TPV TECHNOLOGY LIMITED (Incorporated in Bermuda with limited liability)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in TPV Technology Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s). 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. TPV TECHNOLOGY LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 903) RENEWALS OF EXISTING CONTINUING CONNECTED TRANSACTIONS AND ENTERING INTO OF NEW CONTINUING CONNECTED TRANSACTION Independent financial adviser to the Independent Board Committee and the Independent Shareholders SOMERLEY CAPITAL LIMITED A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 20 to 21 of this circular. A letter from Somerley containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 22 to 40 of this circular. A notice convening the SGM to be held at 3: 30 p.m. on Thursday, 5 February 2015 at Units , 12th Floor, C-Bons International Center, 108 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong is set out on pages SGM-1 to SGM-3 of this circular. A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM in person, you are requested to complete and return the form of proxy in accordance with the instructions set out in the SGM Notice. If your Shares are registered with the Company s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, you should deposit your form of proxy at Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen s Road East, Wanchai, Hong Kong or the Company s principal office in Hong Kong at Units , 12th Floor, C-Bons International Center, 108 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong. If your Shares are registered with the Company s Singapore share transfer office, you should deposit your form of proxy at Boardroom Corporate & Advisory Services Pte. Ltd. at 50 Raffles Place, #32-01 Singapore Land Tower, Singapore or the Company s principal office in Hong Kong at the address stated above. The form of proxy should be deposited as soon as possible but in any event not later than 48 hours before the time appointed for the holding of the SGM in order to be valid. Completion of the form of proxy will not preclude you from attending and voting at the SGM or any adjournment thereof should you so wish. 19 January 2015

2 CONTENTS Page DEFINITIONS... 1 LETTER FROM THE BOARD... 5 LETTER FROM THE INDEPENDENT BOARD COMMITTEE LETTER FROM SOMERLEY APPENDIX GENERAL INFORMATION NOTICE OF THE SGM... SGM-1 i

3 DEFINITIONS In this circular, the following expressions have the meanings set out below unless the context otherwise requires: Annual Caps associate(s) Board CEC CEC Group CGCSZ Company or TPV connected person(s) Continuing Connected Transactions controlling shareholder Director(s) Existing Panda LCD Procurement Agreement Existing Sang Fei Supply Agreement Group the Sang Fei Annual Cap, the Panda LCD Annual Cap and the SZIT Annual Cap has the meaning given to it in the Listing Rules the board of the Directors 中國電子信息產業集團有限公司 (China Electronics Corporation*), a state-owned company established in the PRC with limited liability and the ultimate controlling shareholder of the Company CEC and its subsidiaries (for the purpose of this circular, exclude the Group) 中國長城計算機深圳股份有限公司 (China Great Wall Shenzhen Co., Ltd.*), a joint stock company established in the PRC with limited liability, whose A shares are listed on the Shenzhen Stock Exchange in the PRC (stock code: ) TPV Technology Limited, a company incorporated in Bermuda with limited liability, the shares of which are primarily listed on the main board of The Stock Exchange of Hong Kong Limited and secondarily listed on Singapore Exchange Securities Trading Limited has the meaning given to it in the Listing Rules the Sang Fei Continuing Connected Transaction, the Panda LCD Continuing Connected Transaction and the SZIT Continuing Connected Transaction has the meaning given to it in the Listing Rules the director(s) of the Company the procurement agreement dated 1 June 2012 entered into between Top Victory and Panda LCD in relation to the procurement of the Panda LCD Products by the Top Victory Group from the Panda LCD Group the supply agreement dated 21 July 2014 entered into between the Company and Sang Fei in respect of the supply of the Sang Fei Products by the Group to the Sang Fei Group the Company and its subsidiaries 1

4 DEFINITIONS Hong Kong Independent Board Committee Independent Shareholders Latest Practicable Date LCD LCD panel(s) Listing Rules Panda LCD Panda LCD Annual Cap Panda LCD Continuing Connected Transaction Panda LCD Group Panda LCD Products PC(s) PRC or China the Hong Kong Special Administrative Region of the PRC an independent committee of the Board comprising all independent non-executive Directors, namely Mr. Chan Boon Teong, Dr. Ku Chia-Tai and Mr. Wong Chi Keung, to advise the Independent Shareholders on the terms of the Continuing Connected Transactions (including the Annual Caps) the Shareholders other than CEC and its associates 16 January 2015, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein liquid crystal display liquid crystal display panel(s) the Rules Governing the Listing of Securities on the Stock Exchange 南京中電熊貓液晶顯示科技有限公司 (Nanjing CEC Panda LCD Technology Co., Ltd*), a company established in the PRC with limited liability and a non-wholly owned subsidiary of CEC the proposed annual maximum aggregate value for the Panda LCD Continuing Connected Transaction for the three years ending 31 December 2017 the Renewed Panda LCD Procurement Agreement (including the Panda LCD Annual Cap) and the transactions contemplated thereunder Panda LCD and its parent companies, subsidiaries, associates and connected persons LCD panels and other related products designed, manufactured or sold by the Panda LCD Group to the Top Victory Group personal computer(s) the People s Republic of China and, for the purpose of this circular, excluding Hong Kong, the Macau Special Administrative Region of the People s Republic of China and Taiwan 2

