China ITS (Holdings) Co., Ltd. — Proxy Solicitation & Information Statement 2012

Feb 13, 2012

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 a licensed securities dealer or other bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares of China ITS (Holdings) Co., Ltd. , you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this document, 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 document.

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China ITS (Holdings) Co., Ltd. 中国智能交通系統（控股）有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock code: 1900)

1.) GRANT OF SHARE OPTIONS;

2.) REFRESHMENT OF SHARE OPTION SCHEME LIMIT; AND 3.) NOTICE OF EXTRAORDINARY GENERAL MEETING

A notice convening the extraordinary general meeting of China ITS (Holdings) Co., Ltd. to be held at 3 p.m. on Wednesday, 29 February 2012 at 17th Floor, West Tower, World Financial Center, Beijing, PRC is set out on pages 17 to 18 of this circular. Whether or not you are able to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the Company’s branch share registrar in Hong Kong, Union Registrars Limited at 18th Floor, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong, as soon as possible but in any event not less than 48 hours before the time appointed for the holding of such meeting or any adjournment thereof.

Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjourned meeting should you so wish.

13 February 2012

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1–2
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3–16
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3–4
SHARE OPTION SCHEME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
GRANT OF SHARE OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4–13
IMPLICATIONS OF THE LISTING RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13–14
REFRESHMENT OF THE SHARE OPTION SCHEME LIMIT . . . . . . . . . . . . . . . . . . . . . . . .	14–15
EXTRAORDINARY GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15–16
RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
RESPONSIBILITY STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
NOTICE OF EXTRAORDINARY GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17–18

— i —

DEFINITIONS

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

“associate(s)”	has the meaning ascribed to it under the Listing Rules;
“Board”	the board of Directors of the Company;
“Company”	China ITS (Holdings) Co., Ltd., a company incorporated in
	Cayman Islands whose shares are listed on the Stock Exchange
	(Stock Code: 1900);
“connected person(s)”	has the meaning ascribed to it under the Listing Rules;
“Date of the Grant”	18 January 2012;
“Directors”	the directors of the Company;
“Group”	the Company and its subsidiaries;
“HoldCo”	China ITS Co., Ltd.;
“HoldCo Concert Parties”	Mr. Liao Daoxun, Ms. Wu Yurui, Mr. Jiang Hailin, Mr. Wang
	Jing, Mr. Liang Shiping, Ms. Wu Chunhong, Mr. Zhao Lisen,
	Mr. Yuan Chuang, Mr. Zhang Qian, Mr. Guan Xiong, Mr. Zheng
	Hui, Mr. Lv, Ms. Wang Li, Mr. Dang Kulun, Mr. Pan Jianguo,
	Mr. Jing Yang, HoldCo, Gouver Investments Limited, Rockyjing
	Investment Limited, Joy Bright Success Limited, Best Partners
	Development Limited, Huaxin Investments Limited, Mr. Lu,
	Speedy Fast Investments Limited, Pride Spirit Company Limited,
	Sea Best Investments Limited, Kang Yang Holdings Limited and
	Key Trade Holdings Limited;
“Hong Kong”	the Hong Kong Special Administrative Region of the People’s
	Republic of China;
“Latest Practicable Date”	9 February 2012, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information herein;
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange;
“EGM”	the extraordinary general meeting of the Company to be held on
	Wednesday, 29 February 2012 at 3:00 p.m. at 17th Floor, West
	Tower, World Financial Center, Beijing, PRC, the notice of which
	is set out on pages 17 to 18 of this circular;
“Mr. Liao”	Mr. Liao Jie, executive Director and chief executive off cer of the
	Company;

— 1 —

DEFINITIONS

“Mr. Lu”	Mr. Lu Xiao, executive Director and substantial shareholder of the
	Company;
“Mr. Lv”	Mr. Lv Xilin, executive Director and substantial shareholder of the
	Company;
“Share(s)”	the ordinary share(s) of nominal value of HK$0.0002 each in the
	issued share capital of the Company;
“Share Options”	Share Options under the Share Option Scheme;
“Share Option Scheme”	the share option scheme adopted by the Company on 18 June 2010;
“Share Option Scheme Limit”	the maximum number of Shares which may be issued upon the
	exercise of all Share Options granted or to be granted under the
	Share Option Scheme and any other share option scheme(s) as may
	from time to time be adopted by the Company as permitted under
	the Listing Rules, being 10% of the issued share capital of the
	Company at the date of passing the relevant resolution approving
	such limit;
“Shareholder(s)”	holder(s) of the Shares;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“substantial shareholder(s)”	has the meaning ascribed to it under the Listing Rules;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong; and
“%”	per cent.

