APT Satellite Holdings Limited — Proxy Solicitation & Information Statement 2018

Dec 21, 2018

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular, 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 GOME Retail Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for onward transmission to the purchaser or 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.

==> picture [177 x 57] intentionally omitted <==

GOME RETAIL HOLDINGS LIMITED 國美零售控股有限公司[*]

(incorporated in Bermuda with limited liability)

(Stock Code: 493)

(1) PROPOSED SHARE CONSOLIDATION

(2) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

(3) NOTICE OF SGM

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the continuing connected transactions

A letter from the Board is set out on pages 7 to 23 of this circular and a letter from the Independent Board Committee to the Independent Shareholders is set out on pages 24 to 25 of this circular. A letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 26 to 41 of this circular.

A notice convening the SGM to be held at Gloucester Room I, 3/F, The Excelsior, 281 Gloucester Road, Causeway Bay, Hong Kong on Thursday, 10 January 2019 at 2:30 p.m. is set out on pages 48 to 50 of this circular. A form of proxy for the SGM for use by the Shareholders is enclosed with this circular.

Whether or not you are able to attend the SGM in person, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s branch share registrar in Hong Kong, Tricor Abacus Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable and in any event not later than 48 hours before the time designated for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or at any adjourned meeting should you so wish.

* For identification purpose only

Hong Kong, 21 December 2018

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Expected timetable for the Share Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	48

– i –

DEFINITIONS

In this circular, the following expressions shall have the following meanings unless the context requires otherwise:

• “2016 Master Merchandise Purchase Agreement”

• the agreement dated 25 January 2016 between GOME Appliance, GOME-on-line, GOME Retail and GOME Ruidong in relation to the supply of general merchandise (including but not limited to electrical appliances and consumer electronics products) by GOME Retail, GOME Ruidong or the Parent Group to GOME Appliance or the Group (including GOME-on-line);

• “2016 Master Merchandise Supply Agreement”

• the agreement dated 25 January 2016 between GOME Appliance, GOME-on-line, GOME Retail and GOME Ruidong in relation to the supply of general merchandise (including but not limited to electrical appliances and consumer electronics products) by GOME Appliance or the Group to GOME-on-line, GOME Retail or GOME Ruidong;

• “2016 Merchandise Agreements”

• the 2016 Master Merchandise Purchase Agreement and the 2016 Master Merchandise Supply Agreement;

• “2019 Master Merchandise Purchase Agreement”

• the agreement dated 12 November 2018 between GOME Appliance and Meixin Network in relation to the supply of general merchandise (including but not limited to electrical appliances and consumer electronics products) by Meixin Network to the Group;

• “2019 Master Merchandise Supply Agreement”

• the agreement dated 12 November 2018 between GOME Appliance and Meixin Network in relation to the supply of general merchandise (including but not limited to electrical appliances and consumer electronics products) by the Group to Meixin Network or its subsidiaries or affiliates;

• “2019 Merchandise Agreements”

• the 2019 Master Merchandise Purchase Agreement and the 2019 Master Merchandise Supply Agreement;

• “associate”

• has the meaning ascribed to it under the Listing Rules;

• “Board”

• the board of directors of the Company;

• “Business Day”

• a day (other than a Saturday and Sunday) on which licensed banks are generally open for business more than five hours in Hong Kong;

– 1 –

DEFINITIONS

• “CCASS”

• Central Clearing and Settlement System established and operated by the Hong Kong Securities Clearing Company Limited;

• “Company”

• GOME Retail Holdings Limited, a company incorporated in Bermuda, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 493);

• “connected person(s)” has the meaning ascribed to it under the Listing Rules;

• “Consolidated Share”

• Share of par value of HK$0.1 each in the share capital of the Company upon completion of the proposed Share Consolidation;

• “Controlling Shareholder” Mr. Wong Kwong Yu (黃光裕先生), the controlling shareholder of the Company, who was interested in approximately 50.26% of the issued share capital of the Company;

• “Director(s)” the director(s) of the Company;

• “Effective Date”

• the date on which the Share Consolidation shall become effective, being the next Business Day immediately following the date of the passing of the ordinary resolution approving the Share Consolidation at the SGM;

• “GOME Appliance” 國美電器有限公司 (GOME Appliance Company Limited*), a wholly-owned subsidiary of the Company;

• “GOME Financial Holdings”

• 國美金控投資有限公司 (GOME Financial Holdings Investment Company Limited*), a company established in the PRC, which is owned by the Controlling Shareholder and his associates;

• “GOME Holding”

• 國美控股集團有限公司 (GOME Holding Group Company Limited*), a company established in the PRC, which is owned by the Controlling Shareholder and his associates;

• “GOME Retail”

• 國美電器零售有限公司 (GOME Electrical Appliances Retail Co., Ltd.*), a company established in the PRC;

– 2 –

DEFINITIONS

• “GOME Ruidong”

北京國美銳動電子商務有限公司 (Beijing GOME Ruidong e-Commerce Co., Ltd.*), a company established in the PRC, which is owned by the Controlling Shareholder and his associates;

“GOME-on-line”

• 國美在線電子商務有限公司 (GOME-on-line e-Commerce Co., Ltd.*) (together with its subsidiaries (if any)), a company established in the PRC and a wholly-owned subsidiary of Meixin Network;

• “Group” the Company and its subsidiaries;

• “HK$”

• Hong Kong dollar, the lawful currency of Hong Kong;

• “Hong Kong”

• the Hong Kong Special Administrative Region of the People’s Republic of China;

• “Independent Board Committee”

• an independent committee of the Board, comprising all the independent non-executive Directors, established to advise the Independent Shareholders in relation to the 2019 Merchandise Agreements, the relevant annual caps and the transactions contemplated thereunder;

• “Independent Financial Adviser” or “Platinum”

• Platinum Securities Company Limited, a corporation licensed to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activity under the SFO, and the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the 2019 Merchandise Agreements, the relevant annual caps and the transactions contemplated thereunder;

• “Independent Shareholders”

• Shareholders other than the Controlling Shareholder and his associates;

• “Last Trading Day”

• 8 November 2018, being the last trading day immediately before the publication of the announcement of the Company dated 9 November 2018 in relation to the Share Consolidation;

• “Latest Practicable Date”

17 December 2018, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular;

– 3 –

DEFINITIONS

• “Listing Committee”

the listing committee of the Stock Exchange;

• “Listing Rules”

the Rules Governing the Listing of Securities on the Stock Exchange;

• “Meixin Network”

• 美信網絡技術有限公司 (Meixin Network Technology Company Limited*), a company incorporated in the PRC with limited liability (together with its subsidiaries (if any)), a 60% non-wholly-owned subsidiary of the Group;

• “Parent Group” a group of companies (other than the Group) controlled or more than 50% owned by the Controlling Shareholder;

• “percentage ratio” has the meaning ascribed to it under Chapter 14A of the Listing Rules;

• “PRC” the People’s Republic of China, which, for the purpose of this circular, does not include Hong Kong, Macao Special Administrative Region and Taiwan;

• “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);

• “SGM” the special general meeting of the Company to be convened to approve (1) the Share Consolidation; and (2) the 2019 Merchandise Agreements;

• “Share” ordinary share(s) of par value of HK$0.025 each in the share capital of the Company;

• “Share Consolidation” the proposed consolidation of every 4 issued and unissued shares of par value of HK$0.025 each into one Consolidated Share of par value of HK$0.1 each;

• “Shareholders” shareholders of the Company;

• “Stock Exchange” The Stock Exchange of Hong Kong Limited; and “%” per cent.

Translations of RMB into HK$ are made in this circular for illustration purpose at the rate of HK$1.00 to RMB0.88145. No representation is made that any amounts in RMB or HK$ could have been or could be converted at that rate or at any other rate or at all.

– 4 –

EXPECTED TIMETABLE FOR THE SHARE CONSOLIDATION

The expected timetable for the Share Consolidation is set out below:

Event	Time and date
	2018
Date of despatch of the circular, notice
and proxy form of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 21 December
Event	Time and date
	2019
Latest date and time for lodging transfer documents in order to
qualify for attending and voting at the SGM . . . . . . . . . . . . .	. . . . .4:30 p.m. on Monday,
	7 January
Latest time for return of proxy form of the SGM
(not less than 48 hours prior to time of the SGM) . . . . . . . . .	. . . . .2:30 p.m. on Tuesday,
	8 January
Closure of register of members for the entitlement to
attend and vote at the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 8 January to
Thursday, 10 January (both days inclusive)
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . .2:30 p.m. on Thursday,
	10 January
Announcement of results of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 10 January
Effective Date of the Share Consolidation . . . . . . . . . . . . . . . . .	. . . . . . . .Friday, 11 January
Commencement of dealings in the Consolidated Shares . . . . . . . . . . . . .9:00 a.m. on Friday,
	11 January
Original counter for trading in Shares in existing Shares
in board lots of 1,000 Shares temporarily closes . . . . . . . . . . . . . . . . .9:00 a.m. on Friday,
	11 January
Temporary counter for trading in Consolidated Shares in
board lots of 250 Consolidated Shares (in the form of
existing share certificates) opens. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on Friday,
	11 January

– 5 –

EXPECTED TIMETABLE FOR THE SHARE CONSOLIDATION

Event	Time and date
	2019
First day for free exchange of existing share certificates
for new share certificates for Consolidated Shares commences . . . . . .9:00 a.m. on Friday,
	11 January
Original counter for trading in Consolidated Shares in
board lots of 1,000 Consolidated Shares (in the form
of new share certificates) re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on Friday,
	25 January
Designated broker starts to stand in the market to
provide matching services for the sale and purchase of
odd lots of Consolidated Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on Friday,
	25 January
Parallel trading in Consolidated Shares (in the form of
new and existing share certificates) begins . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on Friday,
	25 January
Designated broker ceases to stand in the market to provide
matching services for the sale and purchase of odd lots
of Consolidated Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. .4:10 p.m. on Tuesday,
	19 February
Temporary counter for trading in Consolidated Shares in
board lots of 250 Consolidated Shares (in the form of
existing share certificates) closes . . . . . . . . . . . . . . . . . . . . . . . . .	. .4:10 p.m. on Tuesday,
	19 February
Parallel trading in Consolidated Shares (in the form of
new and existing certificates) ends . . . . . . . . . . . . . . . . . . . . . . . .	. .4:10 p.m. on Tuesday,
	19 February
Last day for free exchange of existing certificates for new
certificates for Consolidated Shares . . . . . . . . . . . . . . . . . . . . . . .	. . .4:30 p.m. on Friday,
	22 February

All times and dates in this circular refer to Hong Kong local times and dates. Dates or deadlines specified in the expected timetable above are indicative only and may be extended or varied by the Company. Any changes to the expected timetable will be published or notified to the Shareholders as and when appropriate.

– 6 –

LETTER FROM THE BOARD

==> picture [177 x 56] intentionally omitted <==

GOME RETAIL HOLDINGS LIMITED 國美零售控股有限公司[*]

(incorporated in Bermuda with limited liability)

(Stock Code: 493)

Executive Director: ZOU Xiao Chun

Non-executive Directors: ZHANG Da Zhong (Chairman) HUANG Xiu Hong YU Sing Wong

Independent Non-executive Directors: LEE Kong Wai, Conway LIU Hong Yu WANG Gao

Registered office: Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Principal place of business in Hong Kong: Suite 2915, 29th Floor Two International Finance Centre 8 Finance Street, Central Hong Kong

21 December 2018

To the Shareholders

Dear Sir or Madam,

(1) PROPOSED SHARE CONSOLIDATION (2) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

Reference is made to the announcements of the Company dated 9 November 2018 and 18 December 2018 in relation to the Share Consolidation, 12 November 2018 and 27 November 2018 in relation to, among others, the 2019 Merchandise Agreements.

