S.A.S. Dragon Holdings Limited — Proxy Solicitation & Information Statement 2006

Dec 20, 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in S.A.S. Dragon Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims 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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S.A.S. Dragon Holdings Limited

(Incorporated in Bermuda with limited liability)

(Stock Code: 1184)

DISCLOSEABLE TRANSACTION

THE FORMATION OF A JOINT VENTURE COMPANY

Hong Kong, 20 December 2006

CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
2.	Shareholders’ Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
3.	Information on the Group, Ample Pacific Limited,
	Mr. Chung Shun Ming, Mr. Kwok Siu Kwan,
	Ditec Company Limited and Mr. Yeung Chi Hung . . . . . . . . . . . . . . . . . . . . . .	6
4.	Reasons for the formation of the Joint Venture Company . . . . . . . . . . . . . . . . . .	7
5.	General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
6.	Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		9

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DEFINITIONS

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

• “associate” Has the meaning ascribed thereto in the Listing Rules; “Company” S.A.S. Dragon Holdings Limited, the shares of which are listed on the main board of the Stock Exchange;

• “Director(s)” The director(s) of the Company; “Group” The Company and its subsidiaries; “Hong Kong” The Hong Kong Special Administrative Region of the PRC; “Independent Third Party” A third party independent of, and not connected with the Company, any of the directors, chief executives or substantial shareholders of the Company or any of its subsidiaries or their respective associates;

• “INED(s)” Independent non-executive director(s) of the Company; “Joint Venture Company” A company incorporated on 20 February 2006 in Hong Kong with or “Kitronix Limited” limited liability;

• “Latest Practicable Date” 15 December 2006, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein;

• “LCD” Liquid Crystal Display; “LCM” Liquid Crystal Display Module; “Listing Rules” The Rules Governing the Listing of Securities on the Stock Exchange;

• “Party(ies)” The party(ies) to the Shareholders’ Agreement; “PRC” The People’s Republic of China, excluding, for the purpose of this circular, Hong Kong;

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DEFINITIONS

“PRC Subsidiary”	東莞奇創力顯示器有限公司, a wholly owned foreign enterprise
	established in the PRC and wholly-owned by Kitronix Limited;
“S.A.S. Investment”	S.A.S. Investment Company Limited（時捷投資有限公司）, a
	company incorporated in Hong Kong and a wholly-owned
	subsidiary of the Company;
“Shareholder(s)”	Holder(s) of share(s) of the Company;
“Shareholders’ Agreement”	An agreement dated 28 November 2006, entered into between
	S.A.S. Investment, Ample Pacific Limited, Mr. Chung Shun Ming,
	Mr. Kwok Siu Kwan, Ditec Company Limited and Mr. Yeung Chi
	Hung in relation to the formation of the Joint Venture Company;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong; and
“%”	Per cent.

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LETTER FROM THE BOARD

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S.A.S. Dragon Holdings Limited

(Incorporated in Bermuda with limited liability)

(Stock Code: 1184)

Executive Directors: Mr. Yim Yuk Lun, Stanley JP (Chairman and Managing Director) Mr. Wong Sui Chuen

Registered Office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Non-executive Director:

Dr. Chang Chu Cheng

Independent Non-executive Directors:

Mr. Cheung Chi Kwan Mr. Liu Chun Ning, Wilfred Dr. Lui Ming Wah SBS JP Mr. Wong Tak Yuen, Adrian

Principal Office: 6th Floor, Tower B Hunghom Commercial Centre 37 Ma Tau Wai Road Hunghom Kowloon Hong Kong

Hong Kong, 20 December 2006

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION THE FORMATION OF A JOINT VENTURE COMPANY

1. INTRODUCTION

Reference is made to the announcement of the Company dated 28 November 2006, whereby it was announced that S.A.S. Investment（時捷投資有限公司）, a wholly-owned subsidiary of the Company, entered into the Shareholders’ Agreement to form a Joint Venture Company, Kitronix Limited, in Hong Kong.

