WEIli Holdings Limited - Proxy Solicitation & Information Statement 2016

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 you should take, 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 and the enclosed proxy form to the purchaser or the transferee, or to the bank, stockbroker or other agent through whom the sale 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 on the whole or any part of the contents of this circular.

This circular is for information purpose only and does not constitute an invitation of offer to acquire, purchase or subscribe for the Shares or other securities in the Company.

==> picture [112 x 34] intentionally omitted <==

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

(Incorporated in Bermuda with limited liability)

(Stock code: 1037)

==> picture [357 x 45] intentionally omitted <==

Independent financial adviser to the

Independent Board Committee and Independent Shareholders

Capitalised terms used on this cover shall have the same meanings as those defined in this circular, unless the content requires otherwise. A letter from the Board is set out on pages 4 to 22 of this circular.

A letter from the Independent Board Committee is set out on pages 23 to 24 of this circular.

A letter from Gram Capital containing its advice to the Independent Board Committee and Independent Shareholders is set out on pages 25 to 40 of this circular.

A notice convening the SGM to be held at Conference Hall 4, 2/F, 10 Science Park West Avenue Lakeside 2(10W), Hong Kong Science Park, N.T. Hong Kong at 11:00 a.m. on Monday, 29 February 2016 is set out on pages SGM-1 to SGM-3 of this circular. Whether or not you intend to attend the meeting or any adjournment thereof, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof to the branch share registrar of the Company in Hong Kong, Tricor Abacus Limited, Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, for registration not later than 4:00 p.m. on Friday, 26 February 2016. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting or any adjournment meeting if you so wish.

5 February 2016

For identification purpose only

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Letter from Gram Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Appendix I — General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
Notice of the SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

— i —

DEFINITIONS

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

“Ancillary IT Products”

peripheral IT products and equipment including but not limited to video cameras, monitors, networking devices and storage devices

“Announcement”

the Company’s announcement dated 23 December 2015, which disclosed, among others, the entering into of the Framework Agreements and the terms and conditions of the transactions contemplated under the Framework Agreements which constitute continuing connected transactions for the Company under the Listing Rules

“associate”

has the meaning ascribed thereto under the Listing Rules

“Board”

the board of Directors

“Build-Own-Operate”

a service model in which the Group provides project-based system integration service to its clients, fees shall primarily be paid on a monthly basis. The ownership of the IT system and the associated intellectual property rights remains with the Company

“Build-Own-Operate and IT Project Framework Agreement”

the agreement dated 23 December 2015 entered into between the Company and Hon Hai as referred to under the sub-section headed “(B) Build-Own-Operate and IT Project Framework Agreement” of the section headed “2. CONTINUING CONNECTED TRANSACTIONS” of this circular

“Company”

Daiwa Associate Holdings Limited, a company incorporated in Bermuda with limited liability whose shares are listed on the main board of the Stock Exchange (stock code: 1037)

“connected person(s)”

has the meaning ascribed to it under the Listing Rules

“continuing connected transaction(s)”

has the meaning ascribed to it under the Listing Rules

“controlling shareholder(s)” has the meaning ascribed to it under the Listing Rules
“Director(s)”

the director(s) of the Company

“Effective Date”

the date on which the approval by the Independent Shareholders’ approval has been obtained for the transactions contemplated under the Framework Agreements and the proposed annual caps thereof in the SGM

— 1 —

DEFINITIONS

“Framework Agreements”
the IT System Operation and Maintenance Framework Agreement, the Build-Own-Operate and IT Project Framework Agreement, the Procurement Framework Agreement and the Sales Framework Agreement
“FSK Holdings”

FSK Holdings Limited, a company incorporated in Hong Kong with limited liability and a limited partner contributing about 75% of the total commitment of Asia-IO Acquisition Fund L.P., a substantial shareholder of the Company

“Gram Capital” or “Independent Financial Adviser”
Gram Capital Limited, a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the transactions contemplated under the Framework Agreements and the proposed annual caps thereof
“Group” the Company and its subsidiaries
“HKD”
Hong Kong dollar, the lawful currency of Hong Kong
“holding company”
has the meaning ascribed to it under the Listing Rules
“Hon Hai”
Hon Hai Precision Industry Company Limited, a company incorporated in Taiwan with limited liability and the shares of which are listed on the Taiwan Stock Exchange
“Hon Hai Group”
Hon Hai and its group companies
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”
an independent committee of the Board comprising all the independent non-executive Directors, established for the purpose of advising the Independent Shareholders in connection with the transactions contemplated under the Framework Agreements and the proposed annual caps thereof
“Independent Shareholders” Shareholders other than Asia-IO Acquisition Fund L.P. and its associates
“IT”
information technology
“IT Project”

a service model in which the Group provides project-based system integration service to its clients. Fees shall be paid primarily based on progress billing. The ownership of the IT system will be transferred to the customers. The ownership of the intellectual property rights produced under the project shall be determined in accordance with the terms of the purchase order of the project

— 2 —

DEFINITIONS

“IT System Operation and Maintenance Framework Agreement”
“Latest Practicable Date”
“Listing Rules”
“PRC”
“Procurement Framework Agreement”
“Proposed Change of Company Name”
“RMB”
“Sales Framework Agreement”
“SGM”
“Share(s)”
“Shareholders”
“Stock Exchange”
“substantial shareholder”
“%”
the agreement dated 23 December 2015 entered into between the Company and Hon Hai as referred to under the sub-section headed “(A) IT System Operation and Maintenance Framework Agreement” of the section headed “2. CONTINUING CONNECTED TRANSACTIONS” of this circular
2 February 2016, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein
the Rules Governing the Listing of Securities on the Stock Exchange

the People’s Republic of China

the agreement dated 23 December 2015 entered into between the Company and Hon Hai as referred to under the sub-section headed “(C) Procurement Framework Agreement” of the section headed “2. CONTINUING CONNECTED TRANSACTIONS” of this circular

the proposed change of the name of the Company as referred to under the section headed “1. PROPOSED CHANGE OF COMPANY NAME” of this circular

Renminbi, the lawful currency of the PRC
the agreement dated 23 December 2015 entered into between the Company and Hon Hai as referred to under the sub-section headed “(D) Sales Framework Agreement” of the section headed “2. CONTINUING CONNECTED TRANSACTIONS” of this circular
the special general meeting of the Company to be held to consider and approve, among others, the Proposed Change of Company Name and the transactions contemplated under the Framework Agreements and the proposed annual caps thereof
ordinary share(s) in the share capital of the Company
holders of shares of the Company

The Stock Exchange of Hong Kong Limited

has the meaning ascribed to it under the Listing Rules
Per cent

— 3 —

LETTER FROM THE BOARD

==> picture [111 x 34] intentionally omitted <==

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

(Incorporated in Bermuda with limited liability)

(Stock code: 1037)

Directors:

Executive: Hui Lap Shun John (Chairman) Chien Yi-Pin Mark Tse Tik Yang Denis Ryu Young Sang James Lau Tak Wan Fung Wai Ching

Independent non-executive: Tang Tin Lok Stephen Kan Ji Ran Laurie Chen Timothy

Registered office:

Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Head office and principal place

of business:

11th Floor, Block G East Sun Industrial Centre 16 Shing Yip Street Kwun Tong, Kowloon Hong Kong

5 February 2016

To the Shareholders

Dear Sir or Madam,

(1) PROPOSED CHANGE OF COMPANY NAME; (2) CONTINUING CONNECTED TRANSACTIONS; AND (3) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement in respect of (i) the Proposed Change of Company Name; and (ii) the Framework Agreements and the transactions contemplated thereunder.

As announced by the Board, the Group has entered into the Framework Agreements with Hon Hai on 23 December 2015.

As at the Latest Practicable Date, FSK Holdings is a limited partner of AsiaIO Acquisition Fund L.P. contributing to about 75% of its total commitment. Asia-IO Acquisition Fund L.P. is a substantial Shareholder of the Company holding 383,608,260 Shares, representing approximately 57.93% of the issued share capital of the Company. To the best knowledge of the Directors after having made all reasonable enquiries, Hon Hai, through Foxconn (Far East) Ltd., Foxconn Technology Company Limited, PanInternational Industrial Corporation and its related parties, indirectly holds approximately 42.525% attributable equity interests in FSK Holdings. Despite Hon Hai does not fall

— 4 —

LETTER FROM THE BOARD

within the ambit of an associate of Asia-IO Acquisition Fund L.P. under the Listing Rules, the Company voluntarily complies with the reporting, announcement and Independent Shareholders’ approval requirements for the transactions contemplated under the Framework Agreements as if Hon Hai is a connected person of the Company under Chapter 14A of the Listing Rules. The Board also understands that the Stock Exchange is considering whether or not to deem Hon Hai as a connected person of the Company under Rule14A.19 of the Listing Rules.

The Independent Board Committee has been formed to advise the Independent Shareholders in respect of the Framework Agreements and the proposed annual caps thereof.

The purpose of this circular is to (i) provide the Shareholders further information in respect of the Proposed Change of Company Name; (ii) provide the Shareholders further information in respect of the Framework Agreements and the proposed annual caps thereof; (iii) set out the recommendation of the Independent Board Committee to the Independent Shareholders and the advice of Gram Capital to the Independent Board Committee and the Independent Shareholders in respect of the Framework Agreements and the proposed annual caps thereof; and (iv) give the Shareholders the notice of the SGM and other information as required under the Listing Rules.

(1) PROPOSED CHANGE OF COMPANY NAME

The Board proposed to change the English name of the Company from “Daiwa Associate Holdings Limited” to “Maxnerva Technology Services Limited”, and adopt the Chinese name “ 雲智匯科技服務有限公司 ” as the secondary name of the Company to replace the Chinese name “ 台和商事控股有限公司 ” which was adopted for identification purpose only.

Reasons for the Proposed Change of Company Name

The Group is principally engaged in manufacturing and trading of diodes, electronic manufacturing services, and manufacturing of telecom and radio frequency devices, plastic components and wires. The Group has planned to expand its business operation and coverage by providing system integration service and smart manufacturing solutions to electronics manufacturers. The Board considers that the Proposed Change of Company Name may better reflect the change of Company status and provide the Company with a new corporate image and identity.

The Board believes that the Proposed Change of Company Name will benefit the Company’s future business development and is in the best interests of the Company and the Shareholders as a whole.

Conditions for the Proposed Change of Company Name

The Proposed Change of Company Name is subject to the following conditions having been satisfied:

(a) the passing of a special resolution by the Shareholders at the SGM to approve the Proposed Change of Company Name; and

— 5 —

LETTER FROM THE BOARD

(b) the Registrar of Companies in Bermuda approving the Proposed Change of Company Name.