— 2 —

LETTER FROM THE BOARD

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China ITS (Holdings) Co., Ltd. 中国智能交通系統（控股）有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock code: 1900)

Executive Directors:

Mr. Jiang Hailin Mr. Liao Jie Mr. Wang Jing Mr. Lu Xiao Mr. Pan Jianguo Mr. Lv Xilin

Registered Offi ce:

Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Independent Non-Executive Directors:

Mr. Zhou Chunsheng Mr. Choi Onward Mr. Sun Lu

Head Offi ce in the PRC:

Unit 1801A, 18th Floor West Tower World Financial Centre No. 1 East 3rd Ring Road Middle Chaoyang District Beijing 100020, China

Principal Place of Business in Hong Kong:

Unit 2209, 22nd Floor Wu Chung House 213 Queen’s Road East Wanchai, Hong Kong

13 February 2012

To the Shareholders

Dear Sirs or Madam,

1.) GRANT OF SHARE OPTIONS;

2.) REFRESHMENT OF SHARE OPTION SCHEME LIMIT; AND 3.) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

As set out in the Company’s announcement dated 18 January 2012, the Board resolved on 18 January 2012 to grant Share Options to 191 grantees which includes certain Directors, chief executive, substantial shareholders and employees of the Company to subscribe for an aggregate of 155,000,000 Shares.

— 3 —

LETTER FROM THE BOARD

The Share Options granted to Mr. Lu and Mr. Lv, each representing in the aggregate over 0.1% of the Shares in issue and having an aggregate value, based on the closing price of the securities on the Date of the Grant, in excess of HK$5 million in the 12-month period up to and including the Date of the Grant. The grant of Share Options to each of Mr. Lu and Mr. Lv are therefore conditional upon Shareholders’ approval being obtained at the EGM.

Further, the total number of Shares to be issued upon exercise of the Share Options granted to Mr. Liao would exceed 1% of the Shares in issue in the 12-month period up to and including the Date of the Grant. Accordingly, the grant of Share Options to Mr. Liao is conditional upon Shareholders’ approval being obtained at the EGM.

The Board also proposed to refresh the Share Option Scheme Limit for the purpose of future grant of share options to the eligible participants under the Share Option Scheme.

The purpose of this circular is to provide you with information relating to (i) the grant of Share Options to Mr. Lu, Mr. Lv and Mr. Liao; (ii) the refreshment of the Share Option Scheme Limit; and (iii) to give you a notice of the EGM at which resolutions of the above matters will be proposed for approval.

SHARE OPTION SCHEME

The Company conditionally adopted the Share Option Scheme on 18 June 2010. The purpose of the Share Option Scheme is to recognize and acknowledge the contributions that the eligible participants had or may have made to the Group. The Share Option Scheme will provide the eligible participants an opportunity to have a personal stake in the Company with the view to achieving the following objectives:

• (i) motivate the eligible participants to optimize their performance effi ciency for the benefi t of the Group; and

• (ii) attract and retain or otherwise maintain an ongoing business relationship with the eligible participants whose contributions are or will be benefi cial to the long-term growth of the Group.

GRANT OF SHARE OPTIONS

Details of the Share Options granted on 18 January 2012 to 191 grantees which comprise of certain Directors, chief executive, substantial shareholders and employees of the Company to subscribe for an aggregate of 155,000,000 Shares are as follows:

Date of the Grant: 18 January 2012 Exercise Price of the Share Options: HK$1.05, which is equal to or higher than (i) the closing price of HK$1.05 per Share as stated in the daily quotations sheet of the Stock Exchange on 18 January 2012, being the date of grant; (ii) the average closing price of HK$1.05 per Share as stated in the daily quotations sheets of the Stock Exchange for the fi ve business days immediately preceding the Date of Grant and (iii) the nominal value per Share.

— 4 —

LETTER FROM THE BOARD

Number of Share Options Granted:

155,000,000 Share Options are divided into the following tranches:

Tranche 1A — 8,192,713 Tranche 1B — 8,192,713 Tranche 1C — 8,192,713 Tranche 1D — 8,192,713 Tranche 2A — 12,911,500 Tranche 2B — 12,911,500 Tranche 2C — 12,911,500 Tranche 2D — 12,911,500 Tranche 3A — 17,630,287 Tranche 3B — 17,630,287 Tranche 3C — 17,630,287 Tranche 3D — 17,692,287

(each Share Option shall entitle the holder of the Share Option to subscribe for one Share) Closing Price of the Shares on HK$1.05 the Date of Grant: Validity Period of the Share Options: (i) the date on which the Share Option lapses when the Company cancel any outstanding Share Options in whole or in part in the event that the grantee sells, transfers, charges, mortgages, encumbers or creates any interest (legal or benefi cial) in favor of any third party in relation to any Share Option or (ii) the date falling ten (10) years from the date of acceptance by the grantee. Vesting Date: The Share Options granted shall be vested in different tranches. The vesting dates of the respective tranches are as follows: Tranche 1A — 19 April 2012 Tranche 1B — 19 July 2012 Tranche 1C — 19 October 2012 Tranche 1D — 19 January 2013 Tranche 2A — 19 April 2013 Tranche 2B — 19 July 2013 Tranche 2C — 19 October 2013 Tranche 2D — 19 January 2014 Tranche 3A — 19 April 2014 Tranche 3B — 19 July 2014 Tranche 3C — 19 October 2014 Tranche 3D — 19 January 2015

— 5 —

LETTER FROM THE BOARD

• Consideration on Acceptance of the Share Options:

• HK$1.00 to be paid by the grantee to the Company no later than 28 days from the date of grant. The amount paid for the grant of the Share Options is not refundable and shall not in any circumstances be, or be deemed to be, a partial payment of the Exercise Price.

