WEIli Holdings Limited — Proxy Solicitation & Information Statement 2012

Dec 31, 2012

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 licensed securities dealer, registered institution 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 (the “ Company ”), you should at once hand this circular to the purchaser or the transferee or to the bank, licensed securities dealer, registered institution in securities 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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DAIWA ASSOCIATE HOLDINGS LIMITED
台和商事控股有限公司
(incorporated in Bermuda with limited liability)
(Stock code: 1037)
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MAJOR TRANSACTION INVOLVING DISPOSAL OF SUBSIDIARIES

Financial Adviser to the Company

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New Spring Capital Limited

A letter from the Board is set out on pages 5 to 16 of this circular.

31 December 2012

• For identification purpose only

CONTENTS

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Appendix I — Financial information of the Group. . . . . . . . . . . . . . . . . . . . . .	17
Appendix II — General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19

— i —

DEFINITIONS

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

“Adjusted NAV”	the NAV after adjustment for items of assets and liabilities
	of the Disposal Group and exclusion for certain assets
	owned by the Disposal Group which are not included in the
	Disposal
“AR Retention Money”	HK$10,000,000 or 20% of the book value of the accounts
	receivables of the Disposal Group as at the Completion
	Date, whichever is lower
“Board”	the board of Directors
“Business Day”	a day (excluding Saturday, Sunday or public or statutory
	holiday in Hong Kong and any day on which a tropical
	cyclone warning No. 8 or above is hoisted or remains
	hoisted between 9:00 a.m. and 12:00 noon and is not
	lowered at or before 12:00 noon or on which a “black”
	rainstorm warning signal is hoisted or remains in effect
	between 9:00 a.m. and 12:00 noon and is not discontinued
	at or before 12:00 noon) on which licensed banks in
	Hong Kong are generally open for business in Hong Kong
	throughout their normal business hours
“BVI”	British Virgin Islands
“Company”	Daiwa Associate Holdings Limited, an exempted company
	incorporated in Bermuda with limited liability, whose issued
	Shares are listed on the main board of the Stock Exchange
	(stock code: 1037)
“Completion”	completion of the Disposal in accordance with the terms of
	the Disposal Agreement
“Completion Date”	the date on or before the date falling on the 5th Business
	Day from the date of fulfillment of the conditions precedent
	contained in the Disposal Agreement
“connected person(s)”	has the meaning ascribed to this term under the Listing
	Rules
“Consideration”	c o n s i d e r a t i o n o f t h e D i s p o s a l w h i c h a m o u n t s t o
	HK$67,287,724 (being the sum of HK$60,000,000 plus an
	amount equivalent to the NAV), subject to adjustments
“Creditor Banks”	the banks of Disposal Group or the Group in relation to the
	Cross Guarantee and Collaterals

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DEFINITIONS

“Cross Guarantees and	(a) the corporate guarantees and other collaterals and
Collaterals”	security given or provided by members of the Group in
	favour of the Creditor Banks to secure the obligations of
	the members of the Disposal Group; and (b) the corporate
	guarantees and other collaterals and security given or
	provided by members of the Disposal Group in favour of the
	Creditor Banks to secure the obligations of the members of
	the Group
“DC (Shanghai)”	台和元器件（上海）有限公司(Daiwa Component (Shanghai)
	Limited), a company incorporated in the PRC and a wholly
	owned subsidiary of DRL
“DC (Shenzhen)”	台和元器件（深圳）有限公司(Daiwa Component (Shenzhen)
	Limited), a company incorporated in the PRC and a wholly
	owned subsidiary of DEL
“DDL”	Daiwa Distribution Limited, a company incorporated in Hong
	Kong with limited liability and a wholly owned subsidiary of
	the Vendor
“DEL”	Daiwa Electronic Limited, a company incorporated in Hong
	Kong with limited liability and a wholly owned subsidiary of
	the Vendor
“Deposit”	HK$30,000,000, being the deposit and part of the payment
	of the Consideration which has been paid by the Purchaser
	to the Vendor by cashier order upon signing of the Disposal
	Agreement
“Director(s)”	director(s) of the Company
“Disposal”	the disposal of the Disposal Group subject to and upon the
	terms and conditions of the Disposal Agreement
“Disposal Agreement”	the sale and purchase agreement dated 23 November
	2012 entered into between the Vendor, the Purchaser, the
	Company and the Guarantor in relation to the Disposal
“Disposal Companies”	collectively, DDL, DRL and DEL, being companies
	incorporated under the laws of Hong Kong with limited
	liabilities and are indirect non-wholly owned subsidiaries of
	the Company
“Disposal Group”	the Disposal Companies, together with their subsidiaries
“DRL”	Daiwa Resources Limited, a company incorporated in Hong
	Kong with limited liability and a wholly owned subsidiary of
	the Vendor

