SINO-i TECHNOLOGY LIMITED

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in doubt about this circular or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Sino-i Technology Limited, you should at once hand this circular to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular. SINO-i TECHNOLOGY LIMITED (Incorporated in Hong Kong with limited liability) (Stock Code: 250) MAJOR AND CONNECTED TRANSACTION LOAN EXTENSION AND NOTICE OF EXTRAORDINARY GENERAL MEETING Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders A notice convening the EGM (as defined herein) to be held at Ballroom, 5/F, Island Shangri-La, Pacific Place, Supreme Court Road, Central, Hong Kong on Thursday, 15 June 2017 at 10:00 a.m. is set out on pages 39 to 40 of this circular. A form of proxy for use in connection with the EGM is enclosed with the circular. Whether or not you intend to attend the EGM, please complete and return the enclosed form of proxy in accordance with the instructions printed hereon to the share registrar of the Company, 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 holding the EGM or any adjourned meeting thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM (or any adjourned meeting thereof) should you so wish. 26 May 2017

2 CONTENTS Page DEFINITIONS... 1 LETTER FROM THE BOARD... 6 LETTER FROM THE INDEPENDENT BOARD COMMITTEE LETTER FROM THE INDEPENDENT FINANCIAL ADVISER APPENDIX I FINANCIAL INFORMATION OF THE GROUP APPENDIX II GENERAL INFORMATION NOTICE OF THE EGM i

3 DEFINITIONS In this circular, unless the contents otherwise requires, the following expressions have the meanings as set out below: Advance associate(s) Board Company or Lender connected person(s) Dadi Century Beijing the loan in the principal amount of HK$1,645,530,000 advanced by the Company to Nan Hai pursuant to the Loan Agreement has the meaning given to it under the Listing Rules the board of Directors Sino-i Technology Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed and traded on the Stock Exchange (stock code: 250) and a non-wholly owned subsidiary of Nan Hai has the meaning given to it under the Listing Rules 大地時代文化傳播 ( 北京 ) 有限公司 (Dadi Century Culture Media (Beijing) Company Limited*), a company incorporated in the PRC, which is an associate of Ms. Liu Rong (an executive Director) and holds 85% equity interest of GD Cinema Circuit Dadi Legend 北京大地傳奇投資合夥企業 (Beijing Dadi Legend Investment Partnership*), a partnership enterprise, equally owned by Ms. Liu Rong (an executive Director) and an independent third party, and is an associate of Ms. Liu and holds 15% equity interest of GD Cinema Circuit Digital Huigu Director(s) EGM Fifth Supplemental Agreement 數碼慧谷置業管理股份有限公司 (Digital Huigu Property Management Co., Ltd.*), a subsidiary of the Company the director(s) of the Company the extraordinary general meeting of the Company to be convened and held on Thursday, 15 June 2017 to consider and, if thought fit, approve the Fifth Supplemental Agreement and the transactions contemplated thereunder the conditional loan extension agreement entered into between the Company as lender and Nan Hai as borrower on 2 May 2017 in relation to the extension of the repayment date for the Remaining Outstanding Principal for two (2) years from 30 June 2017 to 29 June

4 DEFINITIONS First Supplemental Agreement Fourth Supplemental Agreement the conditional loan extension agreement entered into between the Company as lender and Nan Hai as borrower on 20 May 2011 in relation to the extension of the repayment date for the outstanding principal under the Loan Agreement for two (2) years from 30 June 2011 to 29 June 2013 the conditional loan extension agreement entered into between the Company as lender and Nan Hai as borrower on 30 April 2015 in relation to the extension of the repayment date for the outstanding principal under the Loan Agreement (as supplemented by the First Supplemental Agreement, the Second Supplemental Agreement and the Third Supplemental Agreement) for two (2) years from 30 June 2015 to 29 June 2017 GD Cinema Circuit 廣東大地電影院線股份有限公司 (GD Cinema Circuit Company Limited*), an associate of Ms. Liu Rong (an executive Director) and a connected person of the Company GD Cinema Circuit Group GFA Group HK$ Hong Kong Independent Board Committee Independent Financial Adviser or First Shanghai Independent Shareholders GD Cinema Circuit, its shareholders, and its subsidiaries gross floor area the Company and its subsidiaries Hong Kong dollars, the lawful currency of Hong Kong the Hong Kong Special Administrative Region of the PRC the independent committee of the Board, comprising Prof. Jiang Ping and Mr. Fung Wing Lap, the independent nonexecutive Directors, established for the purpose of making recommendations to the Independent Shareholders in respect of the Fifth Supplemental Agreement and the transactions contemplated thereunder First Shanghai Capital Limited, a corporation licensed to carry out type 6 (advising on corporate finance) regulated activity under the SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Fifth Supplemental Agreement and the transactions contemplated thereunder Shareholders other than Nan Hai and its associates 2