Vesting Conditions:

Where the grantee remains in employment with the Company and/or its subsidiaries, the grantee shall be in continuous compliance with all rules, regulations, legal and contractual obligations regarding the grantee’s employment with the Company and/or its subsidiaries, including, but not limited to, its staff handbook and the grantee’s employment contract with the Company and its subsidiaries.

Termination of Employment*:

Pursuant to the terms of the offer letter, in the event that the grantee ceases to be an eligible participant for any reason other than due to death, ill-health, disability (Note 1) and/ or any of the following reasons: (i) the grantee is guilty of serious misconduct; (ii) the grantee has been convicted of any criminal offense involving violations of integrity or honesty as an employee of the Company; (iii) the grantee has become insolvent, bankrupt or have made arrangements or compositions with the grantee’s creditors generally; or (iv) any other ground as determined by the Board that would warrant termination of the grantee’s employment at common law or pursuant to any applicable laws or under the grantee’s service contract with the Company (collectively, (i) to (iv) shall constitute terminations for “ Cause ”), the grantee may exercise any vested portion of the Share Option (to the extent not already exercised) within three (3) months following the date the grantee cease to be an eligible participant.

Upon ceasing to be an eligible participant and upon entering into a noncompetition agreement in a form provided by the Company, the grantee shall be entitled to any already vested portion of the Share Option, subject to the following terms:

• In the event that the grantee ceases to be an eligible participant by reason of death, ill-health or disability (as determined by the Board), and none of the events which would be grounds to constitute a Cause, the grantee may exercise the Share Options in full within 12 months (or such longer period as the Board may determine) following the date the grantee ceases to be an eligible participant.

— 6 —

LETTER FROM THE BOARD

• In the event that the grantee ceases to be an eligible participant due to a Cause, the Share Options shall automatically lapse and not be exercisable (to the extent not already exercised).

• Subject to the terms of the offer letter and the terms of the Share Option Scheme, the Share Options shall be exercised in whole or in part (other than where it is exercised to the full extent outstanding) and in integral multiples of such number of Shares as shall represent one board lot for dealing in Shares on the Stock Exchange for the time being, by grantee upon delivering the following documents to the Company:

• (a) A written notice stating that the Option is thereby exercised and the number of Shares in respect of which it is exercised; and

• (b) Remittance for the full amount of the exercise price for the Shares in respect of which such notice is given.

• Within 21 days after receipt of such notice and remittance in full and (where appropriate) receipt of the certifi cate of the auditors or the approved independent fi nancial adviser as the case may be pursuant to the Share Option Scheme, the Company will allot and issue the relevant number of Shares to the grantee credited as fully paid and issue to the grantee certifi cates in respect of the Shares so allotted.

• Notwithstanding anything to the contrary in the offer letter, if the issue of Shares following the exercise of the Share Options by a grantee who is deemed a connected person relating to any of the Shares held by such Grantee would result in the Company not meeting the Public Float Requirement (as defi ned below) immediately after the exercise of such Share Options, then the number of Shares to be issued pursuant to such exercise of the Share Options shall be reduced to the maximum number of Shares issuable by the Company which would not in the reasonable opinion of the Company result in a breach of the Public Float Requirement and the balance of the Shares attached to the exercise shall be suspended until such time when the Company is able to issue additional Shares in satisfaction of the exercise of the relevant balance of the Share Options and at the same time comply with the Public Float Requirement.

— 7 —

LETTER FROM THE BOARD

• In the event that the above-mentioned shall affect the exercise of the Share Options by a grantee who is or is deemed a connected person, the Company shall use reasonable endeavors to procure that there will be a suffi cient number of Shares in public hands for the purposes of the Listing Rules so that all issue of new Shares suspended from the exercise of such Share Option may be issued to the fullest extent as soon as practicable without causing the Company to breach the Public Float Requirement.

• The term “Public Float Requirement” means the requirement under the Listing Rules applicable to the Company that not less than a specifi ed percentage of the Shares which are listed on the Stock Exchange shall be held by the public for the purpose of the Listing Rules.

• Note 1: Reference is made to page VI-22 of the IPO prospectus of the Company. For the avoidance of doubt, in the event that the grantee ceases to be an eligible participant by reason of death, ill-health or disability (as determined by the Board), and none of the events which would be grounds to constitute Cause, the grantee may exercise the Share Options in full within 12 months (or such longer period as the Board may determine) following the date the grantee ceases to be an eligible participant.

Voting Rights:

Until the share certifi cate evidencing Shares is issued to the grantee, the grantee shall have no right to vote or receive dividends or any other rights as a shareholder, notwithstanding the exercise of the Option.

For the grant to the Directors, substantial shareholders and senior management, upon exercising the Share Options granted, in whole or in part, any voting rights arising from any exercised portion of the Option held by the grantee shall be assigned to HoldCo until such time as the grantee disposes of such Shares.

