WEIli Holdings Limited — Proxy Solicitation & Information Statement 2004

Aug 2, 2004

IMPORTANT

If you are in any doubt about this circular or as to the action to be taken, you should consult a stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in Daiwa Associate Holdings Limited (the “Company”), you should at once hand this circular with the enclosed form of proxy to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

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

DAIWA ASSOCIATE HOLDINGS LIMITED

(incorporated in Bermuda with limited liability)

(Stock code: 1037)

Directors: Executive: LAU Tak Wan (President) CHAN Yuen Mei, Pinky (Vice-President) WAN Chor Fai MAK Hon Kai, Stanly

Independent non-executive: Barry John BUTTIFANT YUEN Chi Choi, Simon

Registered office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Head office and principal place of business: 11th Floor, Block G East Sun Industrial Centre 16 Shing Yip Street Kwun Tong, Kowloon Hong Kong

30 July 2004

To Shareholders

ELECTION OF DIRECTORS GENERAL MANDATES TO ISSUE AND TO REPURCHASE SHARES

Dear Sirs,

INTRODUCTION

The purpose of this circular is to provide you with information regarding the following resolutions to be proposed at the annual general meeting (the “Annual General Meeting”) of the Company to be held at The Turner, 1/F., Intercontinental Grand Standford Hotel, 70 Mody Road, Tsimshatsui East, Kowloon, Hong Kong on 17 September 2004, Friday at 3:30 p.m. relating to the election of Directors and the granting to the Directors of the general mandates.

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(A) ELECTION OF DIRECTORS

Ordinary Resolutions will be proposed at the Annual General Meeting to re-elect and appoint directors of the Company.

Pursuant to Bye-law 99 of the Bye-Laws, Mr. Mak Hon Kai, Stanly and Mr. Barry John Buttifant shall retire at the Annual General Meeting. Both the retiring Directors, being eligible, will offer themselves for re-election.

The Company recommended appointing Mr. Choi Yuk Fan and Mr. Liu Ngai Wing as independent non-executive director.

A brief biographical detail of the retiring Directors and proposed Directors is set out in Appendix I to this circular.

(B) GENERAL MANDATES TO ISSUE SHARES AND TO REPURCHASE SHARES

This is an explanatory statement given to all shareholders of the Company relating to ordinary resolutions to be proposed at the Annual General Meeting authorising the Company to repurchase its own shares and to issue shares.

GENERAL MANDATE TO ISSUE SHARES

Ordinary Resolutions will be proposed at the Annual General Meeting to grant to the directors of the Company (the “Directors”) a general mandate to allot, issue and deal with shares of the Company (the “Shares”) not exceeding 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the passing of the resolution (“Share Issue Mandate”) and approving an extension of the Share Issue Mandate by adding to it the aggregate nominal amount of any Shares repurchased by the Company under the Share Repurchase Mandate (as hereinafter defined), details of which are set out in Ordinary Resolutions No. (1) and No. (3) of item 5 of the Notice of Annual General Meeting.

GENERAL MANDATE TO REPURCHASE SHARES

An ordinary resolution will also be proposed at the Annual General Meeting to grant to the Directors a general mandate to exercise the powers of the Company to repurchase Shares with an aggregate nominal amount of up to 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the passing of the resolution (“Share Repurchase Mandate”) as set out in Ordinary Resolution No. (2) of item 5 of the Notice of Annual General Meeting.

This explanatory statement contains all the information required pursuant to rule 10.06(1)(b) and other relevant provisions of the Securities Buy Back Rules in the Listing Rules which is set out as follows:

• (i) On the basis of 158,809,600 fully-paid up Shares in issue as at 30 July 2004 (being the Latest Practicable Date prior to the printing of this circular) and assuming no further shares will be issued or repurchased prior to Annual General Meeting, the Company may repurchase up to 15,880,960 Shares (being 10% of issued share capital as at date of approval) under the Share Repurchase Mandate during the period prior to the next Annual General Meeting of the Company following the passing of the resolution referred to above, or the expiration of the period within which such meeting is required by law to be held, or the revocation or variation of such mandate by an ordinary resolution of the shareholders of the Company in general meeting, whichever occurs first.