5 DEFINITIONS Renewed Panda LCD Procurement Agreement Renewed Sang Fei Supply Agreement the procurement agreement dated 24 December 2014 entered into between Top Victory and Panda LCD in relation to the procurement of the Panda LCD Products by the Top Victory Group from the Panda LCD Group the supply agreement dated 24 December 2014 entered into between the Company and Sang Fei in relation to the supply of the Sang Fei Products by the Group to the Sang Fei Group Sang Fei 深圳桑菲消費通信有限公司 (Shenzhen Sang Fei Consumer Communications Co., Ltd.*), a joint stock company incorporated in the PRC with limited liability and a nonwholly owned subsidiary of CEC Sang Fei Annual Cap Sang Fei Continuing Connected Transaction Sang Fei Group Sang Fei Products SFO the proposed annual maximum aggregate value for the Sang Fei Continuing Connected Transaction for the three years ending 31 December 2017 the Renewed Sang Fei Supply Agreement (including the Sang Fei Annual Cap) and the transactions contemplated thereunder Sang Fei and its associates touch screen panels and such other products as may be agreed between the Group and the Sang Fei Group from time to time the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) SGM the special general meeting of the Company to be convened on 5 February 2015 for the purpose of considering, and if thought fit, approving each of the Continuing Connected Transactions (including the Annual Caps) Share(s) Shareholder(s) Somerley or Independent Financial Adviser ordinary share(s) of US$0.01 each in the share capital of the Company holder(s) of the Share(s) Somerley Capital Limited, a corporation licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance, the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Continuing Connected Transactions (including the Annual Caps) 3

6 DEFINITIONS Stock Exchange The Stock Exchange of Hong Kong Limited SZIT 深圳中電國際信息科技有限公司 (Shenzhen CECI Information Technology Co., Ltd.*), a company established in the PRC with limited liability and a wholly-owned subsidiary of CEC SZIT Annual Cap SZIT Continuing Connected Transaction SZIT Group SZIT Procurement Agreement SZIT Products Top Victory the proposed annual maximum aggregate value for the SZIT Continuing Connected Transaction for the three years ending 31 December 2017 the SZIT Procurement Agreement (including the SZIT Annual Cap) and the transactions contemplated thereunder SZIT and its parent companies, subsidiaries, associates and connected persons the procurement agreement dated 24 December 2014 entered into betweentopvictoryandszitinrelationtotheprocurementof the SZIT Products by the Top Victory Group from the SZIT Group electronic components or semi-conductors and other related products designed, manufactured or sold by the SZIT Group to the Top Victory Group Top Victory Investments Limited, a company incorporated in Hong Kong and a wholly-owned subsidiary of the Company Top Victory Group Top Victory and its subsidiaries, associates and connected persons TV(s) US$ television(s) United States dollars, the lawful currency of the United States of America * The English translations of the Chinese company names are for illustrative purpose only. 4

7 LETTER FROM THE BOARD TPV TECHNOLOGY LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 903) Executive Director: Dr. Hsuan, Jason (Chairman and Chief Executive Officer) Non-executive Directors: Mr. Liu Liehong Ms. Wu Qun Mr. Du Heping Dr.LiJun Mr. Hideki Noda Independent non-executive Directors: Mr. Chan Boon Teong Dr. Ku Chia-Tai Mr.WongChiKeung Registered office: Canon s Court 22 Victoria Street Hamilton HM 12 Bermuda Principal office and place of business in Hong Kong: Units , 12th Floor, C-Bons International Center, 108 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong 19 January 2015 To the Shareholders Dear Sir or Madam, RENEWALS OF EXISTING CONTINUING CONNECTED TRANSACTIONS AND ENTERING INTO OF NEW CONTINUING CONNECTED TRANSACTION (A) INTRODUCTION Reference is made to the announcement of the Company dated 24 December 2014 in relation to the entering into of the Renewed Sang Fei Supply Agreement, the Renewed Panda LCD Procurement Agreement and the SZIT Procurement Agreement (i.e. the Continuing Connected Transactions). Details of each of these Continuing Connected Transactions (including the Annual Caps) are set out in the sections below. 5

8 LETTER FROM THE BOARD The purpose of this circular is to provide the Shareholders with: (i) (ii) the relevant information relating to the Continuing Connected Transactions (including the Annual Caps); the recommendation and advice of the Independent Board Committee on the terms of the Continuing Connected Transactions (including the Annual Caps); (iii) the letter of advice from Somerley containing its advice to the Independent Board Committee and the Independent Shareholders in relation to the terms of the Continuing Connected Transactions (including the Annual Caps); and (iv) the notice of the SGM to consider and, if thought fit, to ratify and approve the Continuing Connected Transactions (including the Annual Caps). (B) THE RENEWED SANG FEI SUPPLY AGREEMENT Introduction Reference is made to the announcements of the Company dated 21 July 2014 and 29 July 2014 regarding the Existing Sang Fei Supply Agreement. As the Existing Sang Fei Supply Agreement expired on 31 December 2014, the Company and Sang Fei renewed the Existing Sang Fei Supply Agreement on 24 December Pursuant to the Renewed Sang Fei Supply Agreement, the Group may continue to supply the Sang Fei Products to the Sang Fei Group. Details of the Renewed Sang Fei Supply Agreement are set out below. The Renewed Sang Fei Supply Agreement Date 24 December 2014 Parties (1) The Company (2) Sang Fei Principle terms Pursuant to Renewed Sang Fei Supply Agreement, the Group may supply, and the Sang Fei Group may purchase, the Sang Fei Products. 6

