Veson Holdings Limited

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular or as to the action to be taken, you should consult your licensed securities dealer 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 Veson Holdings Limited, you should at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank, licensed securities dealer 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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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 01399)

CONTINUING CONNECTED TRANSACTIONS

(1) THE PROCESSING FRAMEWORK AGREEMENT AND

(2) THE SALES FRAMEWORK AGREEMENT AND NOTICE OF EXTRAORDINARY GENERAL MEETING

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

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A letter from the Board is set out on pages 6 to 23 of this circular. A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 24 to 25 of this circular. A letter from Red Solar Capital Limited, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 26 to 50 of this circular.

A notice convening the EGM to be held at Head Office, Scud Industrial Park, Fuzhou Pilot Free Trade Zone, No. 98 Jiangbin East Avenue, Mawei District, Fuzhou, Fujian Province, PRC on Friday, 21 March 2025 at 10:00 a.m. is set out on pages EGM-1 to EGM-2 of this circular. Whether or not you are able to attend the EGM in person, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the Company’s share registrar, Tricor Investor Services Limited, located at 17/F. Far East Finance Centre, 16 Harcourt Road, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy as instructed will not preclude you from subsequently attending and voting at the EGM or any adjourned meeting if you so wish.

3 March 2025

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . .	24
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . .	26
APPENDIX I – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	APP I-1
NOTICE OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1

DEFINITIONS

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

“associate(s)” has the meaning ascribed to it in the Listing Rules “Board” the board of Directors “Company” Veson Holdings Limited, a limited liability company incorporated in the Cayman Islands, the shares of which are listed on the Main Board of the Stock Exchange “connected person(s)” has the meaning ascribed to it in the Listing Rules “controlling shareholder(s)” has the meaning ascribed to it in the Listing Rules “DIP” dual in-line packaging “Director(s)” the director(s) of the Company “Effective Date” in respect of the Processing Framework Agreement, the date on which the Independent Shareholders’ approval relating to the Processing Framework Agreement, the transactions contemplated thereunder and the Proposed Processing Fee Caps having been obtained; in respect of the Sales Framework Agreement, the date on which the Independent Shareholders’ approval relating to the Sales Framework Agreement, the transactions contemplated thereunder and the Proposed Sales Caps having been obtained “EGM” the extraordinary general meeting of the Company to be held to consider and, if thought fit, approve (i) the Processing Framework Agreement, the transactions contemplated thereunder and the Proposed Processing Fee Caps; and (ii) the Sales Framework Agreement, the transactions contemplated thereunder and the Proposed Sales Caps “Fee Quote” has the meaning ascribed to it under the section headed “THE PROCESSING FRAMEWORK AGREEMENT” in the “Letter from the Board” in this circular “Fuzhou ETD Zone Investment 福州經濟技術開發區資運慧聯股權投資合夥企業 ( 有限合夥 ) Partnership” (Fuzhou Economic and Technology Development Zone Ziyun Huilian Equity Investment Partnership Enterprise (Limited Partnership)*), a limited partnership established in the PRC

“Group”

the Company and its subsidiaries

DEFINITIONS

“Historical Annual Cap(s)” has the meaning ascribed to it under the section headed “THE PROPOSED PROCESSING FEE CAPS AND BASIS OF DETERMINATION – Historical Transaction Amounts and Historical Annual Caps” in the “Letter from the Board” in this circular
“Historical Transaction Amounts” has the meaning ascribed to it under the section headed “THE PROPOSED PROCESSING FEE CAPS AND BASIS OF DETERMINATION – Historical Transaction Amounts and Historical Annual Caps” in the “Letter from the Board” in this circular
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee” a committee of the Board comprising Mr. Heng Ja Wei Victor, Mr. Lam Yau Yiu and Mr. Cheung Wai Kwok Gary, being all the independent non-executive Directors
“Independent Financial Adviser” Red Solar Capital Limited, a corporation licensed to conduct Type 6 regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), and is the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in relation to (i) the Processing Framework Agreement, the transactions contemplated thereunder and the Proposed Processing Fee Caps; and (ii) the Sales Framework Agreement, the transactions contemplated thereunder and the Proposed Sales Caps
“Independent Third Party(ies)” independent third party(ies) who is/are not connected person(s) of the Company and is/are independent of and not connected with the Company and Directors, chief executive, controlling shareholders and substantial shareholders of the Company or any of its subsidiaries or their respective associates
“Independent Shareholders” the Shareholders who are not required to abstain from voting at the EGM
“Latest Practicable Date” 24 February 2025, being the latest practicable date for the purpose of ascertaining certain information contained in this circular prior to its publication

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

DEFINITIONS

“Mr. Fang Jin”	Mr. Fang Jin (方金)*, the controlling Shareholder of the Company
	as at the Latest Practicable Date and the father of Mr. Fang Yubin
“Mr. Fang Yubin”	Mr. Fang Yubin* (方玉濱), the son of Mr. Fang Jin
“Notice of EGM”	the notice to Shareholders set out in this circular regarding the
	convening of the EGM and setting out therein the Proposed
	Resolutions
“ODM”	original design manufacturing
“Penghao Investment Partnership”	福建鵬昊投資合夥企業(有限合夥) (Fujian Penghao Investment
	Partnership Enterprise (Limited Partnership)*), a limited
	partnership established in the PRC
“percentage ratios”	the percentage ratios calculated based on the requirements under
	Rule 14.07 of the Listing Rules
“PRC”	the People’s Republic of China excluding, for the purpose of this
	circular, Hong Kong, the Macau Special Administrative Region of
	the People’s Republic of China and Taiwan
“Processing Framework Agreement”	the framework agreement for the provision of Processing Services
	dated 7 February 2025 entered into between Scud Battery (as the
	provider of the Processing Services) and Scud Power Technology
	(as the receiver of the Processing Services)
“Processing Fees”	the fees receivable by Scud Battery from Scud Power Technology
	for the Processing Services provided by Scud Battery under the
	Processing Framework Agreement
“Processing Services”	the processing services for printed circuit board assembly to be
	provided by Scud Battery to Scud Power Technology under the
	Processing Framework Agreement
“Products”	including but not limited to bare battery cells, plastic parts and
	nickel sheets to be provided by Scud Electronics to Vietnam Scud
	Power Technology pursuant to the Sales Framework Agreement
“Proposed Processing Fee Cap(s)”	has the meaning ascribed to it under the section headed “THE
	PROPOSED PROCESSING FEE CAPS AND BASIS OF
	DETERMINATION – Proposed Processing Fee Caps” in the
	“Letter from the Board” in this circular
“Proposed Resolutions”	the proposed ordinary resolutions to be approved by the
	Independent Shareholders, as set out in the Notice of EGM

DEFINITIONS

“Proposed Sales Cap(s)” has the meaning ascribed to it under the section headed “THE PROPOSED SALES CAPS AND BASIS OF DETERMINATION – Proposed Sales Caps” in the “Letter from the Board” in this circular
“RMB” Renminbi, the lawful currency of the PRC
“Sales Framework Agreement” the framework agreement for the sale of Products dated 7 February 2025 entered into between Scud Electronics (as the supplier of the Products) and Vietnam Scud Power Technology (as the purchaser of the Products)
“Scud Battery” 飛毛腿電池有限公司 (Scud Battery Co., Ltd.*), a wholly foreignowned enterprise established in the PRC and an indirect whollyowned subsidiary of the Company
“Scud Electronics” 飛毛腿（福建）電子有限公司 (Scud (Fujian) Electronics Co., Ltd.*), a wholly foreign-owned enterprise established in the PRC and an indirect wholly-owned subsidiary of the Company
“Scud Energy Technology” 飛毛腿能源科技有限公司 (Scud Energy Technology Co., Ltd.*), a limited liability company established in the PRC
“Scud Power Technology” 福建飛毛腿動力科技有限公司 (Fujian Scud Power Technology Co., Ltd.*), a limited liability company established in the PRC and a connected person of the Company
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

“Share(s)” the ordinary share(s) in the Company with a nominal value of HK$0.10 each

“Shareholder(s)” the holder(s) of the Shares

“SMT” surface mount technology “Specific Order(s)” specific purchase order(s) for the purchase of Products to be placed by Vietnam Scud Power Technology and confirmed by Scud Electronics under the Sales Framework Agreement “Stock Exchange” The Stock Exchange of Hong Kong Limited “Vietnam Scud Power Technology” 越南飛毛腿動力科技有限公司 (Vietnam Scud Power Technology Co., Ltd.*), a limited liability company established in Vietnam and a connected person of the Company

DEFINITIONS

“2021 Processing Framework the framework agreement for provision of processing services dated Agreement” 25 November 2021 entered into between Scud Battery (as the provider of processing services) and Scud Power Technology and Scud Energy Technology (as the receivers of the processing services), the details of which are set out in the announcement of the Company dated 25 November 2021

For the purpose of this circular, unless otherwise indicated, the exchange rate of HK$1=RMB0.92055 has been used, where applicable, for the purpose of illustration only and does not constitute a representation that any amount has been, could have been or may be exchanged at such rate or at all.

For identification purpose only
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LETTER FROM THE BOARD

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VESON HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 01399)

Executive Directors: Mr. Feng Ming Zhu (Chairman) Ms. Lian Xiu Qin (Chief Executive Officer) Mr. Ni Chen Hui

Non-executive Director: Dr. Loke Yu

Registered office: Conyers Trust Company (Cayman) Limited Cricket Square, Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Independent non-executive Directors: Mr. Heng Ja Wei Victor Mr. Lam Yau Yiu Mr. Cheung Wai Kwok Gary

Place of business in Hong Kong: Room 1017, 10/F Leighton Centre 77 Leighton Road Causeway Bay Hong Kong

3 March 2025

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS (1) THE PROCESSING FRAMEWORK AGREEMENT AND

(2) THE SALES FRAMEWORK AGREEMENT AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

1. INTRODUCTION

Reference is made to the announcement of the Company dated 7 February 2025 in relation to the Processing Framework Agreement, the Sales Framework Agreement and the transactions contemplated thereunder, respectively. On 7 February 2025, (i) Scud Battery (an indirect wholly-

LETTER FROM THE BOARD

owned subsidiary of the Company) entered into the Processing Framework Agreement with Scud Power Technology (a connected person of the Company), pursuant to which Scud Battery has conditionally agreed to provide the Processing Services for printed circuit board assembly (PCBA) to Scud Power Technology for a term of three years commencing from the Effective Date; and (ii) Scud Electronics (an indirect wholly-owned subsidiary of the Company) entered into the Sales Framework Agreement with Vietnam Scud Power Technology (a connected person of the Company), pursuant to which Scud Electronics has conditionally agreed to supply the Products (including but not limited to bare battery cells, plastic parts and nickel sheets) from time to time to Vietnam Scud Power Technology for a term of three years commencing from the Effective Date.

The purpose of this circular is to provide the Shareholders with, among other things, (i) details of the Processing Framework Agreement, the transactions contemplated thereunder and the Proposed Processing Fee Caps; (ii) details of the Sales Framework Agreement, the transactions contemplated thereunder and the Proposed Sales Caps; (iii) a letter from the Independent Board Committee to the Independent Shareholders in relation to the Processing Framework Agreement, the Sales Framework Agreement, the transactions contemplated thereunder respectively, the Proposed Processing Fee Caps and the Proposed Sales Caps; (iv) a letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders; and (v) the notice convening the EGM.

2. THE PROCESSING FRAMEWORK AGREEMENT

A summary of the principal terms of the Processing Framework Agreement is set out below.

Date: 7 February 2025 Parties: (i) Scud Battery (as the provider of the Processing Services) (ii) Scud Power Technology (as the receiver of the Processing Services)

Term: Three years commencing from the Effective Date (both days inclusive), and such term may be extended by mutual agreement subject to compliance with applicable Listing Rules at the time. Processing Services: Scud Battery shall provide the Processing Services for printed circuit board assembly (PCBA) according to the manufacturer’s instructions given by Scud Power Technology, which includes the following key processes:

(a) surface mount technology (SMT); (b) dual in-line packaging (DIP); and/or

LETTER FROM THE BOARD

(c) undergoing other pre-processing procedures on the printed circuit boards such as labelling, testing and wire harness, depending on specific requirements and designs specified in purchase orders to be placed by Scud Power Technology and to be agreed by Scud Battery.

Scud Power Technology shall provide Scud Battery with product test proposals in writing and provide on-site technology support during the first mass production of new products.

Scud Power Technology shall provide the materials for processing and Scud Battery shall collect such materials and conduct inventory and quality checks. If there is quality defects of such materials or the quantity of such materials is insufficient, Scud Battery shall notify Scud Power Technology in a timely manner, after which Scud Power Technology shall make up for the shortfalls or replacements and a reasonable extension of delivery date may be requested by Scud Battery accordingly.

After having received the materials, Scud Battery shall check the model number of the electronic components against the respective bill of materials and confirm with Scud Power Technology if there is any issue. Scud Battery shall keep the electronic components dry and in vacuum packaging before SMT processing.