The purposes of this circular are to:

• (i) provide Shareholders with details of the Share Consolidation;

• (ii) provide the Shareholders with details of the 2019 Merchandise Agreements;

* For identification purpose only

– 7 –

LETTER FROM THE BOARD

• (iii) set out the opinion of the Independent Financial Adviser on the terms of the 2019 Merchandise Agreements;

• (iv) set out the recommendation of the Independent Board Committee on the 2019 Merchandise Agreements; and

• (v) give the Shareholders notice of the SGM to consider and, if thought fit, to approve (1) the Share Consolidation; and (2) the 2019 Merchandise Agreements.

1. PROPOSED SHARE CONSOLIDATION

The Board proposes to implement the Share Consolidation on the basis that every 4 issued and unissued Shares of par value of HK$0.025 each in the share capital of the Company will be consolidated into one Consolidated Share of par value of HK$0.1 each.

Conditions of the Share Consolidation

The Share Consolidation is conditional upon:

• (i) the passing of the relevant resolution to approve the proposed Share Consolidation by the Shareholders at the SGM;

• (ii) the compliance with all relevant procedures and requirements under Bermuda law (where applicable) to effect the Share Consolidation; and

• (iii) the Listing Committee of the Stock Exchange granting approval for the listing of, and permission to deal in, the Consolidated Shares.

As at the Latest Practicable Date, none of the conditions above have been satisfied.

Subject to the satisfaction of all the above conditions, it is expected that the Share Consolidation will become effective on the Effective Date, i.e. being the next Business Day immediately following the date of passing the relevant ordinary resolution approving the Share Consolidation at the SGM.

Effect of the Share Consolidation

As at the Latest Practicable Date, the authorised share capital of the Company is HK$5,000,000,000 divided into 200,000,000,000 Shares of par value of HK$0.025 each, of which 21,557,627,422 Shares have been issued and are fully paid or credited as fully paid. Assuming that no further Shares are issued or repurchased before the SGM, immediately after the proposed Share Consolidation becoming effective, the authorized share capital of the Company will become HK$5,000,000,000 divided into 50,000,000,000 Consolidated Shares of par value of HK$0.1 each, of which 5,389,406,855 Consolidated Shares will be in issue.

– 8 –

LETTER FROM THE BOARD

Status of the Consolidated Shares

The Consolidated Shares will rank pari passu in all respects with each other in accordance with Memorandum of Association and Bye-Laws of the Company and as to all future dividends and distributions which are declared, made or paid. There will be no change in the relative rights of the Shareholders. Other than the expenses to be incurred in relation to the Share Consolidation (including without limitation professional fees and printing fees), the implementation of the Share Consolidation will not, in itself, alter the underlying assets, business operations, management or financial position of the Company or the proportionate interests or rights of the Shareholders, save for any fractional Consolidated Shares which may arise.

Fractional Consolidated Shares will not be issued by the Company to the Shareholders. Any fractional entitlements of Consolidated Shares will be aggregated, sold and retained for the benefit of the Company.

Outstanding options, warrants or other securities

As at the Latest Practicable Date, the Company has no outstanding options, warrants, derivatives or other securities which are convertible or exchangeable into, any existing Shares or Consolidated Shares.

Listing application

An application has been made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Consolidated Shares.

All necessary arrangements will be made for the Consolidated Shares to be admitted into the CCASS. The Share Consolidation will be conducted in accordance with the provisions in the Bye-laws.

No part of the share capital of the Company is listed or dealt in on any other stock exchanges other than the Stock Exchange and no such listing or permission to deal is being or is proposed to be sought.

– 9 –

LETTER FROM THE BOARD

Share Capital Structure of the Company before and after the Share Consolidation

The following table sets out the effect on the share capital structure of the Company before and immediately after the Share Consolidation, assuming that no further Shares will be issued before the Effective Date:

Before the Share After the Share Consolidation Consolidation Par value per share of the Company HK$0.025 HK$0.1 Authorized share capital of the Company HK$5,000,000,000 HK$5,000,000,000 Number of authorized ordinary shares of the Company 200,000,000,000 50,000,000,000 Issued share capital of the Company HK$538,940,685 HK$538,940,685 Number of issued ordinary shares of the Company 21,557,627,422 5,389,406,855

Board Lot Size

As at the Latest Practicable Date, the Shares are traded on the Stock Exchange in the board lot size of 1,000 Shares. No change to the board lot size is being contemplated as a result of the Share Consolidation.

Based on the closing price of HK$0.76 per Share (equivalent to HK$3.04 per Consolidated Share) as quoted on the Stock Exchange as at the Last Trading Day, the value of each board lot of the Shares is HK$760 and the theoretical market value of each board lot of the Consolidated Shares, assuming the proposed Share Consolidation had became effective, would be HK$3,040.

Reasons for the proposed Share Consolidation

The trading price of the Shares has consistently been trading at below HK$1.20 for the past two years. Pursuant to the “Guide on Trading Arrangements for Selected Types of Corporate Actions” issued by the Hong Kong Exchanges and Clearing Limited on 28 November 2008 and updated on 25 July 2016 (“the Guideline”), the expected board lot value per board lot should be greater than HK$2,000 taking into account the minimum transaction costs for a securities trade. As at the Last Trading Date, the closing price of the Shares was HK$0.76 and the board lot size was 1,000 Shares. The Shares are trading at under HK$2,000 per board lot. For the purpose of reducing transaction and registration costs, the Board proposes the Share Consolidation.

– 10 –

LETTER FROM THE BOARD

Brokers charge their clients a fee per board lot, i.e. the handling costs of dealings in more board lots are higher than those for less board lots. After the Share Consolidation, the number of new board lots will be reduced. It is expected that the Share Consolidation would bring about a corresponding upward adjustment in the trading price of the Consolidated Shares on the Stock Exchange, and will reduce the overall transaction and handling costs of dealings in the Shares of the Company.

The Company considers that although increasing the board lot size could also achieve a similar effect as the Share Consolidation, it cannot provide any upward adjustment to the share price of the Company. Certain brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced shares or tend to discourage individual brokers from recommending low-priced shares to their customers. Certain investment banks and financial institutions also have internal guidelines stipulating that no margin credit will be offered to customers for low-priced shares. Accordingly, potential investors will find investing in the Shares which currently trades below HK$1.00 less attractive. Therefore, with a higher trading price of the Consolidated Shares and reduction in the transaction and handling costs as a proportion of the market value of each board lot, the Company believes that the Share Consolidation will enhance the corporate image of the Company so as to make investing in the Consolidated Shares more attractive to a broader range of institutional and professional investors and other members of the investing public.

Having decided not to adjust the board lot size on the above considerations and based on the recent average trading price per Share, the Company considered that consolidating 4 issued and unissued Shares into one Consolidated Share will at the same time satisfy the board lot value requirement under the Guideline while creating the minimal number of odd lots.

Given the above reasons, the Company considers the proposed Share Consolidation is justifiable in light of the potential costs and negative impact arising from the creation of odd lots to shareholders. Accordingly, the Directors consider that the Share Consolidation is beneficial to and in the interests of the Company and the Shareholders as a whole.

Corporate action plan of the Company

As at the Latest Practicable Date, the Company does not have any intention or plan (initial or concrete) or otherwise foresee to undertake in the next 12 months any (a) equity fundraising or (b) other corporate action or arrangement that may affect the trading in its shares (e.g. share consolidation or subdivision or change in board lot size). However, the Directors will not rule out that they may consider equity fund raising activities when it is reasonably necessary for the Group to raise fund to meet its operational needs or for future development. The Directors will consider carefully the likely impact on the Shareholders before they will proceed on any such equity fund raising exercises.

– 11 –

LETTER FROM THE BOARD

OTHER ARRANGEMENTS

Arrangement on odd lot trading

In order to facilitate the trading of odd lots of the Consolidated Shares as a result of the Share Consolidation, the Company has appointed CITIC Securities Brokerage (HK) Limited to provide matching services, on a best effort basis, to those Shareholders who wish to purchase or to sell their holdings of odd lots of the Consolidated Shares at their own expense to make up a full board lot.

Shareholders who wish to take advantage of this facility should contact the Customer Service Officer of CITIC Securities Brokerage (HK) Limited at telephone number (852) 2237 6534 during office hours. Shareholders should note that successful matching of the sale and purchase of odd lots of the Consolidated Shares is not guaranteed and will depend on, among other things, there being adequate amounts of odd lots of the Consolidated Shares available for such matching. Please refer to the section headed “Expected Timetable for the Share Consolidation” on pages 5 and 6 of this circular for the period during which the Company will provide matching service for the sale and purchase of odd lots of the Consolidated Shares. Shareholders may also make their own arrangements to top-up or sell their holdings of odd lots of the Consolidated Shares at their own expense. For the avoidance of doubt, Shareholders who purchase odd lots of the Consolidated Shares shall pay the relevant purchase price and normal transaction costs for which they are otherwise responsible.

Shareholders are recommended to consult their stockbrokers, other registered dealers in securities, bank managers, solicitors, professional accountants or other independent professional advisers if they are in any doubt about the matching facility described above.

Free exchange of Consolidated Shares’ certificates and trading arrangement

Subject to the proposed Share Consolidation becoming effective, which is expected to be on Friday, 11 January 2019, Shareholders may, during the period from Friday, 11 January 2019 to Friday, 22 February 2019 (both days inclusive) between 9:00 a.m. and 4:30 p.m. on any Business Day, submit share certificates for the existing Shares in orange colour to the Company’s branch share registrar and transfer office in Hong Kong, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, to exchange, at the expense of the Company, for new certificates of the Consolidated Shares in blue colour. Thereafter, each share certificate for the existing Shares will be accepted for exchange only on payment of a fee of HK$2.50 (or such higher amount as may be from time to time be specified by the Stock Exchange) for each new share certificate issued for the Consolidated Shares or each share certificate for the existing Shares submitted for cancellation, whichever the number of certificates issued or cancelled is higher. Nevertheless, the share certificates for the existing Shares will continue to be good evidence of legal title and may be exchanged for new share certificates for the Consolidated Shares at any time but are not accepted for trading, settlement and registration upon completion of the Share Consolidation.

– 12 –

LETTER FROM THE BOARD

2. CONTINUING CONNECTED TRANSACTIONS

Reference is made to the announcements of the Company dated 25 January 2016 and 12 November 2018 in relation to, among other things, the 2016 Merchandise Agreements and the 2019 Merchandise Agreements. As the 2016 Merchandise Agreements will expire on 31 December 2018, the 2019 Merchandise Agreements were entered into by the Group to enable the Group to continue its existing operations going forward. Details of the 2019 Merchandise Agreements are set out below:

(A) 2019 Master Merchandise Purchase Agreement

Date:

12 November 2018

Parties:

• (a) GOME Appliance, a wholly-owned subsidiary of the Company, which is principally engaged in the retailing of electrical appliances and consumer electronics products; and

• (b) Meixin Network, a 60% non-wholly-owned subsidiary of the Group, which is principally engaged in the business of mobile social data platform. Meixin Network also holds the entire equity of GOME-on-line, the e-commerce platform of the Group. The remaining 40% equity interests of Meixin Network are held by GOME Holding and GOME Financial Holdings, companies owned by the Controlling Shareholder and his associates. Meixin Network is hence an associate of the Controlling Shareholder and a connected subsidiary of the Company for the purpose of the Listing Rules.

