Concord New Energy Group Ltd. - Proxy Solicitation & Information Statement 2018

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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.

If you are in doubt as to any aspect of this circular, you should consult a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Cinda International Holdings Limited (the “ Company ”), 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 dealers, or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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(Incorporated in Bermuda with limited liability)

(Stock code: 111)

(I) CONTINUING CONNECTED TRANSACTIONS; (II) PROPOSED RE-ELECTION OF RETIRING DIRECTOR; AND

(III) NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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A letter from the board (the “ Board ”) of directors of the Company is set out on pages 1 to 14 of this circular. A letter from the independent board committee (the “ Independent Board Committee ”) of the Board containing its advice to the independent shareholders (the “ Independent Shareholders ”) of the Company is set out on page 15 of this circular. A letter from Opus Capital Limited, the Independent Financial Adviser, containing its advice and recommendations to the Independent Board Committee and the Independent Shareholders is set out on pages 16 to 37 of this circular.

A notice convening the SGM to be held at 45th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong on 14 December 2018 at 11:00 a.m. is set out on pages SGM-1 to SGM-2 of this circular. Whether or not you are able to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as practicable and in any event not less than 48 hours before the time appointed for holding the SGM (i.e., by 12 December 2018, at 11:00 a.m.) (or any adjournment thereof) to the office of the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM (or any adjournment thereof) if you so wish and in such event, the instrument appointing a proxy shall be deemed to be revoked.

In order to qualify for attending the SGM, all transfer documents, accompanied by the relevant share certificates, must be lodged with the Hong Kong branch share registrar of the Company, Tricor Secretaries Limited, whose share registration public offices are located at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on 10 December 2018.

29 November 2018

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Letter from Opus Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Appendix – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

– i –

DEFINITIONS

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

“associate(s)”

has the meaning ascribed to it under the Listing Rules

“Board” the board of Directors
“Category I Transactions” provision by the Group to the CCAM Group of brokering services for securities, futures and options trading; placing, underwriting and sub-underwriting services for securities (including but not limited to securities issued by the CCAM Group) as contemplated under the New Master Agreement
“Category II Transactions” provision by the Group to the CCAM Group of corporate finance advisory services (including but not limited to advisory services in relation to (i) the compliance of the Listing Rules and The Codes on Takeovers and Mergers and Share Buy-backs; (ii) the issue of securities; and (iii) group restructuring) as contemplated under the New Master Agreement
“Category III Transactions” provision by the Group to the CCAM Group of asset management services as contemplated under the New Master Agreement
“CCAM”
China Cinda Asset Management Co., Ltd., a company incorporated in the PRC with limited liability, the H shares of which are listed on the Main Board of the Stock Exchange (stock code: 1359)
“CCAM Group”
CCAM and/or its associates
“China Cinda (HK)”
China Cinda (HK) Holdings Company Limited, a company incorporated in Hong Kong with limited liability and a whollyowned subsidiary of CCAM
“Company”
Cinda International Holdings Limited, a company incorporated in Bermuda with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange (stock code: 111)
“connected persons”
has the meaning ascribed to it under the Listing Rules
“Director(s)”
director(s) of the Company

– ii –

DEFINITIONS

“Existing Master Agreement”

“Group”
“HK$”
“Hong Kong”
“Independent Board Committee”
“Independent Financial Adviser” or “Opus Capital ”
“Independent Shareholders”
“Independent Third Party(ies)”
“Latest Practicable Date”
“Listing Rules”

the master agreement dated 18 December 2015 and entered into between the Company and CCAM (as supplemented by a supplemental agreement dated 31 March 2016) in relation to, among other things, the provision of certain financial services by the Group to the CCAM Group

the Company and its subsidiaries

Hong Kong dollars, the lawful currency of Hong Kong

the Hong Kong Special Administrative Region of the PRC

the committee of the Board comprising all the independent non-executive Directors established to advise the Independent Shareholders as to voting at the SGM on the resolution approving the New Master Agreement and the transactions contemplated thereunder, including the Proposed Annual Caps

Opus Capital Limited, a corporation licensed under the SFO to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the New Master Agreement and the Proposed Annual Caps

Shareholders other than Sinoday and its associates

persons(s) or company(ies) which is/are independent of any member of the Group, the directors, the chief executives, the controlling shareholders, the substantial shareholders of the Company or its subsidiaries, and their respective associates
27 November 2018, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

the Rules Governing the Listing of Securities on the Stock Exchange

– iii –

DEFINITIONS

“New Master Agreement” the master agreement dated 30 October 2018 and entered into between the Company and CCAM in relation to, among other things, the provision of certain financial services by the Group to the CCAM Group “PRC” the People’s Republic of China which, for the purpose of this circular, shall exclude Hong Kong, the Macau Special Administrative Region and Taiwan “Proposed Annual Caps” the proposed annual caps in respect of each category of transactions contemplated under the New Master Agreement for each of the three years ending 31 December 2021 respectively “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SGM” the special general meeting of the Company to be convened and held for the Shareholders (or Independent Shareholders, as the case may be) to consider and approve (i) the resolution in respect of the New Master Agreement and the transactions contemplated thereunder, including the Proposed Annual Caps; and (ii) the resolution in respect of the proposed re-election of Mr. Yu Fan “Share(s)” issued ordinary share(s) of HK$0.1 each in the share capital of the Company “Shareholder(s)” holder(s) of the Shares “Sinoday” Sinoday Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of China Cinda (HK) “Stock Exchange” The Stock Exchange of Hong Kong Limited “%” per cent.

– iv –

LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability)

(Stock code: 111)

Executive Directors:

Mr. Yu Fan (Chairman) Mr. Gong Zhijian (Deputy Chairman and Managing Director) Mr. Lau Mun Chung

Non-executive Directors: Mr. Chow Kwok Wai Ms. Zheng Yi

Independent non-executive Directors: Mr. Hung Muk Ming Mr. Xia Zhidong Mr. Liu Xiaofeng

Registered office: Clarendon House 2 Church Street Hamilton, HM 11 Bermuda

Head office and principal place of business in Hong Kong: 45th Floor COSCO Tower 183 Queen’s Road Central Hong Kong

29 November 2018

To all Shareholders

Dear Sir or Madam,

(I) CONTINUING CONNECTED TRANSACTIONS; (II) PROPOSED RE-ELECTION OF RETIRING DIRECTOR; AND

(III) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the announcements of the Company both dated 30 October 2018 in relation to, among other things, (i) the entering into of the New Master Agreement and the Proposed Annual Caps; and (ii) the appointment of Mr. Yu Fan (“ Mr. Yu ”) as an executive Director and the chairman of the Board.

The purposes of this circular are to provide you with, among other things, (i) principal terms of, and information relating to, the New Master Agreement and the transactions contemplated thereunder; (ii) information relating to the Proposed Annual Caps for the three years ending 31 December 2021; (iii) a letter from the Independent Board Committee, which sets out its recommendations to the Independent Shareholders in relation to the New Master Agreement and the Proposed Annual Caps; (iv) a letter from Opus Capital, which sets out its opinions and recommendations to the Independent Board Committee and the Independent Shareholders in relation to the New Master Agreement and the Proposed Annual Caps; (v) information relating to the proposed re-election of retiring director; and (vi) the notice of the SGM.

– 1 –

LETTER FROM THE BOARD

(I) CONTINUING CONNECTED TRANSACTIONS – THE NEW MASTER AGREEMENT

Reference is made to the announcements of the Company dated 18 December 2015 and 31 March 2016 respectively, in relation to, among other things, the entering into of the Existing Master Agreement (as supplemented on 31 March 2016) between the Company and CCAM and the continuing connected transactions of the Company contemplated thereunder. In contemplation of the expiry of the Existing Master Agreement on 31 December 2018 and in view of the intention of the Company to continue certain types of transactions with the CCAM Group after such expiry, and to facilitate the development of the business of the Group, on 30 October 2018 (after trading hours of the Stock Exchange), the Company entered into the New Master Agreement with CCAM for the provision of the Category I Transactions, Category II Transactions and Category III Transactions to the CCAM Group.

Pursuant to the New Master Agreement, the Group has agreed to provide (i) brokering services for securities, futures and options trading; placing, underwriting and sub-underwriting services for securities; (ii) corporate finance advisory services; and (iii) asset management services to the CCAM Group. The New Master Agreement shall have a term of three years commencing from 1 January 2019 to 31 December 2021.

Principal terms of the New Master Agreement and the Proposed Annual Caps are summarized as follows:

Date: 30 October 2018 Parties: (i) the Company; and (ii) CCAM.

Term: Three years commencing from 1 January 2019 up to 31 December 2021 (both dates inclusive).

Without prejudice to the right of any party to terminate the New Master Agreement, the New Master Agreement shall automatically terminate if (a) the Company or CCAM consider that it is not feasible to comply with the Listing Rules at the relevant time; or (b) compliance with the Listing Rules would require changes to the New Master Agreement which are not acceptable to any of the parties thereto.

Proposed Annual Caps: For details of the Proposed Annual Caps please refer to the section headed “The Proposed Annual Caps” below.

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LETTER FROM THE BOARD

Pursuant to the New Master Agreement, the Group shall provide the following services to the CCAM Group:

(i) provision of brokering services for securities, futures and options trading; placing, underwriting and sub-underwriting services for securities (including but not limited to securities issued by the CCAM Group) (known as Category I Transactions);
(ii) provision of corporate finance advisory services (including but not limited to advisory services in relation to (i) the compliance of the Listing Rules and The Codes on Takeovers and Mergers and Share Buy-backs; (ii) the issue of securities; and (iii) group restructuring) (known as Category II Transactions); and
(iii) provision of asset management services (known as Category III Transactions).