After the printed circuit boards have been assembled, Scud Battery shall deliver them by the delivery date specified in the purchase order to a place designated by Scud Power Technology. In general, it takes about three (3) working days to deliver assembled printed circuit boards which involved SMT, and about five (5) working days to deliver assembled printed circuit boards where other pre-processing procedures are required on top of SMT, each date being from the date of receipt of all required materials. For urgent orders to be handled in priority, the parties may separately agree on a delivery date.

LETTER FROM THE BOARD

Scud Power Technology shall conduct inventory and quality checks on the processed products. Products which do not meet quality standards or malfunction during sample inspection should be either returned to Scud Battery for rework or, depending on the circumstances, rework by Scud Power Technology if agreed by both parties. For products that Scud Power Technology requires to be debugged, Scud Battery must keep complete debugging and maintenance data record.

On the last working day of each calendar month, Scud Battery shall provide Scud Power Technology with a list of products yet to be processed and the reasons.

For the avoidance of doubt, the Processing Framework Agreement is non-exclusive in nature. Scud Battery is not obliged to provide the Processing Services to Scud Power Technology, and Scud Power Technology is not obliged to commission Scud Battery to provide the Processing Services.

Processing Fee:

Within two (2) working days after Scud Power Technology submits a request for quotation through a specified service platform, Scud Battery shall provide a fee quote to Scud Power Technology (“ Fee Quote ”) which specifies the Processing Fee of the relevant purchase order.

The Processing Fee shall primarily depend on the size of the purchase orders be calculated based on the unit price/ charging basis as shown in the table below, in each case having taken into account the production efficiency resulting from panelization:

LETTER FROM THE BOARD

									Others
Type of products to which the processed printed circuit boards shall apply			Mobile phone batteries and accessories	3C/Motive batteries	Smart home batteries	LED lighting panel	POS machines	Car products	Others
Processing procedure		Unit	Unit price (tax exclusive) (RMB)
SMT		point	0.01	0.01	0.009	0.004	0.008	0.019	Fee quote to be provided on a case by case basis
Laser marking		piece	0.06	0.053	0.053	–	0.044	–
		hour	30	30	–	–	–	40
De-paneling	With milling tool	piece		0.106	0.106
		hour	30	30		–	24.3	40
	Without milling tool	piece		0.08	0.08
		hour	30	30		–	24.3	40
DIP		point	–	0.088	0.088	–	–	–
		hour	30	30	–	–	24.3	40
Testing		hour	30	30	–	–	24.3	40
Dispensing		piece	–	0.088	0.088	–	–	–
		hour	30	30	–	–	24.3	40
Assembly		hour	–	–	–	–	24.3	40

(i) For orders of 300,000 or more pieces of processed products and orders for special projects: the parties may agree a discounted Processing Fee at the rate of 0.9 to 0.95 times of the Processing Fee calculated based on the breakdown of fees for the relevant procedures involved in processing each piece of product in accordance with the unit price or charging basis as set out in the table above;

(ii) For orders of processed products above 1000 pieces but below 300,000 pieces: the Processing Fee shall be calculated based on the breakdown of fees for the relevant procedures involved in processing each piece of product in accordance with the unit price or charging basis as set out in the table above;

(iii) For orders of processed products in the range of 201 and 1,000 pieces and research and development orders: the Processing Fee shall be charged at a rate of 1.5 to 2 times of the Processing Fee calculated based on the breakdown of fees for the relevant procedures involved in processing each piece of product in accordance with the unit price or charging basis as set out in the table above; and

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LETTER FROM THE BOARD

(iv) For orders of 200 or less pieces of processed products: a one-time charge of RMB1,500 (tax exclusive) per order.

Depletion fees (to be included in the Fee Quote) are charged at a rate of 0.3% of the cost of materials.

Packaging fees (to be included in the Fee Quote) are charged based on the actual cost of packaging materials.

For processed products which are determined to be defective after testing, to the extent that such defects are the responsibility of Scud Power Technology, Scud Battery will be commissioned to rework at RMB10 (tax inclusive) per piece and the required materials will be provided by Scud Power Technology.

At the last working day of each calendar month, Scud Battery shall cross-check its records against the records of Scud Power Technology to ascertain and confirm the Processing Fee payable, based on which Scud Battery shall issue invoice to Scud Power Technology which shall be payable within 60 days after the relevant calendar month end. Interest on any overdue payment shall be calculated based on the average interest rate of one-year working capital loans granted by PRC banks in the same period.

Long Stop Date:

In the event that the Independent Shareholders’ approval relating to the Processing Framework Agreement and the Proposed Processing Fee Caps has not been obtained on or before 30 June 2025 (or such other date as agreed in writing between the parties), the Processing Framework Agreement shall be automatically terminated, and neither of the party shall be entitled to any right or benefit, or be liable under or related to the Processing Framework Agreement.

The Processing Fee was agreed between Scud Battery and Scud Power Technology having considered (i) the processing fee charged by Scud Battery to clients which are Independent Third Parties for similar processing services; (ii) the prevailing market price of similar processing services; and (iii) the prevailing market condition. The transactions to be conducted under the Processing Framework Agreement will be carried out on normal commercial terms and the Processing Fee to be charged on Scud Power Technology for each transaction shall not be more favourable than those being charged on Independent Third Party clients.

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LETTER FROM THE BOARD

3. THE PROPOSED PROCESSING FEE CAPS AND BASIS OF DETERMINATION

Historical Transaction Amounts and Historical Annual Caps

The table below summarises the historical amounts of the processing fees received by Scud Battery from Scud Power Technology in relation to the processing services provided by Scud Battery for the three years ended 31 December 2024 pursuant to the 2021 Processing Framework Agreement (the “ Historical Transaction Amounts ”) and the historical annual caps under the 2021 Processing Framework Agreement (“ Historical Annual Cap(s) ”):

	For the year	For the year	For the year
	ended	ended	ended
	31 December	31 December	31 December
	2022	2023	2024
	(RMB)	(RMB)	(RMB)
	15,435,953	13,021,825	30,580,352 (Note 2)
	(equivalent to	(equivalent to	(equivalent to
Historical Transaction Amounts	approximately	approximately	approximately
(Note 1)	HK$16,768,000)	HK$14,146,000)	HK$33,220,000)
Historical Annual Cap	40,000,000	40,000,000	40,000,000

Notes:

The 2021 Processing Framework Agreement was entered into between Scud Battery (as the provider of processing services) with Scud Power Technology and Scud Energy Technology (as the receivers of the processing services). Scud Energy Technology is not a party to the Processing Framework Agreement. The Historical Transaction Amounts in the table indicates the historical amounts of the processing fees received by Scud Battery from Scud Power Technology pursuant to the 2021 Processing Framework Agreement, which represents almost 100% of the historical amounts received by Scud Battery under the 2021 Processing Framework Agreement.
The historical transaction amounts for the year ended 31 December 2024 is subject to audit and may be different from the audited figures.

Proposed Processing Fee Caps

Pursuant to the Processing Framework Agreement, the relevant caps (being the maximum amount of processing fees receivable by Scud Battery under the Processing Framework Agreement from the Effective Date to 31 December 2025, the two years ending 31 December 2027, and from 1 January 2028 to the date immediately before the third anniversary date of the Effective Date) for the transactions contemplated under the Processing Framework Agreement (the “ Proposed Processing Fee Cap(s) ”) are as follows:

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LETTER FROM THE BOARD

				From 1 January
				2028 to the date
				immediately
	From the			before the third
	Effective Date	For the year	For the year	anniversary
	to 31 December	ending 31	ending 31	date of the
	2025	December 2026	December 2027	Effective Date
	(RMB)	(RMB)	(RMB)	(RMB)
	40,000,000	50,000,000	60,000,000	10,000,000
Proposed	(equivalent to	(equivalent to	(equivalent to	(equivalent to
Processing	approximately	approximately	approximately	approximately
Fee Caps	HK$43,452,000)	HK$54,315,000)	HK$65,178,000)	HK$10,863,000)

Basis of determination of the Proposed Processing Fee Caps

The following factors have been taken into account when determining the Proposed Processing Fee Caps for the transactions contemplated under the Processing Framework Agreement:

(a) the expected demand of Scud Power Technology for the Processing Services during the term of the Processing Framework Agreement, taking into account the internal production schedules and business plans during the term of the Processing Framework Agreement as indicated by Scud Power Technology and the expected growth in demand for the overall consumer battery [1)]
industry [(Note] owing to the increasing popularity of 5G and artificial intelligence technology;
(b) production capacities, manpower and business plans of the Group during the term of the Processing Framework Agreement;
(c) the Historical Transaction Amounts and the Historical Annual Caps. The Historical Transaction Amounts and the utilisation rate of the relevant Historical Annual Caps were lower than expected as the demand by Scud Power Technology for the Processing Services had significantly dropped and that was because the operation of their production lines in the PRC, and the relevant supply chain of raw materials as well as the freight logistics had been severely impacted by the COVID-19 pandemic, and it takes time to gradually recover the capacity of the production lines of Scud Power Technology and the demand for the Processing Services. In this context, there is a relatively large difference between the Historical Annual Caps (as well as the Proposed Processing Fee Caps) and the Historical Transaction Amounts in 2022 and 2023. The Historical Transaction Amounts in 2024 had rebounded to approximately RMB30.58 million and utilised more than 75% of the Historical Annual Cap in 2024, which indicates that the demand by Scud Power Technology for the Processing Services are gradually recovering; and
(d) the inclusion of a buffer of approximately 10% to 15% to allow for a potential increase in demand for the Processing Services during the term of the Processing Framework Agreement.
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LETTER FROM THE BOARD

Note:

According to the consumer battery market report published by SkyQuest Technology Group (a global market intelligence, innovation management and commercialisation organisation) in February 2025, the overall consumer battery market is projected to grow at a CAGR of approximately 6.9% during 2025 to 2032.

4. THE SALES FRAMEWORK AGREEMENT

A summary of the principal terms of the Sales Framework Agreement is set out below.

Date: 7 February 2025

Parties: (i) Scud Electronics (as the supplier of the Products)

(ii) Vietnam Scud Power Technology (as the purchaser of the Products)

Term:

Three years commencing from the Effective Date (both days inclusive), and such term may be extended by mutual agreement subject to compliance with applicable Listing Rules at the time.

Sale of Products:

Scud Electronics may from time to time supply the Products (including but not limited to bare battery cells, plastic parts and nickel sheets) to Vietnam Scud Power Technology. Scud Electronics and Vietnam Scud Power Technology shall enter into Specific Orders for the purchase of Products, which will set out the specific terms (such as the price, quantity specifications, delivery date of the Products) for the relevant transactions contemplated under the Sales Framework Agreement. The terms of the Specific Orders shall be consistent with the principles and terms of the Sales Framework Agreement and in compliance with the Listing Rules. If there is any discrepancy between the terms of a transaction under a Specific Order and the Sales Framework Agreement, the latter shall prevail.

Confirming or Terminating the Specific Order

After Vietnam Scud Power Technology send a stamped purchase order to Scud Electronics, Scud Electronics shall confirm the purchase order within two (2) days. If the purchase order is not confirmed within the time limit, the purchase order is deemed to have been rejected.

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LETTER FROM THE BOARD

Vietnam Scud Power Technology is required to provide a 90-day demand forecast (which should be updated on a monthly basis) to Scud Electronics, so that Scud Electronics may adjust its inventories in accordance with the anticipated demand of Products from Vietnam Scud Power Technology.

In the event that it is necessary to terminate a valid Specific Order due to market changes or other unforeseeable circumstances, both parties shall first negotiate to work out the applicable compensation. If negotiation fails, Vietnam Scud Power Technology shall pay the full amount specified in the relevant Specific Order.

Inspection and warranty period of the Products

Vietnam Scud Power Technology shall confirm receipt of the Products purchased under a Specific Order within three (3) working days upon the delivery of the relevant Products. Inspection of the Products shall be based on the specifications agreed by both parties. If Vietnam Scud Power Technology discovers any Products which are not up to standard during the inspection process, it shall notify Scud Electronics in writing within 48 hours upon receipt of the relevant Products. Otherwise, the Products under the relevant Specific Order are deemed to have passed the inspection and been accepted.

Scud Electronics guarantees the quality of the Products for 12 months commencing on the date of despatch of the Products.

For the avoidance of doubt, the Sales Framework Agreement is non-exclusive in nature. Scud Electronics is not obliged to supply the Products to Vietnam Scud Power Technology, and Vietnam Scud Power Technology is not obliged to purchase the Products from Scud Electronics.

Pricing Policy:

The prices of the Products shall be determined based on the procurement costs of the Products plus a gross profit margin of approximately 10% to 15%. The procurement costs borne by Scud Electronics include the costs of raw materials, transportation costs and customs fees. The prices of the Products shall be adjusted on a quarterly basis based on the actual costs incurred by Scud Electronics.

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LETTER FROM THE BOARD

Scud Electronics shall issue invoice which meets the requirements of Vietnam Scud Power Technology as agreed and payment shall be made by Vietnam Scud Power Technology within 90 days upon the delivery of the Products. Interest on any overdue payment shall be calculated based on the average interest rate of one-year working capital loans granted by PRC banks in the same period.

