maximum daily deposit amount (including accrued interest) placed by the Group with CEC Finance during the term of the Financial Services Agreement is increased to not more than RMB500,000,000.00.

Loan Services:

According to the Board Letter, other than the stipulation of the Supplemental Agreement, all other terms and conditions under the Existing Continuing Connected Transactions remain effective and unchanged.

Basis of the Revised Annual Caps

According to the Board Letter, it is indicated that the historical amounts of the actual transactions for the Existing Continuing Connected Transactions and the Revised Annual Caps are as follow:

		For the	For the
	For the year	six months	nine months
	ended 31	ended 30	ended 30
	December 2012	June 2013	September 2013
	(audited)	(unaudited)	(unaudited)
	RMB’000	RMB’000	RMB’000
Deposit balance	173,900	45,900	57,960
Balance of loan, loan guarantee and
other credit financing services	—	145,000	109,138

According to the Board Letter, the Revised Annual Caps was determined with reference to the aforementioned historical data and future development requirements of the Company.

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LETTER FROM WALLBANCK BROTHERS

Deposit Services

According to the representation by the Directors, from 31 December 2011 to 30 September 2013, the Company’s cash and bank deposits (less proceeds raised in June 2013) maintained in the range of RMB270 million to RMB600 million. Since CEC Finance provides interest rate concessions, the Company will increase the settlement size with CEC Finance. The Company will retain a portion of fund settlement with commercial banks.

In assessing the fairness and reasonableness of the Revised Annual Caps for the deposit services (the “ Deposit Caps ”), enquiries have been made with the Directors regarding the underlying bases and assumptions for the Deposit Caps.

Loan, loan guarantee and other credit financing services

According to the representation by the Board, from 31 December 2011 to 30 September 2013, the Company’s short term loans maintained in the range of RMB350 million to RMB600 million. Since the interest rate on loan of CEC Finance is not higher than that offered by commercial banks, the Company will reduce the loan size with commercial banks and increase the same with CEC Finance.

According to the Board Letter, for the sake of good corporate governance, the Board will submit the new proposed annual caps of loan, loan guarantee and other credit financing services to the EGM for the Independent Shareholders’ approval.

In assessing the fairness and reasonableness of the Revised Annual Caps for the loan, loan guarantee and other credit financing services (the “ Loan Caps ”), enquiries have been made with the Directors regarding the underlying bases and assumptions for the Loan Caps. The Directors have provided (i) requirements of SASAC of the State Council; (ii) the future development plan of the Company; (iii) interests on loan of the Group for the nine months ended 30 September 2013 and each of the two years ended 31 December 2012; (iv) the Company’s actual funding requirements and business development needs; and (v) the Group’s estimates on future demands and operating conditions. In addition, according to the representation by the Board, the Group’s bank and other borrowings in CEC Finance was approximately RMB109 million as at 30 September 2013.

Internal Control measures for pricing Policy

According to the representation by the Board, the Company set up Audit Committee to perform annual review regarding the pricing policy. In addition, the Finance Department of the Company has arranged specific personnel to be in charge of banking and Connected Transactions respectively. The Company implements standard interest rates for deposits and loans in all banks. In the case of commercial banks raise deposit interest rate, the Company will consult CEC Finance to make adjustment accordingly.

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LETTER FROM WALLBANCK BROTHERS

Impact of the proceeds from non-public issuance of A Shares to cash balance being deposited in CEC Finance and the Revised Annual Caps

Reference is also made to the announcements of the Company dated 8 November 2012 and 1 July 2013 and the circular dated 7 December 2012, in relation to the issue of 258,823,529 A Shares by the Company by way of non-public issuance of A Shares in June 2013, and the announcements of the Company dated 26 December 2012, 8 January 2013, 1 April 2013, 19 April 2013, 5 June 2013, 8 August 2013, 26 September 2013, 16 October 2013 and 9 December 2013, and the circular dated 4 September 2013 of the Company.

According to the 2013 Interim Report, the Company raised proceeds in aggregate of approximately RMB1,320 million by way of non-public issue of A shares in 2013. After deduction of issuance expenses of approximately RMB26 million, the net proceeds amounted to approximately RMB1,294 million.

According to the representation by the Board, the proceeds are for the use to finance certain investment projects including automation equipment, communication equipment, transportation equipment and R&D Centre. According to the relevant regulations of China Securities Regulatory Commission, the proceeds shall be deposited in a specific account in commercial bank and only can be used for the specific investment project. According to the representation by the Board, the Company set up specific bank accounts in Bank of Communications, China Construction Bank, Shanghai Pudong Development Bank and other commercial banks accordingly. Please refer to the relevant Announcements published on 20 July 2013, 17 October 2013 and 10 December 2013.

According to the representation by the Board, from the end of 2011 to 30 September 2013, the amount of the Company’s bank balance and cash are as follows:

	30 September	30 June	31 December	31 December
	2013	2013	2012	2011
	RMB’000	RMB’000	RMB’000	RMB’000
Bank balance and cash	1,022,459	1,761,492	590,800	446,889
Bank balance and cash
(excluding fund-raising)	278,005	467,088	590,800	446,889

As indicated in the table above, since the completion of non-public offering of A shares, the amount of the Company’s bank balance and cash have significantly increased. At present, the amount of funds raised are deposited in an account set up by a commercial bank.

— 32 —

LETTER FROM WALLBANCK BROTHERS

According to the plan of fund raising, the additional revenue from the certain investment projects to the Company will be RMB2,450 million. According to the Board Letter, the construction periods of the above investment projects to be financed by the proceeds raised from Non-public Issuance of A Shares is 24 months, production of the Proceeds Investment Projects is expected to generate approximately RMB2,450 million in annual revenue of the Group. As the Company has invested in the Proceeds Investment Projects using other internal capital resources prior to the completion of the Non-public Issuance of A Shares, implementation of the Proceeds Investment Projects may take place earlier than scheduled, and revenue may be generated as early as in the second half of 2014. The Group’s business in fund settlement is therefore expected to increase in the coming two years. The Group will settle the funds generated from the Proceeds Investment Projects with commercial banks in the PRC, including CEC Finance, and the Group’s settlement size with CEC Finance will thereby increase.

According to the Board Letter, with reference to the annual revenue of RMB2,450 million expected to generate from the Proceeds Investment Projects, the Group intends to deposit approximately 20% of it funds with CEC Finance and the ramining approximately 80% of its fund will be deposited with other commercial banks in the PRC. The maximum daily deposit amount placed by the Group with CEC Finance during the term of the Financial Services Agreement in any event shall not exceed RMB500 million.

According to the Board Letter, where the Group intends to place deposit with CEC Finance, it will review the status of deposits of the Group before placing such deposit with CEC Finance. Further, the chief financial officers will monitor the status of deposits of the Group and to make the necessary adjustment whenever there is any change of status of deposits placed by the Group with other commercial banks in the PRC.

Internal Control Measures on Concentration Risks

According to the Board Letter, for deposit services and fund settlement business with CEC Finance under the Financial Services Agreement and the Supplemental Agreement, the Company carried out sufficient test and formulated a series of normative documents, defining the process of deposit and settlement business and establishing risk prevention plans as follows:

(a) Pursuant to the current actual situation of the cash and bank deposits and the business development trends for the coming two years, the Company cautiously and reasonably determined the annual caps of deposit services. The Board and independent Directors reviewed the basic information, business license, finance license, audit report and risk evaluation report of CEC Finance; requested the Company to carry out finance business with CEC Finance in accordance with the requirements of the listing rules of the stock exchanges of the places of listing of the Company, the Guidelines of the Shanghai Stock Exchange on Connected Transactions of Listed Companies, System of Related Party Transactions Management of the Company etc; requested the relevant personnel of CEC Finance to regulate behaviors to protect

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LETTER FROM WALLBANCK BROTHERS

the legal interest of the Company and all shareholders in accordance with the requirements of the Guidelines for the Conduct of the Controlling Shareholder and Beneficial Controller of a Company Listed on the Shanghai Stock Exchange and the new Code of Conduct for Controlling Shareholder and De Facto Controller.

(b) According to the Board Letter, based on the requirements of applicable laws, regulations and accounting standards, the Company’s internal finance management regulations regulate the management of funds, accounting systems and controls, and monitoring and control procedures of the Company. The Company also formulated new Code of Conduct for Controlling Shareholder and De Facto Controller to define the code of conduct for the controlling shareholder, De Facto Controller and related parties of the Company; formulated the Emergency Response Plan for Risks in Deposits in China Electronics Financial Co., Ltd (as indicated in Appendix V) to define procedures and measure for handling risks in deposit and settlement business with CEC Finance.
(c) According to the Board Letter, the Company will continue to refine and perfect its legal entity governance structures in accordance with the latest changes to applicable laws and regulations. The Company regularly reviews and updates its corporate governance rules regarding the audit committee, nomination committee, independent non-executive directors, and the work of the secretary to the Board pursuant to the requirements of the CSRC, the Securities and Futures Commission of Hong Kong, the Stock Exchange and other regulatory authorities.

