Vietnam Manfng and Exp Prcsng Hldng : CONTINUING CONNECTED TRANSACTIONS

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Vietnam Manufacturing and Export Processing (Holdings) Limited

越南製造加工出 口（ 控股 ）有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 422) CONTINUING CONNECTED TRANSACTIONS CONTINUING CONNECTED TRANSACTIONS

The Board is pleased to announce that on 19 January 2017, the Company and Sanyang entered into the MIO Manufacture Agreement, pursuant to which, among others, (i) the Group shall provide manufacturing and assembly services in relation to the MIO Motorbikes to the Sanyang Group and (ii) in relation to such manufacturing and assembly services, the Sanyang Group shall supply the MIO Parts to the Group, commencing from the date of the agreement and ending on 31 December 2018.

LISTING RULES IMPLICATIONS

The Transactions are conducted between members of the Group and members of the Sanyang Group. As at the date of this announcement, Sanyang, through its wholly-owned subsidiary, SYI, held approximately 67.07% of the issued share capital of the Company and thus, is an indirect controlling shareholder of the Company. As Sanyang is an indirect controlling shareholder of the Company and thus a connected person of the Company by virtue of Rule 14A.07(1) of the Listing Rules, members of the Sanyang Group are also connected persons of the Company. Accordingly, the Transactions constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios in respect of each of the (i) annual caps for the manufacturing and assembly cost; and (ii) annual caps for the sourcing of parts, under the MIO Manufacture Agreement exceed 0.1% but all the applicable percentage ratios are less than 5%, the MIO Manufacture Agreement and the annual caps are exempt from the independent shareholders' approval requirement but are subject to the reporting, annual review and announcement requirements under Chapter 14A of the Listing Rules.

BACKGROUND

The Board is pleased to announce that on 19 January 2017, the Company and Sanyang entered into the MIO Manufacture Agreement, pursuant to which, among others, (i) the Group shall provide manufacturing and assembly services in relation to the MIO Motorbikes to the Sanyang Group and (ii) in relation to such manufacturing and assembly services, the Sanyang Group shall supply the MIO Parts to the Group, commencing from the date of the agreement and ending on 31 December 2018.

MIO Manufacture Agreement

Date: 19 January 2017

Parties: (a) Sanyang (for itself and on behalf of other members of the Sanyang Group) as the purchaser; and

(b) the Company (on behalf of other members of the Group) as the manufacturer and seller

Term: 19 January 2017 to 31 December 2018

Major terms and pricing terms of the MIO Manufacture Agreement

1. the manufacture and assemble of MIO Motorbikes

   Under the MIO Manufacture Agreement, the Group manufactures and assembles the MIO Motorbikes for the Sanyang Group, and deliver the finished products to the customers of the Sanyang Group in European countries pursuant to the purchase orders made between the Sanyang Group and these customers. The pricing at which the Group manufactures and assembles the MIO Motorbikes for the Sanyang Group under such agreement is at a fixed price of US$945 per motorbike, which was determined by the Group with reference to the estimated cost of production including labour cost, and the purchase cost of components and the MIO Parts required for the manufacturing and assembling of the MIO Motorbikes. The Sanyang Group shall pay for the manufacturing and assembly fee under the MIO Manufacture Agreement in cash within 30 days after the date of the invoice unless the relevant parties determined otherwise in the relevant purchase order.

2. the supply of the MIO Parts by Sanyang Group

In connection with the manufacturing and assembly services provided by the Group under the MIO Manufacture Agreement, the Sanyang Group also supplies to the Group certain MIO Parts such as connecting rods, side and body covers, panels and battery lids, for the manufacturing and assembly of the MIO Motorbikes. The pricing at which MIO Parts are to be sold by the Sanyang Group to the Group under such agreement is at a cost plus basis, which will be determined at the manufacturing cost or purchase cost (as the case may be) of such MIO Parts plus a margin of 2%. The Group shall pay for the purchases of MIO Parts under the MIO Manufacture Agreement in cash within 30 days after the date of the invoice unless the relevant parties determined otherwise in the relevant purchase order.