When there are significant market fluctuations that may affect the fairness and reasonableness of the transaction(s), Vietnam Scud Power Technology may exercise its right to propose re-negotiation of the pricing method. Vietnam Scud Power Technology shall notify Scud Electronics in writing at least one (1) month in advance, and the new purchase prices of the Products will be implemented after both parties have agreed and confirmed in writing.

The prices of the Products offered by Scud Electronics shall be comparable to those offered by Independent Third Parties and the transaction under the Specific Order shall be conducted on normal commercial terms.

Long Stop Date:

In the event that the Independent Shareholders’ approval relating to the Sales Framework Agreement and the Proposed Sales Caps has not been obtained on or before 30 June 2025 (or such other date as agreed in writing between the parties), the Sales Framework Agreement shall be automatically terminated, and neither of the party shall be entitled to any right or benefit, or be liable under or related to the Sales Framework Agreement.

The pricing policy of the Products was agreed between Scud Electronics and Vietnam Scud Power Technology having considered (i) the prevailing market price of similar Products charged by other Independent Third Party suppliers; and (ii) the capability of Scud Electronics in sourcing large quantity of high-quality raw materials from its well-established network of suppliers at advantageous rates in a timely manner, which is valued by Vietnam Scud Power Technology as well as its clients downstream in the production chain. The transactions to be conducted under the Sales Framework Agreement will be carried out on normal commercial terms and the prices to be charged on Vietnam Scud Power Technology for the Products shall not be more favourable than those being charged on Independent Third Party customers.

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LETTER FROM THE BOARD

5. THE PROPOSED SALES CAPS AND BASIS OF DETERMINATION

Proposed Sales Caps

Pursuant to the Sales Framework Agreement, the relevant caps (being the maximum amount of sales receivable by Scud Electronics under the Sales Framework Agreement from the Effective Date to 31 December 2025, the two years ending 31 December 2027, and from 1 January 2028 to the date immediately before the third anniversary date of the Effective Date) for the transactions contemplated under the Sales Framework Agreement (the “ Proposed Sales Cap(s) ”) are as follows:

					From 1 January
					2028 to the date
					immediately
		From the			before the third
		Effective Date	For the year	For the year	anniversary
		to 31 December	ending 31	ending 31	date of the
		2025	December 2026	December 2027	Effective Date
		(RMB)	(RMB)	(RMB)	(RMB)
		15,000,000	20,000,000	20,000,000	5,000,000
		(equivalent to	(equivalent to	(equivalent to	(equivalent to
Proposed	Sales	approximately	approximately	approximately	approximately
Caps		HK$16,295,000)	HK$21,726,000)	HK$21,726,000)	HK$5,432,000)

Basis of determination of the Proposed Sales Caps

The following factors have been taken into account when determining the Proposed Sales Caps for the transactions contemplated under the Sales Framework Agreement:

(a) the estimated procurement costs of the Products with reference to their prevailing market prices;
(b) the expected demand of Vietnam Scud Power Technology for the Products during the term of the Sales Framework Agreement, taking into account the internal production schedules and business plans during the term of the Sales Framework Agreement as indicated by Vietnam Scud Power Technology; and
(c) the inclusion of a buffer of approximately 10% to 15% to allow for a potential increase in demand for the Products and increase of procurement costs (if any) (and hence selling prices) of the Products in the future.
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LETTER FROM THE BOARD

6. INTERNAL CONTROL MEASURES

To ensure that the transactions under the Processing Framework Agreement and the Sales Framework Agreement will be conducted on normal commercial terms and not prejudicial to the interests of the Company in accordance with the pricing policy or terms set out in the Processing Framework Agreement and the Sales Framework Agreement respectively and in compliance with the Listing Rules, the Group has adopted the following internal control measures:

(a) in respect of the Processing Framework Agreement, when preparing the Fee Quote to Scud Power Technology in respect of the Processing Services, Scud Battery shall take into account the Processing Fee agreed between Scud Battery and at least two other Independent Third Party clients to whom Scud Battery provided processing services of similar nature, specification and size, to ensure that the Fee Quote to be provided to, and the Processing Fee to be agreed with Scud Power Technology under the Fee Quote will not be lower than those agreed with such Independent Third Party customers. The protection circuit module division shall set out in writing the basis of selection of such Independent Third Party customers and the basis of setting the Fee Quote and the Processing Fee for review by the Group’s risk management department, which performs an internal audit function and is responsible for reviewing the Group’s continuing connected transactions;
(b) in respect of the Sales Framework Agreement, when receiving the Specific Orders from Vietnam Scud Power Technology in respect of the Products, Scud Electronics shall take into account the purchase price agreed with Vietnam Scud Power Technology and compare such purchase price with at least two fee quotes from Independent Third Party suppliers who supply comparable Products to ensure that the fee quote to be provided to, and the purchase price to be agreed with, Vietnam Scud Power Technology will be comparable with those provided by Independent Third Party suppliers and shall not be more favourable than those being offered to Independent Third Party customers;
(c) in respect of the Processing Framework Agreement and the Sales Framework Agreement, when Scud Battery and Scud Power Technology (in respect of the Processing Framework Agreement) and Scud Electronics and Vietnam Scud Power Technology (in respect of the Sales Framework Agreement) cross-check their records to ascertain and confirm the Processing Fee or the purchase price for the Products (as the case may be) payable within 60 days after the relevant calendar month end (in respect of the Processing Framework Agreement) or within 90 days upon the delivery of the Products (in respect of the Sales Framework Agreement), the protection circuit module division of Scud Battery or the product development division of Scud Electronics (as the case may be) shall set out in writing the basis of determining the Processing Fee receivable or the sales receivable for the Products (as the case may be) for approval by their respective division head, and such determination shall be cross-checked by the Group’s risk management department;
(d) to ascertain whether the Proposed Processing Fee Cap and the Proposed Sales Cap for the relevant period have been exceeded, the Group’s finance department shall (i) aggregate the amounts of Processing Fee by the end of each calendar month and compare such aggregated amount with the Proposed Processing Fee Cap for the relevant period and (ii) aggregate the
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LETTER FROM THE BOARD

amounts of sales receivable for the Products by the end of each calendar month and compare such aggregated amount with the Proposed Sales Cap for the relevant period, and such aggregation and determination shall be cross-checked by the Group’s risk management department; and

(e) the independent non-executive Directors and the auditors of the Company will conduct annual review on the transactions contemplated under the Processing Framework Agreement and the Sales Framework Agreement to ensure they have been conducted in accordance with their respective terms and the Proposed Processing Fee Cap and the Proposed Sales Cap have not been exceeded respectively for the relevant period.

7. REASONS FOR AND BENEFITS OF ENTERING INTO THE PROCESSING FRAMEWORK AGREEMENT AND THE SALES FRAMEWORK AGREEMENT

With the increasing popularity of 5G and artificial intelligence technology, it is anticipated that the broad application prospects will lead to the rapid growth of the market scale of the consumer battery products. The Group endeavours to harness the opportunities by providing quality processing services and enhancing its brand competitiveness and influence. The Group’s machinery for producing and processing printed circuit boards is reputable in Fuzhou, PRC and its surrounding areas. The Company considers that the entering into of the Processing Framework Agreement continues to provide a stable revenue stream to the Group by utilising its existing production capacities and manpower.

As a reputable manufacturer of batteries of consumer electronics, Scud Electronics is able to source large quantity of raw materials from its well-established network of suppliers at advantageous rates and ensure the quality of the Products and timely delivery to meet the standards and production timeline required by Vietnam Scud Power Technology and its downstream customers in the production chain. The Company considers that the entering into of the Sales Framework Agreement can increase the Group’s revenue.

In light of the above, the Board (including the independent non-executive Directors after taking into account the advice of the Independent Financial Adviser) is of the view that the terms and conditions of the Processing Framework Agreement and the Sales Framework Agreement, the transactions contemplated thereunder respectively, the Proposed Processing Fee Caps and the Proposed Sales Caps are fair and reasonable, on normal commercial terms or better, are entered into in the ordinary and usual course of business of the Group and are in the interests of the Company and its shareholders as a whole.

None of the Directors have any material interest in (i) the Processing Framework Agreement and the transactions contemplated thereunder and (ii) the Sales Framework Agreement and the transactions contemplated thereunder. Accordingly, no Director is required to abstain from voting on the Board resolutions to approve (i) the Processing Framework Agreement, the transactions contemplated thereunder and the Proposed Processing Fee Caps; and (ii) the Sales Framework Agreement, transactions contemplated thereunder and the Proposed Sales Caps.

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LETTER FROM THE BOARD

8. INFORMATION ON THE GROUP, SCUD BATTERY AND SCUD ELECTRONICS

The Company is principally engaged in investment holding. The Group is principally engaged in the manufacture and sale of lithium-ion battery modules, lithium-ion bare battery cells, and related accessories to well-known international and domestic mobile communication companies and Internet technology companies.

Scud Battery is an indirect wholly-owned subsidiary of the Company. Its principal business is manufacturing and supply of self-developed and self-designed power management systems for various kind of lithium-ion battery products.

Scud Electronics is an indirect wholly-owned subsidiary of the Company. Its principal business is ODM business which mainly supplies lithium-ion battery modules, power banks, motive battery and related accessories for mobile phones and digital electrical appliances to manufacturers of well-known brands in the consumer electronics market.

For more information of the business of the Group, please visit the Group’s website at www.vesonhldg.com.

9. INFORMATION ON SCUD POWER TECHNOLOGY AND VIETNAM SCUD POWER TECHNOLOGY

Scud Power Technology is a motive battery developer and its main business is to provide motive batteries, energy storage control systems, energy storage power supplies and related ancillary products. It is owned as to approximately:

(i) 68.63% by Mr. Fang Yubin (the son of Mr. Fang Jin, the controlling shareholder of the Company);
(ii) 24.48% by Scud Energy Technology (which is owned as to 99.9% by Mr. Fang Jin and 0.1% by Ms. Chen Chen Chen*, an Independent Third Party);
(iii) 4.29% by Scud Battery;
(iv) 2.17% by Penghao Investment Partnership. Ms. Fang Ming*, the sister of Mr. Fang Jin, is the executive partner and one of the limited partners holding approximately 75.4098% partnership interest in Penghao Investment Partnership. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the remaining limited partners of Penghao Investment Partnership are Independent Third Parties; and
(v) 0.43% by Fuzhou ETD Zone Investment Partnership. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, China-Africa Xinyin Investment Co., Ltd. (中非信銀（上海）股權投資管理有限公司) (which is the executive partner of Fuzhou ETD Zone Investment Partnership) and Fuzhou Development Zone State-owned Assets Operation Co., Ltd.* (福州開發區國有資產營運有限公司) hold approximately 0.1996% and
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LETTER FROM THE BOARD

99.8004% partnership interests in Fuzhou ETD Zone Investment Partnership, respectively. Both China-Africa Xinyin Investment Co., Ltd. and Fuzhou Development Zone State-owned Assets Operation Co., Ltd. are Independent Third Parties.

Vietnam Scud Power Technology is wholly owned by Scud Power Technology. Vietnam Scud Power Technology is principally engaged in the manufacture, processing and sale of batteries (such as twowheeled vehicle batteries and vacuum cleaner batteries) in Vietnam.

10. LISTING RULE IMPLICATIONS

As at the Latest Practicable Date, Scud Power Technology is owned as to approximately 68.63% by Mr. Fang Yubin (the son of Mr. Fang Jin, the controlling shareholder of the Company) and 24.48% by Scud Energy Technology (which is owned as to 99.9% by Mr. Fang Jin), respectively, whereas Vietnam Scud Power Technology is a wholly-owned subsidiary of Scud Power Technology. As such, Scud Power Technology and Vietnam Scud Power Technology are connected persons of the Company under the Listing Rules. Accordingly, the entering into of the Processing Framework Agreement and the Sales Framework Agreement, and the transactions contemplated thereunder constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios in respect of the highest Proposed Processing Fee Cap and the highest Proposed Sales Cap, respectively, exceed 5%, the Processing Framework Agreement, the Sales Framework Agreement and their transactions contemplated thereunder respectively are subject to annual review, announcement and Independent Shareholders’ approval requirements under the Listing Rules.

11. INDEPENDENT FINANCIAL ADVISER AND INDEPENDENT BOARD COMMITTEE

The Company has appointed Red Solar Capital Limited as the independent financial adviser to make recommendations to the Independent Board Committee and the Independent Shareholders as to whether the terms and conditions of the Processing Framework Agreement and the Sales Framework Agreement, the transactions contemplated thereunder respectively, the Proposed Processing Fee Caps and the Proposed Sales Caps are fair and reasonable, on normal commercial terms or better, are entered into in the ordinary and usual course of business of the Group and are in the interests of the Company and its shareholders as a whole.