9 LETTER FROM THE BOARD Pricing basis The Group will sell the Sang Fei Products to the Sang Fei Group on a purchaseby-purchase basis. The price and specifications of the Sang Fei Products shall be set out in a purchase order. The price and the other terms (including the payment terms) of the purchase order shall be (i) on normal commercial terms; (ii) determined with reference to the prevailing market prices; (iii) taking into consideration the cost and reasonable profit margin of the Group; (iv) determined after arm s length negotiation; and (v) in any event, no more favourable to the Sang Fei Group than price and the other terms available to independent third party customers. As a reference, the payment terms for historical transactions were 60 days. The payment terms proposed by the sales officer for the Sang Fei Group or any other independent third party customers will be submitted to finance department for credit review, which mainly includes assessment of financial statements and credibility of the potential customers. After approval from finance department is obtained, the proposed payment terms will be reviewed and approved by the head of sales to ensure the payment terms offered to the Sang Fei Group shall not be more favorable than that offered by the Group to other independent third party customers. Further information of the pricing policies for the supply of the Sang Fei Products is set out in the section headed (E) Pricing policies below in this letter. Conditions precedent The Renewed Sang Fei Supply Agreement is conditional upon (i) the approval obtained by CGCSZ pursuant to the listing rules of the Shenzhen Stock Exchange (as applicable); and (ii) compliance by the Company of the relevant requirements in the Listing Rules (as applicable). Term and renewal Subject to the conditions precedent, the Renewed Sang Fei Supply Agreement commenced on 1 January 2015 and shall continue in force until 31 December Subject to compliance with the requirements of the Listing Rules, the Company and Sang Fei may agree to renew or extend the term of the Renewed Sang Fei Supply Agreement for subsequent three-year periods. The renewal or extension of the Renewed Sang Fei Supply Agreement will be subject to the approval procedures in accordance with the Listing Rules and the listing rules of the Shenzhen Stock Exchange (as applicable). 7

10 LETTER FROM THE BOARD Termination Either party may terminate the Renewed Sang Fei Supply Agreement forthwith by giving notice to the other if, among other things, the other party commits any breach of any of the terms and conditions of the Renewed Sang Fei Supply Agreement and fails to remedy that breach (if capable of remedy) within one month after written notice from the other party giving full particulars of the breach and requiring it to be remedied. The Renewed Sang Fei Supply Agreement will also terminate automatically if the Sang Fei Group cease to be connected persons of the Company. The Sang Fei Annual Cap Set out below is the Sang Fei Annual Cap for the three years ending 31 December For the year ending 31 December US$ 000 US$ 000 US$ 000 Amount of the Sang Fei Annual Cap 33,080 47,340 60,000 The Sang Fei Annual Cap was determined by reference to a number of factors, particularly (i) the historical sales amount of the Sang Fei Products for the period from 21 July 2014 to 30 November 2014; (ii) the expected demand for the Sang Fei Products by the Sang Fei Group with reference to the projected sales of smartphones by the Sang Fei Group with a compound annual growth rate ( CAGR )ofapproximately 16% during the period from 2014 to 2017; (iii) the Sang Fei Group s planned reallocation of purchase of the Sang Fei Products from other suppliers to the Group such that the proportion of purchase from the Group out of the total purchase quantity of the Sang Fei Group is anticipated to increase from approximately 12.7% (on an annualised basis) in 2014 to 35%, 45% and 50% for the three years ending 31 December 2015, 2016 and 2017 respectively; and (iv) the projected selling prices of the Sang Fei Products during the term of the Renewed Sang Fei Supply Agreement after taking into account the market price forecast of the Sang Fei Products published by DisplaySearch. The historical sales of the Sang Fei Products for the period from 21 July 2014 to 30 November 2014 was approximately US$2.3 million and the annual maximum aggregate value for the transactions contemplated under the Existing Sang Fei Supply Agreement for the period from 21 July 2014 to 31 December 2014 was US$10.0 million. 8

11 LETTER FROM THE BOARD (C) THE RENEWED PANDA LCD PROCUREMENT AGREEMENT Introduction Reference is made to the announcement of the Company dated 1 June 2012 and the circular of the Company dated 22 June 2012 regarding the Existing Panda LCD Procurement Agreement. As the Existing Panda LCD Procurement Agreement expired on 31 December 2014, Top Victory, a wholly-owned subsidiary of the Company, and Panda LCD renewed the Existing Panda LCD Procurement Agreement on 24 December Pursuant to the Renewed Panda LCD Procurement Agreement, the Top Victory Group may continue to procure the Panda LCD Products from the Panda LCD Group. Details of the Renewed Panda LCD Procurement Agreement are set out below. The Renewed Panda LCD Procurement Agreement Date 24 December 2014 Parties (1) Top Victory; and (2) Panda LCD Principle terms Pursuant to the Renewed Panda LCD Procurement Agreement, the Top Victory Group may procure the Panda LCD Products from the Panda LCD Group. Pricing basis The procurement of the Panda LCD Products by the Top Victory Group from the Panda LCD Group will be by way of purchase order, which will set out the quality, model type, specifications, pricing and payment terms of the Panda LCD Products. The pricing and other terms (including the payment terms) of the Panda LCD Products shall be negotiated on an arm s length basis between the parties to the Renewed Panda LCD Procurement Agreement and be determined based on normal commercial terms with reference to prevailing market prices that are fair and reasonable and in any event should be below the best available price offered by the Panda LCD Group to independent third party purchasers. As a reference, the payment terms for historical transactions were 30 days. The payment terms of the purchase order shall be subject to the Top Victory Group s tendering process. In any event, if Panda LCD Group is selected after arm s length tendering process, the final payment terms shall not be less favorable to the Top Victory Group than that offered by any other independent third 9