Transfer of the Share Options:

The Share Options shall not be transferable or assignable. In the event the grantee sells, transfers, charges, mortgages, encumbers or creates any interest (legal or benefi cial) in favor of any third party in relation to any Share Options, the Company shall be entitled to cancel any outstanding Share Options in whole or in part.

— 8 —

LETTER FROM THE BOARD

Restriction of the Sale of the Shares and Target Price:

There is no performance target that must be achieved before the Share Options can be exercised. The grantee shall not sell, hypothecate, encumber or otherwise transfer any Shares or any right in such Shares until such time that the fair market value of a Share corresponding to each of Tranches 1A through 3D exceeds the Target Price for each respective Tranche which are as follows:

Tranche 1A — HK$2.50 Tranche 1B — HK$2.50 Tranche 1C — HK$2.50 Tranche 1D — HK$2.50 Tranche 2A — HK$3.00 Tranche 2B — HK$3.00 Tranche 2C — HK$3.00 Tranche 2D — HK$3.00 Tranche 3A — HK$3.50 Tranche 3B — HK$3.50 Tranche 3C — HK$3.50 Tranche 3D — HK$3.50

*Note:

The Board would like to clarify that the paragraph set out on page VI-22 of the IPO prospectus of the Company under clause 1(l)(i) has an inadvertent typographical error in respect of the duration of the period whereby the period should be “ within three months (or such longer period as the Board may determine) ” instead of one month.

The Board is of the view that the correction set out herein is not material and does not alter the disclosure in the IPO prospectus.

— 9 —

LETTER FROM THE BOARD

Details of the grant of Share Options to Directors, chief executive and substantial shareholders are as follows:

								The sum of (a)
								the number of
								Shares to be
								transferred from
								China ITS
								Co., Ltd.,
								a controlling
								shareholder of
								the Company,
								upon the exercise
		Number of Shares	Outstanding					of the share
		transferred from	number of Shares					options granted
		China ITS	to be transferred					under the Pre-IPO
		Co., Ltd.,	from China ITS					Share Incentive
		a controlling	Co., Ltd.,					Scheme and (b)
		shareholder of	a controlling	Details of the Share Options granted under the Share Option Scheme				the Number of
		the Company,	shareholder of				Number of Shares	Shares to be
		upon the exercise	the Company,				to be issued	issued upon
		of the share	upon the exercise				upon the exercise	the exercise of
		options granted	of the share options				of the Share	the Share Options
	Relationship	under the Pre-IPO	granted under				Options granted	granted under
	with the	Share Incentive	the Pre-IPO Share				under the Share	the Share
Name of Grantee	Company	Scheme*	Incentive Scheme	Tranche	Vesting Start Date	Exercise Price (HK$)	Option Scheme	Option Scheme
Mr. Jiang Hailin	Executive Director,	—	—	1A	19 April 2012	1.05	77,203	1,855,848
(“Mr. Jiang”)	Chairman,			1B	19 July 2012	1.05	77,203
	Substantial Shareholder			1C	19 October 2012	1.05	77,203
				1D	19 January 2013	1.05	77,203
				2A	19 April 2013	1.05	154,592
				2B	19 July 2013	1.05	154,592
				2C	19 October 2013	1.05	154,592
				2D	19 January 2014	1.05	154,592
				3A	19 April 2014	1.05	231,981
				3B	19 July 2014	1.05	231,981
				3C	19 October 2014	1.05	231,981
				3D	19 January 2015	1.05	232,725
Total:							1,855,848
Mr. Pan Jianguo	Executive Director,	—	—	1A	19 April 2012	1.05	173,707	4,175,659
(“Mr. Pan”)	Substantial Shareholder			1B	19 July 2012	1.05	173,707
				1C	19 October 2012	1.05	173,707
				1D	19 January 2013	1.05	173,707
				2A	19 April 2013	1.05	347,832
				2B	19 July 2013	1.05	347,832
				2C	19 October 2013	1.05	347,832
				2D	19 January 2014	1.05	347,832
				3A	19 April 2014	1.05	521,957
				3B	19 July 2014	1.05	521,957
				3C	19 October 2014	1.05	521,957
				3D	19 January 2015	1.05	523,632
Total:							4,175,659
Mr. Wang Jing	Executive Director,	4,000,000	7,350,000	1A	19 April 2012	1.05	77,203	9,205,848
(“Mr. Wang”)	Substantial Shareholder			1B	19 July 2012	1.05	77,203
				1C	19 October 2012	1.05	77,203
				1D	19 January 2013	1.05	77,203
				2A	19 April 2013	1.05	154,592
				2B	19 July 2013	1.05	154,592
				2C	19 October 2013	1.05	154,592
				2D	19 January 2014	1.05	154,592
				3A	19 April 2014	1.05	231,981
				3B	19 July 2014	1.05	231,981
				3C	19 October 2014	1.05	231,981
				3D	19 January 2015	1.05	232,725
Total:							1,855,848

