WEIli Holdings Limited — Proxy Solicitation & Information Statement 2011

Nov 16, 2011

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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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DAIWA ASSOCIATE HOLDINGS LIMITED 台和商事控股有限公司 * (Incorporated in Bermuda with limited liability)

(Stock code: 1037)

MAJOR TRANSACTION DISPOSAL OF PROPERTY

Financial adviser to Daiwa Associate Holdings Limited

16 November 2011

• For identification purpose only

CONTENTS

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Appendix I — Financial information of the Group. . . . . . . . . . . . . . . . . 11
Appendix II — Valuation report of the Property. . . . . . . . . . . . . . . . . . . . 13
Appendix III — General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

— i —

DEFINITIONS

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

• “Agreement” the agreement for sale and purchase of the Property and entered into amongst the Vendor, the Purchasers and the Company after trading hours on 26 October 2011

• “associates” has the meaning ascribed to this term under the Listing Rules

• “Board” the board of Directors from time to time

• “Company” Daiwa Associate Holdings Limited, a company incorporated in Bermuda with limited liability and the issued Shares of which are listed on the main board of the Stock Exchange

• “Completion” completion of the Disposal in accordance with the terms and conditions of the Agreement

• “connected persons” has the meaning ascribed to this term under the Listing Rules

• “Director(s)” the director(s), including the independent nonexecutive directors of the Company from time to time

• “Disposal” the disposal of the Property subject to and upon the terms and conditions of the Agreement

• “Group” the Company and its subsidiaries from time to time

• “Hong Kong” Hong Kong Special Administrative Region of the PRC

• “Latest Practicable Date” 14 November 2011, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

— 1 —

DEFINITIONS

“Listing Rules”	the Rules Governing the Listing of Securities on
	Stock Exchange
“PRC”	the People’s Republic of China, which for the
	purpose of this circular, excludes Hong Kong,
	the Macau Special Administrative Region of the
	People’s Republic of China and Taiwan
“Property”	Daling Industrial Estate, Fenggang Town, Dongguan
	City, Guangdong Province, PRC and the buildings
	erected thereon
“Purchasers”	林濟扶(Mr. Lam Chai Fu, Terry) and張超強(Mr.
	Cheung Chiu Keung, for translation purpose only)
“SFO”	Securities and Futures Ordinance (Cap.571) of the
	Laws of Hong Kong
“Shareholders”	the holders of the issued Shares from time to time
“Shares”	ordinary shares of HK$0.10 each in the share
	capital of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Tenant”	東莞市億方房地產投資有限公司 (Dongguan YiFang
	Property Investment Co., Ltd., for translation
	purpose only), the new tenant of the Property
	beginning on 1 November 2011
“Vendor”	Daiwa Associate (China) Limited, a wholly-owned
	subsidiary of the Company
“HK$”	Hong Kong dollars, the lawful currency of Hong
	Kong

— 2 —

DEFINITIONS

“RMB”

Reminbi, the lawful currency of the PRC

“%” per cent

For illustration purpose, in this circular amounts in RMB translated into HK$ is calculated at the exchange rate of RMB0.82 = HK$1.00. Such translation does not constitute a representation that any amount has been, could have been or may be exchanged at such rate.

— 3 —

LETTER FROM THE BOARD

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DAIWA ASSOCIATE HOLDINGS LIMITED 台和商事控股有限公司 *

(Incorporated in Bermuda with limited liability)

(Stock code: 1037)

Executive Directors:

Lau Tak Wan (President) Chan Yuen Mei, Pinky (Vice-President) Wan Chor Fai Mak Hon Kai, Stanly

Registered office: Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Independent Non-Executive Directors:

Barry John Buttifant Choi Yuk Fan Liu Ngai Wing

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

16 November 2011

To the Shareholders for their information only

Dear Sir or Madam,

MAJOR TRANSACTION DISPOSAL OF PROPERTY

INTRODUCTION

The Board is pleased to announce that after trading hours on 26 October 2011, the Agreement was entered into by the Purchasers as purchasers, the Vendor as vendor and the Company as guarantor pursuant to which, the Property will be disposed of by the Vendor to the Purchasers at a consideration of RMB72,000,000 (equivalent to approximately HK$87,805,000). An announcement of the Company was released on 26 October 2011 summarising the principal terms of the Disposal and the transactions contemplated under the Agreement.

• For identification purpose only

— 4 —

LETTER FROM THE BOARD

As one or more of the applicable percentage ratios (as defined in rule 14.07 of the Listing Rules) in respect of the Disposal exceed 25% but are less than 75%, the Disposal under the Agreement constitutes a major transaction for the Company under the Listing Rules and is subject to notification, publication and Shareholders’ approval requirements under the Listing Rules. None of the Shareholders is required to abstain from voting at a special general meeting of the Shareholders for such approval, if such a special general meeting were to be required to be held.

