S.A.S. Dragon Holdings Limited — Proxy Solicitation & Information Statement 2009

Dec 2, 2009

THIS CIRCULAR IS INFORMATION AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in the Company, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser(s) or transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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

S.A.S. Dragon Holdings Limited

(Incorporated in Bermuda with limited liability)

(Stock Code: 1184)

CONTINUING CONNECTED TRANSACTIONS

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

A letter from the Independent Board Committee is set out on page 12 of this circular.

A letter from Guangdong Securities containing its advice to the Independent Board Committee and the Independent Shareholders on the Caps, the Renewal Agreement and the transactions contemplated thereunder is set out on pages 13 to 24 of this circular.

A notice convening the SGM to be held at 6/F., Tower B, Hunghom Commercial Centre, 37 Ma Tau Wai Road, Hunghom, Kowloon, Hong Kong on 22 December 2009 at 11:00 a.m. is set out on pages 30 to 31 of this circular. Whether or not you are able to attend and/or vote at the SGM in person, you are requested to complete the enclosed form of proxy and return it to the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong in accordance with the instructions printed thereon as soon as possible but in any event not later than 48 hours before the time appointed for the holding of the SGM. Completion and return of the form of proxy will not preclude you from subsequently attending and voting in person at the SGM should you so wish.

3 December 2009

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
The Renewal Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Relationship between the Company and the connected persons . . . . . . . . . . . . . . . . . .	9
Information of the Group and Hon Hai Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Reasons and benefits for the Continuing Connected Transactions . . . . . . . . . . . . . . . .	9
Implications of the Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . .	12
LETTER FROM GUANGDONG SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
APPENDIX – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
NOTICE OF THE SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	30

– i –

DEFINITIONS

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

“Announcement” the announcement issued by the Company dated 18 November 2009; “associate(s)” has the meaning ascribed to it under the Listing Rules; “Board” or “Directors” the board of directors of the Company; “Caps” the Purchase Caps and the Sales Caps; “Company” S.A.S. Dragon Holdings Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Stock Exchange; “Conditional Master Agreement” The conditional master agreement dated 21 November 2006 made between the Company and Hon Hai, to govern the sales and purchases of electronic components between the Group and Hon Hai and its subsidiaries for the three financial years from 1 January 2007 to 31 December 2009; “connected person(s)” has the meaning ascribed to it under the Listing Rules; “Continuing Connected the Purchase Transactions and the Sales Transactions; Transactions” “Distribution Agreement” the distribution agreement made between Hon Hai and S.A.S. Electronic dated 1 January 2009 in relation to the non-exclusive distribution of Hon Hai’s products by S.A.S. Electronic and certain other members of the Group in Hong Kong, Taiwan and certain regions in the PRC; “Foxconn” Foxconn Holding Limited, a wholly owned subsidiary of Hon Hai and a substantial shareholder of the Company; “Group” the Company and its subsidiaries;

the announcement issued by the Company dated 18 November 2009;

– 1 –

DEFINITIONS

“Guangdong Securities” or	Guangdong Securities Limited, a licensed corporation to
“Independent Financial	carry out type 1 (dealing in securities), type 4 (advising
Adviser”	on securities); type 6 (advising on corporate finance) and
	type 9 (asset management) regulated activities as defined
	under the SFO and the independent financial adviser to
	the Independent Board Committee and the Independent
	Shareholders in relation to the Renewal Agreement;
“Hon Hai”	Hon Hai Precision Industry Company Limited, a company
	incorporated in Taiwan with limited liability, the shares
	of which are listed on the Taiwan Stock Exchange
	Corporation;
“Hon Hai Group”	Hon Hai, Foxconn and their respective subsidiaries and
	associates;
“Hong Kong”	Hong Kong Special Administrative Region of the PRC;
“Independent Board Committee”	an independent board committee of the Company
	comprising Mr. Cheung Chi Kwan, Mr. Liu Chun Ning,
	Wilfred, Dr. Lui Ming WahSBS J.P.and Mr. Wong Tak Yuen,
	Adrian to advise the Independent Shareholders in relation
	to the Caps, the Renewal Agreement and the transactions
	contemplated thereunder;
“Independent Shareholder(s)”	Shareholder(s) other than Hon Hai, Foxconn and any of
	their respective associates;
“Latest Practicable Date”	30 November 2009, being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information included in this circular;
“Listing Rules”	Rules Governing the Listing of Securities on the Stock
	Exchange;
“percentage ratios”	the percentage ratios calculated based on the requirements
	under Rule 14.07 of the Listing Rules;

– 2 –

DEFINITIONS

“PRC”	The People’s Republic of China excluding Hong Kong,
	Macau Special Administrative Region and Taiwan;
“Purchase Agreement”	the purchase agreement made between Hon Hai and the
	Group in relation to the rights and responsibilities in the
	product sales to Hon Hai;
“Purchase Caps”	for the purpose of Chapter 14A of the Listing Rules, means
	the annual caps of HK$33,000,000, HK$35,200,000 and
	HK$37,400,000 for each of the three financial years ending
	31 December 2010, 2011 and 2012 respectively in respect
	of the Purchase Transactions;
“Purchase Transactions”	the purchases of electronic components by the Group from
	Hon Hai Group under the Renewal Agreement;
“Renewal Agreement”	the renewal conditional master agreement dated 17
	November 2009 entered into between the Company
	and Hon Hai in respect of the Continuing Connected
	Transactions for an extension of three financial years
	ending 31 December 2012;
“Sales Caps”	for the purpose of Chapter 14A of the Listing Rules, means
	HK$580,800,000, HK$621,500,000 and HK$704,000,000,
	being the annual caps for each of the three financial years
	ending 31 December 2010, 2011 and 2012 respectively in
	respect of the Sales Transactions;
“Sales Transactions”	the sales of electronic components (including distribution
	arrangement) by the Group to Hon Hai Group under the
	Renewal Agreement;
“S.A.S. Electronic”	S.A.S. Electronic Co., Ltd., a company incorporated
	in Hong Kong and a wholly owned subsidiary of the
	Company;
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws
	of Hong Kong);