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DEFINITIONS

“Final Settlement Date” the 20th day of the 13th month after the Completion “Group” the Company and its subsidiaries “Guarantor” Mr. Sham, an Independent Third Party

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

• “Independent Third person(s) and their respective associates or, in the case Party(ies)” of, their ultimate beneficial owner(s) and their respective associates, who are independent of and not connected with the Company and its subsidiaries and their respective connected persons

• “Inventory Retention Money” HK$10,000,000 or 20% of the book value of the inventories of the Disposal Group as set out in the Disposal Agreement as at the Completion Date, whichever is lower

• “Latest Practicable Date” 24 December 2012, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

• “LIBOR” London Interbank Offered Rate

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

• “Long Stop Date” 15 February 2013, being the last day of the 12th week after the date of the Disposal Agreement

• “Management Accounts” the unaudited management accounts of the Disposal Companies as at the Management Accounts Date

• “Management Accounts 31 October 2012, being the date to which the Management Date” Accounts are made up

• “Mr. Lau” Mr. Lau Tak Wan, an executive Director and a controlling shareholder of the Company

• “Mr. Sham” Mr. Sham Ka Hung, the ultimate beneficial owner of the Purchaser and an Independent Third Party

“NAV” the net asset value of the Disposal Group as shown in the Management Accounts “NAV Difference” the difference between NAV and Adjusted NAV

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DEFINITIONS

“PRC”	the People’s Republic of China, which for the purpose
	of this circular excludes Hong Kong, the Macau Special
	Administrative Region of the PRC and Taiwan
“Purchaser”	Protech Century Limited, a company incorporated under the
	laws of Hong Kong with limited liability
“Real Property”	the real property located at上海市浦東新區金橋出口加工區15
	街坊3丘,金晥路389號509室（金門廣場）and is legally and
	beneficially held by DC (Shanghai)
“Remaining Group”	the remaining direct and indirect subsidiaries and associate
	companies of the Vendor after the Disposal
“Retention Money”	collectively the AR Retention Money and the Inventory
	Retention Money
“Sale Shares”	the entire issued share capital of each of the Disposal
	Companies
“SCG”	SCG Hong Kong SAR Limited, a supplier of electronic
	components and an Independent Third Party
“SFO”	the Securities and Futures Ordinance, Chapter 571 of the
	Laws of Hong Kong
“Share(s)”	ordinary share(s) of HK$0.1 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of issued Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Vastpoint”	Vastpoint Imtec Electronics Limited, a wholly owned
	subsidiary of the Company
“Vendor”	D a i w a D i s t r i b u t i o n H o l d i n g s L i m i t e d , a c o m p a n y
	incorporated in the BVI and an indirect non-wholly owned
	subsidiary of the Company
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC
“%”	per cent.

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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:

Mr. Lau Tak Wan Mr. Wan Chor Fai Mr. Mak Hon Kai, Stanly

Ms. Chan Yuen Mei, Pinky

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

Independent non-executive Directors:

Mr. Barry John Buttifant Mr. Choi Yuk Fan

Dr. 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

31 December 2012

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION INVOLVING DISPOSAL OF SUBSIDIARIES

INTRODUCTION

Reference is made to the announcement of the Company dated 23 November 2012 in relation to the Disposal. On 23 November 2012, after the trading hours of the Stock Exchange, the Vendor, the Purchaser, the Company and the Guarantor entered into the Disposal Agreement pursuant to which the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, the entire equity interests in each of the Disposal Companies and the total consideration for the Disposal payable by the Purchaser to the Vendor for the Sale Shares shall be the sum of HK$67,287,724 (being the aggregate of the sum of HK$60,000,000 and the NAV) subject to adjustment on the NAV on Completion. Upon Completion, the Disposal Companies will cease to be subsidiaries of the Company.

The purpose of this circular is to provide you further information in respect of the Disposal Agreement and the transactions contemplated thereunder and to provide you with the financial information and general information of the Group.

* For identification purpose only

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LETTER FROM THE BOARD

THE DISPOSAL AGREEMENT

Date : 23 November 2012

Parties:

• (i) Daiwa Distribution Holdings Limited, a non-wholly owned subsidiary of the Company, as the Vendor;

• (ii) the Company, as the guarantor for the Vendor;

• (iii) Protech Century Limited, as the Purchaser; and

• (iv) Mr. Sham, as the guarantor for the Purchaser

The Purchaser is a company incorporated under the laws of Hong Kong with limited liability. The principal activities of the Purchaser are distribution of electronic components in Hong Kong and the PRC. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, each of the Purchaser and its ultimate beneficial owner(s), being the Guarantor is an Independent Third Party.

