WEIli Holdings Limited - Proxy Solicitation & Information Statement 2017

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 Maxnerva Technology Services 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.

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MAXNERVA TECHNOLOGY SERVICES LIMITED 雲智匯科技服務有限公司

(Incorporated in Bermuda with limited liability)

(Stock code: 1037)

(1) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS; AND (2) NOTICE OF SPECIAL GENERAL MEETING

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 5 to 23 of this circular.

A letter from the Independent Board Committee is set out on pages 24 to 25 of this circular.

A letter from Gram Capital containing its advice to the Independent Board Committee and Independent Shareholders is set out on pages 26 to 51 of this circular.

A notice convening the SGM to be held at Conference Hall 02, G/F, 1 Science Park East Avenue (IE), Hong Kong Science Park, Shatin, N.T., Hong Kong at 11:00 am on Friday, 15 December 2017 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. 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.

28 November 2017

CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from	the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . .	24
Letter from	Gram Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Appendix I	– General information . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		SGM-1

– i –

DEFINITIONS

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

“2015 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, all dated 23 December 2015 and entered into between the Company and Hon Hai

“2017 Build-Own-Operate and IT Project Framework Agreement”
the agreement dated 22 September 2017 entered into between the Company and Hon Hai as referred to under the subsection headed “(B) 2017 Build-Own-Operate and IT Project Framework Agreement” of the section headed “PRINCIPAL TERMS OF THE 2017 FRAMEWORK AGREEMENTS” of this circular
“2017 Framework Agreements”

the 2017 IT System Operation and Maintenance Framework Agreement, the 2017 Build-Own-Operate and IT Project Framework Agreement, the 2017 Procurement Framework Agreement and the 2017 Sales Framework Agreement

“2017 IT System Operation and Maintenance Framework Agreement”
the agreement dated 22 September 2017 entered into between the Company and Hon Hai as referred to under the subsection headed “(A) 2017 IT System Operation and Maintenance Framework Agreement” of the section headed “PRINCIPAL TERMS OF THE 2017 FRAMEWORK AGREEMENTS” of this circular
“2017 Procurement Framework Agreement”
the agreement dated 22 September 2017 entered into between the Company and Hon Hai as referred to under the subsection headed “(C) 2017 Procurement Framework Agreement” of the section headed “PRINCIPAL TERMS OF THE 2017 FRAMEWORK AGREEMENTS” of this circular
“2017 Sales Framework Agreement”

the agreement dated 22 September 2017 entered into between the Company and Hon Hai as referred to under the subsection headed “(D) 2017 Sales Framework Agreement” of the section headed “PRINCIPAL TERMS OF THE 2017 FRAMEWORK AGREEMENTS” of this circular

– 1 –

DEFINITIONS

“Ancillary IT Products”
“Announcement”
“associate”
“Board”
“Build-Own-Operate”
“CAGR”
“Company”
“connected person(s)”
“continuing connected transaction”
“Director(s)”
“FSK Holdings”

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

the Company’s announcement dated 22 September 2017, which disclosed, among others, the entering into of the 2017 Framework Agreements and the terms and conditions of the transactions contemplated under the 2017 Framework Agreements which constitute continuing connected transactions for the Company under the Listing Rules
has the meaning ascribed thereto under the Listing Rules
the board of Directors

a service model in which the Group builds, owns and operates a project, facility or structure for a specified period. The ownership of the IT system and the associated intellectual property rights remains with the Company during the specified period

compound annual growth rate

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

has the meaning ascribed to it under the Listing Rules

the director(s) of the Company

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

– 2 –

DEFINITIONS

“Gram Capital”
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 2017 Framework Agreements and the proposed annual caps thereof
“Group”
the Company and its subsidiaries
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“Hon Hai”
Hon Hai Precision Industry Company Limited, a company incorporated in Taiwan with limited liability and listed in 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 2017 Framework Agreements and the proposed annual caps thereof
“Independent Shareholders”
Shareholders other than Asia-IO Acquisition Fund L.P. and its associates
“IoT” Internet-of-Things
“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

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DEFINITIONS

“Latest Practicable Date” 23 November 2017, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “PRC” the People’s Republic of China “SGM” the special general meeting of the Company to be held to consider and approve the transactions contemplated under the 2017 Framework Agreements and the proposed annual caps thereof “Share(s)” ordinary share(s) in the share capital of the Company “Shareholder(s)” holders of the Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “substantial Shareholder” has the meaning ascribed to it under the Listing Rules “%” per cent

– 4 –

LETTER FROM THE BOARD

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MAXNERVA TECHNOLOGY SERVICES LIMITED 雲智匯科技服務有限公司

(Incorporated in Bermuda with limited liability)

(Stock code: 1037)

Chairman and non-executive Director: Hui Lap Shum, John

Executive Directors:

Baker Sung Mahn Sam (Chief Executive Officer) Chien Yi-Pin, Mark Fung Wai Ching

Non-executive Directors: Tse Tik Yang Denis Lee Eung Sang

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

Head office and principal place of business: Flat L-N, 15/F Kings Wing Plaza 1 3 On Kwan Street Shatin, Hong Kong

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

28 November 2017

To the Shareholders

Dear Sir or Madam,

(1) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS; AND (2) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement in respect of the 2017 Framework Agreements and the transactions contemplated thereunder.

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LETTER FROM THE BOARD

As the current term of each of the 2015 Framework Agreements will expire on 31 March 2018 and following the change of financial year end date from 31 March to 31 December, the Company has on 22 September 2017 (after trading hours) entered into the 2017 Framework Agreements to renew the continuing connected transactions as contemplated under each of the 2015 Framework Agreements for a term of three financial years ending 31 December 2018, 2019 and 2020. Pursuant to the 2017 Framework Agreements, the Group 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.

Based on the applicable size tests performed with respect to the proposed annual cap amounts under the 2017 Framework Agreements, as one or more of the applicable percentage ratios of the proposed annual caps of the 2017 Framework Agreements for the three financial years ending 31 December 2018, 2019 and 2020 for the transactions contemplated under the 2017 Framework Agreements are expected to be higher than 5% and more than HK$10,000,000 on an annual basis, the transactions contemplated under the 2017 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 2017 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.

The purpose of this circular is to (i) provide the Shareholders further information in respect of the 2017 Framework Agreements and the proposed annual caps thereof; (ii) 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 2017 Framework Agreements and the proposed annual caps thereof; and (iii) give the Shareholders the notice of the SGM and other information as required under the Listing Rules.

PRINCIPAL TERMS OF THE 2017 FRAMEWORK AGREEMENTS

The following sets out the principal terms of each of the 2017 Framework Agreements:

(A) 2017 IT System Operation and Maintenance Framework Agreement

Date: 22 September 2017 Parties: The Company; and Hon Hai

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LETTER FROM THE BOARD

Term:

Nature of Transactions:

Pricing basis:

From 1 January 2018 to 31 December 2020 (both days inclusive) and the 2015 IT system operation and maintenance framework agreement shall be terminated automatically on 1 January 2018.

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.

The services to be provided under the 2017 IT System Operation and Maintenance Framework Agreement will be charged on a monthly basis. The service fees will be determined after arm’s length negotiations between the Group and Hon Hai Group based on the following factors:

(a) the number of IT technicians involved, their time spent for delivery of such IT services and their respective monthly charging rate which 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; and
(c) the Group adopts the same principles 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.

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LETTER FROM THE BOARD

Payment terms:

The service fees shall be paid to the Company on the date agreed upon between the Group and Hon Hai under each individual project.

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

Proposed Annual Cap

The table below sets out the proposed annual caps for the service fees payable by Hon Hai Group to the Group pursuant to the 2017 IT System Operation and Maintenance Framework Agreement for each of the three financial years ending 31 December 2018, 2019 and 2020:

Financial year ending 31 December 2018 2019 2020 HK$ HK$ HK$ Service fees payable by Hon Hai Group to the Group 103,479,918 134,523,893 174,881,061

Basis of determination of the proposed annual caps

The proposed annual caps are determined based on:

(i) the historical transaction amount during the year ended 31 March 2017;
(ii) a buffer of 10% to allow for the increase in demand of services by Hon Hai Group for the financial year ending 31 December 2018 as anticipated by the management; and
(iii) an expected growth of 30% on the proposed annual caps for the three financial years ending 31 December 2018, 2019 and 2020 with reference to (1) the future growth prospects of the IoT industry relating to implementation of smart solutions according to the research results from an independent research firm; and (2) the Group’s sales forecast with Hon Hai Group.