– 3 –

DEFINITIONS

“SGM”	the special general meeting of the Company to be held
	at 6/F., Tower B, Hunghom Commercial Centre, 37 Ma
	Tau Wai Road, Hunghom, Kowloon, Hong Kong on 22
	December 2009 at 11:00 a.m. to approve the Caps, the
	Renewal Agreement and the transactions contemplated
	thereunder, notice of which is set out on pages 30 to 31 of
	this circular;
“Shareholder(s)”	holder(s) of shares of the Company;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“substantial shareholder(s)”	has the meaning ascribed to it under the Listing Rules;
“3C”	computer, communication and consumer electronics;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong; and
“%”	per cent.

– 4 –

LETTER FROM THE BOARD

S.A.S. Dragon Holdings Limited

(Incorporated in Bermuda with limited liability)

(Stock Code: 1184)

Executive Directors: Mr. Yim Yuk Lun, Stanley J.P. (Chairman and Managing Director) Mr. Wong Sui Chuen Mr. Lau Ping Cheung

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Non-executive Directors: Dr. Chang Chu Cheng

Independent Non-executive Directors: Mr. Cheung Chi Kwan Mr. Liu Chun Ning, Wilfred Dr. Lui Ming Wah SBS J.P. Mr. Wong Tak Yuen, Adrian

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

3 December 2009

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

Reference is made to an announcement and a circular dated 23 November 2006 and 12 December 2006 respectively. The term of the Conditional Master Agreement dated 21 November 2006 for the sales and purchases of electronic components between the Group and Hon Hai and its subsidiaries will expire on 31 December 2009. As a result, on 17 November 2009, the Company entered into a renewal conditional master agreement with Hon Hai to govern the sales and purchases of electronic components between the Group and Hon Hai Group for an extension of three financial years ending 31 December 2012.

– 5 –

LETTER FROM THE BOARD

THE RENEWAL AGREEMENT

The Company entered into the Renewal Agreement with Hon Hai on 17 November 2009, to govern the Continuing Connected Transactions for the three financial years ending 31 December 2012. The principal terms of the Renewal Agreement are set out below:

Date: 17 November 2009 Parties: The Company Hon Hai Subject matter: Sales and purchases of electronic components between the Group and Hon Hai Group Term: From 1 January 2010 to 31 December 2012

The Renewal Agreement is conditional upon the approval of the Renewal Agreement and the Caps by the Independent Shareholders.

Under the Renewal Agreement, the parties agree that the Continuing Connected Transactions shall be on normal commercial terms and in particular:–

• (a) the members of the Group who are parties to the Continuing Connected Transactions shall receive or pay such consideration for the transactions with members of Hon Hai Group based on market rates or rates which are no less favourable than those available from or to (as appropriate) independent third parties;

• (b) the terms of the Continuing Connected Transactions shall be fair and reasonable and negotiated on an arm’s length basis; and

• (c) the total amount of the Continuing Connected Transactions shall not exceed the applicable caps or such other caps as approved by the Independent Shareholders from time to time.

Hon Hai will procure Hon Hai Group to comply with the provisions of the Renewal Agreement.

– 6 –

LETTER FROM THE BOARD

Certain members of the Group and certain members of Hon Hai Group have entered or may from time to time enter into agreements to provide for more detailed terms on certain Continuing Connected Transactions. Any such agreements (including the Distribution Agreement and the Purchase Agreement) made or to be made between the relevant members of the Group and relevant members of Hon Hai Group in respect of the Continuing Connected Transactions will be subject to the Renewal Agreement.

At present, the electronic components sold by the Group to Hon Hai Group mainly include memory IC, super IO IC, transistor and diode mainly for computer and mobile phone products and the electronic components sold by Hon Hai Group to the Group mainly include cable and connector for a wide range of electronic products.

DETERMINATION

The following is a summary of the approximate amounts of historical transactions in respect of the sales and purchases of electronic components between the Group and Hon Hai and its subsidiaries for the two years ended 31 December 2008 and the nine months ended 30 September 2009:–

Purchases from Hon Hai and its subsidiaries Sales to Hon Hai and its subsidiaries Total	For the financial year ended 31 December 2007 (HK$’000) 43,640 347,943 391,583	For the financial year ended 31 December 2008 (HK$’000) 30,734 446,157 476,891	For the nine months ended 30 September 2009 (HK$’000) 13,986 290,313 304,299

The aggregate transaction amounts in respect of the sales and purchases of electronic components between the Group and Hon Hai and its subsidiaries for the two years ended 31 December 2008 and the nine months ended 30 September 2009 have not exceed (i) the purchase caps of HK$45,000,000, HK$49,500,000 and HK$54,450,000; and (ii) the sales caps of HK$373,440,000, HK$483,120,000 and HK$601,392,000, for each of the three financial years ending 31 December 2007, 2008 and 2009 respectively, which were all approved by the Independent Shareholders.