Kitronix Limited（奇創力有限公司） will be a joint venture whose principal business, the manufacturing of LCM and related products, will be carried out through the PRC Subsidiary.

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LETTER FROM THE BOARD

The purpose of this circular is to give you further information regarding the formation of the Joint Venture Company. As the investment amount of HK$13,300,000 exceeds 5% of the results of the consideration test as calculated under Rule 14.07 of the Listing Rules, the entering into the Shareholders’ Agreement constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules.

2. SHAREHOLDERS’ AGREEMENT

Date: 28 November 2006

Parties:–

• (1) S.A.S. Investment

• (2) Ample Pacific Limited

• (3) Mr. Chung Shun Ming

• (4) Mr. Kwok Siu Kwan

• (5) Ditec Company Limited

• (6) Mr. Yeung Chi Hung

Having made all reasonable enquiry, the Directors confirm to the best of their knowledge, information and belief that Ample Pacific Limited, Ditec Company Limited and their ultimate beneficial owners; and Mr. Chung Shun Ming, Mr. Kwok Siu Kwan and Mr. Yeung Chi Hung are third parties independent of and not connected with the Directors, chief executive or substantial Shareholders of the Company of its subsidiaries or any of their respective associates.

Joint Venture Company

The name of the Joint Venture Company is Kitronix Limited（奇創力有限公司）. The Company formed Kitronix Limited on 20 February 2006 under the laws of Hong Kong with the intention of inviting investors to join as joint venture partners. It was not until November 2006 when the Company managed to finalise the Agreement with the Parties. Up to 31 October 2006, the unaudited consolidated net book value and the profit and loss accounts of Kitronix Limited together with the PRC Subsidiary showed a deficit of approximately HK$780,000 which mainly accounted for pre-operation expenses. The existing book value of Kitronix Limited is equivalent to its loss as appearing on its profit and loss accounts since Kitronix Limited has not commenced business yet and all capital injected into Kitronix Limited has been expended.

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LETTER FROM THE BOARD

Validity and duration of the Shareholders’ Agreement

The Shareholders’ Agreement will continue in full force and effect until the Joint Venture Company shall be wound up or otherwise cease to exist as a separate corporate entity or unless terminated earlier pursuant to the following circumstances:–

• (a) if an order is made or a resolution is passed or analogous proceedings are taken for the winding up of the Joint Venture Company other than for the purposes of amalgamation or reconstruction or if all or substantially all of the assets of the Joint Venture Company are expropriated or otherwise placed under the direct control of any government or if the Joint Venture Company is unable to pay its debts, make a general assignment for the benefit of its creditors or has a receiver or manager appointed over all or a substantial part of its undertakings or assets, either of the Parties to the Shareholders’ Agreement shall be entitled forthwith to terminate the Shareholders’ Agreement by delivery of a notice of termination to the others;

• (b) the Shareholders’ Agreement shall terminate in the event that all the shares in the Joint Venture Company are held beneficially by one Party; or

• (c) the Shareholders’ Agreement shall terminate in relation to any Party after such Party shall have ceased to be a shareholder in the Joint Venture Company.

Investment amount

HK$38,000,000

Registered capital

HK$1, further increased to HK$38,000,000 on 28 November 2006

Capital injection into registered capital

The investment amount of HK$38,000,000 has been negotiated on an arm’s length basis and the investment amount will be injected into the share capital of the Joint Venture Company.

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LETTER FROM THE BOARD

The Parties have furnished HK$38,000,000 to the Joint Venture Company on 30 November 2006 in cash at par for the following respective numbers and percentages of the issued ordinary shares of the Joint Venture Company as set out in the table below:–

	Amount of	Percentage of total
Joint Venture Party	capital injection	registered capital
	(HK$)	(%)
S.A.S. Investment	13,300,000	35
Ample Pacific Limited	9,500,000	25
Mr. Chung Shun Ming	5,700,000	15
Mr. Kwok Siu Kwan	5,700,000	15
Ditec Company Limited	1,900,000	5
Mr. Yeung Chi Hung	1,900,000	5
	38,000,000	100

The Parties agree that the HK$38,000,000 shall be applied partially to repay the outstanding loan of HK$11,319,210 advanced by S.A.S. Investment to Kitronix Limited. The outstanding loan represents the cumulative amounts incurred by the Company from time to time for the start-up of Kitronix Limited since its incorporation.