In consideration of the Vendor agreeing to enter into the Disposal Agreement, the Guarantor has agreed to guarantee the performance by the Purchaser of its obligations under the Disposal Agreement subject to and upon the terms and conditions of the Disposal Agreement.

In consideration of the Purchaser agreeing to enter into the Disposal Agreement, the Company has agreed to guarantee the performance by the Vendor of its obligations under the Disposal Agreement subject to and upon the terms and conditions of the Disposal Agreement.

Assets to be disposed of

Subject to the terms and conditions of the Disposal Agreement, the Vendor has agreed to sell and the Purchaser has agreed to acquire the Sale Shares, which comprise the entire shareholding in the Disposal Companies held by the Vendor. Upon Completion, the Company will not hold any interest in the Disposal Companies, and the Disposal Companies will cease to be subsidiaries of the Company.

Consideration

The total consideration for the Disposal payable by the Purchaser to the Vendor for the Sale Shares shall be the sum of HK$67,287,724 (being the sum of HK$60,000,000 and the NAV) subject to adjustment on the NAV on Completion. The Consideration shall be satisfied in cash by the Purchaser as follows:

• (1) HK$30,000,000 has been paid by the Purchaser to the Vendor as Deposit and part payment of the Consideration upon signing of the Disposal Agreement; and

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LETTER FROM THE BOARD

• (2) the balance of Consideration after addition or deduction of the NAV Difference and less the Retention Money, shall be payable by the Purchaser to the Vendor upon Completion.

Further announcement will be made by the Company when the adjustments to the Consideration on Completion as referred to above are finalized and the adjustments to be made to the balance of the Consideration is determined.

The Consideration was arrived at after arm’s length negotiations between the Vendor and the Purchaser and was determined with reference to (i) the unaudited consolidated net profit after tax of the Disposal Group for the year ended 31 March 2012; (ii) the declining trend of the historical financial performance and the low profitability of the Disposal Group; (iii) the business prospects of the Disposal Group; (iv) the synergies and benefits to be derived by the Purchaser from the acquisition of the Disposal Group; and (v) the net assets value of the Disposal Group as shown in the Management Accounts.

If the Completion cannot take place as a result of the conditions (1), (2), (3), (5) or (6) as set out under the sub-paragraph headed “Conditions precedent” cannot be fulfilled on or before the Long Stop Date, the Vendor shall refund the Deposit to the Purchaser with interest at the interest rate of LIBOR plus 2% per annum which will be accrued on a daily basis from the date of the Disposal Agreement.

If conditions (1), (2), (3), (5) or (6) as set out under the sub-paragraph headed “Conditions precedent” have been fulfilled on or before the Long Stop Date but Completion does not take place, the Vendor shall be entitled to forfeit the Deposit and the Disposal Agreement shall cease to have effect.

Adjusted NAV

The Adjusted NAV shall be arrived, after adjusted upward or, as appropriate, downward by items of assets and liabilities of the Disposal Group, including but not limited to:

• (i) foreign exchange difference of the inventories, account receivables, accounts payables and trust receipts bank borrowings as shown in the Management Accounts;

• (ii) total amounts of the distributions or dividend declared, paid or made to the Group during the period between the date of the Disposal Agreement until Completion;

• (iii) Hong Kong profits tax liabilities for which the Disposal Group would be liable for the year ended 31 March 2012 and for the period commencing 1 April 2012 and up to and including the Management Accounts Date which have not yet been paid or accrued in the Management Accounts;

• (iv) the PRC corporate income tax liabilities for which the Disposal Group would be liable for the period up to and including the Management Accounts Date;

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LETTER FROM THE BOARD

• (v) the PRC withholding tax on the remaining retained earnings of DC (Shenzhen) and DC (Shanghai) as at the Management Accounts Date;

• (vi) the employee’s statutory compensation for which the Disposal Group is liable up to and including the Completion Date;

• (vii) the inventories of the Disposal Group other than those inventories carrying the brands of ON Semiconductor, Toshiba, On Bright or Abilis as shown in the Management Accounts;

• (viii) the difference between the unsold inventories as physical counted on the Completion Date by the Purchaser and the total book value of the unsold inventories of the Disposal Group as shown in the Management Accounts;

• (ix) any accounts receivable of the Disposal Group which has been overdue for more than one year as at the Management Accounts Date;

• (x) the SCG and Toshiba inventories purchased from Vastpoint by the Disposal Group at original purchase price on the date of the Disposal Agreement up to the Completion Date; and

• (xi) any outstanding amount owed by or due to the Disposal Group to or by the Group.