– 7 –

LETTER FROM THE BOARD

The proposed Caps of the Continuing Connected Transactions for each of the three financial years ending 31 December 2010, 2011 and 2012 of the Group are set out below:–

	For the	For the	For the
	financial	financial	financial
	year ended	year ended	year ended
	31 December	31 December	31 December
	2010	2011	2012
	(HK$’000)	(HK$’000)	(HK$’000)
Purchase Caps	33,000	35,200	37,400
Sales Caps	580,800	621,500	704,000

In determining the proposed Caps of the Continuing Connected Transactions for each of the three financial years ending 31 December 2010, 2011 and 2012 of the Group, the Board based on the following major factors:

• (a) projections of the sales and purchases of electronic components between the Group and Hon Hai Group including the expected market growth of mobile phone, new generation PC, netbook and LED lighting related products plus a buffer of 10%;

• (b) turnover outlook of the Company; and

• (c) indications of certain other members of Hon Hai Group in respect of purchase of electronic components from the Group which represents new business opportunities to the Group.

If the amounts of the Continuing Connected Transactions shall exceed the respective Caps or upon the expiry of the Caps or where there is a material change to the terms of the Continuing Connected Transactions, the Company will re-comply with all applicable requirements under the Listing Rules, including (where required) the obtaining of approval of the Independent Shareholders. The Company will also comply with the annual review and reporting requirements of Rule 14A.37 to Rule 14A.41 and Rule 14A.45 to Rule 14A.47 in relation to the Continuing Connected Transactions.

– 8 –

LETTER FROM THE BOARD

RELATIONSHIP BETWEEN THE COMPANY AND THE CONNECTED PERSONS

Foxconn, being a wholly owned subsidiary of Hon Hai, is interested in 17.73% of the issued share capital of the Company and a substantial shareholder of the Company. Therefore, Hon Hai, Foxconn and their respective associates are connected persons of the Company and the Continuing Connected Transactions constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

INFORMATION OF THE GROUP AND HON HAI GROUP

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

Hon Hai Group is a global manufacturing service provider in the 3C industries.

REASONS AND BENEFITS FOR THE CONTINUING CONNECTED TRANSACTIONS

The Conditional Master Agreement for the sales and purchases of electronic components between the Group and Hon Hai and its subsidiaries will expire on 31 December 2009. As a result, the Company entered into the Renewal Agreement to govern the sales and purchases of electronic components between the Group and Hon Hai Group for an extension of three financial years ending 31 December 2012.

Purchase Transactions

A number of the members of the Hon Hai Group are vendors approved by certain end customers of the Group. The Group is required by these customers to purchase materials and components from approved vendors.

Sales Transactions

The continued growth of the sales of electronic components by the Group to Hon Hai Group has contributed significantly to the Group’s results over the past financial years ended 31 December 2007 and 31 December 2008. The Directors consider that Hon Hai Group is a reliable source of business for the Group and it is in its best interests to generate incremental income by carrying out product sales to Hon Hai Group.

– 9 –

LETTER FROM THE BOARD

The Directors (including the independent non-executive Directors) confirm that the Continuing Connected Transactions will be conducted in the usual and ordinary course of business of the Group, and based on normal commercial terms and on terms no less favourable to the Group than terms available to or from (as appropriate) other independent third parties. The Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from Guangdong Securities) are of the view that the Caps, the Renewal Agreement and the transactions contemplated thereunder are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

IMPLICATIONS OF THE LISTING RULES

As the Continuing Connected Transactions constitute continuing connected transactions and the applicable percentage ratios for the Purchase Caps and the Sales Caps are expected to exceed 2.5% on an annual basis, the Continuing Connected Transactions constitute non-exempt continuing connected transactions of the Company and the Renewal Agreement and the Caps are subject to the Announcement requirements and the reporting and independent shareholders’ approval requirements under Rule 14A.35 of the Listing Rules. The SGM will be convened for the Independent Shareholders to approve the Caps, the Renewal Agreement and the transactions contemplated thereunder by poll.

In view of the interests of Hon Hai and Foxconn in the Company, Hon Hai and Foxconn and their respective associates will be abstained from voting in relation to the resolutions to approve the Caps, the Renewal Agreement and the transactions contemplated thereunder.

Guangdong Securities has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders regarding the Caps, the Renewal Agreement and the transactions contemplated thereunder. An independent board committee of the Company has been appointed to advise the Independent Shareholders on whether or not the Caps, the Renewal Agreement and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole, and are fair and reasonable so far as the Independent Shareholders are concerned.

SGM

There is set out on pages 30 to 31 of this circular a notice convening the SGM to be held at 6/F., Tower B, Hunghom Commercial Centre, 37 Ma Tau Wai Road, Hunghom, Kowloon, Hong Kong at on 22 December 2009 at 11:00 a.m. at which an ordinary resolution will be proposed for the approval by the Independent Shareholders by poll the Caps, the Renewal Agreement and the transactions contemplated thereunder.

– 10 –

LETTER FROM THE BOARD

Whether or not you are able to attend the SGM in person, you are requested to complete and return the enclosed proxy form in accordance with the instructions printed thereon to the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong but in any event not later than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. The completion of the enclosed proxy form will not preclude you from attending and voting at the SGM or any adjournment thereof should you so wish.

In compliance with the Listing Rules, the votes to be taken at the SGM in respect of the Caps, the Renewal Agreement and the transactions contemplated thereunder will be taken by poll, the results of which will be announced after the SGM.

RECOMMENDATION

The Independent Board Committee and the Directors, having taken into account the advice of Guangdong Securities, consider that the Caps, the Renewal Agreement and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole and are fair and reasonable so far as the Independent Shareholders are concerned. The Independent Board Committee and the Directors therefore recommend the Independent Shareholders to vote in favour of the resolutions to be proposed in the SGM to approve the Caps, the Renewal Agreement and the transactions contemplated thereunder.