Terms of the 2019 Master Merchandise Purchase Agreement and annual caps

Pursuant to the 2019 Master Merchandise Purchase Agreement, Meixin Network agreed to, and will procure its subsidiaries and affiliates to, at the request of the GOME Appliance or any member of the Group from time to time, supply general merchandise (including but not limited to electrical appliances and consumer electronics products) to the Group on an at-cost basis, which is determined by taking into account the total consideration (including the cost of merchandise and cost of logistics from the warehouse of the supplier to the warehouse of Meixin Network, the logistics service of which is included in the supply of goods contract entered into with the third party supplier) payable to the third party supplier under each supply of goods contract entered into between members of the Meixin Network and the third party supplier, for a period of three years from 1 January 2019 to 31 December 2021, subject to the annual caps of the transaction amounts (excluding value added tax) under the 2019 Master Merchandise

– 13 –

LETTER FROM THE BOARD

Purchase Agreement for the three years ending 31 December 2019, 2020 and 2021 not exceeding RMB5 billion (equivalent to HK$5.7 billion), RMB8 billion (equivalent to HK$9.1 billion) and RMB10 billion (equivalent to HK$11.3 billion), respectively.

Historical transaction amounts

The historical transaction amounts for the general merchandise purchased under the 2016 Master Merchandise Purchase Agreement for the two financial years ended 31 December 2016 and 2017 and the nine-month period ended 30 September 2018 are as follows:

			For the
	For the	For the	nine-month
	year ended	year ended	ended
	31 December	31 December	30 September
	2016	2017	2018
	RMB (HK$)’	RMB (HK$)’	RMB (HK$)’
	million	million	million
Annual caps	6,000.0 (6,807.0)	7,000.0 (7,941.5)	8,000.0 (9,076.0)
			(Note 1)
Transaction amounts	589.2 (668.4)	1,140.3 (1,293.7)	1,521.4 (1,726.0)
(Note 2 and Note 3)

• Note 1: For the entire year ended 31 December 2018.

• Note 2: The significant increase in the transaction amount in 2017 as compared with 2016 was mainly attributable to (i) the Group experienced an overall 20.10% year-on-year growth in the gross merchandise volume (“ GMV ”), including a 8.46% year-on-year increase in the Group’s offline platform and 48.67% year-on-year increase in the Group’s online platform in 2017 as compared with the corresponding period in 2016; (ii) the Group vigorously promoted the integration of its online and offline businesses to capture more customers as disclosed in the 2017 annual report of the Company; and (iii) customers being more accustomed to purchasing a larger range of products previously not available offline.

• Note 3: The low utilization rate was mainly attributable to the completion of the acquisition of Artway Development Limited (“Artway”) by the Group from an associate of the Controlling Shareholder on 31 March 2016. Prior to completion of the acquisition, Artway together with GOME Retail, which was wholly-owned by Artway, were indirectly owned by the Controlling Shareholder. Upon completion of the acquisition, each of Artway and GOME Retail became a wholly owned subsidiary of the Company. GOME Retail was a party to the 2016 Merchandise Agreements. The annual caps for 2016 to 2018 were fixed before the completion of the acquisition. Accordingly, after the completion of the acquisition the transactions between Artway and the Group under these agreements ceased to be connected transactions and were not counted towards the annual caps stipulated under the 2016 Merchandise Agreements.

Payments for products supplied under the 2019 Master Merchandise Purchase Agreement will be made within 30 business days from the receipt of the products.

– 14 –

LETTER FROM THE BOARD

Basis for determining the purchase price and annual caps of the 2019 Master Merchandise Purchase Agreement

Meixin Network is a subsidiary of the Group and the purchase of merchandise from Meixin Network is a transaction between the Group and its subsidiary or affiliate. As such, the purchase by the Group of merchandise under the 2019 Master Merchandise Purchase Agreement has been fixed on at cost basis.

The proposed annual cap amounts of the 2019 Master Merchandise Purchase Agreement were determined after taking into consideration:

• i. the historical transaction amounts of merchandise supplied under the 2016 Master Merchandise Purchase Agreement to the Group taking into account the reason for the low utilization rate as explained in Note 3 above on page 14. The proposed annual cap amounts of the 2019 Master Merchandise Purchase Agreement have been reduced from RMB6 billion, RMB7 billion and RMB8 billion for the three years ending 31 December 2018 in the previous agreement to RMB5 billion, RMB8 billion and RMB10 billion for the three years ending 31 December 2021;

• ii. the expected increase in demand for general merchandise by the Group’s physical stores as they will carry a broader range of general merchandise due to the introduction of a series of new initiatives including for example household, furniture, home decorations, mother care and baby goods and toys to the Group’s physical stores since 2018;

• iii. the continued growth in GMV of the Group (2017: 20.10% increase from 2016; 2016: 31.05% increase from 2015) and the growth in offline GMV (2017: 8.46% increase from 2016; 2016: 13.63% increase from 2015); and

• iv. the plan of rapidly expanding the coverage of the Group’s physical stores to the third to sixth-tier cities in the PRC by opening of about 2,000 more stores within the next three years (it is expected that the Group will open about 600, 600 and 800 stores each year from 2019 to 2021) (number of stores as at 30 June 2018: 1,867 stores), and the Group’s estimate of the expected revenue derived from each of these new stores based on the Group’s experience of penetration into other similar-tier cities.

Having considered all of the factors in (ii) to (iii) which will lead to an organic growth from the existing stores and growth resulting from the number of stores to be opened, expected size of the stores and the population of the relevant cities, on the assumption of similar prevailing market conditions, it is expected that the Company could maintain a year-on-year increase of overall GMV (including online and offline) of approximately 5% to 20%, which will drive the demand for the physical stores. As such, under the 2019 Master Merchandise Purchase Agreement, the annual cap for 2020 will be increased by 60% as compared to the annual cap of 2019 and the annual cap of 2021 will be increased by 25% as compared to the annual cap of 2020, the Board considers that the proposed annual caps are fair and reasonable.

– 15 –

LETTER FROM THE BOARD

(B) 2019 Master Merchandise Supply Agreement

Date:

12 November 2018

Parties:

• (a) GOME Appliance, a wholly-owned subsidiary of the Company; and

• (b) Meixin Network, a 60% non-wholly-owned subsidiary of the Group.

Terms of the 2019 Master Merchandise Supply Agreement and annual caps

Pursuant to the 2019 Master Merchandise Supply Agreement, GOME Appliance agreed to, and will procure other members of the Group to, at the request of Meixin Network or its subsidiaries or affiliates from time to time, supply general merchandise (including but not limited to electrical appliances and consumer electronics products) to Meixin Network or its subsidiaries or affiliates on an at-cost basis, which is determined by taking into account the total consideration (including the cost of merchandise and cost of logistics from the warehouse of the supplier to the warehouse of the Group, the logistics service of which is included in the supply of goods contract entered into with the third party supplier) payable to the third party supplier under each supply of goods contract entered into between members of the Group and the third party supplier, for a period of three years from 1 January 2019 to 31 December 2021, subject to the annual caps of the transaction amounts (excluding value added tax) under the 2019 Master Merchandise Supply Agreement for the three years ending 31 December 2019, 2020 and 2021 not exceeding RMB10 billion (equivalent to HK$11.3 billion), RMB15 billion (equivalent to HK$17.0 billion) and RMB20 billion (equivalent to HK$22.7 billion), respectively.

Historical transaction amounts

The historical transaction amounts for general merchandise supplied under the 2016 Master Merchandise Supply Agreement for the two financial years ended 31 December 2016 and 2017 and the nine-month period ended 30 September 2018 are as follows:

			For the
	For the	For the	nine-month
	year ended	year ended	ended
	31 December	31 December	30 September
	2016	2017	2018
	RMB (HK$)’	RMB (HK$)’	RMB (HK$)’
	million	million	million
Annual caps	6,000.0 (6,807.0)	7,000.0 (7,941.5)	8,000.0 (9,076.0)
			(Note 1)
Transaction amounts	3,150.6 (3,574.3)	6,767.8 (7,678.0)	6,004.5 (6,812.1)
(Note 2 and Note 3)

– 16 –

LETTER FROM THE BOARD

• Note 1: For the entire year ended 31 December 2018.

Note 2: The significant increase in the transaction amount in 2017 as compared with 2016 was mainly attributable to (i) the Group experienced an overall 20.10% year-on-year growth in the GMV, including a 48.67% year-on-year increase in the Group’s online platform; (ii) the Group vigorously promoted the integration of its online and offline businesses to capture more customers as disclosed in the 2017 annual report of the Company; and (iii) customers being more accustomed to purchasing a larger range of products previously not available online.

• Note 3: Please refer to Note 3 above on page 14 for the reasons for under-utilization of the annual caps.

Payments for the products supplied under the 2019 Master Merchandise Supply Agreement will be made within 30 business days from the receipt of the products.

Basis for determining the selling price and annual caps of the 2019 Master Merchandise Supply Agreement

Meixin Network is a subsidiary of the Group and the supply of merchandise to Meixin Network is a transaction between the Group and its subsidiary or affiliate. As such, the supply of merchandise by the Group to Meixin Network under the 2019 Master Merchandise Supply Agreement has been fixed on at cost basis.

The proposed annual cap amounts of the 2019 Master Merchandise Supply Agreement were determined after taking into consideration:

• i. the historical transaction amounts of merchandise supplied under the 2016 Master Merchandise Supply Agreement, which experienced a significant year-on-year growth as a result of the quick developing e-commerce business of the Group;

• ii. the expected trend of customers of the Group becoming more used to using the Group’s online platform to purchase electrical appliances, including for example AV and small white appliances (i.e. including small kitchen appliances, hair dryers and electronic iron, etc.);

• iii. the continued year-on-year growth in GMV of the Group (2017: 20.10% increase from 2016, 2016: 31.05% increase from 2015) and the year-on-year growth in GMV of the online business (2017: 48.67% increase from 2016, 2016: 110.09% increase from 2015);

• iv. the expected continued increase in the number of online shoppers in the PRC leading to a continued growth in the online business and hence leading to an increase in demand from GOME Appliance; and

• v. the consequential increase in online transaction volume as a result of the increase in online browsers of the Meixin Network due to the brand penetration into third to sixth-tier cities which the Group will open its new stores.

Having considered all the above factors, on the assumption of similar prevailing market conditions, it is expected that the Company could maintain a year-on-year increase of overall GMV (including online and offline) of approximately 5% to 20%, which will drive the demand for e-commerce business. As such, the annual caps are set as to RMB10 billion, RMB15 billion and RMB20 billion for the three years ending 31 December 2021, representing an increase of 50% from 2019 to 2020 and 33% from 2020 to 2021, the Board considers that the proposed annual caps are fair and reasonable.

– 17 –

LETTER FROM THE BOARD

INTERNAL CONTROL POLICY FOR CONTINUING CONNECTED TRANSACTIONS

The following principles apply to all the 2019 Merchandise Agreements.

In order to ensure that the continuing connected transactions of the Group are being conducted in a fair and reasonable manner, and are in line with the prevailing market rates, the Group adopts the following internal control methods and procedures:

• (a) The relevant management personnel of the Group will conduct regular checks on a quarterly basis to review and assess whether the transactions contemplated under the relevant continuing connected transaction are being conducted in accordance with the terms of the relevant agreement and they will also regularly, on a monthly basis update the market price for the purpose of considering if the price charged for a specific transaction is fair and reasonable and in accordance with the pricing policy of the Group:

• (i) to determine the prevailing market rate, the Group will obtain quotations from at least two independent suppliers of similar services to set the reference market price. If there is no quotations or information to determine the prevailing market price, the Group will determine the prevailing market rate by reference to the average price of similar products previously purchased/supplied by the Group, and on normal commercial terms which are no less favourable than that are available from independent third parties. In addition, the management team of the Group will from time to time (on a regular monthly basis and/or prior to price negotiation) gather market intelligence by way of research and investigation to ascertain the quality of the products/services compared to similar products/services in the market and the reference price of each type of transactions in the market;

• (ii) the management team of the Group will, on a monthly basis, review, monitor and benchmark with the average industry prices in respect of the sales of the products/provision of the services;

• (iii) the Group also conducts regular quarterly reviews of the sales, costs of sales and expenses of the products/services and ensures the transactions are within the annual caps;

• (iv) the Group will also work closely with customers/suppliers with a view to obtaining information on the demand and inventory situation, and the Company would then adjust or negotiate the prices of the products/services as and when necessary to ensure price fairness.