Moreover, the total amount of the fixed assets and vehicles (other than the Real Property as referred to below), total leasehold improvement and total value of the club membership of the Disposal Group as shown in the Management Accounts shall be deducted from the NAV provided that the Vendor can, at its sole discretion, dispose of any of these items during the period between the date of the Disposal Agreement until Completion.

Saved as disclosed above, each of the Vendor and Purchaser shall use its best endeavours to procure DC (Shanghai), to dispose of, on a best efforts basis, the Real Property held by DC (Shanghai) within 30 months after the Completion Date. Upon completion of disposal of the Real Property, the Purchaser shall pay to the Vendor the sale price of the Real Property after netting off (i) all reasonable expenses incurred by DC (Shanghai) in relation to the disposal of the Real Property; (ii) the net book value of the Real Property as shown in the Management Accounts; (iii) all tax incurred from such disposal; (iv) prevailing enterprise income tax in connection with the disposal of the Real Property; and (v) prevailing dividend tax in connection with the disposal of the Real Property after deduction of such enterprise income tax.

Release of Retention Money

The Purchaser will pay to the Vendor in cash for the difference between the AR Retention Money and the actual book value of the outstanding accounts receivable of the Disposal Group on the 10th day of each month after Completion. On the Final Settlement Date, if there exists any outstanding AR Retention Money not yet been paid to the Vendor by the Purchaser, the Purchaser will release to the Vendor all the outstanding AR

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LETTER FROM THE BOARD

Retention Money. The Vendor will simultaneously pay to the Purchaser for the outstanding accounts receivables of the Disposal Group on the Final Settlement Date. The Purchaser will procure the Disposal Group to assign all the rights, interest, and benefits of the Disposal Group in the relation to the outstanding accounts receivable to the Vendor at no extra cost.

On the Final Settlement Date, the Purchaser will release the entire Inventory Retention Money to the Vendor in cash after deduction of the handling fees accrued and, if applicable, the shortfall when the relevant inventories are sold at selling prices below their cost. The Vendor will simultaneously pay to the Purchaser for the unsold inventories of the Disposal Group on the Final Settlement Date and the Purchaser will procure the Disposal Group to transfer the unsold inventories of the Disposal Group which has been settled by the Vendor at no cost.

Conditions precedent

The Disposal Agreement is conditional upon the fulfillment (or waiver) of the following conditions:

• (1) the passing by the Shareholders in writing (in lieu of holding a general meeting) of an ordinary resolution to approve the Disposal Agreement and the transactions contemplated hereunder;

• (2) there being no material un-reported liabilities or no material litigations that will have material adverse effect on the going concern of the Disposal Group;

• (3) all necessary consents and approvals required to be obtained on the part of the Vendor and the Company in respect of the Disposal Agreement and the transactions contemplated hereunder having been obtained and remaining in full force and effect;

• (4) all necessary consents and approvals required to be obtained on the part of the Purchaser and the Guarantor in respect of the Disposal Agreement and the transactions contemplated thereunder having been obtained and remaining in full force and effect;

• (5) the warranties of the Vendor contained in the Disposal Agreement remains true and accurate in all respect;

• (6) the warranties of the Company contained in the Disposal Agreement remains true and accurate in all respect;

• (7) the warranties of the Purchaser contained in the Disposal Agreement remains true and accurate in all respect; and

• (8) the warranties of the Guarantor contained in the Disposal Agreement remains true and accurate in all respect.

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LETTER FROM THE BOARD

Save that conditions (7) and (8) are waivable by the Vendor and conditions (5) and (6) are waivable by the Purchaser, the conditions are incapable of being waived by the parties. If the conditions have not been satisfied or waived (as the case may be) on or before 4:00 p.m. on the Long Stop Date, or such other date as the Purchaser and Vendor may agree, the Disposal Agreement shall cease and determine and thereafter neither party shall have any obligations and liabilities towards each other under the Disposal Agreement save for any antecedent breaches.

As at the Latest Practicable Date, save for condition (1) above has been satisfied, none of the above conditions has been satisfied.

Completion

Completion shall take place on or before the date falling on the fifth Business Day after the fulfillment or waiver of the conditions precedent as set out in the sub-paragraph headed “Conditions precedent” above.

Upon Completion, the Disposal Companies will cease to be subsidiaries of the Company.

Guarantor’s Guarantee

The Guarantor unconditionally and irrevocably undertakes to the Vendor to procure the due and punctual performance by the Purchaser of all the payment and obligations expressed to be imposed on or assumed by it under the Disposal Agreement and undertakes to indemnify and keep effectively indemnified the Vendor (if necessary by the payment of cash on first demand) against all liabilities, losses, damages, costs and expenses stipulated under the Disposal Agreement or otherwise which the Vendor may suffer or incur in connection with any default or delay on the part of the Purchaser in the performance of any such obligations or in the observance and compliance of such covenants.

