China ITS (Holdings) Co., Ltd. - Proxy Solicitation & Information Statement 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisers.

If you have sold or transferred all your shares in China ITS (Holdings) Co., Ltd. (the ‘‘Company’’), you should at once hand this circular to the purchaser(s) or transferee(s) or to the stockbroker, registered dealer in securities or other agent through whom the sale was effected for transmission to the purchaser(s) or the transferee(s).

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.

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China ITS (Holdings) Co., Ltd. 中国智能交通系统（控股）有限公司 (incorporated in the Cayman Islands with limited liability)

(Stock code: 1900)

MAJOR TRANSACTION IN RELATION TO THE ISSUE OF PREFERRED SHARES BY BESTVILLA INVESTMENTS LIMITED AND POTENTIAL CONTINUING CONNECTED TRANSACTION IN RELATION TO THE TECHNOLOGY LICENSE AGREEMENT

A letter from the Board is set out on pages 6 to 22 of this circular.

18 January 2013

		Page
Definition	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Appendix I	— Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Appendix II — General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		27

– i –

DEFINITION

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

‘‘Announcements’’
the announcement and the supplemental announcements of the Company dated 11 December 2012, 12 December 2012, 4 January 2013 and 14 January 2013, respectively relating to the Share Subscription Agreement and the Investment
‘‘Aproud Technology’’
北京亞邦偉業技術有限公司 (Beijing Aproud Technology Co., Ltd.*), a company incorporated in the PRC with limited liability and is owned as to 20% by Jiangsu Zhongzhi Transportation and as to 80% by Fairstar
‘‘Beijing Aproud Information’’ 北京亞邦偉業信息工程有限公司 ( B e i j i n g A p r o u d Information Engineering Co., Ltd.*), a company incorporated in the PRC with limited liability and is wholly-owned by Aproud Technology
‘‘Beijing Bailian’’ 北京百聯智達科技發展有限公司 (Beijing Bailian Zhida Technology Development Co., Ltd.*), a company incorporated in the PRC with limited liability and was owned as to 90% by RHY Technology and 10% by Haotian Jiajie as at 30 June 2012
‘‘Beijing Huading’’ 北京華鼎恒業技術有限公司 (Beijing Huading Hengye Technology Co., Ltd.*), a company incorporated in the PRC with limited liability and is wholly-owned by RHY Technology
‘‘Beijing Jingwei’’ 北京經緯智通科技有限公司 (Beijing Jingwei Zhitong Technology Co., Ltd.*), a company incorporated in the PRC with limited liability and is owned as to 90.28% indirectly by China ITS Urban
‘‘Beijing STONE’’ 北京四通智能交通系統集成有限公司 (Beijing STONE Intelligent Transportation System Integration Co., Ltd.*), a company incorporated in the PRC with limited liability and is owned as to 72% by Beijing Jingwei and 10% by Beijing Bailian
‘‘Bestvilla’’
Bestvilla Investments Limited, a company incorporated in BVI with limited liability
‘‘Board’’
the board of Directors
‘‘Business Day’’
a day (other than a Saturday or Sunday) on which banks are generally open for normal business in Hong Kong

– 1 –

DEFINITION

‘‘BVI’’

the British Virgin Islands

‘‘China ITS Urban’’
China ITS Urban Traffic Holdings Co., Ltd., a company incorporated in the BVI with limited liability, a whollyowned subsidiary of the Company
‘‘China Toprise’’ China Toprise Limited, a company incorporated in the BVI with limited liability, a wholly-owned subsidiary of Bestvilla since 8 October 2012
‘‘CIC BVI’’ China ITS (Holdings) Co., Ltd. (BVI), a company incorporated in the BVI with limited liability, a whollyowned subsidiary of the Company
‘‘Closing’’ the completion of the Share Subscription Agreement in accordance with its terms
‘‘Company’’ China ITS (Holdings) Co., Ltd. (中国智能交通系统（控股）有限公司), a company incorporated in Cayman Islands with limited liability and whose issued shares are listed on the main board of the Stock Exchange
‘‘connected person(s)’’
has the meaning ascribed thereto under the Listing Rules
‘‘CSOP’’
CSOP Growth Fund, a company incorporated in Cayman Islands with limited liability
‘‘Director(s)’’ director(s) of the Company
‘‘Fairstar’’
Fairstar Success Holdings Limited, a company incorporated in the BVI with limited liability, a wholly-owned subsidiary of the Company
‘‘Group’’ the Company and its subsidiaries
‘‘Haotian Jiajie’’
北京昊天佳捷科技有限公司 (Beijing Haotian Jiajie Technology Co., Ltd.*), a company established under the laws of the PRC and is owned as to 85% by China Toprise and 15% by Jiangsu Zhongzhi Transportation
‘‘Hong Kong’’
the Hong Kong Special Administrative Region of the PRC
‘‘Independent Third Party(ies)’’
third party(ies) independent of the Company and connected persons (as defined under the Listing Rules) of the Company and are not connected persons (as defined under the Listing Rules) of the Company

– 2 –

DEFINITION

‘‘Investment’’
‘‘ITS’’
‘‘Jiangsu Yijie’’
‘‘Jiangsu Zhongzhi Jiaye’’
‘‘Jiangsu Zhongzhi Transportation’’
‘‘Latest Practicable Date’’
‘‘Listing Rules’’
‘‘Ordinary Shares’’
‘‘PRC’’
‘‘PRC Group’’
‘‘Preferred Shares’’
‘‘RHY Technology’’
the issue of the Preferred Shares, representing 49% equity interest in Bestvilla, to the Strategic Investor pursuant to the Share Subscription Agreement
Intelligent Transportation Systems, the application of interrelated systems of computers, electronics, and communication technologies and management strategies to improve the safety and efficiency of the transportation system
江蘇易捷科技有限公司 (Jiangsu Yijie Technology Co., Ltd.*), a company incorporated in the PRC with limited liability and was owned as to 100% by RHY Technology as at 30 June 2012
江蘇中智嘉業電子科技有限公司 (Jiangsu Zhongzhi Jiaye Electronic Technology Co., Ltd.*), a company incorporated in the PRC with limited liability and is owned as to 100% by RHY Technology as at the date of this circular
江蘇中智交通科技有限公司 ( J i a n g s u Z h o n g z h i Transportation Technology Co., Ltd.*), a company incorporated in the PRC with limited liability and is owned as to 100% by CIC BVI
14 January 2013, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
the Rules Governing the Listing of Securities on the Stock Exchange
ordinary shares of US$1.00 each of Bestvilla
the People’s Republic of China
RHY Technology, Wuhan Chenguang, Xinjiang RHY, Beijing Huading, Jiangsu Zhongzhi Jiaye, Xinan IT and Shandong Yigou
4,900 preferred shares of US$1.00 each to be issued by Bestvilla, representing the 49% of the entire issued share capital of Bestvilla as at Closing on an enlarged basis
北京瑞華贏科技發展有限公司 (Beijing RHY Technology Development Co., Ltd.*), a company incorporated in the PRC with limited liability and is owned as to 75% by China Toprise and 25% by Beijing Aproud Information

– 3 –

DEFINITION

‘‘SFO’’

‘‘Shandong Yigou’’
‘‘Share Subscription Agreement’’
‘‘Shareholders’’
‘‘Shares’’
‘‘Stock Exchange’’
‘‘Strategic Investor’’
‘‘Subscription Price’’
‘‘Technology’’
‘‘Technology License Agreement’’
‘‘Wuhan Chenguang’’

the Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong) as amended, supplemented or otherwise from time to time 山東易構軟件技術有限公司 (Shandong Yigou Software Technology Co., Ltd.*), a company incorporated in the PRC with limited liability and is owned as to 52.8% by RHY Technology

the share subscription agreement dated 11 December 2012 entered into between Bestvilla and the Strategic Investor and as amended by a supplemental agreement dated 14 January 2013 entered into by the parties in relation to the Strategic Investor’s subscription for the Preferred Shares to be issued by Bestvilla
the shareholders of the Company
ordinary share(s) of HK$0.0002 each in the issued share capital of the Company

The Stock Exchange of Hong Kong Limited

Beijing Global Holdings Limited, a company incorporated in BVI with limited liability
the aggregate consideration payable by the Strategic Investor for the subscription of the Preferred Shares, being RMB550 million
the technical data, know-how and technical documentation relating to the technology, systems and methods to be provided by the Strategic Investor as set forth in the Technology License Agreement
the technology license agreement to be entered into between Bestvilla and the Strategic Investor in relation to certain technologies that are valuable for the development of Bestvilla’s expressway sector business pursuant to the Share Subscription Agreement
武漢辰光交通科技發展有限公司 (Wuhan Chenguang Transportation Technology Development Co., Ltd.*), a company incorporated in the PRC with limited liability and is owned as to 51% by RHY Technology

– 4 –

DEFINITION

‘‘Xinan IT’’ 西南智能交通有限公司 (Xinan Intelligent Transportation Co., Ltd.*), a company incorporated in the PRC with limited liability and is owned as to 100% by RHY Technology
‘‘Xinjiang Delida’’ 新疆得利達信息技術有限公司 ( X i n j i a n g D e l i d a Information Technology Co., Ltd.*), a company incorporated in the PRC with limited liability and was owned as to 57% by RHY Technology as at 30 June 2012
‘‘Xinjiang RHY’’ 新疆瑞華贏機電工程有限公司 (Xinjiang RHY Engineering Co., Ltd.*), a company incorporated in the PRC with limited liability and is owned as to 80% by RHY Technology
‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong ‘‘RMB’’ Renminbi, the lawful currency of the PRC ‘‘US$’’ United States dollars, the lawful currency of the United States of America
‘‘%’’ percentage
denotes an English translation of a Chinese name and is for identification purposes only. If there is any inconsistency between the Chinese name and the English translation, the Chinese name shall prevail.