The above categories of transactions are viewed separately with separated Proposed Annual Caps as (i) Category I Transactions are generally commission-based transactions and the commissions/ fees to be charged are generally determined with reference to the monetary value of the transaction orders; (ii) Category II Transactions are related to advisory services for corporate finance transactions and the fees to be charged are determined generally with reference to the complexity of the transactions; and (iii) Category III Transactions are generally fee-based transactions and the fees to be charged are generally determined with reference to the monetary value of the sizes and the performance of the assets under management.

Conditions Precedent to the New Master Agreement

The effectiveness of the New Master Agreement is conditional upon the following conditions precedent being fulfilled:

(i) (where applicable) the Company and CCAM having obtained the approval at the SGM (or a general meeting, in the case of CCAM) on the New Master Agreement and the transactions contemplated thereunder, including the Proposed Annual Caps;
(ii) the Company having obtained all necessary approval for the entering into of the New Master Agreement and for the performance of its obligations thereunder; and
(iii) CCAM having obtained all necessary approval for the entering into of the New Master Agreement and for the performance of its obligations thereunder.

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LETTER FROM THE BOARD

None of the above conditions can be waived. As at the Latest Practicable Date, none of the abovementioned conditions has been fulfilled. Unless the above conditions have been fulfilled by 31 December 2018, the New Master Agreement shall automatically terminate and none of the parties thereto shall have any claims against each other.

The Proposed Annual Caps

The Board proposes the Proposed Annual Caps in respect of each category of transactions contemplated under the New Master Agreement for each of the three years ending 31 December 2021 respectively as follows:

	For the	For the	For the
	year ending	year ending	year ending
	31 December	31 December	31 December
	2019	2020	2021
	HK$	HK$	HK$
Category I Transactions	42,000,000	60,000,000	78,000,000
Category II Transactions	15,000,000	15,000,000	15,000,000
Category III Transactions	120,000,000	150,000,000	180,000,000

The Proposed Annual Caps were determined by the Company after taking into account of the following:

For Category I Transactions

The Company has taken into account of:

(i) the historical transactions amount for the relevant transactions as detailed in the section headed “Historical Transactions Amount and Annual Caps under the Existing Master Agreement” below, adjusted by (a) the estimated total monetary value of the transactions during the term of the New Master Agreement taking into account of the Company’s plan to provide more securities brokering services to Nanyang Commercial Bank, Limited, which had previously been acquired by CCAM, and the Company estimated such transactions amount to have an increase of approximately 10% per year; (b) the estimated substantial increase of approximately 2 to 3 times in the monetary value of debt securities issuance by the CCAM Group to be underwritten or placed by the Group during the term of the New Master Agreement compared with the historical transactions amount for the year ending 31 December 2018 and hence the expected corresponding increase in underwriting commission receivable by the Group; and (c) the estimated increase in the amount of brokering commission of approximately 50% to 2 times for the securities to be traded for the CCAM Group during the term of the New Master Agreement.

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LETTER FROM THE BOARD

(ii) the estimated total monetary value which would be brokered for securities and bonds trading, placing, underwriting and sub-underwriting for securities to be issued by the CCAM Group for each of the three years ending 31 December 2021 respectively;
(iii) the relevant commission rates to be charged by the Group for each type of securities trading, placing and underwriting as mentioned in (ii) above, in accordance with the Group’s pricing policies for each of the three years ending 31 December 2021 respectively, which are determined with reference to the usual market ranges of 0.1% to 0.5% for securities brokering and 0.1% to 5.0% for securities underwriting; and
(iv) a buffer of approximately 10% to provide flexibility to cater for any potential fluctuations of the actual size of the projects and market conditions over the term of the New Master Agreement.

When determining the Proposed Annual Caps for Category I Transactions, the Company has also based on the principal assumptions that (i) there will be a significant growth in the amount of securities brokering services to the CCAM Group taking into account of further expansion and growth of its business; and (ii) the market conditions, operation and business environment will remain stable and there will not be any adverse change in government policies, laws and regulations which may materially affect the business of the Group and/or the CCAM Group.

For Category II Transactions

The Company has taken into account of:

(i) the estimated transaction amount of the services to be provided to the CCAM Group by the Group, which may involve two to three potential corporate exercises which may be undertaken by the CCAM Group involving services from the Group each year during the term of the New Master Agreement and the estimated nature and complexity of such transactions, although no Category II Transaction was conducted by the Group for the CCAM Group under the Existing Master Agreement. The Group understood from the CCAM Group that no corporate finance advisory service was required from the Group as the projects did not materialise as expected, but there may potentially be two to three corporate transactions to be undertaken by the CCAM Group each year during the term of the New Master Agreement;
(ii) the estimated resources to be spent on providing the relevant corporate finance advisory services (i.e. the labour and time costs to be incurred by the staff members of the Group expected to be involved in the potential projects);

– 5 –

LETTER FROM THE BOARD

(iii) where the transaction involves fund raising, the estimated size of the funds involved and the corresponding fee chargeable in line with the Group’s pricing policies; and
(iv) the fees charged by the Group to Independent Third Party clients for similar transactions.

When determining the Proposed Annual Caps for Category II Transactions, the Company has also based on the principal assumption that the market conditions, operation and business environment will remain stable and there will not be any adverse change in government policies, laws and regulations which may materially affect the business of the Group and/or the CCAM Group.

For Category III Transactions

The Company has taken into account of:

(i) the estimated total monetary value of the funds to be managed by the Group during the term of the New Master Agreement for each of the three years ending 31 December 2021 respectively, in particular, although the historical transactions amount for Category III Transactions under the Existing Master Agreement was lower than the Proposed Annual Caps for Category III Transactions under the New Master Agreement. According to the business plan of the Group, there will be 3, 3 and 4 new investment funds to be set up during the three years ending 31 December 2019, 2020 and 2021 respectively, and 2, 1, 2 intermediary projects to be undertaken by the Group for the three years ending 31 December 2019, 2020 and 2021 respectively, hence substantially increasing the amount of management and advisory fee for the Group;
(ii) the management fee and performance fee rates to be charged by the Group in accordance with the Group’s pricing policies, which are determined with reference to the usual market ranges of approximately 0.1% to 2.0% for fund management fee and 5.0% to 20.0% of the fund performance fee; and
(iii) a buffer of approximately 10% to provide flexibility to cater for any potential fluctuations of the actual size of the funds and market conditions over the term of the New Master Agreement.

When determining the Proposed Annual Caps for Category III Transactions, the Company has also based on the principal assumptions that (i) the current trend of increasing number of funds being set up and hence the demand for professional fund management services to be provided by the Group, and the recent business development plan of the CCAM Group will remain unchanged during the term of the New Master Agreement; and (ii) the market conditions, operation and business environment will remain stable and there will not be any adverse change in government policies, laws and regulations which may materially affect the business of the Group and/or the CCAM Group.

– 6 –

LETTER FROM THE BOARD

The Board (other than the independent non-executive Directors whose opinion was included in the letter from the Independent Board Committee of this circular) is of the view that the Proposed Annual Caps are in line with the estimated development of the business of the Group, and are determined based on the principles of fairness and reasonableness.

Pricing Policies

The transactions contemplated under the New Master Agreement shall be entered into on normal commercial terms and the services fees will be charged at rates no less favorable to the Group than rates at which the Group charges Independent Third Parties for comparable transactions. Detailed payment terms will be specified in the individual contracts governing the particular transactions.

In particular, in determining the pricing of each transaction under each category of services:

Category I Transactions

The commission rates to be charged under Category I Transactions by the Group for brokering services for securities, futures and options trading will be determined by the senior management of the Group who are Responsible Officers under the SFO in accordance with the Group’s internal commission policy which is applicable to all customers, and serves as a management guidance for determining the commission rates for different category of clients and sets forth a tiered pricing structure under each category of services, when and if applicable, whether approval by the Group’s supervisors of the securities department, executive Directors and/or Managing Director of the Company is required. Such internal commission policy is set by the executive management committee of the Group (the “ EMC ”) (which comprises the Managing Director of the Company, another executive Director and two deputy general managers of the Company, one of whom supervises, among others, the compliance and internal audit department of the Group (the “ CIA Department ”)) from time to time based on their experience, marketing strategy and with reference to the then prevailing market rates of each type of products, quality and size of the relevant client.

The commission rates to be charged under Category I Transactions for placing, underwriting and sub-underwriting services for securities will be determined by the senior management of the Group who are Responsible Officers under the SFO (or the lead underwriter in the case of underwriting under an underwriter syndicate) taking into account, among other things, the size of placing or underwriting/sub-underwriting commitments, the market demand for the particular issue, the liquidity of the relevant securities, financial performance and industry of the issuer, pricing of the issue and the then prevailing market rates.

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LETTER FROM THE BOARD

The relevant Responsible Officers will then report such decision the CIA Department, which will then review such fee determined and countercheck it against the prevailing pricing policies of the Group for transactions similar to those contemplated under Category I Transactions, and to ensure such commission rate chargeable to the CCAM Group under Category I Transactions will fall within the range of commission rates chargeable to Independent Third Party clients, which is to be determined with reference to the then prevailing market range of commission rates from time to time.

Category II Transactions

The fees to be charged under Category II Transactions by the Group will be determined based on a number of factors applicable to all customers, including but not limited to the complexity and urgency of transactions, the resources estimated to be spent on providing the relevant corporate finance advisory services, the size of the transactions involved, the fees charged for historical transactions of similar nature and the then prevailing market rates. The fee for each individual corporate finance advisory transaction (including transactions with Independent Third Parties) shall then be reviewed and approved by the project engagement committee of the Group (the “ PEC ”) (which comprises the Managing Director of the Company and two Responsible Officers for Type 6 regulated activities under the SFO) based on the aforesaid factors. The PEC will also gather at least two most recent quotations or invoices issued by the Group to Independent Third Parties for services provided which are comparable to the particular service to be provided under Category II Transactions for reference, and to make sure that the fees chargeable under Category II Transactions to the CCAM Group will be no less favorable to the Group than those chargeable by the Group to the Independent Third Party clients.