5 DEFINITIONS Latest Practicable Date Listar Listar Sale Shares Listar Share Mortgage Listing Rules Loan Agreement LWD Nan Hai or Borrower Nan Hai Development Nan Hai Group NHD Share Mortgage NHD Shares 22 May 2017, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein Listar Properties Limited, a company incorporated in the British Virgin Islands, which is an indirect wholly-owned subsidiary of Nan Hai 10,200,000 shares of US$1.00 each in Listar, representing 51% of its issued share capital the share mortgage executed by Nan Hai as mortgagor in favour of the Company as mortgagee by way of first fixed charge in respect of the Listar Sale Shares as a continuing security for the payment by Nan Hai of the Advance and all interest accrued thereon the Rules Governing the Listing of Securities on the Stock Exchange the loan agreement entered into between the Company as lender and Nan Hai as borrower on 29 May 2009 in relation to the Advance Liu Wan Development (BVI) Company Limited, a company incorporated in the British Virgin Islands, which is an indirect wholly-owned subsidiary of Nan Hai Nan Hai Corporation Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed and traded on the Stock Exchange (stock code: 680), the holding company and a connected person of the Company as defined under the Listing Rules Nan Hai Development Limited, a company incorporated in Hong Kong which is a wholly-owned subsidiary of Nan Hai Nan Hai and its subsidiaries the share mortgage executed by Nan Hai as mortgagor in favour of the Company as mortgagee by way of first fixed charge in respect of the NHD Shares as a continuing security for the payment by Nan Hai of the Outstanding Principal (or any part thereof) and all interest accrued thereon two (2) shares having paid up capital of HK$2 in Nan Hai Development, representing 100% of its issued share capital 3

6 DEFINITIONS Outstanding Principal Partial Principal Repayment Amount PRC Remaining Outstanding Principal RMB Second Supplemental Agreement SFO Share(s) Shareholder(s) Stock Exchange Third Supplemental Agreement the outstanding principal being owed by Nan Hai to the Company under the Loan Agreement (as supplemented by the First Supplemental Agreement, the Second Supplemental Agreement, the Third Supplemental Agreement and the Fourth Supplemental Agreement) (i.e. approximately HK$1,317,149,000 as at the Latest Practicable Date) HK$200,000,000, which shall be repaid by Nan Hai on or before 29 June 2017 the People s Republic of China, for the purposes of this circular, excluding Hong Kong, Macau Special Administrative Region of the PRC and Taiwan the Outstanding Principal as at the date of the Fifth Supplemental Agreement less the Partial Principal Repayment Amount Renminbi, the lawful currency of the PRC the agreement entered into between the Company as lender and Nan Hai as borrower on 31 October 2012 in relation to variation of certain terms and provisions of the Loan Agreement (as supplemented by the First Supplemental Agreement) the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as may be amended from time to time ordinary shares of the Company the holder(s) of the Shares The Stock Exchange of Hong Kong Limited the conditional loan extension agreement entered into between the Company as lender and Nan Hai as borrower on 9 May 2013 in relation to, among other things, the extension of the repayment date for the outstanding principal under the Loan Agreement (as supplemented by the First Supplemental Agreement and the Second Supplemental Agreement) for two (2) years from 30 June 2013 to 29 June

7 DEFINITIONS Xinnet 北京新網數碼信息技術有限公司 (Beijing Xinnet Cyber Information Company Limited*), a limited liability company incorporated in the PRC and is effectively 100% controlled by XWHT through various structured agreements, and is deemed as a subsidiary of XWHT pursuant to the Companies Ordinance, Chapter 622 of the Laws of Hong Kong XWHT 新網華通信息技術有限公司 (Xinnet Technology Information Company Limited*), a limited liability company incorporated in the PRC and an indirect whollyowned subsidiary of the Company sq.m. square meter(s) % per cent. For the purpose of this circular, unless otherwise indicated, the exchange rate of RMB = HK$1 has been used for currency translation, where applicable. Such exchange rate is for the purpose of illustration only and does not constitute a representation that any amounts in HK$ or RMB has been, could have been or may be converted at such or any other rates. * For identification purposes only 5

8 LETTER FROM THE BOARD SINO-i TECHNOLOGY LIMITED (Incorporated in Hong Kong with limited liability) (Stock Code: 250) Executive Directors: Mr. YU Pun Hoi (Chairman) Ms. LIU Rong Mr. CHEN Ming Fei Non-executive Director: Mr. LAM Bing Kwan Registered office: 12/F., The Octagon No. 6 Sha Tsui Road Tsuen Wan New Territories Hong Kong Independent non-executive Directors: Prof. JIANG Ping Mr. FUNG Wing Lap Mr. XIAO Sui Ning 26 May 2017 To the Shareholders Dear Sirs, I. INTRODUCTION MAJOR AND CONNECTED TRANSACTION LOAN EXTENSION References are made to (1) the joint announcement of the Company and Nan Hai dated 29 May 2009 and the circular of the Company dated 12 June 2009 in relation to the Advance made by the Lender to the Borrower pursuant to the Loan Agreement; (2) the announcement dated 20 May 2011 and circular dated 10 June 2011 of the Company in relation to the extension of the repayment of the outstanding principal for two (2) years from 30 June 2011 to 29 June 2013 pursuant to the First Supplemental Agreement; (3) the announcement dated 31 October 2012 and circular dated 21 November 2012 of the Company in relation to (i) variation of the security under the Loan Agreement (as supplemented by the First Supplemental Agreement) by substituting the Listar Share Mortgage with the NHD Share Mortgage, and (ii) release of the Listar Share Mortgage pursuant to the Second Supplemental Agreement; (4) the announcement dated 9 May 2013 and circular dated 24 May 2013 of the Company in relation to the second extension of the repayment of the outstanding principal for two (2) years from 30 June 2013 to 29 June 2015 pursuant to the Third Supplemental Agreement; and (5) the 6

