BYD Electronic : · BYD ELECTRONIC CONNECTED TRANSACTIONS(2016-06-22)

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(incorporated in Hong Kong under the Companies Ordinance with limited liability)

(Stock code: 285)

Website: http://www.byd-electronic.com

CONNECTED TRANSACTIONS

On 22 June 2016, the Company entered into the Assets Sale Agreement and the Assets Purchase Agreement with BYD and the Transactions thereunder constitute connected transactions of the Company.

As BYD is the controlling Shareholder of the Company indirectly interested in approximately 65.76% of the issued share capital of the Company, it is a connected person of the Company. As such, the Assets Sale Transaction and the Assets Purchase Transaction constitute connected transactions of the Company under Chapter 14A of the Listing Rules.

As certain of the applicable percentage ratios stipulated under Rule 14.07 of the Listing Rules in respect of each of the Assets Sale Transaction (after aggregation with the July 2015 Assets Sale Transaction and the December 2015 Assets Sale Transaction) and the Assets Purchase Transaction (after aggregation with the July 2015 Assets Purchase Transaction and the December 2015 Assets Purchase Transaction), in each case, exceed 0.1% but are less than 5%, the Transactions are subject to the reporting and announcement requirements but are exempt from the independent Shareholders' approval requirement set out in Chapter 14A of the Listing Rules.

CONNECTED TRANSACTIONS

Details of the Assets Sale Agreement and the Assets Purchase Agreement are set out below:

1. THE ASSETS SALE AGREEMENT

   Date: 22 June 2016

   Parties: BYD as purchaser

   The Company as seller

   Consideration: The total consideration for the assets which the Group agreed to sell to the BYD Group shall be equal to the unaudited net asset value of the relevant assets as at the day of delivery and shall be payable by the BYD Group to the Group in cash.

   As at 30 April 2016, the unaudited net asset value of the assets was approximately RMB96,857,000, which is expected to be subject to a downward adjustment as at the day of delivery of the assets due to depreciation accrued up to delivery.

   The consideration was determined after arm's length negotiation between the parties by reference to the unaudited net book value of the assets as at 30 April 2016, depreciation of the assets to be accrued up to delivery, working conditions of the assets and current market value of assets of similar capability.

   Since the total consideration payable by the BYD Group under the Assets Sale Agreement shall be equal to the unaudited net asset value of relevant assets as at the day of delivery, there is no significant gain or loss accrued to the Company from the sale. The proceeds from the sale will be used as general working capital of the Group.

   Assets sold: Assets sold by the Group to the BYD Group comprise painting line (噴塗線), die-casting machine (壓鑄機) and other related equipment.

   The aggregate original acquisition cost of the said assets paid by the Group was approximately RMB209,951,000.

   Delivery: Delivery shall take place by the end of the calendar month immediately after (i) the execution of the Assets Sale Agreement or (ii) the relevant approval (if required) has been obtained from the relevant PRC government authority, including the PRC customs authority (as the case may be).

   Payment Term: The consideration shall be paid by the BYD Group in cash within 60 days after delivery of the relevant assets by the Group to the BYD Group.

   Completion: Completion for the sale of the said assets will take place upon the payment in respect of such assets by the BYD Group to the Group, subject to the condition that the representations and warranties set forth in the Assets Sale Agreement in relation to due and proper working conditions of the relevant assets remain to be true and accurate at that time.

2. THE ASSETS PURCHASE AGREEMENT

Date: 22 June 2016

Parties: The Company as purchaser BYD as seller

Consideration: The total consideration for the assets which the BYD Group agreed to sell to the Group shall be equal to the unaudited net asset value of such assets as at the day of delivery and shall be payable by the Group to the BYD Group in cash.

As at 30 April 2016, the unaudited net asset value of the assets was approximately RMB74,468,000, which is expected to be subject to a downward adjustment as at the day of delivery of the assets due to depreciation accrued up to delivery.

The consideration was determined after arm's length negotiation between the parties by reference to the unaudited net book value of the assets as at 30 April 2016, depreciation of the assets to be accrued up to delivery, working conditions of the assets and current market value of assets of similar capability.

The consideration shall be financed by internal resources of the Group.

Assets acquired: Assets purchased by the Group from the BYD Group comprise surface mount machines/system (貼片機), spark machines (火花 機), drilling and cutting process center (鑽削加工中心) and other related equipment.

The original acquisition cost of which paid by the BYD Group was approximately RMB177,939,000.

Delivery: Delivery shall take place by the end of the calendar month immediately after (i) the execution of the Assets Purchase Agreement or (ii) the relevant approval (if required) has been obtained from the relevant PRC government authority, including the PRC customs authority (as the case may be).

Payment Term: The consideration shall be paid by the Group in cash within 60 days after delivery of the relevant assets by the BYD Group to the Group.

Completion: Completion for the purchase of the said assets will take place upon the payment in respect of such assets by the Group to the BYD Group, subject to the condition that the representations and warranties set forth in the Assets Purchase Agreement in relation to due and proper working conditions of the relevant assets remain true and accurate at that time.

REASONS FOR AND BENEFITS OF THE TRANSACTIONS

The adoption of metal cases and metal components in smartphones continued to increase. To further enhance our competitiveness, the Group intends to enhance its production capacity of metal components by purchasing the equipment for production of metal components while disposing of idle equipment to meet market demand to BYD who, to the understanding of the Company, is willing to acquire the assets for its business. The assets purchased by BYD are useful for the BYD Group's business.

In relation to the proposed disposal of assets by the Group to the BYD, it is believed that such disposal of idle assets at reasonable prices would be economical and beneficial to the Group. The Company negotiated with BYD on an arm's length basis and agreed on the transaction, while the assets to be sold under the Assets Sale Agreement are useful to the BYD Group for its business.

In relation to the proposed purchase of assets by the Group from the BYD, it is believed that such purchase of assets from the BYD is the fastest and more cost-effective way to increase the Group's production capacity, reducing additional costs and time. Due to the proximity of the location of the Group and the BYD Group, the Group will benefit from reduced transportation cost and more convenient testing of the assets by purchasing the same from BYD.

INFORMATION ON THE GROUP AND THE BYD GROUP

The Group is principally engaged in the business of the manufacture and sales of handset components and modules, the provision of handset design and assembly services, and the provision of parts and assembly services of other electronic products.

The BYD Group is principally engaged in rechargeable battery and photovoltaic business, handset components and assembly services, as well as automobile business which includes traditional fuel-engined vehicles and new energy vehicles while taking advantage of its technological superiority to actively develop business relating to the area of new energy products.

LISTING RULES REQUIREMENTS

As BYD is the controlling Shareholder of the Company indirectly interested in approximately 65.76% of the issued share capital of the Company, it is a connected person of the Company. As such, each of the Assets Sale Transaction and the Assets Purchase Transaction constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. Mr. WANG Chuan-fu, being a non-executive Director of the Company, is also an executive director and chairman of the board of directors of BYD and is interested in approximately 20.89% of the total issued share capital of BYD as at the date of the Assets Sale Agreement and the Assets Purchase Agreement. Mr. WU Jing-sheng, who is a non-executive Director of the Company, is also the vice president and chief financial officer of BYD and is interested in approximately 0.18% of the total issued share capital of BYD as at the date of the Assets Sale Agreement and the Assets Purchase Agreement. Accordingly, Mr. WANG Chuan-fu and Mr. WU Jing-sheng, being Directors who may have a material interest, have voluntarily abstained from voting on the board resolutions of the Company concerning the Transactions.