Category III Transactions

The management fee and performance fee to be charged under Category III Transactions by the Group will be determined based on a number of factors applicable to all customers, including but not limited to the size and nature of the fund, the fees charged for historical transactions of similar nature and the then prevailing market rates. The fee for each individual asset management transaction (including transactions with Independent Third Parties) shall then be reviewed and approved by the investment management committee of the Group (the “ IMC ”) (which comprises the Managing Director of the Company, and another executive Director and two deputy general managers of the Company, one of whom supervises, among others, the CIA Department) based on the aforesaid factors, as well as the prevailing range of management fee and performance fee chargeable by the Group to Independent Third Party clients for funds with similar size and terms, which shall be set with reference to the then prevailing range of market rates.

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LETTER FROM THE BOARD

Internal Control Measures

Detailed payment terms will be specified in the individual contracts governing the particular transactions. To ensure that the transactions contemplated under the New Master Agreement are conducted in accordance with the terms of the New Master Agreement, on normal commercial terms and comply with the pricing policies of the Group, (i) the fees to be charged for each individual transaction by the Group to the CCAM Group under the New Master Agreement shall be determined by the relevant Responsible Officers or department head (including the deputy) according to the pricing policies set by the EMC from time to time as disclosed in the section headed “Pricing Policies” above; (ii) the CIA Department, the EMC, the PEC or the IMC (as the case may be), where applicable, will also review the prevailing market rates, quotations or invoices issued to Independent Third Party clients for comparison and as a reference to ensure that fees chargeable by the Group are comparable to those transacted with Independent Third Parties; and (iii) the CIA Department will review such terms determined and prices chargeable under the transactions contemplated under the New Master Agreement to ensure that the fees are set in compliance with the Group’s internal pricing policies (where applicable) and are charged on normal commercial terms and at rates no less favorable to the Group than rates at which the Group charges Independent Third Party clients for comparable transactions. Moreover, the Company has established a connected transaction committee in September 2018 to monitor, review and approve any connected transactions of the Company, and report its advice to the EMC when the transaction amounts exceed the authority of the committee. The auditors of the Company will also conduct annual review on the continuing connected transactions entered into by the Company such that the Company could be able to ensure compliance with the Group’s pricing policies.

The Directors are of the view that as the businesses of the Group under Category I Transactions, Category II Transactions and Category III Transactions are regulated under the SFO, the market in general is more transparent. Given the Directors’ experience in the market and their knowledge about the industry and information available from the public, the Group is able to obtain sufficient information to assess the market rates and determine whether the fees receivable from the CCAM Group under the New Master Agreement are not less favorable to the Group than those receivable from the Independent Third Party clients.

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LETTER FROM THE BOARD

Historical Transactions Amount and Annual Caps under the Existing Master Agreement

Set out below are the historical income in respect of the Category I Transactions, Category II Transactions and Category III Transactions conducted under the Existing Master Agreement for the two years ended 31 December 2016 and 31 December 2017 and the nine months ended 30 September 2018 respectively:

	For the	For the	For the
	year ended	year ended	nine months ended
	31 December	31 December	30 September
	2016	2017	2018
	Actual income	Actual income	Actual income
	HK$	HK$	HK$
Category I Transactions	10,541,166	9,090,197	7,535,833
Category II Transactions	0	0	0
Category III Transactions	27,703,718	35,982,945	50,075,779

Set out below are the annual caps for the transactions contemplated under the Existing Master Agreement:

	For the	For the	For the
	year ended	year ended	year ending
	31 December	31 December	31 December
	2016	2017	2018
	HK$	HK$	HK$
Category I Transactions	23,000,000	46,000,000	67,000,000
Category II Transactions	15,000,000	15,000,000	15,000,000
Category III Transactions	90,000,000	150,000,000	200,000,000

– 10 –

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF ENTERING INTO THE NEW MASTER AGREEMENT

The Group is principally engaged in the provision of corporate finance advisory services, asset management, securities brokering, commodities and futures broking, financial planning and insurance broking.

The CCAM Group is principally engaged in distressed asset management, and provides customized financial solutions and differentiated asset management services to its clients through its diversified business platforms.

The transactions contemplated under the New Master Agreement are in the ordinary and usual course of business of the Group. Taking into consideration that Category I Transactions, Category II Transactions and Category III Transactions will contribute positively to the Group’s income, the Directors (other than the independent non-executive Directors whose opinion was included in the letter from the Independent Board Committee of this circular) consider that the terms of the New Master Agreement (including the Proposed Annual Caps), which have been negotiated on an arm’s length basis, are on normal commercial terms, fair and reasonable and the entering into of the New Master Agreement is in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

Mr. Yu, the chairman of the Board and an executive Director, Mr. Gong Zhijian, the deputy chairman of the Board and a managing Director, and Ms. Zheng Yi, a non-executive Director, all held management positions in or are employed by the CCAM Group, and therefore are considered having interests in the New Master Agreement and have therefore abstained from voting on the Board resolutions approving the New Master Agreement and the transactions contemplated thereunder.

As at the Latest Practicable Date, Sinoday is interested in 403,960,200 Shares, representing approximately 63% of the issued share capital of the Company. Sinoday is a wholly-owned subsidiary of China Cinda (HK) which is in turn a wholly-owned subsidiary of CCAM. Accordingly, members of the CCAM Group are connected persons of the Company and the transactions contemplated under the New Master Agreement constitute continuing connected transactions of the Company under Rule 14A.31 of the Listing Rules.

Since the Proposed Annual Caps for Category I Transactions, Category II Transactions and Category III Transactions for each of the three years ending 31 December 2021 respectively are expected to exceed 5% of certain applicable percentage ratios under the Listing Rules and are expected to exceed HK$10 million each, the continuing connected transactions contemplated under Category I Transactions, Category II Transactions and Category III Transactions under the New Master Agreement, and the respective Proposed Annual Caps therefore are subject to the reporting, annual review, announcement, circular and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

The Independent Board Committee comprising all independent non-executive Directors, namely Mr. Hung Muk Ming, Mr. Xia Zhidong and Mr. Liu Xiaofeng, has been established for the purpose of advising the Independent Shareholders in respect of, among other things, the New Master Agreement and the Proposed Annual Caps for the three years ending 31 December 2021. The Independent Financial Adviser has also been appointed to advise the Independent Board Committee and the Independent Shareholders in respect of, among other things, the New Master Agreement and the Proposed Annual Caps for the three years ending 31 December 2021.

(II) PROPOSED RE-ELECTION OF RETIRING DIRECTOR

Mr. Yu has been appointed as an executive Director, the chairman of the Board and the chairman of the nomination committee of the Company with effect from 30 October 2018.

Pursuant to bye-law 86(2) of the Company, any Director so appointed shall hold office only until the first general meeting of the Company after his or her appointment (in the case of filling a casual vacancy) and shall then be eligible for re-election at that meeting.

Accordingly, Mr. Yu is subject to retirement at the SGM and, being eligible, offers himself for reelection. The Board considers that the re-election of Mr. Yu as an executive Director is in the best interests of the Company and the Shareholders as a whole.

Mr. Yu, aged 55, an executive Director, the chairman of the Board and the chairman of the nomination committee of the Company respectively, is currently a director and the chief executive officer of Cinda Securities Co., Ltd. 信達證券股份有限公司 (“ Cinda Securities ”), the chairman of the board of First State Cinda Fund Management Co., Ltd. 信達澳銀基金管理有限公司 and the chairman of the board of Shanghai Cinda Guoxin Equity Investment Management Co., Ltd. 上海信達國鑫股權投資管理有限公司 respectively. Mr. Yu holds the professional title of Senior Economist.

Mr. Yu has substantial experience in the financial market of the PRC. He was the law lecturer of the Management Officers’ College of the then Chemistry Ministry of the PRC and had been the deputy general manager and general manager of the office management department, research department and investment business department of China Cinda Trust and Investment Company. He was the senior manager of the debt management department of China Cinda Asset Management Corporation 中國信達資產管理公司, the predecessor of CCAM, the indirect controlling shareholder (as defined in the Listing Rules) of the Company; the secretary of the board of directors and deputy general manager of Hongyuan Securities Co., Ltd. 宏源證券股份有限公司; the secretary of the board of directors, deputy general manager and executive deputy general manager of Cinda Securities; and the deputy general manager of the investment banking department and the general manager of the investment and financing department of CCAM, respectively.

– 12 –

LETTER FROM THE BOARD

Mr. Yu has signed the letter of appointment with the Company with three years fixed term of service and Mr. Yu is subject to retirement by rotation and re-election pursuant to the bye-laws of the Company. Mr. Yu does not receive any director’s fee and/or remuneration pursuant to his letter of appointment.

Save as disclosed above, Mr. Yu neither holds any directorship in other public companies the securities of which are listed on any securities market in Hong Kong or overseas in the last three years, nor holds any other position with the Company and other members of the Group.

As at the Latest Practicable Date, save as disclosed above, Mr. Yu does not have any relationship with any Directors, senior management, substantial or controlling shareholders of the Company (as defined in the Listing Rules) and he does not have, and is not deemed to have, any interests or short positions in any shares, underlying shares or debentures of the Company or any of its associated corporations within the meaning of Part XV of the SFO.

There is no information relating to Mr. Yu that is required to be disclosed pursuant to Rules 13.51(2)(h) to (v) of the Listing Rules. Save as disclosed above, there is no other matter in relation to the appointment of Mr. Yu that needs to be brought to the attention of the Shareholders.

GENERAL

The SGM will be held for the Independent Shareholders to consider and, if thought fit, approve, among other things, (i) the entering into of the New Master Agreement; and (ii) the Proposed Annual Caps for the three years ending 31 December 2021 by way of an ordinary resolution.

Besides, the SGM will be held for all the Shareholders to consider and, if thought fit, approve, among other things, the re-election of Mr. Yu as an executive Director by way of an ordinary resolution.