Subject to satisfaction of the conditions set out above, the Proposed Change of Company Name will become effective from the date of entry of the new English name of the Company and the date of entry of the new Chinese secondary name of the Company, in each case, on the register maintained by the Registrar of Companies in Bermuda. Upon taking effect of the Proposed Change of Company Name and the receipt of the Certificate of Incorporation on Change of Name and the Certificate of Secondary Name, the Company will then carry out the necessary filing procedures with the Registrar of Companies in Hong Kong.

Effects of the Proposed Change of Company Name

The Proposed Change of Company Name will not affect any rights of the existing holders of securities of the Company or the Company’s daily business operation and its financial position. All the existing certificates of securities of the Company in issue bearing the existing name of the Company in English and, the existing Chinese name of the Company adopted for identification purpose only, will, after the Proposed Change of Company Name becoming effective, continue to be evidence of title to such securities of the Company and will continue to be valid for trading, settlement, registration and delivery for the same number of securities of the Company in the new English name and the secondary name of the Company. Accordingly, there will not be any arrangement for free exchange of the existing certificates of the securities of the Company for new share certificates of the securities bearing the new English name and the secondary name of the Company. Once the Proposed Change of Company Name has become effective, any new certificates of the securities of the Company will be issued in the new English name and secondary name of the Company.

In addition, subject to the confirmation by the Stock Exchange, the English stock short name and the Chinese stock short name for trading of the shares of the Company will also be changed after the Proposed Change of Company Name has become effective.

Further announcement(s) will be made by the Company in relation to the results of the SGM, the effective date of the Proposed Change of Company Name and the new stock short name for trading of the Shares as and when appropriate.

SGM

The SGM will be convened by the Company at 11:00 a.m. on Monday, 29 February 2016 at Conference Hall 4, 2/F, 10 Science Park West Avenue Lakeside 2(10W), Hong Kong Science Park, N.T. Hong Kong for the purpose of, among others, considering and, if thought fit, approving the Proposed Change of Company Name, by way of poll.

To the best of the Directors’ knowledge, information and belief after having made all reasonable enquiries, none of the Shareholders has direct or indirect material interest in the Proposed Change of Company Name and accordingly, no Shareholder is required to abstain from voting on the special resolution relating to the Proposed Change of Company Name at the SGM.

— 6 —

LETTER FROM THE BOARD

The notice of SGM is set out on pages SGM-1 to SGM-3 of this circular. A form of proxy for use at the SGM is also enclosed herewith. Whether or not you intend to attend the SGM, you are advised to read the notice and complete the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and return the form of proxy to the branch share registrar of the Company in Hong Kong, Tricor Abacus Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM if you so wish.

Recommendation

The Board considers that the Proposed Change of Company Name is in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the special resolution to be proposed at the SGM to approve the Proposed Change of Company Name.

(2) CONTINUING CONNECTED TRANSACTIONS

On 23 December 2015 (after trading hours), the Company entered into the Framework Agreements with Hon Hai. The Framework Agreements consist of (1) the IT System Operation and Maintenance Framework Agreement, (2) the Build-Own-Operate and IT Project Framework Agreement, (3) the Procurement Framework Agreement and (4) the Sales Framework Agreement.

Pursuant to the Framework Agreements, the Group agreed to (i) provide IT support and maintenances services to Hon Hai Group; (ii) provide Build-Own-Operate and IT Project services to Hon Hai Group; (iii) purchase enterprise-level products including but not limited to communication software, servers and related hardware equipment from Hon Hai Group to be used primarily for the provision of various IT services; and (iv) sell Ancillary IT Products to Hon Hai Group.

Principal terms of the Framework Agreements

The following sets out the principal terms of the Framework Agreements:

(A) IT System Operation and Maintenance Framework Agreement

Date: 23 December 2015 Parties: The Company; and Hon Hai Terms: From the Effective Date to 31 March 2018 (both days inclusive)

— 7 —

LETTER FROM THE BOARD

Nature of transactions:

The Group agreed to provide IT services to Hon Hai Group to support its existing IT infrastructure. The IT services include, among others, IT strategical planning, IT management, IT deployment and transfer, IT maintenance, IT system design and IT valued-added services.

Pricing basis:

The services to be provided under the IT System Operation and Maintenance Framework Agreement will be charged on a monthly basis. The service fee will be determined based on the following factors:

a) the number of IT technicians involved and their time spent for delivery of such IT services and their respective monthly charging rate is determined according to their skills, experience or grading, with reference to the market rates of IT technicians from at least two independent third parties;
b) the principle of cost plus a reasonable margin with regard to the purchase of any parts, software and products which is required for delivery of such IT services. Such margin is to be determined by the management based on its experience with reference to the charge in the industry for similar products offered by independent third parties in the ordinary course of business and under normal commercial terms;
c) the service fees will be arrived at after arm’s length negotiations between the Group and Hon Hai Group based on the nature, scale and complexity of services and on normal commercial terms. When determining the service fee, where there are similar or comparable services in the market, management of the Company shall take into account the prices of at least two similar and comparable transactions entered into with or carried out by independent third parties in the ordinary course of business in the corresponding period for reference; and
d) the Group adopts the same principle of cost plus a reasonable margin for services to be provided to both Hon Hai Group and independent customers and hence, in any event the terms and prices offered by the Group to Hon Hai Group will be no more favourable than those offered to an independent third party for the same or similar type of services.

— 8 —

LETTER FROM THE BOARD

Payment terms:

The service fees shall be paid to the Group for each month by the 30th day of the following month.

Condition The agreement is conditional upon the Company precedent: obtaining Independent Shareholders’ approval at the SGM in accordance with the Listing Rules.

Proposed annual caps

The table below sets out the proposed annual caps for the service fees payable by Hon Hai Group to the Group pursuant to the IT System Operation and Maintenance Framework Agreement for each of the three financial years ending 31 March 2016, 2017 and 2018:

	Proposed annual caps for	Proposed annual caps for	the	financial
	year	ending 31 March
	2016	2017		2018
	HKD	HKD		HKD
Service fees payable by Hon
Hai Group to the Group	26,732,000	479,525,000	623,383,000

Basis of determination of the proposed annual caps

The proposed annual caps are determined based on:

i) internal estimated turnover of the Group with reference to the expected level of services required by Hon Hai Group regarding IT system operation and maintenance service in different premises and factories after discussion with Hon Hai Group to understand their upcoming demand for our services;
ii) a buffer of 10% to allow for the increase in demand of services by Hon Hai Group for the financial years ending 31 March 2016 and 2017 as anticipated by the management; and
iii) an expected growth rate of 30% on the proposed annual cap for the year ending 31 March 2018. Such expected growth rate is with reference to the future growth prospects of the industry relating to implementation of smart solutions, according to the research results from an independent research firm.

The Shareholders should note that the proposed annual caps represent the best estimate by the Directors of the amount of the relevant transactions based on the information currently available. Such caps bear no direct relationship to, nor should be taken to have any direct bearing to, the Group’s financial or potential financial performance.

— 9 —

LETTER FROM THE BOARD

(B) Build-Own-Operate and IT Project Framework Agreement

Date: 23 December 2015

Parties:

The Company; and Hon Hai

Terms:

From the Effective Date to 31 March 2018 (both days inclusive)

Nature of transactions:

The Group agreed to provide project-based system integration service to Hon Hai Group, including but not limited to design and development of new systems, provision of application programming recommendations, installation, implementation, testing, auditing and integration of new systems within the IT environments; maintenance and support services; and providing cultural transitioning of workforces to new environments, including training of employees and other end users. These projects will be customized according to customer specifications and needs with reference to their business plan and development which include, among others, smart factory, smart office, video conferencing, cloud computing, enterprise application and mobile application.

Pricing basis:

The Company shall provide the services based on the following pricing principles:

(a) where there are similar or comparable services in the market, with reference to the market rate for provision of such project management services with comparable nature, scale or scope. When determining the relevant market rates, management of the Company shall take into account the rates of at least two similar and comparable transactions entered into with or carried out by independent third parties in the ordinary course of business in the corresponding period for reference;

— 10 —

LETTER FROM THE BOARD

(b) based on the principle of cost plus a reasonable margin with regard to the purchase of any parts, software and products which is required for delivery of such project management services. Such margin is to be determined by the management based on its experience with reference to the charge in the industry for similar services and products offered by independent third parties in the ordinary course of business and under normal commercial terms. The cost will take into account of the required level of knowhow and technical expertise, the cost of equipment and software used in the project, cost of labour including but not limited to the number of IT technicians required and their time spent for the project and their respective charging rate is determined according to their skills, experience or grading, with reference to the market rates of IT technicians from at least two independent third parties;
(c) the fees of individual project will be arrived at after arm’s length negotiations between the Group and Hon Hai Group based on the nature, scale and complexity of the project and corresponding services and on normal commercial terms; and
(d) the Group adopts the same principle of cost plus a reasonable margin for services to be provided to both Hon Hai Group and independent customers and hence, in any event the terms and prices offered by the Group to Hon Hai Group will be no more favourable than those offered to an independent third party for the same or similar type of services.

Payment terms: The consideration of individual projects shall be paid in accordance with the terms to be agreed prior to the commencement of such project, with reference to terms commonly adopted in the market such as payment based on progress billing or by monthly payment.

Condition The agreement is conditional upon the Company precedent: obtaining Independent Shareholders’ approval at the SGM in accordance with the Listing Rules.

— 11 —

LETTER FROM THE BOARD

Proposed annual caps

The table below sets out the proposed annual caps for the service fees payable by Hon Hai Group to the Group pursuant to the Build-Own-Operate and IT Project Framework Agreement for each of the three financial years ending 31 March 2016, 2017 and 2018:

	Proposed annual caps for	Proposed annual caps for	the	financial
	year	ending 31 March
	2016	2017		2018
	HKD	HKD		HKD
Service fees payable by Hon
Hai Group to the Group	68,684,000	725,497,000	943,146,000

Basis of determination of the proposed annual caps

The proposed annual caps are determined based on:

i) the number of projects expected to be built or managed for Hon Hai Group in different premises and factories, which is based on the expected level of services, technological advancement required by Hon Hai Group and the corresponding time required to complete those requirements after discussion with Hon Hai Group to understand their upcoming demand for our services;
ii) a buffer of 10% to allow for the increase in demand of services by Hon Hai Group for the financial years ending 31 March 2016 and 2017 as anticipated by the management; and
iii) an expected growth rate of 30% on the proposed annual cap for the year ending 31 March 2018. Such expected growth rate is with reference to the future growth prospects of the industry relating to implementation of smart solutions, according to the research results from an independent research firm.