For the reasons set out in the section headed “Listing Rules Implications” in this circular, the special general meeting requirement to approve the Disposal under the Agreement is to be dispensed with. This circular will therefore be sent to the Shareholders for their information only.

The purpose of this circular is to provide you with further information regarding the Disposal under the Agreement and the transactions contemplated thereunder; and to provide you with financial information of the Group and valuation on the Property.

THE AGREEMENT

The Board is pleased to announce the entering into of the Agreement after trading hours on 26 October 2011, summarised details of which are as follows:

Date of the Agreement: 26 October 2011 (after trading hours) Parties to the Agreement: (i) the Vendor as vendor; (ii) the Purchasers as purchasers; and (iii) the Company as guarantor.

Conditions precedent as set out under the Agreement are as follows:

1. all necessary consents, licences and approvals required to be obtained in respect of the Disposal, having been obtained by the Vendor;

2. compliance of all the requirements under the Listing Rules by the Company, including the passing by the Shareholders of the Company at a special general meeting of the Company the resolutions approving the Agreement and the transactions contemplated thereunder;

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LETTER FROM THE BOARD

1. the Vendor shall conduct such financial, credit background or other due diligence review on the Purchasers and the Vendor being satisfied with the results of the due diligence review to be conducted on the Purchasers and that each of the Purchasers is an independent third party not connected with the Directors, chief executive or substantial shareholders of each of the Company and the Vendor, or any of their subsidiaries or an associate of any of them;

2. the first right of refusal granted to the Tenant as set out in the Agreement, having been waived by the Tenant; and

3. the existing two tenancy agreements entered into between the Vendor and the Tenant, having been cancelled.

The Agreement also contains a “force majeure” provision which frees both the Vendor and the Purchasers from liability or obligation in case of the happening of an extraordinary event or circumstance beyond the control of the parties. Any claim by either the Vendor or the Purchasers for loss arising from a breach of the Agreement against the party in default shall be limited to RMB20,000,000 (equivalent to approximately HK$24,390,000). Any assignment of the Agreement is subject to the prior written approval of the other relevant party/ parties to the Agreement.

As set out in the Agreement, the Disposal is subject to a first right of refusal granted to the Tenant and if the Tenant exercises its first right of refusal, the Tenant will be entitled to purchase the Property by paying no less than the same consideration as set out above and the Agreement shall become null and void.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, each of the Purchasers and the Tenant and its ultimate beneficial owner is an independent third party not connected with the Directors, chief executive or substantial Shareholders of the Company or any of its subsidiaries or an associate of any of them as defined under the Listing Rules.

The Company is required to guarantee the performance of the Vendor under the Agreement. The Purchasers’ liabilities under the Agreement are joint and several. Pursuant to the Agreement, it is a condition precedent that the Vendor will negotiate a settlement with the Tenant for a cancellation of its existing two tenancy agreements entered into by the parties and will be solely responsible for any compensation arising thereof. The Agreement is subject to PRC laws and regulations.

— 6 —

LETTER FROM THE BOARD

The Property to be disposed of

The land and the factory building situated at Daling Industrial Estate, Fenggang Town, Dongguan City, Guangdong Province, PRC, with an area of approximately 41,614 square meters. The total area of the buildings erected on the land is approximately 40,691 square meters.

The Property has been used as a factory by the Group for producing electronic components and providing contract electronic manufacturing services. The net book value of the Property was approximately HK$46,952,000 as at 31 March 2011.

As the Group has been relocating most of its machineries and equipment to its other factory at Hi-Tech Development Zone, He Yuan City, Guangdong Province, PRC and the Purchasers will allow the Group to continue to use part of the Property after the Completion until 31 August 2013 free of rent, for the purpose of its gradual removal of the remaining machineries and equipment, there will be no adverse impact on the operation of the Group after the Disposal.

For the two financial years immediately preceding the Disposal ended 31 March 2010 and 2011 as set out in the audited accounts of the Vendor for the year ended 31 March 2011, the net profits (both before and after taxation and extraordinary items) attributable to the Property were approximately HK$865,000 and approximately HK$3,247,000 respectively (there were no taxation and extraordinary items).

As set out in the audited accounts of the Vendor, the profits attributable to the Property for the two years ended 31 March 2010 and 2011 respectively were all rental incomes from fellow wholly-owned subsidiaries of the Company. Such rental incomes were inter-company incomes and would have been eliminated upon consolidation of the Vendor’s (together with other subsidiaries’) accounts into the Group’s accounts so that the Group’s bottom-line profitability would not be affected.