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On 24 June 2004, the Company announced the proposed Rights Issue (“Rights Issue”). The Rights Issue is to raise fund by issuing 105,873,067 Rights Share at a price of HK$0.45 per Right Share. The Right Issue is on the basis of two Rights Share for every three Shares held on the Record Date. (Please make reference to the announcement of the Company on 25 June 2004). If the proposed Rights Issue is approved in Special General Meeting on 23 August 2004 and is completed on 15 September 2004, on the basis of 158,809,600 fully paid up Shares in issue as at 30 July 2004 (being the Latest Practicable Date prior to the printing of this circular) and assuming no further shares, except for the shares to be issued pursuant to the proposed Rights Issue, will be issued or repurchased prior to Annual General Meeting then the fully-paid up Shares in issue would increase to 264,682,667. The exercise in full of the Share Repurchase Mandate would result in up to 26,468,267 Shares being 10% of issued share capital as at the date Annual General Meeting. (The detail of the Rights Issue is set out in Circular despatched on 30 July 2004)

• (ii) The Directors believe that it is in the best interests of the Company and its shareholders to have a general authority from shareholders to enable the Directors to repurchase Shares on the market. Trading conditions of the Company’s shares on the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) have sometimes been volatile in recent years. At any time in the future when Shares are trading at a discount to their underlying value, the ability of the Company to repurchase Shares will be beneficial to those shareholders who retain their investment in the Company since their percentage interest in the assets of the Company would increase in proportion to the number of shares repurchased by the Company and thereby resulting in an increase in net assets and/or earnings per share of the Company. Such repurchases will only be made when the Directors believe that such repurchases will benefit the Company and its shareholders.

• (iii) In repurchasing shares, the Company may only apply funds legally available for such purpose in accordance with its memorandum of association and bye-laws and the laws of Bermuda. The Companies Act 1981 of Bermuda (as amended) (the “Companies Act”) provides that the amount of capital repaid in connection with a share repurchase may only be paid from the distributable profits of the Company and/or the proceeds of a new issue of shares, made for the purpose of the repurchase to such extent allowable under the Companies Act.

• (iv) There might be a material adverse impact on the working capital or gearing position of the Company as compared with the position disclosed in the latest published audited consolidated accounts contained in the annual report for the year ended 31 March 2004 in the event that the Share Repurchase Mandate is exercised in full. The Directors do not propose to exercise the Share Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse impact on the working capital requirement of the Company or the gearing level which in the opinion of the Directors are from time to time appropriate for the Company.

• (v) None of the Directors or, to the best of their knowledge having made all reasonable enquiries, any of their associates has any present intention, in the event that the Share Repurchase Mandate is approved by shareholders of the Company, to sell any Shares to the Company or its subsidiaries.

• (vi) The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Share Repurchase Mandate in accordance with the Listing Rules and the applicable laws of Bermuda.

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• (vii) If a shareholder’s proportionate interest in the voting right of the company increases as a result of a share repurchase, such increase will be treated as an acquisition for the purposes of the Code on Takeovers and Mergers (the “Takeover Code”). In certain circumstances, a shareholder or a group of shareholders acting in concert could, as a result of such increase, obtain or consolidate control of the company and become obliged to make a mandatory offer in accordance with Rules 26 of the Takeover Code.

As at the Latest Practicable Date, to the best knowledge and belief of the Directors, the following substantial shareholders have direct or indirect interest in 10% or more of the issued share capital of the Company:

Substantial Shareholder

Beneficially held in Shares before Shares after completion of completion of the proposed % of the proposed Rights Issue Interest Rights Issue China Capital Holdings Investment Ltd_(Note 1) 28,121,300 17.71% 46,868,833 Smartco United Ltd(Note 2)_ 0 0% 79,409,534 Mr. Lau Tak Wan 1,600,000 1.01% 2,666,667 Ms. Chan Yuen Mei 500,000 0.31% 833,333 Mr. Lau Tak Wan & Ms. Chan Yuen Mei jointly held 1,512,000 0.95% 2,520,000 Total 19.98%

% of Interest 17.71% 30.00% 1.01% 0.31% 0.95%

49.98%

The aggregate percentage of interest in shares of Mr. LAU Tak Wan and Ms. CHAN Yuen Mei, represented 19.98% and 49.98% of issued share capital of the Company before and after the completion of the Rights Issue respectively.

Note 1: The entire issued share capital of China Capital Holdings Investment Ltd is owned by a trustee of the benefit of a discretionary trust beneficiaries of which include Mr. Lau Tak Wan, Ms. Chan Yuen Mei (the spouse of Mr. Lau Tak Wan), and certain of their family members.