Undertakings of the Company

Pursuant to the Disposal Agreement, the Company agrees to give tax indemnities and non-competition undertaking to the Purchaser as follows:

Tax indemnities

The Company undertakes to indemnify the Purchaser in respect of:

• (i) any tax liabilities of the Disposal Group incurred on or before the Management Accounts Date less that any tax liabilities under the adjustment items for arriving at the Adjusted NAV;

• (ii) any dividend tax paid by the Disposal Group in excess of 5% of the dividend declared and distributed by the Disposal Group from retained earnings earned up to the Management Accounts Date;

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LETTER FROM THE BOARD

• (iii) any capital gain tax arising from and in connection with entering into the Disposal Agreement;

• (iv) the losses and damages suffered by the Purchaser as a result of the failure of the Vendor to handover past accounting books and records, company secretarial records and other documents required by statutory laws on Completion; and

• (v) all costs (including all legal costs), interests, penalties, charges and expenses or other liabilities which the Purchaser or any member of the Disposal Group may incur or suffer in connection with:

• (a) settlement or any claim initiated by the Purchaser or any member of the Disposal Group under or in respect of the tax indemnities;

• (b) any legal proceeding in which the Purchaser or any member of the Disposal Group claims under or in respect of the tax indemnities and in which judgment is given for the Purchaser or any member of the Disposal Group; or

• (c) the enforcement of any such settlement or judgment.

Non-competition undertaking

The Company undertakes and covenants that within two years after Completion, the Company shall not be, directly or indirectly, concerned in any business carrying on as authorised distributor of semiconductors in Hong Kong or the PRC carrying the brand name of Toshiba, ON Semiconductor, On-Bright or Abilis save and except for those manufacturing of finished products and spare part, the sale of the Disposal Group’s inventories carrying those brands by the Vendor and its associates and items purchased from the Purchaser.

The undertakings given by the Company to the Purchaser are arrived at after arm’s length negotiation between the Purchaser and the Vendor. The Directors consider that these terms are fair and reasonable and are in the interest of the Company and the Shareholders as a whole.

Release of Cross Guarantees and Collaterals

Each of the Purchaser and the Guarantor irrevocably, unconditionally, jointly and severally covenants to the Vendor that it/he shall either (i) repay and settle the outstanding banks loans and the credit facilities granted by the Creditor Banks and/or (ii) take such steps and actions (including the provision of guarantee, security or other collaterals or financial assistance by the Purchaser or other parties as may be agreed by the Purchaser, the relevant member of the Disposal Group and the relevant Creditor Bank) which are necessary for the complete and absolute release and discharge of the obligations and liabilities of the Group under the Cross Guarantees and Collaterals in order to procure the Creditor Banks to completely and absolutely discharge and release the Cross Guarantees and Collaterals on the Completion.

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LETTER FROM THE BOARD

The Company undertakes to the Purchaser that within 30 days after Completion, it shall procure the Creditor Banks to completely and absolutely discharge and release corporate guarantees and collateral given by the Disposal Group in favour of the Creditor Banks under the Cross Guarantees and Collaterals, failing which the Vendor and the Company shall indemnify the Disposal Group all loss, damages and claims (including interests, costs and expenses) arising from the Cross Guarantees and Collaterals.

In the event that the Group uses the credit facilities granted by the Creditor Banks for the period after the Completion Date and pending release of the Cross Guarantees and Collaterals, the Company shall indemnify the Purchaser and the Disposal Group against all liabilities, loses, damages, costs and expenses which the Purchaser and the Disposal Group may suffer or incur in connection with the use of such credit facilities by the Group.

BACKGROUND INFORMATION ON THE DISPOSAL GROUP

The Disposal Group consists of DDL, DRL, DC (Shanghai), DEL and DC (Shenzhen). DDL is a company incorporated in Hong Kong which principal business is distribution of electronic components. DEL is a company incorporated in Hong Kong which principal business is investment holding and its principal asset is the entire shareholding in DC (Shenzhen). DC (Shenzhen) is a company incorporated in the PRC and its principal business is trading of electronic components. DRL is a company incorporated in Hong Kong which principal business is investment holding and its principal asset is the entire shareholding in DC (Shanghai). DC (Shanghai) is a company incorporated in the PRC which principal business is trading of electronic components.

The following is a summary of the audited financial information of DDL, DEL and DRL and the management accounts of DC (Shenzhen) and DC (Shanghai) for the financial years ended 31 March 2011 and 2012 prepared in accordance with Hong Kong Financial Reporting Standards.