Consideration

The consideration for the Disposal is RMB72,000,000 (equivalent to approximately HK$87,805,000), of which, RMB5,000,000 (equivalent to approximately HK$6,098,000) was paid as a deposit and the balance was paid/is payable as follows:

1. RMB5,000,000 (equivalent to approximately HK$6,098,000) was paid as further deposit on 28 October 2011;

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LETTER FROM THE BOARD

1. RMB10,000,000 (equivalent to approximately HK$12,195,000) on or before 28 November 2011;

2. RMB10,000,000 (equivalent to approximately HK$12,195,000) on or before 28 December 2011;

3. RMB10,000,000 (equivalent to approximately HK$12,195,000) on or before 28 January 2012;

4. RMB10,000,000 (equivalent to approximately HK$12,195,000) on or before 28 February 2012; and

5. RMB22,000,000 (equivalent to approximately HK$26,829,000) on or before 28 March 2012.

The consideration of the Disposal is arrived at after arm’s length negotiation between the parties to the Agreement after taking into account the market price per square meter of the adjacent location to the Property and in accordance with the applicable laws and regulations of the PRC.

Completion

Pursuant to the Agreement, Completion will take place after the satisfaction of all conditions precedent as set out under the Agreement and the settlement of consideration by the Purchasers, in which the Vendor will pass to the Purchasers the relevant documentation to effect the transfer of the Property within 21 working days after the Completion.

REASON FOR THE DISPOSAL

The Group is principally engaged in the design, development, manufacturing and distribution of electronic components, contract electronic manufacturing services and consumer electronics, and the distribution of personal computer products. In terms of business segment, the Group mainly operates four segments, namely, (i) electronic components distribution, (ii) contract electronic manufacturing services, (iii) consumer electronics and electronic components manufacturing and (iv) personal computer products distribution in North America.

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LETTER FROM THE BOARD

The Company has set up new and larger factory buildings with more advanced plants at Hi-Tech Development Zone, He Yuan City, Guangdong Province, PRC. All present manufacturing activities at the Property will be moved to the He Yuan factory and plants gradually. The Company will continue to engage in the electronic manufacturing industry.

BENEFITS OF THE DISPOSAL AND INTENDED USE OF PROCEEDS

It is estimated that, upon Completion, the Group is expected to accrue a gain on the Disposal of approximately HK$36,772,000. Such gain is estimated based on the consideration receivable from the Disposal, i.e. HK$87,805,000, less the net book value of the Property of approximately HK$46,952,000 as at 31 March 2011 and other related costs and expenses. The Disposal will have a positive effect on the assets of the Group and a neutral effect on its liabilities.

The estimated net sale proceeds received from the Disposal, after deduction of the related costs and expenses, is approximately HK$83,724,000, of which approximately HK$15,000,000 will be used for the set up of new manufacturing sites and production facilities, approximately HK$40,000,000 will be used for further development of electronic components distribution business and the remaining balance will be used for working capital of the Group.

The Directors are of the view that the Disposal is in the interest of the Company and the terms of the Disposal are on normal commercial terms and are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined in rule 14.07 of the Listing Rules) in respect of the Disposal exceed 25% but are less than 75%, the Disposal under the Agreement constitutes a major transaction for the Company under the Listing Rules and is subject to notification, publication and Shareholders’ approval requirements under the Listing Rules. None of the Shareholders is required to abstain from voting at a special general meeting of the Shareholders for such approval, if such a special general meeting were to be required to be held.

— 9 —

LETTER FROM THE BOARD

Under Rule 14.40 of the Listing Rules, a major transaction must be made conditional on approval by shareholders of an issuer. In this regard and in lieu of holding a special general meeting of the Shareholders to approve the Disposal, the Company has, under Rule 14.44 of the Listing Rules, obtained written approvals on the Disposal from Leading Trade Limited and China Capital Holdings Investment Limited respectively, which are a closely allied group of Shareholders and applied to the Stock Exchange to dispense with such special general meeting requirement. Leading Trade Limited and China Capital Holdings Investment Limited are beneficially owned by Mr. LAU Tak Wan and his spouse, Ms. CHAN Yuen Mei, Pinky and are in aggregate, interested in 167,925,229 Shares, representing approximately 53.24% of the issued share capital of the Company giving them the right to attend and vote at such a special general meeting, if one is to be required.