According to the Board Letter, the internal control regulations of the Company regulate the daily operations of the Company through monitoring of operations, audit systems, investment appraisal systems, and supervision, and are reviewed and updated annually. The Company will continue to regulate connected transactions, increase transparency, enhance supervision of senior management, and regulate the behaviors of substantial shareholders and De Facto controllers. It will further develop the function of the Audit Committee and internal audit organization, and monitor and examine connected transactions throughout the process. Currently, the fund management and control of the Company is good.

Important Notice

The Shareholders shall be fully aware that as the Revised Annual Caps are relating to future events and are estimated based on assumptions which may or may not remain valid for the period up to 20 December 2015, and they do not represent forecasts of cash balance and/or loan amounts of the Company. Consequently, no opinion has been expected as to how closely the actual cash balance and the loan amounts of the Company will correspond with the Revised Annual Caps.

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LETTER FROM WALLBANCK BROTHERS

Listing Rules implication

The Directors indicated that the Company shall comply with the requirements of Rules 14A.37 to 14A.41 of the Listing Rules pursuant to which (i) the values of the transactions contemplated under the Supplemental Agreement must be restricted by the Revised Annual Caps from the date of approval by Independent Shareholders at the EGM to 20 December 2015; (ii) the terms of the Supplemental Agreement (together with the Revised Annual Caps) must be reviewed by the independent nonexecutive Directors annually; and (iii) details of the independent non-executive Directors’ annual review on the terms of the Supplemental Agreement (together with the Revised Annual Caps) must be included in the Company’s subsequent published annual reports and financial accounts. Furthermore, it is also required by the Listing Rules that the auditors of the Company must provide a letter to the Board confirming, among other things, that the transactions contemplated under the Supplemental Agreement are carried out in accordance with the pricing policies of the Company, and the Revised Annual Caps are not being exceeded. In the event that the total amounts of the transactions contemplated under the Supplemental Agreement exceed the Revised Annual Caps, or that there is any material amendment to the terms of the Supplemental Agreement, the Company, as confirmed by the Directors, shall comply with the applicable provisions of the Listing Rules governing continuing connected transactions.

RECOMMENDATION

Having considered the above principal factors and reasons and Directors’ representations, on balance and in general terms, we hold the view that in such circumstances of the Company and at this stage, the revision of annual caps of the existing Continuing Connected Transactions is on normal commercial term and is fair and reasonable so far as the Independent Shareholders are concerned and the revision of annual caps is in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Shareholders, and also recommend the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the resolution approving the Supplemental Agreement (including the Revised Annual Caps) and the Revised Continuing Connected Transactions at the forthcoming EGM.

Yours faithfully, For and on behalf of

WALLBANCK BROTHERS Securities (Hong Kong) Limited Phil Chan

Chief Executive Officer

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GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(A) Interests of Directors

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

Interests in domestic shares of the Company:

					Percentage
				No. of	of share
Name of			Nature of	shares held	capital in
Director	Position	Capacity	interests	(Long position)	issue
					(%)
Xu Guofei	Executive	Beneficial	Personal	2,546	0.00028
	Director	owner

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GENERAL INFORMATION

APPENDIX I

(B) Interests of Substantial Shareholders

As at the Latest Practicable Date, so far as is known to the Directors, Supervisors and chief executive of the Company, the interests or short positions of the persons (not being a Director or Supervisor or chief executive of the Company) in the shares and underlying shares of the Company which would fall to be disclosed 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 as otherwise notified to the Company and the Stock Exchange:

(i) Interests in the shares of the Company

			Approximate
		Class/	percentage in	Approximate
	Capacity/	no. of shares	the relevant	percentage in
Name of	nature of	interested	class of shares	the total shares
Shareholder	interests	(long position)	in issue	in issue
PEGL	Corporate interests	334,715,000	49.82%	36.63%
	held in the capacity	domestic shares
	of beneficial owner
Lewis Joseph	Personal interests	20,260,000	8.37%	2.22%
	held in the capacity	H shares
	of beneficial owner
Tuesday	Corporate interests	16,920,000	7.00%	1.85%
Thirteen Inc.	held in the capacity	H shares
	of beneficial owner
Tang Hanbo	Personal interests	20,376,000	8.42%	2.23%
	held in the capacity	H shares
	of beneficial owner

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GENERAL INFORMATION

APPENDIX I

As at the Latest Practicable Date, so far as is known to the Directors, the following Directors and supervisors hold offices as Directors or employees in CEC, the ultimate controller of the Company as shown above:

Name of Director/ Supervisor


Name of Director/ Supervisor	Position held in CEC
Lai Weide	Deputy General Manager
Xu Guofei	Assistant General Manager

As at the Latest Practicable Date, so far as is known to the Directors, the following Directors and supervisors hold offices as Directors or employees in NEIIC, the controlling shareholder of PEGL as shown above:

Name of Director/ Supervisor

Name of Director/ Supervisor Position held in NEIIC Lai Weide Chairman Xu Guofei General Manager Zhang Yinqian Secretary of the Party Committee

As at the Latest Practicable Date, so far as is known to the Directors, the following Directors and supervisors hold offices as Directors or employees in PEGL, the controlling Shareholder of the Company as shown above:

Name of Director/ Supervisor	Position held in PEGL
Lai Weide	Chairman
Xu Guofei	General Manager
Zhang Yinqian	Secretary of the Party Committee
Deng Weiming	Deputy General Manager
Lu Qing	Deputy General Manager

As at the Latest Practicable Date, so far as is known to the Directors, none of the Directors and supervisors hold offices as Directors or employees in CEC Finance, non-banking financial institute of CEC.

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GENERAL INFORMATION

APPENDIX I

As at the Latest Practicable Date, so far as is known to the Directors, the following Directors and supervisors hold offices as Directors or employees in TPV Technology, whose ultimate controlling shareholder is CEC, the ultimate controller of the Company as shown above and therefore an associate of the Company:

Name of Director/ Supervisor

Position held in TPV Technology

Jason Hsuan Chairman

(ii) Interests in non-wholly owned subsidiaries of the Company

		Approximate
		percentage of
Name of non-wholly	Name of shareholders	interest held by
owned subsidiaries	interested in 10% or more of	that shareholder
of the Company	the subsidiaries of the Company	(long position)
Nanjing Panda Information	GALANT (HK) LIMITED	25%
Industry Co., Ltd
Nanjing Panda International	Hong Kong Shun Sing	28%
Telecommunication	Development Co., Ltd
System Co., Ltd
Nanjing Panda Electronics	GALANT (HK) LIMITED	25%
Manufacturing Co., Ltd
Nanjing Panda System	Liu Changhua	10.90%
Integration Co., Ltd
Nanjing Panda Power	Shi Qingrong	11.46%
Supply Technology
Manufacture Co., Ltd

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GENERAL INFORMATION

APPENDIX I

Save as disclosed above, the Directors, supervisors and chief executive of the Company are not aware that there is any person (other than a Director, supervisor or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of members of the Group or any options in respect of such capital.

3. LITIGATION

As at the Latest Practicable Date, there was no litigation or claim of material importance known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or supervisors of the Company had entered, or proposed to enter, into a service contract with any member of the Group which is not determinable by the Group within one year without payment of compensation, other than statutory compensation.

5. COMPETING INTERESTS

As at the Latest Practicable Date, so far was known to the Directors, none of the Directors or their respective associates was considered to have an interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group (other than those businesses to which the Directors and his/her associates were appointed to represent the interests of the Company and/or the Group) or have any other conflicts of interest with the Group pursuant to the Listing Rules.

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GENERAL INFORMATION

APPENDIX I

6. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

As disclosed above, Mr. Lai holds offices in CEC and PEGL, Mr. Xu holds an office in PEGL and holds approximately 0.00028% of the total issued share capital of the Company and Mr. Deng and Mr. Lu hold offices in PEGL, and are all therefore considered to be interested in the transactions contemplated under the Revised Continuing Connected Transactions and had abstained from voting on the relevant resolutions of the Board approving the Revised Continuing Connected Transactions.

Save as aforesaid, the Board confirms that as at the Latest Practicable Date, none of the other Directors had any direct or indirect interests in any assets which had been 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 since 31 December 2012 (being the date to which the latest published audited accounts of the Group were made up), none of the other 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.

Mr. Hsuan, by virtue of his office held TPV Technology as disclosed above, is also a connected person of the Company and had abstained from voting on the relevant resolutions of the Board approving the Revised Continuing Connected Transactions.

Save as aforesaid, the Board confirms that none of the other Directors abstained from voting on the relevant resolutions of the Board approving the Existing Continuing Connected Transactions and the New Continuing Connected Transaction.

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GENERAL INFORMATION

APPENDIX I

7. 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 2012 (being the date to which the latest published audited accounts of the Group were made up).

8. EXPERTS AND CONSENTS

The followings are the qualification of the experts who have been named in this circular or have given opinions or advice in this circular:

Name Qualifications

Yongheng Partners Legal advisor on the PRC law Wallbanck Brothers A licensed corporation to carry out type 4 (advising on Securities securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities as defined under SFO

As at the Latest Practicable Date, each of Wallbanck Brothers and the PRC Lawyer did not have any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for securities in any member of the Group nor did it have any direct or indirect interests in any assets which had been, since 31 December 2012 (being the date to which the latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or which were proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, each of Wallbanck Brothers and the PRC Lawyer has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name in the form and context in which they respectively appear herein.