For ease of reference, the exchange rates between United States dollars, Renminbi and Hong Kong dollars provided in this circular are USD1.00 = HK$7.7526 and RMB1.00 = HK$1.2366 respectively. The provision of such exchange rates do not mean that Hong Kong dollars could be converted into United States dollars or Renminbi based on such exchange rates.

– 5 –

LETTER FROM THE BOARD

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

Executive Directors:

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

Independent Non-executive Directors: Mr. Zhou Chunsheng Mr. Choi Onward Mr. Sun Lu

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

Head Office in the PRC: Unit 1801A, 18/F 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, 22/F Wu Chung House 213 Queen’s Road East Wanchai, Hong Kong 18 January 2013

To the Shareholders,

Dear Sir or Madam,

MAJOR TRANSACTION IN RELATION TO THE ISSUE OF PREFERRED SHARES BY BESTVILLA INVESTMENTS LIMITED AND POTENTIAL CONTINUING CONNECTED TRANSACTION IN RELATION TO THE TECHNOLOGY LICENSE AGREEMENT

INTRODUCTION

Reference is made to the Announcements. On 11 December 2012, Bestvilla, a whollyowned subsidiary of the Company, and the Strategic Investor entered into the Share Subscription Agreement, pursuant to which, the Strategic Investor agreed to subscribe and Bestvilla agreed to issue and allot the Preferred Shares at the total Consideration of RMB550

– 6 –

LETTER FROM THE BOARD

million. On 14 January 2013, Bestvilla and the Strategic Investor entered into a supplemental agreement to supplement and amend certain terms and conditions of the Share Subscription Agreement.

Upon Closing, (a) the Strategic Investor will be interested in 49% of the issued share capital of Bestvilla as enlarged by the Preferred Shares; and (b) the Company’s interest in Bestvilla will be diluted to 51%, representing a decrease of 49%. Accordingly, the Investment constitutes a deemed disposal of 49% interest in the issued share capital of Bestvilla by the Company pursuant to Rule 14.29 of the Listing Rules.

As more than one of the applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules are more than 25% but less than 75%, the Investment constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and hence is subject to notification, publication and shareholders’ approval requirements under the Listing Rules.

At the Closing, the Strategic Investor shall execute and deliver the Technology License Agreement in favour of Bestvilla, pursuant to which the Strategic Investor will grant Bestvilla an exclusive and non-transferable license to use the Technology to strengthen the expressway sector business of Bestvilla.

After the Closing, the Strategic Investor will become a substantial shareholder in Bestvilla and hence a connected person of the Company. Accordingly, the transactions contemplated under the Technology License Agreement will constitute continuing connected transactions of the Company.

The purpose of this circular is to provide you with, among other things, (a) details of the Investment and the License (as defined below); (b) the financial information of the Group; and (c) other information required under the Listing Rules.

THE SHARE SUBSCRIPTION AGREEMENT

The principal terms of the Share Subscription Agreement (as amended) are as follows:

Date: 11 December 2012 (amended on 14 January 2013) Parties Bestvilla: Bestvilla, a company incorporated in the BVI with limited liability and a wholly-owned subsidiary of the Company Subscriber: the Strategic Investor

Subject Matter of the Share Subscription Agreement

Pursuant to the Share Subscription Agreement, Bestvilla has conditionally agreed to issue and allot and the Strategic Investor has conditionally agreed to subscribe for the Preferred Shares, representing 49% of the entire issued share capital of Bestvilla after the Closing.

– 7 –

LETTER FROM THE BOARD

Upon the Closing, Bestvilla will be owned as to 51% by the Company and 49% by the Strategic Investor and thus, the shareholding interest of the Company in Bestvilla will be diluted from 100% to 51%. Bestvilla will continue to be a subsidiary of the Company after the Closing and the financial information of Bestvilla and its subsidiaries will continue to be consolidated into the accounts of the Group.

Subscription Price

The Subscription Price for the Preferred Shares is RMB550 million in aggregate, which shall be satisfied in cash in RMB (or its equivalent in US$ or HK$) and shall be paid via wire transfer by the Strategic Investor to Bestvilla in three instalments in accordance with the following schedule:

(a) 20% of the Subscription Price, equivalent to RMB110 million (the ‘‘First Payment’’), shall be payable by the Strategic Investor on or before the later of the Closing Date and the 45th Business Day after the execution of the Share Subscription Agreement (the ‘‘First Payment Date’’); and
(b) 40% of the Subscription Price, equivalent to RMB220 million (the ‘‘Second Payment’’), shall be payable by the Strategic Investor on or before the 12th month after the First Payment Date (the ‘‘Second Payment Date’’); and
(c) the balance of 40% of the Subscription Price, equivalent to RMB220 million (the ‘‘Final Payment’’), shall be payable by the Strategic Investor on or before the 135th Business Day after the Second Payment Date.

The Subscription Price was determined as a result of arm’s length negotiation between the parties with reference to the unaudited consolidated net asset value of China Toprise and its subsidiaries as at 30 June 2012. The Directors also considered the potential investment risk to which the Strategic Investor will be exposed due to the limited excess cash flow from operations, the relatively large demand for capital of Bestvilla and the priority of the Strategic Investor in terms of cash payment for any Guaranteed Dividend (as defined below). A chart illustrating the group structure of China Toprise and its subsidiaries and the relevant entities involved in the Reorganisation (as defined below) as at 30 June 2012 is set out below:

==> picture [450 x 196] intentionally omitted <==

----- Start of picture text -----

The Company
100% 100% 100% 100%
China ITS Urban China Toprise Holdings LimitedFairstar Success China ITS (Holdings)Co., Ltd. (BVI)
Traffic Holdings Co.,Ltd. (BVI) China Toprise and its subsidiaries asat 30 June 2012 75% 20% 80% 100%
Beijing RHY Beijing Aproud Jiangsu Zhongzhi
Technology Technology Transportation
90.28% Development Co., Ltd Technology
(indirectshareholding Co., Ltd. 25% Co., Ltd.
throughintermediate 51% 100% 80% 15% 85% 100% 100% 100%
holding
Beijing Jingweicompanies) Wuhan ChenguangTransportationDevelopmentTechnologyCo., Ltd. Jiangsu YijieTechnologyCo., Ltd. Xinjiang RHYEngineeringCo., Ltd. Haotian Jiajie Beijing AproudEngineeringInformationCo., Ltd Hengye TechnologyBeijing HuadingCo., Ltd. Jiangsu ZhongzhiJiaye ElectronicsTechnologyCo., Ltd.
Zhitong Technology 57% 90%
Co., Ltd. Xinjiang Delida 10%
Information
Technology Beijing Bailian
Co., Ltd 42.8% Zhida Technology
72% Shandong Yigou DevelopmentCo., Ltd.
Software Technology
Beijing STONE Co., Ltd.
Intelligent
Transportation
System Integration
Co., Ltd. 10%
Denotes companies engaged in the expressway sector business.
----- End of picture text -----

– 8 –

LETTER FROM THE BOARD

Based on the unaudited consolidated financial statements of China Toprise and its subsidiaries as at 30 June 2012, the unaudited net asset value of China Toprise was RMB543,109,000. Based on arm’s length negotiation between the Company and the Strategic Investor, Bestvilla was valued at RMB572,448,979 (the ‘‘Valuation’’), or at a 5.40% premium over the net asset value of China Toprise as at 30 June 2012, given that other than China Toprise, Bestvilla does not hold any material assets. The Valuation was not based on any valuation report prepared by any valuer or any profit forecast. Based on the Valuation, the Subscription Price was determined to be RMB550 million, which is 49% of the “post-money” value of Bestvilla, RMB1,122,448,979, being the sum of the consideration and the Valuation. The Directors are of the view that the Valuation is beneficial to the Group, considering that the Company’s shares were trading below its net asset value at the time of the negotiation of the Investment.

In the event that the Strategic Investor delays in payment of any instalments or any part thereof for more than 30 days:

(a) in relation to any delay with the Second Payment or any part of it, the Preferred Shares shall be transferred back to Bestvilla for cancellation and all instalments already paid by the Strategic Investor shall be retained by Bestvilla and not refundable to the Strategic Investor;
(b) in relation to any delay with the Final Payment or any part of it, 40% of the Preferred Shares shall be transferred back to Bestvilla for cancellation and all instalments already paid by the Strategic Investor shall be retained by Bestvilla and not refundable to the Strategic Investor;
(c) in all cases, the Strategic Investor shall return to Bestvilla all dividend paid, if any, to the Strategic Investor as a holder of the Preferred Shares; and
(d) in all cases, the Strategic Investor shall pay a compensation to the Company at the rate of 0.1% per day on the amount in arrears until the relevant amount has been paid or the relevant amount of the Preferred Shares are transferred back to Bestvilla for cancellation in accordance with the provisions set out in paragraphs (a) and (b) above.