Reasons and benefits for the MIO Manufacture Agreement

Sanyang Group has developed the MIO Motorbikes and has been supplying the MIO Motorbikes to its customers in the European countries in the past years. The Sanyang Group has decided to cease the manufacture and sale of the MIO Motorbikes to the European market in view of the recent changes in market demand. On the other hand, seeing the potential demand of the MIO Motorbikes in Vietnam, being the exclusive territories the Group is engaged in, the Group plans to engage in the development and manufacturing of the MIO Motorbikes in its own production plants in Vietnam for the domestic sales in Vietnam.

Given that Sanyang Group had already contracted with a number of customers in European countries for the delivery of the MIO Motorbikes in the year 2017, as transition arrangement for the winding down of Sanyang Group's manufacturing of such model in Taiwan, the Sanyang Group will engage the Group to manufacture and assemble the MIO Motorbikes, with a view to complete the export of MIO Motorbikes pursuant to the purchase orders. To enable the Group to take over the Sanyang Group's manufacturing functions of the MIO Motorbikes during such transition period, the Sanyang Group shall also supply the MIO Parts, which are exclusive for the manufacturing and assembly of the specific model of the MIO Motorbikes, at a cost lower than that for the supply of other parts by the Sanyang Group under the Master Purchase Agreement entered into between the Company as the purchaser and Sanyang as the seller in relation to purchases of motorbike parts by the Group from the Sanyang Group dated 8 December 2015.

The Directors believe it is in the Company's interest to generate additional source of income, increase the utilisation rate and hence economies of scale of the Group's production facilities by carrying out manufacturing and assembly services of MIO Motorbikes to the Sanyang Group in response to their needs during the transition period. The supply of MIO Parts by the Sanyang Group, being the developer of the MIO Motorbikes and have good understanding of the specification and production need of the MIO Motorbikes, at a favourable cost to the Group also ensure that the production process is to be carried out smoothly in a cost effective manner.

PROPOSED ANNUAL CAPS AND BASIS

1. annual caps for the manufacturing and assembly cost under the MIO Manufacture Agreement

   Based on the number of confirmed purchase orders between the Sanyang Group and the third party customers for the MIO Motorbikes, it is expected that not more than 1,800 units of MIO Motorbikes will be manufactured and assembled by the Group under the MIO Manufacture Agreement. The Board estimated that the annual caps for the manufacturing and assembly price of the MIO Motorbikes under the MIO Manufacture Agreement for the two financial years ending 31 December 2017 and 31 December 2018 shall be US$1,701,000 (equivalent to approximately HK$13,191,255) and US$1,701,000 (equivalent to approximately HK$13,191,255), respectively based on the fixed manufacturing and assembly price of US$945 per motorbike.

2. annual caps for the sourcing of parts under the MIO Manufacture Agreement

Based on the estimated number of units of MIO Motorbikes to be manufactured by the Group under the MIO Manufacture Agreement and the MIO Parts required for the manufacturing and assembly process, the Board estimated that the annual caps for the sourcing of the MIO Parts under the MIO Manufacture Agreement for the two financial years ending 31 December 2017 and 31 December 2018 shall be US$1,450,000 (equivalent to approximately HK$11,244,750) and US$1,450,000 (equivalent to approximately HK$11,244,750), respectively.

INTERNAL CONTROL MEASURES

The Company has established internal control measures to ensure that the continuing connected transactions contemplated under the MIO Manufacture Agreement are in accordance with the pricing policies and the terms and conditions of the agreement, and that the terms and conditions of the MIO Manufacture Agreement are on normal commercial terms and terms no less favourable than those terms offered to the Group by independent third parties or supplied by the Group to independent third parties for similar products and services. Such internal control measures employed by the Group include the following:

(i) all the orders under the MIO Manufacture Agreement shall be reviewed and approved by the directors and general manager, and finance department of the Company to ensure the terms are in compliance with the agreement under which the transactions are entered into, and in this connection he/she must be satisfied that (i) the pricing policies and internal procedures adopted by the Company have been fully complied with; (ii) the transactions thereunder are on normal commercial terms; (iii) the manufacturing and assembly of the MIO Motorbikes are carried out in accordance with the fixed price of US$945 per motorbike as agreed by the Group and the Sanyang Group; and (iv) the purchase price of the relevant products and services from the Sanyang Group are no less favourable to the Group than the prices at which such products are offered by independent third parties to the Group, before relevant orders are entered into;