• (b) The Company will conduct periodic half-yearly audit reviews of the continuing connected transactions of the Company, to consider the (i) effective implementation of the pricing policies and the payment methods, evaluation of balances of annual

– 18 –

LETTER FROM THE BOARD

caps; and (ii) management weaknesses, and recommendation of improvement measures to ensure that the internal control measures in respect of the continuing connected transactions remain complete and effective and where any weaknesses are identified, the Company will take measures to address them as soon as practicable.

• (c) The independent non-executive directors of the Company will review the transactions contemplated under the continuing connected transactions of the Company pursuant to Listing Rule 14A.55, and confirm in the annual report whether the transactions have been entered in the ordinary and usual course of business of the Group; on normal commercial terms or better; and according to the agreement governing the transactions on terms that are fair and reasonable and in the interests of the Company’s shareholders as a whole.

The independent auditor of the Group will also conduct an annual review on the pricing terms and annual caps of the continuing connected transactions.

REASONS FOR ENTERING INTO OF THE 2019 MERCHANDISE AGREEMENTS

Meixin Network is a non-wholly owned subsidiary of the Group. As it is owned as to 40% by the Controlling Shareholder, it is an associate of the Controlling Shareholder and a connected subsidiary of the Company and intra-group transactions between the Group and Meixin Network are connected transactions for the Company for the purpose of the Listing Rules.

Both GOME Appliance and Meixin Network are involved in the sale of electrical appliances and consumer electronic products in the PRC. GOME Appliance focuses primarily on offline retail of electrical appliances and consumer electronic products and Meixin Network focuses on online retail of electrical appliances and consumer electronic products and general merchandises. Each of GOME Appliance and Meixin Network has its own procurement channels and suppliers. Owing to historical reason, GOME Appliance’s procurement focus primarily on electrical appliances and consumer electronic products, whereas Meixin Network focus more on general merchandise. As the retail strategy of the Group evolves, the boundaries of online and offline retails have become blurred with the e-commerce platform becoming more involved in the retail of electrical appliances and consumer electronic products and the physical stores also becoming more involved in the retail of general merchandise. The 2019 Merchandise Agreements were entered into to improve the efficiency of the Group’s procurement of products and enable GOME Appliance and Meixin Network to source products from their own or the other party’s suppliers and make such products available to both the online and offline retail platforms of the Group to allow the Group (through GOME Appliance, its wholly owned subsidiary, and Meixin Network, its non-wholly owned subsidiary) to capture the demand of all potential customers online and offline. Hence, the products which are the subject of each of the 2019 Merchandise Agreements include the full range of products currently and to be offered by the relevant subsidiary. It is expected that GOME Appliance will be supplying mainly large sized electrical appliances (e.g. AV, air-conditioner, refrigerators and washing machine, etc.) under the 2019 Master Merchandise Supply Agreement; while Meixin

– 19 –

LETTER FROM THE BOARD

Network will be supplying mainly popular online products (e.g. telecommunication, IT, digital and related accessories, etc.) under 2019 Master Merchandise Purchase Agreement. As such, the products supplied by/to Meixin Network to/from GOME Appliance may be of the same but under different brand names.

The products carried by the Group’s offline retail stores and the online e-commerce platform are the same. This strategy is in line with many other international retailers. The same product will be supplied from the same ultimate manufacturer. The relevant subsidiary (GOME Appliance or Meixin Network) will, based on the method explained above, be able to source the product at the lowest price. The prices charged under the 2019 Merchandise Agreements will not be higher than the price charged by independent suppliers on similar terms for the same or similar products.

Apart from ensuring the Group could capture all potential customers through its online and offline platform, the other main purpose of the 2019 Merchandise Agreements is to ensure that the Group (whether through GOME Appliance, its wholly owned subsidiary, or Meixin Network, its non-wholly owned subsidiary) obtains the relevant products at the lowest cost possible (on similar terms) and on normal or better commercial terms as (i) before placing any order of goods, the merchandising department of the Group would source for a supplier to provide the best terms available for the Group. Then, it would use the subsidiary that could negotiate the best terms and also preferred by the supplier (e.g. small goods suppliers usually prefer Meixin Network while large electrical appliances goods suppliers usually prefer GOME Appliance) to enter into the relevant supply agreements. Hence, the relevant product is sourced at the lowest cost (on similar terms) to the Group as a whole; (ii) the products supplied under the 2019 Merchandise Agreements will be priced on an at-cost basis; and (iii) before making a purchase from the other subsidiary, the relevant subsidiary is subject to the internal controls set out in the section headed “INTERNAL CONTROL POLICY FOR CONTINUING CONNECTED TRANSACTIONS”.

Through the above procedures, the relevant subsidiary will be able to obtain the best term under the 2019 Merchandise Agreements available to it for the purchase of the relevant product. As such, the pricing of the products will be fair and reasonable and on normal commercial terms or better. The arrangement will minimise the occurrence of shortage of products and lower purchase costs and is essential for the operation and development of the Group.

As explained in the method for determining the at-cost price of merchandise sold by the Group to Meixin Network and vice versa, the supply of goods contracts will include logistics services provided by the third party supplier for delivery of merchandise to the warehouse of the contracting party. Members of GOME Appliance or Meixin Network will then bear their own logistics costs for the delivery of such merchandise from the warehouse of the contracting party to their respective retail locations or end customers. The Board considers that the procurement size of an order is the main factor that a third party supplier will take into account when the consideration for a supply of merchandise contract is negotiated. Administrative cost is fixed in nature and is incurred by the Group when the Group places an order with the third

– 20 –

LETTER FROM THE BOARD

party supplier. Since each of GOME Appliance or Meixin Network will still place orders with the relevant third party supplier to satisfy its own demand for the relevant merchandise, irrespective of whether it makes bulk purchases taking into account the demand from the other subsidiary, there is no significant increase in any administrative costs in making additional purchases for GOME Appliance or Meixin Network.

The Directors consider that the transactions under each of the 2019 Merchandise Agreements were negotiated and entered into on an arm’s length basis, on normal commercial terms and that the respective terms and conditions of the 2019 Merchandise Agreements, including the annual caps, are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As Meixin Network is owned as to 60% by the Group and 40% by the Controlling Shareholder and his associates, Meixin Network is an associate of the Controlling Shareholder and a connected subsidiary of the Company, transactions between the Group and Meixin Network constitutes connected transaction for the Company. As the applicable percentage ratios (other than profits ratio) in respect of the transactions under each of the 2019 Merchandise Agreements are respectively expected to be more than 5% on an annual basis, the transactions contemplated under each of the 2019 Merchandise Agreements will be subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Shareholders with a material interest in the 2019 Merchandise Agreements shall abstain from voting at the relevant resolutions at the SGM. The Controlling Shareholder and his associates are considered to be interested in the 2019 Merchandise Agreements and will abstain from voting at the relevant resolutions at the SGM. Except as disclosed above, to the best of their knowledge and belief, no other Shareholder is required to abstain from voting at the SGM.

GENERAL

The Independent Board Committee comprising all the independent non-executive Directors has been formed to advise the Independent Shareholders on the terms of the 2019 Merchandise Agreements. Platinum Securities Company Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders.

Mr. Zou Xiao Chun (who is a Director originally nominated in 2010 by the Controlling Shareholder’s associate), Ms. Huang Xiu Hong (who is the sister of the Controlling Shareholder) and Mr. Yu Sing Wong (who hold senior management roles in various companies controlled by the Controlling Shareholder and/or its associate) are considered to be interested in the transactions contemplated under the 2019 Merchandise Agreements and have abstained from voting on the relevant board resolutions approving the transactions.

– 21 –

LETTER FROM THE BOARD

SGM

A SGM will be convened at which ordinary resolutions will be proposed to consider and, if thought fit, to approve (1) the Share Consolidation; and (2) the 2019 Merchandise Agreements.

A notice of the SGM is set out on pages 48 to 50 of this circular.

A form of proxy for the SGM is enclosed herewith. Whether or not you intend to attend and vote at the SGM in person, you are requested to complete the form of proxy and return it to the Company’s branch share registrar in Hong Kong, Tricor Abacus Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong in accordance with the instructions printed thereon as soon as practicable but in any event no later than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or at any adjournment thereof should you so wish.

CLOSURE OF SHAREHOLDERS’ REGISTER

For the purpose of determining the list of shareholders who are entitled to attend and vote at the SGM, the shareholders’ register of the Company will be closed from Tuesday, 8 January 2019 to Thursday, 10 January 2019 (both dates inclusive). No transfer of shares of the Company will be registered during these days. In order to qualify to attend and vote at the SGM, all instruments of transfer together with the relevant share certificate(s) must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Abacus Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on Monday, 7 January 2019.

RECOMMENDATIONS

(1) The Share Consolidation

Having considered the reasons set out under “ Reasons for the proposed Share Consolidation ”, the Board recommends the Shareholders to vote in favour of the proposed resolution approving the Share Consolidation at the SGM.

– 22 –

LETTER FROM THE BOARD

(2) The 2019 Merchandise Agreements

Your attention is drawn to the letter from the Independent Board Committee of this circular which contains its recommendations to the Independent Shareholders in respect of the terms of the 2019 Merchandise Agreements. Your attention is also drawn to the letter of advice from the Independent Financial Adviser which contains, amongst other matters, its advices to the Independent Board Committee and the Independent Shareholders. The letter from the Independent Financial Adviser is set out on pages 26 to 41 of this circular.

The Board (including the independent non-executive Directors who have considered the advice of the Independent Financial Adviser other than Mr. Zou Xiao Chun, Ms. Huang Xiu Hong and Mr. Yu Sing Wong) considers that each of the 2019 Merchandise Agreements is on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board (including the independent non-executive Directors who have considered the advice of the Independent Financial Adviser other than Mr. Zou Xiao Chun, Ms. Huang Xiu Hong and Mr. Yu Sing Wong) recommends the Independent Shareholders to vote in favour of the proposed resolutions approving the 2019 Merchandise Agreements (including the relevant annual caps) at the SGM.

By Order of the Board GOME Retail Holdings Limited Zhang Da Zhong Chairman

– 23 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of the letter of recommendations, prepared for the purpose of incorporation in the circular, from the Independent Board Committee to the Independent Shareholders regarding the terms of the 2019 Merchandise Agreements and the transactions contemplated thereunder.

==> picture [177 x 57] intentionally omitted <==

GOME RETAIL HOLDINGS LIMITED 國美零售控股有限公司[*]

(incorporated in Bermuda with limited liability) (Stock Code: 493)

21 December 2018

To the Independent Shareholders

Dear Sir or Madam,

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

We refer to the circular of the Company to the Shareholders dated 21 December 2018 (the “ Circular ”), in which this letter forms a part. Unless the context requires otherwise, capitalised terms used in this letter will have the same meanings given to them in the section headed “Definitions” of the Circular.

We have been authorised by the Board to form the Independent Board Committee to advise the Independent Shareholders on whether the terms of the 2019 Merchandise Agreements are fair and reasonable so far as the Independent Shareholders are concerned.