9 LETTER FROM THE BOARD announcement dated 30 April 2015 and circular dated 18 May 2015 of the Company in relation to the third extension of the repayment of the outstanding principal for two (2) years from 30 June 2015 to 29 June 2017 pursuant to the Fourth Supplemental Agreement. As of the Latest Practicable Date, the Outstanding Principal and outstanding accrued interest are approximately HK$1,317,149,000 and HK$88,067,000 respectively, which are being secured by the NHD Share Mortgage. The Fifth Supplemental Agreement constitutes a major transaction for the Company under Chapter 14 of the Listing Rules. As Nan Hai is the holding company of the Company, the Fifth Supplemental Agreement also constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. Accordingly, the Fifth Supplemental Agreement will be subject to the approval of the Independent Shareholders at the EGM (i.e. Nan Hai and its associates shall abstain from voting at the EGM). The purposes of this circular are to provide you, among other things: (i) (ii) further information on the Fifth Supplemental Agreement and the transactions contemplated thereunder; a letter of advice containing the recommendations from the Independent Board Committee to the Independent Shareholders in relation to the Fifth Supplemental Agreement and the transactions contemplated thereunder; (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to Fifth Supplemental Agreement and the transactions contemplated thereunder; and (iv) the notice of the EGM. II. THE FIFTH SUPPLEMENTAL AGREEMENT On 2 May 2017 after trading hours, the Company and Nan Hai entered into the Fifth Supplemental Agreement under which the Company conditionally agreed to extend the due date of repayment of the Remaining Outstanding Principal by Nan Hai to the Company under the Loan Agreement (as supplemented by the First Supplemental Agreement, the Second Supplemental Agreement, the Third Supplemental Agreement and the Fourth Supplemental Agreement) for a period of two (2) years from 30 June 2017 to 29 June 2019, the material terms and conditions of which are set out below: Date 2 May 2017 Parties (1) Lender: The Company (2) Borrower: Nan Hai 7

10 LETTER FROM THE BOARD Remaining Outstanding Principal Approximately HK$1,117,149,000. Extension of Repayment of the Remaining Outstanding Principal The due date for repayment of the Remaining Outstanding Principal shall be extended for two (2) years from 30 June 2017 to 29 June Interest Rate 8.0% per annum during the extension period which shall accrue from day to day, be calculated on the basis of the actual number of days lapsed and a 365-day year, and be paid in arrears when the Remaining Outstanding Principal (or the relevant part thereof) shall be repaid/prepaid. The interest rate of 8.0% per annum was set with reference to the prevailing prime lending rates in Hong Kong and the weighted average cost of finance of the Group at approximately 4.6% per annum as at 31 December Default Interest Rate 10% per annum on the default amount, which shall accrue from day to day on the basis of a 365-day year commencing from and including the due date of payment to the date of actual payment. Security Repayment of the Remaining Outstanding Principal and outstanding accrued interest will be secured by share mortgage (by way of first fixed charge) in respect of the NHD Shares, representing 100% of the issued share capital of Nan Hai Development. Details of Nan Hai Development are set out below. Conditions The Fifth Supplemental Agreement is conditional upon: (a) Nan Hai having settled in full the outstanding interest accrued on the Outstanding Principal on or before 29 June 2017, being approximately HK$99,037,000 up to 29 June 2017; (b) the Borrower having repaid the Partial Principal Repayment Amount on or before 29 June 2017; and (c) the Independent Shareholders having approved the Fifth Supplemental Agreement and the transactions contemplated thereunder in accordance with the provisions of the Listing Rules. If the conditions set out above are not fulfilled by 29 June 2017, or such later date as the parties may agree, the Fifth Supplemental Agreement will be null and void and of no further effect. 8

11 LETTER FROM THE BOARD Save as amended by the Fifth Supplemental Agreement, all other terms and provisions of the Loan Agreement (as supplemented by the First Supplemental Agreement, the Second Supplemental Agreement, the Third Supplemental Agreement and the Fourth Supplemental Agreement) shall remain unchanged and in full force and effect and binding on both the Lender and the Borrower. III. INFORMATION ON THE PARTIES Nan Hai Development Nan Hai Development is an investment holding company incorporated in Hong Kong with limited liability, which directly holds 100% of the issued share capital of LWD and 100% of the issued share capital of Listar. LWD ultimately holds 100% equity interest in a property project namely The Peninsula in Shenzhen City, Guangdong Province, the PRC. The Peninsula is a largescale residential property development project and consists of five phases. The Peninsula occupies a total site area of approximately 313,000 sq.m., with a total GFA of approximately 873,000 sq.m.. As per the valuation report dated 14 March 2017 issued by an independent valuer to Nan Hai, the total value of The Peninsula as of 31 December 2016 was approximately RMB24,870,000,000 (equivalent to approximately HK$28,085,827,000). Listar ultimately holds 100% equity interest in a property project namely Free Man Garden in Guangzhou City, Guangdong Province, the PRC. Free Man Garden is a large-scale residential property development project and consists of eight phases. Free Man Garden occupies a total site area of approximately 615,000 sq.m., with a total GFA of approximately 1,033,000 sq.m.. As per the valuation report dated 14 March 2017 issued by an independent valuer to Nan Hai, the total value of Free Man Garden as of 31 December 2016 was approximately RMB3,605,620,000 (equivalent to approximately HK$4,071,846,000). Nan Hai Nan Hai is an investment holding company whose securities are listed and traded on the Main Board of the Stock Exchange. The Nan Hai Group is principally engaged in (i) culture and media services (mainly in cinemas business on a nationwide basis in the PRC in addition to film distribution and other media related businesses); (ii) property development; and (iii) corporate IT application services (through the Group) as at the Latest Practicable Date. In 2015, the Nan Hai Group also started to tap into new business segments such as New Media and Innovative Business and it plans to step up its efforts in establishing these two business segments as the new growth points of Nan Hai. As at the Latest Practicable Date, Nan Hai, through a number of wholly-owned subsidiaries, holds approximately 64.45% of the issued share capital of the Company. The Company The Company is an investment holding company whose securities are listed and traded on the Main Board of the Stock Exchange. The Group is principally engaged in the provision of corporate IT application services. 9