Conditions Precedent

The obligations of the Strategic Investor to purchase the Preferred Shares at the Closing are, unless otherwise waived in writing by the Strategic Investor, subject to the fulfillment on or before the Closing of each of the following conditions by Bestvilla:

(a) the representations and warranties of Bestvilla under the Share Subscription Agreement shall be true, correct and complete when made, and shall be true, correct and complete on and as of the Closing;
(b) Bestvilla shall have performed and complied with all agreements, obligations and conditions contained in the Share Subscription Agreement that are required to be performed or complied with by it on or before the Closing;

– 9 –

LETTER FROM THE BOARD

(c) Bestvilla shall have obtained all the necessary approvals required under the Memorandum and Articles of Association of Bestvilla, applicable law and the Listing Rules for the completion of the transactions contemplated under the Share Subscription Agreement, including the approval by the shareholders of the Company in accordance with the requirements of the Listing Rules;
(d) Bestvilla and the Strategic Investor shall have duly executed an escrow agreement, whereby the Company and the Strategic Investor have jointly appointed an escrow agent as their escrow agent to hold the share certificates in respect of the Preferred Shares to be issued by Bestvilla to the Strategic Investor pursuant to the Share Subscription Agreement, who will be authorised by Bestvilla to release such share certificates to the Strategic Investor upon receipt of the First Payment on or before the First Payment Date; and
(e) the Company and Bestvilla shall have appointed an independent financial advisor, who shall report to both of the board of directors of the Company and the board of directors of Bestvilla, to explore different capital market options for the future capital market development of the expressway sector business of Bestvilla with a view to optimise the interests of the shareholders of the Company and that of the shareholders of Bestvilla.

The Strategic Investor may, at its discretion and upon such terms as it thinks fit, at any time waive, in whole or in part and conditionally or unconditionally, any of the Conditions by notice in writing to the Company. If the conditions are not fulfilled or waived by the Strategic Investor on or before 6 months from the date of signing of the Share Subscription Agreement, the Share Subscription Agreement shall automatically lapse and the parties hereto shall be fully released and discharged from their respective obligations relating to the subscription and sale of the Preferred Shares under the Share Subscription Agreement.

In respect of Condition (e), the Company and Bestvilla have appointed Guotai Junan Capital Limited as the independent financial advisor contemplated under this condition.

Save as disclosed above, as at the Latest Practicable Date, the conditions precedent set out above are yet to be fulfilled and none of them has been waived.

Closing

The Closing shall take place on the date falling 2 days after the date on which the fulfillment or waiver (as the case may be) of the conditions precedent of the Share Subscription Agreement (or such other date as may be agreed by the Strategic Investor and Bestvilla).

– 10 –

LETTER FROM THE BOARD

The following chart illustrates the group structure of Bestvilla as at the Latest Practicable Date:

==> picture [427 x 167] intentionally omitted <==

----- Start of picture text -----

The Company
100% 100% 100%
China ITS (Holdings) Fairstar Success
Co., Ltd. (BVI) Holdings Limited
Bestvilla
100%
Bestvilla and its subsidiariesbefore Closing 100% Jiangsu ZhongzhiTransportation
China Toprise Technology Co., Ltd.
75% 20% 80%
Beijing RHY 25%
Technology Beijing Aproud
Development Co., Ltd. Technology
Co., Ltd.
100%
51% 80% 100% 100% 100% 52.8% 85% Beijing AproudInformation
Engineering Co., Ltd.
Wuhan Chenguang Xinjiang RHY Beijing Huading Jiangsu Zhongzhi Xinan Intelligent Shandong Yigou
Transportation TechnologyDevelopment Co., Ltd. EngineeringCo., Ltd. Hengye TechnologyCo., Ltd. Technology Co., Ltd.Jiaye Electronics TransportationCo., Ltd. Software TechnologyCo., Ltd. Haotian Jiajie 15%
----- End of picture text -----*

Denotes companies engaged in the expressway sector business.

A chart illustrating the group structure of Bestvilla and its subsidiaries after the Closing and after completion of the Reorganisation (as defined below) is set out below:

==> picture [388 x 168] intentionally omitted <==

----- Start of picture text -----

The Strategic Investor The Company
49% 51% 100% 100%
China ITS (Holdings) Fairstar Success
Co., Ltd. (BVI) Holdings Limited
Bestvilla
100%
Bestvilla and its subsidiariesafter the Reorganisation 100% Jiangsu ZhongzhiTransportation
China Toprise Technology Co., Ltd.
75% 20% 80%
Beijing RHY 25%
Technology Beijing Aproud
Development Co., Ltd. Technology
Co., Ltd.
100%
51% 80% 100% 100% 100% 52.8% Beijing AproudInformation
Engineering Co., Ltd.
Wuhan Chenguang Xinjiang RHY Beijing Huading Jiangsu Zhongzhi Xinan Intelligent Shandong Yigou
Transportation TechnologyDevelopment Co., Ltd. EngineeringCo., Ltd. Hengye TechnologyCo., Ltd. Technology Co., Ltd.Jiaye Electronics TransportationCo., Ltd. Software TechnologyCo., Ltd.
----- End of picture text -----*

Denotes companies engaged in the expressway sector business.

Expenses and taxes in relation to the Reorganisation

The Strategic Investor agreed to bear up to RMB28,700,000 (the ‘‘Cap Amount’’) of all costs, fees, expenses, taxes, levies, rates, duties and any other forms of taxes incurred by the Group in connection with or incidental to the Reorganisation (as defined below). The Strategic Investor shall reimburse the Company or any member of the Group as designated by the Company promptly upon request any such expenses, taxes and any other expenses which the Group has incurred in connection with or incidental to the Reorganisation (as defined below), subject to the Cap Amount.

– 11 –

LETTER FROM THE BOARD

Post-closing Covenants

Dividend Guarantee

Bestvilla shall not declare or pay any dividend or other distributions, whether in cash, in property or in shares of its capital to the shareholder(s) of the Ordinary Shares, unless and until the Strategic Investor is first paid in full dividends of an amount to be determined by the board of directors of Bestvilla from time to time (the ‘‘Guaranteed Dividend’’) on a pro rata basis based on the 49% interest represented by the Preferred Shares held by the Strategic Investor. Any cash paid out by Bestvilla as dividend distribution must first be paid to the Strategic Investor to satisfy the Guaranteed Dividend, before any cash will be paid to the Company for its entitlement to dividends declared. However, Bestvilla has no obligation to declare any dividends as a result of the foregoing.

Reorganisation

Bestvilla shall procure the completion of a reorganisation of subsidiaries of China Toprise (the ‘‘Reorganisation’’) to the effect that (i) all subsidiaries of the Company which are engaged in the expressway sector business in the PRC will become direct or indirect subsidiaries of China Toprise; and (ii) all direct and indirect subsidiaries of the Company which are not Expressway Subsidiaries (as defined below) will not be engaged in businesses that compete with companies which are subsidiaries of China Toprise after the Reorganisation (the ‘‘Expressway Subsidiaries’’).

The Reorganisation involved the following transactions: RHY Technology (i) transferred 90% equity interest in Beijing Bailian to Beijing Lihe Datong Technology Co., Ltd., (ii) transferred 15% equity interest of Haotian Jiajie, 20% equity interest of Aproud Technology, and 100% equity interest in Jiangsu Yijie to Jiangsu Zhongzhi Transportation, (iii) transferred 57% equity interest in Xinjiang Delida to Mr. Pan Jinghui, one of the existing shareholders of Xinjiang Delida, (iv) acquired 52.8% equity interest of Shandong Yigou, (v) acquired 100% equity interest of Beijing Huading, (vi) acquired 100% equity interest of Jiangsu Zhongzhi Jiaye, (vii) established Xinan IT, and (viii) will transfer 85% equity interest of Haotian Jiajie to a wholly-owned subsidiary of the Company. As at the date of this circular, all of the above steps involved in the Reorganisation other than transfer of 85% equity interest of Haotian Jiajie have been completed. The Company currently expects that the transfer of 85% equity interest of Haotian Jiajie will be completed by the end of April 2013.

The different business segments of the Company, namely, the expressway sector, railway sector, energy sector and urban traffic sector, are clearly delineated with different target markets and hence different customers, and each of them is managed by a dedicated management team. Accordingly, our businesses in different segments do not compete or overlap with each other. After the completion of the Reorganisation, the expressway sector business will be controlled by Bestvilla, through its indirect ownership of 75% of the equity interest in RHY Technology. All subsidiaries of Bestvilla will be solely engaged in expressway sector businesses and will not be engaged in any other businesses carried out by the Group. Other than the subsidiaries of Bestvilla, no other subsidiary of the Company is or will be engaged in expressway sector businesses. The Directors are of the view that given (i) the different segments of businesses of the Group do not overlap or compete with each other; and

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LETTER FROM THE BOARD

(ii) the different segments are being developed vertically within their segment according to the Company’s strategy, the requirement that the Expressway Subsidiaries and the other subsidiaries of the Company should not compete with each other will not affect the Company’s flexibility in pursuing future business development.

Related Party Transactions

Bestvilla shall procure that all transactions between any of the Expressway Subsidiaries and any of the related parties of the Company which are not Expressway Subsidiaries are terminated.

Outstanding Intra-group Balances

Bestvilla shall procure that all outstanding receivables and/or payables between any of the Expressway Subsidiaries and any other direct or indirect subsidiaries or associates of the Company (which are not Expressway Subsidiaries) are settled in full.

Future Investment Opportunities

Bestvilla shall procure that the Strategic Investor be provided with the opportunity to participate in any future fund-raising activities of the Company to the extent allowed by applicable laws and regulations, subject to the condition that the Strategic Investor remains a holder of the Preferred Shares.

Share Repurchase

Subject to the conditions set out in the following paragraph, Bestvilla agrees to repurchase, and the Strategic Investor agrees to sell, the Repurchase Shares issued by the Company to the Strategic Investor under the Share Subscription Agreement (the ‘‘Share Repurchase’’) in consideration for the refund of the Final Payment without any interest. ‘‘Repurchase Shares’’ means 40% of the Preferred Shares subscribed by the Strategic Investors pursuant to the terms of the Share Subscription Agreement.