12 LETTER FROM THE BOARD party suppliers. Further information of the pricing policies for the procurement of the Panda LCD Products is set out in the section headed (E) Pricing policies below in this letter. Production planning and warehousing To assist the Panda LCD Group with an orderly planning of adequate supplies, production and stock levels, the Top Victory Group will, on a monthly basis, provide a three-month rolling forecast to the Panda LCD Group. In the event of any changes in delivery of the Panda LCD Products, the Panda LCD Group will use its best endeavour to store the relevant Panda LCD Products in its own warehouse facilities. Furthermore, the Panda LCD Group will maintain a one-month safety stock level of the Panda LCD Products to meet the Top Victory Group s production needs. During the term of the Renewed Panda LCD Procurement Agreement, both parties to the Renewed Panda LCD Procurement Agreement are committed to conduct quarterly review of production planning road maps, in order to facilitate new Panda LCD Products research and development as well as the launch of new Panda LCD Products. Quality and services requirements The Top Victory Group and the Panda LCD Group should confirm technical specifications and product acceptance specifications of the Panda LCD Products before the bulk delivery of the relevant Panda LCD Products. Details of the specific quality and services requirements are set out in the Renewed Panda LCD Procurement Agreement. Conditions precedent The Renewed Panda LCD Procurement Agreement is conditional upon, among others, (i) the approval obtained by CGCSZ pursuant to the listing rules of the Shenzhen Stock Exchange (as applicable); and (ii) the approval by the Independent Shareholders by way of a poll at the SGM to approve the Panda LCD Continuing Connected Transaction (including the Panda LCD Annual Cap) (as applicable). Term and renewal Subject to the conditions precedent, the Renewed Panda LCD Procurement Agreement commenced on 1 January 2015 and shall continue in force until 31 December Subject to compliance with the requirements of the Listing Rules, the Company and Panda LCD may agree to renew or extend the term of the Renewed Panda LCD Procurement Agreement for subsequent three-year periods. The renewal or extension of the Renewed Panda LCD Procurement Agreement will be subject to the approval procedures in accordance with the Listing Rules and the listing rules of the Shenzhen Stock Exchange (as applicable). 10

13 LETTER FROM THE BOARD Termination Unless otherwise specified in the Renewed Panda LCD Procurement Agreement, any of the parties to the Renewed Panda LCD Procurement Agreement has a right to terminate the Renewed Panda LCD Procurement Agreement if, among other things, the other party who commits a material breach of the Renewed Panda LCD Procurement Agreement and fails to remedy that breach after giving a 30-day written notice. The Panda LCD Annual Cap Set out below is the Panda LCD Annual Cap for the three years ending 31 December For the year ending 31 December US$ 000 US$ 000 US$ 000 Amount of the Panda LCD Annual Cap 617, , ,282 The Panda LCD Annual Cap was determined by reference to a number of factors, particularly (i) the historical procurement of the Panda LCD Products by the Group for the period from 17 July 2012 to 31 December 2012, the year ended 31 December 2013 and the eleven months ended 30 November 2014; (ii) the projected growth in demand for the Panda LCD Products driven by the projected increase in procurement quantity at the Top Victory s own discretion with a CAGR of approximately 9.8% between 2014 and 2017; (iii) the Top Victory Group s planned allocation of a substantial portion of the aforesaid incremental procurement quantity at its own discretion for the three years ending 31 December 2015, 2016 and 2017 to the Panda LCD Group and the planned reallocation of certain portion of the existing procurement quantity at its own discretion from other suppliers to the Panda LCD Group such that the proportion of purchase by the Top Victory Group from the Panda LCD Group out of the total purchase quantity is anticipated to increase from approximately 9.6% (on an annualised basis) for the year ended 31 December 2014 to 18.2%, 23.3% and 24.7% for the three years ending 31 December 2015, 2016 and 2017 respectively; (iv) the purchase of LCD panels in new sizes for production of large screen LCD TVs, laptops, tablets and smartphones, which are a major strategic focus of the Top Victory Group in the coming years; (v) the projected production capacity of the Panda LCD Group for production of the Panda LCD Products during the term of the Renewed Panda LCD Procurement Agreement which was expected to grow from approximately 63.6 million units in 2015 to approximately million in 2017; (vi) the projected purchase prices of the Panda LCD Products during the term of the Renewed Panda LCD Procurement Agreement based on the market price forecast published by DisplaySearch; and (vii) a buffer to accommodate the abrupt changes in purchasing quantity and pricing of the Panda LCD Products. 11