— 10 —

LETTER FROM THE BOARD

								The sum of (a)
								the number of
								Shares to be
								transferred from
								China ITS
								Co., Ltd.,
								a controlling
								shareholder of
								the Company,
								upon the exercise
		Number of Shares	Outstanding					of the share
		transferred from	number of Shares					options granted
		China ITS	to be transferred					under the Pre-IPO
		Co., Ltd.,	from China ITS					Share Incentive
		a controlling	Co., Ltd.,					Scheme and (b)
		shareholder of	a controlling	Details of the Share Options granted under the Share Option Scheme				the Number of
		the Company,	shareholder of				Number of Shares	Shares to be
		upon the exercise	the Company,				to be issued	issued upon
		of the share	upon the exercise				upon the exercise	the exercise of
		options granted	of the share options				of the Share	the Share Options
	Relationship	under the Pre-IPO	granted under				Options granted	granted under
	with the	Share Incentive	the Pre-IPO Share				under the Share	the Share
Name of Grantee	Company	Scheme*	Incentive Scheme	Tranche	Vesting Start Date	Exercise Price (HK$)	Option Scheme	Option Scheme
Mr. Liao Jie	Executive Director,	—	—	1A	19 April 2012	1.05	1,694,612	40,735,874
(“Mr. Liao”)	Chief Executive Off cer			1B	19 July 2012	1.05	1,694,612
				1C	19 October 2012	1.05	1,694,612
				1D	19 January 2013	1.05	1,694,612
				2A	19 April 2013	1.05	3,393,298
				2B	19 July 2013	1.05	3,393,298
				2C	19 October 2013	1.05	3,393,298
				2D	19 January 2014	1.05	3,393,298
				3A	19 April 2014	1.05	5,091,984
				3B	19 July 2014	1.05	5,091,984
				3C	19 October 2014	1.05	5,091,984
				3D	19 January 2015	1.05	5,108,282
Total:							40,735,874
Mr. Lu Xiao (“Mr. Lu”)	Executive Director,	—	4,662,105	1A	19 April 2012	1.05	289,512	11,621,537
	Substantial Shareholder			1B	19 July 2012	1.05	289,512
				1C	19 October 2012	1.05	289,512
				1D	19 January 2013	1.05	289,512
				2A	19 April 2013	1.05	579,721
				2B	19 July 2013	1.05	579,721
				2C	19 October 2013	1.05	579,721
				2D	19 January 2014	1.05	579,721
				3A	19 April 2014	1.05	869,929
				3B	19 July 2014	1.05	869,929
				3C	19 October 2014	1.05	869,929
				3D	19 January 2015	1.05	872,713
Total:							6,959,432
Mr. Lv Xilin (“Mr. Lv”)	Executive Director,	—	1,773,000	1A	19 April 2012	1.05	266,351	8,175,677
	Substantial Shareholder			1B	19 July 2012	1.05	266,351
				1C	19 October 2012	1.05	266,351
				1D	19 January 2013	1.05	266,351
				2A	19 April 2013	1.05	533,343
				2B	19 July 2013	1.05	533,343
				2C	19 October 2013	1.05	533,343
				2D	19 January 2014	1.05	533,343
				3A	19 April 2014	1.05	800,335
				3B	19 July 2014	1.05	800,335
				3C	19 October 2014	1.05	800,335
				3D	19 January 2015	1.05	802,896
Total:							6,402,677

— 11 —

LETTER FROM THE BOARD

									The sum of (a)
									the number of
									Shares to be
									transferred from
									China ITS
									Co., Ltd.,
									a controlling
									shareholder of
									the Company,
									upon the exercise
		Number of Shares		Outstanding					of the share
		transferred from	number of Shares						options granted
		China ITS	to	be transferred					under the Pre-IPO
		Co., Ltd.,	from China ITS						Share Incentive
		a controlling		Co., Ltd.,					Scheme and (b)
		shareholder of		a controlling	Details of the Share Options granted under the Share Option Scheme				the Number of
		the Company,		shareholder of				Number of Shares	Shares to be
		upon the exercise		the Company,				to be issued	issued upon
		of the share	upon the exercise					upon the exercise	the exercise of
		options granted	of the share options					of the Share	the Share Options
	Relationship	under the Pre-IPO		granted under				Options granted	granted under
	with the	Share Incentive	the	Pre-IPO Share				under the Share	the Share
Name of Grantee	Company	Scheme*	Incentive Scheme		Tranche	Vesting Start Date	Exercise Price (HK$)	Option Scheme	Option Scheme
Mr. Jing Yang	Controlling Shareholder	—		—	1A	19 April 2012	1.05	38,602	927,924
(“Mr. Jing”)					1B	19 July 2012	1.05	38,602
					1C	19 October 2012	1.05	38,602
					1D	19 January 2013	1.05	38,602
					2A	19 April 2013	1.05	77,296
					2B	19 July 2013	1.05	77,296
					2C	19 October 2013	1.05	77,296
					2D	19 January 2014	1.05	77,296
					3A	19 April 2014	1.05	115,991
					3B	19 July 2014	1.05	115,991
					3C	19 October 2014	1.05	115,991
					3D	19 January 2015	1.05	116,359
Total:								927,924
Mr. Choi Onward	Independent	—		—	1A	19 April 2012	1.05	8,232	98,824
(“Mr. Choi”)	Non-Executive Director				1B	19 July 2012	1.05	8,232
					1C	19 October 2012	1.05	8,232
					1D	19 January 2013	1.05	8,232
					2A	19 April 2013	1.05	8,232
					2B	19 July 2013	1.05	8,232
					2C	19 October 2013	1.05	8,232
					2D	19 January 2014	1.05	8,232
					3A	19 April 2014	1.05	8,232
					3B	19 July 2014	1.05	8,232
					3C	19 October 2014	1.05	8,232
					3D	19 January 2015	1.05	8,272
Total:								98,824
Mr. Zhou Chunsheng	Independent	—		—	1A	19 April 2012	1.05	8,232	98,824
(“Mr. Zhou”)	Non-Executive Director				1B	19 July 2012	1.05	8,232
					1C	19 October 2012	1.05	8,232
					1D	19 January 2013	1.05	8,232
					2A	19 April 2013	1.05	8,232
					2B	19 July 2013	1.05	8,232
					2C	19 October 2013	1.05	8,232
					2D	19 January 2014	1.05	8,232
					3A	19 April 2014	1.05	8,232
					3B	19 July 2014	1.05	8,232
					3C	19 October 2014	1.05	8,232
					3D	19 January 2015	1.05	8,272
Total:								98,824