DDL

Net Assets Profit before tax Profit for the year	As at 31 March 2012 HK$’000 5,054 For the year ended 31 March 2012 HK$’000 4,354 3,483	As at 31 March 2011 HK$’000 5,171
		For the year ended 31 March 2011 HK$’000 3,564 3,210

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LETTER FROM THE BOARD

DEL

Net Assets/(Liabilities) Profit/(Loss) before tax Profit/(Loss) for the year DC (Shenzhen) Net Assets (Loss)/Profit before tax (Loss)/Profit for the year DRL Net Assets Profit/(Loss) before tax Profit/(Loss) for the year	As at 31 March 2012 HK$’000 11 For the year ended 31 March 2012 HK$’000 738 738 As at 31 March 2012 RMB’000 7,958 For the year ended 31 March 2012 RMB’000 (3,532) (3,566) As at 31 March 2012 HK$’000 6 For the year ended 31 March 2012 HK$’000 13,858 13,858	As at 31 March 2011 HK$’000 (54) For the year ended 31 March 2011 HK$’000 (5) (5) As at 31 March 2011 RMB’000 12,149 For the year ended 31 March 2011 RMB’000 3,265 2,684 As at 31 March 2011 HK$’000 1,184 For the year ended 31 March 2011 HK$’000 (5) (5)

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LETTER FROM THE BOARD

DC (Shanghai)

Net Assets Profit before tax Profit for the year	As at 31 March 2012 RMB’000 19,657 For the year ended 31 March 2012 RMB’000 5,575 3,137	As at 31 March 2011 RMB’000 27,820
		For the year ended 31 March 2011 RMB’000 9,857 8,623

Note:

(a) Profits or losses of the Disposal Companies for the years ended 31 March 2011 and 2012 included certain transactions with other group companies, and where applicable, dividends received from subsidiaries.

(b) The net assets/(liabilities) of the Disposal Companies as at 31 March 2011 and 2012 included certain balances with group companies.

(c) The net assets/(liabilities) of DRL and DEL as at 31 March 2011 and 2012 also included the investment costs in DC (Shanghai) and DC (Shenzhen) respectively.

Structure before the Disposal

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----- Start of picture text -----

The Vendor
100% 100% 100% 100%
Remaining
DDL DRL DEL
Group
100% 100%
DC (Shanghai) DC (Shenzhen)
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Structure after the Disposal

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----- Start of picture text -----

The Purchaser The Vendor
100% 100% 100% 100%
Remaining
DDL DRL DEL
Group
100% 100%
DC (Shanghai) DC (Shenzhen)
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LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE DISPOSAL

The Group is principally engaged in the distribution of personal computer products, the design, development, manufacturing and distribution of electronic components, contract electronic manufacturing services and manufacturing of consumer electronics products.

Given the current sluggish market environment in the distribution of electronic components caused by the decreased global demand and the low incentive market, the turnover from distribution segment of the Group decreased by 25% for the year ended 31 March 2012. The Directors consider that the Disposal represents a good opportunity to realize its investment and streamline the distribution business of the Group by reducing the low profitability business in order to concentrate in higher value market in the future.

In view of the above, the Directors consider that the terms and conditions of the Disposal Agreement are fair and reasonable and are in the interests of the Shareholders as a whole.

INTENDED USE OF PROCEEDS FROM THE DISPOSAL

The estimated net proceeds from the Disposal, after deducting expenses attributable to the Disposal, will be approximately HK$66.12 million. Such net proceeds are expected to be used as the general working capital of the Group.

FINANCIAL EFFECTS OF THE DISPOSAL

Upon Completion, the Disposal Companies will cease to be subsidiaries of the Company. As a result, the financials of the Disposal Group will be excluded from the financial statements of the Group subsequent to the Completion.

The Group expects to record an unaudited gain before taxation from the Disposal of approximately HK$58.83 million, which is calculated mainly by reference to, (i) the net proceeds from the Disposal of approximately HK$66.12 million; and (ii) the net asset value of the Disposal Group as at the Management Accounts Date of approximately HK$7.29 million.

Shareholders should note that the actual gain from the Disposal will be calculated on the basis of the relevant figures as at the Completion Date and subject to audit and therefore would be different from the aforesaid amount.

The Disposal is also likely to meet the conditions of “discontinued operations” under Hong Kong Financial Reporting Standards and the financial statements of the Group would be accounted for accordingly.

REMAINING BUSINESSES OF THE GROUP

The Group is principally engaged in the distribution of personal computer products, the design, development, manufacturing and distribution of electronic components, contract electronic manufacturing services and manufacturing of consumer electronics products. Following the Disposal, the Group will continue to be engaged in the distribution of personal computer products, electronic component distribution with higher profitability, the design, development, manufacturing of electronic components, contract electronic manufacturing of services and manufacture of consumer electronics products.