A notice convening the SGM to be held at 45th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong on 14 December 2018 at 11:00 a.m., is set out on pages SGM-1 to SGM-2 of this circular.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as practicable and in any event not less than 48 hours before the time appointed for holding the SGM (i.e., by 12 December 2018, at 11:00 a.m.) (or any adjournment thereof) to the office of the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM (or any adjournment thereof) if you so wish and in such event, the instrument appointing a proxy shall be deemed to be revoked.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, Sinoday, being the controlling Shareholder and an indirect wholly-owned subsidiary of CCAM, is interested in 403,960,200 Shares, representing approximately 63% of the issued share capital of the Company, and is deemed to have material interests in the New Master Agreement and the transactions contemplated thereunder, including the Proposed Annual Caps. Sinoday and its associates will, therefore, abstain from voting at the SGM on the resolution in relation to the entering into of the New Master Agreement and the transactions contemplated thereunder, including the Proposed Annual Caps.

RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee set out on page 15 of this circular which contains its recommendations to the Independent Shareholders. In addition, your attention is drawn to the letter from Opus Capital set out on pages 16 to 37 of this circular which contains its opinions and recommendations to the Independent Board Committee and the Independent Shareholders and the principal factors and reasons considered by it in formulating its advice.

The Directors consider that the re-election of Mr. Yu as an executive Director is in the interests of the Company and the Shareholders as a whole and so recommend you to vote in favour of the ordinary resolution in relation to his re-election to be proposed at the SGM.

ADDITIONAL INFORMATION

Your attention is also drawn to the information set out in the appendix to this circular and the notice of the SGM set out in this circular.

Yours faithfully,

For and on behalf of the Board

Cinda International Holdings Limited

Lau Mun Chung

Executive Director

– 14 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the letter of advice from the Independent Board Committee to the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

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(Incorporated in Bermuda with limited liability)

(Stock code: 111)

29 November 2018

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular of the Company dated 29 November 2018 (the “ Circular ”) of which this letter forms part. Unless the context otherwise requires, terms used herein shall have the same meanings as those defined in the Circular.

We have been appointed by the Board to form the Independent Board Committee to consider and advise the Independent Shareholders as to whether, in our opinion, the New Master Agreement was entered into in the ordinary and usual course of business of the Group on normal commercial terms, the terms of the New Master Agreement and the Proposed Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Having considered the terms of the New Master Agreement and the advice of Opus Capital in relation thereto as set out on pages 16 to 37 of the Circular, we are of the opinion that the New Master Agreement was entered into in the ordinary and usual course of business of the Group on normal commercial terms, the terms of the New Master Agreement and the Proposed Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM to approve the New Master Agreement and the transactions contemplated thereunder, including the Proposed Annual Caps.

Yours faithfully,

For and on behalf of

the Independent Board Committee

Mr. Hung Muk Ming

Mr. Xia Zhidong Independent Non-executive Directors

Mr. Liu Xiaofeng

– 15 –

LETTER FROM OPUS CAPITAL

Set out below is the text of a letter received from Opus Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the New Master Agreement and the Proposed Annual Caps for the purpose of inclusion in this circular.

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18[th] Floor, Fung House 19–20 Connaught Road Central Central, Hong Kong

29 November 2018

To: The Independent Board Committee and the Independent Shareholders of Cinda International Holdings Limited

Dear Sir/Madam,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders of the Company in respect of the New Master Agreement and the Proposed Annual Caps, details of which are set out in the section headed “Letter from the Board” (the “ Letter from the Board ”) in the circular dated 29 November 2018 (the “ Circular ”) of which this letter forms a part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

On 30 October 2018, the Company and CCAM entered into the New Master Agreement, pursuant to which the Group has agreed to provide: (i) brokering services for securities, futures and options trading, as well as placing, underwriting and sub-underwriting services for securities; (ii) corporate finance advisory services; and (iii) asset management services to the CCAM Group.

As stated in the Letter from the Board, as at the Latest Practicable Date, Sinoday is interested in 403,960,200 Shares, representing approximately 63% of the issued share capital of the Company. Sinoday is a wholly-owned subsidiary of China Cinda (HK) which is in turn a wholly-owned subsidiary of CCAM. Accordingly, members of the CCAM Group are connected persons of the Company and the transactions contemplated under the New Master Agreement constitute continuing connected transactions of the Company under Rule 14A.31 of the Listing Rules.

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LETTER FROM OPUS CAPITAL

Since the Proposed Annual Caps for Category I Transactions, Category II Transactions and Category III Transactions for each of the three years ending 31 December 2019, 2020 and 2021 respectively are expected to exceed: (i) 5% of certain applicable percentage ratios under the Listing Rules; and (ii) HK$10 million each, the continuing connected transactions contemplated under Category I Transactions, Category II Transactions and Category III Transactions under the New Master Agreement, and the respective Proposed Annual Caps therefore are subject to the reporting, annual review, announcement, circular and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Mr. Yu Fan, the chairman of the Board and an executive Director, Mr. Gong Zhijian, the deputy chairman of the Board and a managing Director, and Ms. Zheng Yi, a non-executive Director, all held management positions in or are employed by the CCAM Group, and therefore are considered having interests in the New Master Agreement. They have abstained from voting on the Board resolutions approving the New Master Agreement and the transactions contemplated thereunder.

Sinoday, being the controlling Shareholder, is deemed to have material interests in the New Master Agreement and the transactions contemplated thereunder, including the Proposed Annual Caps. Sinoday and its associates will, therefore, abstain from voting at the SGM on the resolution in relation to the entering into of the New Master Agreement and the transactions contemplated thereunder, including the Proposed Annual Caps.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising all independent non-executive Directors, namely Mr. Hung Muk Ming, Mr. Xia Zhidong and Mr. Liu Xiaofeng, has been established by the Company for the purpose of advising the Independent Shareholders in respect of the New Master Agreement and the Proposed Annual Caps. We have been appointed by the Company to advise the Independent Board Committee and the Independent Shareholders as to whether: (i) the New Master Agreement was entered in the ordinary and usual course of business of the Group; and (ii) the terms of the New Master Agreement are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole. We are also required to make a recommendation on how the Independent Shareholders should vote in respect of the relevant resolution to approve the New Master Agreement and the Proposed Annual Caps.

OUR INDEPENDENCE

As at the Latest Practicable Date, we do not have any relationship with, or interest in, the Company, CCAM or any other parties that could reasonably be regarded as relevant to our independence. Apart from normal independent financial advisory fees payable to us in connection with this appointment, no arrangements exist whereby we had received or will receive any fees or benefits from the Company, CCAM or any other parties that could reasonably be regarded as relevant to our independence. Accordingly, we consider that we are independent pursuant to Rule 13.84 of the Listing Rules.

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LETTER FROM OPUS CAPITAL

BASIS OF OUR OPINION

In formulating our advice and recommendation to the Independent Board Committee and the Independent Shareholders, we have considered and reviewed, amongst other things, (i) the Existing Master Agreement (as supplemented on 31 March 2016); (ii) the New Master Agreement; (iii) the Company’s annual reports for the three years ended 31 December 2015, 2016 and 2017 (the “ Annual Reports ”); (iv) the Company’s interim reports for the six months ended 30 June 2017 and 2018 (the “ Interim Reports ”); (v) certain internal records and procedures of the Group; and (vi) other information set out in the Circular. We have also discussed with the Company with respect to the terms of and reasons for the entering into the New Master Agreement.

We have relied on the truth, accuracy and completeness of the statements, information, opinions and representations contained or referred to in the Circular and the information and representations made to us by the Company, the Directors and the management of the Group (collectively, the “ Management ”). We have assumed that all information and representations contained or referred to in the Circular and provided to us by the Management, for which they are solely and wholly responsible, are true, accurate and complete in all respects and not misleading or deceptive at the time when they were provided or made and will continue to be so up to the Latest Practicable Date. Shareholders will be notified of material changes as soon as possible, if any, to the information and representations provided and made to us after the Latest Practicable Date and up to and including the date of the SGM.

We have also assumed that all statements of belief, opinion, expectation and intention made by the Management in the Circular were reasonably made after due enquiries and careful consideration and there are no other facts not contained in the Circular, the omission of which make any such statement contained in the Circular misleading. We have no reason to suspect that any relevant information has been withheld, or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Management, which have been provided to us.

We considered that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. However, we have not carried out any independent verification of the information provided by the Management, nor have we conducted any independent investigation into the business, financial conditions and affairs of the Group or its future prospects. We also have not considered the taxation implication on the Group as a result of the New Master Agreement and the transactions contemplated thereunder.

The Directors jointly and severally accept full responsibility for the accuracy of the information disclosed and confirm, having made all reasonable enquiries that to the best of their knowledge and belief, there are no other facts not contained in this letter, the omission of which would make any statement herein misleading.

– 18 –

LETTER FROM OPUS CAPITAL

This letter is issued to the Independent Board Committee and the Independent Shareholders solely in connection for their consideration of the terms of the transactions contemplated under the New Master Agreement and the transactions contemplated thereunder, including the Proposed Annual Caps, and except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinions and recommendation to the Independent Board Committee and the Independent Shareholders, we have taken into consideration, inter alia, the following principal factors and reasons:

1. Information on the Group and the CCAM Group

1.1 The Group

Set out below is a summary of the Group’s consolidated segmental revenues for the three years ended 31 December 2015, 2016 and 2017 and six months ended 30 June 2017 and 2018:

Table 1: The Group’s consolidated segment revenue

		Brokerage/sales
	Asset	and trading	Corporate
management		business	finance	Total
	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)
For the year ended 31 December:
2015	34,631	82,540	31,206	148,377
2016	59,791	81,310	17,531	158,632
2017	63,187	109,586	20,548	193,321
For the six months ended 30 June:
2017	36,379	48,007	12,364	96,750
2018	47,406	47,265	17,174	111,845

Sources: The Annual Reports and the Interim Reports

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LETTER FROM OPUS CAPITAL

In general, revenues generated by the Group, in particular its asset management business, have experienced an upward trend in the past few years.