(C) Procurement Framework Agreement

Date: 23 December 2015 Parties: The Company; and Hon Hai

— 12 —

LETTER FROM THE BOARD

Terms:

From the Effective Date to 31 March 2018 (both days inclusive)

Nature of transactions:

The Company (as buyer) agreed to purchase enterprise-level products directly or via its subsidiaries including but not limited to communication software, servers and related hardware equipment from Hon Hai Group (as seller). The enterprise-level products, which are manufactured or developed by Hon Hai Group and also available in the market, will be used primarily by the Group for the provision of various IT services during the term of the Procurement Framework Agreement.

Pricing basis:

The prices for each purchase order are arrived at after arm’s length negotiations, taking into account the then prevailing market conditions; provided that the terms and prices offered to the Group shall be no less favourable than those offered to the Group by independent third party for the same or similar type of ancillary equipment and parts and on normal commercial terms. When determining the relevant market prices, management of the Company shall take into account the quotation of at least two independent third parties for the relevant products to be procured in the corresponding period for reference.

Payment terms:

The price of the equipment/products shall be paid within 30 days after receiving an invoice from Hon Hai Group.

Condition The agreement is conditional upon the Company precedent: obtaining Independent Shareholders’ approval at the SGM in accordance with the Listing Rules.

Proposed annual caps

The table below sets out the proposed annual caps for the fees payable by the Group to Hon Hai Group pursuant to the Procurement Framework Agreement for each of the three financial years ending 31 March 2016, 2017 and 2018:

Proposed annual caps for the financial year ending 31 March 2016 2017 2018 HKD HKD HKD Fees payable by the Group to Hon Hai Group 18,732,000 197,863,000 257,222,000

— 13 —

LETTER FROM THE BOARD

Basis of determination of the proposed annual caps

The proposed annual caps are determined based on:

i) the estimated revenue generated from provision of the Build-OwnOperation and IT Project services after the assessment of the market prospects in Greater China based on the estimate by a global provider of market intelligence;
ii) the expected proportion of those enterprise-level products to be utilized by the Group for provision of IT services that could also be purchased from Hon Hai Group; and
iii) an expected growth rate of 30% on the proposed annual cap for the year ending 31 March 2018. Such expected growth rate is by reference to the future growth prospects of the industry relating to implementation of smart solutions, according to the research results from an independent research firm.

(D) Sales Framework Agreement

Date: 23 December 2015 Parties: The Company; and Hon Hai Terms: From the Effective Date to 31 March 2018 (both days inclusive) Nature of The Company (as seller) agreed to sell Ancillary transactions: IT Products directly or via its subsidiaries to Hon Hai Group (as buyer) during the term of the Sales Framework Agreement. Leveraging on the Group’s historical network and experience in the trading and manufacturing of electronic parts and devices, the Group considers that it may from time to time be approved or designated by Hon Hai Group to source the Ancillary IT Products in response to their needs.

— 14 —

LETTER FROM THE BOARD

Pricing basis:

The prices for each sales order are arrived at after arm’s length negotiations, taking into account the then prevailing market conditions; provided that the terms and prices offered by the Group shall be no more favourable than those available to an independent third party for the same or similar type of ancillary equipment and parts and on normal commercial terms. When determining the relevant market prices, management of the Company shall take into account the prices of at least two similar and comparable transactions entered into with or carried out by independent third parties in the ordinary course of business in the corresponding period for reference.

Payment terms:

The price of the equipment/products shall be paid within 30 days after receiving an invoice from the Group.

Condition The agreement is conditional upon the Company precedent: obtaining Independent Shareholders’ approval at the SGM in accordance with the Listing Rules.

Proposed annual caps

The table below sets out the proposed annual caps for the service fees payable by Hon Hai Group to the Group pursuant to the Sales Framework Agreement for each of the three financial years ending 31 March 2016, 2017 and 2018:

	Proposed annual caps for	Proposed annual caps for	the	financial
	year	ending 31 March
	2016	2017		2018
	HKD	HKD		HKD
Fees payable by Hon Hai
Group to the Group	8,674,000	109,547,000	142,412,000

Basis of determination of the proposed annual caps

The proposed annual caps have been determined based on:

(i) approximately 10% of the total forecast revenue generated from the IT system operation and maintenance service, Build-Own-Operate and IT Project services which represents the best estimate of the Directors after discussion with Hon Hai Group to understand their upcoming demand for our services and the assessment of the market prospects in Greater China based on the estimate by a global provider of market intelligence; and

— 15 —

LETTER FROM THE BOARD

(ii) an expected growth rate of 30% on the proposed annual cap for the year ending 31 March 2018. Such expected growth rate is by reference to the future growth prospects of the industry relating to implementation of smart solutions, according to the research results from an independent research firm.

Further condition on the transactions contemplated under the Framework

Agreements

The transactions as contemplated under the Framework Agreements between the Group and Hon Hai Group (except the Procurement Framework Agreement) are also subject to the condition that the revenue attributable to Hon Hai Group will be less than 80% of the total revenue of the Group and the remaining 20% of the total revenue of the Group will not be attributable to the associates of Hon Hai for each of the financial years ending 31 March 2016, 2017 and 2018 (the “ Condition ”). The calculation of the above percentages will be based on the year-end financial result of the Group. For details of the internal control measures on the compliance with the Condition, please refer to the paragraph headed “Internal Control” of the section headed “2. CONTINUING CONNECTED TRANSACTIONS” of this circular.

The bases for determining the Condition above are as follows:

(1) the expected transaction volumes with Hon Hai Group pursuant to the Framework Agreements (except the Procurement Framework Agreement); and
(2) the forecasted demand for the manufacturing business, SMS service and General IT service by other independent customers following various discussions with them and the continuing market effort of the Group.

Internal Control

The Company has formulated the Management Measures for Connected Transactions to ensure the transactions contemplated under the Framework Agreements are conducted in accordance with the terms of the Framework Agreements and the annual caps thereof are not exceeded. The following guidelines and mechanisms are in place in the Management Measures for Connected Transactions :

(1) The finance department shall inform the relevant business departments of the Company, in writing, the approved annual caps for the continuing connected transactions.

— 16 —

LETTER FROM THE BOARD

(2) Prior to entering into a transaction, the relevant business department shall, where applicable and in accordance with the pricing basis under the corresponding Framework Agreements, collect information on the market rate for the service or comparable service; obtain quotation form independent third parties; and/or compare the price offered to independent third parties.
(3) The relevant business department shall compile a profit/loss statement for every transaction under the Framework Agreements.
(4) The business department shall report to the finance department the revenue amount attributable to Hon Hai Group and such amount attributable to non-Hon Hai Group customers on a monthly basis. If the total revenue attributable to Hon Hai Group exceeds 80% of the total revenue of the Group up to such calender month, the finance department will understand the reasons and take adequate measures in collaboration with the business department to ensure that the Condition shall be fulfilled by the end of such financial year.
(5) The final price of each contract has to be reviewed and approved by the relevant department head.
(6) The finance department shall conduct regular checks regarding the compliance of the terms of Framework Agreements and the Condition.
(7) The relevant business department shall regularly report the progress and implementation of the relevant transactions to the finance department, who shall consolidate the information, perform auditing and report to the chief financial officer and the audit committee/independent non-executive Directors.
(8) When the actual transaction amount under any one of the Framework Agreements exceeds 50% or 80% of the respective annual cap, the relevant business department shall promptly report to the finance department and the chief financial officer.
(9) The auditors of the Company shall review the respective continuing connected transactions of the Company and confirm to the Board that the transactions have been entered into in accordance with the pricing policies as set forth in the relevant Framework Agreements governing such transactions. The auditors of the Company shall also confirm that the annual caps applicable to the respective continuing connected transactions entered into between the Company and its connected persons have not been exceeded.
(10) The independent non-executive Directors shall conduct annual review on the continuing connected transactions and confirm that the transactions are on normal commercial terms or better; or if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Company than those available to

— 17 —

LETTER FROM THE BOARD

or (if applicable) from independent third parties; and have been entered into in accordance with the relevant terms that are fair and reasonable and in the overall interests of the shareholders of the Company as a whole.

Further information about the new business of the Group

The new business of the Group can be broadly categorised as follows:

Provision of smart manufacturing solutions (“ SMS ”) service: SMS enable industrial companies and in particular, electronic manufacturers to upgrade and streamline their manufacturing process through the adoption of SMS service. Each SMS needs to be customized based on the specific requirements of customers and also their unique manufacturing process and hence, each SMS project is highly heterogeneous to the other. Services to be provided by the Group pursuant to the Build-Own-Operate and IT Project Framework Agreement fall within this category.
General IT service and maintenance and sales of Ancillary IT Products (“ General IT ”): as part of the new business of the Group, it also intends to provide general IT service support and maintenance to customers. Services to be provided and products to be sold pursuant to the IT System Operation and Maintenance Framework Agreement and the Sales Framework Agreement, respectively, fall within this category.

Company’s plans on the new business

It is the current business strategy of the Group to primarily focus its market effort for the provision of SMS service to leading industrial companies in Asia (in particular electronic manufacturers), including but not limited to Hon Hai Group. The Board believes that business collaboration with the leading industrial companies such as Hon Hai Group can serve as a platform to showcase the SMS service provided by the Group to other leading industrial companies and can help to enhance the Group’s clientele profile.

In addition to Hon Hai Group, the Group is also in the course of actively exploring business collaborations with other leading industrial companies with respect to its SMS service. For instance, the Group has entered into a memorandum of understanding in relation to business collaboration with another leading global player in the IT industry. The Board is of the view that with the establishment of strategic cooperation with this leading global player, the Group could leverage on its global footprint in the IT industry to reach out to a wider group of customers for its SMS service.

Furthermore, the Group has been devoting its efforts to capture the market opportunities arising amongst government departments/authorities or small-to-medium enterprises in the PRC. Currently, the Group has been in discussion with 24 potential independent customers for its new business.