The Independent Board Committee, comprising Mr. Heng Ja Wei Victor, Mr. Lam Yau Yiu and Mr. Cheung Wai Kwok Gary, being all the independent non-executive Directors, has been established to advise the Independent Shareholders as to whether the terms and conditions of the Processing Framework Agreement and the Sales Framework Agreement, the transactions contemplated thereunder respectively, the Proposed Processing Fee Caps and the Proposed Sales Caps are fair and reasonable, on normal commercial terms or better, are entered into in the ordinary and usual course of business of the Group and are in the interests of the Company and its shareholders as a whole, after taking into account the recommendations of Red Solar Capital Limited.

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LETTER FROM THE BOARD

12. EXTRAORDINARY GENERAL MEETING AND SHAREHOLDERS WHO ARE REQUIRED TO ABSTAIN FROM VOTING AT THE EGM

The following are the details of the EGM:

Date: Friday, 21 March 2025 Time: 10:00 am Venue: Head Office, Scud Industrial Park, Fuzhou Pilot Free Trade Zone, No. 98 Jiangbin East Avenue, Mawei District, Fuzhou, Fujian Province, PRC

The Notice of EGM is set out on pages EGM-1 to EGM-2 of this circular. A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon as soon as possible and, in any event not later than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof to the branch share registrar and transfer office of the Company in Hong Kong, Tricor Investor Services Limited, located at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

The results of the EGM will be announced by the Company in accordance with Rule 13.39(5) of the Listing Rules.

Any Shareholder with a material interest in the Processing Framework Agreement, the Sales Framework Agreement and the transactions contemplated thereunder respectively and its/his close associates are required to abstain from voting on the relevant Proposed Resolutions at the EGM. Having made all reasonable enquiries, the Board believes that there are no other Shareholders who are required to abstain from voting at the EGM on the Proposed Resolutions other than Mr. Fang Jin’s wholly-owned subsidiaries, Swift Joy Holdings Limited and Right Grand Holdings Limited, holding 423,770,000 Shares and 128,568,000 Shares, respectively, representing approximately 38.88% and 11.79% of the total number of issued Shares as at the Latest Practicable Date. Scud Power Technology is owned as to approximately 68.63% by Mr. Fang Yubin (the son of Mr. Fang Jin, the controlling shareholder of the Company) and approximately 24.48% by Scud Energy Technology (which is owned as to 99.9% by Mr. Fang Jin) as at the Latest Practicable Date, whereas Vietnam Scud Power Technology is a wholly-owned subsidiary of Scud Power Technology. As such, Mr. Fang Jin (together with his associates) has a material interest in the transactions contemplated under the Processing Framework Agreement and the Sales Framework Agreement and will abstain from voting at the EGM.

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LETTER FROM THE BOARD

13. CLOSURE OF REGISTER OF MEMBERS

Shareholders whose name appear on the Company’s register of member on Friday, 21 March 2025 shall be entitled to attend and vote at the EGM. The Company’s register of members and books of transfer will be closed from Tuesday, 18 March 2025 to Friday, 21 March 2025, both days inclusive, during which no transfer of Shares will be registered. In order for the Shareholders to qualify for attending and voting at the EGM, all transfer forms accompanied by the relevant Share certificates must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited, located at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong by 4:30 p.m. on Monday, 17 March 2025.

14. RECOMMENDATION

The Directors (including the independent non-executive Directors having taken into consideration the advice of the Independent Financial Adviser) are of the view that the terms of the Processing Framework Agreement, the Sales Framework Agreement, the transactions contemplated thereunder respectively, the Proposed Processing Fee Caps and the Proposed Sales Caps are fair and reasonable, on normal commercial terms or better and in the interests of the Company and the Shareholders as a whole.

Accordingly, the Board (including the independent non-executive Directors) would recommend the Independent Shareholders to vote in favour of the Proposed Resolutions.

15. ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the Letter from the Independent Board Committee, Letter from the Independent Financial Adviser, the appendix to this circular and the Notice of EGM.

By order of the Board Veson Holdings Limited Feng Ming Zhu Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [96 x 107] intentionally omitted <==

VESON HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 01399)

3 March 2025

To the Independent Shareholders

Dear Sirs or Madam,

CONTINUING CONNECTED TRANSACTIONS (1) THE PROCESSING FRAMEWORK AGREEMENT AND

(2) THE SALES FRAMEWORK AGREEMENT

We refer to the circular of the Company to the Shareholders dated 3 March 2025 (the “ Circular ”), of which this letter forms part. Unless otherwise indicated herein or the context requires otherwise, capitalised terms used in this letter shall have the same meanings as defined in the Circular.

We have been appointed by the Board as the Independent Board Committee to advise you as to whether, in our opinion, (i) the terms and conditions of the Processing Framework Agreement and the Sales Framework Agreement are fair and reasonable; (ii) the Processing Framework Agreement, the Sales Framework Agreement and the transactions contemplated thereunder respectively are entered into on normal commercial terms or better and in the ordinary and usual course of business of the Group; and (iii) the Processing Framework Agreement, the Sales Framework Agreement, the transactions contemplated thereunder respectively, the Proposed Processing Fee Caps and the Proposed Sales Caps are in the interests of the Company and the Shareholders as a whole.

Red Solar Capital Limited has been appointed as Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Processing Framework Agreement, the Sales Framework Agreement, the transactions contemplated thereunder respectively, the Proposed Processing Fee Caps and the Proposed Sales Caps.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

We wish to draw your attention to (i) the letter from the Board set out on pages 6 to 23 of the Circular which contains, among other things, information on the Processing Framework Agreement, the Sales Framework Agreement, the transactions contemplated thereunder respectively, the Proposed Processing Fee Caps and the Proposed Sales Caps, and (ii) the letter of advice from the Independent Financial Adviser as set out on pages 26 to 50 of the Circular which contains details of the independent advice of the Independent Financial Adviser, together with the principal factors and reasons the Independent Financial Adviser has taken into consideration.

Having considered the Processing Framework Agreement, the Sales Framework Agreement, the transactions contemplated thereunder respectively, the Proposed Processing Fee Caps and the Proposed Sales Caps, as well as the opinion and advice of the Independent Financial Adviser as stated in its letter of advice as set out on pages 26 to 50 of the Circular, we are of the opinion that (i) the terms and conditions of the Processing Framework Agreement and the Sales Framework Agreement are fair and reasonable; (ii) the Processing Framework Agreement, the Sales Framework Agreement and the transactions contemplated thereunder respectively are entered into on normal commercial terms or better and in the ordinary and usual course of business of the Group; and (iii) the Processing Framework Agreement, the Sales Framework Agreement, the transactions contemplated thereunder respectively, the Proposed Processing Fee Caps and the Proposed Sales Caps are in the interests of the Company and the Shareholders as a whole.

We therefore recommend the Independent Shareholders to support and to vote in favour of the Proposed Resolutions.

Yours faithfully,

For and on behalf of

INDEPENDENT BOARD COMMITTEE

of

Veson Holdings Limited

Mr. Heng Ja Wei Victor Mr. Lam Yau Yiu Mr. Cheung Wai Kwok Gary Independent Non-Executive Independent Non-Executive Independent Non-Executive Director Director Director

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter of advice from Red Solar Capital Limited, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, in respect of the Processing Framework Agreement and the Sales Framework Agreement and the transactions contemplated thereunder for the purpose of inclusion in this circular.

==> picture [186 x 60] intentionally omitted <==

Unit 402B, 4/F China Insurance Group Building No.141 Des Voeux Road Central Central, Hong Kong

3 March 2025

To: The Independent Board Committee and the Independent Shareholders of Veson Holdings Limited

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS (1) THE PROCESSING FRAMEWORK AGREEMENT AND (2) THE SALES FRAMEWORK AGREEMENT

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Processing Framework Agreement and the Sales Framework Agreement and the transactions contemplated thereunder (collectively, the “ Transactions ”), details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular of the Company dated 3 March 2025 (the “ Circular ”), of which this letter of advice forms part. Unless the context requires otherwise, capitalised terms used in this letter of advice shall have the same meanings as defined in the Circular.

The Processing Framework Agreement

On 7 February 2025 (after trading hours), Scud Battery (an indirect wholly-owned subsidiary of the Company) entered into the Processing Framework Agreement with Scud Power Technology (a connected person of the Company), pursuant to which Scud Battery has conditionally agreed to provide the Processing Services for printed circuit board assembly (PCBA) to Scud Power Technology for a term of three years commencing from the Effective Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Sales Framework Agreement

On 7 February 2025 (after trading hours), Scud Electronics (an indirect wholly-owned subsidiary of the Company) entered into the Sales Framework Agreement with Vietnam Scud Power Technology (a connected person of the Company), pursuant to which Scud Electronics has conditionally agreed to supply the Products (including but not limited to bare battery cells, plastic parts and nickel sheets) from time to time to Vietnam Scud Power Technology for a term of three years commencing from the Effective Date.

Listing Rules implications

As at the Latest Practicable Date, Scud Power Technology is owned as to approximately 68.63% by Mr. Fang Yubin (the son of Mr. Fang Jin, the controlling shareholder of the Company) and approximately 24.48% by Scud Energy Technology (which is owned as to 99.9% by Mr. Fang Jin), respectively, whereas Vietnam Scud Power Technology is a wholly-owned subsidiary of Scud Power Technology. As such, Scud Power Technology and Vietnam Scud Power Technology are connected persons of the Company under the Listing Rules. Accordingly, the entering into of the Processing Framework Agreement and the Sales Framework Agreement, and the transactions contemplated thereunder constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

THE INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

An Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Heng Ja Wei Victor, Mr. Lam Yau Yiu and Mr. Cheung Wai Kwok Gary has been established to advise the Independent Shareholders in relation to (i) the Processing Framework Agreement, the transactions contemplated thereunder and the Proposed Processing Fee Caps; and (ii) the Sales Framework Agreement, the transactions contemplated thereunder and the Proposed Sales Caps. We, Red Solar Capital Limited, have been appointed by the Company with the approval of the Independent Board Committee as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this relation.

OUR INDEPENDENCE

During the past two years immediately preceding the Latest Practicable Date, save for this engagement of us as the Independent Financial Adviser, no other relationship has been formed and no direct engagement has been performed between the Group, the other party(ies) to the Transactions, or a close associate or core connected person of any of them and us. As at the Latest Practicable Date, we did not have any relationship with, or interest in, the Group, the other party(ies) to the Transactions, or a close associate or core connected person of any of them, or other parties that could reasonably be regarded as relevant to our independence. Apart from the normal advisory fee payable to us by the Company in connection with our engagement as the Independent Financial Adviser, no arrangement exists whereby we shall receive any other fees or benefits

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

from the Group, the other party(ies) to the Transactions, or a close associate or core connected person of any of them. Accordingly, we considered that we are independent to act as the Independent Financial Adviser in respect of the Transactions pursuant to Rule 13.84 of the Listing Rules.

BASIS OF OUR OPINION

In formulating our opinion and recommendation to the Independent Board Committee and the Independent Shareholders, we have relied on the information and facts supplied, opinions expressed, statements and representations made to us by the management of the Group (including but not limited to those contained or referred to in the Announcement and the Circular). We have reviewed documents including but not limited to (i) the Announcement; (ii) the Circular and the Letter from the Board contained therein; (iii) the Processing Framework Agreement; (iv) the Sales Framework Agreement; (v) the annual report and interim report of the Company for the year ended 31 December 2023 and the six months ended 30 June 2024, respectively (the “ 2023 Annual Report ” and “ 2024 Interim Report ”, respectively); and (vi) the relevant supporting documents provided by the Company to formulate our opinion and recommendation. We have assumed that the information and facts supplied, opinions expressed, statements and representations made to us by the management of the Group were true, accurate and complete at the time they were made and continue to be true, accurate and complete in all material aspects until the date of the EGM. We have also assumed that all statements of belief, opinions, expectation and intention made by the management of the Company in the Circular were reasonably made after due enquiry and careful consideration. Where applicable, we have also conducted our own desktop search and we are not aware of material deviation between our search results and the information and facts supplied, opinions expressed, statements and representations made to us by the management of the Group. 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 no reason to suspect that any material fact 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 management and/or advisers, which have been provided to us.

We have not, however, conducted any independent in-depth investigation into the business and affairs or future prospects of the Group, or their respective shareholders, subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the Transactions. Our opinion is necessarily based on the market, financial, economic and other conditions in effect and the information made available to us up to the Latest Practicable Date, which could be subject to subsequent developments and changes from time to time. Where information in this letter of advice has been extracted from published or otherwise publicly available sources, we have ensured that such information has been carefully extracted. We have not, however, conducted any independent in-depth investigation nor verification of such information.

The Directors have collectively and individually accepted full responsibility for the Circular and have confirmed, having made all reasonable enquiries, that to the best of their knowledge and belief the information contained in the 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 in the Circular misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Nothing contained in this letter of advice should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion in respect of the Transactions, we have considered the following principal factors and reasons:

1. Background of and reasons for the Transactions

(a) Background information of the Group

The Company is a public limited liability company incorporated in the Cayman Islands as an exempted company and its Shares were listed on the Main Board of the Stock Exchange (stock code: 1399). The Company is principally engaged in investment holding. The Group is principally engaged in manufacture and sale of lithium-ion battery modules, lithium-ion bare battery cells, and related accessories to well-known international and domestic mobile communication companies and Internet technology companies.