1.2 The CCAM Group

CCAM is a joint stock limited company incorporated in the PRC, the H shares of which are listed on the Main Board of the Stock Exchange (stock code: 1359).

According to the annual report of CCAM for the year ended 31 December 2017, the principal business segments of the CCAM Group include distressed asset management, financial investment and asset management, as well as provision of financial services. Among all the principal business segments of the CCAM Group, distressed asset management is considered to be the core business of the CCAM Group.

CCAM has several subsidiaries as platforms for providing distressed asset management, asset management and financial services in the PRC and Hong Kong, including reputable companies such as Nanyang Commercial Bank, Limited (“ Nanyang Commercial Bank ”), Cinda Securities Co., Ltd., China Jingu International Trust Co., Ltd., Cinda Financial Leasing Co., Ltd., Happy Life Insurance Co., Ltd., Cinda Investment Co., Ltd, China Cinda (HK) and Zhongrun Economic Development Co., Ltd.

2. Background of and reasons for entering into the New Master Agreement

Pursuant to the New Master Agreement, the Group shall provide the following services to the CCAM Group with a term of three years commencing from 1 January 2019 to 31 December 2021:

(i) provision of brokering services for securities, futures and options trading, as well as placing, underwriting and sub-underwriting services for securities (including but not limited to securities issued by the CCAM Group) (known as Category I Transactions);
(ii) provision of corporate finance advisory services (including but not limited to advisory services in relation to: (i) the compliance of the Listing Rules and The Codes on Takeovers and Mergers and Share Buy-backs; (ii) the issue of securities; and (iii) group restructuring) (known as Category II Transactions); and
(iii) provision of asset management services (known as Category III Transactions).

– 20 –

LETTER FROM OPUS CAPITAL

As stated in the Letter from the Board, Category I Transactions, Category II Transactions and Category III Transactions will contribute positively to the Group’s income. As it is the intention of the Company to continue with the provision of services in Category I Transactions, Category II Transactions and Category III Transactions to the CCAM Group after the expiry of the Existing Master Agreement (as supplemented on 31 March 2016) which will take place on 31 December 2018, the Company entered into the New Master Agreement with CCAM.

Taking into consideration of the natures of Category I Transactions, Category II Transactions and Category III Transactions are consistent with the existing business activities of the Group and taking into account of the pricing policies mentioned below where service fees will be charged at rates no less favourable to the Group than rates at which the Group would charge Independent Third Parties for comparable transactions, we concur with the Directors’ views that the New Master Agreement was entered in the ordinary and usual course of business of the Group, on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

3. The New Master Agreement

3.1 Principal terms of the New Master Agreement

Parties: (i) the Company; and

(ii) CCAM.

Date: 30 October 2018

Term: Three years commencing from 1 January 2019 up to 31 December 2021 (both dates inclusive).

Nature of (i) Category I Transactions;

transactions:

(ii) Category II Transactions; and
(iii) Category III Transactions.

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LETTER FROM OPUS CAPITAL

3.2 Basis for service fees and factors to be considered

(i) Category I Transactions

The Group shall be entitled to receive brokerage fees, commissions and expense reimbursements from CCAM for provision of services under Category I Transactions. The commission/fees to be charged under Category I Transactions by the Group are determined with reference to: (i) the monetary value of the transaction orders; (ii) the rate under which the Group would render similar services to Independent Third Parties; and (iii) prevailing market rates for similar services.

(ii) Category II Transactions

The Group shall be entitled to receive advisory fees for provision of services under Category II Transactions. The fees to be charged under Category II Transactions by the Group are determined with reference to: (i) the complexity of the transactions; (ii) the rate under which the Group would render similar services to Independent Third Parties; and (iii) prevailing market rates for similar services.

(iii) Category III Transactions

The Group shall be entitled to receive management and performance fees for provision of services under Category III Transactions. The fees to be charged under Category III Transactions by the Group are determined with reference to: (i) monetary value of the assets under management (“ AUM ”) and performance; (ii) the rate under which the Group would render similar services to Independent Third Parties; and (iii) prevailing market rates for similar services.

3.3 Pricing policies

The transactions contemplated under the New Master Agreement shall be entered into on normal commercial terms and the services fees will be charged at rates no less favourable to the Group than rates at which the Group would charge Independent Third Parties for comparable transactions. Detailed payment terms will be specified in the individual contracts governing the particular transactions.

Set out below are the pricing policies adopted by the Management in determining the pricing of each transaction under each category of services.

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LETTER FROM OPUS CAPITAL

(i) Category I Transactions

The commission rates to be charged under Category I Transactions by the Group for brokering services for securities, futures and options trading will be determined by the senior management of the Group who are Responsible Officers under the SFO in accordance with the Group’s internal commission policy which is applicable to all customers, and serves as a management guidance for determining the commission rates for different category of clients and sets forth a tiered pricing structure under each category of services, when and if applicable, whether approval by the Group’s supervisors of the securities department, executive Directors and/or Managing Director of the Company is required. Such internal commission policy is set by the the executive management committee of the Group (the “ EMC ”) (which comprises the Managing Director of the Company, another executive Director and two deputy general managers of the Company one of whom supervises, among others, the compliance and internal audit department of the Group (the “ CIA Department ”)) from time to time based on their experience, marketing strategy and with reference to the then prevailing market rates of each type of products, quality and size of the relevant client.

The relevant Responsible Officers will then report such decision to the CIA Department, which will then review such fee determined and countercheck it against the prevailing pricing policies of the Group for transactions similar to those contemplated under Category I Transactions, and to ensure such commission rates chargeable to the CCAM Group under Category I Transactions will fall within the range of commission rates chargeable to Independent Third Parties, which is to be determined with reference to the then prevailing market range of commission rates from time to time.

– 23 –

LETTER FROM OPUS CAPITAL

(ii) Category II Transactions

The fees to be charged under Category II Transactions by the Group will be determined based on a number of factors applicable to all customers, including but not limited to the complexity and urgency of transactions, the resources estimated to be spent on providing the relevant corporate finance advisory services, the size of the transactions involved, the fees charged for historical transactions of similar nature and the then prevailing market rates. The fee for each individual corporate finance advisory transaction (including transactions with Independent Third Parties) shall then be reviewed and approved by the project engagement committee of the Group (the “ PEC ”) (which comprises the Managing Director of the Company and two Responsible Officers for Type 6 regulated activities under the SFO) based on the aforesaid factors. The PEC will also gather at least two most recent quotations or invoices issued by the Group to Independent Third Parties for services provided which are comparable to the particular service to be provided under Category II Transactions for reference, and to make sure that the fees chargeable under Category II Transactions to the CCAM Group will be no less favourable to the Group than those chargeable by the Group to Independent Third Parties.

(iii) Category III Transactions

The management fee and performance fee to be charged under Category III Transactions by the Group will be determined based on a number of factors applicable to all customers, including but not limited to the size and nature of the fund, the fees charged for historical transactions of similar nature and the then prevailing market rates. The fee for each individual asset management transaction (including transactions with Independent Third Parties) shall then be reviewed and approved by the investment management committee of the Group (the “ IMC ”) (which comprises the Managing Director of the Company and another executive Director and two deputy general managers of the Company one of whom supervises, among others, the CIA Department) based on the aforesaid factors, as well as the prevailing range of management fee and performance fee chargeable by the Group to Independent Third Parties for funds with similar size and terms, which shall be set with reference to the then prevailing range of market rates.

– 24 –

LETTER FROM OPUS CAPITAL

3.4 Internal control measures

Detailed payment terms will be specified in the individual contracts governing the particular transactions. To ensure that the transactions contemplated under the New Master Agreement are conducted in accordance with the terms of the New Master Agreement, on normal commercial terms and comply with the pricing policies of the Group: (i) the fees to be charged for each individual transaction by the Group to the CCAM Group under the New Master Agreement shall be determined by the relevant Responsible Officers or department head (including the deputy) according to the pricing policies set by the EMC from time to time as disclosed in the paragraph headed “3.3 Pricing policies” above; (ii) the CIA Department, the EMC, the PEC or the IMC (as the case may be), where applicable, will also review the prevailing market rates, quotations or invoices issued to Independent Third Parties for comparison and as a reference to ensure that fees chargeable by the Group are comparable to those transacted with Independent Third Parties; and (iii) the CIA Department will review such terms determined and prices chargeable under the transactions contemplated under the New Master Agreement to ensure that the fees are set in compliance with the Group’s internal pricing policy (where applicable) and are charged on normal commercial terms and at rates no less favourable to the Group than rates at which the Group charges Independent Third Parties for comparable transactions. Moreover, the Company has established a connected transaction committee in September 2018 to monitor, review and approve any connected transactions of the Company, and report its advice to the EMC when the transaction amounts exceed the authority of the committee. The auditors of the Company will also conduct annual review on the continuing connected transactions entered into by the Company such that the Company could be able to ensure compliance with the Group’s pricing policies.

We have reviewed the Existing Master Agreement and noted that the pricing basis and the other key terms are in line with the Existing Master Agreement. We have obtained two internal approval records for each of Category I Transactions and Category III Transactions that took place between 1 January 2016 and 30 September 2018. No internal approval record for Category II Transactions was obtained as the Group did not undertake any transactions under this category during this period. We have also performed a walk-through of the internal control measures with the Management regarding the transactions by having sighted the abovementioned internal approval records.

– 25 –

LETTER FROM OPUS CAPITAL

We are of the view that the effectiveness of the Company’s internal control measures is evidenced through our satisfactory walk-through of the transactions and sample check of the Company’s internal approval records. Based on the above, we are of the view that given the collective experience of the Directors and senior management of the Group (which often involves the CIA Department, the EMC, the PEC or the IMC (as the case may be) for transactional approval) in the market and their knowledge about the financial industry and information available from the public, the Group is able to obtain sufficient information to assess the market rates and determine whether the fees receivable from the CCAM Group under the New Master Agreement are no less favorable to the Group than those receivable from the Independent Third Parties.