According to the research results published in September 2017 by a market research report publisher based in the United States, the global market for IoT is forecast to reach 41 billion connected devices by 2024 and Asia-Pacific represents the fastest growing market with a CAGR of 33.3% over the period from 2015 to 2024.

In relation to the Group’s sales forecast with Hon Hai Group, it is estimated based on the expected demand for its services by Hon Hai Group after discussion with the management of different group companies of Hon Hai. The Directors envisage that the demand from Hon Hai Group will be substantial because they have numerous factories and offices spreading across different regions in the PRC as well as the globe. It is expected that these factories and offices will look for an upgrade with IoT applications. It has also been assumed that the Group will win the tender amongst other service providers and Hon Hai Group will be able to obtain approval on those expected projects with no significant delay in execution.

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LETTER FROM THE BOARD

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.

Existing annual caps and the actual transaction amounts

The table below sets out the existing annual caps and the actual transaction amounts of the service fees payable by Hon Hai Group to the Group pursuant to the 2015 IT system operation and maintenance framework agreement:

	Year	ended/ending 31	March
	2016	2017	2018Note
	HK$	HK$	HK$
Existing annual caps	26,732,000	479,525,000	623,383,000
Actual transaction amounts	798,973	72,363,579	31,813,890

Note: Up to 31 August 2017 and hence, the five months ended 31 August 2017.

(B) 2017 Build-Own-Operate and IT Project Framework Agreement

Date: 22 September 2017 Parties: The Company; and Hon Hai Term: From 1 January 2018 to 31 December 2020 (both days inclusive) and the 2015 build-own-operate and IT project framework agreement shall be terminated automatically on 1 January 2018.

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; 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 corporate plan and development which include, among others, smart factory, smart office, video conferencing, cloud computing, enterprise application and mobile application.

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LETTER FROM THE BOARD

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 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. 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 which 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 projects 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 projects and corresponding services and on normal commercial terms; and

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LETTER FROM THE BOARD

(d) the Group adopts the same principles 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 projects, with reference to terms commonly adopted in the market such as payment based on progress billing or by monthly payment.

Condition precedent: The agreement is conditional upon the Company 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 2017 Build-Own-Operate and IT Project Framework Agreement for each of the three financial years ending 31 December 2018, 2019 and 2020:

Financial year ending 31 December 2018 2019 2020 HK$ HK$ HK$ Service fees payable by Hon Hai Group to the Group 322,088,370 431,714,882 561,229,346

Basis of determination of the proposed annual caps

The proposed annual caps are determined based on:

(i) the historical transaction amount during the year ended 31 March 2017;
(ii) a buffer of 10% to allow for the increase in demand of services by Hon Hai Group for the financial year ending 31 December 2018 as anticipated by the management; and
(iii) an expected growth of 30% on the proposed annual caps for the three financial years ending 31 December 2018, 2019 and 2020 with reference to (1) the future growth prospects of the IoT industry according to the research results from an independent research firm; and (2) the Group’s sales forecast with Hon Hai Group.

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LETTER FROM THE BOARD

Existing annual caps and the actual transaction amounts

The table below sets out the existing annual caps and the actual transaction amounts of the service fees payable by Hon Hai Group to the Group pursuant to the 2015 build-own-operate and IT project framework agreement:

	Year	ended/ending 31	March
	2016	2017	2018Note
	HK$	HK$	HK$
Existing annual caps	68,684,000	725,497,000	943,146,000
Actual transaction amounts	4,165,180	232,229,630	32,612,099

Note: Up to 31 August 2017 and hence, the five months ended 31 August 2017.

(C) 2017 Procurement Framework Agreement

Date: 22 September 2017 Parties: The Company; and Hon Hai Term: From 1 January 2018 to 31 December 2020 (both days inclusive) and the 2015 procurement framework agreement shall be terminated automatically on 1 January 2018.

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LETTER FROM THE BOARD

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 2017 Procurement Framework Agreement.

Pricing basis: The prices for each purchase order will be 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 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 quotation of two independent third parties for the relevant products to be procured in the corresponding period to the extent independent-third-party suppliers are available.
Payment terms: The price shall be paid to Hon Hai on the date agreed upon between the Group and Hon Hai under each individual order.
Condition precedent: The agreement is conditional upon the Company 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 2017 Procurement Framework Agreement for each of the three financial years ending 31 December 2018, 2019 and 2020:

Financial year ending 31 December 2018 2019 2020 HK$ HK$ HK$ Service fees payable by the Group to Hon Hai Group 165,302,704 214,893,516 279,361,570

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LETTER FROM THE BOARD

Basis of determination of the proposed annual caps

The proposed annual caps are determined based on:

(i) the historical transaction amount during the year ended 31 March 2017;
(ii) the confirmed sales orders with customers and delivery plan projected by Hon Hai Group for the financial year ending 31 December 2018;
(iii) a buffer of 10% to allow for the increase in demand of purchases from Hon Hai Group for the financial year ending 31 December 2018 as anticipated by the management; and
(iv) an expected growth of 30% on the proposed annual caps for the three financial years ending 31 December 2018, 2019 and 2020 with reference to (1) the future growth prospects of the IoT industry according to the research results from an independent research firm; and (2) the Group’s sales forecast with Hon Hai Group.

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LETTER FROM THE BOARD

Existing annual caps and the actual transaction amounts

The table below sets out the existing annual caps and the actual transaction amounts of the service fees payable by the Group to Hon Hai Group pursuant to the 2015 procurement framework agreement:

	Year	ended/ending 31	March
	2016	2017	2018Note
	HK$	HK$	HK$
Existing annual caps	18,732,000	197,863,000	257,222,000
Actual transaction amounts	950,757	52,463,869	42,638,889

Note: Up to 31 August 2017 and hence, the five months ended 31 August 2017.

(D) 2017 Sales Framework Agreement

Date: 22 September 2017 Parties: The Company; and Hon Hai

Term:

From 1 January 2018 to 31 December 2020 (both days inclusive) and the 2015 sales framework agreement shall be terminated automatically on 1 January 2018.

Nature of Transactions:

The Company (as seller) agreed to sell Ancillary IT Products directly or via its subsidiaries to Hon Hai Group (as buyer) during the term of the 2017 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 will be 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 quotation of two independent third parties for the relevant products to be procured in the corresponding period for reference.

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LETTER FROM THE BOARD

Payment terms:

The price of the equipment/products shall be paid to the Company on the date agreed upon between the Group and Hon Hai under each individual order.

Condition precedent: The agreement is conditional upon the Company 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 2017 Sales Framework Agreement for each of the three financial years ending 31 December 2018, 2019 and 2020:

Financial year ending 31 December 2018 2019 2020 HK$ HK$ HK$ Service fees payable by Hon Hai Group to the Group 20,262,617 26,341,402 34,243,822

Basis of determination of the proposed annual caps

The proposed annual caps are determined based on:

(i) the historical transaction amount during the year ended 31 March 2017;
(ii) a buffer of 10% to allow for the increase in demand of services by Hon Hai Group for the financial year ending 31 December 2018 as anticipated by the management; and
(iii) an expected growth of 30% on the proposed annual caps for the three financial years ending 31 December 2018, 2019 and 2020 with reference to (1) the future growth prospects of the IoT industry according to the research results from an independent research firm; and (2) the Group’s sales forecast with Hon Hai Group.

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LETTER FROM THE BOARD

upgrade with IoT applications. It has also been assumed that the Group will win the tender amongst other service providers and Hon Hai Group will be able to obtain approval on those expected projects with no significant delay in execution.

Existing annual caps and the actual transaction amounts

The table below sets out the existing annual caps and the actual transaction amounts of the service fees payable by Hon Hai Group to the Group pursuant to the 2015 sales framework agreement:

	Year	ended/ending 31	March
	2016	2017	2018Note
	HKD	HKD	HKD
Existing annual caps	8,674,000	109,547,000	142,412,000
Actual transaction amounts	770,945	14,169,662	6,392,647

Note: Up to 31 August 2017 and hence, the five months ended 31 August 2017.

Further condition on the transactions contemplated under the 2017 Framework Agreements

The transactions as contemplated under the 2017 Framework Agreements between the Group and Hon Hai Group (except the 2017 Procurement Framework Agreement) are also subject to the condition that the revenue attributable to Hon Hai Group will be less than 60% of the total revenue of the Group and the remaining 40% 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 December 2018, 2019 and 2020 (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 section headed “Internal Control” 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 2017 Framework Agreements (except the 2017 Procurement Framework Agreement); and
(2) the forecasted demand for the Group’s service by other independent customers following various discussions with them and the continuing market effort of the Group.