• Note 2 : Smartco United Ltd is a company 89.10% owned by Mr. Lau Tak Wan. According to Underwriting Agreement (the detail is set out in the Circular despatched on 30 July 2004), Smartco United Ltd will take up 79,409,534 Shares as a result of its underwriting obligations based on the assumption that no Qualifying shareholder (Note 3), except Mr. Lau Tak Wan, Ms. Chan Yuen Mei, China Capital Investment Holdings Ltd and his associates and parties acting in concert, will take up his/her/its entitlement under the Rights Issue.

Note 3 : Qualifying shareholders is the shareholders whose addresses (as shown on the branch register of members of the Company in Hong Kong at the close of business on the Record Date (23 August 2004)) are inside Hong Kong.

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In the event that the Directors exercise in full the power to repurchase shares in accordance with the terms of the ordinary resolution to be proposed at the Annual General Meeting of the Company, the respective shareholdings together with the options of each of the above mentioned substantial shareholder and of the directors in the Company would be increased to :

	Shareholding	Shareholding
	Before completion	After completion
	of Rights Issue	of Rights Issue
China Capital Holdings Investment Ltd	19.68%	19.68%
Smartco United Ltd	0%	33.34%
Mr. Lau Tak Wan	1.12%	1.12%
Ms. Chan Yuen Mei	0.35%	0.35%
Mr. Lau Tak Wan &
Ms. Chan Yuen Mei jointly held	1.06%	1.06%
Total	22.21%	55.55%

The aggregate percentage of interest in shares of Mr. LAU Tak Wan and Ms. CHAN Yuen Mei, represented 22.21% and 55.55% of issued share capital of the Company before and after the completion of Rights Issue, in the event that the Share Repurchase Mandate is exercised in full. If the proposed Rights Issue does not proceed, the aggregate interest of Mr. Lau Tak Wan and his associates and parties acting in concert with him in the Company will not over 30% of the Company’s issued share capital and it will not trigger a mandatory general offer to be made by Mr. Lau Tak Wan for all the shares in issue other than those already owned or agreed to be acquired by him and / or parties acting in concert with him under Rule 26 of Takeover Code as the result of the exercise of the Share Repurchase Mandate in full.

If the aggregate shareholding interests of Mr. Lau Tak Wan and parties acting in concert with him after the completion of Rights Issue are in the range of 30% to 50% of the issued share capital of the Company, Mr. Lau Tak Wan and parties acting in concert with him will be subject to mandatory general offer as set out in the Takeover Code as the result of the exercise of the Share Repurchase Mandate in full.

If the aggregate shareholding interests of Mr. Lau Tak Wan and parties acting in concert with him after the completion of Rights Issue exceed 50% of the issued share capital of the Company, Mr. Lau Tak Wan and parties acting in concert with him would not be subject to a mandatory general offer as the result of the exercise of the Share Repurchase Mandate in full.

To the best knowledge and belief of the Directors, the Directors have no present intention to exercise the repurchase mandate to such extent as would give rise to the obligation to make a mandatory offer in accordance with Rules 26 of the Code.

• (viii) No purchases of Shares have been made by the Company during the previous 6 months, whether on the Stock Exchange or otherwise.

• (ix) The Listing Rules prohibit a company from knowingly repurchasing shares of the company on the Stock Exchange from a “connected person”, that is, a director or substantial shareholder or their associates (as defined in the Listing Rules). A connected person shall not knowingly sell his shares to the company.

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No connected person (as defined in the Listing Rules) has notified the Company that he has a present intention to sell Shares to the Company, or has undertaken not to do so, in the event that the Share Repurchase Mandate is approved by shareholders of the Company.

• (x) The highest and lowest trading prices for Shares recorded on the Stock Exchange during each of the previous 12 months were as follows.

	Lowest	Highest
	(HK$)	(HK$)
July 2003	0.57	0.58
August 2003	0.60	0.61
September 2003	0.57	0.60
October 2003	0.58	0.61
November 2003	0.58	0.59
December 2003	0.56	0.57
January 2004	0.58	0.59
February 2004	0.65	0.67
March 2004	0.62	0.64
April 2004	0.51	0.57
May 2004	0.54	0.54
June 2004	0.44	0.46

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

For and on behalf of Daiwa Associate Holdings Limited LAU Tak Wan President

Notes:

1. The procedure to demand a poll is set out in Appendix II of this Circular.

2. In order to be valid, a form of proxy together with a power of attorney or other authority (if any) under which it is signed, or a notarially certified copy thereof, must be deposited at the office of the Company’s branch registrar in Hong Kong, Abacus Share Registrars Limited, G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, not latter than 48 hours before the time appointed for holding of Annual General Meeting or adjourned meeting or poll (as the case may be).