14 LETTER FROM THE BOARD The historical procurement of the Panda LCD Products for the period from 17 July 2012 to 31 December 2012, the year ended 31 December 2013 and the eleven months ended 30 November 2014 were approximately US$70.5 million, US$108.2 million and US$136.7 million respectively. The annual maximum aggregate values for the transactions contemplated under the Existing Panda LCD Procurement Agreement for the period from 17 July 2012 to 31 December 2012 and the two years ended 31 December 2013 and 2014 were approximately US$241.6 million, US$556.8 million and US$679.4 million respectively. (D) THE SZIT PROCUREMENT AGREEMENT Introduction On 24 December 2014, Top Victory entered into the SZIT Procurement Agreement with SZIT in relation to the Top Victory Group s procurement of the SZIT Products from the SZIT Group. Details of the SZIT Procurement Agreement are set out below. The SZIT Procurement Agreement Date 24 December 2014 Parties (1) Top Victory; and (2) SZIT Principle terms Pursuant to the SZIT Procurement Agreement, the Top Victory Group may procure the SZIT Products from the SZIT Group. Pricing basis The procurement of the SZIT Products by the Top Victory Group from the SZIT Group will be by way of purchase order, which will set out the quality, model type, specifications, pricing and payment terms of the SZIT Products. Pursuant to the SZIT Procurement Agreement, the pricing and other terms of the SZIT Products shall be negotiated on an arm s length basis between the parties to the SZIT Procurement Agreement and be determined based on normal commercial terms with reference to the costs of the raw materials and core components, prevailing market prices of the SZIT Products that are fair and reasonable and in any event the prices and other terms of the SZIT Products will not be less favourable to the Top Victory Group than the average prices and other terms of similar products offered by independent third party vendors. SZIT further guarantees that the prices of the SZIT Products offered to the Top Victory Group should be below the best available price offered by the SZIT Group to 12

15 LETTER FROM THE BOARD independent third party purchasers. Payment term shall be 120 days from end of the month. Further information of the pricing policies for the procurement of the SZIT Products is set out in the section headed (E) Pricing policies below in this letter. Safety stock level During the term of the SZIT Procurement Agreement, the SZIT Group will reserve safety stocks of about one month to ensure the Top Victory Group can meet its production uninterrupted by stock shortage. The SZIT Group further guarantees the Top Victory Group that there will not be any stock shortage throughout the term of the SZIT Procurement Agreement. Conditions precedent The SZIT Procurement Agreement is conditional upon (i) the approval obtained by CGCSZ pursuant to the listing rules of the Shenzhen Stock Exchange (as applicable); and (ii) compliance by the Company of the relevant requirements in the Listing Rules (as applicable). Term and renewal Subject to the conditions precedent, the SZIT Procurement Agreement commenced on 1 January 2015 and shall continue in force until 31 December Subject to compliance with the requirements of the Listing Rules, Top Victory and SZIT may agree to renew or extend the term of the SZIT Procurement Agreement for subsequent three-year periods. The renewal or extension of the SZIT Procurement Agreement will be subject to the approval procedures in accordance with the Listing Rules and the listing rules of the Shenzhen Stock Exchange (as applicable). Termination Unless otherwise specified in the SZIT Procurement Agreement, Top Victory has a right to terminate the SZIT Procurement Agreement if, among other things, SZIT commits a material breach of the SZIT Procurement Agreement and fails to remedy that breach after giving a 30-day written notice. The SZIT Procurement Agreement can also be terminated if any of the parties to the SZIT Procurement Agreement has filed for or being declared bankrupt. 13

16 LETTER FROM THE BOARD The SZIT Annual Cap Set out below is the SZIT Annual Cap for the three years ending 31 December For the year ending 31 December US$ 000 US$ 000 US$ 000 Amount of the SZIT Annual Cap 11,310 13,730 16,710 The SZIT Annual Cap was determined by reference to a number of factors, particularly (i) the historical procurement of the SZIT Products from other suppliers; (ii) the projected growth in demand for the SZIT Products during the term of the SZIT Procurement Agreement; (iii) the projected purchase prices of the SZIT Products for the year ending 31 December 2015 with reference to the latest average market prices of the SZIT Products in the fourth quarter of 2014; and (iv) a buffer averaging approximately 21% per annum to accommodate the abrupt changes in purchasing quantity and pricing of the SZIT Products. (E) PRICING POLICIES Supply of the Sang Fei Products In the course of the supply of the Sang Fei Products to the Sang Fei Group, the Group will sell the Sang Fei Products to the Sang Fei Group on a purchase-bypurchase basis. The price and specifications of the Sang Fei Products shall be set out in a purchase order issued by the Sang Fei Group. Prior to the issue of the purchase order, the Sang Fei Group will issue a request for quotation which sets out the detailed specifications of the Sang Fei Products, the Group will propose the design to the Sang Fei Group based on their detailed specifications. Once the design is confirmed between both parties, the Group will source the components from different suppliers under a tendering process. The Group will primarily calculate a base price quotation to be issued to the Sang Fei Group with a pricing model based on the costs of the components, together with the logistic costs, taxes and other relevant costs, plus a profit margin within an internal target range, which is determined with reference to profit margin of other products of the Group which is subject to periodic review. The base price quotation is subject to benchmarking to at least two or more of the following prevailing market prices as available: (i) price quotations to other independent third party customers of comparable products; (ii) quotations from other independent third party vendors if the orders will be outsourced; and (iii) prices offered by other independent third party suppliers in the market for comparable products. The sales officer will mark up the base quotation to the prevailing market price as per the benchmarking above. Once the sales officer completes the calculation of the price quotation and includes the other relevant terms in the price quotation, he/ she will present the price quotation and the relevant support documents of the benchmarking (including the reasons for his/her chosen independent third party price 14