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LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

As the applicable ratio of the Disposal under Rule 14.07 of the Listing Rules exceeds 25% but is less than 75%, the Disposal constitutes a major transaction on the part of the Company and is therefore subject to the reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

To the best knowledge, information and belief of the Directors, after having made all reasonable enquiries, as the Purchaser and its ultimate beneficial owner, being the Guarantor, are Independent Third Parties, no Shareholder has a material interest in the Disposal. Therefore, none of the Shareholders is required to abstain from voting if the Company were to convene a general meeting to approve the Disposal. Mr. Lau, the controlling Shareholder, and his associates who are beneficially interested in 219,721,529 Shares, representing approximately 55.73% of the issued capital of the Company as at the date of the Disposal Agreement, have given its written approval for the Disposal in lieu of a general meeting in accordance with Rule 14.44 of the Listing Rules. Therefore, no general meeting will be held to approve the Disposal.

RECOMMENDATION

The Directors consider that the Disposal is in the interests of the Company and the Shareholders as a whole. The Directors also believe that terms of the Disposal Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole and therefore recommend the Shareholders to vote in favour of the resolution to approve the Disposal if the Company was to convene a general meeting for the approval of the Disposal.

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. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

During the six months ended 30 September 2012, the unaudited consolidated turnover was HK$604.3 million (for the six months ended 30 September 2011: HK$801.8 million) and unaudited consolidated gross profit was HK$50.3 million (for the six months ended 30 September 2011: HK$74.8 million).

The Group will continue to engage in the distribution of personal computer products, electronic component distribution (apart from the distribution of electronic components carrying the brand name of Toshiba, ON Semiconductor, On-Bright or Abilis) with higher profitability, the design, development, manufacturing of electronic components, contract electronic manufacturing of services and manufacture of consumer electronics products.

Electronic components distribution constitutes the core business of the Group. However, the global slowdown of economic activities and the low incentive market sentiment leads to keen price competition has caused the slowed down of activities in this segment. The Group had prudent control in credit risk and turned down a substantial portion of business of un-reasonable profit margins and high risk sales and thus, turnover of distribution segment. Business in this segment is mainly to act as authorized distributor of various renowned brand names including the Group’s own manufactured electronic components. Upon completion of the Disposal, the Group will still maintain an array of authorized distributorships with renowned suppliers such as Arnold Magnetics, Lite-on, CET, Rohm, COS, Diodes, Everlight and AEM. Our sales office in Shenzhen, Shanghai, Beijing and Chengdu will play an important role in the distribution segment of the Group. The Group will further strengthen the engineering capability in providing total solutions to customers and reduce the low margin and high labor intensive EMS (contract electronic manufacturing services) products in order to enhance the profitability and product mix of the Group in future.

The net proceeds from the Disposal will be used as general working capital of the Group. It is expected that the financial performance and position of the Group will be improved as a result of the Disposal.

As at the Latest Practicable Date, the Group has no agreement, arrangement, understanding, negotiation and intention to dispose of and/or scale down its existing business.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIx I

2. INDEBTEDNESS STATEMENT

Borrowings

As at the close of business on 31 October 2012, 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$283,277,000, details of which are set out as follows:

Trust receipt bank loans Short term bank borrowings Other bank borrowings Finance lease liabilities Total	HK$’000 202,386 14,736 56,916 9,239
	283,277

As at 31 October 2012, except for a bank borrowing amounting to approximately HK$13,953,000 secured by certain available-for-sale financial assets, and finance lease liabilities, all borrowings are unsecured.

Contingent liabilities

As at the close of business on 31 October 2012, the Group did not have any significant contingent liabilities.

Save as aforesaid, at the close of business on 31 October 2012, the Group did not have any outstanding loan capital, bank overdrafts, loans, mortgages, charges or other similar indebtedness, or hire purchase of finance lease commitments, liabilities under acceptances or acceptance credits, guarantees or other material contingent liabilities.

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 twelve months from the date of publication of this circular in the absence of unforeseen circumstances.

4. 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 2012, being the date to which the latest published audited consolidated financial statements of the Company were made up to.

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GENERAL INFORMATION

APPENDIx II

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 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 (“Mr. Lau”) Ms. Chan Yuen Mei, Pinky (“Ms. Chan”) Mr. Wan Chor Fai Mr. Barry John Buttifant	Ordinary shares in issued
	Personal interests Corporate interests Other interests Total Interests Percentage 8,196,426 (Note 1) 210,096,536 (Note 2, 3) 1,428,567 219,721,529 55.73% 5,053,567 (Note 1) 210,096,536 (Note 2, 3) 4,571,426 219,721,529 55.73% 62,500 — — 62,500 0.02% 125,000 — — 125,000 0.03%

Notes:

1. 3,625,000 Shares are jointly held by Mr. Lau and Ms. Chan, the spouse of Mr. Lau.