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GENERAL INFORMATION

APPENDIX I

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of the Company at 301 Zhongshan Road East, Nanjing, Jiangsu Province, the PRC and the Company’s solicitors at 23rd Floor, Admiralty Centre, Tower II, 18 Harcourt Road, Hong Kong, during normal business hours on any weekday (except public holidays) from the date of this circular up to and including 11 March 2014:

(a) the Financial Services Agreement;
(b) the Supplemental Agreement;
(c) the letter from the Independent Board Committee, the text of which is set out in this circular;
(d) the letter from Wallbanck Brothers, the text of which is set out in this circular;
(e) the PRC legal opinion on the amendments to the Articles of Association issued by the PRC Lawyer;
(f) the written consents referred to in the section headed “Experts and Consents” in this Appendix; and
(g) the Memorandum and Articles of Association of the Company.

10. GENERAL

(a) The registered office of the Company is situated at Level 1-2, Block 5, North Wing, Nanjing High and New Technology Development Zone, Nanjing, Jiangsu Province, the PRC.
(b) The principal place of business of the Company is at 301 Zhongshan Road East, Nanjing, Jiangsu Province, the PRC.
(c) The company secretary of the Company is Mr. Shen Jianlong, who is the Chief Accountant and Secretary to the Board.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

Amendment to Article 191 of the Articles of Association:

The original Article 191:

“Article 191 At the end of each fiscal year, the Company shall prepare a financial report which shall be examined and verified in a manner prescribed by law.

The Company’s financial report shall include the following accounting statements and schedules:

(1) balance sheet;
(2) income statement;
(3) statement of changes in financial position;
(4) statement of financial position;
(5) statement of profit appropriation.”

is to be amended as:

“Article 191 At the end of each fiscal year, the Company shall prepare a financial report which shall be examined and verified in a manner prescribed by law.

The Company’s financial report shall include the following accounting statements and schedules:

(1) balance sheet and consolidated balance sheet;
(2) income statement and consolidated income statement;
(3) statement of cash flows and consolidated statement of cash flows;
(4) statement of changes in owners’ equity and consolidated statement of changes in owners’ equity;
(5) comparative figures for the statements referred to in (1) to (4) above inclusive for the corresponding previous period;
(6) accounting policies and notes to financial statements.”

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

Amendment to Article 203 of the Articles of Association:

The original Article 203:

“Article 203 Decision-making procedures for the Company’s profit distribution:

(1) The board of directors of the Company shall, based on the Company’s profit, capital needs and the Shareholders’ Return Plan, formulate its annual profit distribution proposal and submit the same to the general meeting for consideration. When making decisions on and formulating its profit distribution proposal, the board of directors shall record in detail the advice of the management, key points of the speeches of directors present at the meeting, opinions of independent directors, voting results of the board of directors, etc. and form written minutes to be properly kept as the Company’s records.
(2) When considering the cash dividend distribution plan, the board of directors of the Company shall carefully consider and deliberate the timing, conditions and minimum percentage, etc., and independent directors shall express their opinions thereon.
(3) When the profit distribution plan is considered at the general meeting, the Company shall communicate and exchange ideas through multiple channels with shareholders (minority shareholders in particular), listen fully to the opinions and demands of minority shareholders, and give timely replies to issues that concern minority shareholders.
(4) On the condition that profit is recorded and there is sufficient cash to support the ongoing operation and long-term development of the Company, the Company shall actively distribute dividends in the form of cash. If profit is recorded in the reporting period but the board of directors of the Company does not put forth a cash dividend distribution proposal, reasons therefor and the use of capital that may otherwise be used as dividends but has been retained by the Company shall be disclosed in its periodic report, and independent directors shall express independent opinions thereon.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

(5) The Company’s profit distribution policy shall be formulated by the board of directors of the Company and be implemented upon consideration and approval by shareholders at the general meeting. The profit distribution proposal proposed by the board of directors of the Company shall be passed by majority votes of the board of directors of the Company. Independent directors shall provide their independent opinions on the formulation of or amendment to the profit distribution policy. If the Company needs to adjust its profit distribution policy and Shareholders’ Return Plan due to significant changes in the external operating environment or its own operation, with the protection of shareholders’ interests as the starting point and after discussing the relevant matters in detail, the board of directors of the Company shall put forward a proposal for adjusting the profit distribution policy and Shareholders’ Return Plan to the general meeting for consideration and approval.
(6) The Company shall strictly implement the cash dividend policy as determined in the Articles of Association and the specific plan for distribution of cash dividends as considered and approved at the general meeting. If the Company needs to adjust or change the cash dividend policy as determined in the Articles of Association, it is required to satisfy the conditions under the Articles of Association and execute appropriate decisionmaking procedures after discussion. The adjustment or changes shall be passed by shareholders present in the meeting representing not less than two-thirds of voting rights. The Company shall disclose the formulation and implementation of cash dividend policy in detail in its periodic reports.”

is to be amended as:

(1) The board of directors of the Company shall, based on the Company’s profit, capital needs and the Shareholders’ Return Plan, formulate its annual profit distribution proposal and submit the same to the general meeting for consideration. When making decisions on and formulating its profit distribution proposal, the board of directors shall listen fully to the opinions and demands of independent directors and record in detail the advice of the management, key points of the speeches of directors present at the meeting, opinions of independent directors, voting results of the board of directors, etc. and form written minutes to be properly kept as the Company’s records.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

(2) When considering the cash dividend distribution plan, the board of directors of the Company shall carefully consider and deeply deliberate the timing, conditions and minimum percentage, etc., and independent directors shall express their opinions thereon. Independent directors can collect advice from minority shareholders and prepare a cash distribution proposal which can be directly proposed to the board of directors for its consideration.
(3) When the profit distribution plan (including the cash dividend distribution plan) is considered at the general meeting, the Company shall actively communicate and exchange ideas through multiple channels with shareholders (minority shareholders in particular), listen fully to the opinions and demands of minority shareholders, and give timely replies to issues that concern minority shareholders by ways of open solicitation and convening discussion meetings, etc.
(4) If profit is recorded in the reporting period but the board of directors of the Company does not put forth a cash dividend distribution proposal, reasons therefor and the use of capital that may otherwise be used as dividends but has been retained by the Company, as well as the expected profit, the consideration and voting at the board meeting shall be disclosed in its periodic report, and independent directors shall express independent opinions thereon.
(5) The Company’s profit distribution policy shall be formulated by the board of directors of the Company and be implemented upon consideration and approval by shareholders at the general meeting. The profit distribution proposal proposed by the board of directors of the Company shall be passed by majority votes of the board of directors of the Company. Independent directors shall provide their independent opinions on the formulation of or amendment to the profit distribution policy. If the Company needs to adjust its profit distribution policy and Shareholders’ Return Plan considered and passed at the general meeting by way of amending the Articles of Association due to significant changes in the external operating environment or its own operation, with the protection of shareholders’ interests as the starting point and after discussing the relevant matters in detail, the board of directors of the Company shall put forward a proposal for adjusting the profit distribution policy and Shareholders’ Return Plan to the general meeting for consideration and approval and shall be passed by shareholders present in the meeting representing not less than two-thirds of voting rights.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

(6) The Company shall strictly implement the cash dividend policy as determined in the Articles of Association and the specific plan for distribution of cash dividends as considered and approved at the general meeting. If the Company needs to adjust or change the cash dividend policy as determined in the Articles of Association due to significant changes in the external operating environment or its own operation, it is required to satisfy the conditions under the Articles of Association and execute appropriate decisionmaking procedures after discussion. The board of directors of the Company shall put forward a proposal for the adjustment or changes to the general meeting for consideration and approval and shall be passed by shareholders present in the meeting representing not less than two-thirds of voting rights. The Company shall disclose the formulation and implementation of cash dividend policy in detail in its periodic reports. If there is any adjustment or change to the cash dividend policy, detailed descriptions shall be provided on the regulatory compliance and transparency regarding the conditions and procedures for such adjustment or change.
(7) The supervisory committee of the Company shall monitor the execution of cash dividend policy and the Shareholders’ Return Plan carried out by the board of directors, as well as the execution of appropriate decision-making procedures and the information disclosure. The supervisory committee shall express explicit opinions and urge the Board to make correction in a timely manner in case of any of the following circumstances:
i. Failure to strictly implement the cash dividend policy and Shareholders’ Return Plan;
ii. Failure to strictly execute appropriate decision-making procedures for cash dividends;
iii. Failure to make an authentic, accurate and complete disclosure of the cash dividend policy and its implementation.
(8) The Company encourages medium and small investors and institutional investors to participate in the decision-making for profit distribution of the Company in accordance with relevant regulations.”

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

Amendment to Article 204 of the Articles of Association:

The original Article 204:

“Article 204 Profit distribution policy of the Company:

(1) The Company shall adopt a continuous and steady profit distribution policy. The Company’s profit distribution shall focus on providing investors with reasonable investment return as well as maintaining the sustainable development of the Company. The Company’s profit distribution shall not exceed the range of the accumulated distributable profits or damage the Company’s ability to continue operations.

If there is any surplus following appropriation of after-tax profits according to items (1) to (4) of Article 197, the Company shall distribute dividends. The dividends of the Company shall be distributed at least once a year. After the profit distribution plan is approved at the general meeting of the Company, the board of directors of the Company shall complete the distribution of the dividends (or shares) within two months after convening the shareholders’ general meeting.