In compliance with Rule 14.60(5) of the Listing Rules, the relationship between Mr. LAU Tak Wan (the President of the Company and an executive Director) and his spouse Ms. CHAN Yuen Mei, Pinky (an executive Director) and the number of Shares held by Leading Trade Limited and China Capital Holdings Investment Limited are set out above. Consequently, the abovementioned special general meeting requirement to approve the Disposal under the Agreement is to be dispensed with. Therefore, this circular is despatched to the Shareholders for their information only.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

By Order of the Board Daiwa Associate Holdings Limited LAU Tak Wan President

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. INDEBTEDNESS, LIQUIDITY AND FINANCIAL RESOURCES

Borrowings

At as the close of business on 31 October 2011, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had outstanding borrowings of approximately HK$315,102,000, comprising the following:

• (i) short-term bank loans of approximately HK$18,000,000;

• (ii) trust receipts bank loans of approximately HK$215,038,000;

• (iii) portion of bank borrowings repayable within one year of approximately HK$21,845,000;

• (iv) portion of bank borrowings due for repayment after one year which contains a repayment of demand clause of approximately HK$57,361,000; and

• (v) obligations under finance leases of approximately HK$2,858,000.

Contingent liabilities

As at 31 October 2011, the Group had contingent liabilities in respect of guarantees issued by banks to certain suppliers of the Group’s of approximately HK$67,570,000.

Disclaimer

Save as aforesaid and apart from intra-group liabilities, neither the Group nor any of the companies comprising the Group had, at the close of business on 31 October 2011, any loan capital issued and outstanding or agreed to be issued, bank overdrafts, term loans, debt securities or other similar indebtedness, liabilities under acceptance (other than normal trade bills and payables) or acceptance credits, debentures, mortgages, charges, hire purchase or other finance lease commitments, guarantees or other material contingent liabilities.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. MATERIAL ADVERSE CHANGE

The Directors have confirmed that they were not aware of any material adverse change in the financial or trading position of the Group since 31 March 2011, being the date to which the latest published audited accounts of the Company were made up to.

3. WORKING CAPITAL

The Directors are of the opinion that, after taking into account of the Group’s internal resources, cash flow from operations, banking facilities available to the Group and net proceeds from the Disposal, the Group will have sufficient working capital to satisfy its present requirements that is, for at least the next twelve months from the date of this circular in the absence of unforeseen circumstances.

4. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Following the Eurozone debt crisis and fiscal problem in the US, the global market is likely to remain unstable. The business outlook in distribution of electronic components is expected to become more challenging. In order to maintain the Group in a leading position, and to enhance further negotiation power with suppliers and to enable further penetration into different market sectors and distribution networks, the Group endeavors to seek opportunities of locating new global suppliers and exploring the possibility to acquire new business partners. At the same time, the Group will further penetrate into PRC market.

To concentrate management efforts and usage of overheads, the Group has transferred most of its manufacturing operations to Heyuan production site. The Group expects to have a sizable saving of overheads and can also enjoy lower minimum wages in the inner China geographical region. To improve its competitiveness, the Group will make use of part of sale proceed of the Disposal of the old Fenggang production site and further invest on the Heyuan site with more advanced equipment and facilities. With extensive production experience, the Group is well prepared for upcoming opportunities and challenges in the unstable global market.

Further information will be disclosed in the forthcoming interim results announcement.

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APPENDIX II

VALUATION REPORT OF THE PROPERTY

The following is the text of a letter and valuation certificate prepared for the purpose of incorporation in this circular received from Ascent Partners Transaction Service Limited, an independent property valuer, in connection with its valuation as at 31 October 2011 of the Property.

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Suite 2102, Hong Kong Trade Centre 161-167 Des Voeux Road Central Hong Kong Tel: 3679-3890 Fax: 3586-0683

Date: 16 November 2011

The Board of Directors Daiwa Associate Holdings Limited 11/F., Block G, East Sun Industrial Centre No.16 Shing Yip Street Kwun Tong Hong Kong Dear Sirs,

INSTRUCTIONS

In accordance with your instructions for us to value property interests of Daiwa Associate Holdings Limited (the “Company”) and its subsidiaries (hereinafter together referred to as the “Group”) in the People’s Republic of China (the “PRC”) to be disposed of, we confirm that we have carried out property inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the property interests as at 31 October 2011 (referred to as the “Valuation Date”).

This letter which forms part of our valuation report explains the basis and methodologies of valuation, clarifying assumptions, valuation considerations, title investigation and limiting conditions of this valuation.

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VALUATION REPORT OF THE PROPERTY

APPENDIX II

BASIS OF VALUATION

Our valuation of the property interests represents the market value which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion”.

VALUATION METHODOLOGY

In valuing the property interests, we have adopted a combination of the open market and depreciated replacement cost approaches in assessing the land portions of the property and the buildings and structures standing on the land respectively. Hence, the sum of the two results represents the value of the property as a whole. In the valuation of the land portions, reference has been made to the sales transactions as available in the subject localities as well as the relevant benchmark land prices.