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ELECTION OF DIRECTORS

APPENDIX I

RE-ELECTION OF DIRECTORS

Mr. MAK Hon Kai, Stanly

Mr. MAK Hon Kai, Stanly, aged 42, is the Sales Director of the Group responsible for the Group’s overall marketing strategy and the distribution of electronic components. Mr. Mak joined the Group in 1988 and has been appointed as Sales Director and executive director since 1994. Mr. Mak has more than 20 years’ experience in the sales and marketing of electronic components.

As at the date of this circular, Mr. Mak does not have any interests in shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance as recorded in the register required to be kept under section 352 of the Securities and Futures Ordinance or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies. The annual emolument for Mr. Mak under his latest service contract dated 1 April 1998 with the Company amounts to approximately HK$1,276,000 including bonus and other benefits which may be granted at the discretion of the Company. The emoluments of the Directors are determined by the Board with reference to the Company’s performance and profitability, as well as remuneration benchmark in the industry and prevailing market conditions. The service contract will continue thereafter until terminated by either party for not less than three months’ prior written notice and will be subject to retirement by rotation and re-election at the Company’s Annual General Meeting in accordance with Bye-law 99 of the Company’s Bye-law.

Mr. Mak does not have any relationship with any other Directors, senior management, or substantial shareholders of the Company.

Mr. Barry John BUTTIFANT

Mr. Barry John BUTTIFANT, aged 59, has been appointed the Operating Partner of Barings Private Equity Partners (HK) Ltd, a large HK based private equity fund. Prior to joining Barings, Mr. Buttifant was the Managing Director and Corporate Adviser to Wo Kee Hong (Holdings) Ltd and before that the Managing Director of IDT International Limited for over 8 years. He earlier worked for Sime Darby Hong Kong Limited and Polly Peck Group for more than 11 years in the capacity of Finance Director and Managing Director during the period. He is also an independent non-executive director of Giordano International Limited; China Merchants Di Chain (Asia) Limited; MediaNation Inc.; and director of one NYSE public company Global-Tech Appliances Inc. and one NASDAQ listed company DF China Technology Inc.

Mr. Buttifant is a fellow member of the Association of Chartered Certified Accountants and the Hong Kong Society of Accountants. He is also a fellow member of the Chartered Management Institute; the Hong Kong Management Association and the Hong Kong Institute of Directors. Mr. Buttifant has joined the Group as an independent non-executive director of the Company since 1994.

As at the date of this circular, Mr. Buttifant has interest in 100,000 shares of the Company (0.06% and 0.04% of the Company’s total issued shares before and after the completion of Rights Issue respectively) within the meaning of Part XV of the Securities and Futures Ordinance as recorded in the register required to be kept under section 352 of the Securities and Futures Ordinance or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies. There is no service contract between Mr. Buttifant and the Company, and he will be subject to retirement by rotation and re-election at the Company’s Annual General Meeting in accordance with Bye-law 99 of the Company’s Bye-law. There is no

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specific term on the length of his service. The prior shareholders’ approval in Annual General Meeting is not applicable under Rule 13.68 of Listing Rules as the period of his service will not exceed three years and the Company will not be required to give a period of notice of more than one year or to pay compensation or make other payments equivalent to more than one year’s emoluments for termination of his service. Mr. Buttifant is entitled to a Director fee of HK$100,000 per annum. The Directors’ fee are reviewed by the Board on annual basis with reference to the Company’s performance and profitability, as well as remuneration benchmark in the industry and prevailing market conditions.

Mr. Buttifant does not have any relationship with any other Directors, senior management, or substantial shareholders of the Company.

APPOINTMENT OF INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. CHOI Yuk Fan

Mr. Choi, Yuk Fan, age 51, is a holder of a Bachelor Degree of Laws (LLB) awarded by the University of London in 1988 and a Post-graduate Certificate in Laws (PCLL) awarded by the University of Hong Kong in 1991. Now Mr. Choi is the Principal of Messrs. Y. F. Choi & Co., Solicitors and is a solicitor by profession providing legal services to the citizens and business organizations of Hong Kong.