The Share Repurchase shall be conditional upon the occurrence of the following event:

(a) the trade receivable turnover days of the expressway sector business of the Company (the ‘‘Expressway Turnover Days’’) for the year ending 31 December 2013 increases by 90 days or more as compared to the year ending 31 December 2012; and
(b) all the representations, warranties and undertakings made by the Strategic Investor in connection with the Share Purchase pursuant to the Share Subscription Agreement being accurate and correct in all respects.

For the purpose of the Share Repurchase, ‘‘Expressway Turnover Days’’ shall be calculated with reference to the consolidated financial statements of Bestvilla and shall be equal to the average of the starting and ending trade receivables balances of the year divided by revenue for the year and multiplied by 365 days.

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LETTER FROM THE BOARD

THE TECHNOLOGY LICENSE AGREEMENT

Grant of license

At the Closing, the Strategic Investor shall execute and deliver the Technology License Agreement in favour of Bestvilla in respect of certain technologies that are strategically important to the development of the expressway sector business of Bestvilla. Pursuant to the Technology License Agreement, the Strategic Investor will grant Bestvilla an exclusive and non-transferable license (‘‘License’’) to use certain technologies including the registered software, technical data, know-how and technical documentation to conduct the expressway sector business of Bestvilla in the PRC and Hong Kong as stipulated in the Technology License Agreement. The License will commence on the Closing date for a period of 3 years, subject to renewal. The License may be terminated (a) by a party giving the other party 60 days notice in writing in the event of a material breach of the Technology License Agreement by the other party; or (b) by mutual agreement; or (c) by the Strategic Investor giving Bestvilla 60 days notice in writing in the event that the Strategic Investor or any of its affiliates ceases hold to any shares of Bestvilla.

The fee (‘‘Fee’’) payable by Bestvilla for the Strategic Investor’s provision shall be 50% of the gross receipts of Bestvilla on a cash basis received during such period in respect of any services of Bestvilla, without any deduction in respect of any indirect costs, expenses, overhead, taxes, depreciation or any other payments, less any cash discounts, rebates or refunds to customers of Licensee generated by the Technology. Licensee shall pay the Fee quarterly in arrears, within 30 days after the end of each calendar quarter in respect of which the fee is payable. The maximum amount of the Fee for each of the years ending 31 December 2013, 2014 and 2015 is expected to be RMB5 million, RMB5 million and RMB5 million, respectively. Such maximum amounts are based on the estimation that during each of the years ending 31 December 2013, 2014 and 2015, the Group will be able to secure five to ten contracts that utilize the Technology, each with a contract value of RMB500,000 or less. The Directors consider such estimation reasonable, taking into account the time needed for the Group to penetrate into the post-construction value-added services segment by leveraging the Technology.

The method of calculating the Fee was determined after arm’s length negotiations between the parties to the agreement taking into account the value of the Technology and the subscription of the Preferred Shares by the Strategic Investor.

Support Services

In accordance with the Technology License Agreement, the Strategic Investor shall provide certain support services to Bestvilla including provision of any subsequent new releases of or improvement to the Technology, maintenance of the Technology, replacement of the software therein and prompt response to Bestvilla’s inquiries in relation to the Technology. The Strategic Investor has also agreed to train technical and other personnel of Bestvilla and dispatch technical advisers to Bestvilla if required.

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LETTER FROM THE BOARD

INFORMATION ON THE GROUP

Principal activities of the Group

The Group is principally engaged in providing intelligent transportation systems and transportation infrastructure technology solutions and services to expressway, railway, urban traffic (including urban roadways and rapid transit) and energy sectors in the PRC.

INFORMATION ON THE BESTVILLA

Bestvilla

Bestvilla is an investment holding company incorporated in the BVI on 6 September 2012 with limited liability and is wholly-owned by the Company, and its subsidiaries are principally engaged in turnkey and specialized ITS solutions in the expressway sector. Bestvilla is the legal and beneficial owner of the entire issued share capital of China Toprise. Other than China Toprise, Bestvilla does not hold any material assets.

For each of the two years ended 31 December 2011, the unaudited combined net profit of China Toprise and its subsidiaries before and after tax are as follows:

	For the year ended	For the year ended
	31 December	31 December
	2010	2011
	RMB’000	RMB’000
Net Profit Before Tax
(before and after extraordinary items)	148,057	109,199
Net Profit After Tax
(before and after extraordinary items)	130,113	92,225

As at 30 June 2012, the unaudited combined net assets of China Toprise and its subsidiaries was RMB543,109,000.

China Toprise

China Toprise is an investment holding company incorporated in the BVI with limited liability and is wholly owned by Bestvilla. China Toprise is the legal and beneficial owner of the 75% equity interest of RHY Technology and the 85% equity interest of Haotian Jiajie.

The PRC Group

RHY Technology owns 51% equity interest of Wuhan Chenguang, 80% equity interest of Xinjiang RHY, 100% equity interest of Beijing Huading, 100% equity interest of Jiangsu Zhongzhi Jiaye, 100% equity interest of Xinan IT and 52.8% equity interest of Shandong Yigou.

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LETTER FROM THE BOARD

Each of RHY Technology, Wuhan Chenguang, Xinjiang RHY, Beijing Huading, Jiangsu Zhongzhi Jiaye, Xinan IT and Shandong Yigou is a company incorporated in the PRC with limited liability. The PRC Group is principally engaged in the provision of turnkey solutions and value-added operation and services for the expressway sector in the PRC.

INFORMATION ON THE STRATEGIC INVESTOR

The Strategic Investor, a company incorporated in the BVI, is a wholly-owned subsidiary of CSOP and established by CSOP for the purpose of holding its investment in Bestvilla. To the best knowledge, information and belief of the Directors having made all reasonable enquiries, the Strategic Investor, CSOP and its ultimate beneficial owners are independent of the Company and its connected persons.

CSOP is a private equity fund duly organized and existing under the laws of Cayman Islands since 2010. CSOP focuses on investment in high growth companies, pre-IPO or listing companies and its major practice areas include technology, media and telecommunication (‘‘TMT’’) industries. The management of CSOP possesses extensive professional expertise and experience in the area of corporate finance and rich experience in investing in technology companies. In particular, CSOP is a major investor in one of the largest software developers’ community operator in the PRC, among other portfolio companies in TMT industries. The Directors believe that as a result of the relationship between CSOP and the Group arising from the Investment, the Group can be introduced to other companies in CSOP’s network, including CSOP’s present and past investees as well as its other business partners in the TMT space, which help to cultivate business cooperation or other opportunities with these companies.

The ultimate beneficial owner of CSOP is Ms. Dipl.-ing. Dong Qing. Ms. Dipl.-ing. Dong graduated from Computer Science faculty of Tsinghua University in 1988 and obtained her master’s degree from Technical University of Vienna in 1992. She then worked for Siemens Europe as a senior software manager and subsequently established a software outsourcing company which was later sold by her. Ms. Dipl.-ing. Dong has accumulated extensive experience in technology, business networking and capital during her work and gained a reputation as an experienced expert and investor in TMT industries. After establishing CSOP, Ms. Dipl.-ing. Dong has been focusing on investment activities in TMT industries.

The Company was introduced to CSOP during an investment summit and chose CSOP as the strategic investor and partner for our expressway business from several other potential investors by taking into account the background, the personnel, capital, enterprise management experience and relevant technology license that CSOP will bring to the Company and the favourable terms of investment it offered.

REASONS FOR AND BENEFITS OF ENTERING INTO THE TRANSACTION

To become a market leading integrated ITS solution and service provider, the Company is developing its businesses in different sectors independently and deeply in order to cater for the specific market environment of the specific sectors according to differences in technology standard, customer base, stage of development and capital requirement. The Company executes such strategy through devising and executing specific business development plans for each sector, engaging strategic investors or partners for each sector and executing merger and

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LETTER FROM THE BOARD

acquisition of complementary targets in each sector as appropriate. While the Investment is being categorised as a deemed disposal of Bestvilla by the Company under the Listing Rules, it is not an indication of any reduction in the Company’s absolute economic interest in the expressway sector business or any change in the Company’s lines of business or strategy. Indeed, the Investment is consistent with the Company’s strategy of developing its different lines of businesses by engaging different strategic partners as appropriate for different segments of the Group’s businesses. Such strategy is also reflected in the Company’s past merger and acquisition transactions, for example, the Company’s acquisition of Beijing STONE Intelligent Transportation System Integration Co., Ltd. in June 2012 and the acquisition of China Traffic Holding Limited in August 2011.

The Directors considered that (1) the expressway construction in China has come into post-construction stage where new technology is required in value-added service provision and the Company is in need of such new technology in order to meet market needs; (2) more capital is required in new business models including build-transfer (BT) and build-operatetransfer (BOT) which are to be used in the Company’s future expansion in western area where the expressway construction has been stimulated by the Development of the West Regions strategy of the PRC government; (3) more market resource, capital and new functional product shall be put into our under-construction projects; and (4) the expressway sector business of the Company will have a gradual transformation from serving industry operator (B2B) to serving industry participants (B2C) in the next few years and a strong strategic partner with potential market referrals, technology input and capital injection is needed to realize such transformation; and (5) the expressway sector business of the Company is largely undervalued and not fully reflected in the Company’s market capitalization.

In order for the expressway business of the Company to be properly and fairly valued in the market and to optimize the interests of the shareholders of the Company, the Company intends to reorganise its businesses in the expressway sector and to obtain further capital for the growth of such business. As CSOP has extensive experience in investing in businesses in the technology sector in the PRC, it is expected that the Strategic Investor will bring strategic values including the contribution of the working capital and the strategic input into the Company to facilitate the new business models, future expansion and internal restructuring of the expressway business of the Company. The Directors also consider the Share Subscription Agreement provides a solid foundation for the strategic relationship between the Strategic Investor and the Group and the Strategic Investor will bring other strategic values to the Company by enhancing the expressway, railway, urban traffic and smart city business operations of the Company through new business opportunities referrals and by licensing the Technology to Bestvilla pursuant to the Technology License Agreement.