As the nature of the buildings and structures cannot be valued on the basis of market value, they have therefore been valued on the basis of their depreciated replacement cost. The depreciated replacement cost approach considers the cost to reproduce or replace in new condition the property appraised in accordance with current construction costs for similar buildings and structures in the locality, with allowance for accrued depreciation as evidenced by observed condition or obsolescence present, whether arising from physical, functional or economic causes. The depreciated replacement cost approach generally furnished the most reliable indication of value for the property in the absence of a known market based on comparable sales. The approach is subject to adequate potential profitability of the business.

VALUATION CONSIDERATIONS

In valuing the property interests, we have complied with all the requirements contained in Chapter 5 and Practice Note 12 to the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited and the HKIS Valuation Standards on Properties (First Edition 2005) published by The Hong Kong Institute of Surveyors effective from 1 January 2005.

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VALUATION REPORT OF THE PROPERTY

APPENDIX II

VALUATION ASSUMPTIONS

Our valuations have been made on the assumption that the seller sells the property interests on the open market in their existing states without the benefit of a deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements, which could serve to affect the values of the property interests.

In undertaking our valuation, we have assumed that, unless otherwise stated, transferable land use rights in respect of the property interests for specific terms at nominal annual land use fees have been granted and that any premium payable has already been fully paid. We have also assumed that the owners of the properties have enforceable titles to the properties and have free and uninterrupted rights to use, occupy or assign the properties for the whole of the respective unexpired terms as granted.

No allowance has been made in our report for any outstanding or additional land premium, charges, mortgages or amounts owing on the property interests valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interests are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values.

Other special assumptions of the property interests, if any, have been stated out in the footnotes of the valuation certificate attached herewith.

TITLE INVESTIGATION

We have been, in some instances, shown copies of various title documents and other documents relating to the property interests and have made relevant enquiries. We have not examined the original documents to verify the existing title to the property interests and any material encumbrances that might be attached to the property interests or any lease amendments. However, we have relied considerably on the information given by the Company’s PRC legal adviser, 廣東 卓信（東莞）律師事務所 (Guangzhou Zhuoxin (Dongguan) Law Firm, for translation purpose) concerning the validity of the Group’s title to the property interests located in the PRC.

All legal documents provided by the Group have been used for reference only. No responsibility regarding legal title to the property interests is assumed in this valuation report.

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VALUATION REPORT OF THE PROPERTY

APPENDIX II

LIMITING CONDITIONS

We have inspected the exterior, and wherever possible, the interior of the properties but no structural survey had been made. In the course of our inspection, we did not note any serious defects. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. Further, no test has been carried out on any of the building services. All dimensions, measurements and areas are only approximates. We have not been able to carry out detailed on-site measurements to verify the site and floor areas of the properties and we have assumed that the areas shown on the copies of documents handed to us are correct.

We have relied to a considerable extent on information provided by the Group and have accepted advice given to us on such matters, in particular, but not limited to, the sales records, tenure, planning approvals, statutory notices, easements, particulars of occupancy, site and floor areas and all other relevant matters in the identification of the property interests.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We have also been advised by the Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and we have no reason to suspect that any material information has been withheld.

Liability in connection with this valuation report is limited to the client to whom this report is addressed and for the purpose for which it is carried out only. We will accept no liability to any other parties or any other purposes.

This report is to be used only for the purpose stated herein, any use or reliance for any other purpose, by you or third parties, is invalid. No reference to our name or our report in whole or in part, in any document you prepare and/or distribute to third parties may be made without written consent.

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VALUATION REPORT OF THE PROPERTY

APPENDIX II

EXCHANGE RATE

Unless otherwise stated, all monetary amounts stated in this report are in Renminbi (RMB).

Our valuation certificate is herewith attached.

Yours faithfully,

For and on behalf of

Ascent Partners Transaction Service Limited

Ian K. F. Ng

MBA BSc(EstMan) BSc MHKIS MRICS RPS(GP) Associate Director

Mr. Ian K. F. Ng is a Registered Professional Surveyor with over 8 years’ experience in valuation of properties in HKSAR, Macau SAR and mainland China. Mr. Ng is a Professional Member of The Hong Kong Institute of Surveyors as well as a chartered surveyor of The Royal Institution of Chartered Surveyors.

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VALUATION REPORT OF THE PROPERTY

APPENDIX II

VALUATION CERTIFICATE

Property interests of the Group to be disposed of in the PRC

Property

Description and Tenure

Market Value in Existing State as at Particular of 31 October Occupancy 2011

Industrial Complex located at Daling Industrial Estate, Fenggang Town, Dongguan City, Guangdong Province, the PRC

The property comprises a parcel of land with an area of approximately 41,614 sq.m. on which various blocks of buildings (together referred to as the “Buildings”) and ancillary structures were built and completed in various stages between 1996 and 2000.