S.A.S. Investment’s portion of capital injection will be funded by internal resources of the Group.

Board composition

The board of directors of the Joint Venture Company will consist of 5 directors amongst whom 2 will be nominated by S.A.S. Investment and each of Ample Pacific Limited, Mr. Chung Shun Ming and Mr. Kwok Siu Kwan will nominate 1 director.

3. INFORMATION ON THE GROUP, AMPLE PACIFIC LIMITED, MR. CHUNG SHUNG MING, MR. KWOK SIU KWAN, DITEC COMPANY LIMITED AND MR. YEUNG CHI HUNG

The Group is principally engaged in the distribution of electronic components and semiconductors products.

Ample Pacific Limited is a company incorporated in the British Virgin Islands. It is an investment holding company which is ultimately and beneficially owned by an Independent Third Party.

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LETTER FROM THE BOARD

Mr. Chung Shun Ming is an Independent Third Party.

Mr. Kwok Siu Kwan is an Independent Third Party.

Mr. Chung Shun Ming and Mr. Kwok Siu Kwan are ex-directors of a sizable listed company mainly engaging in manufacturing of LCD and related products and have over 20 years experience in the LCD and LCM industries. They will be responsible for the major operations including the overall production planning and marketing of Kitronix Limited.

Ditec Company Limited is a company incorporated in Hong Kong. It is an investment holding company which is ultimately and beneficially owned by an Independent Third Party.

Mr. Yeung Chi Hung is an Independent Third Party.

4. REASONS FOR THE FORMATION OF THE JOINT VENTURE COMPANY

The formation of the Joint Venture Company will enable the Group to diversify its business into the manufacture and sales of LCM and related products so as to provide a comprehensive range of products to its customers. The Joint Venture Company carries out its manufacturing activities through a factory in Dongguan held by the PRC Subsidiary. Accordingly, the Directors believe that the terms of the transaction are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

The investment amount was financed by the internal resources of the Group. Upon signing the Agreement, it will become a jointly controlled entity of the Group and the consolidated results of Kitronix Limited will be accounted for in the consolidated accounts of the Group by way of proportionate consolidation method.

As a long term investment and a good business opportunity to further broadening the Group’s product range, the Directors consider that the formation of Kitronix Limited would create a positive effect on the Group attributable to the increase in turnover, earning, and total value of the Group.

5. GENERAL

As the investment amount of HK$13,300,000 exceeds 5% of the results of the consideration test as calculated under Rule 14.07 of the Listing Rules, the entering into the Shareholders’ Agreement constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules.

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LETTER FROM THE BOARD

6. ADDITIONAL INFORMATION

Your attention is drawn to the general information of the Company set out in the appendix to this circular.

Yours faithfully,

By order of the Board

S.A.S. Dragon Holdings Limited Yim Yuk Lun, Stanley JP Chairman and Managing Director

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

2. DIRECTORS’ DISCLOSURE OF INTERESTS

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

Long positions

Ordinary shares of HK$0.10 each of the Company

			Percentage of
		Number of	issued share
		issued ordinary	capital of
Name of directors	Capacity	shares held	the Company
Yim Yuk Lun, Stanley_JP_	Beneficial owner	8,094,000	3.34%
	Held by controlled
	corporation_(Note)_	63,771,400	26.29%
		71,865,400	29.63%
Wong Sui Chuen	Beneficial owner	462,000	0.19%

Note: These shares are held by a unit trust whose trustee is Unimicro Limited, a company incorporated in the British Virgin Islands, of which Mr. Yim Yuk Lun, Stanley JP is also a director. All units in the unit trust are beneficially owned by a discretionary trust established by Mr. Yim Yuk Lun, Stanley JP , the beneficiaries of which include the spouse and issues of Mr. Yim Yuk Lun, Stanley JP .