The following is a summary of the key financial information of the Group for each of the two years ended 31 December 2023 (the “ FY2022 ” and “ FY2023 ”, respectively) and the six months ended 30 June 2023 and 2024, respectively (the “ 6M2023 ” and “ 6M2024 ”, respectively) as extracted from the 2023 Annual Report and the 2024 Interim Report, respectively:

	For the	For the	For the	For the	For the
	6M2024	6M2023	FY2023		FY2022
	RMB’000	RMB’000	RMB’000		RMB’000
	(unaudited)	(unaudited)	(audited)		(audited)
Turnover	2,440,776	2,645,133	6,145,228		6,359,226
Gross profit	156,183	180,088	418,778		456,707
Profit/(Loss) before
income tax	8,708	(12,539)		10,915	26,902
Profit/(Loss) for the
period/year	5,556	(15,343)		14,214	20,066
	As at		As at		As at
	30 June 2024	31 December 2023		31	December 2022
	RMB’000		RMB’000		RMB’000
	(unaudited)		(audited)		(audited)
Total assets	4,300,619		4,870,355		5,041,651
Total liabilities	3,211,140		3,784,300		3,972,390
Net assets	1,089,479		1,086,055		1,069,261

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Comparison between FY2022 and FY2023

The turnover of the Group decreased by approximately RMB214.00 million, or approximately 3.37%, from approximately RMB6,359.23 million for the FY2022 to approximately RMB6,145.23 million for the FY2023. The gross profit of the Group decreased by approximately RMB37.93 million, or approximately 8.30%, from approximately RMB456.71 million for the FY2022 to approximately RMB418.78 million for the FY2023. The net profit of the Group also decreased by approximately RMB5.85 million, or approximately 29.16%, from approximately RMB20.07 million for the FY2022 to approximately RMB14.21 million for the FY2023. According to the 2023 Annual Report, such deteriorations in the Group’s performance were attributed to the sustained downturn in the global smartphone market in 2023, as the ODM business of the Group, the major revenue contributor, primarily targets the smartphone segment in the consumer electronics market. Throughout the first three quarters of 2023, both the global and domestic mobile phone markets experienced an overall decline in sales volume; however, this decline significantly narrowed down in the fourth quarter. As quoted in the 2023 Annual Report, according to a report released by IDC, a market research agency, global smartphone shipments fell by 3.2% year on year to 1.17 billion units in 2023. The long-term impact of the COVID-19 pandemic, supply chain instability, economic volatility, and increased market saturation brought significant challenges to the smartphone market. In addition to factors such as economic downturns and consumer confidence affecting consumers’ purchasing decisions, another significant reason behind declining smartphone sales is that product durability continues to improve over time, thereby further extending consumers’ replacement cycles.

Comparison between 6M2023 and 6M2024

The turnover of the Group decreased by approximately RMB204.36 million, or approximately 7.73%, from approximately RMB2,645.13 million for the 6M2023 to approximately RMB2,440.78 million for the 6M2024. The gross profit of the Group also decreased by approximately RMB23.91 million, or approximately 13.27%, from approximately RMB180.09 million for the 6M2023 to approximately RMB156.18 million for the 6M2024. Nonetheless, the Group recorded a net profit of approximately RMB5.56 million for the 6M2024 in contrast with a net loss of approximately RMB15.34 million for the 6M2023. It was primarily because of the decreases in the Group’s selling and distribution expenses and administrative expenses, and the reversal of impairment loss recognised on trade and notes receivables, net for the 6M2024. As set out in the 2024 Interim Report, as the mobile phone market has matured and the room for development has gradually narrowed, although the overall sales volume of the Group’s ODM battery products during the 6M2024 increased as compared with the 6M2023, the sales revenue and gross profit contributed by mobile phone batteries in the 6M2024 decreased as compared with the 6M2023 due to the general decline in the sales volume and the selling prices, which affected the overall profit margin and operating results of the Group’s ODM business. Due to the weak global economy, the replacement cycle of mobile phones eventually became longer, resulting in a sharp overcapacity of the mobile phone industry chain, coupled with the general overcapacity of lithium-ion battery materials leading to a continuous decline in prices, and the relatively fierce domestic price competition, the gross profit margin of mobile phone products and related accessories contracted.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Prospects

Although the global smartphone market faced challenges during 2022, 2023 and early 2024, management of the Company believed that it has been steadily recovering from the past fluctuations since the second quarter of 2024. As quoted in the 2024 Interim Report, according to a report released by IDC, a market research agency, in the second quarter of 2024, global smartphone shipments increased by 6.5% year on year to approximately 285.4 million units, realising growth for four consecutive quarters. The Group also believes that for a long time to come, smartphones will still be the most important carrier for personal entertainment, consumption and social networking, the light productivity characteristics of smartphones are also constantly strengthening, and there is no new technology terminal that can really replace smartphones. Smartphones themselves are also constantly evolving and upgrading, and the high-end mobile phone market represented by foldable mobile phones has brought users differentiated applications, content and operation experience while enriching product modality. The Group also considered that the rapid penetration of AI technology has become a key driving force for market growth, and AI will constantly drive the demand for smartphone replacement in next few years. Leading mobile phone brands are rapidly promoting their highend product strategies focusing on AI functions to improve user experience and product competitiveness by introducing advanced AI technologies. The Group is confident that with the increasing popularity of 5G and AI technology, the broad application prospects will lead the rapid growth of the market scale of new intelligent products, driving the demand for consumer lithium-ion batteries and battery protection circuits.

In light of the aforementioned industry developments, the Group is adjusting its development strategy and taking measures to diversify business risks by actively exploring new power supply product markets, and developing backup battery products with higher profits. The Group will continue to invest in the research and development of new technologies, and the research and development team will continuously strive for innovation in industrial design and AI technology application to ensure that the Company can gain momentum for future business development, and better identify and respond to the changing needs of customers, industry trends and competitiveness.

(b) Reasons for and benefits of the Transactions

As set out in the Letter from the Board, with the increasing popularity of 5G and artificial intelligence technology, it is anticipated that the broad application prospects will lead to the rapid growth of the market scale of the consumer battery products. The Group endeavours to harness the opportunities by providing quality processing services and enhancing its brand competitiveness and influence. The Company considers that the entering into of the Processing Framework Agreement will continue to provide a stable revenue stream to the Group by utilising its existing production capacities and manpower.

Meanwhile, the Company also considers Scud Electronics a reputable manufacturer of batteries of consumer electronics, and that it is able to source large quantity of raw materials from its well-established network of suppliers at advantageous rates and ensure the quality of the Products and timely delivery to meet the standards and production timeline required by

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Vietnam Scud Power Technology and its downstream customers in the production chain. The Company also considers that the entering into of the Sales Framework Agreement can increase the Group’s revenue.

In respect of the entering into of the Processing Framework Agreement, we noted that the provision of processing services is part of the ODM business of the Group, which is a major revenue contributor. For the FY2022 and FY2023, the turnover of the Group’s ODM business amounted to approximately RMB6,046.85 million (re-presented) and RMB5,745.84 million, respectively. For the 6M2023 and 6M2024, the turnover of the Group’s ODM business also amounted to approximately RMB2,472.94 million and RMB2,236.93 million, respectively. We considered that the ODM business of the Group, including the provision of processing services, is the usual and ordinary business of the Group, and therefore the entering into of the Processing Framework Agreement is in the ordinary course of business of the Group. We also agreed with the Company that the entering into of the Processing Framework Agreement will continue to provide a stable revenue stream to the Group by utilising its existing production capacities and manpower.

In respect of the entering into of the Sales Framework Agreement, while the sales of Products have not been a major revenue contributor to the Group’s revenue during the FY2022, FY2023, 6M2023 and 6M2024, we noted that the Group will sell raw materials and work-inprogress from time to time, as integrated in the others segment of the Group. We also understood from the Company that the Products (including but not limited to bare battery cells, plastic parts and nickel sheets) are raw materials commonly seen in the Group’s ordinary productions and operations. Therefore, we considered that the Products and the sales of them are related to the ordinary course of business of the Group. We also noted that it is the Group’s strategy to diversify business risks by actively exploring new power supply product markets, and considered that the sales of the Products could be a means to diversify the Group’s business risks and income source. We also agreed with the Company that the entering into of the Sales Framework Agreement can increase the Group’s revenue.

Considering that (i) the ODM business is the major revenue contributor of the Group and the entering into of the Processing Framework Agreement is in the ordinary course of business of the Group; (ii) we agreed that the entering into of the Processing Framework Agreement will continue to provide a stable revenue stream to the Group by utilising its existing production capacities and manpower; (iii) the Products and the sales of them are related to the ordinary course of business of the Group because the Products, being electronic components including but not limited to bare battery cells, plastic parts and nickel sheets, are raw materials commonly seen in the Group’s ordinary productions and operations, and we noted that the Group will sell raw materials and work-in-progress from time to time, as integrated in the others segment of the Group; (iv) the entering into of the Sales Framework Agreement is in line with the Group’s strategy to diversify its business risks by actively exploring new power supply product markets, and the sales of the Products could be a means to diversify the Group’s business risks and income source; and (v) we agreed that the entering into of the Sales Framework Agreement can increase the Group’s revenue, we were of the view that the entering into of the Processing Framework Agreement and Sales Framework Agreement are in the ordinary course of business of the Group and fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. The Processing Framework Agreement

(a) Principal terms of the Processing Framework Agreement

A summary of the principal terms of the Processing Framework Agreement is set out below:

Date: 7 February 2025

Parties: (i) Scud Battery (as the provider of the Processing Services)
(ii) Scud Power Technology (as the receiver of the Processing Services)

Term:

Three years commencing from the Effective Date (both days inclusive), and such term may be extended by mutual agreement subject to compliance with applicable Listing Rules at the time.

Processing Services:

Scud Battery shall provide the Processing Services for printed circuit board assembly (PCBA) according to the manufacturer’s instructions given by Scud Power Technology, which includes the following key processes:

(a) surface mount technology (SMT);
(b) dual in-line packaging (DIP); and/or
(c) undergoing other pre-processing procedures on the printed circuit boards such as labelling, testing and wire harness, depending on specific requirements and designs specified in purchase orders to be placed by Scud Power Technology and to be agreed by Scud Battery.

Scud Power Technology shall provide Scud Battery with product test proposals in writing and provide on-site technology support during the first mass production of new products.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

On the last working day of each calendar month, Scud Battery shall provide Scud Power Technology with a list of products yet to be processed and the reasons.

For the avoidance of doubt, the Processing Framework Agreement is nonexclusive in nature. Scud Battery is not obliged to provide the Processing Services to Scud Power Technology, and Scud Power Technology is not obliged to commission Scud Battery to provide the Processing Services.

Processing Fee:

Within two (2) working days after Scud Power Technology submits a request for quotation through a specified service platform, Scud Battery shall provide a fee quote to Scud Power Technology which specifies the Processing Fee of the relevant purchase order.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Processing Fee shall primarily depend on the size of the purchase orders be calculated based on the unit price/charging basis as shown in the table below, in each case having taken into account the production efficiency resulting from panelization:


Type of products to which the processed printed circuit boards shall apply			Mobile phone batteries and accessories	3C/ Motive batteries	Smart home batteries	LED lighting panel	POS machines	Car products	Others
Processing procedure		Unit	Unit price (tax exclusive) (RMB)
SMT		point	0.01	0.01	0.009	0.004	0.008	0.019	Fee quote to be provided on a case by case basis
Laser marking		piece	0.06	0.053	0.053	–	0.044	–
		hour	30	30	–	–	–	40
De-paneling	With milling tool	piece		0.106	0.106
		hour	30	30		–	24.3	40
	Without milling tool	piece		0.08	0.08
		hour	30	30		–	24.3	40
DIP		point	–	0.088	0.088	–	–	–
		hour	30	30	–	–	24.3	40
Testing		hour	30	30	–	–	24.3	40
Dispensing		piece	–	0.088	0.088	–	–	–
		hour	30	30	–	–	24.3	40
Assembly		hour	–	–	–	–	24.3	40

(i) For orders of 300,000 or more pieces of processed products and orders for special projects: the parties may agree a discounted Processing Fee at the rate of 0.9 to 0.95 times of the Processing Fee calculated based on the breakdown of fees for the relevant procedures involved in processing each piece of product in accordance with the unit price or charging basis as set out in the table above;
(ii) For orders of processed products above 1,000 pieces but below 300,000 pieces: the Processing Fee shall be calculated based on the breakdown of fees for the relevant procedures involved in processing each piece of product in accordance with the unit price or charging basis as set out in the table above;
(iii) For orders of processed products in the range of 201 and 1,000 pieces and research and development orders: the Processing Fee shall be charged at a rate of 1.5 to 2 times of the Processing Fee calculated based on the breakdown of fees for the relevant
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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

procedures involved in processing each piece of product in accordance with the unit price or charging basis as set out in the table above; and

(iv) For orders of 200 or less pieces of processed products: a onetime charge of RMB1,500 (tax exclusive) per order.