— 18 —

LETTER FROM THE BOARD

Reasons for and benefits of entering into the Framework Agreements

The Group has a long historical record in trading of electronic parts and manufacturing of electronic devices and planned to expand its business operation and coverage by providing smart manufacturing solutions to electronics manufacturers. The Group is expanding its IT professional team comprising mainly IT technicians and programmers and aims to assist electronics manufacturers in the Greater China region to upgrade their manufacturing lines through system integration services utilizing “Internet-of-Things” (“ IoT ”) modules, analytics software, and other digital technologies. Hon Hai Group is a leading player in the electronics manufacturing industry, and, based on the understanding of the Company, Hon Hai Group is planning to upgrade its manufacturing lines to adopt the IoT modules supplemented with other specific IT solutions. Given Hon Hai Group is also a large supplier of enterprise-level products and this type of component such as communication software, servers and related hardware equipment are commonly adopted by the Group and its technicians during the provision of IT system integration services or designing smart manufacturing solution for its client, the Framework Agreements also allow the Group to secure the supplies should those enterprise-level products fit the specifications required by the Group’s clients.

The Framework Agreements allow the Group to (i) explore a long term and strategic business relationship with Hon Hai Group, which is the world’s largest electronics manufacturing services provider; (ii) leverage its business relationship with Hon Hai Group to enhance the Group’s clientele profile; and (iii) maintain a stable source of business order for the Group’s IT services and secure a stable source of supplies for enterprise-level products from a large electronics manufacturing group like Hon Hai Group. The Board believes that business collaboration with the leading industrial companies such as Hon Hai Group can serve as a platform to showcase the SMS service provided by the Group to other leading industrial companies and can help to enhance the Group’s clientele profile.

The Directors (including the independent non-executive Directors) consider it beneficial to the Group to conduct the continuing connected transactions contemplated under the Framework Agreements given that they are in line with the Group’s strategies to expand into the smart manufacturing solutions business, and are able to continue to generate stable revenue and income to the Group.

In light of the above, the Directors (including the independent non-executive Directors) consider that the Framework Agreements and the respective annual caps thereof have been entered into/ arrived at (a) in the ordinary and usual course of the business of the Company; (b) on normal commercial terms; and (c) on terms that are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

Information about the parties

— 19 —

LETTER FROM THE BOARD

Hon Hai is a global manufacturing services provider in the computer, communications and consumer electronics industry whose shares are listed on the Taiwan Stock Exchange.

Implications under the Listing Rules

As at the Latest Practicable Date, FSK Holdings is a limited partner of AsiaIO Acquisition Fund L.P. contributing to about 75% of its total commitment. AsiaIO Acquisition Fund L.P. is a substantial Shareholder of the Company holding 383,608,260 Shares, representing approximately 57.93% of the issued share capital of the Company. To the best knowledge of the Directors after having made all reasonable enquiries, Hon Hai, through Foxconn (Far East) Ltd., Foxconn Technology Company Limited, Pan-International Industrial Corporation and its related parties, indirectly holds approximately 42.525% attributable equity interests in FSK Holdings. Despite Hon Hai does not fall within the ambit of an associate of Asia-IO Acquisition Fund L.P. under the Listing Rules, the Company voluntarily complies with the reporting, announcement and Independent Shareholders’ approval requirements for the transactions contemplated under the Framework Agreements as if Hon Hai is a connected person of the Company under Chapter 14A of the Listing Rules. The Board also understands that the Stock Exchange is considering whether or not to deem Hon Hai as a connected person of the Company under Rule14A.19 of the Listing Rules.

As one or more of the applicable percentage ratios of the proposed annual caps of the Framework Agreements for the three financial years ending 31 March 2018 for the transactions contemplated under the Framework Agreements are expected to be higher than 5% and more than HKD10,000,000 on an annual basis, the transactions contemplated under the Framework Agreements are subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules.

The Independent Board Committee has been established to advise the Independent Shareholders on the transactions contemplated under the Framework Agreements and the proposed annual caps thereof. Gram Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

Chien Yi-Pin Mark is a director of Hon Hai. Hence, Mr. Chien had abstained from voting on the resolution to approve the Framework Agreements and the transactions contemplated thereunder at the relevant meeting of the Board. Save as disclosed above, none of the Directors has any material interest in the Framework Agreements and the transactions contemplated thereunder.

SGM

The notice of SGM is set out on pages SGM-1 to SGM-3 of this circular. The SGM will be convened by the Company at 11:00 a.m. on Monday, 29 February 2016 at Conference Hall 4, 2/F, 10 Science Park West Avenue Lakeside 2(10W), Hong Kong Science Park, N.T. Hong Kong. At the SGM, an ordinary resolution will be proposed and, if thought fit, passed to approve the Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof by poll.

Any Shareholder with a material interest in the Framework Agreements and the transactions contemplated thereunder, shall not vote on the resolution in relation to the Framework Agreements proposed at the SGM.

— 20 —

LETTER FROM THE BOARD

As the Company decided to voluntarily comply with the reporting, announcement and Independent Shareholders’ approval requirements for the transactions contemplated under the Framework Agreements as if Hon Hai is a connected person of the Company under Chapter 14A of the Listing Rules. The Board also understands that the Stock Exchange is considering whether or not to deem Hon Hai as a connected person of the Company under Rule14A.19 of the Listing Rules. To the best of the Directors’ knowledge and belief having made all reasonable enquiries, as at the Latest Practicable Date, save for Asia-IO Acquisition Fund L.P. and its associates, no other Shareholder is required to abstain from voting on the resolution for approving the Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof at the SGM.

As at the Latest Practicable Date, Asia-IO Acquisition Fund L.P. held 383,608,260 Shares, representing approximately 57.93% of the issued share capital of the Company. Asia-IO Acquisition GP Limited, being the general partner of AsiaIO Acquisition Fund L.P., is deemed to be interested in 57.93% of the issued share capital of the Company. Tse Tik Yang Denis, being the controlling shareholder of Asia-IO Acquisition GP Limited, Asia-IO Holdings Limited and Asia-IO Advisors Limited, is deemed to be interested in 64.85% of the issued share capital of the Company. FSK Holdings contributes about 75% of the total commitment of Asia-IO Acquisition Fund L.P. and is deemed to be interested in 57.93% of the issued share capital of the Company.

A form of proxy for use at the SGM is also enclosed herewith. Whether or not you intend to attend the SGM, you are advised to read the notice and complete the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and return the form of proxy to the branch share registrar of the Company in Hong Kong, Tricor Abacus Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM if you so wish.

Pursuant to Rule 13.39(4) of the Listing Rules, the vote of the Independent Shareholders at the SGM will be taken by poll and the announcement on the results of which will be published on the websites of the Company and of the Stock Exchange following the SGM.

Recommendation

Your attention is drawn to (i) the letter from the Independent Board Committee as set out on pages 23 to 24 of this circular which contains its recommendation to the Independent Shareholders on the terms of the Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof; and (ii) the letter of advice from Gram Capital as set out on pages 25 to 40 of this circular which contains, amongst other matters, its advice to the Independent Board Committee and the Independent Shareholders in relation to the terms of the Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof together with the principal factors and reasons considered by it in concluding its advice.

— 21 —

LETTER FROM THE BOARD

Having considered the factors mentioned above, the Directors (including the independent non-executive Directors) are of the view that the terms of the Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof are on normal commercial terms, and are fair and reasonable so far as the Independent Shareholders are concerned, and are in the interest of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the SGM to approve the Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof.

Additional Information

Your attention is also drawn to the appendix to this circular and the notice of the SGM.

Yours faithfully, By Order of the Board Daiwa Associate Holdings Limited HUI LAP SHUN, JOHN Chairman and acting Chief Executive Officer

— 22 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [111 x 34] intentionally omitted <==

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

(Incorporated in Bermuda with limited liability)

(Stock code: 1037)

5 February 2016

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular dated 5 February 2016 of the Company (the “ Circular ”) of which this letter forms a part. Terms defined in the Circular shall have the same meanings herein unless the context otherwise requires.

We have been appointed to form the Independent Board Committee to consider and to advise the Independent Shareholders as to whether, in our opinion, the terms of the Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof are fair and reasonable so far as the Independent Shareholders are concerned. Gram Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof.

We wish to draw your attention to the “Letter from the Board” set out on pages 4 to 22 of the Circular which contains, inter alia, information on the Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof, as well as the letter from Gram Capital set out on pages 25 to 40 of the Circular which contains its advice in respect of the terms of the Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof.

Having taken into account the advice of Gram Capital, we consider that (i) the terms of the Framework Agreements are on normal commercial terms or better, fair and reasonable, and are in the interests of the Company and the Shareholders as a whole, (ii) the transactions contemplated under the Framework Agreements will be carried out in the ordinary and usual course of business of the Company, and (iii) the annual caps of the Framework Agreements for each of the three financial years ending on 31 March 2016, 2017 and 2018 are fair and reasonable, and in the interests of the Company and Shareholders as a whole. Accordingly, we recommend the Independent Shareholders

For identification purpose only

— 23 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

to vote in favour of the ordinary resolutions to be proposed at the SGM to approve the Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof.

Yours faithfully, For and on behalf of

Independent Board Committee

Tang Tin Lok Stephen

Independent non-executive Director

Kan Ji Ran Laurie

Independent non-executive Director

Chen Timothy

Independent non-executive Director

— 24 —

LETTER FROM GRAM CAPITAL

Set out below is the text of a letter received from Gram Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Framework Agreements and the transactions contemplated thereunder for the purpose of inclusion in this circular.

==> picture [169 x 32] intentionally omitted <==

Room 1209, 12/F. Nan Fung Tower 88 Connaught Road Central/ 173 Des Voeux Road Central Hong Kong

5 February 2016

To: The independent board committee and the independent shareholders of Daiwa Associate Holdings Limited

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Framework Agreements and the transactions contemplated thereunder, details of which are set out in the letter from the Board (the “ Board Letter ”) contained in the circular dated 5 February 2016 issued by the Company to the Shareholders (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 23 December 2015 (after trading hours), the Company entered into the Framework Agreements with Hon Hai. The Framework Agreements consist of (a) the IT System Operation and Maintenance Framework Agreement; (b) the Build-Own-Operate and IT Project Framework Agreement; (c) the Procurement Framework Agreement, and (d) the Sales Framework Agreement.

Pursuant to the Framework Agreements, the Company agreed to (i) provide IT support and maintenance services to Hon Hai Group; (ii) provide Build-Own-Operate and IT Project services to Hon Hai Group; (iii) purchase enterprise-level products including but not limited to communication software, servers and related hardware equipment from Hon Hai Group to be used primarily for the provision of various IT services; and (iv) sell Ancillary IT Products to Hon Hai Group.