We wish to draw your attention to the letter of advice from Platinum, the Independent Financial Adviser appointed to advise the Independent Board Committee and the Independent Shareholders on the terms of the 2019 Merchandise Agreements as set out on pages 26 to 41 of the Circular and the letter from the Board as set out on pages 7 to 23 of the Circular.

* For identification purpose only

– 24 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered, among other matters, the factors and reasons considered by, and the opinion of the Independent Financial Adviser as stated in its letter of advice, we consider that the terms of the 2019 Merchandise Agreements are on normal commercial terms, are fair and reasonable and in the interests of the Company and the Shareholders as a whole in the ordinary and usual course of business of the Group. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution in relation to the 2019 Merchandise Agreements and the transactions contemplated thereunder to be proposed at the SGM.

Yours faithfully,

For and on behalf of the Independent Board Committee

Mr. Lee Kong Wai, Conway Ms. Liu Hong Yu Independent Non-executive Independent Non-executive Director Director

Mr. Wang Gao Independent Non-executive Director

– 25 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the 2019 Merchandise Agreements for the purpose of incorporation into this circular.

21 December 2018

To the Independent Board Committee and the Independent Shareholders

Dear Sir or Madam,

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

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 2019 Merchandise Agreements, and the annual caps in relation to the continuing connected transactions contemplated under the 2019 Merchandise Agreements (the “ Transactions ”). Details of the Transactions are contained in the Letter from the Board as set out in the circular of the Company dated 21 December 2018 (the “ Circular ”). Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

The Board announced that on 12 November 2018, the Company has entered into the 2019 Merchandise Agreements to renew the 2016 Merchandise Agreements which will expire on 31 December 2018.

BASIS OF OUR OPINION

In our capacity as the Independent Financial Adviser, our role is to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the 2019 Merchandise Agreements and the relevant annual caps in relation to the Transactions are entered into in the ordinary and usual course of business of the Company, on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Group and the Shareholders as a whole; and to give independent advice to the Independent Board Committee.

– 26 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In formulating our opinion, we have relied on the information and facts supplied to us by the Directors and/or management of the Company. We have reviewed, among other things: (i) the 2016 Merchandise Agreements; (ii) the announcement of the Company dated 12 November 2018 (the “ 2019 CCT Announcement ”); (iii) the audited annual report of the Group for the financial year ended 31 December 2017; and (iv) the unaudited interim report of the Group for the six months ended 30 June 2018.

We have assumed that all information, facts, opinions and representations contained in the Circular and all information, statements and representations provided to us by the Directors and/or the management of the Company, which we have relied on the same, are true, complete and accurate in all material respects as of the date hereof and we have relied on the same and the Independent Shareholders will be notified of any material changes as soon as practicable. The Directors have confirmed that they take full responsibility for the contents of the Circular and have made all reasonable inquiries that no material facts have been omitted from the information supplied to us.

We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy or completeness of the information of all facts as set out in the Circular and of the information and representations provided to us by the Directors and/or management of the Company. Furthermore, we have no reason to suspect the reasonableness of the opinions and representations expressed by the Directors and/or management of the Company, which have been provided to us. In line with normal practice, we have not, however, conducted a verification process of the information supplied to us, nor have we conducted any independent in-depth investigation into the business and affairs of the Group. We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion, and we consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules.

During the past two years, Platinum Securities Company Limited had no past engagement with the Company. As at the Latest Practicable Date, we were independent from, and were not associated with the Company or any other party to the Transactions, or their respective substantial shareholder(s) or connected person(s), as defined under the Listing Rules and accordingly, are considered eligible to give independent advice on the Transactions. We will receive a fee from the Company for our role as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Transactions. Apart from this normal professional fee payable to us in connection with this appointment, no arrangements exist whereby we will receive any fees or benefits from the Company or any other party to the Transactions or their respective substantial shareholder(s) or connected person(s), as defined under the Listing Rules.

The Independent Board Committee, comprising all independent non-executive Directors of the Company namely Mr. Lee Kong Wai, Conway, Ms. Liu Hong Yu and Mr. Wang Gao, has been established to advise the Independent Shareholders as to whether the terms of the 2019 Merchandise Agreements and the relevant annual caps in relation to the Transactions are

– 27 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

entered into in the ordinary and usual course of business of the Company, 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.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating and giving our independent financial advice to the Independent Board Committee and the Independent Shareholders, we have taken into account the following principal factors:

1. Background of the Transactions

Reference is made to the announcement of the Company dated 25 January 2016 and 12 November 2018 in relation to, among other things, the 2016 Merchandise Agreements and the 2019 Merchandise Agreements. As the 2016 Merchandise Agreements will expire on 31 December 2018, the 2019 Merchandise Agreements were entered into by the Group to enable the Group to continue its existing operations going forward.

As Meixin Network is owned as to 60% by the Group and 40% by the Controlling Shareholder and his associates, Meixin Network is an associate of the Controlling Shareholder and a connected subsidiary of the Company, transactions between the Group and Meixin Network constitutes connected transaction for the Company. As the applicable percentage ratios (other than profits ratio) in respect of the transactions under each of the 2019 Merchandise Agreements are respectively expected to be more than 5% on an annual basis, the transactions contemplated under each of the 2019 Merchandise Agreements will be subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

2. Reasons for and benefits of entering into of the 2019 Merchandise Agreements

As discussed with the management of the Company, we noted that similar type of master merchandise purchase and supply agreements had already been entered into since 2005 for a better co-ordinated and transacted in a more efficient manner between the procurement of products by the Group and the Parent Group. We agree that without such an arrangement, the ultimate costs of securing products for the Group and the Parent Group may increase, in particularly in cases where certain products may not be able to source from local branches of suppliers.

As stated in the Letter from the Board in the Circular that GOME Appliance focuses primarily on offline retail of electrical appliances and consumer electronic products and Meixin Network focuses on online retail of electrical appliances and consumer electronic products and general merchandises. We understand from the management of the Company that each of GOME Appliance and Meixin Network has its own procurement channels and suppliers, where the GOME Appliance’s procurement focuses primarily on electrical appliances and consumer electronic products, whereas Meixin Network focuses more on general merchandise. We note

– 28 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

that the retail strategy of the Group evolves and its e-commerce business was started since 2011. The Group aims to provide more product-comprehensive online and offline platforms in order to provide convenience to existing customers as well as to capture all potential new customers, and therefore the boundaries of online and offline retails have become blurred with the e-commerce platform becoming more involved in the retail of electrical appliances and consumer electronic products and the physical stores also becoming more involved in the retail of general merchandise. The 2019 Merchandise Agreements were entered into to improve the efficiency of the Group’s procurement of products and enable GOME Appliance and Meixin Network to source products from their own or the other party’s suppliers and make such products available to both the online and offline retail platforms of the Group to allow the Group (through GOME Appliance and Meixin Network) to capture the demand of all potential customers online and offline. Hence, the products which are the subject of each of the 2019 Merchandise Agreements include the full range of products currently and to be offered by the relevant subsidiary. It is expected that GOME Appliance will be supplying mainly large sized electrical appliances (e.g. AV, air-conditioner, refrigerators and washing machine, etc.) under the 2019 Master Merchandise Supply Agreement, while Meixin Network will be supplying mainly popular online products (e.g. telecommunication, IT, digital and related accessories, etc.) under the 2019 Master Merchandise Purchase Agreement. As such, the products supplied by/to Meixin Network to/from GOME Appliance may be of the same but under different brand names. Therefore, the products carried by the Group’s offline retail stores and the online e-commerce platform are similar which the same products will be supplied from the same ultimate manufacturer. As such, we believe that the relevant subsidiary (GOME Appliance or Meixin Network) will, based on the method explained above, be able to source the product at the lowest price. We also understand that the prices charged under the 2019 Merchandise Agreements will not be higher than the price charged by independent suppliers on similar terms for the same or similar products.

Apart from ensuring the Group could capture all potential customers through its online and offline platform, we were advised by the management of the Company that the other main purpose of the 2019 Merchandise Agreements is to ensure that the Group (whether through GOME Appliance or Meixin Network) to obtain the relevant products at a lowest cost as possible (i.e. on similar terms) and on normal or better commercial terms. We understand that usually the merchandising department of the Group will source for suppliers whom could provide the best terms available for the Group and then the Group will assign its subsidiaries (i.e. GOME Appliance or Meixin Network) to further negotiate the best terms with the selected suppliers based on the product category (i.e. small good suppliers usually prefer Meixin Network while large electrical appliances goods suppliers prefer GOME Appliance) and to enter into the relevant supply agreements. We consider that such negotiation tactic enabling the Group to secure low cost on the relevant products to be sourced and the products supplied under the 2019 Merchandise Agreements will be priced on an at-cost basis as well. As such, the pricing of the products (if purchased from the counterparty to the relevant) will be on normal commercial terms or better which we think that such arrangement will minimise the occurrence of shortage of products and lower purchase costs and is essential for the operation and development of the Group. Therefore, we think that the above mechanism is fair and reasonable so far as the Independent Shareholders’ are concerned.

– 29 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We also noted that the supply of goods contracts will include logistics services provided by the third party supplier for delivery of merchandise to the warehouse of the contracting party. Members of the GOME Appliance or Meixin Network will then bear their own logistics costs for the delivery of such merchandise from the warehouse of the contracting party to their respective retail locations or end customers. We understand that the procurement size of an order is the main factor that a third party supplier will take into account when the consideration for a supply of merchandise contract is negotiated. Administrative cost is fixed in nature and is incurred by the Group when the Group places an order with the third party supplier. Since each of GOME Appliance or Meixin Network will still place orders with the relevant third party supplier to satisfy its own demand for the relevant merchandise, irrespective of whether it makes bulk purchases taking into account the demand from the other subsidiary, there is no significant increase in any administrative costs in making additional purchases for GOME Appliance or Meixin Network.

In addition, since 2013, it has been common and frequent that members of the Group or e-commerce platform outside a supplier’s delivery network would have to or tend to source products from other reachable members within the Group or e-commerce platform. This result in the increase in intra-group supplies of general merchandise between the Group’s e-commerce platform and other members of the Group when the Group’s e-commerce platform requires supplies of a much wider product range than before with higher probabilities that suppliers of each different type of general merchandise products may not be big suppliers and may have only relatively less extensive delivery network coverage than that of the Group’s e-commerce platform, and also when the Group expand their respective physical store networks in the third- to sixth-tier cities which currently may not be accessible to the delivery network of some suppliers.

Moreover, since the Group positions itself as an omni-channel retailer of home appliances and consumer electronic products, which sells its products through physical stores, O2M micro shops, as well as through mobile terminals and e-commerce channels, that together constitute a seamless retail continuum. As such, it is the Group’s intention to continually integrate its e-commerce business and offline business by sharing their procurement, logistics, after-sales and information to increase its gross profit, reduce costs and improve its profitability. We concur with the management of the Company that the integration of the supply chains of the Group’s e-commerce platforms and physical stores by restructuring and extending the current mutual supply arrangements between the Group and Meixin Network to cover more mutual supply arrangements between the Group and the Meixin Network with respect to general merchandise is in line with the Group’s intention to integrate its e-commerce business and offline business and maximise the above said benefits and improvement of operational efficiency in order to maintain its competitiveness in the retail industry.

In light of above, we are of the view that the entering into the 2019 Merchandise Agreements is in line with the Company’s operation and strategy and in the interests of the Company and the Shareholders as a whole.