Depletion fees (to be included in the Fee Quote) are charged at a rate of 0.3% of the cost of materials.

Packaging fees (to be included in the Fee Quote) are charged based on the actual cost of packaging materials.

At the last working day of each calendar month, Scud Battery shall crosscheck its records against the records of Scud Power Technology to ascertain and confirm the Processing Fee payable, based on which Scud Battery shall issue invoice to Scud Power Technology which shall be payable within 60 days after the relevant calendar month end. Interest on any overdue payment shall be calculated based on the average interest rate of one-year working capital loans granted by PRC banks in the same period.

Long Stop In the event that the Independent Shareholders’ approval relating to the Date: Processing Framework Agreement and the Proposed Processing Fee Caps has not been obtained on or before 30 June 2025 (or such other date as agreed in writing between the parties), the Processing Framework Agreement shall be automatically terminated, and neither of the party shall be entitled to any right or benefit, or be liable under or related to the Processing Framework Agreement.

(b) Discussion on the pricing policy of the Processing Framework Agreement

As set out in the Circular, the Processing Fee was agreed between Scud Battery and Scud Power Technology with reference to (i) the processing fee charged by Scud Battery to clients which are independent third parties for similar processing services; (ii) the prevailing market price of similar processing services; and (iii) the prevailing market condition. It is also set out that the transactions to be conducted under the Processing Framework Agreement will be carried out on normal commercial terms and the Processing Fee to be charged on Scud Power Technology for each transaction shall not be more favourable than those being charged on Independent Third Party clients.

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In particular, we have further enquired with the Company and understood that when determining the processing fees that the Group charges to all its customers, including Scud Power Technology as well as independent third parties, the Group generally goes through similar determination process which includes: (i) estimating the Group’s labour, material and overhead costs (whichever applicable) for performing each type of processing procedure for each type of product to which the processed printed circuit boards shall apply. Such costs for performing any given type of processing procedure for any given type of product to which the processed printed circuit boards shall apply for Scud Power Technology as well as independent third parties, respectively, are substantially the same, according to the Company; (ii) determining a profit margin over the Group’s costs for each type of processing procedure for each type of product to which the processed printed circuit boards shall apply, taking into account factors such as the cost for processing, level of technology and skills required, prevailing market conditions, and varying specifications of the orders. In general, the Group’s costs and such profit margin shall collectively constitute the basic unit price to be charged by the Group for performing a given type of processing procedure for a given type of product to which the processed printed circuit boards shall apply, and the basic unit prices that the Group charges Scud Power Technology will be no less favourable to the Group than those the Group charges independent third parties; and (iii) determining, in general, if a multiplier (which can be less than 1 in the case of discounts and larger than 1 in the case of additional charges) shall be applied to the basic unit price or that other fixed prices shall be charged by the Group for small orders of less than 1,001 pieces or bulk purchases of more than 300,000 pieces or orders for special projects. We considered that the aforementioned cost-plus pricing policy of the Processing Framework Agreement which shall apply equally to Scud Power Technology as well as independent third parties, and that the unit prices the Group charges Scud Power Technology will be no less favourable to the Group than those the Group charges independent third parties, is commercially justifiable, fair and reasonable so far as the Independent Shareholders are concerned.

To further assess the aforementioned pricing policy of the Processing Framework Agreement, we have examined the carrying out of the pricing policy of its predecessor, the 2021 Processing Framework Agreement, which has substantially the same principle with that of the Processing Framework Agreement. We have sample checked three purchase orders from each of two independent third party customers of the Group for each of the three years ended 31 December 2024 (i.e. 18 purchase orders in total), covering different type of processing procedure for different type of product to which the processed printed circuit boards shall apply, and compared the unit prices on such purchase orders with the processing fees set out in the 2021 Processing Framework Agreement. Considering (i) we sample checked purchase orders from two independent third party customers of the Group for each of the three years ended 31 December 2024; (ii) we sample checked three purchase orders from each of such independent third party customers of the Group for each of the three years ended 31 December 2024; (iii) the total sampled purchase orders covered different type of processing procedure for different type of product to which the processed printed circuit boards shall apply, such that they were sufficient for us to assess the processing fees charged to independent third party customers of the Group for various processing services similar to the Processing Services, we were of the view that the number of sample checked purchase orders were sufficient for our assessment. We noted that the processing fees set out in the 2021 Processing Framework

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Agreement are no less favourable to the Group than the processing fees charged to the independent third party customers for performing similar processing services. As such, we considered that the pricing policy of the 2021 Processing Framework Agreement, including that the unit prices the Group charges Scud Power Technology and Scud Energy Technology (in the case of the 2021 Processing Framework Agreement only) shall be no less favourable to the Group than those the Group charges independent third parties, has been carried out according to the terms and conditions of the 2021 Processing Framework Agreement. In light of this, we have no reason to doubt that the pricing policy of the Processing Framework Agreement will not be carried out according to its terms and conditions.

We have also reviewed other terms and conditions of the Processing Framework Agreement and 2021 Processing Framework Agreement, including (i) scope of processing services; (ii) duties and responsibilities of both parties; (iii) clearance and payment terms; (iv) delivery arrangements; (v) special treatments such as depletion fees and packaging fees; and (vi) other miscellaneous terms and conditions. We were not aware of material deviation between them, and considered that the terms and conditions of the Processing Framework Agreement are normal commercial terms in general.

Considering that (i) the cost-plus pricing policy of the Processing Framework Agreement as discussed above is commercially justifiable; (ii) such pricing policy shall apply equally to Scud Power Technology as well as independent third parties, and that the unit prices the Group charges Scud Power Technology will be no less favourable to the Group than those the Group charges independent third parties, which we considered fair and reasonable so far as the Independent Shareholders are concerned; (iii) we have examined historical purchase orders and considered that the pricing policy of the 2021 Processing Framework Agreement, which has substantially the same principle with that of the Processing Framework Agreement, has been carried out according to its terms and conditions, and therefore have no reason to doubt that the pricing policy of the Processing Framework Agreement will not be carried out accordingly; and (iv) we have also reviewed other terms and conditions of the Processing Framework Agreement and considered them normal commercial terms in general, we were of the view that the terms and conditions of the Processing Framework Agreement, including but not limited to the pricing policy thereunder, are on normal commercial terms, fair and reasonable and in the interest of the Company so far as the Company and the Independent Shareholders are concerned.

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(c) Discussion on the proposed annual caps of the Processing Framework Agreement

Historical Transaction Amounts and Historical Annual Caps

	For the year ended	For the year ended	For the year ended
	31 December 2022	31 December 2023	31 December 2024
	(RMB)	(RMB)	(RMB)
Historical	15,435,953	13,021,825	30,580,352 (Note 2)
Transaction	(equivalent to	(equivalent to	(equivalent to
Amounts (Note 1)	approximately	approximately	approximately
	HK$16,768,000)	HK$14,146,000)	HK$33,220,000)
Historical Annual	40,000,000	40,000,000	40,000,000
Caps

Notes:

The 2021 Processing Framework Agreement was entered into between Scud Battery (as the provider of processing services) with Scud Power Technology and Scud Energy Technology (as the receivers of the processing service). Scud Energy Technology is not a party to the Processing Framework Agreement. The Historical Transaction Amounts in the table indicates the historical amounts of the processing fees received by Scud Battery from Scud Power Technology pursuant to the 2021 Processing Framework Agreement, which represents almost 100% of the historical amounts received by Scud Battery under the 2021 Processing Framework Agreement.
The historical transaction amounts for the year ended 31 December 2024 is subject to audit and may be different from the audited figures.

Proposed Processing Fee Caps and basis of determination

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2027, and from 1 January 2028 to the date immediately before the third anniversary date of the Effective Date) for the transactions contemplated under the Processing Framework Agreement (the “ Proposed Processing Fee Cap(s) ”) are as follows:

					From
					1 January 2028
					to the date
					immediately
		From the			before the third
		Effective Date to	For the year ending	For the year ending	anniversary date of
		31 December 2025	31 December 2026	31 December 2027	the Effective Date
		(RMB)	(RMB)	(RMB)	(RMB)
Proposed		40,000,000	50,000,000	60,000,000	10,000,000
Processing	Fee	(equivalent to	(equivalent to	(equivalent to	(equivalent to
Caps		approximately	approximately	approximately	approximately
		HK$43,452,000)	HK$54,315,000)	HK$65,178,000)	HK$10,863,000)

As set out in the Letter from the Board, the following factors have been taken into account when determining the Proposed Processing Fee Caps for the transactions contemplated under the Processing Framework Agreement:

(a) the expected demand of Scud Power Technology for the Processing Services during the term of the Processing Framework Agreement, taking into account the internal production schedules and business plans during the term of the Processing Framework Agreement as indicated by Scud Power Technology and the expected growth in demand for the overall consumer battery industry [(Note][1)] owing to the increasing popularity of 5G and artificial intelligence technology;
(b) production capacities, manpower and business plans of the Group during the term of the Processing Framework Agreement;
(c) the Historical Transaction Amounts and the Historical Annual Caps. The Historical Transaction Amounts and the utilisation rate of the relevant Historical Annual Caps were lower than expected as the demand by Scud Power Technology of Processing Services had significantly dropped and that was because the operation of their production lines in the PRC, and the relevant supply chain of raw materials as well as the freight logistics had been severely impacted by the COVID-19 pandemic, and it takes time to gradually recover the capacity of the production lines of Scud Power Technology and the demand for the Processing Services. In this context, there is a relatively large difference between the Historical Annual Caps (as well as the Proposed Processing Fee Caps) and the Historical Transaction Amounts in 2022 and 2023. The Historical Transaction Amounts in 2024 had rebounded to approximately RMB30.58 million and utilised more than 75% of the Historical Annual Cap in 2024, which indicates that the demand by Scud Power Technology for the Processing Services are gradually recovering; and
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(d) the inclusion of a buffer of approximately 10% to 15% to allow for a potential increase in demand for the Processing Services during the term of the Processing Services Agreement.

Note:

1. According to the consumer battery market report published by SkyQuest Technology Group (a global market intelligence, innovation management and commercialisation organisation) in February 2025, the overall consumer battery market is projected to grow at a CAGR of approximately 6.9% during 2025 to 2032.

Our discussion on the Proposed Processing Fee Caps

To assess the basis of determining the Proposed Processing Fee Caps and the factors considered by the Board, we have the following analysis.

We noted that the Historical Transaction Amounts in 2022 and 2023 were significantly lower than the annual caps of the 2021 Processing Framework Agreement in the same years. We, however, concurred with the view of the Company that it could be attributed to the COVID-19 pandemic during the same years where compulsory lock-downs and business suspensions took place in the PRC as a result, and we agreed that such pandemic containment measures inevitably disrupted the operations of both the Group and Scud Power Technology in the PRC, the supply chain of raw materials as well as the logistics for delivery of the processed printed circuit boards. Nonetheless, we noted that the COVID-19 pandemic in the PRC was alleviated in 2024, and correspondingly, the Historical Transaction Amounts in 2024 also rebounded back to approximately RMB30.58 million, representing an increase of approximately 134.84% when compared with that in 2023 of approximately RMB13.02 million, and representing over 75% of the Historical Annual Cap in 2024, being RMB40 million. Based on the above, we considered that the capacity of the production lines of Scud Power Technology and the resulting demands of processed printed circuit boards and the Group’s Processing Services are gradually recovering.

In addition, we have obtained the management accounts of Scud Power Technology for each of the three years ended 31 December 2023, and noted that it recorded revenue and costs of operation of both over RMB1,000 million for each of the three years ended 31 December 2023. We therefore placed no doubt as to the operation scale of Scud Power Technology and thus the capacity of its production lines and its demands for processed printed circuit boards and the Group’s Processing Services.

We have also obtained an estimated production schedule of Scud Power Technology and noted that both its production volume and value were expected to grow by around 20% for each of the three years ending 31 December 2027. Considering this together with the operation scale of Scud Power Technology, we believe it is reasonable that Scud Power Technology may have growing demands for processed printed circuit boards and the Group’s Processing Services.

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Considering (i) that the COVID-19 pandemic, the primary cause of compulsory lock-downs and business suspensions in the PRC and therefore disruptions in the operations of both the Group and Scud Power Technology in the PRC, the supply chain of raw materials as well as the logistics for delivery of the processed printed circuit boards in 2022 and 2023, was alleviated in 2024; (ii) that the Historical Transaction Amounts in 2024 rebounded back to approximately RMB30.58 million, representing an increase of approximately 134.84% when compared with that in 2023 of approximately RMB13.02 million; (iii) the operation scale of Scud Power Technology and thus the capacity of its production lines and its demands for processed printed circuit boards and the Group’s Processing Services; (iv) the growing estimated production schedule of Scud Power Technology and our belief that Scud Power Technology may have growing demands for processed printed circuit boards and the Group’s Processing Services for the three years ending 31 December 2027; (v) that the Group also expected growth in demand for the overall consumer battery industry owing to the increasing popularity of 5G and artificial intelligence technology and therefore the market demands for the Group’s processing services; and (vi) that we were not aware of any factor which may have material adverse impact on the Group’s industry and the market demands for the Group’s processing services, we considered the Proposed Processing Fee Caps fair and reasonable.