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LETTER FROM THE BOARD

								The sum of (a)
								the number of
								Shares to be
								transferred from
								China ITS
								Co., Ltd.,
								a controlling
								shareholder of
								the Company,
								upon the exercise
		Number of Shares	Outstanding					of the share
		transferred from	number of Shares					options granted
		China ITS	to be transferred					under the Pre-IPO
		Co., Ltd.,	from China ITS					Share Incentive
		a controlling	Co., Ltd.,					Scheme and (b)
		shareholder of	a controlling	Details of the Share Options granted under the Share Option Scheme				the Number of
		the Company,	shareholder of				Number of Shares	Shares to be
		upon the exercise	the Company,				to be issued	issued upon
		of the share	upon the exercise				upon the exercise	the exercise of
		options granted	of the share options				of the Share	the Share Options
	Relationship	under the Pre-IPO	granted under				Options granted	granted under
	with the	Share Incentive	the Pre-IPO Share				under the Share	the Share
Name of Grantee	Company	Scheme*	Incentive Scheme	Tranche	Vesting Start Date	Exercise Price (HK$)	Option Scheme	Option Scheme
Mr. Sun Lu (“Mr. Sun”)	Independent	—	—	1A	19 April 2012	1.05	8,232	98,824
	Non-Executive Director			1B	19 July 2012	1.05	8,232
				1C	19 October 2012	1.05	8,232
				1D	19 January 2013	1.05	8,232
				2A	19 April 2013	1.05	8,232
				2B	19 July 2013	1.05	8,232
				2C	19 October 2013	1.05	8,232
				2D	19 January 2014	1.05	8,232
				3A	19 April 2014	1.05	8,232
				3B	19 July 2014	1.05	8,232
				3C	19 October 2014	1.05	8,232
				3D	19 January 2015	1.05	8,272
Total:							98,824

• The pre-IPO share incentive scheme (“ Pre-IPO Share Incentive Scheme ”) was adopted by HoldCo on 28 December 2008. Upon exercise of the options under the Pre-IPO Incentive Scheme, HoldCo will transfer the relevant number of Shares to the grantee of the options. There is therefore no dilutive effect on the shareholders of the Company resulting from the exercise of the options under the Pre-IPO Share Incentive Scheme.

IMPLICATIONS OF THE LISTING RULES

Approval from the Independent Non-Executive Directors

Pursuant to Rule 17.04(1) of the Listing Rules and the provisions of the Share Option Scheme, the grant of the Share Options by the Company to any Director, chief executive, or substantial shareholder of the Company or any of their respective associates must be approved by the independent non-executive Directors (excluding the independent non-executive Director who is the grantee of the Share Options concerned).

On the Date of the Grant, the grant of the Share Options to each of Mr. Jiang, Mr. Pan, Mr. Wang, Mr. Liao, Mr. Lu, Mr. Lv, Mr. Jing, Mr. Choi, Mr. Zhou and Mr. Sun has been approved by the independent non-executive Directors (with each of the independent non-executive Directors abstaining from voting in respect of the grant of Share Options to himself).

— 13 —

LETTER FROM THE BOARD

Approval from the Shareholders

On the Date of the Grant, there are 1,612,817,760 Shares in issue. The total number of Shares to be issued upon exercise of the Share Options granted to each of Mr. Lu and Mr. Lv will represent in aggregate over 0.1% of the Shares in issue, and will have an aggregate value, based on the closing price of the Shares on the Date of the Grant, in excess of HK$5 million in the 12-month period up to and including the Date of the Grant. Therefore, pursuant to Rule 17.04(1) of the Listing Rules, the grant of Share Options to Mr. Lu and Mr. Lv are conditional upon the approval of the Shareholders at the EGM at which all connected persons shall abstain from voting.