The Share Subscription Agreement also represents an opportunity to raise additional funds for the Group. The estimated net proceeds from the issue of the Preferred Shares would be approximately RMB550 million.

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LETTER FROM THE BOARD

The Technology includes a series of expressway multi-dimensional geographic information system (‘‘EMGIS’’) applications that are especially valuable to Bestvilla’s expressway sector business. The EMGIS is a traffic information platform based on the multidimensional geographic information, digital survey and database management technology with core intellectual property in digital map, satellitic and aerial image processing, digital elevation and 3-dimensional imaging processing. The EMGIS applications include road administration management software, road condition inspection and management software and mechanical and electrical facilities operation maintenance software. The Technology supports mobile application platform. This Technology strategically fills the gaps in the Company’s current technology portfolio from construction stage to post-construction stage business transformation. The Directors consider that the Technology License Agreement will strengthen Bestvilla’s expressway product offering and service provision and market leading position in the fast growing expressway sector in the PRC. The Directors also believe that the Technology License Agreement will benefit Bestvilla by lowering its operating costs and strengthening its bargaining power in the market.

The Directors, including the independent non-executive Directors, consider that each of the Share Subscription Agreement and the Technology License Agreement has been entered into on normal commercial terms and the terms of each of the Share Subscription Agreement and the Technology License Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

USE OF PROCEEDS

It is expected that the net proceeds from the Investment will be RMB550 million. Approximately 25% to 30% will be used to facilitate the reorganisation of the Group’s businesses in the expressway sector; approximately 45% to 50% will be used to increase the working capital the Company and to support our business expansion; the remaining 20% to 30% will be used to meet further capital requirement under new business models including BT and BOT in the expressway sector businesses.

FINANCIAL EFFECTS OF THE TRANSACTION ON THE GROUP

Upon Closing, the total assets of the Group are expected to increase by the amount of the Subscription Price, while the total liabilities of the Group are expected to increase by RMB220 million, representing the amount of the price for the Repurchase Shares, being the Final Payment, in accordance with the applicable financial reporting standards. The gearing ratio of the Company, being its adjusted cash (interest-bearing bank borrowings minus pledged deposits, and cash and bank balances) divided by its total equity, is expected to decrease due to the increase in the equity of the Company resulting from the Investment. The Company is not expected to record in its income statement any gain or loss arising from the Investment. As a result of the Investment, the Company’s interest in the expressway sector business, which is held by RHY Technology, will be diluted from 100% to 63.25%. As Bestvilla only owns 75% of RHY Technology while the remaining 25% of RHY Technology is held by a wholly-owned subsidiary of the Company, the dilution of the Company’s interest in Bestvilla will be related to 75% of the Company’s interest in the expressway sector business only. On a fully diluted basis, the Group’s earnings derived from the expressway sector business is expected to be

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LETTER FROM THE BOARD

diluted by 36.75% (being 49%, representing interest in Bestvilla held by the Strategic Investor, multiplied by 75%, being the percentage of interests in RHY Technology held by Bestvilla). For illustrative purposes, according to the annual results of the Group for the year ended 31 December 2011, the expressway sector business of the Group accounted for 59.5% of the Group’s consolidated operating profit, and accordingly, a dilution impact of 21.9% on the Group’s consolidated operating profit would have been resulted had the dilution to the expressway sector business been applicable to the Group’s results for the year ended 31 December 2011.

The exact financial effects of the Investment as result of the Investment are subject to the review by the Company’s auditors.

IMPLICATIONS UNDER THE LISTING RULES

Share Subscription Agreement

As more than one of the applicable percentage ratios calculated under Rule 14.07 of the Listing Rules are more than 25% but less than 75%, the Investment constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and hence is subject to notification, publication and shareholders’ approval requirements under the Listing Rules.

To the best of the knowledge of the Directors, having made all reasonable enquiries, no Shareholder is required to abstain from voting if the Company were to convene a general meeting for the approval of the Share Subscription Agreement. As such, the Share Subscription Agreement may be approved by written Shareholders’ approval in accordance with Rule 14.44 of the Listing Rules. The Company has obtained the written shareholders’ approval from China ITS Co., Ltd., Pride Spirit Company Limited, Kang Yang Holdings Limited, Joy Bright Success Limited, Rockyjing Investment Limited, Huaxin Investments Limited, Speedy Fast Investments Limited, Joyful Business Holdings Limited, Lv Xilin and Jiang Hailin, a closely allied group of Shareholders who beneficially held 928,309,289 Shares, representing approximately 56.4113% of the issued share capital of the Company as at the Latest Practicable Date. Accordingly, no general meeting for the Shareholders’ approval of the Subscription will be held.

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LETTER FROM THE BOARD

A chart illustrating the group structure of the closely allied group as at the Latest Practicable Date is set out below:

==> picture [450 x 357] intentionally omitted <==

----- Start of picture text -----

Liao Wu Jiang Wu Liang Yuan Zhao Lv
Daoxun Yurui Hailin Chunhong Shiping Chuang Lisen Xilin
Wang Zhang Zheng Guan Wang
Jing Qian Hui Xiong Li
Pan Jing Dang Lu Liao
Jianguo Yang Kulun Xiao Jie
Fino Tesco The trustee and Ampio Binks
Investments Investments holder is Credit International Investments
Limited Limited Suisse Trust Limited Limited Limited
83% 17%
100%
Best Partners
Development
Limited
100%
Kang Yang Gouver Rockyjing
Holdings Investments Investment
Limited Limited Limited
100% 100% 100% 100%
Pride SpiritCompanyLimited China ITS Co., Ltd. Joy BrightSuccess Limited InvestmentsHuaxin Investments Speedy FastLimited CompanyBusinessJoyful Public
Limited
0.8032% 0.0002% 27.6631% 5.8276% 3.2137% 6.0329%5.9782% 1.3501% 1.1365% 4.4056% 43.5887%
China ITS (Holdings) Co., Ltd.
----- End of picture text -----

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LETTER FROM THE BOARD

The respective shareholding of Pride Spirit Company Limited, China ITS Co., Ltd., Kang Yang Holdings Limited, Joy Bright Success Limited, Rockyjing Investment Limited, Huaxin Investments Limited, Speedy Fast Investments Limited, Joyful Business Holdings Limited, Lv Xilin and Jiang Hailin as at the Latest Practicable Date and the relationship among them are set forth below:

Shareholders China ITS Co., Ltd. Huaxin Investments Limited Speedy Fast Investments Limited Joy Bright Success Limited Joyful Business Holdings Limited Rockyjing Investment Limited Lv Xilin Jiang Hailin Pride Spirit Company Limited Kang Yang Holdings Limited Total	Number of Shares 455,226,945 99,278,087 98,378,462 95,900,234 72,499,423 52,885,399 22,217,727 18,702,440 13,217,727 2,845 928,309,289	Percentage 27.6631% 6.0329% 5.9782% 5.8276% 4.4056% 3.2137% 1.3501% 1.1365% 0.8032% 0.0002%
		56.4113%

China ITS Co., Ltd., Pride Spirit Company Limited, Kang Yang Holdings Limited, Joy Bright Success Limited, Rockyjing Investment Limited, Huaxin Investments Limited, Speedy Fast Investments Limited, Joyful Business Holdings Limited, Lv Xilin and Jiang Hailin (and certain of their ultimate beneficial owners where applicable) have entered into shareholders voting agreements pursuant to which each of the parties (other than China ITS Co., Ltd.) has authorized China ITS Co., Ltd. to exercise their voting rights in the Company on their behalves.

Each of China ITS Co., Ltd, Pride Spirit Company Limited and Kang Yang Holdings Limited is wholly-owned by Best Partners Development Limited, which is owned as to 17% by Tesco Investments Limited and as to 83% by Fino Investments Limited. Fino Investments Limited is owned as to 50% by Serangoon Limited and as to 50% by Seletar Limited, as nominees and trustees for Credit Suisse Trust Limited, which is the trustee holding such interest on trust for the beneficiaries of the Fino Trust, namely, Liao Daoxun, Wu Yurui, Jiang Hailin, Liang Shiping, Wu Chunhong, Yuan Chuang, Zhao Lisen and Lv Xilin. The Fino Trust is an irrevocable discretionary trust established under the laws and regulations of Singapore. Tesco Investments Limited is owned as to 50% by Serangoon Limited and as to 50% by Seletar Limited, as nominees and trustees for Credit Suisse Trust Limited, which is the trustee holding such interest on trust for the beneficiaries of the Tesco Trust, namely Wang Jing, Guang Xiong, Zhang Qian, Zheng Hui and Wang Li. The Tesco Trust is an irrevocable discretionary trust established under the laws and regulations of Singapore.

Joy Bright Success Limited is wholly-owned by Gouver Investments Limited. Each of Gouver Investments Limited and Rockyjing Investment Limited is wholly-owned by Ampio International Limited. Ampio International Limited is owned as to 50% by Serangoon Limited

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LETTER FROM THE BOARD

and as to 50% by Seletar Limited, as nominees and trustees for Credit Suisse Trust Limited, which is the trustee holding such interest on trust for the beneficiaries of the Ampio Trust, namely, Pan Jianguo and Jing Yang. The Ampio Trust is an irrevocable discretionary trust established under the laws and regulations of Singapore.