Based on the above, and in particular: (i) the transactions contemplated under the New Master Agreement shall be entered into on normal commercial terms and the services fees will be charged at rates no less favourable to the Group than rates at which the Group would charge Independent Third Parties for comparable transactions; (ii) the fees to be charged for each individual transaction by the Group to the CCAM Group under the New Master Agreement shall be determined by the relevant Responsible Officers or department head (including the deputy) according to the established pricing policies; (iii) the involvement of the CIA Department, the EMC, the PEC or the IMC (as the case may be), where applicable, to review the fees to be charged for each individual transaction against the prevailing market rates, quotations or invoices issued to Independent Third Parties; (iv) the involvement of the CIA Department to review such terms determined and prices chargeable under the transactions contemplated under the New Master Agreement to ensure that the fees are set in compliance with the Group’s internal pricing policy and are charged based on the principle (i) above; and (v) the Company’s internal control measures mentioned above, we consider the pricing terms of the New Master Agreement to be on normal commercial terms, are fair and reasonable so far as the Independent Shareholders are concerned.

4. Analysis on the Proposed Annual Caps

4.1 The Proposed Annual Caps

Set out below is a summary of the Proposed Annual Caps for each category of the transactions contemplated under the New Master Agreement for the three years ending 31 December 2019, 2020 and 2021.

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LETTER FROM OPUS CAPITAL

Table 2: Summary of the Proposed Annual Caps for each category of the transactions

	For the year ending 31 December	For the year ending 31 December	For the year ending 31 December
	2019	2020	2021
	(HK$’000)	(HK$’000)	(HK$’000)
Category I Transactions	42,000	60,000	78,000
Category II Transactions	15,000	15,000	15,000
Category III Transactions	120,000	150,000	180,000

4.2 Basis of the Proposed Annual Caps

(i) Category I Transactions

In determining the Proposed Annual Caps for Category I Transactions, the Company has taken into account of:

the historical transactions amount for the relevant transactions as detailed in the section headed “Historical Transactions Amount and Annual Caps under the Existing Master Agreement” in the Letter of the Board, adjusted by (a) the estimated total monetary value of the transactions during the term of the New Master Agreement taking into account of the Company’s plan to provide more securities brokering services to Nanyang Commercial Bank which had previously been acquired by CCAM, and the Company estimated such transactions amount to have an increase of approximately 10% per year; (b) the estimated substantial increase of approximately 2 to 3 times in the monetary value of debt securities issuance by the CCAM Group to be underwritten or placed by the Group during the term of the New Master Agreement compared with the historical transactions amount for the year ending 31 December 2018 and hence the expected corresponding increase in underwriting commission receivable by the Group; and (c) the estimated increase in the amount of brokering commission of approximately 50% to 2 times for the securities to be traded for the CCAM Group during the term of the New Master Agreement;
the estimated total monetary value which would be brokered for securities and bonds trading, placing, underwriting and sub-underwriting for securities to be issued by the CCAM Group for each of the three years ending 31 December 2019, 2020 and 2021;

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LETTER FROM OPUS CAPITAL

the relevant commission rates to be charged by the Group for each type of securities trading, placing and underwriting as mentioned above, in accordance with the Group’s pricing policies for each of the three years ending 31 December 2019, 2020 and 2021 respectively, which are determined with reference to the usual market ranges of approximately 0.1% to 0.5% for securities brokering and approximately 0.1% to 5.0% for securities underwriting; and
a buffer of approximately 10% to provide flexibility to cater for any potential fluctuations of the actual size of the projects and market conditions over the term of the New Master Agreement.

When determining the Proposed Annual Caps for Category I Transactions, the Company has also based on the principal assumptions that: (i) there will be a significant growth in the amount of securities brokering services to the CCAM Group taking into account of further expansion and growth of its business; and (ii) the market conditions, operation and business environment will remain stable and there will not be any adverse change in government policies, laws and regulations which may materially affect the business of the Group and/or the CCAM Group.

We note that historical transactions amount for the relevant transactions under Category I Transactions for the two years ended 31 December 2016 and 2017 and the nine months ended 30 September 2018 were approximately HK$10.5 million, HK$9.1 million and HK$7.5 million respectively. Although the figures were much smaller than the Proposed Annual Caps in respect of Category I Transactions of HK$42.0 million, HK$60.0 million and HK$78.0 million for the three years ending 31 December 2019, 2020 and 2021, the growth, as we examined, are mainly driven by the estimated substantial increase in debt securities issuance by the CCAM Group to be underwritten or placed by the Group as well as the planned increase in the share of securities brokering services amongst Nanyang Commercial Bank’s panel of brokers by the Group. The Management also advised that it is intended that the Group will be involved in more underwriting or placing of debt securities issuance of the CCAM Group during the term of the New Master Agreement. Furthermore, the Management estimated that significantly more securities brokering services will be provided to Nanyang Commercial Bank, a subsidiary acquired by CCAM in 2016, during the term of the New Master Agreement, as the Company will forge a closer relationship with Nanyang Commercial Bank to enlarge its share of securities brokering services amongst Nanyang Commercial Bank’s panel of brokers.

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LETTER FROM OPUS CAPITAL

During the review, based on the estimate provided by the Management, we note that the estimated transactions amount for Category I Transactions under the Existing Master Agreement for the year ending 31 December 2018, being fees and/ or commissions earned from provision of brokering services for securities, futures and options trading, as well as placing, underwriting and sub-underwriting services, would be approximately HK$16.1 million. The Proposed Annual Caps in respect of Category I Transactions for the year ending 31 December 2019 of HK$42.0 million implies a significant growth rate of approximately 260.9%. Thereafter the size of the Proposed Annual Caps appears to increase at more moderate annual growth rates of approximately 42.8% and 30.0% for each of the two years ending 31 December 2020 and 2021 respectively. To examine the reasonableness of such significant ramp up and growth rates, we have obtained and reviewed the business plan of the Group, confirming that it is expected that the total size of the debt securities to be underwritten by the Group for the CCAM Group would increase by approximately 101.2%, 30.0% and 23.1% during the three years ending 31 December 2019, 2020 and 2021 respectively while the Group is also looking to increase its underwriting commission by 40% in 2019 while maintaining the same level for the two years ending 31 December 2020 and 2021. The projected increase in underwriting commission for the three years ending 31 December 2019, 2020 and 2021, as explained by the Management, has reflected (i) the higher commissions to be charged on the underwriting of the debt securities issuances by associates of CCAM which have lower credit ratings compared to debt securities issuances underwritten by the Group in the past; and (ii) the higher commissions to be charged due to the deteriorating performance of the financial markets. Furthermore, based on the business plan of the Group, the Group would expand its collaboration with Nanyang Commercial Bank, to significantly increase its share of securities brokering services amongst Nanyang Commercial Bank’s panel of brokers from approximately 15% to 30%, 45% and 60% for each of the three years ending 31 December 2019, 2020 and 2021.

In terms of reviewing the relevant commission rates to be charged by the Group for each type of securities trading, placing and underwriting as mentioned above: (i) 0.1% to 0.5% for securities brokering; and (ii) 0.1% to 5.0% for securities underwriting, we have reviewed the historical commission rates charged to the CCAM Group by the Group against the rates being used as assumptions in determining the Proposed Annual Caps under Category I Transactions and noted that they are broadly similar. Furthermore, we have reviewed, on a best effort basis, the terms of similar services provided by 9 comparable companies (the “ Comparable Companies ”) listed on the Main Board of the Stock Exchange with their listing documents published during 1 January 2015 to 30 September 2018 and noted the relevant commission rates of the Comparable Companies are as stated below:

– 29 –

LETTER FROM OPUS CAPITAL

Table 3: Brokerage and placing/underwriting commission rates of the Comparable Companies

			Brokerage commission	Brokerage commission			Placing/underwriting	Placing/underwriting	Placing/underwriting
			rate	(%)			commission	rate	(%)
			(Note 1)				(Note	2)
Name of the Comparable Companies	Stock code	The PRC		Hong Kong		The PRC		Hong Kong
		Low	High	Low	High	Low	High	Low		High
							(Note 3)
BOCOM International Holdings Company Limited	3329.HK	–	–	0.059	0.364	–	–	0.300		2.800
China International Capital Corporation Limited
(Note 4)	3908.HK	0.079	0.108	0.168	0.204	–	–		–	–
China Merchants Securities Co., Ltd
(Note 4)	6099.HK	–	–	–	–	0.070	7.580		–	–
CSC Financial Co., Ltd (Note 4)	6066.HK	0.001	0.076	–	–	0.032	1.924		–	–
Everbright Securities Company Limited (Note 4)	6178.HK	0.038	0.069	–	–	0.100	8.000		–	–
GF Securities Co., Ltd (Note 4)	1776.HK	0.069	0.088	–	–	0.090	6.100		–	–
Guotai Junan Securities Co., Ltd (Note 4)	2611.HK	0.001	0.071	–	–	0.118	7.466		–	–
Huatai Securities Co., Ltd (Note 4)	6886.HK	0.001	0.061	–	–	0.050	9.650		–	–
China Renaissance Holdings Ltd	1911.HK	–	–	0.050	0.200	–	–	1.750		7.000
Range based on the above companies		0.001	0.108	0.050	0.364	0.032	9.650		–	7.000

Source: Listing documents of the respective companies from the website of the Stock Exchange

Notes:

Include brokerage commission rate of securities, futures and funds.
Include placing/underwriting commission rate for placing of bonds and equities.
High end of these ranges in certain cases were due to inclusion of sponsor fees into the underwriting fees for purpose of disclosure in the relevant listing documents.
These companies have businesses in the PRC and Hong Kong, but some companies did not disclose the rates in the PRC and Hong Kong separately in their respective listing documents. Given they derived more revenues from the PRC, we have assumed these rates were charged in the PRC but these may include rates charged in Hong Kong.