17 LETTER FROM THE BOARD quotations and the verified cost data) for further review and approval by the head of sales. The final price quotation shall be at a price (i) not lower than the cost plus method as mentioned above; (ii) in line with the prevailing market price as per the benchmarking above; and (iii) shall not be lower than the price offered to other independent third party customers. After the price quotation is issued by the Group, Sang Fei Group will also select the supplier based on its own tendering process. The final price and other terms of the purchase order to be issued by the Sang Fei Group are subject to mutual agreement by the management of both parties after arm s length negotiation and based on normal commercial terms. Procurement of the Panda LCD Products and the SZIT Products In the course of the procurement of the Panda LCD Products and the SZIT Products, members of the CEC Group shall sell the relevant products to members of the Top Victory Group on a purchase-by-purchase basis. The price and specifications of the relevant products shall be specified in a purchase order to be issued by members of the Top Victory Group to members of the CEC Group. Prior to the issue of the purchase order, the members of the Top Victory Group will obtain the price quotation from members of the CEC Group through a request for quotation. The price quotation is subject to a tendering process by Top Victory, in which price quotations offered by at least two other independent third party suppliers will be benchmarked, based on the same specifications, to ensure the final procurement price is fair and reasonable with reference to the prevailing market price. In doing so, the procurement officer initiating the request for quotation will select the price quotations obtained from independent third party suppliers with products that resemble most closely with specifications of the Panda LCD Products and the SZIT Products. The procurement officer will then compare the selected price quotations with the price quotation issued by the CEC Group. After the procurement officer s review and approval of the CEC Group s price quotation, he/she will present the request for quotation and the relevant support documents of the tendering process (including the reasons for his/her chosen independent third party price quotations) for further review and approval by a manager and the director of procurement to ensure the supplier offering the lowest price is selected given the other terms are equivalent. The final price and other terms of the purchase order are subject to mutual agreement by the management of both parties after arm s length negotiation and based on normal commercial terms. For the supply of the Sang Fei Products, based on the methods and procedures as detailed in this section above, the Directors consider that the methods and procedures can ensure that the transactions will be conducted on normal commercial terms and not prejudicial to the interests of the Company and the Independent Shareholders since (i) the quotation will be taken into consideration of the costs and reasonable profit margin; (ii) the quotation will be subject to benchmarking to independent market prices of comparable products; and (iii) the final prices will be subject to higher level review and approval to ensure proper internal control is in place. 15

18 LETTER FROM THE BOARD For the procurement of the Panda LCD Products and the SZIT Products, based on the methods and procedures as detailed in this section above, the Directors consider that the methods and procedures can ensure that the transactions will be conducted on normal commercial terms and not prejudicial to the interests of the Company and the Independent Shareholders since (i) the quotation will be subject to benchmarking to independent market prices of comparable products; and (ii) the final prices will be subject to higher level review and approval to ensure proper internal control is in place. (F) INFORMATION ON THE PARTIES The Company TPV is an internationally-renowned PC monitor and TV manufacturer. It has been listed on both the Hong Kong and Singapore stock exchanges since TPV has enjoyed significant growth over the last two decades by successfully leveraging its core competencies in manufacturing, operational efficiency, research and development as well as its exceptional commitment to quality. TPV serves as an original design manufacturer for some of the best-known TV and PC brands in the industry. In addition to developing these constructive partnerships, TPV distributes its products worldwide under its own brands AOC and Envision. In 2009 and 2011, TPV entered into noteworthy license agreements with Koninklijke Philips N.V. ( Philips ) to secure the rights to sell Philips-branded monitors globally and Philips-branded TVs in the PRC. In April 2012, the Group established TP Vision Holding B.V. ( TP Vision ), a joint-venture company with Philips, to oversee Philips TV business in most regions of the world. In June 2014, TP Vision formally became a wholly-owned subsidiary of TPV. Sang Fei Sang Fei is a company established in the PRC with limited liability and a nonwholly owned subsidiary of CEC. Sang Fei is a well-known domestic mobile communication enterprise with its strength integrated with advanced research and development center, economic-scale manufacture base and global marketing service system. Its main business includes the manufacturing and distribution of mobile phone and digital audio visual products. With its headquarters located at 深圳高科技工業園 (Shenzhen Hi-tech Industrial Park), Sang Fei has a modern plant and leading mobile phone production lines which have produced tens of millions of Philips branded mobile phones serving local and overseas demands. Panda LCD Panda LCD is a company established in the PRC with limited liability and a nonwholly owned subsidiary of CEC. It is principally engaged in the manufacture of LCD panels and displays. 16