Huaxin Investments Limited is wholly-owned by Binks Investments Limited. Binks Investments Limited is owned as to 50% by Serangoon Limited and as to 50% by Seletar Limited, as nominees and trustees for Credit Suisse Trust Limited, which is the trustee holding such interest on trust for the beneficiaries of the Binks Trust, namely Dang Kulun, Shi Li, Dang Hankun, Dang Hanwen, Dang Zhen and New Song Cristian Life Centre. The Binks Trust is an irrevocable discretionary trust established under the laws and regulations of Singapore.

Technology License Agreement

The Directors confirmed that none of the Directors has a material interest in the License and the Technology License Agreement has been undertaken on an arm’s length basis and on normal commercial terms. Each of the applicable percentage ratios (other than the profit ratio) of the transactions contemplated under the Technology License Agreement is less than 1% on an annual basis and the transaction is a connected transaction only because the Strategic Investor is a connected person of the issuer by virtue of its relationship with Bestvilla, being a subsidiary of the Company. Accordingly, the Technology License Agreement constitutes continuing connected transactions for our Group exempt from the reporting, annual review, announcement and independent shareholders’ approval requirements pursuant to Rule 14A.33(3) of the Listing Rules.

GENERAL INFORMATION

Your attention is drawn to the general information set out in the Appendix II to this circular.

By order of the Board China ITS (Holdings) Co., Ltd. Liao Jie Chairman

As at the date of this circular, the executive directors of the Company are Mr. Liao Jie, Mr. Jiang Hailin, Mr. Wang Jing, Mr. Lu Xiao, Mr. Pan Jianguo, Mr. Lv Xilin, and the independent non-executive directors of the Company are Mr. Zhou Chunsheng, Mr. Choi Onward and Mr. Sun Lu.

– 22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The financial information of the Group for (i) the period ended 30 June 2012 is disclosed in the interim report of the Company published on 18 September 2012; (ii) the year ended 31 December 2011 is disclosed in the annual report of the Company published on 20 April 2012, and (iii) the year ended 31 December 2010 is disclosed in the annual report of the Company published on 20 April 2011; and (iv) the year ended 31 December 2009 is disclosed in the prospectus of the Company published on 30 June 2010, all of which have been published on the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (www.its.cn).

INDEBTEDNESS

As at the Latest Practicable Date, the Company has issued RMB denominated 10.0% guaranteed bonds, due 2015, in the aggregate principal amount of RMB210 million.

As at the close of business on 30 November 2012, being the latest practicable date for the purpose of ascertaining the indebtedness of the Group prior to the printing of this circular, the Group had the following interest-bearing borrowings:

Group Contractual interest rate % Current Bank loans — secured and repayable within one year: 6.19–8.20 Bank loans — guaranteed and repayable within one year: 6.60–7.87	As at 30 November 2012 RMB’000 169,500 162,820
	332,320

. Bank loans of RMB145.0 million were secured by investment properties of RMB90.8 million at the Latest Practicable Date.
. Bank loans of approximately RMB4.5 million were pledged by contract receivables of RMB9.9 million of the project ‘‘Xi’an Subway Line 1’’ as at the Latest Practicable Date. As at the Latest Practicable Date, the Group had related trade receivables under the project ‘‘Jing-Hu Railway’’ of RMB4.0 million.
. Bank loans of approximately RMB92.9 million as at the Latest Practicable Date were guaranteed by Aproud Technology and RHY Technology, subsidiaries of the Company.
. Bank loans of approximately RMB29.9 million as at the Latest Practicable Date were guaranteed by the Company.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at the Latest Practicable Date, the Group had unutilised available bank facilities amounting to RMB380.92 million. The Group’s bank loans are all denominated in RMB with fixed interest rates. The carrying amounts of the Group’s current borrowings approximate to their fair values.

Save as aforesaid, as at the close of business on 30 November 2012, the Group did not have any indebtedness in respect of any debentures, borrowings or indebtedness including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments, loan capital, bank loans, term loans and other borrowings, debt securities or other similar liabilities, finance lease commitments (whether or not secured), mortgages, charges, guarantees or other contingent liabilities.

To the best knowledge of the Directors, having made all reasonable enquiries, there were no material changes in indebtedness or contingent liabilities of the Group since 30 November 2012 to the Latest Practicable Date.

MATERIAL ADVERSE CHANGES

As at the Latest Practicable Date, the Directors were not aware of any material adverse changes in the Group’s financial or trading position since 31 December 2011, the date to which the latest published audited consolidated accounts of the Group were made up.

WORKING CAPITAL

The Directors are of the opinion that, after taking into account the cash flows generated from the operating activities, the financial resources available to the Group, including available banking facilities, in the absence of unforeseen circumstances, the Group will have sufficient working capital to meet its requirements for at least 12 months from the date of this circular.

FINANCIAL AND TRADING PROSPECTS

The Group is a transportation infrastructure technology solutions and services provider in the PRC. Its turnkey and specialised ITS solutions address the fundamental needs of safety, reliability, efficiency, pollution reduction and secure revenue collection in the expressway, railway and urban traffic sectors. The Group’s business consists of turnkey solutions, specialized solutions and value-added services segments, and the Group conducts its business in the expressway, railway, urban traffic and energy sectors of the China ITS market.

In the expressway sector, we expect that the demand on ITS, as part of the demand on expressway, will remain robust and may even increase based on a statement issued by the PRC Ministry of Transport in late March 2012 that the country’s expressway network construction is expected to take another decade before it can be completed. Our expectation is also based on the following trends: (i) China will be focusing on increasing efficient usage of the expressways with more utilisation of Electronic Toll Collection, monitoring and traffic alert systems; (ii) tunnel expressways will be predominant in China’s mountainous western provinces, which require more ITS spending per kilometer than open expressways; and (iii) the replacement cycle of ITS is relatively stable, being five to six years, which will result in a regular and expected demand for our products.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In the railway sector, we plan to focus more on projects in relation to operating, maintaining and upgrading existing lines capitalized on the expected increase in expenditure on ITS upgrades resulting from construction of new high speed railways and speed increase of existing lines. Such expected increase arises from the twelfth five-year plan of the PRC, pursuant to which the National Development and Reform Commission of the PRC plans to spend RMB3 trillion on railways.

In the urban traffic sector, we expect that ITS spending by the PRC government will take up a material proportion of the total investment to be made in relation to urban traffic construction, which is expected to exceed RMB700 billion during the period of the twelfth five-year plan, as investment and upgrade of ITS have been proven to be an effective way to relieve the urban traffic problems including traffic congestion and to assist the traffic law enforcement and traffic flow monitoring & routing.

In the energy sector, as energy business is in a saturated stage and is no longer a key focus of the Company, we expect that the revenue and profit contribution from the energy sector will continue to decline.

The Company is following its strategy of developing its businesses in different transportation sectors, with a view to become a leading transportation infrastructure technology solutions and services provider across different sectors. The Company’s strategy encompasses focusing the development of the businesses vertically, putting in place dedicated management teams, engaging strategic partners, executing a vertically driven merger and acquisition strategy for each sector in which the Group operates.

As disclosed in the 2012 interim report of the Company, the Group recorded revenue of RMB728.1 million for the six months ended 30 June 2012. New contracts signed and orders secured recorded RMB1,475.6 million for the six months ended 30 June 2012. Backlog reached historical high, which was RMB2,185.2 as at 30 June 2012. The overall gross profit was RMB205.3 million and gross profit margin was 28.2% for the six months ended 30 June 2012. After deduction of the non-cash equity-settled share option expense of approximately RMB22.0 million, profit of the Group for the six months ended 30 June 2012 was approximately RMB25.9 million.

In the first half of 2012, the whole industry is still slumped and recovering. The Group expects that it will continue to rebound in the second half of the year. The Group will continue switching from business/product-oriented to industry/customer-oriented, formulate long-term development plans and become a leading player in the industry. The Group aims at delivering solutions that enhance safety, efficiency, convenience and sustainability of the transportation industry.

Upon the completion of the Share Subscription Agreement, the Strategic Investor will become a major investor in the Group’s expressway sector business. As a result of the investment by the Strategic Investor and the Technology licensed to the Group by the Strategic Investor pursuant to the Technology License Agreement, the Company will be able to streamline its organization structure by completing the Reorganisation, gain access to and take advantage of new business opportunities and to operate its business in a more efficient manner.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at the Latest Practicable Date, other than the Investment by the Strategic Investor, the Company currently had no intention, negotiation, agreement, arrangement and understanding about any disposal, scaling down, and/or termination of its existing business or introduce any other strategic investors.

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GENERAL INFORMATION

APPENDIX II

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 respect to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge, belief and based on information provided by the Group, 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 in this circular misleading.