12 LETTER FROM THE BOARD IV. REASONS FOR AND BENEFITS OF THE FIFTH SUPPLEMENTAL AGREEMENT As at the Latest Practicable Date, the Outstanding Principal and outstanding accrued interest are approximately HK$1,317,149,000 and HK$88,067,000 respectively. Nowadays, competition among cinemas has becomes increasingly keen, and the trend of merger and acquisition of film industry is sweeping across the PRC. Nan Hai is also committed to consolidate its position in the theater market. Moreover, for the purpose of enhancing its position in the entire film industrial chain and diversify profitability, Nan Hai will spare no effort to lay the groundwork for distribution and content products and map out the crucial deployment for content industry. As a result, Nan Hai continues to require the loan contemplated under the Fifth Supplemental Agreement for financing its operations. As advised by Nan Hai and disclosed in Nan Hai s annual report, Phase 4 of The Peninsula,NanHai s flagship real estate project, is expected to begin pre-sale in 2017, which by then should start generating cash inflows for Nan Hai. In addition, the cash inflow generated from the sales of Phase 3 of The Peninsula shall also gradually be realized in As such, Nan Hai expects that it is able to repay the Remaining Outstanding Principal within two years, i.e. an extra twenty four (24) months from 30 June 2017 are required. Currently, the Company has no intention to further extend the term of the Remaining Outstanding Principal beyond the expiry date as contemplated under the Fifth Supplemental Agreement. Comparing with the prevailing interest rate for time deposits being offered by banks to the public, the interest rate under the Fifth Supplemental Agreement remains attractive. The Company considers that the Fifth Supplemental Agreement will generate a stable interest income and offer a higher return to the Group when comparing with the interest to be earned by making a Hong Kong dollar time deposit with financial institutions in Hong Kong. The Group does not have material funding requirement in the next two (2) years despite it will keep on spending in research and development for maintaining the competitiveness of its product lines. As conditions precedent to the Fifth Supplemental Agreement, Nan Hai shall have to fully settle the outstanding interest accrued on the Outstanding Principal and repay the Partial Principal Repayment Amount on or before 29 June In addition, with the original business of the Group becoming gradually stable and capable of generating cash inflows, the Company is of the view that the Group will have sufficient financial resources to support its funding need for its new cloud service products designated for small and medium enterprises ( SMEs ) via platforms in the next two years. As a result, the Group considers the opportunity of gaining the interest at the relatively higher rate of 8.0% per annum from Nan Hai to be beneficial to the Group. 10

13 LETTER FROM THE BOARD The Board has assessed the credit risk associated with the transactions contemplated under the Fifth Supplemental Agreement and considers such credit risk to be low and acceptable to the Group based on the following two reasons: (i) (ii) Nan Hai Group had been generating operating cash inflow before working capital changes for the past five financial years ended 31 December 2016, which had demonstrated that it has strong capability to generate operating cash inflow to finance its ordinary and usual course of business; and the repayment of the Remaining Outstanding Principal and the interest incurred thereof is secured by the share mortgage in respect of the NHD Shares. As disclosed in this circular, Nan Hai Development indirectly holds 100% of each of The Peninsula project and Free Man Garden project, which, according to independent valuation has an valuation of approximately RMB24,870,000,000 and RMB3,605,620,000, respectively. The Board (including the independent non-executive Directors based on the advice of the Independent Financial Adviser, but excluding Mr. Yu Pun Hoi, the Director, who is deemed to have interest in Nan Hai and has abstained from voting in the board meeting for considering and approving the Company to enter into the Fifth Supplement Agreement) considers that the Fifth Supplemental Agreement and the transactions contemplated therein are on normal commercial terms and the terms and conditions of the Fifth Supplemental Agreement are fair and reasonable and in the interests of the Company and Shareholders as a whole notwithstanding such transactions are not in the ordinary and usual course of business of the Group. Accordingly, the Directors (excluding Mr. Yu Pun Hoi) recommend the Independent Shareholders to vote for the resolution approving the Fifth Supplemental Agreement and the transactions contemplated therein. As Mr. Xiao Sui Ning, an independent non-executive Director, is also an independent non-executive director of Nan Hai, he is not considered sufficiently independent to give advice or recommendation to the Independent Shareholders in relation to the Fifth Supplemental Agreement. Accordingly, Prof. Jiang Ping and Mr. Fung Wing Lap, the remaining independent non-executive Directors, have been appointed to form the Independent Board Committee to advise the Independent Shareholders, and the Independent Financial Adviser has been appointed to advise the Independent Board Committee in relation to the Fifth Supplemental Agreement. V. POSSIBLE FINANCIAL EFFECTS OF THE FIFTH SUPPLEMENTAL AGREEMENT The interest rate stipulated the Fifth Supplemental Agreement is 8.0% per annum during the extension period which shall accrue from day to day, be calculated on the basis of the actual number of days lapsed and a 365-day year, and be paid in arrears when the Remaining Outstanding Principal (or the relevant part thereof) shall be repaid/prepaid. As a result, the Fifth Supplemental Agreement will have the following financial effects on the earnings, assets and liabilities of the Group. 11