Further, pursuant to Rule 17.03(4) of the Listing Rules, unless approved by shareholders, the total number of securities issued and to be issued upon exercise of the options granted to each participant (including both exercised and outstanding options) in any 12-month period must not exceed 1% of the relevant class of securities of the listed issuer (or the subsidiary) in issue.

The total number of Shares to be issued upon exercise of the Share Options granted to Mr. Liao would exceed 1% of the Shares in issue in the 12-month period up to and including the Date of the Grant. Therefore, pursuant to Rule 17.03(4) of the Listing Rules, the grant of Share Options to Mr. Liao is conditional upon the approval of the Shareholders at the EGM. Mr. Liao and his associates shall abstain from voting in respect of the resolution approving the grant of the Share Options to him. As at the Latest Practicable Date, Mr. Liao and his associates did not hold any Shares.

The Board believed that it is in the best interests of the Company and the Shareholders as a whole to make the grant of Share Options to Mr. Lu, Mr. Lv and Mr. Liao to provide incentives to them and to motivate them to promote long-term growth of the Company and its subsidiaries.

REFRESHMENT OF THE SHARE OPTION SCHEME LIMIT

Further to the abovementioned grant, the Board also proposed to refresh the Share Option Scheme Limit for the purpose of future grants of share options to the eligible participants under the Share Option Scheme.

The existing Share Option Scheme Limit obtained on 18 June 2010 (i.e. the date of adoption of the Share Option Scheme) is 155,029,633 Shares, being 10% of the issued share capital of the Company at the date of passing the relevant resolution approving such limit. Prior to the grant of the Share Options on 18 January 2012, the Company had not granted any Share Options. Following the grant of Share Options on 18 January 2012, the remaining mandate not utilized under the existing Share Option Scheme Limit is 29,633 Shares.

As at the Latest Practicable Date, the Board did not have any immediate plan for granting any Share Options under the proposed Share Option Scheme Limit. The Board, however, believed that it is in the best interests of the Company and the Shareholders as a whole to refresh the Share Option Scheme Limit immediately following the approval of the abovementioned grant to allow further share options to be granted under the Share Option Scheme in the future so as to provide additional incentives and to recognize the contribution of eligible participants under the Share Option Scheme.

— 14 —

LETTER FROM THE BOARD

The EGM will be convened to consider and approve the Share Options grant to each of Mr. Lu, Mr. Lv and Mr. Liao. The Board also proposed to refresh the Share Option Scheme Limit at the EGM so that the Company may grant additional share options up to 10% of the total number of Shares in issue at the date of the EGM. Based on the total number of Shares in issue at the Latest Practicable Date and assuming the number of the Shares in issue remains unchanged at the date of the EGM, the new Share Option Scheme Limit, if refreshed, will be 161,281,776 Shares.

The total sum of the number of Shares to be transferred from HoldCo, upon the exercise of the outstanding share options granted under the Pre-IPO Share Incentive Scheme and the number of Shares to be issued upon the exercise of the Share Options granted under the Share Option Scheme is 252,506,480, representing approximately 15.6562% of the issued share capital of the Company as at the Latest Practicable Date.

The refreshment of the Share Option Scheme Limit is conditional upon:

• (a) the Shareholders passing an ordinary resolution to approve the refreshment of the Share Option Scheme Limit at the EGM; and

• (b) the Listing Committee of the Stock Exchange granting the approval for the listing of, and permission to deal in, the Shares to be issued pursuant to the exercise of any options granted under the refreshed limit which shall not exceed 10% of the issued share capital of the Company at the date of approval of such refreshment.

Application will be made to the Listing Committee of the Stock Exchange for the grant of the listing of, and permission to deal in, the Shares (representing a maximum of 10% of the Shares in issue at the date of the EGM) that may fall to be issued upon the exercise of any options that may be granted under the Share Option Scheme and any other share option scheme(s) of the Company.

EXTRAORDINARY GENERAL MEETING

A notice convening the EGM to be held on Wednesday, 29 February 2012 at 3 p.m. at 17th Floor, West Tower, World Financial Center, Beijing, PRC is set out on pages 17 to 18 of this circular. At the EGM, ordinary resolutions will be proposed to approve the grant of Share Options to Mr. Lu, Mr. Lv and Mr. Liao and the refreshment of Share Option Scheme Limit.

A proxy form for use at the EGM is enclosed. Whether or not you are able to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Union Registrars Limited at 18th Floor, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong as soon as possible and, in any event, not less than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM and any adjourned meeting (as the case may be) should you so wish.

In accordance with Rule 13.39(4) of the Listing Rules, the chairman of the EGM will demand a poll for all the resolutions to be proposed at the EGM. The results of the voting will be announced after the EGM.