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APPENDIX

GENERAL INFORMATION

As at the Latest Practicable Date, save as disclosed above and other than certain nominee shares in subsidiaries held by certain Directors in trust for the Company, none of the directors and chief executive of the Company had any interests and short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the Securities and Futures Ordinance (including interests and short positions which he was taken or deemed to have under such provisions of the Securities and Futures Ordinance) or were required, pursuant to Section 352 of the Securities and Futures Ordinance, to be entered in the register referred to therein or were required pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules to be notified to the Company and the Stock Exchange.

3. SUBSTANTIAL SHAREHOLDERS’ DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, so far as was known to any director or chief executive of the Company, the following persons (other than a director or the chief executive of the Company) had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the Securities and Futures Ordinance, or who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group:

(i) Long positions in shares of the Company

Ordinary shares of HK$0.10 each of the Company

			Percentage
			of the
		Number of	issued share
Name of		issued ordinary	capital of
shareholders	Capacity	shares held	the Company
Hon Hai Precision	Held by controlled	46,000,000	18.97%
Industry Co Ltd	corporation_(Note)_
(“Hon Hai”)
Foxconn Holding Limited	Beneficial owner	46,000,000	18.97%
(“Foxconn”)

Note: Hon Hai owns 100% interest in Foxconn and is accordingly deemed to be interested in those ordinary shares of the Company beneficially owned by Foxconn.

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GENERAL INFORMATION

APPENDIX

(ii) Long positions in shares of the subsidiaries of the Company

			Percentage of
		Number of	issued share
Name of		shares held	capital of the
subsidiary of	Name of	as at the Latest	subsidiary of
the Company	shareholder	Practicable Date	the Company
SMartech Electronic Co., Ltd.	Wang Jin	290,000	29%
HAS Electronic Co., Ltd.	Chan Yuk Yee	150,000	15%

Save as disclosed herein, as at the Latest Practicable Date, so far as was known to any director or chief executive of the Company, no persons (other than a director or the chief executive of the Company) had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the Securities and Futures Ordinance, or who were, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

4. LITIGATION AND CLAIMS

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance to the Group and so far as the Directors are aware, no litigation or claims of material importance are pending or threatened by or against any member of the Group.

5. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any proposed service agreement with any member of the Group which would not expire or was not determinable by the Group within one year without payment of compensation (other than statutory compensation).

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GENERAL INFORMATION

APPENDIX

6. DIRECTORS’ INTERESTS IN CONTRACTS AND IN COMPETING BUSINESS

So far as the Directors are aware, as at the Latest Practicable Date:

• (a) none of the Directors or their associates had any direct or indirect interest in any assets which had been, since 31 December 2005 (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to or were proposed to be acquired or disposed of by or leased to any member of the Group; and

• (b) none of the Directors or their associates was materially interested in any contract or arrangement entered into by any member of the Group and subsisting as at the Latest Practicable Date which was significant in relation to the business of the Group. As at the Latest Practicable Date, none of the Directors and their respective associates had interests in a business, apart from the business of the Group, which would compete or would likely compete, either directly or indirectly, with the business of the Group.

7. DOCUMENT AVAILABLE FOR INSPECTION

A copy of the Shareholders’ Agreement is available for inspection by the Shareholders during normal business hours at the principal office of the Company at 6th Floor, Tower B, Hunghom Commercial Centre, 37 Ma Tau Wai Road, Hunghom, Kowloon, Hong Kong on weekdays other than public holidays up to and including 5 January 2007.

8. MISCELLANEOUS

• (a) The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. The principal office of the Company is at 6th Floor, Tower B, Hunghom Commercial Centre, 37 Ma Tau Wai Road, Hunghom, Kowloon, Hong Kong.

• (b) The qualified accountant and the secretary of the Company is Mr. Wong Wai Tai. He is an associate member of the Hong Kong Institute of Certified Public Accountants.

• (c) The Company’s share registrar is Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong.

• (d) This circular has been prepared in both English and Chinese. In the case of any discrepancy, the English text shall prevail over the Chinese text.

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