14 LETTER FROM THE BOARD Earnings The Directors expect that the earnings of the Group will be increased by the amount of interest to be received from Nan Hai. Assets The amount due from Nan Hai under the Loan Agreement (as supplemented by the First Supplemental Agreement, the Second Supplemental Agreement, the Third Supplemental Agreement and the Fourth Supplemental Agreement) has been reflected in the Group s 2016 financial statements. Subsequent to the repayment in the amount of the Partial Principal Repayment Amount, the Directors expect that the assets will only be increased by the amount of interest receivables from Nan Hai pursuant to the Fifth Supplemental Agreement. Liabilities The Directors do not expect any immediate material effect of the Fifth Supplemental Agreement on the liabilities of the Group. VI. LISTING RULE IMPLICATIONS The Fifth Supplemental Agreement constitutes a major transaction for the Company under Chapter 14 of the Listing Rules. As Nan Hai is the holding company of the Company, the Fifth Supplemental Agreement also constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. Accordingly, the Fifth Supplemental Agreement will be subject to the approval of the Independent Shareholders at the EGM. VII. EGM AND PROXY ARRANGEMENT A notice of the EGM to be held at Ballroom, 5/F, Island Shangri-La, Pacific Place, Supreme Court Road, Central, Hong Kong on Thursday, 15 June 2017 at 10:00 a.m. is set out on pages 39 to 40 of this circular. At the EGM, the ordinary resolution will be proposed to consider and, if thought fit, to approve the Fifth Supplemental Agreement and the transactions contemplated therein. Nan Hai and its associates are collectively interested in 12,835,105,316 Shares (representing approximately 64.45% of the total issued Shares), are required to and shall abstain from voting on the ordinary resolution(s) to approve the Fifth Supplemental Agreement and the transactions contemplated thereunder at the EGM. As at the Latest Practicable Date, there was (i) no voting trust or other agreement or arrangement or understanding entered into by binding upon each of Nan Hai and its associates; (ii) no obligation or entitlement of each of Nan Hai and its associates, whereby it has or may have temporarily or permanently passed control over the exercise of the voting right in respect of its Shares to a third party, either generally or on a case by case basis; and (iii) no discrepancy between Nan Hai and its associates beneficial shareholding interest in the Company as disclosed in this circular and the number of Shares in respect of which Nan Hai and its associates will control or will be entitled to exercise control over the voting right at the EGM. 12

15 LETTER FROM THE BOARD The ordinary resolution to be proposed at the EGM to approve the Fifth Supplemental Agreement and the transactions contemplated therein will be determined by way of poll by the Independent Shareholders in accordance with the Listing Rules. A form of proxy for use in connection with the EGM is enclosed with this circular. Whether or not you intend to attend the EGM, please complete and return the enclosed form of proxy in accordance with the instructions printed hereon to the share registrar of the Company, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen s Road East, Wanchai, Hong Kong, as soon as possible and in any event by not less than 48 hours before the time appointed for holding of the EGM or any adjourned meeting thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM (or any adjourned meeting thereof) should you so wish. Pursuant to the Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by poll (except where the chairman of the meeting, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands). Accordingly, the chairman of the EGM will arrange all the proposed resolutions set out in the notice of the EGM to be voted on by poll. The poll results will be published on the websites of the Company and the Stock Exchange on the day of the EGM. VIII. CLOSURE OF REGISTER OF MEMBERS The register of members of the Company will be closed from 12 June 2017 to 15 June 2017, both days inclusive, during which period no transfer of shares will be effected for the purpose of determining the identity of members who are entitled to attend and vote at the EGM. In order to qualify for attending and voting at the EGM, all transfers accompanied by the relevant share certificates must be lodged with the share registrar of the Company, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen s Road East, and Hong Kong not later than 4:30 p.m. on 9 June 2017 for registration. IX. FURTHER INFORMATION Your attention is also drawn to the Letter from the Independent Board Committee as set out in page 14 of this circular, the Letter from the Independent Financial Adviser as set out in pages 15 to 27 of this circular and further information contained in the appendices to this circular. Yours faithfully, By order of the Board Sino-i Technology Limited Liu Rong Executive Director 13