With reference to the Board Letter, despite Hon Hai does not fall within the ambit of an associate of Asia-IO Acquisition Fund L.P. (a substantial Shareholder) under the Listing Rules, the Company voluntarily complies with the reporting, announcement and Independent Shareholders’ approval requirements for the transactions contemplated under the Framework Agreements (the “ CCTs ”) as if Hon Hai is a connected person of the Company under Chapter 14A of the Listing Rules. The Board also understands that the

— 25 —

LETTER FROM GRAM CAPITAL

Stock Exchange is considering whether or not to deem Hon Hai as a connected person of the Company under Rule14A.19 of the Listing Rules. As one or more of the applicable percentage ratios of the proposed annual caps of the Framework Agreements (the “ Annual Cap(s) ”) for the three financial years ending 31 March 2018 for the transactions contemplated under the Framework Agreements are higher than 5% and more than HK$10,000,000 on an annual basis, the transactions contemplated under the Framework Agreements are subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules.

The Independent Board Committee comprising Mr. Tang Tin Lok Stephen, Mr. Kan Ji Ran Laurie and Mr. Chen Timothy (all being independent non-executive Directors) has been established to advise the Independent Shareholders on (i) whether the terms of the Framework Agreements are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the Framework Agreements and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole and are conducted in the ordinary and usual course of business of the Group; and (iii) how the Independent Shareholders should vote in respect of the resolution(s) to approve the Framework Agreements and the transactions contemplated thereunder at the SGM. We, Gram Capital Limited, have been appointed as Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors. We have assumed that all information and representations that have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us. Our opinion is based on the Directors’ representation and confirmation that there are no undisclosed private agreements/ arrangements or implied understanding with anyone concerning the Framework Agreements and the transactions contemplated thereunder. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules.

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, which to the best of their knowledge and belief, that the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in the Circular or the Circular misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

— 26 —

LETTER FROM GRAM CAPITAL

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company, Hon Hai or their respective subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the entering into of the Framework Agreements. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. In addition, nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, it is the responsibility of Gram Capital to ensure that such information has been correctly extracted from the relevant sources while we are not obligated to conduct any independent in-depth investigation into the accuracy and completeness of those information.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Framework Agreements and the transactions contemplated thereunder, we have taken into consideration the following principal factors and reasons:

1. Background of and reasons for the Framework Agreements

Information on the Group

With reference to the Board Letter, the Group is principally engaged in manufacturing and trading of diodes, electronic manufacturing services, and manufacturing of telecom and radio frequency devices, plastic components and wire. The Group has planned to expand by providing system integration service and smart manufacturing solutions to electronics manufacturers.

With reference to the circular (the “ 2015 Circular ”) and announcement of the Company dated 30 September 2015 and 29 October 2015 respectively, the Company completed, on 29 October 2015, the disposal of its business of Hong Kong and the PRC distribution and trading of electronic components, central management of properties holding, and Canada computer distribution (the “ Disposal Group ”), which constituted a very substantial disposal of the Company (the “ VSD ”). With reference to the unaudited combined financial information of the Disposal Group as set out in Appendix II to the 2015 Circular, the Disposal Group recorded revenue of approximately HK$400.82 million for the financial year ended 31 March 2015.

With reference to the interim report of the Company for the six months ended 30 September 2015, the Group recorded turnover of approximately HK$48.34 million and profit from continuing operations of approximately HK$2.45 million.

— 27 —

LETTER FROM GRAM CAPITAL

Information on Hon Hai

With reference to the Board Letter, Hon Hai is a global manufacturing services provider in the computer, communications and consumer electronics industry whose shares are listed on the Taiwan Stock Exchange.

Reasons for entering into the Framework Agreements

With reference to the Board Letter, the Group has a long historical record in trading of electronic parts and manufacturing of electronic devices and planned to expand its business operation and coverage by providing smart manufacturing solutions to electronics manufacturers. The Group is expanding its IT professional team comprising mainly IT technicians and programmers and aims to assist electronics manufacturers in the Greater China region to upgrade their manufacturing lines through system integration services utilizing IoT modules, analytics software, and other digital technologies.

The new business of the Group can be broadly categorised as follows:

Provision of SMS service: SMS enable industrial companies and in particular, electronic manufacturers to upgrade and streamline their manufacturing process through the adoption of SMS service. Each SMS needs to be customised based on the specific requirements of customers and also their unique manufacturing process and hence, each SMS project is highly heterogeneous to the other. Services to be provided by the Group pursuant to the Build-Own-Operate and IT Project Framework Agreement fall within this category.
General IT service and maintenance and sales of Ancillary IT Products (“ General IT ”): as part of the new business of the Group, it also intends to provide general IT service support and maintenance to customers. Services to be provided and products to be sold pursuant to the IT System Operation and Maintenance Framework Agreement and the Sales Framework Agreement, respectively, fall within this category.

Hon Hai Group is a leading player in the electronics manufacturing industry, and, based on the understanding of the Company, Hon Hai Group is planning to upgrade its manufacturing lines to adopt the IoT modules supplemented with other specific IT solutions. Given Hon Hai Group is also a large supplier of enterpriselevel products and this type of component such as communication software, servers and related hardware equipment are commonly adopted by the Group and its technicians during the provision of IT system integration services or designing smart manufacturing solution for its client, the Framework Agreements also allow the Group to secure the supplies should those enterprise-level products fit the specifications required by the Group’s clients.

With reference to the Board Letter, the Framework Agreements allow the Group to (i) explore a long term and strategic business relationship with Hon Hai Group, which is the world’s largest electronics manufacturing services provider; (ii) leverage its business relationship with Hon Hai Group to enhance the Group’s clientele profile;

— 28 —

LETTER FROM GRAM CAPITAL

and (iii) maintain a stable source of business order for the Group’s IT services and secure a stable source of supplies for enterprise-level products from a large electronics manufacturing group like Hon Hai Group. The Directors consider that it is beneficial to the Group to conduct the CCTs given that they are in line with the Group’s strategies to expand into the smart manufacturing solutions business, and are able to continue to generate stable revenue and income to the Group.

In light of the above, the Directors consider that the Framework Agreements and the respective Annual Caps have been entered into (a) in the ordinary and usual course of the business of the Company; (b) on normal commercial terms; and (c) on terms that are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

It is the current business strategy of the Group to primarily focus its market effort on the provision of SMS service to leading industrial companies in Asia (in particular electronic manufacturers), including but not limited to Hon Hai Group. The Board believes that business collaboration with the leading industrial companies such as Hon Hai Group can serve as a platform to showcase the SMS service provided by the Group to other leading industrial companies and can help to enhance the Group’s clientele profile.

Considering the need for business expansion of the Group and that the entering into the Framework Agreements is aligned with the strategy of the Group, we concur with the Directors that the entering into of the Framework Agreements and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole.

2. Principal terms of the Framework Agreements

I. IT System Operation and Maintenance Framework Agreement:

Date: 23 December 2015

Parties: The Company; and Hon Hai

— 29 —

LETTER FROM GRAM CAPITAL

Terms:

Nature of transactions:

Pricing basis:

From the Effective Date to 31 March 2018 (both days inclusive)

The Company agreed to provide IT services to Hon Hai Group to support its existing IT infrastructure. The IT services include, among others, IT strategical planning, IT management, IT deployment and transfer, IT maintenance, IT system design and IT valued-added services.

The services to be provided under the IT System Operation and Maintenance Framework Agreement will be charged on a monthly basis. The service fee will be determined based on the following factors:

a) the number of IT technicians involved and their time spent for delivery of such IT services and their respective monthly charging rate is determined according to their skills, experience or grading, with reference to the market rates of IT technicians from at least two independent third parties;
b) the principle of cost plus a reasonable margin with regard to the purchase of any parts, software and products which is required for delivery of such IT services. Such margin is to be determined by the management based on its experience with reference to the charge in the industry for similar products offered by independent third parties in the ordinary course of business and under normal commercial terms;
c) the service fees will be arrived at after arm’s length negotiations between the Group and Hon Hai Group based on the nature, scale and complexity of services and on normal commercial terms. When determining the service fee, where there are similar or comparable services in the market, management of the Company shall take into account the prices of at least two similar and comparable transactions entered into with or carried out by independent third parties in the ordinary course of business in the corresponding period for reference; and
d) the Group adopts the same principle of cost plus a reasonable margin for services to be provided to both Hon Hai Group and independent customers and hence, in any event the terms and prices offered by the Group to Hon Hai Group will be no more favourable than those offered to an independent third party for the same or similar type of services.

Payment terms:

The service fees shall be paid to the Company for each month by the 30th day of the following month.

— 30 —

LETTER FROM GRAM CAPITAL

II. Build-Own-Operate and IT Project Framework Agreement:

Date: 23 December 2015

Parties: The Company; and Hon Hai

Terms: From the Effective Date to 31 March 2018 (both days inclusive)

Nature of transactions:

Pricing basis:

The Company shall provide the services based on the following pricing principles:

a) where there are similar or comparable services in the market, with reference to the market rate for provision of such project management services with comparable nature, scale or scope. When determining the relevant market rates, management of the Company shall take into account the rates of at least two similar and comparable transactions entered into with or carried out by independent third parties in the ordinary course of business in the corresponding period for reference;
b) based on the principle of cost plus a reasonable margin with regard to the purchase of any parts, software and products which is required for delivery of such project management services. Such margin is to be determined by the management based on its experience with reference to the charge in the industry for similar services and products offered by independent third parties in the ordinary course of business and under normal commercial terms. The cost will take into account of the required level of knowhow and technical expertise, the cost of equipment and software used in the project, cost of labour including but not limited to the number of IT technicians required and their time spent for the project and their respective charging rate is determined according to their skill level, experience or grading, with reference to the market rates of IT technicians from at least two independent third parties;

— 31 —

LETTER FROM GRAM CAPITAL

c) the fees of individual project will be arrived at after arm’s length negotiations between the Company and Hon Hai based on the nature, scale and complexity of the project and corresponding services and on normal commercial terms; and
d) the Group adopts the same principle of cost plus a reasonable margin for services to be provided to both Hon Hai Group and independent customers and hence in any event the terms and prices offered by the Group to Hon Hai Group will be no more favourable than those offered to an independent third party for the same or similar type of services.

Payment terms:

The consideration of individual projects shall be paid in accordance with the terms to be agreed prior to the commencement of such project, with reference to terms commonly adopted in the market such as payment based on progress billing or by monthly payment.

III. Procurement Framework Agreement:

Date: 23 December 2015

Parties: The Company; and Hon Hai

Terms: From the Effective Date to 31 March 2018 (both days inclusive)

Nature of transactions:

The Company (as buyer) agreed to purchase enterpriselevel products directly or via its subsidiaries including but not limited to communication software, servers and related hardware equipment from Hon Hai Group (as seller). The enterprise-level products, which are manufactured or developed by Hon Hai Group and also available in the market, will be used primarily by the Group for the provision of various IT services during the term of the Procurement Framework Agreement.