– 30 –

LETTER FROM OPUS CAPITAL

We consider the list of Comparable Companies to be an exhaustive (based on the aforesaid selection criteria), fair and representative sample for the purpose of our analysis.

Based on the above analysis, we noted that: (i) brokerage commission rates of the Comparable Companies for such services rendered were within the range of approximately 0.001% to 0.108% in the PRC and 0.05% to 0.364% in Hong Kong respectively; and (ii) placing/underwriting commission rates of the Comparable Companies for such services rendered were within the range of approximately 0.032% to 9.65% in the PRC and nil to 7.0% in Hong Kong respectively, the relevant commission rates to be charged by the Group for each type of securities trading, placing and underwriting are within the above ranges.

It is worth noting that the ranges of the commissions can be fairly wide which varies depending on the specifications provided under each category of services. Set out below are our general observations, among others:

commission rates charged for futures would be lower than that for securities;
commission rates for placing/underwriting of equity securities would be higher than that for placing/underwriting of debt securities; and
with regards to placing/underwriting of equities, commission rates charged in an initial offering would typically be higher than that in a secondary offering.

Taking into consideration of the above analysis, observations and discussion with the Management for Category I Transactions, particularly: (i) the estimated substantial increase in debt securities issuance by the CCAM Group to be underwritten or placed by the Group as well as the planned increase in the share of securities brokering services amongst Nanyang Commercial Bank’s panel of brokers by the Group; and (ii) the service fees received by the Group for Category I Transactions are no less favourable than the prevailing market rates, we are of the view that the bases used by the Company in determining the Proposed Annual Caps for Category I Transactions are fair and reasonable.

– 31 –

LETTER FROM OPUS CAPITAL

(ii) Category II Transactions

In determining the Proposed Annual Caps for Category II Transactions, the Company has taken into account of:

the estimated transaction amount of the services to be provided to the CCAM Group by the Group, which may involve two to three potential corporate exercises which may be undertaken by the CCAM Group involving services from the Group each year during the term of the New Master Agreement and the estimated nature and complexity of such transactions, although no Category II Transaction was conducted by the Group for the CCAM Group under the Existing Master Agreement. The Group understood from the CCAM Group that no corporate finance advisory service was required from the Group as the projects did not materialise as expected, but there may potentially be two to three corporate transactions to be undertaken by the CCAM Group each year during the term of the New Master Agreement;
the estimated resources to be spent on providing the relevant corporate finance advisory services (i.e. the labour and time costs to be incurred by the staff members of the Group expected to be involved in the potential projects);
where the transaction involves fund raising, the estimated size of the funds involved and the corresponding fee chargeable in line with the Group’s pricing policies; and
the fees charged by the Group to Independent Third Parties for similar transactions.

As advised by the Management, although the Group has not received any fees for Category II Transactions for the two years ended 31 December 2016, 2017 and the nine months ended 30 September 2018, given the CCAM Group is comprised of many reputable companies, it is prudent to have the Proposed Annual Caps for Category II Transactions. Against this background, we have also obtained and reviewed the list of corporate finance advisory mandates signed by the Group for the provision of corporate finance advisory services (including, among others, the listing sponsorship

– 32 –

LETTER FROM OPUS CAPITAL

engagements, financial advisory engagements and compliance advisory engagements) during the year ended 31 December 2017 and nine months ended 30 September 2018. We note that of the 27 mandates signed during this period, the mandate values ranged from approximately HK$250,000 to HK$6,200,000 with an average of approximately HK$3,600,000. Such variation in fees would depend on complexity and nature of the transactions. It is worth noting that the mandate value of listing sponsorship engagements were usually of higher values with at least a minimum fee of HK$4,000,000. Furthermore, during the year ended 31 December 2017, the Group signed 13 mandates, which is almost four times of the projected two to three potential corporate exercises per year to be undertaken by the CCAM Group involving services from the Group each year during the term of the New Master Agreement.

Based on the above, in particular: (i) the historical mandate values charged by the Group for the provision of corporate finance advisory services; and (ii) the historical number of corporate finance advisory mandates, we are of the view that the bases used by the Company in determining the Proposed Annual Caps for Category II Transactions are fair and reasonable.

(iii) Category III Transactions

In determining the Proposed Annual Caps for Category III Transactions, the Company has taken into account of:

the estimated total monetary value of the funds to be managed by the Group during the term of the New Master Agreement for each of the three years ending 31 December 2019, 2020 and 2021 respectively, in particular, although the historical transactions amount for Category III Transactions under the Existing Master Agreement was lower than the Proposed Annual Caps for Category III Transactions under the New Master Agreement. According to the business plan of the Group, there will be 3, 3 and 4 new investment funds to be set up during the three years ending 31 December 2019, 2020 and 2021 respectively, and 2, 1 and 2 intermediary projects to be undertaken by the Group for the three years ending 31 December 2019, 2020 and 2021 respectively, hence substantially increasing the amount of management and advisory fee for the Group;
the management fee and performance fee rates to be charged by the Group in accordance with the Group’s pricing policies, which are determined with reference to the usual market ranges of approximately 0.1% to 2.0% for fund management fee and 5.0% to 20.0% of the fund performance fee; and

– 33 –

LETTER FROM OPUS CAPITAL

a buffer of approximately 10% to provide flexibility to cater for any potential fluctuations of the actual size of the fund’s and market conditions over the term of the New Master Agreement.

When determining the Proposed Annual Caps for Category III Transactions, the Company has also based on the principal assumptions that: (i) the current trend of increasing number of funds being set up and hence the demand for professional fund management services to be provided by the Group, and the recent business development plan of the CCAM Group will remain unchanged during the term of the New Master Agreement; and (ii) the market conditions, operation and business environment will remain stable and there will not be any adverse change in government policies, laws and regulations which may materially affect the business of the Group and/or the CCAM Group.

We note that historical transactions amount for the relevant transactions under Category III Transactions for the two years ended 31 December 2016 and 2017 and the nine months ended 30 September 2018 were approximately HK$27.7 million, HK$36.0 million and HK$50.1 million respectively. Although the figures were smaller than the Proposed Annual Caps in respect of Category III Transactions of HK$120.0 million, HK$150.0 million and HK$180.0 million for the three years ending 31 December 2019, 2020 and 2021, the growth, as we examined, is mainly driven by the current trend of increasing number of funds being set up for the CCAM Group and hence the demand for more professional fund management services to be provided by the Group to the CCAM Group.

During the review, based on the estimate provided by the Management, we note that the estimated transactions amount for Category III Transactions under the Existing Master Agreement for the year ending 31 December 2018, being the fees generated for the existing funds, would be approximately HK$66.8 million. The Proposed Annual Caps in respect of Category III Transactions for the year ending 31 December 2019 of HK$120.0 million implies a growth rate of approximately 79.6%. Thereafter the size of the Proposed Annual Caps appears to increase at annual growth rates of approximately 25.0% and 20.0% for each of the two years ending 31 December 2020 and 2021 respectively. To examine the reasonableness of such growth rates, we have obtained and reviewed the business plan of the Group, confirming that it is expected that there will be 3, 3 and 4 new investment funds to be set up during the three years ending 31 December 2019, 2020 and 2021 respectively, and 2, 1 and 2 intermediary projects to be undertaken by the Group for the three years ending 31 December 2019, 2020 and 2021 respectively. We also noted that the projected size of AUM for the new investment funds under the Proposed Annual Caps during the three years ending 31 December 2019, 2020 and 2021 would broadly fall under the range of the existing

– 34 –

LETTER FROM OPUS CAPITAL

investment funds’ AUM of approximately HK$0.1 billion to HK$10.2 billion. Based on the above, we consider the growth rates of the Proposed Annual Caps in respect of Category III Transactions for the three years ending 31 December 2019, 2020 and 2021 to be reasonable and not overly aggressive.

In terms of reviewing the relevant management fee and performance fee rates to be charged by the Group, in accordance with the Group’s pricing policies, comprising of: (i) 0.1% to 2.0% for fund management fee; and (ii) 5.0% to 20.0% for fund performance fee, we have reviewed the historical fund management fee rates and fund performance fee rates charged to the CCAM Group by the Group against the rates being used as assumptions in determining the Proposed Annual Caps under Category III Transactions and noted that they are broadly similar. Furthermore, we have reviewed the terms of similar services provided by the Comparable Companies as stated in their listing documents published during 1 January 2015 to 30 September 2018 and noted the relevant fund management fee rates and fund performance fee rates of the Comparable Companies are as stated below:

Table 4: Management fee and performance fee rates of the Comparable

Companies

		Management fee	Management fee	Management fee	rate (%)	rate (%)	Performance fee	Performance fee	Performance fee	rate (%)	rate (%)
			(Note 1)					(Note 2)
Name of the Comparable Companies	Stock code	The	PRC	Hong Kong			The	PRC	Hong Kong
		Low	High	Low		High	Low	High	Low		High
								(Note 3)
BOCOM International Holdings Company Limited	3329.HK	–	–		–	2.00	–	–	10.00		20.00
China International Capital Corporation Limited
(Note 3)	3908.HK	0.10	1.50		–	–	–	–		–	–
China Merchants Securities Co., Ltd (Note 3)	6099.HK	–	2.00		–	–	20.00	20.00		–	–
CSC Financial Co., Ltd (Note 3)	6066.HK	0.02	1.40		–	–	–	–		–	–
Everbright Securities Company Limited (Note 3)	6178.HK	–	1.85		–	–	–	100.00		–	–
GF Securities Co., Ltd (Note 3)	1776.HK	0.02	1.13		–	–	–	–		–	–
Guotai Junan Securities Co., Ltd (Note 3)	2611.HK	0.03	1.18		–	–	–	–		–	–
Huatai Securities Co., Ltd (Note 3)	6886.HK	–	2.00		–	–	–	–		–	–
China Renaissance Holdings Ltd	1911.HK	–	2.00		–	20.00
Range based on the above companies		–	2.00		–	2.00	–	100.00		–	20.00

Source: Listing documents of the respective companies from the website of the Stock Exchange

– 35 –

LETTER FROM OPUS CAPITAL

Notes:

Include management fee per annum for management of collective investment schemes, private equities funds, mutual funds and other assets.
Include performance fee per annum for management of collective investment schemes, private equities funds, mutual funds and other assets.
These companies have businesses in the PRC and Hong Kong, but some companies did not disclose the rates in the PRC and Hong Kong separately in their respective listing documents. Given they derived more revenues from the PRC, we have assumed these rates were charged in the PRC but these may include rates charged in Hong Kong.