19 LETTER FROM THE BOARD SZIT SZIT is a company established in the PRC with limited liability and a whollyowned subsidiary of CEC. It is a national electronic components e-commerce platform of CEC focusing on internet information technology, electronic components trading, media community, application innovation, technical support, big data, finance, modern supply chain and distribution services. (G) REASONS FOR AND BENEFITS OF ENTERING INTO OF THE CONTINUING CONNECTED TRANSACTIONS The supply of the Sang Fei Products by the Group to the Sang Fei Group and the procurement of the Panda LCD Products and the SZIT Products by the Top Victory Group from the Panda LCD Group and the SZIT Group respectively are an integral part of the ordinary and usual course of business of the Group and will be conducted on normal commercial terms and on an arm s length basis. The Directors consider that: (i) (ii) in respect of the continual conduct of the Sang Fei Continuing Connected Transaction, this will accrue benefits for the Group in terms of (a) generating additional revenue for the Group; (b) offering a valuable opportunity for the Group to better understand the competitive dynamics of the mobile phone industry and to identify the Group s competitive edge; and (c) enabling the entrance of the Group into the mobile phone industry supply chain; in respect of the continual conduct of the Panda LCD Continuing Connected Transaction, this will enable the Group to (a) secure stable panel supplies from a reputable supplier within the CEC Group in view of anticipated shortage of certain sizes of LCD panels in the coming years; and (b) command better bargaining power in future negotiations with other panel suppliers; and (iii) in respect of the conduct of the SZIT Continuing Connected Transaction, this will enable the Group to (a) optimise its electronic components procurement channels; (b) access different supplier channels with the latest electronic components; and (c) generate a certain degree of cost savings from economies of bulk purchasing and enhanced efficiency in procurement administration as SZIT will provide onestop procurement and logistics services for various electronic components. (H) LISTING RULES IMPLICATIONS Each of Sang Fei, Panda LCD and SZIT is a connected person of the Company under the Listing Rules by virtue of it being a subsidiary of CEC, the ultimate controlling shareholder of the Company. As one or more of the applicable percentage ratios (other than the profit ratio) as defined under the Listing Rules in respect of the Annual Caps, when aggregated, exceed 5%, each of the Continuing Connected Transactions (including the Annual Caps) is subject to the announcement, reporting, annual review and independent shareholders approval requirements under the Listing Rules. 17

20 LETTER FROM THE BOARD At any time prior to the receipt of the Independent Shareholders approval of the Continuing Connected Transactions at the SGM, the aggregate amount of the Continuing Connected Transactions to be conducted between the Group and each of the Sang Fei Group, the Panda LCD Group and the SZIT Group shall not exceed an amount which would otherwise require the Independent Shareholders approval. (I) INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER The Independent Board Committee, comprising all three of the independent nonexecutive Directors namely Mr. Chan Boon Teong, Dr. Ku Chia-Tai and Mr. Wong Chi Keung, has been formed to advise the Independent Shareholders on the terms of the Continuing Connected Transactions (including the Annual Caps). The Company has appointed Somerley as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in the same regard. (J) SGM A notice convening the SGM to be held at 3: 30 p.m. on Thursday, 5 February 2015 at Units , 12th Floor, C-Bons International Center, 108 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong (the SGM Notice ) is set out on pages SGM-1 to SGM-3 of this circular. A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM in person, you are requested to complete and return the form of proxy in accordance with the instructions set out in the SGM Notice. If your Shares are registered with the Company s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, you should deposit your form of proxy at Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen s Road East, Wanchai, Hong Kong or the Company s principal office in Hong Kong at Units , 12th Floor, C-Bons International Center, 108 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong. If your Shares are registered with the Company s Singapore share transfer office, you should deposit your form of proxy at Boardroom Corporate & Advisory Services Pte. Ltd. at 50 Raffles Place, #32-01 Singapore Land Tower, Singapore or the Company s principal office in Hong Kong at the address stated above. The form of proxy should be deposited as soon as possible but in any event not later than 48 hours before the time appointed for the holding of the SGM in order to be valid. Completion of the form of proxy will not preclude you from attending and voting at the SGM or any adjournment thereof should you so wish. As at the Latest Practicable Date, CEC and its associates which collectively held an aggregate of 869,088,647 Shares, representing of 37.05% the issued share capital of the Company, will abstain from voting on the ordinary resolutions relating to the Continuing Connected Transactions (including the Annual Caps) at the SGM. (K) RECOMMENDATION The Directors, including the independent non-executive Directors, consider that: (i) the entering into of the Continuing Connected Transactions is in the ordinary and usual course of business of the Company and in the interests of the Company and the 18

21 LETTER FROM THE BOARD Shareholders as a whole; and (ii) the terms of the Continuing Connected Transactions (including the Annual Caps) are on normal commercial terms, fair and reasonable as far as the Company and the Independent Shareholders are concerned. Accordingly, the Directors, including the independent non-executive Directors, recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the SGM in relation to the Continuing Connected Transactions (including the Annual Caps). (L) GENERAL Your attention is drawn to the letter of advice from the Independent Board Committee set out on pages 20 to 21 of this circular and the letter from Somerley set out on pages 22 to 40 of this circular containing its recommendation to the Independent Board Committee and the Independent Shareholders in relation to the terms of the Continuing Connected Transactions (including the Annual Caps). Your attention is also drawn to the additional information set out in the appendix of this circular and the notice of the SGM. Yours faithfully, for and on behalf of the board of TPV Technology Limited Dr. Hsuan, Jason Chairman and Chief Executive Officer 19

22 LETTER FROM THE INDEPENDENT BOARD COMMITTEE To the Independent Shareholders Dear Sir or Madam, TPV TECHNOLOGY LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 903) 19 January 2015 RENEWALS OF EXISTING CONTINUING CONNECTED TRANSACTIONS AND ENTERING INTO OF NEW CONTINUING CONNECTED TRANSACTION We refer to the circular dated 19 January 2015 of the Company (the Circular ), of which this letter forms part. Terms defined in the Circular shall have the same meaning herein unless the context otherwise requires. We have been appointed as the Independent Board Committee to consider and advise the Independent Shareholders as to whether, in our opinion, (i) the entering into of the Continuing Connected Transactions is in the ordinary and usual course of business of the Company and in the interests of the Company and the Shareholders as a whole; and (ii) the terms of the Continuing Connected Transactions (including the Annual Caps) are on normal commercial terms, fair and reasonable as far as the Company and the Independent Shareholders are concerned. Somerley has been appointed to advise the Independent Board Committee and the Independent Shareholders in the same regard. We wish to draw your attention to the letter from the Board set out on pages 5 to 19 of the Circular which contains, inter alia, information on the Continuing Connected Transactions (including the Annual Caps) as well as to the letter from Somerley set out on pages 22 to 40 of the Circular which contains its advice in respect of the terms of the Continuing Connected Transactions (including the Annual Caps). 20