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LETTER FROM THE BOARD

INTERNAL CONTROL

The Company has formulated the Management Measures for Connected Transactions to ensure the transactions contemplated under the 2017 Framework Agreements are conducted in accordance with the terms of the 2017 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 should inform the relevant business departments of the Company, in writing, the approved annual caps for the continuing connected transactions.
(2) Prior to entering into a transaction, the relevant business department should, where applicable and in accordance with the pricing basis under the corresponding 2017 Framework Agreements, collect information on the market rate for the service or comparable service; obtain quotation from independent third parties; and/or compare the price offered to independent third parties.
(3) The relevant business department should submit a new project application form incorporating a profit/loss statement for every transaction for approval by the business department heads and finance department heads before order confirmation.
(4) The finance department should calculate 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 60% of the total revenue of the Group up to such calendar 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 should conduct checks quarterly regarding the compliance of the terms of Framework Agreements and the Condition.
(7) The relevant business department shall report, at least once a month, the progress and implementation of the relevant transactions to the finance department, who should 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 2017 Framework Agreements exceeds 50% or 80% of the respective annual cap, the finance department shall promptly report to the chief financial officer. The chief financial officer should discuss monthly with the business department about the business forecast in order to assess the possibility of exceeding respective annual caps.

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LETTER FROM THE BOARD

(9) The auditors of the Company should 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 should 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 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 LATEST DEVELOPMENT OF THE IT INTEGRATION AND SOLUTIONS SERVICES SEGMENT OF THE GROUP

The Directors believe that there is no undue reliance on Hon Hai Group by the Group in relation to the renewal of the continuing connected transactions pursuant to the 2017 Framework Agreement because of the following reasons. First, the transactions as contemplated under the 2017 Framework Agreements between the Group and Hon Hai Group (except the 2017 Procurement Framework Agreement) are subject to the condition that the revenue attributable to Hon Hai Group will be less than 60% of the total revenue of the Group for each of the financial years ending 31 December 2018, 2019 and 2020. Second, the percentage of the Group’s revenue attributable derived from Hon Hai Group to the total revenue of the Group in the upcoming years is expected to be lower than that for the previous financial year. For the financial year ended 31 March 2017, approximately 63.7% of the total revenue of the Group was attributable to Hon Hai Group. During the six months ended 30 September 2017, such proportion of revenue further dropped to below 50%, which demonstrated a decreasing trend of the Group’s revenue proportion from Hon Hai Group.

Further, the Group has been leveraging on its expertise in IoT to develop a range of IoT applications on top of smart manufacturing with a diverse range of customers. These IoT applications include smart office, smart home and smart living solutions.

(a) For smart manufacturing solutions, the Group has gradually acquired new independent third party customers from home appliance, consumer electronics, automotive and food and beverage industries since late 2016 and will continue to explore new business opportunities with a diverse range of customers.

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LETTER FROM THE BOARD

(b) For smart office solutions, the Group planned to launch its interactive white board LCD panel products by end of this year to the general market targeting corporate clients. These products will be used by the Group’s customers as substitute to the projectors used in office meeting rooms at an appealing price.
(c) For smart home solutions, the Group is working with some small and medium sized property developers in relation to the provision of smart home solutions to their residential properties. Property developers are interested to bundle innovative smart home ideas in their high-end products in order to differentiate themselves from their competitors. The Group is close to signing a contract with an independent third party customer for a project at Xining, Qinghai Province. The Group is also in talks with an independent third party customer for another project at four 30+ storey high residential buildings at Shijiazhuang, Hebei Province.
(d) For smart living solutions, the Group has obtained contracts from a PRC newly start-up company, an independent third party of the Company, for providing smart living solutions. Currently the Group expects to enter into more sales contracts with this company as the latter is expanding its business coverage aggressively to tiers 3 and 4 cities in the PRC as well as overseas markets. Going forward, the Group expects to work more closely with those newly start-up companies in the PRC and overseas to develop its smart living solution business in the near future.

REASONS FOR AND BENEFITS OF ENTERING INTO THE 2017 FRAMEWORK AGREEMENTS

With the shift of business focus to the provision of Industry 4.0 related IT Integration and Solutions Services, the Group is committed to provide one-stop customized solutions services ranging from planning, sourcing, construction, consulting to maintenance and support for smart manufacturing, smart office, smart living, etc. While the Group is playing an active role to build a more diversified client portfolio, Hon Hai Group remains one of its major clients given its desire to improve efficiency and productivity through digitalization, based on the understanding of the Company.

The entering into of the 2017 Framework Agreements not only allows the Group to maintain a long term and strategic business relationship with Hon Hai Group, which is a global leading electronics manufacturing services provider, but also continue to leverage on its business relationship with Hon Hai Group to showcase its services and broaden the Group’s clientele profile.

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 which are commonly adopted by the Group and its technicians during the provision of IT integration and solutions services, the 2017 Framework Agreements also allow the Group to continue to secure a stable source of supplies should those enterprise-level products fit the specifications required by the Group’s clients.

– 20 –

LETTER FROM THE BOARD

As announced by the Company on 31 August 2017, the Board has resolved to change the financial year end date of the Company from 31 March to 31 December and hence, the forthcoming financial year end date of the Company will be 31 December 2017. In light of the above change of financial year end date, the term of each of the 2017 Framework Agreements will take effect from 1 January 2018, but not from 1 April 2018 as previously contemplated in the 2015 Framework Agreements, such that the cut-off date of the proposed annual caps pursuant to each of the 2017 Framework Agreements will align with the new financial year end date.

In light of the above, the Directors (including the independent non-executive Directors) consider that the 2017 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

The Group is principally engaged in the provision of system and network integration, IT solutions development and implementation, and related maintenance services and electronic products manufacturing.

Hon Hai Group 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 Latest Practicable Date, FSK Holdings is a limited partner of Asia-IO 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 276,103,622 Shares, representing approximately 41.69% 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 2017 Framework Agreements as if Hon Hai is a connected person of the Company under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

Chien Yi-Pin Mark is a general manager of Hon Hai. Hence, Mr. Chien had abstained from voting on the resolution to approve the 2017 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 2017 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 am on Friday, 15 December 2017 at Conference Hall 02, G/F, 1 Science Park East Avenue (IE), Hong Kong Science Park, Shatin, N.T., Hong Kong. At the SGM, the ordinary resolutions will be proposed and, if thought fit, passed to approve the 2017 Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof by poll.

Any Shareholder with a material interest in the 2017 Framework Agreements and the transactions contemplated thereunder, shall not vote on the resolutions in relation to the 2017 Framework Agreements proposed at the SGM.

The Company had decided to voluntarily comply with the reporting, announcement and Independent Shareholders’ approval requirements for the transactions contemplated under the 2017 Framework Agreements as if Hon Hai is a connected person of the Company under Chapter 14A 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 2017 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 276,103,622 Shares, representing approximately 41.69% of the issued share capital of the Company. Asia-IO Acquisition GP Limited, being the general partner of Asia-IO Acquisition Fund L.P., is deemed to be interested in 41.69% 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 41.69% 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.

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LETTER FROM THE BOARD

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 24 to 25 of this circular which contains its recommendation to the Independent Shareholders on the terms of the 2017 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 26 to 51 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 2017 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.

Having considered the factors mentioned above, the Directors (including the independent non-executive Directors) are of the view that the terms of the 2017 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 2017 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 Maxnerva Technology Services Limited HUI LAP SHUN, JOHN Chairman

– 23 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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MAXNERVA TECHNOLOGY SERVICES LIMITED 雲智匯科技服務有限公司

(Incorporated in Bermuda with limited liability)

(Stock code: 1037)

28 November 2017

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular dated 28 November 2017 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 2017 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 2017 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 5 to 23 of the Circular which contains, inter alia, information on the 2017 Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof, as well as the letter from Gram Capital set out on pages 26 to 51 of the Circular which contains its advice in respect of the terms of the 2017 Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the advice of Gram Capital, we consider that (i) the terms of the 2017 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 2017 Framework Agreements will be carried out in the ordinary and usual course of business of the Company, and (iii) the annual caps of the 2017 Framework Agreements for each of the three years ending on 31 December 2018, 2019 and 2020 are fair and reasonable, and in the interests of the Company and Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the SGM to approve the 2017 Framework Agreements, the transactions contemplated thereunder and the proposed annual caps thereof.