ADDITIONAL INFORMATION

Your attention is drawn to the letters from the Independent Board Committee and from Guangdong Securities which are respectively set out on page 12 and 13 to 24 of this circular. Additional information is also set out in the Appendix of this circular for your information.

By Order of the Board S.A.S. Dragon Holdings Limited Yim Yuk Lun, Stanley J.P. Chairman and Managing Director

– 11 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

S.A.S. Dragon Holdings Limited

(Incorporated in Bermuda with limited liability)

(Stock Code: 1184)

3 December 2009

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular dated 3 December 2009 issued by the Company (the “ Circular ”) of which this letter forms part. Terms defined in the Circular bear the same meanings herein unless the context otherwise requires.

We have been appointed as the members of the Independent Board Committee to consider the Caps, the Renewal Agreement and the transactions contemplated thereunder and to advise the Independent Shareholders as to the fairness and reasonableness of the same. Guangdong Securities has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

RECOMMENDATION

We wish to draw your attention to the letter from the Board, as set out on pages 5 to 11 of the Circular, and the letter from Guangdong Securities which contains its advice to the Independent Board Committee and the Independent Shareholders in respect of the Caps, the Renewal Agreement and the transactions contemplated thereunder as set out on pages 13 to 24 of the Circular.

After taking into consideration the advice from Guangdong Securities, we concur with the views of Guangdong Securities and consider that the Continuing Connected Transactions, the Caps, the Renewal Agreement and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolutions to be proposed in the SGM to approve the Caps, the Renewal Agreement and the transactions contemplated thereunder.

Yours faithfully Cheung Chi Kwan Liu Chun Ning, Wilfred Dr. Lui Ming Wah SBS J.P. Wong Tak Yuen, Adrian Independent Board Committee

– 12 –

LETTER FROM GUANGDONG SECURITIES

Set out below is the text of a letter received from Guangdong Securities, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders regarding the Renewal Agreement and the transactions contemplated thereunder for the purpose of inclusion in this circular.

Units 2505-06, 25/F. Low Block of Grand Millennium Plaza 181 Queen’s Road Central Hong Kong

3 December 2009

To: The independent board committee and

the independent shareholders of S.A.S. Dragon Holdings Limited

Dear Sirs,

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 Continuing Connected Transactions and the Caps, details of which are set out in the letter from the Board (the “ Board Letter ”) contained in the circular dated 3 December 2009 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.

Reference is made to the announcement and the circular of the Company dated 23 November 2006 and 12 December 2006 respectively. The term of the Conditional Master Agreement dated 21 November 2006 for the sales and purchases of electronic components between the Group and Hon Hai Group will expire on 31 December 2009. As a result, on 17 November 2009, the Company entered into the Renewal Agreement with Hon Hai to govern the sales and purchases of electronic components between the Group and Hon Hai Group for an extension of term of three years ending 31 December 2012.

As at the date of the Renewal Agreement, Foxconn, being a wholly-owned subsidiary of Hon Hai, is interested in approximately 17.73% of the issued share capital of the Company and is thus a substantial shareholder of the Company. Accordingly, Hon Hai, Foxconn and their respective associates are connected persons of the Company and the Continuing Connected Transactions constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

– 13 –

LETTER FROM GUANGDONG SECURITIES

As the applicable percentage ratios for the Purchase Caps and the Sales Caps are higher than 2.5% on an annual basis, the Continuing Connected Transactions constitute non-exempt continuing connected transactions for the Company. Accordingly, the Renewal Agreement and the transactions contemplated thereunder, and the Caps are subject to the disclosure and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

In accordance with the Listing Rules, Hon Hai, Foxconn and their respective associates shall abstain from voting on the ordinary resolutions to approve the Renewal Agreement and the transactions contemplated thereunder, and the Caps at the SGM.

An Independent Board Committee comprising Mr. Cheung Chi Kwan, Mr. Liu Chun Ning, Wilfred, Dr. Lui Ming Wah SBS J.P. and Mr. Wong Tak Yuen, Adrian (all being independent nonexecutive Directors) has been established to advise the Independent Shareholders on (i) whether or not the transactions contemplated under the Renewal Agreement are on normal commercial terms, in the ordinary and usual course of business of the Company, and in the interests of the Company and the Shareholders as a whole; (ii) whether or not the terms of the Renewal Agreement and the Caps are fair and reasonable so far as the Independent Shareholders are concerned; and (iii) whether or not the Independent Shareholders should vote in favour of the ordinary resolutions to approve the Renewal Agreement and the transactions contemplated thereunder, and the Caps at the SGM. We, Guangdong Securities Limited, 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 to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors. We have assumed that all information and representations that have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules.

– 14 –

LETTER FROM GUANGDONG SECURITIES

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, which to the best of their knowledge and belief, there are no other facts the omission of which would make any statement in the Circular misleading.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company, Hon Hai and Foxconn or their respective subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the Continuing Connected Transactions. In addition, we have no obligation to update this opinion to take into account events occurring after the issue of this letter. Nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, the sole responsibility of Guangdong Securities is to ensure that such information has been correctly extracted from the relevant sources.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Continuing Connected Transactions, we have taken into consideration the following principal factors and reasons:

• (1) Reasons for and benefits of the Continuing Connected Transactions

(a) Business overview of the Group

The Group is principally engaged in the distribution of electronic components and semiconductors products. As referred to in the Company’s interim report for the six months ended 30 June 2009 (the “ Interim Report ”), the Group will continue to focus on the PRC market to catch up the accelerating economic growth in the upcoming future. Since July 2009, as supplement to the Group’s distribution business of electronic components and semiconductors products, the Group added one product line related to channeling a system solution specialises for quality, safety and health management called “TrackWise”. Target customers of the TrackWise system are large medicine, food and beverages manufacturing firms in Greater China and the Directors are of the view that the Group has a professional consultant team to capture the market opportunity at the time when the market places huge concern on health care and food quality nowadays.