(2) The Company may distribute dividends in cash, in shares or in a combination of both cash and shares.
(3) The Company may distribute interim cash dividends. The profits which the Company has accumulatively distributed in cash over the last three years shall not be less than 30% of the average annual distributable profits realized in such three years. If the Company does not distribute profits in cash in the last three years, the Company shall not issue new shares to the public, issue convertible bonds or place shares to the existing shareholders.
(4) The following conditions shall be satisfied for cash dividend distribution:
the distributable profit (i.e. after-tax profit net of the profit used for making up for losses and the profit transferred to the statutory reserve fund) for the year is positive;
the auditing firm has issued a standard audit report with unqualified opinions on the financial report for the financial year;
the Company has no significant investment plan or material cash outlay event (other than fundraising project).

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

(5) Depending on the profitability and cash flows for the year, the Company may distribute profits by way of shares provided that the minimum cash dividend payout ratio and an optimal share capital base and shareholding structure are maintained.
(6) Whenever the Company distributes dividends, an announcement in respect thereof shall be made to shareholders. No profit shall be distributed in respect of the shares held by the Company.
(7) Dividends payable to the holders of the overseas-listed foreign-invested shares of the Company shall be denominated and declared in Renminbi and paid in foreign currencies. Dividends payable on foreign-invested shares listed in Hong Kong shall be paid in Hong Kong dollars.”

is to be amended as:

“Article 204 Profit distribution policy of the Company:

(1) The Company shall adopt a continuous and steady profit distribution policy. The Company’s profit distribution shall focus on providing investors with reasonable investment return as well as maintaining the sustainable development of the Company. The Company’s profit distribution shall not exceed the range of the accumulated distributable profits or damage the Company’s ability to continue operations.

If there is any surplus following appropriation of after-tax profits according to items (1) to (4) of Article 199, the Company shall distribute dividends. The dividends of the Company shall be distributed at least once a year. After the profit distribution plan is approved at the general meeting of the Company, the board of directors of the Company shall complete the distribution of the dividends (or shares) within two months after convening the shareholders’ general meeting.

(2) The Company may distribute dividends in the form of cash, shares or the combination of cash and shares. On the condition that profit is recorded and there is sufficient cash to support the ongoing operation and long-term development of the Company, the Company shall actively and preferentially distribute dividends in the form of cash.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

(3) The Company may distribute interim cash dividends. The Company’s cash dividend policy adopts the fixed ratio policy, i.e. distributing cash dividend at a fixed percentage of distributable profit realized by the Company. The profits which the Company has accumulatively distributed in cash over the last three years shall not be less than 30% of the average annual distributable profits realized in the last three years. If the Company has not distributed profits in cash in the last three years, the Company shall not issue new shares to the public, issue convertible bonds or place shares to the existing shareholders.

The board of directors shall take various factors into consideration, including its industry features, development stages, business model and profitability as well as whether it has any substantial capital expenditure arrangement, and differentiate the following circumstances and formulate differentiated cash dividend policies in accordance with the procedures under the Articles of Association:

Where the Company is in a developed stage with no substantial capital expenditure arrangement, the dividend distributed in the form of cash shall not be less than 80% of the total profit distribution when distributing its profits;
Where the Company is in a developed stage with substantial capital expenditure arrangement, the dividend distributed in the form of cash shall not be less than 40% of the total profit distribution when distributing its profits;
Where the Company is in a developing stage with substantial capital expenditure arrangement, the dividend distributed in the form of cash shall not be less than 20% of the total profit distribution when distributing its profits.
(4) The following conditions shall be satisfied for cash dividend distribution:
the distributable profit realized (i.e. after-tax profit net of the profit used for making up for losses and the profit transferred to the statutory reserve fund) for the year is positive;
the auditing firm has issued a standard audit report with unqualified opinions on the financial report for the year.
(5) Depending on the profitability and cash flows for the year, the Company may distribute profits by way of shares provided that the minimum cash dividend payout ratio and an optimal share capital base and shareholding structure are maintained. For profit distribution by way of share dividend, it is required to have such authentic and reasonable factors such as corporate growth, dilution of net asset value per share, etc.

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PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION

APPENDIX II

(6) Whenever the Company distributes dividends, an announcement in respect thereof shall be made to shareholders. No profit shall be distributed in respect of the shares held by the Company.
(7) Dividends payable to the holders of the overseas-listed foreign-invested shares of the Company shall be denominated and declared in Renminbi and paid in foreign currencies. Dividends payable on foreign-invested shares listed in Hong Kong shall be paid in Hong Kong dollars.
(8) The Company may issue preferred shares or repurchase shares according to the law, and may repurchase shares when the share price is lower than the net asset value per share (apart from loss).”
Note: The proposed amendments to the Articles of Association are written in Chinese and there is no official English translation in respect thereof. The translation into English language above is for reference only. In case of any inconsistency between the English and Chinese versions, the Chinese version shall prevail.

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PROPOSED NEW SHAREHOLDERS’ RETURN PLAN

APPENDIX III

Details of the Shareholders’ Return Plan are set out below:

Article 1 Factors taken into account by the Company in formulation of the Shareholders’ Return Plan

In order to achieve long-term and sustainable development, the Company, after taking into account of its actual circumstances, development goals, the desires of shareholders and external financing costs and conditions, shall establish a continuous, stable and scientific plan and mechanism for rewarding shareholders and make specific institutional arrangements for profit distribution to ensure the continuity and stability of profit distribution policies.

Article 2 Principles for formulation of the Company’s Shareholders’ Return Plan

The Company adopts continuous and stable profit distribution policies, aiming to bring reasonable returns to investors while ensuring the Company’s actual operation and sustainable development. The board of directors and the Company in general meeting shall, in the decision-making and discussion process in respect of profit distribution policies, communicate and exchange ideas with shareholders (minority shareholders in particular) and independent directors, listen to the opinions and demands of independent directors and minority shareholders and give timely replies to issues that concern minority shareholders.

Article 3 Decision-making procedure for formulating the Shareholders’ Return Plan

In formulating the Shareholders’ Return Plan, the board of directors of the Company shall take into account the Company’s profits, cash flow status, capital demand in the current operating period, etc., take heed of the opinions of shareholders (minority shareholders in particular) and independent directors, and implement the plan after approval is obtained at the general meeting of the Company. The Company shall hear extensively shareholders’ opinions and recommendations on the Company’s dividend distribution and shall be subject to the supervision of Shareholders.

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PROPOSED NEW SHAREHOLDERS’ RETURN PLAN

APPENDIX III

If the Company needs to adjust the Shareholders’ Return Plan due to significant changes in the external operating environment or its own operation, with the protection of shareholders’ interests as the starting point and after discussing the relevant matters in detail, the board of directors of the Company shall put forward a proposal for adjusting the Shareholders’ Return Plan to the general meeting for consideration and approval. The proposal shall be passed by more than two-thirds of the voting rights held by the shareholders present at the general meeting.

Article 4 Time intervals for formulation of the Shareholders’ Return Plan

The Company shall review its Shareholders’ Return Plan at least once every three years to determine its Shareholders’ Return Plan for such period based on the projected operational conditions and opinions of shareholders (minority shareholders in particular), directors (independent directors in particular) and supervisors.

Article 5 Specific Shareholders’ Return Plan for the next three years (2013-2015)

1. Form of profit distribution

The Company may distribute dividends in the form of cash, shares or the combination of cash and shares. On the condition that profit is recorded and there is sufficient cash to support the ongoing operation and long-term development of the Company, the Company shall actively and preferentially distribute dividends in the form of cash.

2. Time intervals for profit distribution

When the conditions for dividend distribution are satisfied, the Company shall pay dividends at least once every year. The Company may also distribute interim dividends. After the profit distribution plan is approved at the general meeting of the Company, the board of directors of the Company shall complete the distribution of the dividends (or shares) within two months after convening the shareholders’ general meeting.

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PROPOSED NEW SHAREHOLDERS’ RETURN PLAN

APPENDIX III

3. Decision-making procedure for profit distribution

The board of directors of the Company shall, based on the Company’s profit, capital needs and the Shareholders’ Return Plan, formulate its annual profit distribution proposal and submit the same to the general meeting for consideration. When making decisions on and formulating its profit distribution proposal, the board of directors shall listen fully to the opinions and demands of independent directors and record in detail the advice of the management, key points of the speeches of directors present at the meeting, opinions of independent directors, voting results of the board of directors, etc. and form written minutes to be properly kept as the Company’s records.

When considering the cash dividend distribution plan, the board of directors of the Company shall carefully consider and deeply deliberate the timing, conditions and minimum percentage, etc., and independent directors shall express their opinions thereon. Independent directors can collect advice from minority shareholders and prepare a cash distribution proposal which can be directly proposed to the board of directors for its consideration.

When the profit distribution plan (including the cash dividend distribution plan) is considered at the general meeting, the Company shall actively communicate and exchange ideas through multiple channels with shareholders (minority shareholders in particular), listen fully to the opinions and demands of minority shareholders, and give timely replies to issues that concern minority shareholders by ways of open solicitation and convening discussion meetings, etc.