2. DISCLOSURE OF INTERESTS

Save as disclosed below, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short position 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 they are taken or deemed to have under such provisions of the SFO); or were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules, to be notified to the Company and the Stock Exchange:

(a) Directors and Chief Executive of the Company

			Approximate
			percentage of
			shareholdings
			as at the Latest
Name of Director	Nature of interest	Securities(11)	Practicable Date(11)
Mr. Lv Xilin(1)(2)	Beneficial owner/	936,484,966(L)	56.91%(L)
	Beneficiary of the
	Fino Trust
Mr. Wang Jing(1)(3)	Beneficial owner/	934,115,137(L)	56.76%(L)
	Beneficiary of the
	Tesco Trust
Mr. Jiang Hailin(1)(4)	Beneficial owner/	930,165,137(L)	56.52%(L)
	Beneficiary of the
	Fino Trust
Mr. Pan Jianguo(1)(5)	Beneficial owner/	152,961,292(L)	9.30%(L)
	Beneficiary of the
	Ampio Trust
Mr. Liao Jie(6)	Beneficial owner	113,235,297(L)	6.88%(L)
Mr. Lu Xiao(1)(7)	Beneficiary owner/	109,999,999(L)	6.68%(L)
	Interest of a
	controlled
	corporation

– 27 –

GENERAL INFORMATION

APPENDIX II

Approximate percentage of shareholdings as at the Latest Name of Director Nature of interest Securities[(11)] Practicable Date[(11)] Mr. Choi Onward[(8)] Beneficial owner 98,824(L) 0.01%(L) Mr. Sun Lu[(9)] Beneficial owner 98,824(L) 0.01%(L) Mr. Zhou Beneficial owner 98,824(L) 0.01%(L) Chunsheng[(10)]

Notes:

(1) To facilitate the management and operation of the Company and as a result of previous restructuring exercises of the Group, China ITS Co., Ltd. (‘‘Holdco’’), Pride Spirit Company Limited, Sea Best Investments Limited, Joy Bright Success Limited, Gouver Investments Limited, Kang Yang Holdings Limited, Huaxin Investments Limited, Rockyjing Investment Limited, Key Trade Holdings Limited, Speedy Fast Investments Limited, Best Partners Development Limited, Joyful Business Holdings Limited, Mr. Liao Jie, Mr. Lu Xiao, 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 Xilin, Ms. Wang Li, Mr. Dang Kulun, Mr. Pan Jianguo and Mr. Jing Yang, entered into shareholders voting agreements (the ‘‘Shareholders Voting Agreements’’), pursuant to which each of the parties (other than Holdco) to the Shareholder Voting Agreements has authorized Holdco to exercise their voting rights in the Company on their behalves.

Holdco is entitled to exercise or control the exercise of the voting rights of a total of 928,309,289 Shares, representing the aggregate number of Shares held by all of the parties to the Shareholder Voting Agreements.

(2) 1,773,000 of these Shares are underlying Shares subject to the exercise of share options granted to Mr. Lv Xilin on 31 December 2008 under the Pre-IPO Share Incentive Scheme. 6,402,677 of these Shares are underlying Shares subject to the exercise of share options granted to Mr. Lv Xilin on 18 January 2012 under the Share Option Scheme.

Mr. Lv Xilin was also interested in all the Shares in which Fino Trust was interested as a beneficiary of Fino Trust. As the beneficial owner of Fino Investments Limited, Fino Trust is deemed to be interested in all the Share in which Fino Investments Limited is interested. Mr. Lv Xilin beneficially and directly owns 22,217,727 Shares, which are part of the 928,309,289 Shares in which Fino Trust is deemed to be interested.

(3) 3,950,000 of these Shares are underlying Shares subject to the exercise of share options granted to Mr. Wang Jing on 31 December 2008 under the Pre-IPO Share Incentive Scheme. 1,855,848 of these Shares are underlying Shares subject to the exercise of share options granted to Mr. Wang Jing on 18 January 2012 under the Share Option Scheme.

Mr. Wang Jing was also interested in all the Shares in which Tesco Trust was interested as a beneficiary of Tesco Trust. As the beneficial owner of Tesco Investments Limited, Tesco Trust is deemed to be interested in all the Shares in which Tesco Investments Limited is interested.

(4) 1,855,848 of these Shares are underlying Shares subject to the exercise of share options granted to Mr. Jiang Hailin on 18 January 2012 under the Share Option Scheme.

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GENERAL INFORMATION

APPENDIX II

Mr. Jiang Hailin was also interested in all the Shares in which Fino Trust was interested as a beneficiary of Fino Trust. As the beneficial owner of Fino Investments Limited, Fino Trust is deemed to be interested in all the Shares in which Fino Investments Limited is interested. Mr. Jiang Hailin beneficially and directly owns 18,702,440 Shares, which are part of the 928,309,289 Shares in which Fino Trust is deemed to be interested.

(5) 4,175,659 of these Shares are underlying Shares subject to the exercise of share options granted to Mr. Pan Jianguo on 18 January 2012 under the Share Option Scheme.

Mr. Pan Jianguo was also interested in all the Shares in which Ampio Trust was interested as a beneficiary of Ampio Trust. As the beneficial owner of Ampio International Limited, Ampio Trust is deemed to be interested in all the Shares in which Ampio International Limited is interested.

(6) 40,735,874 of these Shares are underlying Shares subject to the exercise of share options granted to Mr. Liao Jie on 18 January 2012 under the Share Option Scheme. Mr. Liao Jie is also deemed to be interested in the 72,499,423 Shares held by Joyful Business Holdings Limited, which is wholly-owned by Mr. Liao Jie.
(7) 4,662,105 of these Shares are underlying Shares subject to the exercise of share options granted to Mr. Lu Xiao on 31 December 2008 under the Pre-IPO Share Incentive Scheme. 6,959,432 of these Shares are underlying Shares subject to the exercise of share options granted to Mr. Lu Xiao on 18 January 2012 under the Share Option Scheme.

Remaining 98,378,462 of these Shares are held by Speedy Fast Investments Limited, which is wholly-owned by Mr. Lu Xiao.

(8) These Shares are underlying Shares subject to the exercise of share options granted to Mr. Choi Onward on 18 January 2012 under the Share Option Scheme.
(9) These Shares are underlying Shares subject to the exercise of share options granted to Mr. Sun Lu on 18 January 2012 under the Share Option Scheme.
(10) These Shares are underlying Shares subject to the exercise of share options granted to Mr. Zhou Chunsheng 18 January 2012 under the Share Option Scheme.
(11) (L) denotes long positions.

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GENERAL INFORMATION

APPENDIX II

(b) Substantial Shareholders of the Company and other persons

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, other than a Director or chief executive of the Company, the following persons have interests or short positions in the Shares and underlying shares of the Company which would fall to be disclosed to the issuer under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who is, directly or indirectly, interested in ten per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the group.

				Percentage to	Percentage to
				Company’s
		Long position/	Number of	issued share
Name	Capacity	Short position	Shares		capital
Holdco(1)	Beneficiary	Long position	928,309,289		56.41%
	owner
Best Partners	Interest of	Long position	928,309,289		56.41%
Development	controlled
Limited(2)	corporation
Fino Investments	Interest of	Long position	928,309,289		56.41%
Limited(3)	controlled
	corporation
Tesco Investments	Interest of	Long position	928,903,289		56.41%
Limited(4)	controlled
	corporation
Ampio International	Interest of	Long position	148,785,633		9.04%
Limited(5)	controlled
	corporation
Huaxin Investments	Beneficial	Long position	99,278,087		6.03%
Limited(6)	owner
Binks Investments	Interest of	Long position	99,278,087		6.03%
Limited(6)	controlled
	corporation
Speedy Fast	Beneficial	Long position	98,378,462		5.98%
Investments(7)	owner
Gouver Investments	Interest of	Long position	95,900,234		5.83%
Limited(8)	controlled
	corporation
Joy Bright Success	Beneficial	Long position	95,900,234		5.83%
Limited(8)	owner

Notes:

(1) Holdco is wholly-owned by Best Partners Development Limited. Six of our Directors Mr. Jiang Hailin, Mr. Liao Jie, Mr. Wang Jing, Mr. Lv Xilin, Mr. Lu Xiao and Mr. Pan Jianguo are also directors of Holdco.

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GENERAL INFORMATION

APPENDIX II

(2) The issued share capital of Best Partners Development Limited is held as to 83% by Fino Investments Limited and as to 17% by Tesco Investments Limited. By virtue of the Shareholder Voting Agreements, Best Partners Development Limited is deemed to be controlled by Fino Investments Limited and Tesco Investments Limited. Four of our Directors Mr. Jiang Hailin, Mr. Liao Jie, Mr. Wang Jing and Mr. Lv Xilin are also directors of Best Partners Development Limited.
(3) Fino Investments Limited is owned as to 50% by Serangoon Limited and as to 50% by Seletar Limited, as nominees and trustees for Credit Suisse Trust Limited, which is the trustee holding such interest on trust for the beneficiaries of Fino Trust, namely Mr. Liao Daoxun, Ms. Wu Yurui, Mr. Liang Shiping, Mr. Jiang Hailin, Ms. Wu Chunhong, Mr. Yuan Chuang, Mr. Lv Xilin and Mr. Zhao Lisen. The Fino Trust is an irrevocable discretionary trust established under the laws and regulations of Singapore.
(4) Tesco Investments Limited is owned as to 50% by Serangoon Limited and as to 50% by Seletar Limited, as nominees and trustees for Credit Suisse Trust Limited, which is the trustee holding such interest on trust for the beneficiaries of Tesco Trust, namely Mr. Wang Jing, Mr. Zhang Qian, Mr. Guan Xiong, Mr. Zheng Hui and Ms. Wang Li. The Tesco Trust is an irrevocable discretionary trust established under the laws and regulations of Singapore.
(5) Ampio International Limited is owned as to 50% by Serangoon Limited and as to 50% by Seletar Limited, as nominees and trustees for Credit Suisse Trust Limited, which is the trustee holding such interest on trust for the beneficiaries of Ampio Trust, namely Mr. Pan Jianguo and Mr. Jing Yang. The Ampio Trust is an irrevocable discretionary trust established under the laws and regulations of Singapore.

Each of Joy Bright Success Limited and Rockyjing Investment Limited is wholly-owned by Ampio International Limited. Accordingly, Ampio International Limited is deemed to be interested in the 95,900,234 Shares and 52,885,399 Shares in which Joy Bright Success Limited and Rockyjing Investment Limited are interested, respectively.