The property, as RMB52,300,000 at the Valuation Date, was occupied Renminbi Fifty by the Group for Two Million Three manufacturing, Hundred Thousand dormitory and ancillary office purposes.

The total gross floor area of the Buildings is approximately 40,691.15 sq.m.

The land use rights of the property were granted for a term expiring in December 2043 for industrial use.

Notes:

• (1) Pursuant to a State-owned Land Use Rights Certificate — Dong Fu Guo Yong (1995) Zi Di Te No. 110 issued by the People’s Government of Dongguan City dated 1 April 1997, the land use rights of a parcel of land with an area of approximately 41,614 sq.m. were granted to Daiwa Associate (China) Limited（台和商事（中國）有限公司）for a term expiring in December 2043 for industrial use.

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VALUATION REPORT OF THE PROPERTY

APPENDIX II

• (2) Pursuant to 14 Certificates of Real Estate Ownership, 14 buildings with a total gross floor area of approximately 40,691.15 sq.m. are owned by Daiwa Associate (China) Limited（台和商事（中 國）有限公司）. Details of these Certificates are as follows:

Certificates of Real				Gross Floor	Gross Floor
Estate Ownership	Date	Issued By	Property	Area (sq.m.)
Yue Fang Di Zheng	14-Nov-97	the People’s Government	Factory		11,976.40
Zi Di No.0975835		of Dongguan City	Building A#
Yue Fang Di Zheng	14-Nov-97	the People’s Government	Dormitory		9,643.92
Zi Di No.0975834		of Dongguan City	Building
Yue Fang Di Zheng	28-Jan-08	the People’s Government	Office		3,270.01
Zi Di No.C6346195		of Dongguan City	Building
Yue Fang Di Zheng	23-Nov-01	the People’s Government	Dormitory		7,925.28
Zi Di No.C0384083		of Dongguan City	Building
			Block B
Yue Fang Di Quan	1-Jun-10	Dongguan City Housing	Warehouse		645.26
Zheng Guan Zi Di		Authority	Building
No.2300144121
Yue Fang Di Quan	1-Jun-10	Dongguan City Housing	Power		261.17
Zheng Guan Zi Di		Authority	Distribution
No.2300144122			Room
Yue Fang Di Quan	1-Jun-10	Dongguan City Housing	Canteen		849.75
Zheng Guan Zi Di		Authority	Building A
No.2300144123
Yue Fang Di Quan	1-Jun-10	Dongguan City Housing	Canteen		340.76
Zheng Guan Zi Di		Authority	Building B
No.2300144124
Yue Fang Di Quan	1-Jun-10	Dongguan City Housing	Warehouse		132.36
Zheng Guan Zi Di		Authority	Building
No.2300144125
Yue Fang Di Quan	1-Jun-10	Dongguan City Housing	Facility		614.15
Zheng Guan Zi Di		Authority	Room
No.2300144126
Yue Fang Di Quan	1-Jun-10	Dongguan City Housing	Workshop		1,828.47
Zheng Guan Zi Di		Authority	Building
No.2300144127			Block C
Yue Fang Di Quan	1-Jun-10	Dongguan City Housing	Gas Supply		68.74
Zheng Guan Zi Di		Authority	Room
No.2300144128
Yue Fang Di Quan	1-Jun-10	Dongguan City Housing	Workshop		1,357.88
Zheng Guan Zi Di		Authority	Building
No.2300144129			Block D
Yue Fang Di Quan	1-Jun-10	Dongguan City Housing	Workshop		1,777.00
Zheng Guan Zi Di		Authority	Building
No.2300144130			Block B

Total:

40,691.15

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APPENDIX II

VALUATION REPORT OF THE PROPERTY

• (3) Daiwa Associate (China) Limited（台和商事（中國）有限公司）is wholly-owned subsidiary of the Company.

• (4) Pursuant to 2 Tenancy Agreements both dated 31 August 2011 entered into between Daiwa Associate (China) Limited（台和商事（中國）有限公司）and 東莞市億方房地產投資有限公司 (Dongguan YiFang Property Investment Co., Ltd., for translation purpose only) (the “Tenant”), the property is currently leased to the Tenant for a term commencing on 1 November 2011 and expiring on 30 October 2017. The current monthly rental is RMB433,142.36 inclusive of land management fee and tax. As stipulated on the Tenancy Agreements, the disposal of the property is subject to a first right of refusal granted to the Tenant. As advised by the Company, Daiwa Associate (China) Limited（台和商事（中國）有限公司）will negotiate a settlement with the Tenant for a cancellation of the Tenancy Agreements.