2. 133,948,541 Shares are 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.

1. 76,147,995 Shares are 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 II

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

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

	Number of
	non-voting deferred
Number of associated corporation	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, the executive Director, 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 are required to be disclosed to the Company under the provision of Divisions 2 and 3 of 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.

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GENERAL INFORMATION

APPENDIx II

Interest in the shares and warrants of the Company

			Interest in
			underlying
		Number	shares –	% of the
		of shares	unlisted	total issued
Name of substantial shareholder	Note	held	warrants	shares
China Capital	(1)	133,948,541	-	33.98%
Leading Trade	(2)	76,147,995	-	19.31%
Mr. NG Hung Sang	(3)	75,058,698	-	19.04%
Ms. NG Lai King, Pamela
(spouse of Mr. NG Hung Sang)	(3)	75,058,698	-	19.04%
South China (China) Limited	(3)	40,655,000	-	10.31%
South China Industries (BVI) Limited	(3)	40,655,000	-	10.31%
South China Strategic (BVI) Limited	(3)	40,655,000	-	10.31%
South China Strategic Limited	(3)	40,655,000	-	10.31%

Notes:

(1) China Capital is 60% owned by Mr. Lau and 40% owned by Ms. Chan. Accordingly, Mr. Lau and Ms. Chan are deemed by SFO to be interested in 133,948,541 Shares owned by China Capital.

• (2) Leading Trade is 50% owned by Mr. Lau and 50% owned by Ms. Chan. Accordingly, Mr. Lau and Ms. Chan are deemed by SFO to be interested in 76,147,995 Shares owned by Leading Trade.

• (3) Mr. Ng Hung Sang (“Mr. Ng”) is interested in 75,058,698 Shares of which 74,521,198 Shares are held by his indirect controlled corporations, namely (i) South China Strategic Limited which holds 40,655,000 Shares; and (ii) South China Finance And Management Limited which holds 33,866,198 Shares, and 537,500 Shares which are beneficially owned by his spouse, Ms. Ng Lai King Pamela (“Mrs. Ng”). Mr. Ng has deemed interests in the said 537,500 Shares. Mrs. Ng being the spouse of Mr. Ng is also interested in those 74,521,198 Shares held by Mr. Ng’s indirect controlled corporations.

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.

4. COMPETING INTERESTS

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors or their respective associates had any interest in any 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.

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GENERAL INFORMATION

APPENDIx II

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 with on year without payment of compensation (other than statutory compensation) as at the Latest Practicable Date.

6. DIRECTOR’S 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 has any interest, directly or indirectly, in any assets which have been, since 31 March 2012 (being the date to which the latest published audited consolidated financial statements of the Company were made up), acquired or disposed 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 Disposal Agreement;

2. the underwriting agreement dated 17 August 2012 (as amended by a supplemental agreement dated 23 August 2012) and entered into between Mr. Lau, as underwriter and the Company in relation to the issue by way of rights of 78,847,889 new Shares offered to the qualifying Shareholders;

3. the sale and purchase agreement dated 17 July 2012 and entered into between East Sun 11H Limited, an indirect wholly-owned subsidiary of the Company, as vendor and South America Telecom Company Limited, as purchaser in relation to the disposal of a property located on the 11th Floor, Block H, East Sun Industrial Centre, No. 16 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong at a consideration of HK$20,503,000;

4. the sale and purchase agreement dated 26 October 2011 and entered into amongst Daiwa Associate (China) Limited as vendor, 林濟扶 (Mr. Lam Chai Fu, Terry) and 張超強 (Mr. Cheung Chiu Keung, for translation purpose only) as purchasers, and the Company as guarantor for vendor, for the disposal of a property located at Daling Industrial Estate, Fenggang Town, Dongguan City, Guangdong Province, PRC and the buildings erected thereon at a consideration of RMB72,000,000; and

5. The two leases agreements dated 31 August 2011 and entered into with 東莞 市億方房地產投資有限公司 (Dounguan YiFang Property Investment Co., Ltd, for translation purpose only) as tenant in relation to the leasing of the property mentioned in (4) above.

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GENERAL INFORMATION

APPENDIx II

8. 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.

9. 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.

10. 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 15 January 2013:

• (a) the memorandum of association and bye-laws of the Company;

• (b) the annual reports of the Company for the two years ended 31 March 2011 and 31 March 2012 respectively;

• (c) the unaudited interim report of the Company for the six months ended 30 September 2012;

• (d) the material contracts referred to in the paragraph headed “Material Contracts” in this appendix; and

• (e) this circular.

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