— 15 —

LETTER FROM THE BOARD

As at the Latest Practicable Date, HoldCo Concert Parties were interested in an aggregate of 886,981,551 Shares, representing approximately 54.9958% of the entire issued share capital of the Company. HoldCo Concert Parties will abstain from voting at the EGM on the resolution to approve the grant of Share Options to Mr. Lu and Mr. Lv. No Shareholder is required to abstain from the voting on the resolution approving the refreshment of the Share Option Scheme Limit.

RECOMMENDATION

The Board (including the independent non-executive Directors) believes that it is in the best interests of the Company and the Shareholders as a whole to make the grant of Share Options to Mr. Lu, Mr. Lv and Mr. Liao to provide incentives to them and to motivate them to promote long-term growth of the Company and its subsidiaries.

The Board considers that the proposed resolutions in respect of (i) the grant of Share Options to Mr. Lu, Mr. Lv and Mr. Liao; and (ii) the refreshment of the Share Option Scheme Limit are in the best interests of the Company and the Shareholders, and accordingly recommend you to vote in favour of such resolutions at the EGM.

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, confi rm 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.

By Order of the Board China ITS (Holdings) Co., Ltd. Jiang Hailin Chairman

— 16 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

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==> picture [61 x 51] intentionally omitted <==

China ITS (Holdings) Co., Ltd. 中国智能交通系統（控股）有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1900)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of China ITS (Holdings) Co., Ltd. (the “ Company ”) will be held on Wednesday, 29 February 2012 at 3 p.m. at 17th Floor, West Tower, World Financial Center, Beijing, PRC for the purpose of considering and, if thought fi t, passing with or without amendments, the following resolutions of the Company:

AS ORDINARY RESOLUTIONS

• (1) “THAT the grant of an option to Mr. Lu Xiao to subscribe for 6,959,432 shares of the Company under the share option scheme adopted by the Company on 18 June 2010 on the terms set out in the circular issued by the Company on 13 February 2012 be and is hereby approved, ratifi ed and confi rmed and that the directors of the Company be authorized to take all such steps as may be necessary or desirable to give effect to the grant.”

• (2) “THAT the grant of an option to Mr. Lv Xilin to subscribe for 6,402,677 shares of the Company under the share option scheme adopted by the Company on 18 June 2010 on the terms set out in the circular issued by the Company on 13 February 2012 be and is hereby approved, ratifi ed and confi rmed and that the directors of the Company be authorized to take all such steps as may be necessary or desirable to give effect to the grant.”

• (3) “THAT the grant of an option to Mr. Liao Jie to subscribe for 40,735,874 shares of the Company under the share option scheme adopted by the Company on 18 June 2010 on the terms set out in the circular issued by the Company on 13 February 2012 be and is hereby approved, ratifi ed and confi rmed and that the directors of the Company be authorized to take all such steps as may be necessary or desirable to give effect to the grant.”

• (4) “THAT subject to and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, the shares with a nominal value of HK$0.0002 each in the capital of the Company to be issued pursuant to the exercise of options which may be granted under the share option scheme adopted by the Company on 18 June 2010 (the “ Share Option Scheme ”) and any other share option scheme(s) as may from time to time be adopted by the Company:

• a) approval be granted for the refreshment of the general limit in respect of the grant of options to subscribe for shares of the Company under the Share Option Scheme and any other share option scheme(s) of the Company provided that (i) the total number of shares in respect of which options may be granted under the Share Option Scheme and any other share option scheme(s) of the Company shall not exceed 10% of the total number of shares of the Company in issue at the date of passing this resolution; and (ii) options previously granted under the Share Option Scheme (including those outstanding, cancelled, lapsed

— 17 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

in accordance with the terms of the Share Option Scheme or exercised options and those options referred to in resolutions (1) to (3) as set out in the notice convening this meeting provided that such resolutions have been passed) will not be counted for the purpose of calculating the 10% refreshed limit; and

• b) the directors of the Company be authorised to offer or grant options pursuant to the Share Option Scheme and any other share option scheme(s) of the Company within the 10% refreshed limit and to exercise all powers of the Company to allot and issue shares upon the exercise of such options.”

By Order of the Board China ITS (Holdings) Co., Ltd. Jiang Hailin Chairman

Beijing, 13 February 2012

Notes:

1. Any member entitled to attend and vote at the above meeting is entitled to appoint one or more proxies to attend and, on a poll, vote in his stead. A proxy need not be a member of the Company.

2. To be valid, a form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a certifi ed copy thereof, must be lodged with the Company’s branch share registrar in Hong Kong, Union Registrars Limited at 18th Floor, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong not less than 48 hours before the time fi xed for holding the meeting.

3. All connected persons and HoldCo Concert Parties will abstain from voting at the EGM in respect of resolution no. (1) and (2).

4. Mr. Liao and his associates will abstain from voting at the EGM in respect of resolution no. (3).

5. The ordinary resolution as set out above will be determined by vote of poll.

As at the date of this notice, our Executive Directors are Mr. Jiang Hailin, Mr. Liao Jie, Mr. Wang Jing, Mr Lu Xiao, Mr. Pan Jianguo and Mr. Lv Xilin, and our Independent non-Executive Directors are Mr. Zhou Chunsheng, Mr. Choi Onward and Mr. Sun Lu.

— 18 —