– 30 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Principal terms of the 2019 Merchandise Agreements

• 3.1 2019 Master Merchandise Purchase Agreement

Date

• 12 November 2018

Parties to the 2019 Master Merchandise Purchase Agreement:

• (a) GOME Appliance, a wholly-owned subsidiary of the Company, which is principally engaged in the retailing of electrical appliances and consumer electronics products; and

• (b) Meixin Network, a 60% non-wholly-owned subsidiary of the Group, which is principally engaged in the business of mobile social data platform. Meixin Network also holds the entire equity of GOME-on-line, the e-commerce platform of the Group. The remaining 40% equity interests of Meixin Network are held by GOME Holding and GOME Financial Holdings, companies owned by the Controlling Shareholder and his associates. Meixin Network is hence an associate of the Controlling Shareholder and a connected subsidiary of the Company for the purpose of the Listing Rules.

Terms of the 2019 Master Merchandise Purchase Agreement and annual caps

Pursuant to the 2019 Master Merchandise Purchase Agreement, Meixin Network agreed to, and will procure its subsidiaries and affiliates to, at the request of the GOME Appliance or any member of the Group from time to time, supply general merchandise (including but not limited to electrical appliances and consumer electronics products) to the Group on an at-cost basis for a period of three years from 1 January 2019 to 31 December 2021, subject to the annual caps of the transaction amounts (excluding value added tax) under the 2019 Master Merchandise Purchase Agreement for the three years ending 31 December 2019, 2020 and 2021 as the following:

	For the	For the	For the
	year ending	year ending	year ending
	31 December	31 December	31 December
	2019	2020	2021
	(“FY2019”)	(“FY2020”)	(“FY2021”)
	million	million	million
Annual caps (RMB)	5,000	8,000	10,000
(approximately in HK$)	5,700	9,100	11,300

– 31 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The supply of general merchandise is on an at-cost basis, which is determined by taking into account the total consideration (including the cost of merchandise and cost of logistics from the warehouse of the supplier to the warehouse of Meixin Network, the logistics service of which is included in the supply of goods contract entered into with the third party supplier) payable to the third party supplier under each supply of goods contract entered into between members of the Meixin Network and the third party supplier, we consider that the basis for price determination is fair and reasonable.

Basis of annual caps

We further understand from the management of the Company that (i) the Group will not incur more administrative expenses which are fixed in nature; and (ii) delivery costs are included in the supply of goods contract for the logistics from suppliers to Meixin Network’s warehouse and by the Group and Meixin Network for logistics from the Group’s or Meixin Network’s warehouse to their respective customers. As such, we consider that the basis for price determination is fair and reasonable.

The proposed annual cap amounts of the 2019 Master Merchandise Purchase Agreement were determined after taking into consideration:

• (i) the historical transaction amounts of merchandise supplied under the 2016 Master Merchandise Purchase Agreement to the Group taking into account the reason for the low utilization rate as explained under the section of “Historical transaction amounts” below. The proposed annual cap amounts of the 2019 Master Merchandise Purchase Agreement have been reduced from RMB6 billion, RMB7 billion and RMB8 billion for the three years ending 31 December 2018 in the previous agreement to RMB5 billion, RMB8 billion and RMB10 billion for the three years ending 31 December 2021;

• (ii) the expected increase in demand for general merchandise by the Group’s physical stores as they will carry a broader range of general merchandise due to the introduction of a series of new initiatives including for example household, furniture, home decorations, mother care and baby goods and toys to the Group’s physical stores since 2018;

• (iii) the continued growth in GMV of the Group (2017: 20.10% increase from 2016; 2016: 31.05% increase from 2015) and the growth in offline GMV (2017: 8.46% increase from 2016; 2016: 13.63% increase from 2015); and

• (iv) the plan of rapidly expanding the coverage of the Group’s physical stores to the third to sixth-tier cities in the PRC by opening of about 2,000 more stores within the next three years (it is expected that the Group will open about 600, 600 and 800 stores each year from 2019 to 2021) (number of stores as at 30 June 2018: 1,867 stores), and the Group’s estimate of the expected revenue derived from each of these new stores based on the Group’s experience of penetration into other similar-tier cities.

– 32 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have reviewed the financial reports for the year ended 31 December 2017 (the “ 2017 Annual Report ”) and for the six months ended 30 June 2018 (the “ 2018 Interim Report ”) of the Group and understand that the Group currently has proposed the “Triple New” initiative of “New Business, New Market, New Technology” to rapidly open county-level stores in the third to sixth-tier cities. The Group continued to establish trendy and large-scale experiential stores at prime locations around the central business districts in the first-tier market. In the county-level market, the Group expedited the market penetration and coverage in counties, towns and villages by opening of new stores. We noted that a total of 283 county-level stores have been opened as at 30 June 2018. Having considered the increase in the GMV (and hence a demand for goods) in recent years and the estimated year-on-year expansion rate of the Group based on the number of stores to be opened, expected size of stores and the population of the relevant cities, on the assumption of similar prevailing market conditions, it is expected that the Company could maintain a year-on-year increase of overall GMV (including online and offline) of approximately 5% to 20%, which will drive the demand for the physical stores. Therefore, we concur with the view of the management of the Company that the proposed annual caps are fair and reasonable so far as the Independent Shareholders are concerned.

Historical transactions amounts

To assess the reasonableness of the annual caps for the 2019 Master Merchandise Purchase Agreement, we have reviewed the historical transaction amounts for the general merchandise purchased under the 2016 Master Merchandise Purchase Agreement for the two financial years ended 31 December 2016 and 2017 and the nine-month period ended 30 September 2018, details of which are set out as follow:

			For the
	For the	For the	nine-month
	year ended	year ended	ended
	31 December	31 December	30 September
	2016	2017	2018
	(“FY2016”)	(“FY2017”)	(“9M2018”)
	RMB (HK$)’	RMB (HK$)’	RMB (HK$)’
	million	million	million
Annual caps	6,000.0 (6,807.0)	7,000.0 (7,941.5)	8,000.0 (9,076.0)
			(Note 1)
Transaction amounts	589.2 (668.4)	1,140.3 (1,293.7)	1,521.4 (1,726.0)
Utilization rate	9.8%	16.3%	19.0%

Note 1: For the entire year ended 31 December 2018.

Payments for products supplied under the 2019 Master Merchandise Purchase Agreement will be made within 30 business days from the receipt of the products.

– 33 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We note that the transaction amount increased substantially by approximately 1.6 times from approximately RMB589.2 million for FY2016 to approximately RMB1,521.4 million for 9M2018 and the utilization rate was significantly improved from approximately 9.8% in FY2016 to approximately 19.0% in 9M2018. The annualized transaction amount for the year ended 31 December 2018 (“ FY2018 ”) would be approximately RMB2,029 million and the utilization rate would thereby increase to 25.4%. The proposed annual caps for FY2019, FY2020 and FY2021 represent a decrease of 37.5%, an increase of 60.0% and an increase of 25.0%, respectively, from the annual caps for the preceding year.

According the 2017 Annual Report, we note that the reason for the significant increase in the transaction amount in 2017 as compared with 2016 was mainly attributable to (i) the Group experienced an overall 20.10% year-on-year growth in the GMV, including a 8.46% year-on-year increase in the Group’s offline platform and a 48.67% year-on-year increase in the Group’s online platform in 2017 as compared with the same period in 2016; (ii) the Group vigorously promoted and encouraged the integration of its online and offline businesses so as to capture more customers; and (iii) customers being more accustomed to purchase a larger range of comprehensive products online. Although the annual cap for FY2019 under the 2019 Master merchandise Purchase Agreement of RMB5,000 million increased by about 1.46 times comparing with the annualized actual transaction amounts of approximately RMB2,029 million for FY2018, it has been lowered by approximately 37.5% compared with previous annual cap of RMB8,000 million for FY2018. In addition, the low utilization rate in FY2016 to 9M2018 were mainly attributable to the completion of the acquisition of Artway Development Limited (the “ Artway ”) by the Group from an associate of the Controlling Shareholder on 31 March 2016. Prior to completion of the acquisition, each of Artway together with GOME Retail, which was wholly-owned by Artway, were indirectly owned by the Controlling Shareholder. Upon completion of the acquisition, Artway and GOME Retail became a wholly owned subsidiary of the Company. GOME Retail was a party to the 2016 Merchandise Agreements. The annual caps for 2016 to 2018 were fixed before the completion of the acquisition. Accordingly, after the completion of the acquisition, the transactions between Artway and the Group under these agreements ceased to be connected transactions and were not counted towards the annual caps stipulated under the 2016 Merchandise Agreements. Considering the growth rate of the historical transaction amounts for the last two years and the continuous growth in the GMV of the Group for the past three years, we consider that the proposed annual cap of RMB5,000 million for FY2019 offers more flexibility to the Group for future business expansion and development and therefore it is fair and reasonable and is in the interests of the Company and Shareholders as a whole.

In light of the above, we are of the view that the proposed annual caps of the 2019 Master Merchandise Purchase Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

– 34 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3.2 2019 Master Merchandise Supply Agreement

Date

12 November 2018

Parties to the 2019 Master Merchandise Supply Agreement:

• (a) GOME Appliance, a wholly-owned subsidiary of the Company; and

• (b) Meixin Network, a 60% non-wholly-owned subsidiary of the Group.

Terms of the 2019 Master Merchandise Supply Agreement and annual caps:

Pursuant to the 2019 Master Merchandise Supply Agreement, GOME Appliance agreed to, and will procure other members of the Group to, at the request of Meixin Network or its subsidiaries or affiliates from time to time, supply general merchandise (including but not limited to electrical appliances and consumer electronics products) to Meixin Network or its subsidiaries or affiliates on an at-cost basis for a period of three years from 1 January 2019 to 31 December 2021, subject to the annual caps of the transaction amounts (excluding value added tax) under the 2019 Master Merchandise Supply Agreement for the three years ending 31 December 2019, 2020 and 2021 as the following:

	FY2019	FY2020	FY2021
	million	million	million
Annual caps (RMB)	10,000	15,000	20,000
(approximately in HK$)	11,300	17,000	22,700

Similar to the terms of the 2019 Master Merchandise Purchase Agreement, the supply of general merchandise under the 2019 Master Merchandise Supply Agreement is on an at-cost basis, which is determined by taking into account the total consideration (including the cost of merchandise and cost of logistics from the warehouse of the supplier to the warehouse of the Group, the logistics service of which is included in the supply of goods contract entered into with the third party supplier) payable to the third party supplier under each supply of goods contract entered into between members of the Group and the third party supplier. Moreover, (i) the Group will not incur more administrative expenses which are fixed in nature; and (ii) delivery costs are included in the supply of goods contract for the logistics from suppliers to the Group’s warehouse and by the Group and Meixin Network for logistics from the Group’s or the Meixin Network’s warehouse to their respective customers. Therefore, we consider that the basis for price determination is fair and reasonable.

– 35 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Basis of annual caps

The proposed annual cap amounts of the 2019 Master Merchandise Supply Agreement were determined after taking into consideration:

• (i) the historical transaction amounts of merchandise supplied under the 2016 Master Merchandise Supply Agreement, which experienced a significant year-on-year growth as a result of the quick developing e-commerce business of the Group;

• (ii) the expected trend of customers of the Group becoming more used to using the Group’s online platform to purchase electrical appliances, including for example AV and small white appliances (i.e. including small kitchen appliances, hair dryers and electronic iron, etc.);

• (iii) the continued year-on-year growth in GMV of the Group (2017: 20.10% increase from 2016, 2016: 31.05% increase from 2015) and the year-on-year growth in GMV of the online business (2017: 48.67% increase from 2016, 2016: 110.09% increase from 2015);

• (iv) the expected continued increase in the number of online shoppers in the PRC leading to a continued growth in the online business and hence leading to an increase in demand from GOME Appliance; and

• (v) the consequential increase in online transaction volume as a result of the increase in online browsers of the Meixin Network due to the brand penetration into third to sixth-tier cities which the Group will open its new stores.