• (5) The major certificates and permits of the property are summarized as follows:

• (i) State-owned Land Use Rights Certificate Yes

• (ii) Certificate of Real Estate Ownership Yes

• (6) We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal adviser, which contains, inter alia , the following:

• (i) Daiwa Associate (China) Limited（台和商事（中國）有限公司）legally owns the property and is entitled to occupy, use, transfer and dispose of the property;

• (ii) The land premium has been paid in full; and

• (iii) The property is not subject to mortgage and other encumbrances.

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GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

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

2. DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS

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

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APPENDIX III

GENERAL INFORMATION

which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, to be notified to the Company and the Stock Exchange were as follows:

(a) Long positions in shares and warrants of the Company

Number of issued ordinary shares/underlying shares attached to derivatives

Name of Directors Mr. LAU Tak Wan Ms. CHAN Yuen Mei, Pinky Mr. WAN Chor Fai Mr. Barry John BUTTIFANT	Ordinary shares in issued
	Personal interests Corporate interests Other interests Total Interests % 6,557,141 167,925,229 1,142,854 175,625,224 55.68% (Note 1) (Notes 2, 3) 4,042,854 (Note 1) 167,925,229 (Notes 2, 3) 3,657,141 175,625,224 55.68% 50,000 — — 50,000 0.016% 100,000 — — 100,000 0.03%

Notes:

1. 2,900,000 shares in the Company were jointly held by Mr. Lau Tak Wan (“Mr. Lau”) and Ms. Chan Yuen Mei, Pinky (“Ms. Chan”), the spouse of Mr. Lau.

2. 107,006,833 shares in the Company were beneficially owned by China Capital Holdings Investment Limited (“China Capital”). The issued share capital of China Capital is 60% owned by Mr. Lau, and 40% owned by Ms. Chan.

3. 60,918,396 shares in the Company were beneficially owned by Leading Trade Limited (“Leading Trade”). The issued share capital of Leading Trade is 50% owned by Mr. Lau and 50% owned by Ms. Chan.

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GENERAL INFORMATION

APPENDIX III

(b) Long position in shares of associated corporations of the Company

Dominion International Limited, which is 50% owned by Mr. Lau, and 50% owned by Ms. Chan, holds the following interests in shares of associated corporations of the Company:

Number of non-voting Name of associated corporation deferred shares held

Cosmos Wires and Connectors
Manufacturing Limited	50,000
Westpac Digital Limited	1
Vastpoint Industrial Limited	455,000
Daiwa Associate (H.K.) Limited	1,500,000

In addition, each of Mr. Lau and Ms. Chan beneficially owns 140,000 and 10,000 non-voting deferred shares respectively in Cosmotec Precision Industrial Limited and Mr. Mak Hon Kai, Stanly beneficially owns 200 class B shares in Daiwa Distribution Holdings Limited.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, chief executives of the Company or their associates 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 were required, pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have taken under such provisions of the SFO), to be notified to the Company and the Stock Exchange, or which were required, pursuant to Section 352 of the SFO, to be entered in the register kept by the Company, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, to be notified to the Company and the Stock Exchange.

3. INTERESTS OF SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, to the best knowledge of the Directors and save as disclosed in paragraph headed “2. Directors’ and Chief Executives’ Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company and its Associated Corporations” in this appendix, the following parties (other than Directors or chief executives of the Company), had an interest or short position in the Shares, underlying Shares or debentures of the Company which

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APPENDIX III

GENERAL INFORMATION

are required to be disclosed to the Company under the provision of Divisions 2 and 3 and Part XV of the SFO, or, who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

Interest in the shares and warrants of the Company

			Interest in
			underlying
			shares –	% of
		Number of	unlisted	the total
Name of substantial shareholder	Note	shares held	warrants	issued shares
China Capital Holdings Investment
Limited	(1)	107,006,833	—	33.93%
Leading Trade Limited	(2)	60,918,396	—	19.32%
Mr. NG Hung Sang		56,762,198	—	18.00%
Ms. NG Lai King, Pamela (spouse of
Mr. NG Hung Sang)		56,762,198	—	18.00%
South China (China) Limited		32,514,000	—	10.31%
South China Industries (BVI) Limited		32,514,000	—	10.31%
South China Strategic (BVI) Limited		32,514,000	—	10.31%
South China Strategic Limited		32,514,000	—	10.31%

Notes:

1. China Capital is 60% owned by Mr. Lau and 40% owned by Ms. Chan. Accordingly, China Capital, Mr. Lau and Ms. Chan were deemed by SFO to be interested in 107,006,833, 175,625,224 and 175,625,224 shares of the Company respectively.