16 LETTER FROM THE INDEPENDENT BOARD COMMITTEE SINO-i TECHNOLOGY LIMITED To the Independent Shareholders Dear Sirs, (Incorporated in Hong Kong with limited liability) (Stock Code: 250) MAJOR AND CONNECTED TRANSACTION LOAN EXTENSION 26 May 2017 We have been appointed as the Independent Board Committee to advise the Independent Shareholders in respect of the Fifth Supplemental Agreement and the transactions contemplated thereunder, details of which are set out in the circular dated 26 May 2017 (the Circular )to the Shareholders. First Shanghai has been appointed as the independent financial adviser to advise us in this respect. Unless the context otherwise requires, terms defined in the Circular shall have the same meanings when used in this letter. Your attention is drawn to the Letter from the Board containing, amongst others, details of the Fifth Supplemental Agreement and the Letter from the Independent Financial Adviser containing its advice to us as set out in the Circular. Having taken into account (i) the factors referred to in the section headed Reasons for and benefits of the Fifth Supplemental Agreement in the Letter from the Board ; and(ii) the factors referred to in the Letter from the Independent Financial Adviser, we consider that the terms of the Fifth Supplemental Agreement are fair and reasonable, on normal commercial terms, so far as the interests of the Independent Shareholders are concerned and that the entering into of the Fifth Supplemental Agreement is in the interests of the Company and the Independent Shareholders as a whole, notwithstanding such transactions are not conducted in the ordinary and usual course of business of the Group. Accordingly, we recommend the Independent Shareholders to vote for the resolution approving the Fifth Supplemental Agreement and the transactions contemplated thereunder. Yours faithfully, Prof. Jiang Ping and Fung Wing Lap Independent Board Committee 14

17 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER The following is the text of a letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the terms of the extension of the Remaining Outstanding Principal of the Advance to Nan Hai pursuant to the Fifth Supplemental Agreement prepared for the purpose of incorporation in this circular. To the Independent Board Committee and the Independent Shareholders Sino-i Technology Limited 12th Floor, The Octagon No. 6, Sha Tsui Road Tsuen Wan New Territories Hong Kong Dear Sirs, INTRODUCTION 19th Floor Wing On House 71 Des Voeux Road Central Hong Kong MAJOR AND CONNECTED TRANSACTION LOAN EXTENSION 26 May 2017 We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the extension of the Remaining Outstanding Principal to Nan Hai pursuant to the Fifth Supplemental Agreement, details of which are set out in the Letter from the Board contained in the circular dated 26 May 2017 (the Circular ) to the Shareholders, of which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter shall have the same meanings as those defined in the Circular. On 2 May 2017, the Company and Nan Hai entered into the Fifth Supplemental Agreement pursuant to which the Company conditionally agreed to extend the due date of repayment of the Remaining Outstanding Principal by Nan Hai to the Company under the Loan Agreement (as supplemented by the First Supplemental Agreement, the Second Supplemental Agreement, the Third Supplemental Agreement and the Fourth Supplemental Agreement (collectively, the Previous Four Supplemental Agreements ) foraperiodoftwo(2)years from 30 June 2017 to 29 June

18 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER The Fifth Supplemental Agreement constitutes a major transaction for the Company under Chapter 14 of the Listing Rules. As Nan Hai is the holding company of the Company, the Fifth Supplemental Agreement also constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. Accordingly, the Fifth Supplemental Agreement will be subject to the approval of the Independent Shareholders at the EGM. Nan Hai and its associates shall abstain from voting on the ordinary resolution to approve the Fifth Supplemental Agreement and the transactions contemplated thereunder at the EGM. INDEPENDENT BOARD COMMITTEE Mr. Xiao Sui Ning, being an independent non-executive Director, is also an independent non-executive director of Nan Hai. Thus, Prof. Jiang Ping and Mr. Fung Wing Lap, being the remaining two independent non-executive Directors, have been appointed to form the Independent Board Committee and to give recommendations to the Independent Shareholders on whether the entering into of the Fifth Supplemental Agreement and the transactions contemplated thereunder are on normal commercial terms, in the interests of the Company and the Shareholders as a whole and are fair and reasonable so far as the Independent Shareholders are concerned. As the independent financial adviser to the Independent Board Committee and the Independent Shareholders, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders as to (i) whether the entering into of the Fifth Supplemental Agreement is conducted in the ordinary and usual course of business of the Group, on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole; and (ii) how the Independent Shareholders should vote in respect of the ordinary resolution to approve the Fifth Supplemental Agreement and the transactions contemplated thereunder at the EGM. BASIS OF OUR OPINION In putting forth our opinion and recommendation, we have relied on the accuracy of the information and representations included in the Circular and provided, and opinion expressed to us, by the Directors and the management of the Company (the Management ). We have assumed that all such information and representations made or referred to in the Circular and provided, and opinion expressed, to us by the Directors and the Company were true, accurate and complete at the time they were made and continued to be true as at the date hereof. We have also assumed that all statements of belief, opinion and intention made by the Directors and the Company in the Circular were reasonably made after due enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and the Company and the information contained in the Circular. We have also been advised by the Directors and the Company that no material facts have been withheld or omitted from the information provided and referred to in the Circular. We consider that we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice. We have not, however, conducted any independent verification 16