3. The Sales Framework Agreement

(a) Principal terms of the Sales Framework Agreement

A summary of the principal terms of the Sales Framework Agreement is set out below.

Date: 7 February 2025

Parties: (i) Scud Electronics (as the supplier of the Products)

(ii) Vietnam Scud Power Technology (as the purchaser of the Products)

Term: Three years commencing from the Effective Date (both days inclusive), and such term may be extended by mutual agreement subject to compliance with applicable Listing Rules at the time.

Sale of Products:

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Confirming or Terminating the Specific Order

After Vietnam Scud Power Technology send a stamped purchase order to Scud Electronics, Scud Electronic shall confirm the purchase order within two (2) days. If the purchase order is not confirmed within the time limit, the purchase order is deemed to have been rejected.

Inspection and warranty period of the Products

Scud Electronics guarantees the quality of the Products for 12 months commencing on the date of despatch of the Products.

For the avoidance of doubt, the Sales Framework Agreement is nonexclusive in nature. Scud Electronics is not obliged to supply the Products to Vietnam Scud Power Technology, and Vietnam Scud Power Technology is not obliged to purchase the Products from Scud Electronics.

Pricing Policy:

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The prices of the Products offered by Scud Electronics shall be comparable to those offered by other independent third parties and the transaction under the Specific Order shall be conducted on normal commercial terms.

Long Stop Date:

As set out in the Letter from the Board, the pricing policy of Products was agreed between Scud Electronics and Vietnam Scud Power Technology having considered (i) the prevailing market price of similar Products charged by other independent third parties suppliers; and (ii) the capability of Scud Electronics in sourcing large quantity of high-quality raw materials from its well-established network of suppliers at advantageous rates in a timely manner, which is valued by Vietnam Scud Power Technology as well as its clients downstream in the production chain. It is also set out that the transactions to be conducted under the Sales Framework Agreement will be carried out on normal commercial terms and the prices to be charged on Vietnam Scud Power Technology for the Products shall not be more favourable than those being charged on Independent Third Party customers.

(b) Discussion on the pricing policy of the Sales Framework Agreement

We noted that the prices of the Products shall be determined based on the procurement costs of the Products plus a gross profit margin of approximately 10% to 15%. The procurement costs borne by Scud Electronics include the costs of raw materials, transportation costs and customs fees.

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We have further enquired with the Company and understood that Scud Electronics would, from time to time, check with prevailing market conditions and update the expected costs of the Products to be adopted as the bases of determining the selling prices of the Products. In any case, such update will be performed at least quarterly. In light of this, we considered that measures have been taken by Scud Electronics to closely monitor the costs of the Products, which are important bases of determining the selling prices of the Products.

We also understood from the Company that when determining the selling prices of the Products, apart from their costs, Scud Electronics will also make reference to the prevailing market prices of the Products in the market, and the prices of the Products offered by Scud Electronics shall be comparable to those offered by other independent third parties in the market and the transaction under the Specific Order shall be conducted on normal commercial terms. We further understood from the Company that Scud Electronics has compared the differences between its costs of the Products and their prevailing market prices, and determined that a gross profit margin of approximately 10% to 15% could be made in setting the selling prices of the Products. As such pricing bases have been determined with reference to the prevailing market prices of the Products, we considered it to be on normal commercial terms and fair and reasonable.

In addition, we considered that such cost-plus approach allows the Group to earn a generally stable gross profit for each sale of Products. We also noted that Scud Electronics is not obliged to supply the Products to Vietnam Scud Power Technology, and therefore Scud Electronics has the right to determine if a sale is in line with the terms and conditions of the Sales Framework Agreement, if the price is in line with the prevailing market prices, if the sale is beneficial to Scud Electronics and the Group and, therefore, if the sale should be carried out. In light of this, we considered the pricing policy of the Sales Framework Agreement to be in the interest of the Company and Independent Shareholders and fair and reasonable.

We have also reviewed other terms and conditions of the Sales Framework Agreement, including (i) scope of Products; (ii) duties and responsibilities of both parties; (iii) demand planning; (iv) order, delivery, inspection and receipt procedures; (v) payment terms and arrangements; (vi) quality control arrangements; and (vii) other miscellaneous terms and conditions. We considered that the terms and conditions of the Sales Framework Agreement are normal commercial terms in general.

Considering that (i) measures have been taken by Scud Electronics to closely monitor the costs of the Products, which are important bases of determining the selling prices of the Products; (ii) Scud Electronics will make reference to the prevailing market prices of the Products in the market, and the prices of the Products offered by Scud Electronics shall be comparable to those offered by other independent third parties in the market and the transaction under the Specific Order shall be conducted on normal commercial terms; (iii) the gross profit margin of approximately 10% to 15% in determining the prices of the Products was made with reference to the costs of the Products and their prevailing market prices; (iv) the cost-plus approach allows the Group to earn a generally stable gross profit for each sale of Products; (v) Scud Electronics could determine if a sale is in line with the terms and conditions of the Sales Framework Agreement, beneficial to it, and should be carried out; and (vi) the terms and

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conditions of the Sales Framework Agreement are considered normal commercial terms in general, we were of the view that terms and conditions of the Sales Framework Agreement were on normal commercial terms, in the interests of the Company and the Independent Shareholders, and fair and reasonable so far as the Company and the Independent Shareholders are concerned.

(c) Discussion on the proposed annual caps of the Sales Framework Agreement

The Proposed Sales Caps and basis of determination

					From
					1 January 2028
					to the date
					immediately
		From the			before the third
		Effective Date to	For the year ending	For the year ending	anniversary date of
		31 December 2025	31 December 2026	31 December 2027	the Effective Date
		(RMB)	(RMB)	(RMB)	(RMB)
Proposed	Sales	15,000,000	20,000,000	20,000,000	5,000,000
Caps		(equivalent to	(equivalent to	(equivalent to	(equivalent to
		approximately	approximately	approximately	approximately
		HK$16,295,000)	HK$21,726,000)	HK$21,726,000)	HK$5,432,000)

As set out in the Letter from the Board, the following factors have been taken into account when determining the Proposed Sales Caps for the transactions contemplated under the Sales Framework Agreement:

(a) the estimated procurement costs of the Products with reference to their prevailing market prices;
(b) the expected demand of Vietnam Scud Power Technology for the Products during the term of the Sales Framework Agreement, taking into account the internal production schedules and business plans during the term of the Sales Framework Agreement as indicated by Vietnam Scud Power Technology; and
(c) the inclusion of a buffer of approximately 10% to 15% to allow for a potential increase in demand for the Products and increase of procurement costs (if any) (and hence selling prices) of the Products in the future.
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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Our discussion on the Proposed Sales Caps

We noted that Vietnam Scud Power Technology is wholly owned by Scud Power Technology, and is principally engaged in manufacture, processing and sale of batteries (such as two wheeled vehicle batteries and vacuum cleaner batteries) in Vietnam. As discussed previously, we have obtained the management accounts of Scud Power Technology for each of the three years ended 31 December 2023, and noted that it recorded revenue and costs of operation of both over RMB1,000 million for each of the three years ended 31 December 2023. As such, we considered that Vietnam Scud Power Technology is a part of a group with a large scale of operation, and we placed no doubt as to the operation scale, capacity of production lines and demands for the Products of Vietnam Scud Power Technology itself. We further understood from the Company that Vietnam Scud Power Technology demands the Products from Scud Electronics for its own production and thus sale of batteries in Vietnam. In this relation, we have obtained an estimated production schedule of Vietnam Scud Power Technology and noted that it has a large estimated scale and value of production for each of the three years ending 31 December 2027. Taking into account the estimated production scale and value of Vietnam Scud Power Technology, we believed that the supply of Products by Scud Electronics according to the Proposed Sales Caps were necessary for Vietnam Scud Power Technology’s own production needs.

We also understood from the Company that the demands for Vietnam Scud Power Technology’s own products, such as two wheeled vehicle batteries and vacuum cleaner batteries, are expected to grow during the three years ending 31 December 2027 as Vietnam’s economy is expected to regain momentum and its domestic consumer demand is expected to pick up since 2024. In particular, according to the research[1] of The Hong Kong Trade Development Council, Vietnam’s real gross domestic product in 2024 is forecasted to grow by 5.8% when compared with that in 2023, which is higher than its growth rate in 2023 of 5.0% when compared with that in 2022. Based on the above, we do not doubt the demands for Vietnam Scud Power Technology’s own products, and therefore its demands for the Products to be used in its own production.

Considering (i) the estimated production schedule of Vietnam Scud Power Technology; (ii) the expected growth in Vietnam’s economies and the demands for Vietnam Scud Power Technology’s products therein; and (iii) therefore Vietnam Scud Power Technology’s demands for the Products to be used in its own production, we were of the view that the Proposed Sales Caps were fair and reasonable.

1 Vietnam: Market Profile – The Hong Kong Trade Development Council – https://research.hktdc.com/en/article/MzU3ODA1MjA4

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Internal control measures in respect of the Processing Framework Agreement and Sales Framework Agreement

We have also reviewed the internal control measures of the Group as follows, and we considered that such internal control measures are sufficient to ensure that the Processing Services will be conducted on normal commercial terms and not prejudicial to the interests of the Company and the Independent Shareholders in accordance with the pricing policies and the principles set out in the Processing Framework Agreement and Sales Framework Agreement and in compliance with the Listing Rules.

(a) in respect of the Processing Framework Agreement, when preparing the Fee Quote to Scud Power Technology in respect of the Processing Services, Scud Battery shall take into account the Processing Fee agreed between Scud Battery and at least two other independent third party clients to whom Scud Battery provided processing services of similar nature, specification and size, to ensure that the Fee Quote to be provided to, and the Processing Fee to be agreed with Scud Power Technology under the Fee Quote will not be lower than those agreed with such independent third party customers. The protection circuit module division shall set out in writing the basis of selection of such independent third party customers and the basis of setting the Fee Quote and the Processing Fee for review by the Group’s risk management department, which performs an internal audit function and is responsible for reviewing the Group’s continuing connected transactions;
(b) in respect of the Sales Framework Agreement, when receiving the Specific Orders from Vietnam Scud Power Technology in respect of the Products, Scud Electronics shall take into account the purchase price agreed with Vietnam Scud Power Technology and compare such purchase price with at least two fee quotes from independent third party suppliers who supply comparable Products to ensure that the fee quote to be provided to, and the purchase price to be agreed with, Vietnam Scud Power Technology will be comparable with those provided by independent third party suppliers and shall not be more favourable than those being offered to Independent Third Party customers;
(c) in respect of the Processing Framework Agreement and the Sales Framework Agreement, when Scud Battery and Scud Power Technology (in respect of the Processing Framework Agreement) and Scud Electronics and Vietnam Scud Power Technology (in respect of the Sales Framework Agreement) cross-check their records to ascertain and confirm the Processing Fee or the purchase fee for the Products (as the case may be) payable within 60 days after the relevant calendar month end (in case of the Processing Framework Agreement) or within 90 days upon the delivery of the Products (in respect of the Sales Framework Agreement), the protection circuit module division of Scud Battery or the product development division of Scud Electronics (as the case may be) shall set out in writing the basis of determining the Processing Fee receivable or the sales receivable for the Products (as the case may be) for approval by their respective division head, and such determination shall be cross-checked by the Group’s risk management department;
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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(d) to ascertain whether the Proposed Processing Fee Cap and the Proposed Sales Cap for the relevant period have been exceeded, the Group’s finance department shall (i) aggregate the amounts of Processing Fee by the end of each calendar month and compare such aggregated amount with the Proposed Processing Fee Cap for the relevant period and (ii) aggregate the amounts of sales receivable for the Products by the end of each calendar month and compare such aggregated amount with the Proposed Sales Cap for the relevant period, and such aggregation and determination shall be cross-checked by the Group’s risk management department; and
(e) the independent non-executive Directors and the auditors of the Company will conduct annual review on the transactions contemplated under the Processing Framework Agreement and the Sales Framework Agreement to ensure they have been conducted in accordance with their respective terms and the Proposed Processing Fee Cap and the Proposed Sales Cap have not been exceeded respectively for the relevant period.