— 32 —

LETTER FROM GRAM CAPITAL

Pricing basis:

Payment terms: The price of the equipment/products shall be paid within 30 days after receiving an invoice from Hon Hai Group.

IV. Sales Framework Agreement:

Date: 23 December 2015 Parties: The Company; and Hon Hai

Terms: From the Effective Date to 31 March 2018 (both days inclusive)

Nature of The Company (as seller) agreed to sell Ancillary IT transactions: Products directly or via its subsidiaries to Hon Hai Group (as buyer) during the term of the Sales Framework Agreement. Leveraging on the Group’s historical network and experience in the trading and manufacturing of electronic parts and devices, the Group considers that it may from time to time be approved or designated by Hon Hai Group to source the Ancillary IT Products in response to their needs.

Pricing basis: The prices for each sales order are arrived at after arm’s length negotiations, taking into account the then prevailing market conditions; provided that the terms and prices offered by the Group shall be no more favourable than those available to an independent third party for the same or similar type of ancillary equipment and parts and on normal commercial terms. When determining the relevant market prices, management of the Company shall take into account the prices of at least two similar and comparable transactions entered into with or carried out by independent third parties in the ordinary course of business in the corresponding period for reference.

Payment terms:

The price of the equipment/products shall be paid within 30 days after receiving an invoice from the Company.

— 33 —

LETTER FROM GRAM CAPITAL

Further condition on the transactions contemplated under the Framework Agreements

With reference to the Board Letter, the transactions as contemplated under the Framework Agreements between the Group and Hon Hai Group (except the Procurement Framework Agreement) are also subject to the Condition that the revenue attributable to Hon Hai Group will be less than 80% of the total revenue of the Group and the remaining 20% of the total revenue of the Group will not be attributable to the associates of Hon Hai for each of the financial years ending 31 March 2016, 2017 and 2018. The calculation of the above percentage will be based on the year-end financial results of the Group.

For our due diligence purpose, we have discussed with the Directors to further understand the pricing basis of each of the Framework Agreements. In addition, we were advised by the Directors that the CCTs are governed by the Management Measures for Connected Transactions which has been formulated by the Company to ensure the transactions contemplated under the Framework Agreements are conducted in accordance with the terms of the Framework Agreements and the annual caps thereof are not exceeded. The following guidelines and mechanisms are in place in the Management Measures for Connected Transactions :

(i) The finance department shall inform the relevant business departments of the Company, in writing, the approved annual caps for the continuing connected transactions.
(ii) Prior to entering into a transaction, the relevant business department shall, where applicable and in accordance with the pricing basis under the corresponding Framework Agreements, collect information on the market rate for the service or comparable service; obtain quotation form independent third parties; and/or compare the price offered to independent third parties.
(iii) The relevant business department shall compile a profit/loss statement for every transaction under the Framework Agreements.
(iv) The business department shall report to the finance department the revenue amount attributable to Hon Hai Group and such amount attributable to non-Hon Hai Group customers on a monthly basis. If the total revenue attributable to Hon Hai Group exceeds 80% of the total revenue of the Group up to such calender month, the finance department will understand the reasons and take adequate measures in collaboration with the business department to ensure that the Condition shall be fulfiled by the end of such financial year.
(v) The final price of each contract has to be reviewed and approved by the relevant department head.
(vi) The finance department shall conduct regular checks regarding the compliance of the terms of Framework Agreements and the Condition.

— 34 —

LETTER FROM GRAM CAPITAL

(vii) The relevant business department shall regularly report the progress and implementation of the relevant transactions to the finance department, who shall consolidate the information, perform auditing and report to the chief financial officer and the audit committee/independent non-executive Directors.
(viii) When the actual transaction amount under any one of the Framework Agreements exceeds 50% or 80% of the respective annual cap, the relevant business department shall promptly report to the finance department and the chief financial officer.
(ix) The auditors of the Company shall review the respective continuing connected transactions of the Company and confirm to the Board that the transactions have been entered into in accordance with the pricing policies as set forth in the relevant Framework Agreements governing such transactions. The auditors of the Company shall also confirm that the annual caps applicable to the respective continuing connected transactions entered into between the Company and its connected persons have not been exceeded.
(x) The independent non-executive Directors shall conduct annual review on the continuing connected transactions and confirm that the transactions are on normal commercial terms or better; or if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Company than those available to or (if applicable) from independent third parties; and have been entered into in accordance with the relevant terms that are fair and reasonable and in the overall interests of the shareholders of the Company as a whole.

We have reviewed and discussed with the Directors for better understanding of the guidelines and mechanisms under the Management Measures for Connected Transactions , in particular, the reporting lines and the approval procedures. After the aforesaid review and discussion, we consider that the interest of the Independent Shareholders would be effectively safeguarded should the Internal Control Policy be strictly adhered to.

As advised by the Directors, through obtaining quotation provided by independent third parties to the Group when the Group seeks to sub-contract its IT projects, the Group is able to get hold of the charging rate per month for various levels of IT technicians from independent third parties. The Company would use such charge rate as a basis in determining the relevant market rate for its own IT technicians. Furthermore, the Company may also obtain such information through desktop research or business intelligence.

As further advised by the Directors, while the service to be provided under each project may differ, the fundamental parameters in determining the fee to be charged, such as the amount of hardware and manpower required to accomplish the project, remain the same for its different projects (including projects with independent customers). Based on the industry experience of the management, competitors take into account similar parameters when formulating the price. Hence, the Board is of the view that the pricing basis for the services/products to be provided/supplied to Hon Hai Group is in line with the market and also on normal commercial terms.

— 35 —

LETTER FROM GRAM CAPITAL

In light of the above, we are of the view that the terms of the Framework Agreements are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

3. The Annual Caps

With reference to the Board Letter, the Framework Agreements and the transactions contemplated thereunder will be subject to, among other things, the Annual Caps for each of the three financial years ending 31 March 2016, 2017 and 2018 as set out below:

	Proposed annual caps for the	Proposed annual caps for the	Proposed annual caps for the
	financial	year ending 31 March
	2016	2017	2018
	HK$	HK$	HK$
I. Service fees payable by Hon Hai Group
to the Group under IT System Operation
and Maintenance Framework Agreement
(“Annual Caps I”)	26,732,000	479,525,000	623,383,000
II. Service fees payable by Hon Hai Group
to the Group under Build-Own-Operate
and IT Project Framework Agreement
(“Annual Caps II”)	68,684,000	725,497,000	943,146,000
III. Fees payable by the Group to Hon Hai
Group under Procurement Framework
Agreement (“Annual Caps III”)	18,732,000	197,863,000	257,222,000
IV. Fees payable by Hon Hai Group to
the Group under Sales Framework
Agreement (“Annual Caps IV”)	8,674,000	109,547,000	142,412,000

Note: Given that the Annual Caps for the financial year ending 31 March 2016 only cover the period from the Effective Date to 31 March 2016, such Annual Caps are significantly lower than those for each of the two years ending 31 March 2018.

I. IT System Operation and Maintenance Framework Agreement

With reference to the Board Letter, the Annual Caps I are determined based on:

(i) internal estimated turnover of the Group (the “ Estimated Turnover ”) with reference to the expected level of services required by Hon Hai Group regarding IT system operation and maintenance service for different premises and factories after discussion with Hon Hai Group to understand their upcoming demand for the Group’s services;
(ii) a buffer of 10% to allow for the increase in demand of services by Hon Hai Group for the financial years ending 31 March 2016 and 2017 as anticipated by the management;

— 36 —

LETTER FROM GRAM CAPITAL

(iii) an expected growth rate of 30% on the proposed annual cap for the year ending 31 March 2018. Such expected growth rate is with reference to the future growth prospects of the industry relating to implementation of smart solutions, according to the research results from an independent research firm.

To assess the fairness and reasonableness of the Annual Caps I, we have also discussed with the Directors regarding the basis of determination of the Annual Caps I as set out above. In this regard, we have obtained the breakdown of the Estimated Turnover by categories of the services for the period ending 31 March 2017. For the Estimated Turnover of each category of the services, we have enquired into the Directors to understand the basis of the relevant estimation. In light of the above, we consider that the breakdown of the Estimated Turnover by categories of the services can reflect the basis of determination of the Annual Caps I as aforementioned and form a reasonable basis for the size of the Annual Caps I for the two years ending 31 March 2017.

As for the Annual Caps I for the year ending 31 March 2018, we noted from a press release dated 2 June 2015 with the heading “Explosive Internet of Things Spending to Reach $1.7 Trillion in 2020, According to IDC” under the website of International Data Corporation that “The Internet of Things continues to gain momentum as vendors and enterprises begin to embrace the opportunities this market presents”. According to new research from International Data Corporation (IDC), the worldwide Internet of Things market will grow from US$655.8 billion in 2014 to US$1.7 trillion in 2020. In addition, the Directors advised us that based on the information found over the internet, the global industrial internet services market is expected to grow at a compound annual growth rate of 33.32% over 2014-2019. As such, we consider the expected growth rate of 30% on the Annual Caps I for the year ending 31 March 2017 when determining the Annual Caps I for the year ending 31 March 2018 to be justifiable.

II. Build-Own-Operate and IT Project Framework Agreement

With reference to the Board Letter, the Annual Caps II are determined based on:

(i) the number of projects expected (“ Expected Projects ”) to be built or managed for Hon Hai Group’s in different premises and factories, which is based on the expected level of services, technological advancement required by Hon Hai Group and the corresponding time require to complete those requirements after discussion with Hon Hai Group to understand their upcoming demand for our services;
(ii) a buffer of 10% to allow for the increase in demand of services by Hon Hai Group for the financial years ending 31 March 2016 and 2017 as anticipated by the management;
(iii) an expected growth rate of 30% on the proposed annual cap for the year ending 31 March 2018. Such expected growth rate is with reference to the future growth prospects of the industry relating to implementation of smart solutions, according to the research result from an independent research firm.

— 37 —

LETTER FROM GRAM CAPITAL

To assess the fairness and reasonableness of the Annual Caps II, we have also discussed with the Directors regarding the basis of determination of the Annual Caps II as set out above. In this regard, we have obtained further details of the Expected Projects (such as estimated budget) for the period ending 31 March 2017. We have also enquired into the Directors to understand the Expected Projects. In light of the above, we consider that the number of Expected Projects, together with their estimated budget, can reflects the basis of determination of the Annual Caps II as aforementioned and form a reasonable basis for the size of the Annual Caps II for the two years ending 31 March 2017.