Yours faithfully,

For and on behalf of

Tang Tin Lok Stephen Independent non-executive Director

Independent Board Committee Kan Ji Ran Laurie Independent non-executive Director

Chen Timothy Independent non-executive Director

– 25 –

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 2017 Framework Agreements and the transactions contemplated thereunder for the purpose of inclusion in this circular.

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

28 November 2017

To: The independent board committee and the independent shareholders of Maxnerva Technology Services Limited

Dear Sir/Madam,

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of (i) the provision of IT support and maintenance services to Hon Hai Group as contemplated under the 2017 IT System Operation and Maintenance Framework Agreement (the “ SLA Transactions ”); (ii) the provision of Build-Own-Operate and IT Project services to Hon Hai Group as contemplated under the 2017 Build-Own-Operate and IT Project Framework Agreement (the “ BOO-Project Transactions ”); (iii) the purchase of 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 as contemplated under the 2017 Procurement Framework Agreement (the “ Procurement Transactions ”); and (iv) the sale of Ancillary IT Products to Hon Hai Group as contemplated under the 2017 Sales Framework Agreement (the “ Sales Transactions ”, together with the SLA Transactions, BOO-Project Transactions and Procurement Transactions, the “ CCTs ”), details of which are set out in the letter from the Board (the “ Board Letter ”) contained in the circular dated 28 November 2017 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 22 September 2017 (after trading hours), the Company entered into the 2017 Framework Agreements to renew the continuing connected transactions as contemplated under each of the 2015 Framework Agreements for a term of three years ending 31 December 2018, 2019 and 2020. Pursuant to the 2017 Framework Agreements, the Group 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.

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LETTER FROM GRAM CAPITAL

With reference to the Board Letter, the CCTs constitute continuing connected transactions of the Company and are subject to the reporting, annual review, announcement and Independent Shareholders’ approval requirement under Chapter 14A of the Listing Rule.

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 CCTs are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the CCTs 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 CCTs at the SGM. We, Gram Capital Limited, have been appointed as the 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 is no undisclosed private agreement/arrangement or implied understanding with anyone concerning the CCTs. 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 Hong Kong Listing Rules.

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LETTER FROM GRAM CAPITAL

The 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 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 as contained 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.

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 Group or their respective subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the CCTs. 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. If there is any material change before SGM, Shareholders will be notified as soon as possible.

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.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the CCTs, we have taken into consideration the following principal factors and reasons:

1. Background of and reasons for the CCTs

Information on the Group

With reference to the Board Letter, the Group is principally engaged in the provision of system and network integration, IT solutions development and implementation, and related maintenance services and electronic products manufacturing.

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LETTER FROM GRAM CAPITAL

Set out below are the audited consolidated financial information of the Group for the two years ended 31 March 2017 as extracted from the annual report of the Company for the year ended 31 March 2017 (the “ Annual Report ”):

	For the year	For the year
	ended	ended	Change from
	31 March 2017	31 March 2016	2016 to 2017
	HK$’000	HK$’000	%
Revenue	500,405	111,317	349.53
– Electronic products
manufacturing	103,595	94,127	10.06
– IT integration and
solutions services	396,810	17,190	2,208.38
Gross profit/(loss)	172,542	(27,990)	N/A
Profit/(loss) for the year	75,527	(97,599)	N/A

As depicted from the table above, the revenue of the Group for the year ended 31 March 2017 (“ FY2016/17 ”) amounted to approximately HK$500.41 million, representing an increase of approximately 349.53% as compared to that for the year ended 31 March 2016 (“ FY2015/16 ”). Revenue derived from electronic products manufacturing and IT integration and solutions services increased by approximately 10.06% and 2,208.38% respectively from FY2015/16 to FY2016/17. The Group also recorded gross profit and profit of approximately HK$172.54 million and HK$75.53 million respectively for FY2016/17 as compared to the loss position for FY2015/16.

With reference to the Annual Report, the significant improvement in revenue and gross profit was mainly attributable to the growth of IT integration and solutions services segment which successfully obtained a number of sizeable solutions orders from Hon Hai Group. Given that the Group secured a number of significant new orders from Hon Hai Group, approximately 63.7% of the total revenue of the Group was attributable to Hon Hai Group during FY2016/17.

Information on Hon Hai Group

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

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LETTER FROM GRAM CAPITAL

Reasons for and benefits of entering into the 2017 Framework Agreements

With reference to the Board Letter, with the shift of business focus to the provision of Industry 4.0 related IT Integration and Solutions Services, the Group is committed to provide one-stop customized solutions services ranging from planning, sourcing, construction, consulting to maintenance and support for smart manufacturing, smart office, smart living, etc. While the Group is playing an active role to build a more diversified client portfolio, Hon Hai Group remains one of its major clients given its desire to improve efficiency and productivity through digitalization, based on the understanding of the Company.

As advised by the Directors, the entering into of the 2017 Framework Agreements not only allows the Group to maintain a long term and strategic business relationship with Hon Hai Group, which is a global leading electronics manufacturing services provider, the Group can also continue to leverage on its business relationship with Hon Hai Group to showcase its services and broaden the Group’s clientele profile. 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 which are commonly adopted by the Group and its technicians during the provision of IT integration and solutions services, the 2017 Framework Agreements also allows the Group to continue to secure a stable source of supplies should those enterprise-level products fit the specifications required by the Group’s clients.

As further mentioned in the Board Letter, with reference to the announcement of the Company dated 31 August 2017, the Board has resolved to change the financial year end date of the Company from 31 March to 31 December and hence, the forthcoming financial year end date of the Company will be 31 December 2017. In light of the above change of financial year end date, the term of each of the 2017 Framework Agreements will take effect from 1 January 2018, but not from 1 April 2018 as previously contemplated in the 2015 Framework Agreements, such that the cut-off date of the proposed annual caps pursuant to each of the 2017 Framework Agreements will align with the new financial year end date.

Having considered the above, in particular, (i) the increase in revenue of the Group in both electronic products manufacturing and IT integration and solutions services segment from FY2015/16 to FY2016/17; (ii) the turnaround of loss position of the Group from FY2015/16 to FY2016/17; (iii) that the Group has established formal business relationship with Hon Hai Group under the 2015 Framework Agreements; (iv) Hon Hai Group is one of the major clients and suppliers of the Group; and (v) the change of financial year end date of the Group, we concur with the Directors that the CCTs are conducted in the ordinary and usual course of business of the Group and in the interest of the Company and the Shareholders as a whole.

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LETTER FROM GRAM CAPITAL

2. Principal terms of the CCTs

I. SLA Transactions

Date: 22 September 2017 Parties: The Company; and Hon Hai

Terms: From 1 January 2018 to 31 December 2020 (both days inclusive) and the 2015 IT system operation and maintenance framework agreement shall be terminated automatically on 1 January 2018

Nature of The Group agreed to provide IT services to Hon Hai transactions: 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 2017 IT System Operation and Maintenance Framework Agreement will be charged on a monthly basis. The service fees will be determined after arm’s length negotiations between the Group and Hon Hai Group based on the following factors:

(a) the number of IT technicians involved, their time spent for delivery of such IT services and their respective monthly charging rate which 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; and

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LETTER FROM GRAM CAPITAL

(c) the Group adopts the same principles 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 The service fees shall be paid to the Company on the terms: date agreed upon between the Group and Hon Hai under each individual project.

For our due diligence purpose, we have obtained lists of contracts/agreements for the provision of IT support and maintenance services by the Group to (i) Hon Hai Group; and (ii) independent third parties in 2016 and 2017. We have randomly selected and the Company has provided over 5 individual contracts/agreements from the lists above. Having considered that (i) the above documents were chosen randomly from the lists; and (ii) the above documents cover both 2016 and 2017, we consider the selected samples to be sufficient. We noted from the above documents that the pricing terms of the IT support and maintenance services (i.e. the daily/hourly rate of IT technicians of different grades) offered by the Group to Hon Hai Group and independent third parties are the same.

We have also reviewed the 2015 IT system operation and maintenance framework agreement (the “ 2015 IT System Operation and Maintenance Framework Agreement ”) entered into between the Company and Hon Hai on 23 December 2015, which is the previous framework agreement entered into by the same parties for the same type of transactions. We noted that, save as the amendment to the terms (i.e. duration), the key terms in the 2017 IT System Operation and Maintenance Framework Agreement relating to SLA Transactions (i.e. content of services and pricing basis) are the same as those under the 2015 IT System Operation and Maintenance Framework Agreement.