If profit is recorded in the reporting period but the board of directors of the Company does not put forth a cash dividend distribution proposal, reasons therefor and the use of capital that may otherwise be used as dividends but has been retained by the Company, as well as the expected profit, the consideration and voting at the board meeting shall be disclosed in its periodic report, and independent directors shall express independent opinions thereon.

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PROPOSED NEW SHAREHOLDERS’ RETURN PLAN

APPENDIX III

The Company’s profit distribution policy shall be formulated by the board of directors of the Company and be implemented upon consideration and approval by shareholders at the general meeting. The profit distribution proposal proposed by the board of directors of the Company shall be passed by majority votes of the board of directors of the Company. Independent directors shall provide their independent opinions on the formulation of or amendment to the profit distribution policy. If the Company needs to adjust its profit distribution policy and Shareholders’ Return Plan considered and passed at the general meeting by way of amending the Articles of Association due to significant changes in the external operating environment or its own operation, with the protection of shareholders’ interests as the starting point and after discussing the relevant matters in detail, the board of directors of the Company shall put forward a proposal for adjusting the profit distribution policy and Shareholders’ Return Plan to the general meeting for consideration and approval and shall be passed by shareholders present in the meeting representing not less than two-thirds of voting rights.

The Company shall strictly implement the cash dividend policy as determined in the Articles of Association and the specific plan for distribution of cash dividends as considered and approved at the general meeting. If the Company needs to adjust or change the cash dividend policy as determined in the Articles of Association due to significant changes in the external operating environment or its own operation, it is required to satisfy the conditions under the Articles of Association and execute appropriate decision-making procedures after discussion. The board of directors of the Company shall put forward a proposal for the adjustment or changes to the general meeting for consideration and approval and shall be passed by shareholders present in the meeting representing not less than two-thirds of voting rights. The Company shall disclose the formulation and implementation of cash dividend policy in detail in its periodic reports. If there is any adjustment or change to the cash dividend policy, detailed descriptions shall be provided on the regulatory compliance and transparency regarding the conditions and procedures for such adjustment or change.

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PROPOSED NEW SHAREHOLDERS’ RETURN PLAN

APPENDIX III

The supervisory committee of the Company shall monitor the execution of cash dividend policy and the Shareholders’ Return Plan carried out by the board of directors, as well as the execution of appropriate decision-making procedures and the information disclosure. The supervisory committee shall express explicit opinions and urge the Board to make correction in a timely manner in case of any of the following circumstances:

i. Failure to strictly implement the cash dividend policy and Shareholders’ Return Plan;
ii. Failure to strictly execute appropriate decision-making procedures for cash dividends;
iii. Failure to make an authentic, accurate and complete disclosure of the cash dividend policy and its implementation.

The Company encourages medium and small investors and institutional investors to participate in the decision-making for profit distribution of the Company in accordance with relevant regulations.

4. Conditions for and minimum percentage of cash dividend distribution

All the following conditions shall be satisfied for cash dividend distribution:

i. the distributable profit realized (i.e. after-tax profit net of the profit used for making up for losses and the profit transferred to the statutory reserve fund) for the year is positive;
ii. the auditing firm has issued a standard audit report with unqualified opinions on the financial report for the financial year.

The Company’s cash dividend policy adopts the fixed ratio policy, i.e. distributing cash dividend at a fixed percentage of distributable profit realized by the Company. The profits which the Company has accumulatively distributed in cash in the last three years shall not be less than 30% of the average annual distributable profit realized in the last three years. If the Company has not distributed profits in cash in the last three years, the Company shall not issue to the public new shares, convertible bonds or place shares with existing shareholders.

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PROPOSED NEW SHAREHOLDERS’ RETURN PLAN

APPENDIX III

i. Where the Company is in a developed stage with no substantial capital expenditure arrangement, the dividend distributed in the form of cash shall not be less than 80% of the total profit distribution when distributing its profits;
ii. Where the Company is in a developed stage with substantial capital expenditure arrangement, the dividend distributed in the form of cash shall not be less than 40% of the total profit distribution when distributing its profits;
iii. Where the Company is in a developing stage with substantial capital expenditure arrangement, the dividend distributed in the form of cash shall not be less than 20% of the total profit distribution when distributing its profits.

5. Others

Depending on the profitability and cash flows for the year, the Company may distribute profits by way of shares provided that the minimum cash dividend payout ratio and an optimal share capital base and shareholding structure are maintained. For profit distribution by way of share dividend, it is required to have such authentic and reasonable factors such as corporate growth, dilution of net asset value per share, etc.

The Company may issue preferred shares or repurchase shares according to the law, and may repurchase shares when the share price is lower than the net asset value per share (apart from loss).

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PROPOSED NEW SHAREHOLDERS’ RETURN PLAN

APPENDIX III

Article 6

Matters not covered and validity mechanism

The matters not covered in the plan shall be executed in accordance with relevant laws, regulations, regulatory documents and the Articles of Association. The Shareholders’ Return Plan shall be effective from the date of its approval at the general meeting of the Company.

Note: The Shareholders’ Return Plan is written in Chinese and there is no official English translation in respect thereof. The English translation is for reference only. In case of any inconsistency between the English and Chinese versions, the Chinese version shall prevail.

The proposed New Shareholders’ Return Plan does not form part of the Articles of Association.

The distribution of dividends according to the proposed Shareholders’ Return Plan will follow the provisions in the Articles of Association and the requirements of the Listing Rules.

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APPENDIX IV PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

Nanjing Panda Electronics Company Limited Code of Conduct for Controlling Shareholder and De Facto Controller

CHAPTER I GENERAL PROVISIONS

Article 1 In order to further regulate the behavior of the controlling shareholder and de facto controller of Nanjing Panda Electronics Company Limited (the “Company”) and protect the interests of shareholders (in particular the minority shareholders) from being infringed, in accordance with the relevant requirements under Company Law of the People’s Republic of China, Securities Law of the People’s Republic of China, Rules Governing the Listing of Stocks on the Shanghai Stock Exchange, the Guidelines for the Conduct of the Controlling Shareholder and De Facto Controller of a Company Listed on the Shanghai Stock Exchange and the Articles of Association of the Company, the Company formulates this Code.
Article 2 Controlling shareholder herein referred to a shareholder whose shareholdings represent more than 50% of the total share capital of the Company, or if less than 50%, whose entitlement to voting rights is sufficient to materially affect the resolution at the general meetings of the Company.
Article 3 De Facto Controller herein referred to a natural person, legal person or other organization who is not a shareholder of the Company, while can de facto control or affect the operation of the Company through investment relationships, agreements or other arrangements.
Article 4 Conducts of following subjects are deemed as conducts of controlling shareholder and de facto controller, shall apply to the relevant requirements under this Code:
(1) Legal person and unincorporated organizations (other than the Company and subsidiaries controlled by it) directly or indirectly controlled by the controlling shareholder and de facto controller;
(2) Spouse, parents or children of the controlling shareholder or de facto controller who is a natural person;
(3) The largest shareholder;
(4) Other subjects designated by stock exchanges.

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APPENDIX IV PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

Article 5 Controlling shareholder, de facto controller and other relevant persons of the Company shall comply with the requirements under relevant laws and regulations of stock market, so as to promote the regulated operation of the Company and improve the quality of the Company.
Article 6 Controlling shareholder and de facto controller of the Company shall comply with the principles of honesty and credibility, exercise rights in accordance with the requirements under the law, regulation and the Articles of Association of the Company and strictly implement each commitment he/she/they made, so as to seek mutual development between the interests of the Company and all its shareholders.
Article 7 Controlling shareholder and de facto controller of the Company shall not abuse his/ her/their rights to prejudice the interests of the Company and its other shareholders by ways of connected transactions, profit distribution, asset reorganization and external investment, etc..

CHAPTER II CORPORATE GOVERNANCE

Article 8 Controlling shareholder and de facto controller shall establish a system, clarify the decision-making procedures for significant matters of the Company and the concrete measures for ensuring the independence of the Company, and set up a mechanism for responsibilities, permissions and accountability of relevant persons when dealing with matters in relation to the Company.

Controlling shareholder and de facto controller who carry out the duties of stateowned capital investors in accordance with national laws and regulations or authorization of the authority, shall comply with the requirements abovementioned.

Article 9 Controlling shareholder and de facto controller shall safeguard the completeness of the Company’s assets, and not prejudice the rights of the Company to occupy, utilize, share profit from and dispose of the assets of its legal persons.
(1) Controlling shareholder and de facto controller shall handle the transfer procedures for injecting or transferring into the assets of the Company in time, according to the requirements of the law and contract.

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PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

APPENDIX IV

(2) Controlling shareholder and de facto controller shall not affect the completeness of the Company’s assets by the following ways:
Share the production system, auxiliary production system and ancillary facilities in relation to the production and operation, as well as the business system and relevant assets in relation to the operation of the Company;
Share the trademark, patent and non-patent technology, etc. with the Company in an obviously unfair way;
Occupy, utilize, share profit from and dispose of the assets of the Company free or on obviously unfair conditions.