(6) Huaxin Investments Limited is wholly-owned by Binks Investments Limited. Binks Investments Limited is owned as to 50% by Serangoon Limited and as to 50% by Seletar Limited, as nominees and trustees for Credit Suisse Trust Limited, which is the trustee holding such interest on trust for the beneficiaries of Binks Trust, namely Mr. Dang Kulun, Ms. Shi Li, Mr. Dang Hankun, Mr. Dang Hanwen, Mr. Dang Zhen and New Song Cristian Life Centre. The Binks Trust is an irrevocable discretionary trust established under the laws and regulations of Singapore.
(7) Speedy Fast Investments Limited is wholly owned by Mr. Lu Xiao. Our Director Mr. Lu Xiao is also the director of Speedy Fast Investments Limited.
(8) Joy Bright Success Limited is wholly-owned by Gouver Investments Limited and accordingly Gouver Investments Limited is deemed to be interested in all the Shares in which Joy Bright Success Limited is interested. Our Director Mr. Pan Jianguo is also the director of Gouver Investments Limited and Joy Bright Success Limited.

Save as disclosed in the paragraphs headed ‘‘DISCLOSURE OF INTERESTS — (a) Directors and Chief Executive of the Company’’ and ‘‘DISCLOSURE OF INTERESTS — (b) Substantial Shareholders of the Company and other persons’’ above, no Director or proposed director is a director or employee of a company which has an interest or short position in the shares or 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.

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GENERAL INFORMATION

APPENDIX II

3. DISCLOSURE OF OTHER INTERESTS

(a) Interests in contract or arrangement

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which is significant in relation to the business of the Group.

(b) Interests in assets

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been acquired or disposed of by, or leased to, or which are proposed to be acquired or disposed of by, or leased to, any member of the Group since 31 December 2011, being the date to which the latest published audited accounts of the Group were made up.

(c) Interests in competing business

As at the Latest Practicable Date, none of the Directors nor their respective associates had any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered, or proposed to enter, into a service contract with any member of the Group (excluding contracts expiring or determinable by relevant member of the Group within one year without payment of compensation, other than statutory compensation).

5. MATERIAL CONTRACTS

Set out below are the material contracts (not being contracts entered into in the ordinary course of business) entered into by any member of the Group within the two years immediately preceding the Latest Practicable Date:

(a) On 8 November 2012, the Company entered into a Trust Deed with the Subsidiary Guarantors (as defined below) and DB Trustees (Hong Kong) as trustee (the ‘‘Trustee’’).
(b) On 8 November 2012, the Company entered into an Agency Agreement with the Subsidiary Guarantors, the Trustee, Deutsche Bank AG, Hong Kong Branch as paying agent, Deutsche Bank Luxembourg S.A. as registrar, any other paying agents named therein and Deutsche Bank AG, Hong Kong Branch as transfer agent.
(c) On 1 November 2012, the Company and the subsidiaries of the Company (other than any subsidiaries organized under the laws of the PRC, the ‘‘Subsidiary Guarantors’’), which provide a guarantee for the payment of the 10.0% guaranteed bonds due 2015 in the principal amount of RMB210,000,000 (the ‘‘Bonds’’), entered into the Subscription Agreement with the Guotai Junan Securities (Hong Kong)

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GENERAL INFORMATION

APPENDIX II

Limited, Wing Lung Bank Limited, CCB International Capital Limited, China International Capital Corporation Hong Kong Securities Limited and Haitong International Securities Company Limited (the ‘‘Joint Bookrunners’’), pursuant to which the Joint Bookrunners have agreed severally and not jointly to subscribe and pay for, or to procure subscriptions and payments for, the aggregate principal amount of the Bonds.

(d) On 20 June 2012, China ITS Urban entered into the Offshore Share Purchase Agreement, pursuant to which China ITS Urban became the indirect holder of 65% of the equity interest of Beijing STONE through the acquisition of 100% of the issued share capital of Hugecom Limited, an indirect controlling shareholder of Beijing STONE for a total consideration of RMB119,000,000.
(e) On 20 June 2012, Beijing Bailian entered into the Onshore Share Purchase Agreement, pursuant to which Beijing Bailian acquired 10% of the equity interest of Beijing STONE, for a consideration of RMB18,300,000.
(f) On 25 August 2011, Elegant Cape Limited, a wholly-owned subsidiary of the Company, entered into a Share Purchase Agreement to acquire from Siemens Venture Capital GmbH, GP Investment Ltd. and Boomtown Investments Limited their respective shareholding in China Traffic Holding Limited for a total consideration of US$45,000,000.
(g) On 22 August 2011, China eSOON Limited, which is owned as to approximately 16.6% by the Company, entered into the Sale and Purchase Agreement in relation to, amongst others, the acquisition of the entire shareholding in eSOON Holdings Corp. and certain other assets.

6. LITIGATION

As at the Latest Practicable Date, to the best of the Directors’ knowledge, information and belief, neither the Company nor any of its subsidiaries was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance is known to the Directors to be pending or threatened against the Group as at the Latest Practicable Date.

7. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the Company’s head office and principal place of business in Hong Kong at Unit 2209, 22/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong during normal business hours on any week day (except public holidays) from the date of this circular up to 1 February 2013:

(a) the amended and restated memorandum and articles of association of the Company;
(b) the Technology License Agreement;

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GENERAL INFORMATION

APPENDIX II

(c) the annual reports of the Company for the financial year ended 31 December 2010 and the financial year ended 31 December 2011;
(d) the interim report of the Company for the six months ended 30 June 2012;
(e) the material contracts referred to in the section headed ‘‘Material Contracts’’ in this appendix;
(f) a copy of each circular of the Company pursuant to the requirements set out in Chapter 14 and Chapter 14A of the Listing Rules which has been issued since 31 December 2011 (being the date to which the latest published audited accounts of the Group were made up) (if any); and
(g) this circular.
GENERAL
(a) The registered office of the Company is situated at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands and its principal place of business in Hong Kong is Unit 2209, 22/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong.
(b) The Company’s Hong Kong branch share registrar and transfer office is Union Registrars Limited at 18th Floor, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong.
(c) The company secretary of the Company is Mr. Leung Ming Shu, who is a Fellow Member of the Association of Chartered Certified Accountants (FCCA) and a Fellow Member of the Hong Kong Institute of Certified Public Accountants (FCPA).
(d) The English text of this circular shall prevail over the respective Chinese text in the case of inconsistency.

– 34 –

AI assistant

China ITS (Holdings) Co., Ltd. — Proxy Solicitation & Information Statement 2013

50251_rns_2013-01-17_4c3d61a6-5e18-4637-ab77-4d213dd84c24.pdf

China ITS (Holdings) Co., Ltd. 中 国 智 能 交 通 系 统（ 控 股 ）有 限 公 司 (incorporated in the Cayman Islands with limited liability)

MAJOR TRANSACTION IN RELATION TO THE ISSUE OF PREFERRED SHARES BY BESTVILLA INVESTMENTS LIMITED AND POTENTIAL CONTINUING CONNECTED TRANSACTION IN RELATION TO THE TECHNOLOGY LICENSE AGREEMENT

CONTENTS

DEFINITION

DEFINITION

DEFINITION

DEFINITION

China ITS (Holdings) Co., Ltd. 中 国 智 能 交 通 系 统（ 控 股 ）有 限 公 司 (incorporated in the Cayman Islands with limited liability) (Stock code: 1900)

MAJOR TRANSACTION IN RELATION TO THE ISSUE OF PREFERRED SHARES BY BESTVILLA INVESTMENTS LIMITED AND POTENTIAL CONTINUING CONNECTED TRANSACTION IN RELATION TO THE TECHNOLOGY LICENSE AGREEMENT

INTRODUCTION

THE SHARE SUBSCRIPTION AGREEMENT

Subject Matter of the Share Subscription Agreement

Subscription Price

Conditions Precedent

Closing

Expenses and taxes in relation to the Reorganisation

Post-closing Covenants

Dividend Guarantee

Reorganisation

Related Party Transactions

Outstanding Intra-group Balances

Future Investment Opportunities

Share Repurchase

THE TECHNOLOGY LICENSE AGREEMENT

Grant of license

Support Services

INFORMATION ON THE GROUP

Principal activities of the Group

INFORMATION ON THE BESTVILLA

Bestvilla

China Toprise

The PRC Group

LETTER FROM THE BOARD

INFORMATION ON THE STRATEGIC INVESTOR

REASONS FOR AND BENEFITS OF ENTERING INTO THE TRANSACTION

LETTER FROM THE BOARD

USE OF PROCEEDS

FINANCIAL EFFECTS OF THE TRANSACTION ON THE GROUP

LETTER FROM THE BOARD

IMPLICATIONS UNDER THE LISTING RULES

Share Subscription Agreement

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Technology License Agreement

GENERAL INFORMATION

FINANCIAL INFORMATION OF THE GROUP

INDEBTEDNESS

MATERIAL ADVERSE CHANGES

WORKING CAPITAL

FINANCIAL AND TRADING PROSPECTS

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

(a) Directors and Chief Executive of the Company

Notes:

(b) Substantial Shareholders of the Company and other persons

3. DISCLOSURE OF OTHER INTERESTS

(a) Interests in contract or arrangement

(b) Interests in assets

(c) Interests in competing business

4. SERVICE CONTRACTS

5. MATERIAL CONTRACTS

6. LITIGATION

7. DOCUMENTS AVAILABLE FOR INSPECTION

More from China ITS (Holdings) Co., Ltd.

China ITS (Holdings) Co., Ltd. Proxy Solicitation & Information Statement 2013

China ITS (Holdings) Co., Ltd. 中国智能交通系统（控股）有限公司 (incorporated in the Cayman Islands with limited liability)

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