Mr. Choi was admitted Solicitor of the Supreme Court of Hong Kong in 1993. He was further admitted Solicitor of the Supreme Court of England and Wales in 1994. His practice and professional service rendered to the public is wide ranging. He provides legal advice and acts for clients in matters connected with property law, commercial law, contracts, company practice, land transactions, estates management, and civil and criminal litigation. In addition to serving as Vice-president of Hong Kong Baptist University Alumni Association Limited, he is also a legal advisor to a number of local organizations including Owners Corporations of buildings / housing estates and Social Service Committees of Religious Bodies.

Before Mr. Choi took up his legal career in 1993, he was a liaison officer of Home Affairs Department, a department of Hong Kong Government formerly also known as New Territories Administration or City and New Territories Administration. During his service in the said department for a period of 13 years (1977 - 1990), Mr. Choi devoted most of his time in community building works and social services.

As at the date of this circular, Mr. Choi does not have any interests in shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance as recorded in the register required to be kept under section 352 of the Securities and Futures Ordinance or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies. There is no service contract between Mr. Choi and the Company, and he will be subject to retirement by rotation and re-election at the Company’s Annual General Meeting in accordance with Bye-law 99 of the Company’s Bye-law. There is no specific term on the length of his service. The prior shareholders’ approval in Annual General Meeting is not applicable under Rule 13.68 of Listing Rules as the period of his service will not exceed three years and the Company will not be required to give a period of notice of more than one year or to pay compensation or make other payments equivalent to more than one year’s emoluments for termination of his service. Mr. Choi shall be entitled to a Director fee of HK$50,000 per annum. The Directors’ fee are reviewed by the Board on annual basis with reference to the Company’s performance and profitability, as well as remuneration benchmark in the industry and prevailing market conditions.

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Mr. Choi does not have any relationship with any other Directors, senior management, or substantial shareholders of the Company.

Mr. LIU Ngai Wing

Mr. Liu Ngai Wing, aged 53, holds a Master of Science Degree in Global Business from the Chinese University of Hong Kong, a Master Degree of Science in Hotel and Tourism Management from the Hong Kong Polytechnic University and a Master Degree in Business Administration from the Open University of Hong Kong.

Mr. Liu is an executive director of eSun Holdings Ltd, independent non-executive director of Climax International Ltd, Jackley Holdings Ltd and Hang Fung Gold Technology Ltd. He is an associate member of both the Hong Kong Society of Accountants and the Institute of Chartered Secretaries and Administrators, and is also a fellow member of the Association of Chartered Certified Accountants.

As at the date of this circular, Mr. Liu does not have any interests in shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance as recorded in the register required to be kept under section 352 of the Securities and Futures Ordinance or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies. There is no service contract between Mr. Liu and the Company, and he will be subject to retirement by rotation and re-election at the Company’s Annual General Meeting in accordance with Bye-law 99 of the Company’s Bye-law. There is no specific term on the length of his service. The prior shareholders’ approval in Annual General Meeting is not applicable under Rule 13.68 of Listing Rules as the period of his service will not exceed three years and the Company will not be required to give a period of notice of more than one year or to pay compensation or make other payments equivalent to more than one year’s emoluments for termination of his service. Mr. Liu shall be entitled to a Director fee of HK$50,000 per annum. The Directors’ fee are reviewed by the Board on annual basis with reference to the Company’s performance and profitability, as well as remuneration benchmark in the industry and prevailing market conditions.

Mr. Liu does not have any relationship with any other Directors, senior management, or substantial shareholders of the Company.

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PROCEDURE TO DEMAND A POLL

APPENDIX II

Pursuant to Bye-laws 69, a poll may be demanded in relation to any resolution put to the vote of the Annual General Meeting before or on the declaration of the result of the show of hands by:

• (i) the chairman;

• (ii) at lease 3 members present in person or by proxy or authorized representative for the time being entitled to vote at the meeting;

• (iii) any member or members present in person or by proxy or authorized representative and holding between them not less than one-tenth of the total voting rights of all the members having the right to attend and vote at the meeting; or

• (iv) any member or members present in person or by proxy or authorized representative and holding shares in the Company conferring a right to attend and vote at the meeting being shares on which an aggregate sum has been paid up equal to no less than one-tenth of the total sum paid up on all the shares conferring that right.

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