Article 10 Controlling shareholder and de facto controller shall maintain the independence of the Company personnel, and not affect the independence of the Company personnel by the following ways:

(1) Affect the appointment or removal of the Company personnel, or restrict the directors, supervisors, senior managers and other persons in office of the Company by ways other than exercising the shareholders’ rights under relevant laws and regulations and the Articles of Association;
(2) Appoint the general manager, secretory of the Board, deputy general manager, chief accountant, chief engineer or assistant of general manager to hold management positions other than directors and supervisors in controlling shareholder, de facto controller or the enterprises controlled by them;
(3) Require the Company to provide services for free;
(4) Instigate the directors, supervisors, senior managers and other persons in office of the Company to carry out a decision or conduct to prejudice the interests of the Company.

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APPENDIX IV PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

Article 11 Controlling shareholder and de facto controller shall maintain the financial independence of the Company, and not affect the financial independence of the Company by the following ways:

(1) Share a bank account with the Company or borrow the bank account of the Company;
(2) Engage in the non-operational usage of the Company’s capital by ways of borrowing, illegal guarantee, etc.;
(3) Control the financial accounting or capital transferring of the Company through financial accounting system or other management software;
(4) Require the Company to pay or pay in advance fees such as salary, benefits, insurance, advertising or other expenses.
Article 12 Controlling shareholder and de facto controller that provide daily financial services for the Company through its subordinate financial company (hereinafter referred as “Financial Company”) shall in accordance with the requirements of laws and regulations, urge the Financial Company and related parties to implement the decision-making procedures and obligation for information disclosure of connected transactions, monitor the regulated operation of Financial Company and safeguard the funds deposited by the Company in Financial Company, and shall not force the Company to accept the services from Financial Company by virtue of its dominant position.
Article 13 Controlling shareholder and de facto controller shall maintain the independence of the institutions of the Company and support the independent operation of the Board, supervisory committee, business operation department or other institutions and personnels thereof; shall not interfere the establishment, adjustment or cancellation of the Company institution by ways other than exercising the shareholders’ rights under relevant laws and regulations and the Articles of Association of the Company, or restrict or impose other undue influence on the Board, supervisory committee, other institutions and personnels thereof from exercising official rights.

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APPENDIX IV PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

Article 14 Controlling shareholder and de facto controller shall maintain the Company’s business independency.

(1) Controlling shareholder and de facto controller shall support and cooperate with the Company to establish independent production and operation model, and shall not compete with the Company in the aspects of business scope, business nature, customer target, product substitutability, etc. that might prejudice the interest of the Company;
(2) Controlling shareholder and de facto controller shall safeguard the independent decision of the Company in production and operation, internal management, external investment and guarantee as well as other aspects, support and cooperate with the Company to conduct internal decision-making procedures for significant event according to the laws, and participate in the decision-making process of significant event at the general meeting by way of exercising the shareholders’ rights, such as the proposal right, voting right and etc. as required by relevant laws and regulations and the Articles of Association of the Company;
(3) De facto controller shall not, by virtue of their controlling positions of the Company, seek for commercial opportunity that belongs to the Company.
Article 15 Controlling shareholder and de facto controller shall follow the fair and substantial fair principle of connected transactions procedures and sign written agreement if conduct connected transactions with the Company, and shall not cause the Company’s transmission of interest.

CHAPTER III INFORMATION DISCLOSURE

Article 16 Controlling shareholder and de facto controller shall strictly fulfill the information disclosure obligations in accordance with the relevant requirements, and guarantee the timeliness, fairness, truthfulness, accuracy and completeness of the information disclosed, and that there is no false representation and misleading statement or material omission in the information disclosed.

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APPENDIX IV PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

Article 17

Controlling shareholder and de facto controller shall set up information disclosure management system which clearly stipulates the following:

(1) Scope of significant information relating to the Company;
(2) Reporting process of undisclosed significant information;
(3) Registration system of insider;
(4) Security measures of undisclosed significant information;
(5) Process of external information publishing;
(6) Cooperation procedures of the Company’s information disclosure;
(7) Duties and authorities of relevant personnel in information disclosure;
(8) Other information disclosure management system.
Article 18 Controlling shareholder and de facto controller shall designate relevant departments and personnel to be in charge of information disclosure and timely inform the Company the contact information of relevant departments and personnel.
Article 19 Controlling shareholder and de facto controller shall cooperate with the Company in information disclosure and registration of insider, timely reply to the Company’s inquiries and ensure the truthfulness, accuracy and completeness of the information and materials provided.
Article 20 Controlling shareholder and de facto controller shall inform the Company in written form on the date of occurrence and cooperate with the Company in information disclosure in any of the following circumstances:
(1) Change in control;
(2) Major asset reorganization or debt restructuring of the Company;
(3) Commencement of bankruptcy or dissolution proceedings due to deterioration of operating conditions;

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PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

APPENDIX IV

(4) Other events that might have material impact on the trading prices of the Company’s securities and derivatives.

Controlling shareholder and de facto controller shall immediately inform the Company of the development or change as well as the potential impact thereof should any significant developments or changes in the events aforementioned occur.

Article 21 Controlling shareholder and de facto controller shall immediately inform the Company in written form and cooperate with the Company in information disclosure in any of the following circumstances before the disclosure of the events specified in the preceding article in accordance with the laws:
(1) The event is difficult to be kept confidential;
(2) The event has already been divulged, or rumors already exist in the market;
(3) The Company’s securities and derivatives experience unusual trading patterns.
Article 22 Controlling shareholder and de facto controller shall carry out insider registration and undertake confidentiality obligations when, in order to fulfill statutory duties, require the Company to provide undisclosed information in relation to external investment, financial budget data and financial final data, etc.

Controlling shareholder and de facto controller shall urge the Company to disclose the information pursuant to fair disclosure principles at the same time of provision of the same, if they cannot complete the registration and undertake confidentiality obligations mentioned in the preceding article.

Article 23 Except under the preceding article, controlling shareholder and de facto controller shall not deploy or go through undisclosed information in relation to the finance, business and other aspects of the Company.

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APPENDIX IV PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

Article 24 Controlling shareholder and de facto controller shall cooperate with the Company to complete the inquiry, investigation and verification work in relation to the disclosure of information. If received written inquiry letters from the Company, controlling shareholder and de facto controller shall timely learn about the real situation from related parties, reply to the Company in written form within the deadline, and provide relevant certified information and guarantee the truthfulness, accuracy and completeness of relevant information and materials.
Article 25 Controlling shareholder and de facto controller shall provide the Company with the basic information of de facto controller and its party acting in concert, cooperate with the Company to gradually disclose the equity and relation of control between the Company and de facto controller.
Article 26 If the Company is jointly controlled through investment relations, agreements or other arrangements, controlling shareholder and de facto controller shall also inform the Company of the pattern and contents of the joint control implemented on the Company in written form in addition to the information that shall be provided as required by the preceding article.
Article 27 Controlling shareholder and de facto controller holding equity of the Company by way of accepting entrust or trust shall timely inform the Company of the information of the principal, major contents of the entrust or trust agreements and other asset management arrangement in writing, and cooperate with the Company to fulfill the obligation of information disclosure.
Article 28 Controlling shareholder and de facto controller shall take the initiative to understand the real situation and timely inform the Company of relevant information for disclosure should there appear reports or rumors involving controlling shareholder and de facto controller that might significantly influence the trading prices of the Company’s securities and derivatives in the public media.
Article 29 Controlling shareholder and de facto controller shall not provide or disseminate undisclosed significant information of the Company or provide or disseminate false information or misleading statement, etc. when being interviewed by media or surveyed by investors or communicating with other institutions or individuals.

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APPENDIX IV PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

Article 30 Controlling shareholder and de facto controller and their associated personnel shall keep confidential the undisclosed significant information of the Company which is acquired due to different reasons, and shall not make public or reveal such information or take advantage of such information to make profit.
Article 31 Controlling shareholder and de facto controller of the Company issuing securities and derivatives both at home and abroad simultaneously shall make disclosure through the Company in the domestic market when disclose significant information involving the Company in foreign market.

CHAPTER IV SHARE TRANSACTION, TRANSFER OF CONTROL

Article 32 The controlling shareholder, de facto controller and its party acting in concert shall comply with the provisions under laws and regulations and abide by the relevant statements and commitments in trading shares of the Company through securities trading at the stock exchange, and shall not trade shares of the Company through utilization of others’ account or provision of funds to others.
Article 33 When the shares in which the controlling shareholder, de facto controller and its party acting in concert have interests have reached five percent of the issued shares of the Company, the controlling shareholder, de facto controller and its party acting in concert shall prepare a report on changes in equity, submit a written report to the CSRC and stock exchange, report to agencies, inform the Company and publish an announcement when each further increase or decrease of shares in which they have interest exceeds five percent of the issued shares of the Company through securities trading at the stock exchange (including block trading) or negotiated transfer within three days from the date of such increase or decrease.
Article 34 When the shares in which the controlling shareholder, de facto controller and its party acting in concert have interests have reached or exceeded five percent but are less than thirty percent of the issued shares of the Company, it is required to prepare a long form report on changes in equity. If the circumstance complies with the requirements, it is also required to appoint a financial advisor to issue verification opinions.