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LETTER FROM GRAM CAPITAL

In addition, we noted that the Group has adopted a series of internal control measures (i.e. the Management Measures for Connected Transactions) to ensure that the CCTs are conducted in accordance with the terms of the 2017 Framework Agreements and the proposed 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 should inform the relevant business departments of the Company, in writing, the approved annual caps for the CCTs.
(ii) Prior to entering into a transaction, the relevant business department should, where applicable and in accordance with the pricing basis under the corresponding framework agreement, collect information on the market rate for the service or comparable service; obtain quotation from independent third parties; and/or compare the price offered to independent third parties.
(iii) The relevant business department should submit a new project application form incorporating a profit/loss statement for every transaction for approval by the business department heads and finance department before order confirmation.
(iv) The transactions as contemplated under the 2017 Framework Agreements between the Group and Hon Hai Group (except the 2017 Procurement Framework Agreement) are subject to the condition that the revenue attributable to Hon Hai Group will be less than 60% of the total revenue of the Group and the remaining 40% 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 December 2018, 2019 and 2020 (the “ Condition ”).
(v) The finance department should calculate the revenue amount attributable to Hon Hai Group and such amount attributable to non-Hon Hai Group customers on a monthly basis. If the revenue attributable to Hon Hai Group exceeds 60% of the total revenue of the Group up to such calendar month, the finance department will understand the reasons and take adequate measures in collaboration with the business department to ensure the Condition shall be fulfilled by the end of such financial year.
(vi) The final price of each contract has to be reviewed and approved by the relevant department head.
(vii) The finance department should conduct checks quarterly regarding the compliance of the terms of 2017 Framework Agreements and the Condition.

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LETTER FROM GRAM CAPITAL

(viii) The relevant business department should report, at least once a month, the progress and implementation of the relevant transactions to the finance department, who should consolidate the information, perform auditing and report to the chief financial officer and the audit committee/independent non-executive Directors.
(ix) When the actual transaction amount under any one of the 2017 Framework Agreements exceeds 50% or 80% of the respective annual cap, the finance department shall promptly report to the chief financial officer. The chief financial officer should discuss monthly with the business department about the business forecast in order to assess the possibility of exceeding respective annual caps.
(x) The auditors of the Company should 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 should 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.
(xi) The independent non-executive Directors should 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.

With reference to the Annual Report and as confirmed by the Directors, the independent non-executive Directors have reviewed relevant continuing connected transactions of the Company during FY2016/17 and confirmed that such continuing connected transactions were (i) in the usual and ordinary course of business of the Group; (ii) on normal commercial terms or better; and (iii) in accordance with the relevant agreements governing the same on terms that are fair and reasonable and in the interests of the Shareholders as a whole (the “ INED’s Confirmation ”).

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LETTER FROM GRAM CAPITAL

In addition, the Company’s external auditor was engaged to report on the Group’s continuing connected transaction in accordance with Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” and with reference to Practice Note 740 “Auditor’s Letter on Continuing Connected Transactions under the Hong Kong Listing Rules” issued by the Hong Kong Institute of Certified Public Accountants. For the purpose of Rule 14A.56 of the Listing Rules, the auditor of the Company, has provided a letter to the Board regarding the continuing connected transactions during FY2016/17 confirming that: (i) nothing has come to their attention that causes them to believe that the continuing connected transactions have not been approved by the Board; (ii) for transactions involving the provisions of goods or services by the Group, nothing has come to their attention that causes them to believe that the transactions were not, in all material respects, in accordance with the pricing policies of the Group; (iii) nothing has come to their attention that causes them to believe that the transactions were not entered into, in all material respects, in accordance with the relevant agreements governing such transactions; and (iv) nothing has come to their attention that causes them to believe that the continuing connected transactions have exceeded the annual cap as set by the Company (the “ Auditor’s Confirmation ”).

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

II. BOO-Project Transactions

Date: 22 September 2017 Parties: The Company; and Hon Hai Terms: From 1 January 2018 to 31 December 2020 (both days inclusive) and the 2015 build-own-operate and IT project framework agreement shall be terminated automatically on 1 January 2018

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LETTER FROM GRAM CAPITAL

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 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;

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LETTER FROM GRAM CAPITAL

(b) based on the principle of cost plus a reasonable margin. 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 which 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 projects 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 projects and corresponding services and on normal commercial terms; and
(d) the Group adopts the same principles 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 The consideration of individual projects shall be paid terms: in accordance with the terms to be agreed prior to the commencement of such projects, with reference to terms commonly adopted in the market such as payment based on progress billing or by monthly payment.

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LETTER FROM GRAM CAPITAL

For our due diligence purpose, we have obtained lists of contracts/agreements for the provision of Build-Own-Operate and IT Project Services by the Group to (i) Hon Hai Group; and (ii) independent third parties in 2016 and 2017. We have randomly selected and the Company has provided over 5 individual contracts/agreements from the lists above. Having considered that (i) the above documents were chosen randomly from the lists; and (ii) the above documents cover both 2016 and 2017, we consider the selected samples to be sufficient. We noted from the above documents that (i) for the provision of Build-Own-Operate services, the prices for the same Build-Own-Operate service offered to Hon Hai Group by the Group were higher than those offered to independent third parties, and (ii) for the provision of IT Project services, the pricing terms (i.e. the daily/hourly rate of IT technicians of different grades) offered by the Group to Hon Hai Group and independent third parties are the same.

We have also reviewed the 2015 build-own-operate and IT project framework agreement (the “ 2015 Build-Own-Operate and IT Project Framework Agreement ”) entered into between the Company and Hon Hai on 23 December 2015, which is the previous framework agreement entered into by the same parties for the same type of transactions. We noted that, save as the amendment to the terms (i.e. duration), the key terms in the 2017 Build-Own-Operate and IT Project Framework Agreement relating to BOO-Project Transactions (i.e. the nature of services provided and pricing basis) are the same as those under the 2015 Build-Own-Operate and IT Project Framework Agreement.

In light of the above (including Management Measures for Connected Transactions, the INED’s Confirmation and the Auditor’s Confirmation as aforementioned), we are of the view that the terms of the BOO-Project Transactions are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM GRAM CAPITAL

III. Procurement Transactions

Date: 22 September 2017 Parties: The Company; and Hon Hai Terms: From 1 January 2018 to 31 December 2020 (both days inclusive) and the 2015 procurement framework agreement shall be terminated automatically on 1 January 2018

Nature of The Company (as buyer) agreed to purchase transactions: 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 2017 Procurement Framework Agreement.

Pricing basis: The prices for each purchase order will be 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 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 quotation of two independent third parties for the relevant products to be procured in the corresponding period to the extent independent-third-party suppliers are available.

Payment The price shall be paid to Hon Hai on the date agreed terms: upon between the Group and Hon Hai under each individual order.

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LETTER FROM GRAM CAPITAL

For our due diligence purpose, we have obtained a list of contracts/agreements for the purchase of enterprise-level products by the Group from (i) Hon Hai Group; and (ii) independent third parties in 2016 and 2017. We randomly selected and the Company provided (i) over 5 individual contracts/agreements from the list above; and (ii) the relevant quotation documents regarding the purchase of such products. Having considered that (i) the above documents were chosen randomly from the list; and (ii) the above documents cover both 2016 and 2017, we consider the selected samples to be sufficient. We noted from the above documents that (i) the purchase prices offered by the selected supplier as stated in the individual contracts/agreements were lower than those offered by other suppliers as stated in the quotation documents; and (ii) where member of Hon Hai Group was the selected supplier, the prices for the enterprise-level product offered by Hon Hai Group to the Group were lower than those offered by independent third parties.

We have also reviewed the 2015 procurement framework agreement (the “ 2015 Procurement Framework Agreement ”) entered into between the Company and Hon Hai on 23 December 2015, which is the previous framework agreement entered into by the same parties for the same type of transactions. We noted that, save as the amendment to the terms (i.e. duration), the key terms in the 2017 Procurement Framework Agreement relating to Procurement Transactions (i.e. the products to be provided and pricing basis) are the same as those under the 2015 Procurement Framework Agreement.