As for the Annual Caps II for the year ending 31 March 2018, we noted from a press release dated 2 June 2015 with the heading “Explosive Internet of Things Spending to Reach $1.7 Trillion in 2020, According to IDC” under the website of International Data Corporation that “The Internet of Things continues to gain momentum as vendors and enterprises begin to embrace the opportunities this market presents”. According to new research from International Data Corporation (IDC), the worldwide Internet of Things market will grow from US$655.8 billion in 2014 to US$1.7 trillion in 2020. In addition, the Directors advised us that based on the information found over the internet, the global industrial internet services market is expected to grow at a compound annual growth rate of 33.32% over 2014-2019. As such, we consider the expected growth rate of 30% on the Annual Caps I for the year ending 31 March 2017 when determining the Annual Caps II for the year ending 31 March 2018 to be justifiable.

III. Procurement Framework Agreement

With reference to the Board Letter, the Annual Caps III are determined based

on:

(i) the estimated revenue generated from provision of Build-Own-Operation and IT Project services after the assessment of the market prospects in Greater China based on the estimate by a global provider of market intelligence;
(ii) the expected proportion (the “ Expected Proportion ”) of those enterpriselevel products to be utilized by the Group for provision of IT services that could also be purchased from Hon Hai Group; and
(iii) an expected growth rate of 30% on the proposed annual cap for the year ending 31 March 2018. Such expected growth rate is by reference to the future growth prospects of the industry relating to implementation of smart solutions, according to the research results from an independent research firm.

To assess the fairness and reasonableness of the Annual Caps III, we have also discussed with the Directors regarding the basis of determination of the Annual Caps III as set out above. We were advised by the Directors that the Expected Proportion is approximately 30%, which was estimated based on the quotation provided by other parties for providing project-based system integration service. We have

— 38 —

LETTER FROM GRAM CAPITAL

requested and obtained such quotation and noted that the amount of enterprise-level infrastructure under such projects represents approximately 30% of such quotation. Accordingly, we consider that the Expected Proportion can form a reasonable basis for the size of the Annual Caps III for the three years ending 31 March 2018.

IV. Sales Framework Agreement

With reference to the Board Letter, the Annual Caps IV are determined based on (i) approximately 10% of the total forecast revenue generated from the IT System Operation and Maintenance service, Build-Own-Operate and IT Project services which represents the best estimate of the Directors of the Directors after discussion with Hon Hai Group to understand their upcoming demand for the Group’s services and the assessment of the market prospects in Greater China based on the estimate by a global provider of market intelligence; and (ii) an expected growth rate of 30% on the proposed annual cap for the year ending 31 March 2018. Such expected growth rate is by reference to the future growth prospects of the industry relating to implementation of smart solutions, according to the research results from an independent research firm.

After discussion with the Directors regarding the said basis of Annual Caps IV for the three years ending 31 March 2018, we do not doubt such basis given the uncertainties and difficulties in ascertaining the volume and value of this type of transaction.

In light of the above analysis, we consider that the Annual Caps for the three years ending 31 March 2018 are fair and reasonable so far as the Independent Shareholders are concerned.

Shareholders should note that as the Annual Caps are relating to future events and were estimated based on assumptions which may or may not remain valid for the entire period up to 31 March 2018, and they do not represent forecasts of revenue/ income/purchase costs to be incurred from the CCTs. Consequently, we express no opinion as to how closely the actual revenue/income/purchase costs to be incurred from the CCTs will correspond with the Annual Caps.

4. Listing Rules implication

The Directors confirmed that the Company shall comply with the requirements of Rules 14A.53 to 14A.59 of the Listing Rules pursuant to which (i) the values of the CCTs must be restricted by the Annual Caps for the period concerned under the Framework Agreements; (ii) the terms of the Framework Agreements must be reviewed by the independent non-executive Directors annually; (iii) details of independent non-executive Directors’ annual review on the terms of the Framework Agreements must be included in the Company’s subsequent published annual reports and financial accounts. Furthermore, it is also required by the Listing Rules that the auditors of the Company must provide a letter to the Board confirming, among other things, whether anything has come to their attention that causes them to believe that the CCTs (i) have not been approved by the Board; (ii) were not, in all material respects, in accordance with the pricing policies of the Group if the transactions involve the provision of goods or services by the Group; (iii) were not entered into, in all material respects, in accordance with the relevant agreement

— 39 —

LETTER FROM GRAM CAPITAL

governing the transactions; and (iv) have exceeded the Annual Caps. In the event that the total amounts of the CCTs exceed the Annual Caps, or that there is any material amendment to the terms of the Framework Agreements, as confirmed by the Directors, the Company shall comply with the applicable provisions of the Listing Rules governing continuing connected transactions.

Given the above stipulated requirements for continuing connected transactions pursuant to the Listing Rules, we are of the view that there are adequate measures in place to monitor the continuing connected transactions contemplated under the Framework Agreements and thus the interest of the Independent Shareholders would be safeguarded.

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of the Framework Agreements are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the entering into of the Framework Agreements is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the SGM to approve the Framework Agreements and the transactions contemplated thereunder and we recommend the Independent Shareholders to vote in favour of the resolution(s) in this regard.

Yours faithfully, For and on behalf of Gram Capital Limited Graham Lam Managing Director

— 40 —

GENERAL INFORMATION

APPENDIX

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. DISCLOSURE OF INTERESTS

1) Interests and short positions of the Directors and the chief executive of the Company in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, were as follows:

(a) Long positions in the Shares

Name of Director Tse Tik Yang Denis (Note)	Shares in issue
	Personal interests Corporate interests Other interests Total interests Approximate percentage — 429,464,357 — 429,464,357 64.85%

Note:

Mr. Tse is an executive Director of the Company. Given that 383,608,260 Shares were beneficially owned by Asia-IO Acquisition Fund, L.P. whose general partner is Asia-IO Acquisition GP Limited; 43,439,139 Shares were beneficially owned by Asia-IO Holdings Limited; 2,416,958 Shares were beneficially owned by Asia-IO Advisors Limited, each of Asia-IO Acquisition GP Limited, Asia-IO Holdings Limited and Asia-IO Advisors Limited is beneficially owned (directly or indirectly) as to 100%, 95% and 100% respectively by Mr. Tse, who is deemed to be interested in the Shares held by Asia-IO Acquisition GP Limited, Asia-IO Holding Limited and Asia-IO Advisors Limited.

— I-1 —

GENERAL INFORMATION

APPENDIX

(b) Shares of associated corporations of the Company

Name of
associated	Name of	Number of	Approximate
corporation	Director	shares	percentage
Asia-IO Acquisition	Tse Tik Yang Denis	N/A	0.01%
Fund, L.P.
Asia-IO Acquisition	Chien Yi-Pin	N/A	3.20%
Fund, L.P.	Mark
Asia-IO Acquisition	Tse Tik Yang Denis	One	100.0%
GP Limited

Save as disclosed above, so far as the Directors are aware, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules.

— I-2 —

GENERAL INFORMATION

APPENDIX

2) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial Shareholders

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company) had, or were deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

Long positions in the Shares

			Approximate
	Number or		percentage or
	attributable		attributable
	number of	Nature	percentage of
Name of Shareholder	Shares held	of interests	shareholding
Asia-IO Acquisition Fund, L.P.	383,608,260	Beneficial	57.93%
(Note 1)		interests
Asia-IO Holdings Limited_(Note 2)_	43,439,139	Beneficial	6.56%
		interests
Huatai Principal Investment_(Note 3)_	33,161,972	Beneficial	5.01%
		interests

Notes:

383,608,260 Shares were beneficially held by Asia-IO Acquisition Fund, L.P. whose general partner is Asia-IO Acquisition GP Limited which, in turn, is controlled by Mr. Tse Tik Yang Denis.
43,439,139 Shares were beneficially held by Asia-IO Holdings Limited which is controlled by Mr. Tse Tik Yang Denis.
33,161,972 Shares were beneficially held by Huatai Principal Investment, the entire issued share capital of which is beneficially owned by Huatai Principal Investment Group Limited, which is, in turn, owned by Huatai Financial Holdings (Hong Kong) Limited, the financial adviser to the Company. Huatai Financial Holdings (Hong Kong) Limited, is ultimately owned by Huatai Securities Co., Ltd.. Each of Huatai Principal Investment Group Limited, Huatai Financial Holdings (Hong Kong) Limited, and Huatai Securities Co., Ltd. is deemed interested in those 33,161,972 Shares.

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or 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 member of the Group.

— I-3 —

GENERAL INFORMATION

APPENDIX

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered, or proposed to enter into, a service contract with any member of the Group which is not terminable by the Group within one year without payment of compensation, other than statutory compensation.

4. COMPETING INTEREST

As at the Latest Practicable Date, none of the Directors and their respective close associates had any interest in a business which competes or may compete with the business of the Group.

5. INTEREST OF DIRECTORS IN ASSETS OF THE GROUP OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

Since 31 March 2015, the date to which the latest published audited accounts of the Group have been made up, none of the Directors has, or has had, any direct or indirect interest in any assets which have been acquired, disposed of by or leased to or which are proposed to be acquired, disposed of by or leased to, any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group subsisting at such date and which was significant in relation to the business of the Group.

6. MATERIAL CONTRACTS

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

(a) the Disposal Agreement (as defined in the composite offer and response document issued by the Company on 2 November 2015 and including the supplemental agreement dated 27 July 2015);
(b) the Subscription Agreements (as defined in the composite offer and response document issued by the Company on 2 November 2015);
(c) the agreement dated 21 August 2014 and entered into amongst Advance Creative Technology Limited, Daiwa Associate Limited (“ DAL ”), and Daiwa Associate (China) Limited (all are the wholly-owned subsidiaries of the Company), as vendors, Daiwa Trading (Guangdong) Limited (“ DT ”) (a wholly owned subsidiary of the Company) as target and issuer, the Company as

— I-4 —

GENERAL INFORMATION

APPENDIX

vendors’ guarantor, Vision Best Holdings Limited as purchaser, and Blue Sky Telecommunication Limited (“ Blue Sky ”) as subscriber in relation to (i) the proposed disposal of 98 shares in DT and all obligations, indebtedness and liabilities due, owing or incurred by DT to the vendors at the consideration of RMB100,000,000; and (ii) the subscription for 94 shares in DT by DAL and 2 shares in DT by Blue Sky at the aggregate subscription price of HK$2 and RMB2,000,000 respectively; and

(d) the agreement dated 25 November 2015 and entered into between Grand Field Technology Limited, a wholly-owned subsidiary of the Company, and Mr. Liu Wenjun in relation to the acquisition of the entire equity interest in 雲智匯（重慶）高新科技服務有限公司 (Yunzhihui (Chongqing) High-End Technology Services Limited*) at a consideration of RMB100,000.
Transliteration of the Chinese name

7. LITIGATION

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

8. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March 2015, the date to which the latest published audited financial statements of the Company were made up.