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APPENDIX IV PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

Article 35 When the shares held by the controlling shareholder, de facto controller and its party acting in concert in the Company through securities trading at the stock exchange have reached thirty percent of the issued shares of the Company, any further increase in shareholding shall be conducted by way of general offer or partial offer. When the shares in which the controlling shareholder, de facto controller and its party acting in concert have interests have reached or exceeded thirty percent of the issued shares of the Company, an increase in shareholding may be first conducted and an application can be submitted to the CSRC for waiver of tender offer after the increase in shareholding provided that the increase of shares in which they have interests in the Company within each twelve months after one year from the date of the occurrence of the said fact does not exceed two percent of the issued shares of the Company.

Article 36 The controlling shareholder and de facto controller shall not increase shareholding in the Company in any of the following circumstances:

(1) within ten days before the disclosure of regular reports of the Company;
(2) within ten days before the disclosure of announcement on preliminary results and announcement on estimated results of the Company;
(3) within the term of report and announcement on changes in equity and within two days after the report and announcement where the controlling shareholder and de facto controller conduct securities trading through the stock exchange;
(4) within two trading days from the date of becoming aware of the occurrence of the event which may have a material impact on the stock trading price of the Company or in the decision making process to the disclosure of this event according to the law;
(5) The controlling shareholder and de facto controller undertakes not to trade the shares of the Company within a certain term and in this term;
(6) The circumstances under Article 47 of the Securities Law;
(7) Other circumstance under relevant laws, regulations and regulating documents.

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APPENDIX IV PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

Article 37 If the number of shares sold publicly by the controlling shareholder or de facto controller holding original shares released from trading moratorium in the next month exceeds one percent of the total shares of the Company, it is required to comply with the relevant rules of the Shanghai Stock Exchange and China Securities Depository and Clearing Corporation Limited. The shares held shall be transferred through the block trading system of the Shanghai Stock Exchange.
Article 38 The controlling shareholder and de facto controller shall not transfer the original shares released from trading moratorium within thirty days before publishing the annual report and interim report of the Company.
Article 39 For the negotiated transfer of control by the controlling shareholder or de facto controller, it is required to ensure the fairness, justice and reasonableness of the transaction and it is not allowed to impair the legitimate interests of the Company and other shareholders by the transfer of control.
(1) Before the negotiated transfer of control by the controlling shareholder or de facto controller, it is required to conduct a rational survey on the qualifications, integrity, intention of participating in the transfer, performance capacity, etc. of the transferee and ensure the fairness, justice and reasonableness of the transaction, and it is not allowed to impair the legitimate interests of the listed company and other shareholders by the transfer of control.
(2) Before the negotiated transfer of control by the controlling shareholder or de facto controller, in the event of impairment of the legitimate interests of the Company and other shareholders due to occupancy of corporate funds, etc., it is required to take measures to eliminate such impairment; in the event of outstanding liabilities due to the Company or undischarged guarantee for its liabilities provided by the Company, it is required to cooperate with the Company in proposing the solutions; in case of non-performance of commitments, it is required to take measures to guarantee that the performance of commitments is not affected.
(3) In transfer of control over the Company by the controlling shareholder or de facto controller, it is required to pay attention to and coordinate the replacement of old and new shareholders, so as to ensure the smooth transition of the board of directors and management of the Company.

Article 40

If the controlling shareholder or de facto controller trades the shares of the Company by way of trust, entrustment or other ways, the provisions under this chapter shall apply.

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PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

APPENDIX IV

CHAPTER V OTHER PROVISIONS

Article 41 In making a proposal, the controlling shareholder or de facto controller shall give full consideration to and explain the impact of the proposal on the interests of the Company and other shareholders.

Article 42 The controlling shareholder or de facto controller shall cooperate with the Company in safeguarding other shareholders’ rights of making proposals, voting, etc. through systems such as on-line voting, cumulative voting, collection of voting, etc., and it is not allowed to restrict or obstruct the execution of the legitimate rights by other shareholders for any reason or by any means.

Article 43 The controlling shareholder or de facto controller shall take effective measures to guarantee the effective implementation of its commitments. For the commitments with relatively large performance risks, the controlling shareholder or de facto controller shall provide performance guarantee. In case it is unable or possibly unable to perform the guarantee obligation due to the changes in the guarantor or subject matter of the performance guarantee, the controlling shareholder or de facto controller shall promptly inform the Company, make a disclosure and provide a new performance guarantee.

Unless otherwise stipulated, the transfer of shares of the Company held by the controlling shareholder or de facto controller before the completion of the performance of relevant commitments shall not affect the performance of relevant commitments.

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PROPOSED NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

APPENDIX IV

CHAPTER VI SUPPLEMENTARY PROVISIONS

Article 44 The behaviors of and the relevant work of information disclosure by the controlling shareholder or de facto controller are subject to the day-today regulation by the stock exchange according to the provisions under relevant laws and regulations, and the controlling shareholder and de facto controller shall attend the designated training(s) and be assessed in accordance with the requirements of the regulatory authorities.
Article 45 For the behaviors of the controlling shareholder or de facto controller conducted to the controlled subsidiary(ies) of the Company, the relevant provisions under the Code shall apply.
Article 46 The matters not covered in the Code shall be executed according to the provisions under relevant national laws, administrative regulations, departmental regulations, the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange, the Listing Rules of the Hong Kong Stock Exchange and the Articles of Association of the Company.
Article 47 The Code is formulated, modified and interpreted by the board of directors of the Company.
Article 48 The Code comes into effect from the date of its approval at the general meeting. When the Code becomes effective, the Code of Conduct for Controlling Shareholders of Nanjing Panda Electronics Company Limited shall be abolished.

Board of Directors of Nanjing Panda Electronics Company Limited

January 2014

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EMERGENCY RESPONSE PLAN FOR RISKS IN DEPOSITS IN CEC FINANCE

APPENDIX V

Nanjing Panda Electronics Company Limited Emergency Response Plan against Deposit Risks in China Electronics Financial Co., Ltd. (Revised in January 2014)

CHAPTER 1 GENERAL PROVISIONS

Article 1 The Emergency Response Plan against Deposit Risks in China Electronics Financial Co., Ltd. of Nanjing Panda Electronics Company Limited (the “Response Plan”) is set up to further regulate the connected transactions between Nanjing Panda Electronics Company Limited (the “Company”) and its controlling subsidiaries with China Electronics Financial Co., Ltd. (“Financial Company”), and to effectively prevent, timely control and resolve the risks for the Company’s funds deposited in the Financial Company and to maintain the security and mobility of such fund.

CHAPTER 2 COMPOSITION, RESPONSIBILITIES AND PRINCIPLES FOR RISK RESPONSE

Article 2 The Company shall establish a Leading Team on Deposit Risk Prevention and Response (“Leading Team”) with the general manager as the team leader and is ultimately responsible for the deposit risk prevention and response. The chief financial officer is the deputy team leader, and the members include persons in charge of the Assets and Finance Department, Supervision and Auditing Department and Secretariat to the Board. The team leader and deputy team leader of the Leading Team are responsible for initiating the prevention and response towards the deposit risks.
Article 3 An office shall be established under the Leading Team with the person in charge of the Assets and Finance Department as the office director. Its members include relevant personnel from Assets and Finance Department, Supervision and Auditing Department and Secretariat to the Board. The office is responsible for specific cases concerning the prevention and response towards deposit risks.
Article 4 Members of the Leading Team and the office shall not conceal, postpone or misrepresent the deposit situation of the Company, or instruct others to do so.

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EMERGENCY RESPONSE PLAN FOR RISKS IN DEPOSITS IN CEC FINANCE

APPENDIX V

Article 5 As the risk response organization, once risks occur or may occur in the Financial Company, the Leading Team shall initiate emergency response plan to deal with the situation pursuant to the prescribed procedures.

Article 6 For prevention and response towards deposit risks, the following principles shall be adhered to:

(1) centralized leadership with level-based responsibilities: the prevention and response towards deposit risks shall be led by the Leading Team alone, which is responsible to the Board and shall take charge of all work related to the prevention and response towards deposit risks;
(2) cooperation between independent functions: relevant departments shall divide their duties according to their functions in a joint effort to plan and implement each preventive measure and solution to control and address risks;
(3) sharing of information with prevention as priority: relevant departments and personnel should understand the deposit situation, operation of the Financial Company and the dynamics of supervision and regulation, etc. through various channels and angles, and establish a communication and sharing mechanism to spot, identify and give warnings to the risk factors in a timely manner to prevent and control the occurrence of risks.
(4) timely report and response: relevant departments of the Company should spot and report the deposit risks as soon as possible. Once problems arise, they should report to the Leading Team timely and take decisive measures to prevent the spread of risks and reduce the deposit risks to the lowest.