19 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER of the information included in the Circular and provided to us by the Directors nor have we conducted any form of investigation into the business, operations, financial condition, affairs or future prospects of the Group and Nan Hai Group. We confirm that we have taken all the reasonable steps, which are applicable to the Fifth Supplemental Agreement, as referred to and required under Rule 13.80(2)(b) of the Listing Rules (including its annexed notes) in forming our opinion. The Independent Shareholders should note that, within the past two years from the Latest Practicable Date, we were engaged as the independent financial adviser by the Company for one occasion (i.e. the provision of independent financial advice to the then independent director and independent shareholders of the Company for a major and connected transaction in the same nature in respect of the previous extension of the Outstanding Principal of the Advance to Nan Hai) as detailed in the circular of the Company dated 18 May Given (i) our independent role in that previous engagement; (ii) none of the members of our parent group is a direct party to the Fifth Supplemental Agreement; and (iii) our fees for this present engagement in addition to that previous engagement represented an insignificant percentage of revenue of our parent group, we consider that previous engagement would not affect our independence to form our opinion in respect of the transactions contemplated under the Fifth Supplemental Agreement. PRINCIPAL FACTORS AND REASONS CONSIDERED In formulating our opinion for and recommendation on the extension of the Remaining Outstanding Principal of the Advance pursuant to the Fifth Supplemental Agreement, we have taken into account, among other things, the following principal factors and reasons: 1. Background of the Group The Company is an investment holding company whose securities are listed and traded on the Main Board of the Stock Exchange (Stock Code: 250). The Group is principally engaged in the provision of corporate IT application services. 2. Background of Nan Hai Group Nan Hai is an investment holding company whose securities are listed and traded on the Main Board of the Stock Exchange (Stock Code: 680). The Nan Hai Group is principally engaged in (i) culture and media services (mainly in cinemas business on a nationwide basis in the PRC in addition to film distribution and other media related businesses); (ii) property development; and (iii) corporate IT application services (through the Group) as at the Latest Practicable Date. In 2015, the Nan Hai Group also started to tap into new business segments such as New Media and Innovative Business and it plans to step up its efforts in establishing these two business segments as the new growth points of Nan Hai. As at the Latest Practicable Date, Nan Hai, through a number of wholly-owned subsidiaries, held approximately 64.45% of the issued share capital of the Company. 17

20 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER 3. Reasons for and benefits of the Fifth Supplemental Agreement As at the Latest Practicable Date, the Outstanding Principal and outstanding accrued interest thereon are approximately HK$1,317,149,000 and HK$88,067,000, respectively. As mentioned in the Letter from the Board of the Circular, nowadays, competition among cinemas has become increasingly keen, and the trend of merger and acquisition of film industry is sweeping across the PRC. Nan Hai is also committed to consolidate its position in the threater market. Moreover, for the purpose of enhancing its position in the entire film industrial chain and diversify profitability, Nan Hai will spare no effort to lay the ground-work for distribution and content products and map out the crucial deployment for content industry. As a consequence, Nan Hai continues to require the loan contemplated under the Fifth Supplemental Agreement for financing its operations. AsadvisedbyNanHaianddisclosedinNanHai s annual report, Phase 4 of The Peninsula, NanHai s flagship real estate project, is expected to begin pre-sale in 2017, which by then should start generating cash inflows for Nan Hai. In addition, the cash inflow generated from the sales of Phase 3 of The Peninsula shall also gradually be realized in As such, Nan Hai expects that it is able to repay the Remaining Outstanding Principal within the coming two years, i.e. an extra twenty four (24) months from 30 June 2017 are required. Currently, the Company has no intention to further extend the term of the Remaining Outstanding Principal beyond the expiry date as contemplated under the Fifth Supplemental Agreement. Comparing with the prevailing interest rate for time deposits being offered by banks to the public, the interest rate of 8.0% per annum under the Fifth Supplemental Agreement remains attractive. The Company considers that the Fifth Supplemental Agreement will generate a stable interest income and offer a higher return to the Group when comparing with the interest to be earned by making a Hong Kong dollar time deposit with financial institutions in Hong Kong. The Group does not have material funding requirement in the next two (2) years despite it will keep on spending in research and development for maintaining the competitiveness of its product lines. As conditions precedent to the Fifth Supplemental Agreement, Nan Hai shall have to fully settle the outstanding interest accrued on the Outstanding Principal and repay the Partial Principal Repayment Amount on or before 29 June In addition, with the original business of the Group becoming gradually stable and capable of generating cash inflows, the Board is of the view that the Group will have sufficient financial resources to support its funding need for its new cloud service products designated for small and medium enterprises (the SMEs ) via platforms in the next two years. Currently, the Directors does not have concrete plan for any other alternatives on use of the idle funds. As a result, the Group considers the opportunity of gaining the interest at the relatively higher rate of 8.0% per annum from Nan Hai to be beneficial to the Group. 18