– 15 –

LETTER FROM GUANGDONG SECURITIES

The following table shows the breakdown in total turnover of the Group by operating divisions for the six months ended 30 June 2009 and each of the two years ended 31 December 2008 as extracted from the Interim Report and the Company’s annual report for the year ended 31 December 2008 (the “ Annual Report ”) respectively:

Distribution of electronic components and semiconductors products Properties investment Others Total Turnover	For the six months ended 30 June 2009 (unaudited) HK$’000 1,348,469 2,631 34,140 1,385,240	For the year ended 31 December 2008 2007 (audited) (audited) HK$’000 HK$’000 2,926,749 3,449,010 4,243 – 84,285 50,779 3,015,277 3,499,789	For the year ended 31 December 2008 2007 (audited) (audited) HK$’000 HK$’000 2,926,749 3,449,010 4,243 – 84,285 50,779 3,015,277 3,499,789
			3,499,789

As illustrated by the above table, the Group recorded an audited total turnover of approximately HK$3,015.28 million for the year ended 31 December 2008, representing a decrease of approximately 13.84% as compared to the year ended 31 December 2007. During the same financial year, the turnover from distribution of electronic components and semiconductors products also decreased from approximately HK$3,449.01 million to HK$2,926.75 million, representing a drop of approximately 15.14%. We noted from the Annual Report that such decrease was caused by the global financial turmoil and the economic contraction in the second half of 2008, in particular that the average selling price for distribution of electronic components and semiconductors products decreased sharply in the fourth quarter of 2008 and the purchasing plans in certain export markets were delayed or even stopped. With reference to the Interim Report, the Directors believed that the electronics industry has bottomed out in the first half of 2009 and will move upward in the second half of 2009. In addition, the Group will continue to focus on the PRC market to catch up the economic growth in the second half of 2009.

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LETTER FROM GUANGDONG SECURITIES

(b) Information on Hon Hai Group

Hon Hai Group is a global manufacturing service provider in the 3C industries. Based solely on the information as disclosed on the internet web page of Hon Hai Group, Hon Hai Group is the largest multinationals manufacturing services provider in the world. As referred also to in the Board Letter, a number of the members of Hon Hai Group are the only vendors approved by certain end customers of the Group (the “ End Customers ”) for cable and connector which are the subjects of the Purchase Transactions (the “ Cable & Connector ”).

As confirmed by the Directors, the Group has commenced the sales and purchases of electronic components with Hon Hai Group since 1999, at such time Hon Hai was not a connected person (as defined in the Listing Rules) of the Company. Furthermore, as confirmed by the Directors, since the commencement of business between the Group and Hon Hai Group, the Group has maintained a good business relationship with Hon Hai Group and the Group has neither received any significant complaint from Hon Hai Group in respect of the electronic components it sold to Hon Hai Group nor from the End Customers in respect of the Cable & Connector it purchased from Hon Hai Group and resold to the End Customers.

(c) The Purchase Transactions

As extracted from the Board Letter, at present, the electronic components the Group purchases from Hon Hai Group mainly include the Cable and Connector for a wide range of electronic products. As further advised by the Directors, the Group purchases the Connector and Cable from Hon Hai Group for the market of mobile and consumer electronic market.

The following table demonstrates the comparison between the total purchase from Hon Hai and its subsidiaries and the total cost of sales of the Group for each of the two years ended 31 December 2008:

	For the year ended	For the year ended
	31 December
	2008	2007
	HK$’000	HK$’000
Total purchase from Hon Hai and
its subsidiaries	30,734	43,640
Total cost of sales of the Group	2,865,060	3,298,111
% of total purchase from Hon Hai Group
to total cost of sales of the Group	1.07%	1.32%

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LETTER FROM GUANGDONG SECURITIES

We noted from the above table that the historical purchases of electronic components by the Group from Hon Hai Group represented relatively minimal percentages of approximately 1.32% and 1.07% of the total cost of sales of the Group for the years ended 31 December 2007 and 31 December 2008 respectively. In this relation, the Directors advised us that the Group’s purchase from Hon Hai Group is mainly carried out by S.A.S. Electronic Company Limited, being a wholly-owned subsidiary of the Group, and the electronic components the Group purchases from Hon Hoi Group represent only a small part of the Group’s total requirements for various electronic components. As a number of the members of Hon Hai Group are the only vendors being approved by the End Customers, the Directors estimate that the Purchase Transactions will continue and stay steady in near future.

(d) The Sales Transactions

As extracted from the Board Letter, besides the Purchase Transactions, the Group has been supplying electronic components such as memory IC, super IO IC, transistor and diode mainly for computer and mobile phone products to Hon Hai Group.

The following table demonstrates the comparison between the total sales to Hon Hai and its subsidiaries and the total turnover of the Group from distribution of electronic products for each of the two years ended 31 December 2008:

	For the year ended	For the year ended
	31 December
	2008	2007
	HK$’000	HK$’000
Total sales to Hon Hai and
its subsidiaries	446,157	347,943
Total turnover of the Group from
distribution of electronic products	2,926,749	3,449,010
% of total sales to Hon Hai Group to
total turnover of the Group from
distribution of electronic products	15.24%	10.09%

We noted from the above table that the historical sales of electronic components by the Group to Hon Hai Group represented approximately 10.09% and 15.24% of the Group’s total turnover from the distribution of electronic products for the years ended 31 December 2007 and 31 December 2008 respectively. Moreover, we also noted from the above table that the Group’s sales of electronic components to Hon Hai Group had demonstrated an increase of approximately 28.23% from the year ended 31 December 2007 to the year ended 31 December 2008. The Directors consider that Hon Hai Group is a reliable source of business for the Group.