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EMERGENCY RESPONSE PLAN FOR RISKS IN DEPOSITS IN CEC FINANCE

APPENDIX V

CHAPTER 3 REPORT ON DEPOSIT RISKS

Article 7

The Company shall establish a report mechanism on deposit risks. Assets and Finance Department shall be responsible for drafting the evaluation report of the deposit risks and evaluate the operation qualifications, businesses and risks of the Financial Company and report to the directors of the Company regularly or from time to time. The report shall include but not limited to:

(1) inspecting whether the Financial Company holds a valid financial license and a corporate legal person business license;
(2) monitoring whether there is any violation by the Financial Company of the regulations of Administration of Finance Companies of Corporate Groups 《企業集團財務公司管理辦法》( ) issued by China Banking Regulatory Commission. Should the gearing ratio of Financial Company not meet the requirements of No. 34 of the regulations, the Company shall not place deposits in Financial Company.
(3) withdrawing the deposits from Financial Company in full or in part from time to time to check the security and mobility of relevant deposits and maintain examination records.
(4) before placing the fund in the Financial Company, Assets and Finance Department shall obtain and review the annual report of the Financial Company for the latest financial year audited by an accounting firm with relevant qualifications in security and futures. The Board shall issue an evaluation report on the deposit risks and make disclosures in the form of interim announcements.
(5) during the period of deposits, the Assets and Finance Department shall obtain and review the annual report of the Financial Company every year as audited by an accounting firm with relevant qualifications in securities and futures, and appoint a professional organization and personnel to evaluate and supervise the risks of the capital placed in the Financial Company every half year. The evaluation report shall be reviewed and approved by the Board of the Company, and be disclosed in the interim report and annual report of the Company.

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EMERGENCY RESPONSE PLAN FOR RISKS IN DEPOSITS IN CEC FINANCE

APPENDIX V

Article 8 Relevant department and personnel shall notify the Leading Team and the Board in the form of an interim report upon spotting the occurrence or possible occurrence of deposit risks with the Financial Company.
Article 9 The financial businesses conducted between the Company and the Financial Company shall go through the decision-making procedures and undertake the obligation of information disclosure pursuant to the requirements of relevant laws and regulations.

CHAPTER 4 RISK RESPONSE AND DISCLOSURE

Article 10 During the period of deposits placed in the Financial Company, the Leading Team shall immediately initiate the emergency response procedures and assume corresponding information disclosure obligation should any one of the following occur with the Financial Company:

(1) Financial Company violates the regulations of No. 31, No. 32 or No. 33 of Administration of Finance Companies of Corporate Groups (《企業集團財務公司管理辦法》);
(2) any one of the financial indicators of Financial Company fails to meet the requirements of No. 34 of Administration of Finance Companies of Corporate Groups (《企業集團財務公司管理辦法》);
(3) material incidents occur in the Financial Company such as runs on deposits, failure to meet debt obligations when they fall due, large amount of overdue loans or guaranteed advance, severe computer network breakdown, robbery or fraud, material breach of regulations by its directors or senior management and the involvement of criminal cases;
(4) the Financial Company suffers significant loss in the business of investment of marketable securities and the loss has reached 50% of the registered capital of the Financial Company;
(5) the occurrence of incidents such as material institutional change, equity exchange or operational risks which may affect the normal operation of the Financial Company;
(6) the balance of the loans to a single shareholder or the contribution of such a shareholder to the Financial Company adds up to over 50% of the registered capital of the Financial Company;

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EMERGENCY RESPONSE PLAN FOR RISKS IN DEPOSITS IN CEC FINANCE

APPENDIX V

(7) the balance of the deposits of the Company in the Financial Company is over 50% of the total deposit balance in the Financial Company;
(8) the debts borrowed by the shareholders of the Financial Company from the Financial Company is due over 1 year ago without repayment;
(9) serious payment crisis occurs in the Financial Company;
(10) the loss of the Financial Company for the year exceeds 30% of the registered capital or exceeds 10% of the registered capital for three years in a roll;
(11) the Financial Company receives administrative penalties imposed by the regulators including the China Banking Regulatory Commission due to the violations of laws and regulations;
(12) China Banking Regulatory Commission orders the Financial Company to rectify its business;
(13) the Board of the Company considers there are other issues which may bring potential risks for the deposit placed by the Company.
Article 11 If deposit risk occurs, relevant personnel shall report to the Leading Team immediately. Upon the execution of emergency response plans, the Leading Team shall delegate relevant personnel to urge the Financial Company to provide a detailed representation on the current status and relevant personnel shall collect information from multiple channels, so as to investigate the reasons behind the deposit risk, analyze the development of risk and execute the measures and responsibilities prescribed in the response plans based on the reasons and status of the risk, and formulate a solution for the risk. Such solution is subject to revision and supplements according to the changes to the deposit risk and the problems occurred during the execution of the solution.
Article 12 As for the risk occurred, the Leading Team shall call for a joint meeting with the Financial Company, at which the Financial Company shall be requested to resolve the risk and avoid risk expansion and spread.
Article 13 The Company will exercise the rights empowered by the Articles of Association and exercise all the legal rights if necessary to safeguard the interests of the Company.

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EMERGENCY RESPONSE PLAN FOR RISKS IN DEPOSITS IN CEC FINANCE

APPENDIX V

Article 14 Persons in charge of relevant issues shall report on the execution and implementation of the plan to the Leading Team and the Board timely, and the Leading Team and the Board shall timely analyze the status of execution and implementation of the plan. According to the status of execution and implementation of the plan, the Leading Team and the Board can adjust the risk response plan.

CHAPTER 5 TREATMENT OF SUBSEQUENT ISSUES

Article 15 After the contingent deposit risk subsides, the Leading Team needs to reinforce its supervision on the Financial Company. It shall request the Financial Company to strengthen its funds and increase the anti-risk capacity. The Leading Team needs to re-evaluate the deposit risk of the Financial Company and adjust the proportion of deposit if necessary.
Article 16 The Leading Team, together with the Financial Company, shall analyze and summarize the reasons behind the contingent deposit risk and corresponding consequences, from which experience and lessons can be learned, so as to better prevent and respond towards the deposit risk. If the factors that affect the risks can not be eliminated within a reasonable time, all the deposits shall be withdrawn.

CHAPTER 6 APPENDIXES

Article 17 Issues not covered in the Response Plan shall be executed according to the requirements of the Company Law, the Securities Law and the relevant laws, regulations and regulatory documents including the trading rules of the places of listing of the Company and the Articles of Association of the Company.
Article 18 The Response Plan shall be effective upon the approval of the Board of the Company and shall be disclosed to the public. The Board is responsible for the interpretation and revision of the Response Plan.
Article 19 The Response Plan shall be put into effect from the date of approval by the Board.

The Board of Nanjing Panda Electronics Company Limited

January 2014

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AI assistant

Nanjing Panda Electronics Company Limited — Proxy Solicitation & Information Statement 2014

49292_rns_2014-02-24_ee288740-5ff5-4618-a0d0-2bbbecb7f935.pdf

AMENDMENTS TO THE ARTICLES OF ASSOCIATION, ADOPTION OF NEW SHAREHOLDERS’ RETURN PLAN, ADOPTION OF NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER AND REVISION OF ANNUAL CAPS OF THE EXISTING CONTINUING CONNECTED TRANSACTIONS

DEFINITIONS

Executive Directors

Registered Address:

I. INTRODUCTION

II. AMENDMENTS TO THE ARTICLES OF ASSOCIATION

III. ADOPTION OF NEW SHAREHOLDERS’ RETURN PLAN

IV. ADOPTION OF NEW CODE OF CONDUCT FOR CONTROLLING SHAREHOLDER AND DE FACTO CONTROLLER

V. REVISION OF ANNUAL CAPS OF THE EXISTING CONTINUING CONNECTED TRANSACTIONS

Background information

Existing and proposed annual caps

Particulars of the supplemental agreement

7. Pricing basis:

8. Historical data:

Reasons for and benefits of entering into the supplemental agreement

Requirements under the listing rules

Deposit services

Loan and loan guarantee services

Settlement services

Other financial services

Information on the parties

VI. THE EGM

VII. PROXY ARRANGEMENT

VIII. VOTING BY POLL

IX. RECOMMENDATION

X. ADDITIONAL INFORMATION

REVISION OF ANNUAL CAPS OF EXISTING CONTINUING CONNECTED TRANSACTIONS

Yours faithfully,

REVISION OF ANNUAL CAPS OF THE EXISTING CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

Background

Information on the Group

Information on the CEC Finance

Reasons for the entering into of the Supplemental Agreement

(i) Impact of capital market environment

(a) interest rate liberalization

(b) large uncertainty in liquidity

(ii) Preferential charge

(iii) Basis for determining the maximum deposit amount

Principal terms of the Supplemental Agreement

Date:

Pricing policy

Revised Annual Caps:

Deposit balance:

Loan Services:

Basis of the Revised Annual Caps

Deposit Services

Loan, loan guarantee and other credit financing services

Internal Control measures for pricing Policy

Impact of the proceeds from non-public issuance of A Shares to cash balance being deposited in CEC Finance and the Revised Annual Caps

Internal Control Measures on Concentration Risks

Important Notice

Listing Rules implication

RECOMMENDATION

WALLBANCK BROTHERS Securities (Hong Kong) Limited Phil Chan

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

(A) Interests of Directors

(B) Interests of Substantial Shareholders

(i) Interests in the shares of the Company

Name of Director/ Supervisor

Name of Director/ Supervisor

Name of Director/ Supervisor

Position held in TPV Technology

(ii) Interests in non-wholly owned subsidiaries of the Company

3. LITIGATION

4. SERVICE CONTRACTS

5. COMPETING INTERESTS

6. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

7. MATERIAL ADVERSE CHANGE

8. EXPERTS AND CONSENTS

Name Qualifications

9. DOCUMENTS AVAILABLE FOR INSPECTION

10. GENERAL

is to be amended as:

Nanjing Panda Electronics Company Limited Proxy Solicitation & Information Statement 2014