In light of the above (including Management Measures for Connected Transactions, the INED’s Confirmation and the Auditor’s Confirmation as aforementioned), we are of the view that the terms of the Procurement Transactions are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM GRAM CAPITAL

IV. Sales Transactions

Date: 22 September 2017

Parties: The Company; and Hon Hai

Terms: From 1 January 2018 to 31 December 2020 (both days inclusive) and the 2015 sales framework agreement shall be terminated automatically on 1 January 2018.

Nature of
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 2017 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 will be 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 quotation of two independent third parties for the relevant products to be procured in the corresponding period for reference.

Payment The price of the equipment/products shall be paid to terms: the Company on the date agreed upon between the Group and Hon Hai under each individual order.

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LETTER FROM GRAM CAPITAL

For our due diligence purpose, we have obtained lists of contracts/agreements for the sale of Ancillary IT Products by the Group to (i) Hon Hai Group; and (ii) independent third parties in 2016 and 2017. We noted that the Ancillary Products are diversified in terms of product type and specifications where direct comparison among them are difficult. Upon our request, the Company provided two purchase orders from member of Hon Hai Group and independent third party respectively for the same product provided by the Group. We noted from the above documents that the prices for the Ancillary IT Products sold to Hon Hai Group by the Group were higher than those sold to independent third parties.

We have also reviewed the 2015 sale framework agreement (the “ 2015 Sale Framework Agreement ”) entered into between the Company and Hon Hai on 23 December 2015, which is the previous framework agreement entered into by the same parties for the same type of transactions. We noted that, save as the amendment to the terms (i.e. duration), the key terms in the 2017 Sale Framework Agreement relating to Sales Transactions (i.e. the products to be provided and pricing basis) are the same as those under the 2015 Sale Framework Agreement.

In light of the above (including Management Measures for Connected Transactions, the INED’s Confirmation and the Auditor’s Confirmation as aforementioned), we are of the view that the terms of the Sales Transactions are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

– 42 –

LETTER FROM GRAM CAPITAL

3. The proposed annual caps under the CCTs

I. SLA Transactions

	For the year	For the year	For the year
	ending	ended	ended
	31 March 2018	31 March 2017	31 March 2016
	HK$	HK$	HK$
Existing annual caps	623,383,000	479,525,000	26,732,000
Actual transaction amounts	31,813,890_(Note)_	72,363,579	798,973
Utilisation rate	5.10%	15.09%	2.99%
	For the year	For the year	For the year
	ending	ending	ending
	31 December	31 December	31 December
	2020	2019	2018
	HK$	HK$	HK$
Service fees payable by
Hon Hai Group to
the Group
(the “SLA Cap(s)”)	174,881,061	134,523,893	103,479,918

Note: For the five months ended 31 August 2017

With reference to the Board Letter, the SLA are determined based on (i) the historical transaction amount during the year ended 31 March 2017; (ii) a buffer of 10% to allow for the increase in demand of services by Hon Hai Group for the financial year ending 31 December 2018 as anticipated by the management; and (iii) an expected growth of 30% on the SLA Caps for the three financial years ending 31 December 2018, 2019 and 2020 with reference to (1) the future growth prospects of the IoT industry, according to the research results from an independent research firm; and (2) the Group’s sales forecast with Hon Hai Group. Detailed basis of determining the SLA Caps is set out under the sub-section headed “Proposed Annual Cap” under the section headed “2017 IT System Operation and Maintenance Framework Agreement” of the Board Letter.

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LETTER FROM GRAM CAPITAL

As depicted from the table above, we note that the relevant utilisation rate of the existing annual caps are (i) approximately 2.99% and 15.09% respectively for the year ended 31 March 2016 and 2017; and (ii) approximately 5.10% for the year ending 31 March 2018 based on the actual transaction amounts for the five months ended 31 August 2017. As advised by the Directors, the difference between the existing annual caps and the actual transaction amounts was primarily due to the adjustment according to the actual operations of the Company (i.e. the existing annual caps were determined based on the then expected demand of Hon Hai Group, yet (i) Hon Hai Group might also procure services from other service providers, (ii) Hon Hai Group might have adjusted its proposal or budget, and (iii) some transactions might still be under negotiation and there might be delay in execution).

To assess the fairness and reasonableness of the SLA Caps, we have obtained and reviewed the calculation of the SLA Caps (the “ SLA Calculation ”). We noted from the SLA Calculation that the SLA Caps were based on the actual transaction amount for the year ended 31 March 2017 taking into account of an expected annual growth rate of 30% and a buffer of 10%.

For our due diligence purpose, we have searched over the internet to understand the prospect of the IoT industry. As published by Global Industry Analysts, Inc (an off-the-shelf, market research company) in June 2015, Asia Pacific has the fastest growth in terms of installed base of connected devices in the IoT ecosystem, representing a compounded annual growth rate (“ CAGR ”) of 43.8% during analysis period. With reference to GSMA Intelligence (a provider of mobile operator data, analysis and forecasts run by GSMA which is a trade body for over 800 mobile operators worldwide), the global cellular machine-to-machine (M2M) connection is forecasted to (i) increase at a CAGR of 25% from 2015 to 2020 based on the current trajectory and (ii) increase at a CAGR of 45% from 2018 to 2020 if cellular M2M connections market could grow considerably faster than the current trajectory at higher potential target. According to a press release dated 29 January 2017 on the website of Forbes (a global media company, focusing on business, investing, technology, entrepreneurship, leadership, and lifestyle) headlined “Internet Of Things Market To Reach $267B By 2020”, Boston Consulting Group (a global management consulting firm) predicted that (i) business-to-business (B2B) spending on IoT technologies, apps and solutions will reach USD267 billion by 2020; and (ii) between 2015 to 2020, revenue from all layers of the IoT technology stack will attain at least a 20% CAGR (market sizes of some technology layer such as services, IoT applications, IoT analytics and identity security are predicted to grow at a CAGR of approximately 40%). Having considered the above (“ Findings on IoT Industry Growth ”), we consider the expected growth rate of 30% on the SLA Caps for the three years ending 31 December 2018, 2019 and 2020 to be justifiable.

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LETTER FROM GRAM CAPITAL

With reference to the SLA Calculation, we noted that the Company has applied a buffer of 10% in the determination of the SLA Caps. Having considered that the additional buffer was applied for unforeseeable circumstances such as the unpredictable increase in demand from Hon Hai Group (including the increase in service price), we consider that a buffer of 10% to be acceptable.

In light of the above, we consider that the SLA Cap are fair and reasonable so far as the Independent Shareholders are concerned.

II. BOO-Project Transactions

	For the year	For the year	For the year
	ending	ended	ended
	31 March 2018	31 March 2017	31 March 2016
	HK$	HK$	HK$
Existing annual caps	943,146,000	725,497,000	68,684,000
Actual transaction amounts	32,612,099_(Note)_	232,229,630	4,165,180
Utilisation rate	3.46%	32.01%	6.06%
	For the year	For the year	For the year
	ending	ending	ending
	31 December	31 December	31 December
	2020	2019	2018
	HK$	HK$	HK$
Service fees payable by
Hon Hai Group to
the Group
(the “BOO-Project
Cap(s)”)	561,229,346	431,714,882	332,088,370

Note: For the five months ended 31 August 2017

With reference to the Board Letter, the BOO-Project Caps are determined based on (i) the historical transaction amount during the year ended 31 March 2017; (ii) a buffer of 10% to allow for the increase in demand of services by Hon Hai Group for the financial year ending 31 December 2018 as anticipated by the management; and (iii) an expected growth of 30% on the BOO-Project Caps for the three financial years ending 31 December 2018, 2019 and 2020 with reference to (1) the future growth prospects of the IoT industry, according to the research results from an independent research firm; and (2) the Group’s sales forecast with Hon Hai Group. Detailed basis of determining the BOO-Project Caps is set out under the sub-section headed “Proposed Annual Cap” under the section headed “2017 Build-Own-Operate and IT Project Framework Agreement” of the Board Letter.

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LETTER FROM GRAM CAPITAL

As depicted from the table above, we note that the relevant utilisation rate of the existing annual caps are (i) approximately 6.06% and 32.01% respectively for the year ended 31 March 2016 and 2017; and (ii) approximately 3.46% for the year ending 31 March 2018, based on the actual transaction amounts for the five months ended 31 August 2017. As advised by the Directors, the difference between the existing annual caps and the actual transaction amounts was primarily due to the adjustment according to the actual operations of the Company (i.e. the existing annual caps were determined based on the then expected demand of Hon Hai Group, yet (i) Hon Hai Group might also procure services from other service providers, (ii) Hon Hai Group might have adjusted its proposal or budget, and (iii) some transactions might still be under negotiation and there might be delay in execution).