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LETTER FROM GUANGDONG SECURITIES

(e) Reasons for and benefits of the Continuing Connected Transactions

As aforementioned, Hon Hai Group is the largest multinationals manufacturing services provider in the world based solely on the information as disclosed on its internet web page. Therefore, the Directors are of the view that building long term business relationship with such a reputable group would be beneficial to the Group as it might enable the Group to get involved in potential business opportunities with other worldwide companies.

Furthermore, as mentioned above, the Group has established a prolonged good business relationship with Hon Hai Group since 1999. In this relation, the Directors also confirmed that there had been no bad debt arising from the Sales Transactions for the Group in the past.

With reference to the Board Letter, the term of the Conditional Master Agreement dated 21 November 2006 for the sales and purchases of electronic components between the Group and Hon Hai Group will expire on 31 December 2009. As a result, on 17 November 2009, the Company entered into the Renewal Agreement with Hon Hai to govern the Continuing Connected Transactions between the Group and Hon Hai Group for an extension of term of three years ending 31 December 2012.

In addition, a number of the members of Hon Hai Group are the only vendors approved by the End Customers for the Cable & Connector. The Group is required by those customers to purchase the Cable & Connector from Hon Hai Group only.

As presented under the section headed “The Sales Transactions” of this letter, the continued growth of the sales of electronic components by the Group to Hon Hai Group has contributed significantly to the Group’s financial performance over the past two financial years ended 31 December 2008. The Directors consider that Hon Hai Group is a reliable source of business for the Group and it is in its best interests to generate incremental income by carrying out product sales to Hon Hai Group.

Given the above reasons and benefits for the Continuing Connected Transactions, we concur with the Directors that the Continuing Connected Transactions are conducted in the ordinary and usual course of business of the Company and are in the interests of the Company and the Shareholders as a whole.

– 19 –

LETTER FROM GUANGDONG SECURITIES

(2) Terms of the Renewal Agreement

The following table tabulates a summary of the major terms of the Renewal Agreement:

Date: 17 November 2009

Parties: The Company Hon Hai

Subject: Sales and purchases of electronic components between the Group and Hon Hai Group

Term: From 1 January 2010 to 31 December 2012 (both dates inclusive)

Major terms of the Under the Renewal Agreement, the parties agreed that the Renewal Agreement: Continuing Connected Transactions shall be on normal commercial terms and in particular:

• (a) the members of the Group who are parties to the Continuing Connected Transactions shall receive or pay such consideration for the transactions with the members of Hon Hai Group based on market rates or rates which are no less favourable than those available from or to (as appropriate) independent third parties;

• (b) the terms of the Continuing Connected Transactions shall be fair and reasonable and negotiated on an arm’s length basis; and

• (c) the total amount of the Continuing Connected Transactions shall not exceed the applicable Caps or such other caps as approved by the Independent Shareholders from time to time.

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LETTER FROM GUANGDONG SECURITIES

The above shows that the Renewal Agreement contains clauses which require the members of the Group who are parties to the Continuing Connected Transactions to receive or pay such consideration for the transactions with the members of Hon Hai Group based on market rates or rates which are no less favourable than those available from or to (as appropriate) independent third parties and the terms of the Continuing Connected Transactions shall be fair and reasonable and negotiated on an arm’s length basis. We are therefore of the opinion that the terms of the Renewal Agreement are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole.

In addition, as part of our due diligence process, we have requested the Company to provide us with both the historical purchases and sales invoices between (i) the Group and Hon Hai Group; and (ii) the Group and independent third parties. As represented by the Company and mentioned previously, a number of the members of Hon Hai Group are the only vendors approved by the End Customers for the Cable & Connector, the Group is thus required to purchase the Cable & Connector from Hon Hoi Group only. As such, there has been no purchases record between the Company and independent third parties for the Cable & Connector purchased from Hon Hai Group and we are unable to compare and assess the historical purchase prices offered by Hon Hai Group with the market rates. Nevertheless, the Directors further explained to us that after receiving the purchases indication for the Cable & Connector from the End Customers, the Company would request the relevant price quote from Hon Hai Group. In this respect, the Directors also provided us with certain historical purchases invoices between the Group and Hon Hai Group and sales invoices between the Group and the End Customers and confirmed that the Group has been able to generate reasonable profits from the sales to the End Customers subsequent to the purchases of such Cable & Connector from Hon Hai Group. We consider that such arrangement follows the normal commercial terms.

With regard to the Sales Transactions, having reviewed those sales invoices as provided by the Company, we noted that the historical sales prices offered to Hon Hai Group were based on market rates or rates which were no less favourable than those available from independent third parties and we consider the said pricing follows the normal commercial terms.

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LETTER FROM GUANGDONG SECURITIES

(3) Basis of the new Caps

As extracted from the Board Letter, the proposed Caps of the Continuing Connected Transactions for each of the three years ending 31 December 2010, 2011 and 2012 of the Group are set out as below:

	For the	For the	For the
	financial	financial	financial
	year ending	year ending	year ending
	31 December	31 December	31 December
	2010	2011	2012
	HK$’000	HK$’000	HK$’000
Purchase Caps	33,000	35,200	37,400
Sales Caps	580,800	621,500	704,000

The proposed Caps of the Purchase Transactions and the Sales Transactions for the next three financial years have been determined by the Directors with reference to: (i) projections of the sales and purchases of electronic components between the Group and Hon Hai Group including the expected market growth of mobile phone, new generation PC, netbook, and LED lighting related products plus a buffer of 10%; (ii) turnover outlook of the Company; and (iii) indications of certain other members of Hon Hai Group in respect of purchase of electronic components from the Group which represents new business opportunities to the Group.