21 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER The Board has assessed the credit risk associated with the transactions contemplated under the Fifth Supplemental Agreement, and considers such risk to be low and acceptable to the Group based on the following two reasons: (i) (ii) Nan Hai Group had been generating operating cash inflow before working capital changes for the past five financial years (the FY(s) ) ended 31 December 2016, which had demonstrated that it has strong capability to generate operating cash inflow to finance its ordinary and usual course of business; and the repayment of the Remaining Outstanding Principal and the interest incurred thereof is secured by the share mortgage in respect of the NHD Shares. As disclosed in the Circular, Nan Hai Development indirectly holds 100% of each of The Peninsula project and Free Man Garden project, which, according to an independent valuation has a valuation of approximately RMB24,870,000,000 and RMB3,605,620,000, respectively. According to our independent review of the annual reports of Nan Hai for the past few FYs up to 31 December 2016, we have noted that the operating performance of Nan Hai Group has been fluctuating largely with loss-making results in two out of the past five FYs from 2012 to However, the Nan Hai Group has been operating profitably in the latest two FYs of 2015 and 2016 with profits attributable to owners of Nan Hai of approximately HK$238.9 million and HK$1,359.6 million, respectively. In terms of cash flow generating capability, the Nan Hai Group had been generating meaningful operating cash inflow before working capital changes of approximately HK$24.9 million, HK$103.1 million, HK$335.5 million, HK$577.0 million and HK$2,771.3 million for each of the five FYs from 2012 to 2016, respectively, representing a compounded annual growth rate of approximately 325% over the five year period. This had demonstrated that the Nan Hai Group has strong capability to generate operating cash inflow to finance its ordinary and usual course of business so far, even though the Nan Hai Group had a relatively higher gearing ratio of approximately 381.7% versus a healthier current ratio of approximately 124.5% as at 31 December Looking forward shortly, the Nan Hai Group is anticipating to receive cash proceeds from sales of the Phases 3 and 4 of The Peninsula of not less than HK$28,000 million, which can well cover the Remaining Outstanding Principal amount of approximately HK$1,171.1 million. In addition, the aggregate pledge value secured by the share mortgage in respect of the NHD Shares had fair market value of almost 27.8 times over the Remaining Outstanding Principal, details of which are disclosed below. Based on the confirmation from the Management and our independent review of the annual report of Nan Hai for the FY 2016, there was no unresolved litigation against the Nan Hai Group regarding default of repayment of bank and other borrowings as at 31 December 2016; whilst the repeated extensions of repayment of the Outstanding Principal so far have mainly been for the purpose of more effectively utilising the idle funds between member companies within the larger Nan Hai Group instead of Nan Hai Group s incapability of making repayment to the Group, in particular view of Nan Hai Group s strong capability to generate operating cash inflow over the past few FYs and in the near 19

22 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER future. Based on such scenario, we concur with the Board s assessment that the credibility of the Borrower, apart from its holding company relationship, is not bad and therefore acceptable. The Board (excluding Mr. Yu Pun Hoi who is deemed to be interested in Nan Hai and has abstained from voting on the relevant resolution at the Board meeting) considers that the Fifth Supplemental Agreement and the transactions contemplated thereunder are on normal commercial terms, and the terms and conditions of the Fifth Supplemental Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Based on our review of the annual report of the Company for the FY ended 31 December 2016 (the Annual Report ), despite (i) the Group s adjusted net current liabilities (i.e. after excluding the outstanding balance of the Advance and accrued interest due from Nan Hai in aggregate of approximately HK$1,475.9 million as at 31 December 2016) amounted to approximately HK$432.3 million as at 31 December 2016; and (ii) the Group was mainly financed by banking facilities and bank borrowings with floating rate of 4.40% per annum and fixed rates ranging from 2.40% to 5.22% per annum, with the weighted average cost of financing of the Group was approximately 4.60% per annum. Given the fact that the interest rate of 8.0% per annum is attributable to the Remaining Outstanding Principal pursuant to the Fifth Supplemental Agreement, which is considerably higher than the above mentioned weighted average cost of financing of the Group by 3.4% per annum. In view of the Group s total interest-bearing borrowings and finance lease liabilities of approximately HK$156.8 million as at 31 December 2016, such interest-bearing liabilities are substantially less than the Remaining Outstanding Principal of approximately HK$1,117.1 million, representing approximately 14.0% thereof. Interest income to be generated at the rate of 8.0% per annum by having the Remaining Outstanding Principal extended would substantially outweigh the weighted average cost of financing borne by the Group for its interest-bearing liabilities. In addition, the Group does not have material funding requirement in the next two years, while it considers the opportunity of gaining the interest at the relatively higher rate of 8.0% per annum from Nan Hai to be beneficial to the Group. Based on our discussion with and understanding from the Management, the Group currently anticipates that it would not have material funding requirements in the coming two years; and it has compromised with Nan Hai to request for any possible partial early repayment from time to time within the period from 30 June 2017 to 29 June 2019 if the Group would have unpredictable immediate funding need. In addition, the Group has forecasted that full repayment of the Remaining Outstanding Principal by Nan Hai to the extent of approximately HK$1,171.1 million would very likely remain as idle fund of the Group, so that it might lose the opportunity of gaining a satisfactory amount of interest income at the interest rate of 8.0% per annum as if extension of repayment of the Remaining Outstanding Principal is not allowed. Based on our independent review of the shareholding structure of the Nan Hai Group, the Group is a non-wholly owned sub-group of the larger Nan Hai Group, the Advance initially made in June 2009 and its subsequent repeated extensions of the 20