To assess the fairness and reasonableness of the BOO-Project Caps, we have obtained and reviewed the calculation of the BOO-Project Caps (the “ BOO-Project Calculation ”). We noted from the BOO-Project Calculation that the BOO-Project Caps were based on the actual transaction amount for the year ended 31 March 2017 taking into account of an expected annual growth rate of 30% and a buffer of 10%.

With reference to the BOO-Project Calculation, we noted that the Company has applied a buffer of 10% in the determination of the BOO-Project Caps. Having considered that the additional buffer was applied for unforeseeable circumstances such as the unpredictable increase in demand from Hon Hai Group (including the increase in service price), we consider that a buffer of 10% to be acceptable.

In light of the above and Findings on IoT Industry Growth, we consider that the BOO-Project Caps are fair and reasonable so far as the Independent Shareholders are concerned.

– 46 –

LETTER FROM GRAM CAPITAL

III. Procurement Transactions

	For the year	For the year	For the year
	ending	ended	ended
	31 March 2018	31 March 2017	31 March 2016
	HK$	HK$	HK$
Existing annual caps	257,222,000	197,863,000	18,732,000
Actual transaction amounts	42,638,889_(Note)_	52,463,869	950,757
Utilisation rate	16.58%	26.52%	5.08%
	For the year	For the year	For the year
	ending	ending	ending
	31 December	31 December	31 December
	2020	2019	2018
	HK$	HK$	HK$
Fees payable by
the Group to
Hon Hai Group
(the “Procurement
Cap(s)”)	279,361,570	214,893,516	165,302,704

Note: For the five months ended 31 August 2017

With reference to the Board Letter, the Procurement Caps are determined based on (i) the historical transaction amount during the year ended 31 March 2017; (ii) the confirmed sales orders with customers and delivery plan projected by Hon Hai Group for the financial year ending 31 December 2018; (iii) a buffer of 10% to allow for the increase in demand of purchases from Hon Hai Group for the financial year ending 31 December 2018 as anticipated by the management; and (iv) an expected growth of 30% on the Procurement Caps for the three financial years ending 31 December 2018, 2019 and 2020 with reference to (1) the future growth prospects of the IoT industry, according to the research results from an independent research firm; and (2) the Group’s sales forecast with Hon Hai Group. Detailed basis of determining the Procurement Caps is set out under the sub-section headed “Proposed Annual Cap” under the section headed “2017 Procurement Framework Agreement” of the Board Letter.

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LETTER FROM GRAM CAPITAL

As depicted from the table above, we note that the relevant utilisation rate of the existing annual caps are (i) approximately 5.08% and 26.52% respectively for the year ended 31 March 2016 and 2017; and (ii) approximately 16.58% for the year ending 31 March 2018, based on the actual transaction amounts for the five months ended 31 August 2017. As advised by the Directors, the difference between the existing annual caps and the actual transaction amounts was primarily due to the adjustment according to the actual operations of the Company (i.e. the existing annual caps were determined based on the then expected demand of the Group, yet (i) the Group might also procure products from other suppliers, (ii) the Group might have adjusted its proposal or budget, and (iii) some transactions might still be under negotiation and there might be delay in execution).

To assess the fairness and reasonableness of the Procurement Caps, we have obtained and reviewed the calculation of the Procurement Caps (the “ Procurement Calculation ”). We noted from the Procurement Calculation that the Procurement Caps were based on the actual transaction amount for the year ended 31 March 2017 taking into account of the confirmed extra orders of the Group during the year ending 31 December 2018, an expected annual growth rate of 30% and a buffer of 10%. As advised by the Directors, the extra orders are new types of products under the Procurement Transactions. The actual transaction amount for the year ended 31 March 2017 in the Procurement Calculation does not include such new types of products.

For our due diligence purpose, we obtained a summary of confirmed orders for three products (“ Extra Orders ”) in 2018. We noted that the Extra Orders are the same as the confirmed extra orders in the Procurement Calculation (i.e. the Procurement Cap for the year ending 31 December 2018 = (Actual transaction amounts for the year ended 31 March 2017 x (1+30%) + Extra Orders) x (1+10%); and the Procurement Cap for the year ending 31 December 2019 = the Procurement Cap for the year ending 31 December 2018 x (1+30%)). In light of that (i) the Extra Orders are of similar type (all being enterprise-level products) as other products under the Procurement Transactions; and (ii) the expected growth rate of 30% is determined with reference to the future growth prospect of the IoT industry, we consider the application of the expected growth rate of 30% to be reasonable.

With reference to the Procurement Calculation, we noted that the Company has applied a buffer of 10% as an assumption for the determination of the Procurement Caps. Having considered that the additional buffer was applied for unforeseeable circumstances such as the unpredictable increase in demand from the Group (including the increase in products price), we consider that a buffer of 10% to be acceptable.

In light of the above and Findings on IoT Industry Growth, we consider that the Procurement Caps are fair and reasonable so far as the Independent Shareholders are concerned.

– 48 –

LETTER FROM GRAM CAPITAL

IV. Sales Transactions

	For the year	For the year	For the year
	ending	ended	ended
	31 March 2018	31 March 2017	31 March 2016
	HK$	HK$	HK$
Existing annual caps	142,412,000	109,547,000	8,674,000
Actual transaction amounts	6,392,647_(Note)_	14,169,662	770,945
Utilisation rate	4.49%	12.93%	8.89%
	For the year	For the year	For the year
	ending	ending	ending
	31 December	31 December	31 December
	2020	2019	2018
	HK$	HK$	HK$
Fees payable by Hon Hai
Group to the Group
(the “Sales Cap(s)”)	34,243,822	26,341,402	20,262,617

Note: For the five months ended 31 August 2017

With reference to the Board Letter, the Sales Caps are determined based on (i) the historical transaction amount during the year ended 31 March 2017; (ii) a buffer of 10% to allow for the increase in demand of services by Hon Hai Group for the financial year ending 31 December 2018 as anticipated by the management; and (iii) an expected growth of 30% on the Sales Caps for the three financial years ending 31 December 2018, 2019 and 2020 with reference to (1) the future growth prospects of the IoT industry, according to the research results from an independent research firm; and (2) the Group’s sales forecast with Hon Hai Group. Detailed basis of determining the Procurement Caps is set out under the sub-section headed “Proposed Annual Cap” under the section headed “2017 Sales Framework Agreement” of the Board Letter.

As depicted from the table above, we note that the relevant utilisation rate of the existing annual caps are (i) approximately 8.89% and 12.93% respectively for the year ended 31 March 2016 and 2017; and (ii) approximately 4.49% for the year ending 31 March 2018, based on the actual transaction amounts for the five months ended 31 August 2017. As advised by the Directors, the difference between the existing annual caps and the actual transaction amounts was primarily due to the adjustment according to the actual operations of the Company (i.e. the existing annual caps were determined based on the then expected demand of Hon Hai Group, yet (i) Hon Hai Group might also procure products from other suppliers, (ii) Hon Hai Group might have adjusted its proposal or budget, and (iii) some transactions might still be under negotiation and there might be delay in execution).

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LETTER FROM GRAM CAPITAL

To assess the fairness and reasonableness of the Sales Caps, we have obtained and reviewed the calculation of the Sales Caps (the “ Sales Calculation ”). We noted from the Sales Calculation that the Sales Caps were based on the actual transaction amount for the year ended 31 March 2017 taking into account of an expected annual growth rate of 30% and a buffer of 10%.

With reference to the Sales Calculation, we noted that the Company has applied a buffer of 10% as an assumption for the determination of the Sales Caps. Having considered that the additional buffer was applied for unforeseeable circumstances such as the unpredictable increase in demand from Hon Hai Group (including the increase in products price), we consider that a buffer of 10% to be acceptable.

In light of the above and Findings on IoT Industry Growth, we consider that the Sales Caps are fair and reasonable so far as the Independent Shareholders are concerned.

4. Listing Rules implication regarding the CCTs

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 their respective proposed annual cap for the period concerned under the 2017 Framework Agreements; (ii) the terms of the CCTs (including their respective proposed annual caps) must be reviewed by the independent non-executive Directors annually; (iii) details of independent non-executive Directors’ annual review on the terms of the CCTs 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 governing the transactions; and (iv) have exceeded their respective proposed annual caps. In the event that the total amounts of the CCTs are anticipated to exceed their respective proposed annual caps, or that there is any proposed material amendment to the terms of the CCTs, as confirmed by the Directors, the Company shall comply with the applicable provisions of the Listing Rules governing continuing connected transaction.