23 LETTER FROM THE INDEPENDENT BOARD COMMITTEE Having considered the terms of the Continuing Connected Transactions, and taken into account the advice of Somerley, we consider that: (i) the entering into of the Continuing Connected Transactions is in the ordinary and usual course of business of the Company and in the interests of the Company and the Shareholders as a whole; and (ii) the terms of the Continuing Connected Transactions (including the Annual Caps) are on normal commercial terms, fair and reasonable as far as the Company and the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the SGM in relation to the Continuing Connected Transactions (including the Annual Caps). Yours faithfully for and on behalf of the Independent Board Committee of TPV Technology Limited Mr. Chan Boon Teong Dr. Ku Chia-Tai Mr. Wong Chi Keung Independent non-executive Directors 21

24 LETTER FROM SOMERLEY The following is the letter of advice from Somerley to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular. SOMERLEY CAPITAL LIMITED 20th Floor China Building 29 Queen s Road Central Hong Kong 19 January 2015 To: the Independent Board Committee and the Independent Shareholders of TPV Technology Limited Dear Sirs, RENEWALS OF EXISTING CONTINUING CONNECTED TRANSACTIONS AND ENTERING INTO OF NEW CONTINUING CONNECTED TRANSACTION INTRODUCTION We refer to our appointment by the Company to advise the Independent Board Committee and the Independent Shareholders in connection with the Continuing Connected Transactions (including the Annual Caps). Details of the Continuing Connected Transactions (including the Annual Caps) are set out in the letter from the Board contained in the circular of the Company to the Shareholders dated 19 January 2015 (the Circular ),ofwhichthisletterformspart.capitalisedtermsusedinthislettershall have the same meanings as those defined in the Circular unless the context requires otherwise. As stated in the letter from the Board in the Circular, as both the Existing Sang Fei Supply Agreement and the Existing Panda LCD Procurement Agreement expired on 31 December 2014, the Company and Top Victory, a wholly-owned subsidiary of the Company, entered into the Renewed Sang Fei Supply Agreement and the Renewed Panda LCD Procurement Agreement with Sang Fei and Panda LCD respectively with effect from 1 January Pursuant to the Renewed Sang Fei Supply Agreement, the Group will continue to supply the Sang Fei Products to the Sang Fei Group. Pursuant to the Renewed Panda LCD Procurement Agreement, the Top Victory Group will continue to procure the Panda LCD Products from the Panda LCD Group. 22

25 LETTER FROM SOMERLEY Also as stated in the letter from the Board in the Circular, on 24 December 2014, Top Victory entered into the SZIT Procurement Agreement with SZIT in relation to the Top Victory Group s procurement of the SZIT Products from the SZIT Group with effect from 1 January Each of Sang Fei, Panda LCD and SZIT is a connected person of the Company under the Listing Rules by virtue of it being a subsidiary of CEC, the ultimate controlling shareholder of the Company. As one or more of the applicable percentage ratios (other than the profit ratio) and as defined under the Listing Rules in respect of the Annual Caps, when aggregated, exceed 5%, each of the Continuing Connected Transactions (including the Annual Caps) is subject to the announcement, reporting, annual review and independent shareholders approval requirements under the Listing Rules. The Independent Board Committee, comprising all of the independent non-executive Directors, namely Mr. Chan Boon Teong, Dr. Ku Chia-Tai and Mr. Wong Chi Keung, has been formed to advise and make recommendations to the Independent Shareholders in respect of the terms of the Continuing Connected Transactions (including the Annual Caps). We, Somerley Capital Limited, have been appointed to advise the Independent Board Committee and the Independent Shareholders in the same regard. We are not associated with the Company, Sang Fei, Panda LCD, SZIT or their respective core connected persons, close associates or associates and accordingly are considered eligible to give independent advice on the terms of the Continuing Connected Transactions (including the Annual Caps). Apart from normal professional fees payable to us in connection with this and similar appointments, no arrangement exists whereby we will receive any fees or benefits from the Company, Sang Fei, Panda LCD, SZIT or their respective core connected persons, close associates or associates. In formulating our opinion, we have reviewed, amongst others, the Renewed Sang Fei Supply Agreement, the Renewed Panda LCD Procurement Agreement, the SZIT Procurement Agreement, the business plans in respect of the Continuing Connected Transactions (including the Annual Caps) and the information contained in the Circular. We have also discussed with, and reviewed information provided by, management of the Group regarding the businesses of the Group and the prospects of conducting the Continuing Connected Transactions. We have relied on the information and facts supplied, and the opinions expressed to us, by management of the Group and each of the Sang Fei Group, the Panda LCD Group and the SZIT Group and have assumed that the information and facts provided and opinions expressed to us are true, accurate and complete in all material aspects at the time they were made. We have also sought and received confirmation from the Company that no material facts have been omitted from the information supplied and opinions expressed to us. We have relied on such information and consider that the information we have received is sufficient for us to reach an informed view and have no reason to believe that any material information has been withheld, nor doubt the truth or accuracy of the information 23