The Purchase Caps

The Purchase Cap of HK$33,000,000 for the year ending 31 December 2010 represents approximately 1.07 times of the historical purchases amount from Hon Hai Group for the year ended 31 December 2008. Thereafter, the Purchase Cap increases by approximately 6.67% and 6.25% on a year-on-year basis respectively for the years ending 31 December 2011 and 31 December 2012. We have been provided with the purchases projection and were further advised by the Directors that such increase is mainly due to the positive turnover outlook of the Group after discussion with its major customers of electronic components regarding their expected sales orders in the coming years, plus a buffer of 10%. In light of such positive turnover outlook of the Group and the fact that Hon Hai Group is the designated vendor for the Cable & Connector to the End Customers whom the Directors confirmed that the Group will be confident to maintain persistent future business relationship with, we are of the opinion that the proposed annual Purchase Caps of HK$33,000,000, HK$35,200,000 and HK$37,400,000 for the three years ending 31 December 2012 respectively are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM GUANGDONG SECURITIES

The Sales Caps

The Sales Cap of HK$580,800,000 for the year ending 31 December 2010 represents approximately 1.30 times of the historical sales amount to Hon Hai Group for the year ended 31 December 2008. Thereafter, the Sales Cap increases by approximately 7.01% and 13.27% on a year-on-year basis respectively for the years ending 31 December 2011 and 31 December 2012. Having considered (i) the basis of determining the Caps as mentioned previously; (ii) the relevant sales indication which we have requested and been provided by the Company; and (iii) the recovering economic conditions in the PRC in 2009 as indicated by the rebound of its gross domestic products from approximately RMB6.57 trillion in the first quarter of 2009 to approximately RMB13.99 trillion in the second quarter of 2009 and a further expansion to approximately RMB21.78 trillion in the third quarter of 2009 based on the statistics as released by the National Bureau of Statistics of China, we are of the opinion that the proposed annual Sales Caps of HK$580,800,000, HK$621,500,000 and HK$704,000,000 for the three years ending 31 December 2012 respectively are fair and reasonable so far as the Independent Shareholders are concerned.

(4) Listing Rules’ implications

As confirmed by the Directors, the Company will comply with the annual review requirements of Rules 14A.37 to 14A.41 of the Listing Rules, including but not limited to the restriction of the value of the Continuing Connected Transactions by way of annual cap for each of the three years ending 31 December 2012, and the annual review by the independent non-executive Directors of the terms of the transactions contemplated under the Renewal Agreement and the Caps not being exceeded, details of which must be included in the Company’s subsequent published annual reports and financial accounts. In addition, pursuant to the Listing Rules, the auditors of the Company must provide a letter to the Board confirming, amongst others, that the Continuing Connected Transactions are carried out based on the pricing policies of the Company and that the Caps are not being exceeded. As confirmed by the Directors, the Company will also comply with the applicable provisions of the Listing Rules governing continuing connected transactions in the event that the total amount of the transactions contemplated under the Renewal Agreement exceed the respective Caps, or that there is any material amendment to the terms of the Renewal Agreement.

In light of the above conditions for the continuing connected transactions pursuant to the Listing Rules, we are of the view that there are appropriate measures in place to monitor the Continuing Connected Transactions and protect the interest of the Independent Shareholders.

– 23 –

LETTER FROM GUANGDONG SECURITIES

RECOMMENDATION

Having considered the above factors and reasons, we are of the opinion that the transactions contemplated under the Renewal Agreement are on normal commercial terms, in the ordinary and usual course of business of the Company, and in the interests of the Company and the Shareholders as a whole, and the terms of the Renewal Agreement as well as the Caps are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the SGM to approve the Renewal Agreement and the transactions contemplated thereunder, and the Caps and we also recommend the Independent Shareholders to vote in favour of the relevant resolutions at the SGM.

Yours faithfully, For and on behalf of Guangdong Securities Limited Graham Lam Managing Director

– 24 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY

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

2. 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 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 and short positions which he was taken or deemed to have under such provisions of the SFO) or were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein or were required pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules to be notified to the Company and the Stock Exchange were as follows:

Long positions in shares of the Company

			Percentage of
			issued share
		Number of	capital of
		shares held	the Company
		as at the Latest	as at the Latest
Name	Capacity	Practicable Date	Practicable Date
Yim Yuk Lun, StanleyJ.P.	Beneficial owner	13,990,000	5.39%
	Held by controlled	63,771,400	24.58%
	corporation (Note)
Chang Chu Cheng	Beneficial owner	1,800,000	0.69%
Wong Sui Chuen	Beneficial owner	862,000	0.33%
Lau Ping Cheung	Beneficial owner	200,000	0.08%

Note: These shares were held by Unimicro Limited, a company incorporated in the British Virgin Islands, which is beneficially owned by Mr. Yim Yuk Lun, Stanley J.P.

– 25 –

GENERAL INFORMATION

APPENDIX

As at the Latest Practicable Date:–

• (i) 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 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 and short positions which he was taken or deemed to have under such provisions of the SFO) or were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein or were required pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules to be notified to the Company and the Stock Exchange;

• (ii) none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group taken as a whole;

• (iii) none of the Directors and their respective associates had any interest in a business which competed or was likely to compete, either directly or indirectly, with the business of the Company;

• (iv) none of the Directors and Guangdong Securities had any direct or indirect interest in any assets acquired or disposed of by or leased to, or which were proposed to be acquired, disposed of by or leased to, the Company or any of its subsidiaries since 31 December 2008, the date to which the latest published audited accounts of the Group were made up; and

• (v) Guangdong Securities did not have any shareholding, direct or indirect, in any member of the Group, or right (whether legally enforceable or not) to subscribe for or to nominate any person to subscribe for securities in any member of the Group.