5. Reporting requirements and conditions of the continuing connected transactions contemplated under the Processing Framework Agreement and Sales Framework Agreement

Pursuant to Rules 14A.55 to 14A.59 of the Listing Rules, the continuing connected transactions contemplated under Processing Framework Agreement and Sales Framework Agreement are subject to the following annual review requirements:

(a) The Company’s independent non-executive Directors must review the continuing connected transactions every year and confirm in the annual report whether the transactions have been entered into:
(i) in the ordinary and usual course of business of the Group;
(ii) on normal commercial terms or better; and
(iii) according to the agreement governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole;
(b) The Company must engage its auditors to report on the continuing connected transaction every year. The auditors must provide a letter to the Board confirming whether anything has come to their attention that causes them to believe that the continuing connected transactions:
(i) have not been approved by the Board;
(ii) were not, in all material respects, in accordance with the pricing policies of the Group if the transactions involve the provision of goods or services by the Group;
(iii) were not entered into, in all material respects, in accordance with the relevant agreement governing the transactions; and
(iv) have exceeded the cap;
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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) The Company must allow, and ensure that the counterparties to the continuing connected transactions allow, the auditors sufficient access to their records for the purpose of reporting on the transactions; and
(d) The Company must promptly notify the Stock Exchange and publish an announcement if the independent non-executive Directors and/or the auditors cannot confirm the matters as required. The Stock Exchange may require the Company to re-comply with the announcement and shareholders’ approval requirements and may impose additional conditions.

In light of the reporting requirements attached to the continuing connected transactions and the Group’s internal control measures as discussed in the paragraphs headed “4. Internal control measures in respect of the Processing Framework Agreement and Sales Framework Agreement” above in this letter, we are of the view that appropriate measures will be in place to effectively monitor the conduct of the continuing connected transactions and assist to safeguard the interests of the Independent Shareholders.

RECOMMENDATION

Having considered the principal factors and reasons discussed above, we are of the opinion that the Processing Framework Agreement and the Sales Framework Agreement and the transactions contemplated thereunder, being the provision of the Processing Services and the sales of the Products, respectively, are (i) in the ordinary and usual course of business of the Group; (ii) in the interests of the Company and the Independent Shareholders as a whole; and (iii) the terms of the Processing Framework Agreement and the Sales Framework Agreement are on normal commercial terms and are fair and reasonable so far as the Company and the Independent Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the EGM to approve the Processing Framework Agreement and the Sales Framework Agreement and the transactions contemplated thereunder and we recommend the Independent Shareholders to vote in favour of the resolution(s) in this regard.

Yours faithfully, For and on behalf of

RED SOLAR CAPITAL LIMITED Leo Chan

Managing Director

Mr. Leo Chan is a licensed person and responsible officer of Red Solar Capital Limited registered with the SFC to carry on Type 6 (advising on corporate finance) regulated activity under the SFO and has over 12 years of experience in corporate finance industry.

50 -

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 is not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. INTERESTS AND SHORT POSITIONS OF DIRECTORS AND CHIEF EXECUTIVE

As at the Latest Practicable Date, none of the Directors or the chief executive of the Company had any interests or short positions in any Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which are required to be (i) 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/she is taken or was deemed to have under such provisions of the SFO); or (ii) entered in the register kept by the Company pursuant to section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules.

3. INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as was known to the Directors, the following persons (not being the Directors or the chief executive of the Company) had, were deemed or taken to have interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under section 336 of the SFO were as follows:

Long Positions – Ordinary Shares

			Percentage of the
			issued share capital
			of the Company as
			at the Latest
	Capacity and	Number of Shares	Practicable Date
Name of Shareholder	nature of interest	in which interested	(Note 1)
Swift Joy Holdings	Beneficial owner	423,770,000	38.88%
Limited (Note 2)
Right Grand Holdings	Beneficial owner	128,568,000	11.79%
Limited (Note 2)
Fang Jin (Note 3)	Interest in controlled	552,338,000	50.67%
	corporations

APP I-1 -

GENERAL INFORMATION

APPENDIX I

Notes:

(1) The approximate percentage of interests held was calculated on the basis of 1,090,001,246 Shares in issue as at the Latest Practicable Date.
(2) Each of Swift Joy Holdings Limited and Right Grand Holdings Limited was a private company directly whollyowned by Mr. Fang Jin.
(3) Among 552,338,000 Shares, 423,770,000 Shares were owned by Swift Joy Holdings Limited and 128,568,000 Shares were owned by Right Grand Holdings Limited (see also Note 2 above).

Save as disclosed above, as at the Latest Practicable Date, the Company has not been notified by any person who had any interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under section 336 of the SFO.

4. DIRECTORS’ SERVICE CONTRACTS

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

5. DIRECTORS’ INTERESTS IN ASSETS OR CONTRACTS OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been, since 31 December 2023 (being the date to which the latest published audited consolidated accounts of the Company were made up), acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which was significant in relation to the business of the Group.

6. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or their respective associates had any interest in any business which competes or is likely to compete, whether directly or indirectly, with the business of the Group.

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 2023, being the date to which the latest published audited accounts of the Company were made up.

APP I-2 -

GENERAL INFORMATION

APPENDIX I

8. CONSENT AND QUALIFICATIONS OF EXPERT

The following is the qualification of the expert who has given advice, letter or opinion for incorporation and as contained in this circular:

Name Qualifications

Red Solar Capital Limited a licensed corporation to carry on Type 6 (advising on corporate finance) regulated activity under the SFO

As at the Latest Practicable Date, Red Solar Capital Limited has no shareholding, direct or indirect, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, Red Solar Capital Limited has no direct or indirect interests in any assets which have been, since 31 December 2023 (the date to which the latest published audited accounts of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

Red Solar Capital Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and references to its name or opinion in the form and context in which they are included as at the Latest Practicable Date. The letter from the Independent Financial Adviser contained in this circular was issued on the date of this circular and was made by Red Solar Capital Limited for incorporation in this circular.

9. GENERAL

The English text of this circular shall prevail over the Chinese text to the extent of any inconsistency.

10. DOCUMENTS ON DISPLAY

Electronic copies of the Processing Framework Agreement and the Sales Framework Agreement will be published on the Company’s website (www.vesonhldg.com) and the HKEXnews website (www.hkexnews.hk) for at least 14 days from the date of this circular.

APP I-3 -

NOTICE OF EGM

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VESON HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 01399)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ EGM ”) of Veson Holdings Limited (the “ Company ”) will be held at Head Office, Scud Industrial Park, Fuzhou Pilot Free Trade Zone, No. 98 Jiangbin East Avenue, Mawei District, Fuzhou, Fujian Province, PRC on Friday, 21 March 2025 at 10:00 a.m. (and at any adjournment thereof) for the purpose of considering and, if thought fit, passing, with or without amendments, the following resolutions as ordinary resolutions of the Company. Capitalised terms contained in the circular dated 3 March 2025 issued by the Company (the “ Circular ”) shall have the same meanings when used herein unless otherwise specified.

ORDINARY RESOLUTIONS

“ THAT :
(a) the Processing Framework Agreement, the transactions contemplated thereunder and the Proposed Processing Fee Caps be and are hereby approved and confirmed; and
(b) the Directors be and are hereby authorised for and on behalf of the Company and any member of its subsidiaries to do all things and acts and exercise all power which they consider necessary, desirable or expedient to give effect to and implement the Processing Framework Agreement and the transactions contemplated thereunder.”

“ THAT :

(a) the Sales Framework Agreement, the transactions contemplated thereunder and the Proposed Sales Caps be and are hereby approved and confirmed; and
EGM-1 -

NOTICE OF EGM

(b) the Directors be and are hereby authorised for and on behalf of the Company and any member of its subsidiaries to do all things and acts and exercise all power which they consider necessary, desirable or expedient to give effect to and implement the Sales Framework Agreement and the transactions contemplated thereunder.”

By order of the Board Veson Holdings Limited Feng Ming Zhu Chairman

Hong Kong, 3 March 2025

Executive Directors:

Mr. Feng Ming Zhu (Chairman)

Ms. Lian Xiu Qin (Chief Executive Officer)

Mr. Ni Chen Hui

Non-executive Director:

Dr. Loke Yu

Independent Non-executive Directors:

Mr. Heng Ja Wei Victor Mr. Lam Yau Yiu

Mr. Cheung Wai Kwok Gary

Notes:

Shareholders whose name appear on the Company’s register of member on Friday, 21 March 2025 (i.e the record date) shall be entitled to attend and vote at the EGM. The Company’s register of members and books of transfer will be closed from Tuesday, 18 March 2025 to Friday, 21 March 2025, both days inclusive, during which no transfer of Shares will be registered. In order for the Shareholders to qualify for attending and voting at the EGM, all transfer forms accompanied by the relevant Share certificates must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited, located at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong by 4:30 p.m. on Monday, 17 March 2025.
Any member of the Company entitled to attend and vote at the EGM shall be entitled to appoint a proxy to attend and vote instead of him/her. A proxy need not be a member of the Company. A member who is the holder of two or more Shares may appoint more than one proxy to represent him/her to attend and vote on his/her behalf. If more than one proxy is so appointed, the appointment shall specify the number and class of Shares in respect of which each such proxy is so appointed. In addition, a proxy or proxies representing either a member who is an individual or a member which is a corporation shall be entitled to exercise the same powers on behalf of the member which he/she or they represent as such member could exercise.
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 its seal or under the hand of an officer, attorney or other person duly authorised to sign the same.
The instrument appointing a proxy and (if required by the Board of directors of the Company) the power of attorney or other authority (if any) under which it is signed or a certified copy of such power or authority shall be delivered to the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited, located at 17/F. Far East Finance
EGM-2 -

NOTICE OF EGM

Centre, 16 Harcourt Road, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy shall not preclude a member of the Company from attending and voting in person at the EGM and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

Where there are joint holders of any Share, any one of such joint holders may vote either in person or by proxy in respect of such Share as if he/she were solely entitled thereto; but if more than one of such joint holders be present at any 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 members in respect of the joint holding.
EGM-3 -

AI assistant

Veson Holdings Limited — Proxy Solicitation & Information Statement 2025

49899_rns_2025-03-03_394d9193-3775-475a-b7e1-a7f69b06b7aa.pdf

VESON HOLDINGS LIMITED

CONTINUING CONNECTED TRANSACTIONS

(1) THE PROCESSING FRAMEWORK AGREEMENT AND

(2) THE SALES FRAMEWORK AGREEMENT AND NOTICE OF EXTRAORDINARY GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

VESON HOLDINGS LIMITED

CONTINUING CONNECTED TRANSACTIONS (1) THE PROCESSING FRAMEWORK AGREEMENT AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

1. INTRODUCTION

LETTER FROM THE BOARD

2. THE PROCESSING FRAMEWORK AGREEMENT

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

3. THE PROPOSED PROCESSING FEE CAPS AND BASIS OF DETERMINATION

Historical Transaction Amounts and Historical Annual Caps

Proposed Processing Fee Caps

LETTER FROM THE BOARD

Basis of determination of the Proposed Processing Fee Caps

LETTER FROM THE BOARD

4. THE SALES FRAMEWORK AGREEMENT

Confirming or Terminating the Specific Order

LETTER FROM THE BOARD

LETTER FROM THE BOARD

5. THE PROPOSED SALES CAPS AND BASIS OF DETERMINATION

Proposed Sales Caps

Basis of determination of the Proposed Sales Caps

LETTER FROM THE BOARD

6. INTERNAL CONTROL MEASURES

7. REASONS FOR AND BENEFITS OF ENTERING INTO THE PROCESSING FRAMEWORK AGREEMENT AND THE SALES FRAMEWORK AGREEMENT

8. INFORMATION ON THE GROUP, SCUD BATTERY AND SCUD ELECTRONICS

9. INFORMATION ON SCUD POWER TECHNOLOGY AND VIETNAM SCUD POWER TECHNOLOGY

10. LISTING RULE IMPLICATIONS

11. INDEPENDENT FINANCIAL ADVISER AND INDEPENDENT BOARD COMMITTEE

12. EXTRAORDINARY GENERAL MEETING AND SHAREHOLDERS WHO ARE REQUIRED TO ABSTAIN FROM VOTING AT THE EGM

LETTER FROM THE BOARD

13. CLOSURE OF REGISTER OF MEMBERS

14. RECOMMENDATION

15. ADDITIONAL INFORMATION

VESON HOLDINGS LIMITED

CONTINUING CONNECTED TRANSACTIONS (1) THE PROCESSING FRAMEWORK AGREEMENT AND

(2) THE SALES FRAMEWORK AGREEMENT

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

For and on behalf of

INDEPENDENT BOARD COMMITTEE

of

CONTINUING CONNECTED TRANSACTIONS (1) THE PROCESSING FRAMEWORK AGREEMENT AND (2) THE SALES FRAMEWORK AGREEMENT

INTRODUCTION

The Processing Framework Agreement

The Sales Framework Agreement

Listing Rules implications

THE INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

OUR INDEPENDENCE

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of and reasons for the Transactions

(a) Background information of the Group

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Comparison between FY2022 and FY2023

Comparison between 6M2023 and 6M2024

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Prospects

(b) Reasons for and benefits of the Transactions

2. The Processing Framework Agreement

(a) Principal terms of the Processing Framework Agreement

(b) Discussion on the pricing policy of the Processing Framework Agreement

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) Discussion on the proposed annual caps of the Processing Framework Agreement

Proposed Processing Fee Caps and basis of determination

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Veson Holdings Limited Proxy Solicitation & Information Statement 2025