2. Leading Trade is 50% owned by Mr. Lau and 50% owned by Ms. Chan. Accordingly, Leading Trade, Mr. Lau and Ms. Chan were deemed by SFO to be interested in 60,918,396, 175,625,224 and 175,625,224 shares of the Company respectively.

Save as disclosed above, as at the Latest Practicable Date, the Directors are not aware of any other persons (other than Directors or chief executives of the Company) who have interests or short positions in the Shares, underlying Shares or debentures of the Company which would fall to be disclosed to the Company under the provision of Divisions 2 and 3 and Part XV of the SFO, or, who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or any options in respect of such capital.

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GENERAL INFORMATION

APPENDIX III

4. COMPETING INTEREST

As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors or their respective associates had any interest in a business which competes or may compete, either directly or indirectly, with the business of the Group, or have or may have any other conflicts of interest with the Group pursuant to Rule 8.10 of the Listing Rules.

5. DIRECTORS’ SERVICE CONTRACTS

None of the Directors had entered or been proposed to enter into any service contract with the Company or any other member of the Group which is not determinable by the Group within one year without payment of compensation (other than statutory compensation) as at the Latest Practicable Date.

6. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, none of the Directors were materially interested in any contract or arrangement entered into by any member of the Group which was subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group. As at the Latest Practicable Date, save as disclosed in this circular, none of the Directors had any interest, directly or indirectly, in any assets which have been, since 31 March 2011 (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.

7. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the members of the Group within the two years immediately preceding the date of this circular and are or may be material:

1. the Agreement; and

2. the two lease agreements dated 31 August 2011 and entered into with the Tenant (including the first right of refusal granted to the Tenant in respect of a proposed disposal of the Property under the lease agreements).

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GENERAL INFORMATION

APPENDIX III

8. QUALIFICATIONS OF EXPERT

The following are the qualifications of the experts who have given their advice, letters or reports for the inclusion in this circular:

Name

Qualifications

廣東卓信（東莞）律師事務所 (Guangzhou Zhuoxin (Dongguan) Law Firm, for translation purpose)

PRC legal adviser

Ascent Partners Transaction Service Limited Professional property valuer

9. CONSENTS

• (a) 廣東卓信（東莞）律師事務所 (Guangzhou Zhuoxin (Dongguan) Law Firm, for translation purpose) and Ascent Partners Transaction Service Limited have given and have not withdrawn their respective written consents to the issue of this circular with the inclusion of their respective advice, letters, reports and references to their names and logos in the form and context in which they appear.

• (b) As at the Latest Practicable Date, each of 廣東卓信（東莞）律師事務所 (Guangzhou Zhuoxin (Dongguan) Law Firm, for translation purpose) and Ascent Partners Transaction Service Limited was not beneficially interested in the share capital of any member of the Group nor had any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group and did not have any interest, either directly or indirectly, in any assets which had been, since 31 March 2011 (being the date to which the latest published audited financial statements of the Company were made up), acquired or disposed of by or leased to or were proposed to be acquired or disposed of by or leased to any member of the Group.

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GENERAL INFORMATION

APPENDIX III

10. LITIGATION

As at the Latest Practicable Date, neither the Company nor any other member of the Group is engaged in any litigation or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against the Company or any of its members.

11. GENERAL

• (a) The registered office of the Company is situated at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda.

• (b) The head office and principal place of business of the Company is situated at 11th Floor, Block G, East Sun Industrial Centre, 16 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong.

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

• (d) The company secretary of the Company is Mr. Man Wai Chuen (“Mr. Man”). Mr. Man is a fellow member of both of the Association of Chartered Certified Accountants and the Hong Kong Institute of Chartered Secretaries. Mr. Man is also an associate member of the Hong Kong Institute of Certified Public Accountants.

• (e) In the event of inconsistency, the English text of this circular shall prevail over the Chinese text thereof.

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GENERAL INFORMATION

APPENDIX III

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business of the Company in Hong Kong at 11th Floor, Block G, East Sun Industrial Centre, 16 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong, during normal business hours from 9:00 a.m. to 6:00 p.m. on any business day from the date of this circular up to and including 1 December 2011:

• (a) the memorandum and articles of association of the Company;

• (b) the annual reports of the Company for two years ended 31 March 2010 and 31 March 2011 respectively;

• (c) the valuation report prepared by Ascent Partners Transaction Service Limited the text of which is set out in Appendix II to this circular;

• (d) the written consent(s) referred to in the paragraph headed “Consents” of this Appendix III;

• (e) the material contracts referred to in the paragraph headed “Material Contracts” of this Appendix III;

• (f) the Agreement;

• (g) the circular of the Company dated 26 May 2011; and

• (h) this circular.

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