9. EXPERTS AND CONSENTS

The following is the qualification of the expert who has given opinion or advice which is contained in this circular:

Name

Qualification

Gram Capital a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity as defined under the SFO

As at the Latest Practicable Date, Gram Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion of and reference to its name and statements in the form and context in which it appears.

As at the Latest Practicable Date, Gram Capital was not beneficially interested in the shares in any member of the Group and did not have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for shares in any member of the Group.

— I-5 —

GENERAL INFORMATION

APPENDIX

As at the Latest Practicable Date, Gram Capital did not have any direct or indirect interest in any assets which have been acquired or disposed of by or leased to the Group or are proposed to be acquired or disposed of by or leased to the Group since 31 March 2015, being the date up to which the latest published audited consolidated accounts of the Company were made up.

The letters, recommendation and/or reports given by Gram Capital are given as at of the date of this circular for incorporation herein.

10. MISCELLANEOUS

(a) The registered office the Company is located at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda and the head office and principal place of business in Hong Kong is at 11th Floor, Block G, East Sun Industrial Centre, 16 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong.
(b) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Abacus Ltd. at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(c) The company secretary of the Company is Mr. Tsang Hing Bun (“ Mr. Tsang ”). Mr. Tsang is a member of The Hong Kong Institute of Certified Public Accountants and an associate member of The Hong Kong Institute of Chartered Secretaries. He is also an associate member of the Institute of Chartered Secretaries and Administrators.
(d) The English text of this circular shall prevail over the Chinese text.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of the Company at 1/F, Harbour View 1, 12 Science Park East Avenue, Hong Kong Science Park, New Territories, Hong Kong normal business hours (except for Saturdays and public holidays) from the date of this circular up to and including the date of SGM:

(a) the memorandum of association of the Company and the by-laws of the Company;
(b) the letter from the Board to the Shareholders, the text of which is set out on pages 4 to 22 of this circular;
(c) the letter of recommendation from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 23 to 24 of this circular;
(d) the letter of advice from Gram Capital to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 25 to 40 of this circular;

— I-6 —

GENERAL INFORMATION

APPENDIX

(e) the written consent from Gram Capital referred to in the section headed “9. Expert and Consents” in this appendix;
(f) the annual reports of the Company for the three financial years ended 31 March 2015;
(g) the interim report of the Company for the six months ended 30 September 2015;
(h) the Framework Agreements;
(i) the material contracts as referred to in the paragraph headed “6. Material Contracts” in this appendix; and
(j) this circular.

— I-7 —

NOTICE OF THE SGM

==> picture [111 x 34] intentionally omitted <==

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

(Incorporated in Bermuda with limited liability) (Stock code: 1037)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) of Daiwa Associate Holdings Limited (the “ Company ”) will be held on Monday, 29 February 2016, at 11:00 a.m. at Conference Hall 4, 2/F, 10 Science Park West Avenue Lakeside 2(10W), Hong Kong Science Park, N.T. Hong Kong to consider and, if thought fit, approve with or without modifications, the following resolutions as special resolution or ordinary resolution of the Company:

SPECIAL RESOLUTION

“ THAT subject to and conditional upon the necessary approval of the Registrar of Companies in Bermuda being obtained: (a) the English name of the Company be changed from “Daiwa Associate Holdings Limited” to “Maxnerva Technology Services Limited”, and adopt a new Chinese name “ 雲智匯科技服務有限公司 ” as the secondary name of the Company to replace the Chinese name “ 台和商事控股有限公司 ” which was adopted for identification purpose only; and (b) that the Directors be and are hereby authorized to do all such acts and things and execute such further documents and take all steps which, in their opinion may be necessary, desirable or expedient to implement and give effect to the aforesaid change of name of the Company and to attend to any necessary registration and/or filing for and on behalf of the Company.”

ORDINARY RESOLUTIONS

1. “ THAT :

the framework agreement in relation to IT system operation and maintenance dated 23 December 2015 (the “ IT System Operation and Maintenance Framework Agreement ”) entered into between the Company and Hon Hai Precision Industry Company Limited (“ Hon Hai ”), details of which are described in the circular of the Company dated 5 February 2016 (the “ Circular ”) and a copy of which has been produced to this meeting marked ‘‘A’’ and signed by the chairman of this meeting for the purpose of identification, and the terms and conditions thereof, the proposed annual cap amounts related thereof, all the transactions contemplated thereunder and the implementation thereof be and are hereby confirmed, ratified and approved.”

For identification purpose only

— SGM-1 —

NOTICE OF THE SGM

2. “ THAT :

the framework agreement in relation to build-own-operate and IT project dated 23 December 2015 (the “ Build-Own-Operate and IT Project Framework Agreement ”) entered into between the Company and Hon Hai, details of which are described in the Circular and a copy of which has been produced to this meeting marked ‘‘B’’ and signed by the chairman of this meeting for the purpose of identification, and the terms and conditions thereof, the proposed annual cap amounts related thereof, all the transactions contemplated thereunder and the implementation thereof be and are hereby confirmed, ratified and approved.”

3. “ THAT :

the framework agreement in relation to procurement of enterprise-level products dated 23 December 2015 (the “ Procurement Framework Agreement ”) entered into between the Company and Hon Hai, details of which are described in the Circular and a copy of which has been produced to this meeting marked ‘‘C’’ and signed by the chairman of this meeting for the purpose of identification, and the terms and conditions thereof, the proposed annual cap amounts related thereof, all the transactions contemplated thereunder and the implementation thereof be and are hereby confirmed, ratified and approved.”

4. “ THAT :

the framework agreement in relation to sales of ancillary IT products dated 23 December 2015 (the “ Sales Framework Agreements ”) entered into between the Company and Hon Hai, details of which are described in the Circular and a copy of which has been produced to this meeting marked ‘‘D’’ and signed by the chairman of this meeting for the purpose of identification, and the terms and conditions thereof, the proposed annual cap amounts related thereof, all the transactions contemplated thereunder and the implementation thereof be and are hereby confirmed, ratified and approved.”

5. “ THAT :

any one director of the Company or any other person authorized by the directors of the Company be and is hereby generally and unconditionally authorized to do all such acts and things, to sign and execute all such further documents for and on behalf of the Company, and to take such steps as he may in his absolute discretion consider necessary, appropriate, desirable or expedient to give effect to or in connection with each of the IT System Operation and Maintenance Framework Agreement, Build-Own-Operate and IT Project Framework Agreement, Procurement Framework Agreement and Sales Framework Agreement and the transactions contemplated thereunder.”

By Order of the Board Daiwa Associate Holdings Limited HUI LAP SHUN, JOHN

Chairman and acting Chief Executive Officer

Hong Kong, 5 February 2016

— SGM-2 —

NOTICE OF THE SGM

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

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

Notes:

Any member of the Company entitled to attend and vote at a meeting of the Company shall be entitled to appoint another person as his proxy to attend and vote instead of him. A member of the Company who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of the Company.
Where there are joint holders of any Share, any one of such joint holder may vote, either in person or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at any meeting, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding. Several executors or administrators of a deceased member of the Company in whose name any share stands shall, for the purposes of the bye-laws of the Company, be deemed joint holders thereof.
The instrument appointing a proxy and (if required by the Board) the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority, shall be delivered to the Hong Kong branch share registrar of the Company, Tricor Abacus Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote. Delivery of an instrument appointing a proxy shall not preclude a member of the Company from attending and voting in person at the Meeting convened and in such event, the instrument appointing a proxy shall be deemed to be revoked.

— SGM-3 —

AI assistant

WEIli Holdings Limited — Proxy Solicitation & Information Statement 2016

50558_rns_2016-02-05_fe7c128a-20e2-4799-8509-09f40aa2adc0.pdf

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

Independent financial adviser to the

Independent Board Committee and Independent Shareholders

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

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

Directors:

Registered office:

Head office and principal place

of business:

(1) PROPOSED CHANGE OF COMPANY NAME; (2) CONTINUING CONNECTED TRANSACTIONS; AND (3) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

(1) PROPOSED CHANGE OF COMPANY NAME

Reasons for the Proposed Change of Company Name

Conditions for the Proposed Change of Company Name

LETTER FROM THE BOARD

Effects of the Proposed Change of Company Name

SGM

LETTER FROM THE BOARD

Recommendation

(2) CONTINUING CONNECTED TRANSACTIONS

Principal terms of the Framework Agreements

(A) IT System Operation and Maintenance Framework Agreement

LETTER FROM THE BOARD

Proposed annual caps

(B) Build-Own-Operate and IT Project Framework Agreement

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Proposed annual caps

(C) Procurement Framework Agreement

LETTER FROM THE BOARD

Proposed annual caps

(D) Sales Framework Agreement

LETTER FROM THE BOARD

Proposed annual caps

Further condition on the transactions contemplated under the Framework

Agreements

Internal Control

LETTER FROM THE BOARD

Further information about the new business of the Group

Company’s plans on the new business

Reasons for and benefits of entering into the Framework Agreements

Information about the parties

Implications under the Listing Rules

SGM

LETTER FROM THE BOARD

Recommendation

LETTER FROM THE BOARD

Additional Information

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

CONTINUING CONNECTED TRANSACTIONS

Independent Board Committee

Kan Ji Ran Laurie

Chen Timothy

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of and reasons for the Framework Agreements

Information on the Group

Information on Hon Hai

Reasons for entering into the Framework Agreements

2. Principal terms of the Framework Agreements

I. IT System Operation and Maintenance Framework Agreement:

II. Build-Own-Operate and IT Project Framework Agreement:

LETTER FROM GRAM CAPITAL

III. Procurement Framework Agreement:

LETTER FROM GRAM CAPITAL

IV. Sales Framework Agreement:

Further condition on the transactions contemplated under the Framework Agreements

3. The Annual Caps

I. IT System Operation and Maintenance Framework Agreement

II. Build-Own-Operate and IT Project Framework Agreement

LETTER FROM GRAM CAPITAL

WEIli Holdings Limited Proxy Solicitation & Information Statement 2016