– 26 –

GENERAL INFORMATION

APPENDIX

3. SUBSTANTIAL SHAREHOLDERS

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 SFO, or who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group:

(i) Long positions in shares of the Company

			Percentage of
			issued share
		Number of	capital of
		Shares held	the Company
		as at the Latest	as at the Latest
Name	Capacity	Practicable Date	Practicable Date
Hon Hai	Held by controlled	46,000,000	17.73%
	corporation (Note)
Foxconn	Beneficial owner	46,000,000	17.73%
Chung Shun Ming	Beneficial owner	27,343,400	10.54%
CCB International	Beneficial owner	16,950,000	6.53%
Assets Management
Limited

Note: Hon Hai owned 100% interest in Foxconn and was accordingly deemed to be interested in those shares beneficially owned by Foxconn.

– 27 –

GENERAL INFORMATION

APPENDIX

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

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

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 SFO, or who were, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

4. SERVICE CONTRACTS

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

5. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading positions of the Group since 31 December 2008, being the date to which the latest published audited financial statements of the Group were made up.

6. MISCELLANEOUS

• (i) Mr. Wong Wai Tai, a Certified Public Accountant of the Hong Kong Institute of Certified Public Accountants, is the secretary of the Company.

• (ii) Guangdong Securities, a licensed corporation to carry out type 1 (dealing in securities), type 4 (advising on securities); type 6 (advising on corporate finance) and type 9 (asset management) regulated activities as defined under the SFO.

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GENERAL INFORMATION

APPENDIX

• (iii) Guangdong Securities has given and has not withdrawn its written consent to the issue of this circular with the inclusion of and references to its name and/or letter in the form and context in which they respectively appear.

• (iv) The English text of this circular shall prevail over the Chinese text in the case of inconsistency.

7. DOCUMENTS AVAILABLE FOR INSPECTION

Copy of the following documents are available for inspection at the office of Messrs. Angela Ho and Associates, 1106, Tower I, Lippo Centre, 89 Queensway, Hong Kong, during normal business hours on any day up to and including the date of SGM:–

• (i) the Renewal Agreement;

• (ii) the Distribution Agreement;

• (iii) the Purchase Agreement;

• (iv) letter from the Independent Board Committee dated 3 December 2009; and

• (v) letter from Guangdong Securities dated 3 December 2009.

– 29 –

NOTICE OF THE SGM

S.A.S. Dragon Holdings Limited

(Incorporated in Bermuda with limited liability)

(Stock Code: 1184)

NOTICE IS HEREBY GIVEN that a special general meeting of S.A.S. Dragon Holdings Limited (the “ Company ”) will be held at 6/F., Tower B, Hunghom Commercial Centre, 37 Ma Tau Wai Road, Hunghom, Kowloon, Hong Kong on 22 December 2009 at 11:00 a.m. or at any adjournment thereof for the purpose of considering and, if thought fit, passing the following resolution, with or without amendments, as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT ,

• (a) the Renewal Agreement and the proposed Caps, each as defined and described in the circular of the Company dated 3 December 2009 (the “ Circular ”), a copy of the Renewal Agreement marked “A” together with a copy of the Circular marked “B” being tabled before the meeting and initialled by the chairman of the meeting for identification purpose, and all transactions contemplated thereunder and in connection therewith, be and are hereby approved, ratified and confirmed; and

• (b) any one director of the Company be and is hereby authorised for and on behalf of the Company to execute all such other documents and agreements and to do all such acts or things deemed by him to be incidental to, ancillary to or in connection with the matters contemplated under the Renewal Agreement.”

By Order of the Board S.A.S. Dragon Holdings Limited Yim Yuk Lun, Stanley J.P. Chairman and Managing Director

Hong Kong, 3 December 2009

– 30 –

NOTICE OF THE SGM

Notes:

1. The ordinary resolution to be considered at the meeting will be decided by poll. On voting by poll, each member shall have one vote for each share held in the Company.

2. A member entitled to attend and vote at the meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member may appoint a proxy in respect of part only of his holding of shares in the Company. A proxy need not be a member of the Company.

3. A form of proxy for use at the special general meeting is enclosed herewith.

4. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or if the appointor is a corporation, either under seal or under the hand of an officer, attorney or other person authorized to sign the same.

5. To be valid, the proxy form, together with the power of attorney or other authority (if any) under which it is signed, or a certified copy thereof must be lodged at the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, not less than fortyeight (48) hours before the time appointed for holding the meeting or any adjourned meeting thereof and in default thereof the proxy form and such power or authority shall not be treated as valid.

6. Delivery of an instrument appointing a proxy shall not preclude a member from attending and voting in person at the meeting convened and in such event, the instrument appointing a proxy shall be deemed to be revoked.

7. Where there are joint holders of any share of the Company, any one of such joint holders may vote at any meeting, either in person or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at the meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of the Company in respect of the joint holding.

8. As at the date hereof, the Board comprises eight directors of which Messrs. Yim Yuk Lun, Stanley J.P., Wong Sui Chuen and Lau Ping Cheung are executive directors; Dr. Chang Chu Cheng is non-executive director and Mr. Cheung Chi Kwan, Mr. Liu Chun Ning, Wilfred, Dr. Lui Ming Wah SBS J.P., and Mr. Wong Tak Yuen, Adrian are independent non-executive directors.

– 31 –