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 CCTs and thus the interest of the Independent Shareholders would be safeguarded.

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LETTER FROM GRAM CAPITAL

RECOMMENDATION ON THE CCTs

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of the CCTs are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the CCTs 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. 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 CCTs 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

– 51 –

APPENDIX I

GENERAL INFORMATION

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 the 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 Mr. Tse Tik Yang Denis Mr. Chien Yi-Pin Mark Mr. Cheng Yee Pun	Shares in issue
	Personal interests Family interests Corporate interests Total interests Approximate percentage — — 277,844,580 277,844,580 (Note 1) 41.96% — 13,825,719 — 13,825,719 (Note 2) 2.09% 300,000 — — 300,000 (Note 3) 0.05%

– I-1 –

APPENDIX I

GENERAL INFORMATION

Notes:

276,103,622 Shares were beneficially owned by Asia-IO Acquisition Fund, L.P. whose general partner is Asia-IO Acquisition GP Limited and 1,740,958 Shares were beneficially owned by Asia-IO Advisors Limited. Both Asia-IO Acquisition GP Limited and Asia-IO Advisors Limited are 100% beneficially owned (directly or indirectly) by Mr. Tse, and hence, Mr. Tse is deemed to be interested in the Shares held by Asia-IO Acquisition GP Limited and Asia-IO Advisors Limited.
13,825,719 Shares were beneficially owned by Ms. Kan Sachiko, who is the spouse of Mr. Chien, and hence, Mr. Chien is deemed to be interested in the Shares held by Ms. Kan Sachiko.
On 31 August 2017, Mr. Cheng was granted a total of 300,000 share options which shall entitle him to subscribe for a total of 300,000 Shares.
(b) Shares of associated corporations of the Company

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

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 –

APPENDIX I

GENERAL INFORMATION

(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		percentage of
Name of Shareholder	Shares held	Nature of interests	shareholding
Asia-IO Acquisition Fund, L.P.(Note)	276,103,622	Beneficial interests	41.69%

Note: 276,103,622 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.

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.

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.

– I-3 –

APPENDIX I

GENERAL INFORMATION

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 2017, 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 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.

7 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 2017, the date to which the latest published audited financial statements of the Company were made up.

8 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 under the Securities and Futures Ordinance

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.

– I-4 –

APPENDIX I

GENERAL INFORMATION

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.

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 2017, 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.

9 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 Flat L-N, 15/F, Kings Wing Plaza 1, 3 On Kwan Street, Shatin, 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.

– I-5 –

APPENDIX I

GENERAL INFORMATION

10 DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of the Company at Flat L-N, 15/F, Kings Wing Plaza 1, 3 On Kwan Street, Shatin, Hong Kong during 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 5 to 23 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 24 to 25 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 26 to 51 of this circular;
(e) the written consent from Gram Capital referred to in the section headed “8 Expert and Consents” in this appendix;
(f) the annual reports of the Company for the three financial years ended 31 March 2017;
(g) the 2017 Framework Agreements;
(h) the 2015 Framework Agreements; and
(i) this circular.

– I-6 –

NOTICE OF SGM

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MAXNERVA TECHNOLOGY SERVICES LIMITED 雲智匯科技服務有限公司

(Incorporated in Bermuda with limited liability)

(Stock code: 1037)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that an special general meeting (the “ SGM ”) of Maxnerva Technology Services Limited (the “ Company ”) will be held on Friday, 15 December 2017, at 11:00 am at Conference Hall 02, G/F, 1 Science Park East Avenue (IE), Hong Kong Science Park, Shatin, N.T., Hong Kong to consider and, if thought fit, approve with or without modifications, the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

1. “ THAT :

the framework agreement in relation to IT system operation and maintenance dated 22 September 2017 (the “ 2017 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 28 November 2017 (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.”

2. “ THAT :

the framework agreement in relation to build-own-operate and IT project dated 22 September 2017 (the “ 2017 Build-Own-Operate and IT Project 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 28 November 2017 (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.”

– SGM-1 –

NOTICE OF SGM

3. “ THAT :

the framework agreement in relation to procurement of enterprise-level products dated 22 September 2017 (the “ 2017 Procurement 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 28 November 2017 (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 22 September 2017 (the “ 2017 Sales 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 28 November 2017 (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 authorised by the directors of the Company be and is hereby generally and unconditionally authorised 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 2017 IT System Operation and Maintenance Framework Agreement, 2017 Build-Own-Operate and IT Project Framework Agreement, 2017 Procurement Framework Agreement and 2017 Sales Framework Agreement, and the transactions contemplated thereunder.”

By Order of the Board Maxnerva Technology Services Limited HUI LAP SHUN, JOHN Chairman

Hong Kong, 28 November 2017

– SGM-2 –

NOTICE OF SGM

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

Head office and principal place of business: Flat L-N, 15/F Kings Wing Plaza 1 3 On Kwan Street Shatin, 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 needs not to 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.
Record date (being the last date for registration of any share transfer given there will be no book closure) for determining the entitlement of the shareholders of the Company to attend and vote at the proposed SGM will be 12 December 2017.

– SGM-3 –

AI assistant

WEIli Holdings Limited — Proxy Solicitation & Information Statement 2017

50558_rns_2017-11-28_9b22b373-48f6-4a6e-8c81-0579cba02417.pdf

MAXNERVA TECHNOLOGY SERVICES LIMITED 雲智匯科技服務有限公司

(1) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS; AND (2) NOTICE OF SPECIAL GENERAL MEETING

DEFINITIONS

MAXNERVA TECHNOLOGY SERVICES LIMITED 雲智匯科技服務有限公司

(Stock code: 1037)

(1) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS; AND (2) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

PRINCIPAL TERMS OF THE 2017 FRAMEWORK AGREEMENTS

(A) 2017 IT System Operation and Maintenance Framework Agreement

Proposed Annual Cap

Existing annual caps and the actual transaction amounts

(B) 2017 Build-Own-Operate and IT Project Framework Agreement

Proposed annual caps

Basis of determination of the proposed annual caps

Existing annual caps and the actual transaction amounts

(C) 2017 Procurement Framework Agreement

Proposed annual caps

Existing annual caps and the actual transaction amounts

(D) 2017 Sales Framework Agreement

Proposed annual caps

Existing annual caps and the actual transaction amounts

INTERNAL CONTROL

FURTHER INFORMATION ABOUT THE LATEST DEVELOPMENT OF THE IT INTEGRATION AND SOLUTIONS SERVICES SEGMENT OF THE GROUP

REASONS FOR AND BENEFITS OF ENTERING INTO THE 2017 FRAMEWORK AGREEMENTS

INFORMATION ABOUT THE PARTIES

IMPLICATIONS UNDER THE LISTING RULES

SGM

RECOMMENDATION

ADDITIONAL INFORMATION

MAXNERVA TECHNOLOGY SERVICES LIMITED 雲智匯科技服務有限公司

(Stock code: 1037)

CONTINUING CONNECTED TRANSACTIONS

Yours faithfully,

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of and reasons for the CCTs

Information on Hon Hai Group

2. Principal terms of the CCTs

II. BOO-Project Transactions

LETTER FROM GRAM CAPITAL

III. Procurement Transactions

IV. Sales Transactions

3. The proposed annual caps under the CCTs

I. SLA Transactions

II. BOO-Project Transactions

III. Procurement Transactions

IV. Sales Transactions

4. Listing Rules implication regarding the CCTs

RECOMMENDATION ON THE CCTs

1 RESPONSIBILITY STATEMENT

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

(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

3 DIRECTORS’ SERVICE CONTRACTS

4 COMPETING INTEREST

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

6 LITIGATION

7 MATERIAL ADVERSE CHANGE

8 EXPERTS AND CONSENTS

10 DOCUMENTS AVAILABLE FOR INSPECTION

MAXNERVA TECHNOLOGY SERVICES LIMITED 雲智匯科技服務有限公司

NOTICE OF SPECIAL GENERAL MEETING

ORDINARY RESOLUTIONS

1. “ THAT :

2. “ THAT :

3. “ THAT :

4.

“ THAT :

5.

“ THAT :

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WEIli Holdings Limited Proxy Solicitation & Information Statement 2017