According to 2017 Annual Report, we note that the Group has launched its “Home. Living” strategy in 2017 as to evolve into an one-stop home solution provider, going beyond the traditional home appliance retailer field. Utilizing cutting-edge internet technology, the Group integrated online shopping with offline experiences and continues to nurture “Shared Retail”, its innovative business model. The Group’s total GMV for both online and offline operations increased by approximately 20.10% as compared with the same period of 2016. The sales revenue from the comparable stores increased by approximately 2.33% year-on-year, while the GMV from the e-commerce business increased by approximately 48.67% and GMV from the online marketplace increased by approximately 118.13% as compared with the same period of 2016. In addition, sales revenue from the four regions of Beijing, Shanghai, Guangzhou and Shenzhen accounted for approximately 34% of the total revenue, as compared with 36% for the corresponding period in 2016. We understand that this represented a decrease in revenue contributed from the first-tier market and a continuing increase in revenue contributed from the second-tier market and county-level market which is in line with the Group’s current expansion strategy. Having considered all the above factors, on the assumption of similar prevailing market conditions, it is expected that the Company could maintain a

– 36 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

year-on-year increase of overall GMV (including online and offline) of approximately 5% to 20%, which will drive the demand for e-commerce business. As such, the annual caps are set as to RMB10 billion, RMB15 billion and RMB20 billion for the three years ending 31 December 2021, representing an increase of 50% from FY2019 to FY2020 and 33% from FY2020 to FY2021. Therefore, we concur with the management of the Company that the proposed annual caps are fair and reasonable so far as the Independent Shareholders are concerned after considering the Group’s current business scale, future expansion plan and the high utilization rate of the historical high transaction amounts.

Historical Transaction amounts

To assess the reasonableness of the annual caps for the 2019 Master Merchandise Supply Agreement, we have reviewed the historical transaction amounts for general merchandise supplied under the 2016 Master Merchandise Supply Agreement for the two financial years ended 31 December 2016 and 2017 and the nine-month period ended 30 September 2018, details of which are set out as follow:

	FY2016	FY2017	9M2018
	RMB (HK$)’	RMB (HK$)’	RMB (HK$)’
	million	million	million
Annual caps	6,000.0 (6,807.0)	7,000.0 (7,941.5)	8,000.0 (9,076.0)
			(Note 1)
Transaction amounts	3,150.6 (3,574.3)	6,767.8 (7,678.0)	6,004.5 (6,812.1)
Utilization rate	52.5%	96.7%	75.0%

Note 1: For the entire year ended 31 December 2018.

Payments for the products supplied under the 2019 Master Merchandise Supply Agreement will be made within 30 business days from the receipt of the products.

We note that the transaction amounts increased significantly by approximately 0.9 times from approximately RMB3,150.6 million in FY2016 to approximately RMB6,004.5 million in 9M2018 and the utilization rate also improved from approximately 52.5% in FY2016 to approximately 75.0% in 9M2018. The annualized transaction amount for FY2018 is approximately RMB8,006.0 million, and the utilization rate for the FY2018 would be more than 100.0%. We understand from the management that the Company will monitor the actual transaction amount and make sure the annual cap for FY2018 will not be exceeded. The proposed annual caps for FY2019, FY2020 and FY2021 represent an increase of 25.0%, 50.0% and 33.3%, respectively, from the annual caps for the preceding year.

– 37 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have discussed with the management of the Company and note the significant increase of the transaction amount under the 2016 Master Merchandise Supply Agreement was due to the change of consumer spending behavior. In specific, consumers used to purchase lower value items online and purchase higher value items such as electrical appliances and consumer electronics products in physical stores; while nowadays, people tends to be more willing to purchase higher value items online as well. Due to the change of consumer spending behaviour, the transaction amounts therefore increased significantly over the past few years.

In order to evaluate the fairness and reasonableness of the proposed annual caps under the 2019 Master Merchandise Supply Agreement, the management is of the view that in the long term, the e-commerce business segment of the Group will keep the current momentum and undergo a rapid growing stage. We have carried out our independent work to verify the growth in the PRC e-commerce market and we noticed that according to the National Bureau of Statistics, there were approximately 772 million internet users and 753 million mobile internet users in China as of 31 December 2017, representing an increase of 5.6% and 8.2%, respectively, from the previous year. According to the China Internet Network Information Center (the “ CNNIC ”), following the improvement of mobile technology and the increased popularity of smart phones in China, the proportion of mobile internet users to total internet users increased to a historical high of 97.5% as of 31 December 2017, up 2.4% year-on-year and the e-commerce consumer base is expected to grow. At the same time, there has been a rapid rise in the number of both online retail consumers and mobile retail consumers. According to the CNNIC, the proportion of online retail consumers among total internet users increased from 63.8% in 2016 to 69.1% in 2017 whilst the proportion of mobile retail consumers among online retail consumers increased from 94.5% in 2016 to 94.9% in 2017. Not only the number of online and mobile retail consumers has increased, but the value of total online retail sales has also maintained a rapid growth trend. In 2010, China’s online retail sales amounted to RMB523.1 billion while in 2017, China’s online retail sales had already reached RMB7,175.1 billion, up 32.2% year-on-year. Therefore, we expect that the number of internet and mobile users, online and mobile retail consumers and online and mobile retail sales values in the coming years will continue to increase, which in turn indicates that there is still large potential for the China e-commerce market to grow. In addition, we agree with the management that the trend of purchasing behaviour in higher value items such as electrical appliances and consumer electronics products will continue to grow.

In light of the above, we are of the view that the proposed annual caps of the 2019 Master Merchandise Supply Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

– 38 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Internal control policy for continuing connected transactions

As disclosed in the 2019 CCT Announcement, the Group has adopted the following internal control methods and procedures in order to ensure that the continuing connected transactions of the Group are being conducted in a fair and reasonable manner, and are in line with the prevailing market rates.

• (a) The relevant management personnel of the Group will conduct regular checks on a quarterly basis to review and assess whether the transactions contemplated under the relevant continuing connected transaction are being conducted in accordance with the terms of the relevant agreement and they will also regularly, on a monthly basis update the market price for the purpose of considering if the price charged for a specific transaction is fair and reasonable and in accordance with the pricing policy of the Group:

• (i) to determine the prevailing market rate, the Group will obtain quotations from at least two independent suppliers of similar services to set the reference market price. If there are no quotations or information to determine the prevailing market price, the Group will determine the prevailing market rate by reference to the average price of similar products previously purchased/supplied by the Group, and on normal commercial terms which are no less favourable than that are available from independent third parties. In addition, the management team of the Group will from time to time (on a regular monthly basis and/or prior to price negotiation) gather market intelligence by way of research and investigation to ascertain the quality of the products/services compared to similar products/services in the market and the reference price of each type of transactions in the market;

• (ii) the management team of the Group will, on a monthly basis, review, monitor and benchmark with the average industry prices in respect of the sales of the products/provision of the services;

• (iii) the Group also conducts regular quarterly reviews of the sales, costs of sales and expenses of the products/services and ensures the transactions are within the annual caps; and

• (iv) the Group will also work closely with customers/suppliers with a view to obtaining information on the demand and inventory situation, and the Company would then adjust or negotiate the prices of the products/services as and when necessary to ensure price fairness.

– 39 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• (b) The Company will conduct periodic half-yearly audit reviews of the continuing connected transactions of the Company, to consider the (i) effective implementation of the pricing policies and the payment methods, evaluation of balances of annual caps; and (ii) management weaknesses, and recommendation of improvement measures to ensure that the internal control measures in respect of the continuing connected transactions remain complete and effective and where any weaknesses are identified, the Company will take measures to address them as soon as practicable.

• (c) The independent non-executive Directors of the Company will review the transactions contemplated under the continuing connected transactions of the Company pursuant to Listing Rule 14A.55, and confirm in the annual report whether the transactions have been entered in the ordinary and usual course of business of the Group; on normal commercial terms or better; and according to the agreement governing the transactions on terms that are fair and reasonable and in the interests of the Company’s shareholders as a whole.

Based on the above, we have obtained the internal control manual of the Group and understand that there are stringent controls in the transaction approval and implementation process. We have reviewed, including but not limited to, (i) monthly updates of market prices of the merchandise under the 2016 Merchandise Agreements; (ii) quarterly reviews of the sales, cost of sales and expenses of the products under the 2016 Merchandise Agreements; (iii) the Company’s research on the demand and inventory situation of customers/suppliers; (iv) the Company’s half-yearly audit reviews of the continuing connected transaction; as well as (v) the information on historical transaction prices of the products under the 2016 Merchandise Agreement. In addition we have assessed the fairness and reasonableness of the pricing mechanism by obtaining and reviewing two sample collections of the related internal control procedures prepared by the Group. Such samples were collected randomly on a monthly basis. We note, from the samples collected we have reviewed, each procurement/supply contract was reviewed, when appropriate, by the finance department and internal risk management department before the underlying contract was entered into. Besides, the prices were checked by the purchasing department independently with reference to the market price of similar products with reference quotations from at least two independent customers/suppliers as to make sure the price would not be higher than the price charged by independent suppliers on similar terms. We consider that the internal control procedures contained in the internal control manual of the Group are sufficient and effective to implement the 2019 Merchandise Agreements and are in the ordinary and usual course of business, on normal commercial terms or better. In addition, we have compared the Company’s intelligence on the market prices of the relevant products under the 2016 Merchandise Agreements to the actual transaction prices of the relevant products and ascertained that the Company has followed its pricing policy to ensure that the continuing connected transactions of the Group are being conducted in a fair and reasonable manner, and are in line with the prevailing market rates. The management team of the Group usually, on a monthly basis, review, monitor and benchmark with the average industry prices in respect of the sales and purchase of the products.

– 40 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In light of the above, we consider that the group has devoted reasonable human resources to ensure the internal control manual of the Group could be implemented sufficiently and effectively to ensure the terms of the 2019 Merchandise Agreements are on normal commercial terms or better and the annual caps will not be exceed.

RECOMMENDATION

Having taken into account the above principal factors and reasons, in particular,

• (i) it is in the interests of the Company and the Shareholders to enter into the 2019 Merchandise Agreements;

• (ii) the terms of the 2019 Merchandise Agreements are on normal commercial terms, fair and reasonable and in the interests of the Group and the Shareholders as a whole; and

• (iii) the proposed annual caps under the 2019 Merchandise Agreements are fair and reasonable so far as the Independent Shareholders are concerned,

we are of the view that the terms of the 2019 Merchandise Agreements and the relevant annual caps in relation to the Transactions are entered into in the ordinary and usual course of business of the Company, 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.

Accordingly, we advise the Independent Board Committee to recommend, and we ourselves recommend the Independent Shareholders to vote in favour of the resolutions in relation to the Transactions to be proposed at the SGM.

Yours faithfully, For and on behalf of

Platinum Securities Company Limited Li Lan

Director and Co-Head of Corporate Finance

Mr. Li Lan is a licensed person registered with the Securities and Futures Commission and as a responsible officer of Platinum Securities Company Limited to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO and has over twelve years of experience in corporate finance industry.

