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(Holdings) Limited 裕 元 工 業（集 團）有 限 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 or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Yue Yuen Industrial (Holdings) Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or the transfer was effected for transmission to the purchaser or transferee. This circular appears for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities. 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. YUE YUEN INDUSTRIAL (HOLDINGS) LIMITED 裕元工業（集團）有限公司* (Incorporated in Bermuda with limited liability) (Stock Code: 551) (1) PROPOSED MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE EFFECTIVE DISPOSAL OF THE COMPANY’S ENTIRE SHAREHOLDING IN POU SHENG INTERNATIONAL (HOLDINGS) LIMITED (2) SPECIAL DIVIDEND AND (3) NOTICE OF SPECIAL GENERAL MEETING Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders SOMERLEY CAPITAL LIMITED A letter from the Board is set out on pages 7 to 17 of this circular. A letter of the Independent Board Committee is set out on pages 18 to 19 of this circular. A letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages 20 to 44 of this circular. A notice convening the special general meeting (the “SGM”) of Yue Yuen Industrial (Holdings) Limited to be held at 22nd Floor, C-Bons International Center, 108 Wai Yip Street, Kwun Tong, Kowloon, Hong Kong on Friday, 16 March 2018 at 2:00 p.m. is set out on page 55 to 56 to this circular. Whether or not you are able to attend the SGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the branch share registrar of the Company in Hong Kong, Tricor Secretaries Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not later than 2:00 p.m. on Wednesday, 14 March 2018, or not less than 48 hours before the time for holding the adjourned meeting, as the case may be. Completion and return of the form of proxy will not preclude Shareholders from attending and voting at the SGM or at any adjourned meeting thereof, should you so wish. * For identification purpose only 27 February 2018 CONTENTS Page Definitions . 1 Expected Timetable . 6 Letter from the Board . 7 Letter from the Independent Board Committee . 18 Letter from the Independent Financial Adviser . 20 Appendix I – Financial Information of the Group . 45 Appendix II – General Information . 47 Notice of Special General Meeting . 55 – i – DEFINITIONS In this circular, the following terms or expressions shall have the meanings set out below unless the context requires otherwise: “acting in concert” has the meaning ascribed to it under the Takeovers Code “Announcement” the announcement dated 21 January 2018 issued jointly by Pou Chen, Pou Sheng and the Company in relation to, among others, the Proposal, the Scheme and the possible major and connected transaction for the Company in relation to the Disposal “Announcement Date” 21 January 2018, being the date of the Announcement “Authorizations” all the necessary authorizations, registrations, filings, rulings, consents, permissions and approvals in connection with the Proposal “Bermuda Companies Act” the Companies Act 1981 of Bermuda “Bermuda Court” the Supreme Court of Bermuda “Board” the board of Directors of the Company “business day” any day (other than a Saturday, Sunday or public holiday) on which banks are generally open for business in Hong Kong “Cancellation Price” the cancellation price of HK$2.03 per Scheme Share payable in cash to the Scheme Shareholders pursuant to the Scheme “Company” Yue Yuen Industrial (Holdings) Limited (裕元工業(集團) 有限公司*), a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 551.HK) “Court Meeting” a meeting of the Scheme Shareholders to be convened at the direction of the Bermuda Court at which the Scheme (with or without modification) will be voted upon, or any adjournment thereof “Conditions” the condition(s) to the implementation of the Proposal and the Scheme as described in the section headed “Letter from the Board – C. The Proposal and the Option Offer – Conditions to the Proposal and the Scheme” in this circular “controlling shareholder” has the meaning as ascribed thereto under the Listing Rules “connected person” has the meaning as ascribed thereto under the Listing Rules * For identification purpose only – 1 – DEFINITIONS “Director(s)” director(s) of the Company “Disinterested Scheme Scheme Shareholder(s) other than the Pou Chen Concert Shareholder(s)” Parties “Disposal” the effective disposal by the Company of all Pou Sheng Shares held by it or its subsidiaries to Pou Chen at the Cancellation Price through the cancellation of all such Pou Sheng Shares in exchange for Pou Chen paying to the Company a total consideration of HK$6,763,049,667, which is subject to the approval of the Independent Shareholders “Effective Date” the date on which the Scheme becomes effective in accordance with the Bermuda Companies Act “Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the PRC “HK$” Hong Kong dollars, the lawful currency of Hong Kong “IFA” or “Independent Somerley Capital Limited, a corporation licensed to Financial Adviser” conduct type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO, who is the independent financial adviser to the Independent Board Committee and Independent Shareholders in relation to the terms of the Disposal and the transactions contemplated thereunder “Independent Board the board committee of the Company comprising all Committee” independent non-executive Directors, namely Mr. Leung Yee Sik, Mr. Huang Ming Fu, Mr. Chu Li-Sheng, Ms. Yen Mun-Gie (also known as Teresa Yen) and Mr. Hsieh Yung Hsiang (also known as Alfred Hsieh), established to advise the Independent Shareholders in respect of the Disposal and the transactions contemplated thereunder “Independent Shareholders” Shareholders other than Pou Chen, Wealthplus, Win Fortune as well as Mr. Tsai and his controlled companies who are required to abstain from voting on the Disposal and the transactions contemplated thereunder “Last Trading Day” 19 January 2018, being the last trading day prior to the publication of the Announcement “Latest Practicable Date” 23 February 2018, being the latest date by which certain information in this circular is ascertained prior to publication – 2 – DEFINITIONS “Listing Rules” the Rules Governing the Listing of Securities of the Stock Exchange “Major Focus” Major Focus Management Limited (禮尚管理有限公司), a company incorporated in the British Virgin Islands with limited liability, which is a direct wholly-owned subsidiary of the Company and is interested in approximately 62.38% of the total issued share capital of Pou Sheng as at the Latest Practicable Date “Mr. Chan” Mr. Chan Lu Min, who is the chairman (being a director) of Pou Chen and an executive Director of the Company “Mr. Tsai” Mr. Tsai Chi Jui, a substantial shareholder of the Company for the purpose of the SFO and the father of Ms. Tsai “Ms. Tsai” Ms. Tsai Pei Chun, a director of Pou Chen, an executive Director of the Company, a non-executive director of Pou Sheng and the daughter of Mr. Tsai “Option Offer” the offer to be made by or on behalf of Pou Chen to the Pou Sheng Optionholders “Pou Chen” Pou Chen Corporation (寶成工業股份有限公司), a company incorporated in Taiwan with limited liability, the shares of which are listed on the Taiwan Stock Exchange (stock code: 9904.TW) and which is a controlling shareholder of the Company “Pou Chen Board” the board of directors of Pou Chen “Pou Chen Concert all parties acting in concert with Pou Chen in relation to Party(ies)” Pou Sheng as defined under the Takeovers Code “Pou Chen Group” Pou Chen and its subsidiaries “Pou Sheng” Pou Sheng International (Holdings) Limited (寶勝國際 （控股）有限公司), a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 3813. HK) “Pou Sheng Board” the board of directors of Pou Sheng “Pou Sheng Group” Pou Sheng and its subsidiaries “Pou Sheng Option(s)” share option(s) granted under the share option scheme of Pou Sheng adopted on 14 May 2008 and amended on 7 March 2012 – 3 – DEFINITIONS “Pou Sheng Optionholder(s)” holder(s) of Pou Sheng Option(s) “Pou Sheng SGM” a special general meeting of Pou Sheng Shareholders (including any adjournment thereof) to be convened for the purpose of considering, and if thought fit, approving, among other things, (i) the allotment and issue of one Pou Sheng Share to Pou Chen or its designated wholly-owned
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