– 41 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Directors and Chief Executive

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he is taken or deemed to have under such provisions of SFO), or as recorded in the register required to be kept under Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) were as follows:

Long positions in the shares, the underlying shares and debentures of the Company

Name of
Director/Chief	Personal	Interest of	Corporate			Approximate %
Executive	interest	spouse	interest	Trustee	Total	shareholding
Huang Xiu Hong
(Note 1)	–	–	164,802,270	–	164,802,270	0.76

Note:

1. Ms. Huang Xiu Hong is the sister of Mr. Wong Kwong Yu (“Mr. Wong”), the controlling shareholder of the Company.

– 42 –

GENERAL INFORMATION

APPENDIX

(b) Substantial Shareholders

So far as is known to any Director or the chief executive of the Company, as at the Latest Practicable Date, Shareholders who had interests or short positions in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO were as follows:

Long positions in the Shares and underlying Shares of the Company

		Number of
		ordinary	Approximate %
Name of Shareholder	Nature	Shares held	of shareholding
Mr. Wong (Note 1)	Interest in controlled	10,835,703,338	50.26
	corporation
Ms. Du Juan (Note 2)	Interest of controlled	10,835,703,338	50.26
	corporation
Ever Ocean Investments	Interest of controlled	5,500,000,000	25.51
Limited (Note 3)	corporation
GOME Holdings Limited	Interest of controlled	5,500,000,000	25.51
(Note 3)	corporation
Power Charm Holdings	Interest of controlled	5,500,000,000	25.51
Limited (Note 3)	corporation
GOME Home Appliances	Interest of controlled	5,500,000,000	25.51
(H.K.) Limited	corporation
(Note 3)
GOME Management	Beneficial owner	5,500,000,000	25.51
Limited (Note 3)
Shinning Crown Holdings	Beneficial owner	4,454,979,938	20.67
Inc. (Note 4)
ARK Trust (Hong Kong)	Trustee	1,310,231,000	6.08
Limited

Notes:

1. Of these 10,835,703,338 Shares, 5,500,000,000 Shares were held by GOME Management Limited, 4,454,979,938 Shares were held by Shinning Crown Holdings Inc. and 634,016,736 Shares were held by Shine Group Limited (all the above companies are 100% beneficially owned by Mr. Wong), and 240,955,927 Shares were held by Smart Captain Holdings Limited and 5,750,737 Shares were held by Wan Sheng Yuan Asset Management Company Limited (both companies are 100% beneficially owned by Ms. Du Juan, the spouse of Mr. Wong).

2. Ms. Du Juan is the spouse of Mr. Wong. The aforesaid Shares that Mr. Wong and Ms. Du Juan are deemed to be interested refer to the same parcel of Shares.

3. All these companies are 100% beneficially owned by Mr. Wong. The Shares held by these companies refer to the same parcel of Shares.

4. Shinning Crown Holdings Inc. is 100% beneficially owned by Mr. Wong.

– 43 –

GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, the Company has not been notified of any other person (other than the Directors and chief executives of the Company) who had an interest or short position in the Shares and/or underlying Shares which fell to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO.

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, there was no existing or proposed service contract between any of the Directors and any member of the Group other than service contracts that are expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation).

4. DIRECTORS’ INTERESTS IN COMPETING BUSINESSES

As at the Latest Practicable Date, no Director of the Company was interested in any business (other than those businesses where the Directors were appointed as directors to represent the interests of the Company and/or any member of the Group) which were considered to compete or were likely to compete, whether directly or indirectly, with the businesses of the Group.

On 31 March 2016, the Company completed the acquisition of Artway Development Limited (“ Artway ”, together with its subsidiaries, the “ Artway Group ”). The Artway Group was previously ultimately owned by Mr. Wong and operates an electrical appliances and consumer electronics products retail network under the trademark of “ GOME Electrical Appliances ”, and related operation, (formerly referred to as the “ Non-listed GOME Group ”), mainly in cities other than the designated cities of the PRC in which the Group already had operations. Upon completion of the acquisition, the operations of Non-listed GOME Group has been combined with the operations of the Group. Accordingly, the Board considers that there is no longer any competition between the Group and Mr. Wong and his associates in the retail business of electrical appliances and consumer electronics products under the “GOME” brand name.

Artway, GOME-on-line and Meixin Network Relationship

Upon completion of the acquisition of Artway, Mr. Wong and his associates remained interested in 40% of GOME-on-line (which is a 100% subsidiary of Meixin Network, which in turn is owned as to 40% by the Controlling Shareholder and his associates and 60% by the Group), a 60% non-wholly owned subsidiary of the Group. Since May 2012, the Group has operated GOME-on-line with no geographical restrictions.

– 44 –

GENERAL INFORMATION

APPENDIX

5. MATERIAL ADVERSE CHANGE

On 2 November 2018, the Company announced that the Group’s loss attributable to owners of the parent during the nine-month period ended 30 September 2018 is expected to fall within the range of between RMB400 million and RMB500 million, as compared to a net profit for the corresponding period last year. For further details, please refer to the announcements of the Company dated 2 November 2018 in relation to the profit warning and 28 November 2018 in relation to the unaudited results for the nine-month period ended 30 September 2018. Except as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2017, being the date to which the latest audited financial statements of the Company were made up.

6. LITIGATION

So far as the Company is aware, as at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and there is no litigation or claim of material importance known to the Directors pending or threatened by or against any member of the Group.

7. EXPERT’S QUALIFICATION AND CONSENT

As at the date of this circular, Platinum has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name in the form and context in which it appears. The following expert’s statements were issued on the date of this circular and were made for incorporation or reference (as the case may be) in this circular.

The following is the qualification of the expert who has given its opinion or advice which is contained in this circular:

Name

Qualification

Platinum

a licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

As at the Latest Practicable Date, Platinum did not have any direct or indirect interest in any asset which had been acquired, disposed of by, or leased to any member of the Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Group, since 31 December 2017, being the date to which the latest audited financial statements of the Group was made up; and was not beneficially interested in the share capital of any member of the Group and did not have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

– 45 –

GENERAL INFORMATION

APPENDIX

8. GENERAL

• (a) Except for Ms. Huang Xiu Hong’s interest in (1) 天津國美倉儲有限公司 (Tianjin GOME Warehousing Company Limited) which was acquired by the Group as disclosed in the announcement dated 3 April 2018; and (2) 國美控股集團廣州有限 公司 (GOME Holdings Group Guangzhou Co., Ltd.) which was proposed to be acquired by the Group as disclosed in the announcement of the Company dated 13 September 2018, none of the Directors had any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group or proposed to be so acquired, disposed of by or leased to any member of the Group since 31 December 2017, being the date to which the latest published audited accounts of the Company were made up, and up to the Latest Practicable Date.

• (b) Save as disclosed above, none of the Directors was materially interested in any contract or arrangement entered into by the Company or any of its subsidiaries which contract or arrangement is subsisting at the Latest Practicable Date and which is significant in relation to the business of the Group.

• (c) The company secretary of the Company is Mr. Szeto King Pui, Albert. Mr. Szeto is a Hong Kong solicitor.

• (d) The registered office of the Company is Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda.

• (e) The principal place of business of the Company in Hong Kong is Suite 2915, 29th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong.

• (f) The share registrar of the Company in Hong Kong is Tricor Abacus Limited.

• (g) The principal share registrars of the Company is MUFG Fund Services (Bermuda) Limited.

• (h) The English text of this circular shall prevail over their respective Chinese text for the purpose of interpretation.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the registered office of the Company during normal business hours from the date of this circular up to and including the date of the SGM:

• (a) the memorandum of association and bye-laws of the Company;

• (b) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 24 to 25 of this circular;

– 46 –

GENERAL INFORMATION

APPENDIX

• (c) the letter from Platinum to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 26 to 41 of this circular;

• (d) the written consent referred to in the paragraph headed “Expert’s Qualification and Consent” in this Appendix;

• (e) the 2019 Master Merchandise Purchase Agreement;

• (f) the 2019 Master Merchandise Supply Agreement; and

• (g) this circular.

– 47 –

NOTICE OF SGM

==> picture [177 x 56] intentionally omitted <==

GOME RETAIL HOLDINGS LIMITED 國美零售控股有限公司[*]

(incorporated in Bermuda with limited liability)

(Stock Code: 493)

NOTICE OF SGM AND CLOSURE OF SHAREHOLDERS’ REGISTER

NOTICE IS HEREBY GIVEN that a special general meeting of GOME Retail Holdings Limited (the “ Company ”) will be held at Gloucester Room I, 3/F, The Excelsior, 281 Gloucester Road, Causeway Bay, Hong Kong on Thursday, 10 January 2019, at 2:30 p.m. for the purpose of considering and, if thought fit, passing the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT

1. The Share Consolidation be and is hereby approved and any one director of the Company be and is hereby authorised to do all such acts or things and sign all documents deemed necessary by him/her for the purpose of giving effect to the Share Consolidation.

2. the 2019 Master Merchandise Purchase Agreement, a copy of which is produced at the meeting and marked “A” and initialed by the chairman of the meeting for the purpose of identification, and the transactions contemplated thereby (including the annual caps thereunder) be and is hereby approved and confirmed and any one director of the Company be and is hereby authorised to do all such acts or things and sign all documents deemed necessary by him/her for the purpose of giving effect to the 2019 Master Merchandise Purchase Agreement and the transactions contemplated thereunder.

* For identification purpose only

– 48 –

NOTICE OF SGM

1. the 2019 Master Merchandise Supply Agreement, a copy of which is produced at the meeting and marked “B” and initialed by the chairman of the meeting for the purpose of identification, and the transactions contemplated thereby (including the annual caps thereunder) be and is hereby approved and confirmed and any one director of the Company be and is hereby authorised to do all such acts or things and sign all documents deemed necessary by him/her for the purpose of giving effect to the 2019 Master Merchandise Supply Agreement and the transactions contemplated thereunder.”

CLOSURE OF SHAREHOLDERS’ REGISTER

For the purpose of determining the list of shareholders who are entitled to attend and vote at the SGM, the shareholders’ register of the Company will be closed from Tuesday, 8 January 2019 to Thursday, 10 January 2019 (both dates inclusive). No transfer of shares of the Company will be registered during these days. In order to qualify to attend and vote at the SGM, all instruments of transfer together with the relevant share certificate(s) must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Abacus Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on Monday, 7 January 2019.

By order of the Board GOME Retail Holdings Limited Zhang Da Zhong Chairman

Hong Kong, 21 December 2018

Registered office: Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Principal place of business in Hong Kong: Suite 2915, 29th Floor Two International Finance Centre 8 Finance Street, Central Hong Kong

– 49 –

NOTICE OF SGM

Notes:

• (1) Any member of the Company entitled to attend and vote at the SGM is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is holder of two or more shares of the Company may appoint more than one proxy to attend and vote instead of him/her. A proxy need not be a member of the Company.

• (2) A form of proxy for use at the SGM is enclosed herewith.

• (3) The form of proxy must be signed by you or your attorney duly authorised in writing or, in the case of a corporation, must be under its seal or the hand of an officer or attorney duly authorised.

• (4) The form of proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof must be lodged at the Company’s branch share registrar in Hong Kong, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not later than 48 hours before the time appointed for holding the SGM or any adjourned meeting (as the case may be) and in default the proxy shall not be treated as valid. Completion and return of the form of proxy shall not preclude members from attending and voting in person at the SGM or at any adjourned meeting (as the case may be) should they so wish.

• (5) Where there are joint registered holders of any share, any one of such persons may vote at any meeting, either in person or by proxy, in respect of such share as if he/she was solely entitled thereto; but if more than one of such joint holders be present at the meeting in person or by proxy, the vote of one of the said persons so present whose name stands first on the register of members in respect of such share shall be accepted to the exclusion of the votes of the other joint holders.

• (6) As at the date of this notice, the Board comprises Mr. Zou Xiao Chun as executive director, Mr. Zhang Da Zhong, Ms. Huang Xiu Hong and Mr. Yu Sing Wong as non-executive directors, and Mr. Lee Kong Wai, Conway, Ms. Liu Hong Yu and Mr. Wang Gao as independent non-executive directors.

• (7) Words and expressions that are not expressly defined in this notice shall bear the same meaning as that defined in the circular dated 21 December 2018 published by the Company.

– 50 –