Based on the above analysis, we noted that: (i) annual management fee rates for asset or fund management were within the range of approximately nil to 2.0% for such services rendered in both the PRC and Hong Kong; and (ii) annual performance fee rates for asset or fund management were within the range of approximately nil to 100.0% and nil to 20.0% for such services rendered in the PRC and Hong Kong respectively, the relevant management fee and performance fee rates to be charged by the Group are within the above ranges. Similar to the observation of Category I Transactions, the management fee rates charged in the provision of asset management services under Category III Transactions would also vary significantly based on the investment strategy and the type of service the investment manager can offer.

Taking into consideration of the above analysis, observations and discussion with the Management for Category III Transactions, particularly: (i) the established investment funds of the Group will continue to accrue Category III Transactions revenue from the CCAM Group; (ii) the business plan of the Group outlining clear and quantifiable funds and projects to be undertaken by the Group; and (iii) the service fees received by the Group for Category III Transactions are no less favourable than the prevailing market rates, we are of the view that the bases used by the Company in determining the Proposed Annual Caps for Category III Transactions are fair and reasonable.

– 36 –

LETTER FROM OPUS CAPITAL

RECOMMENDATION

Having taken into account the above principal factors and reasons, we are of the view that: (i) the entering into of the New Master Agreement is in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole; and (ii) the terms of the New Master Agreement, including the Proposed Annual Caps, are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the New Master Agreement and the transactions contemplated thereunder, including the Proposed Annual Caps.

Yours faithfully, For and on behalf of Opus Capital Limited Koh Kwai Yim Executive Director

Ms. Koh Kwai Yim is the Executive Director of Opus Capital and is licensed under the SFO as a Responsible Officer to conduct Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities. Ms. Koh has over 17 years of corporate finance experience in Asia and has participated in and completed various financial advisory and independent financial advisory transactions.

– 37 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS OF DIRECTORS AND CHIEF EXECUTIVE

As at the Latest Practicable Date, none of the Directors and the chief executive of the Company has interests and short positions 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 are required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he is taken or deemed to have under such provisions of SFO), or are required, pursuant to Section 352 of the SFO, to be recorded in the register required to be kept by the Company, or which are required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules.

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as known to the Directors and the chief executive of the Company, the following persons (other than a Director or a chief executive of the Company) had interests or short positions 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, or who were, directly or indirectly, interested in 10% or more the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

			Approximate
		Number of	percentage of
Name	Capacity	Shares	shareholding
Sinoday	Beneficial owner	403,960,200	63.00%
		(Note)
China Cinda (HK)	Interest through a controlled corporation	403,960,200	63.00%
		(Note)
CCAM	Interest through a controlled corporation	403,960,200	63.00%
		(Note)

– 38 –

GENERAL INFORMATION

APPENDIX

Note: These shares were held by Sinoday. The issued share capital of Sinoday was wholly-owned by China Cinda (HK) which was a wholly-owned subsidiary of CCAM. By virtue of the provisions of the SFO, China Cinda (HK) and CCAM were deemed to be interested in all the shares in which Sinoday was interested.

4. INTEREST OF DIRECTORS IN COMPETING BUSINESS

As at the Latest Practicable Date, the Directors are not aware that any of them or any of their associates had interests in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group which would fall to be discloseable under the Listing Rules.

5. DIRECTORS’ INTEREST IN ASSETS AND CONTRACTS OF THE GROUP

As at the Latest Practicable Date, none of the Directors had (i) any direct or indirect interests in any assets which have been since 31 December 2017 (being the date to which the latest published audited consolidated financial statements of the Group were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group; and (ii) any material interest in any contract or arrangement at the Latest Practicable Date which is significant in relation to the business of the Group.

6. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with the Company or any of its subsidiaries which is not terminable within one year without payment of compensation (other than statutory compensation).

7. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading positions of the Group since 31 December 2017, the date to which the latest published audited consolidated financial statements of the Group were made up.

– 39 –

GENERAL INFORMATION

APPENDIX

8. EXPERT AND CONSENT

The following is the qualification of the expert who has given opinion or advice for inclusion in this circular:

Name

Qualification

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

Opus Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter of advice or references to its name in the form and context in which they respectively appear.

As at the Latest Practicable Date, Opus Capital did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, Opus Capital has no direct or indirect interests in any assets which has been acquired or disposed of by or leased to any member of the Group since 31 December 2017 (the date to which the latest published audited consolidated financial statements of the Company were made up) or proposed to be acquired, disposed of or leased to.

9. GENERAL

(a) The Company’s registered office is at Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda.
(b) The company secretary of the Company is Mr. Lau Mun Chung. Mr. Lau is a fellow member of the Association of Chartered Certified Accountants, an associate member of the Hong Kong Institute of Certified Public Accountants, an associate of The Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and Administrators.
(c) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Secretaries Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(d) The English texts of this circular and the accompanying proxy form shall prevail over the Chinese texts.

– 40 –

GENERAL INFORMATION

APPENDIX

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the Company’s principal place of business in Hong Kong at 45th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong from the date of this circular up to and including the date of the SGM:

(a) the New Master Agreement;
(b) the letter from the Board, the text of which is set out on pages 1 to 14 of this circular;
(c) the letter from the Independent Board Committee, the text of which is set out on page 15 of this circular;
(d) the letter from Opus Capital, the text of which is set out on pages 16 to 37 of this circular; and
(e) the letter of consent from Opus Capital referred to in the paragraph headed “Expert and consent” in this Appendix.

– 41 –

NOTICE OF SGM

==> picture [45 x 39] intentionally omitted <==

==> picture [297 x 35] intentionally omitted <==

(Incorporated in Bermuda with limited liability)

(Stock code: 111)

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) of Cinda International Holdings Limited (the “ Company ”, together with its subsidiaries, the “ Group ”) will be held at 45th Floor, COSCO Tower, 183 Queen’s Road Central, Hong Kong on 14 December 2018 at 11:00 a.m. for the purpose of considering and, if thought fit, with or without amendment, passing the following resolutions:

ORDINARY RESOLUTIONS

“ THAT :
(i) the master agreement dated 30 October 2018 (a copy of which is tabled at the SGM marked “A” and initialled by the chairman of the meeting for identification purpose) entered into between the Company and China Cinda Asset Management Co., Ltd. (“ CCAM ”) in relation to the provision of certain financial services by the Group to CCAM, its subsidiaries, and/or its associates (the “ New Master Agreement ”), and the transactions contemplated thereunder be and are hereby approved, ratified and confirmed;
(ii) the Proposed Annual Caps for Category I Transactions, Category II Transactions and Category III Transactions (as defined in the circular of the Company dated 29 November 2018) as contemplated under the New Master Agreement be and are hereby approved, ratified and confirmed; and
(iii) the execution of the New Master Agreement by any director of the Company be and is hereby approved, ratified and confirmed and any director of the Company be and is hereby authorised to sign, execute, perfect and deliver all such documents and, where necessary, to affix the common seal of the Company on any such document as and when necessary and do all such acts, matters and things as he may in his absolute discretion consider necessary or desirable for the purpose of or in connection with the implementation of the New Master Agreement and the transactions contemplated thereunder.

– SGM-1 –

NOTICE OF SGM

To re-elect Mr. Yu Fan as an executive director of the Company and to authorise the board of directors of the Company to fix his remuneration.”

By order of the Board

Cinda International Holdings Limited Lau Mun Chung Executive Director

Hong Kong, 29 November 2018

Notes:

A form of proxy for use at the SGM is enclosed herewith.
In order to qualify for attending the SGM, all transfer documents, accompanied by the relevant share certificates, must be lodged with the Hong Kong branch share registrar of the Company, Tricor Secretaries Limited, whose share registration public offices are located at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on 10 December 2018.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his/her attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of any officer, attorney or other person authorised to sign the same.
A member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one or more than one proxies to attend and vote in his/her stead. A proxy need not be a member of the Company. If more than one proxy is so appointed, the appointment shall specify the number of shares in respect of which each such proxy is so appointed.
In order to be valid, the form of proxy must be deposited at the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority, not less than 48 hours before the time appointed for holding the meeting (i.e., by 12 December 2018, at 11:00 a.m.) (or any adjournment thereof).
Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting convened by the above notice or at any adjournment thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.
Concerning resolution no. 2 above, the biographical details and interests in the securities of the Company (if any) of the director proposed to be re-elected at the SGM are provided in this circular.

– SGM-2 –

AI assistant

Concord New Energy Group Ltd. — Proxy Solicitation & Information Statement 2018

35804_rns_2018-11-28_5e49954b-8855-436d-832f-36d0b460c5d6.pdf

(I) CONTINUING CONNECTED TRANSACTIONS; (II) PROPOSED RE-ELECTION OF RETIRING DIRECTOR; AND

(III) NOTICE OF SPECIAL GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

(I) CONTINUING CONNECTED TRANSACTIONS; (II) PROPOSED RE-ELECTION OF RETIRING DIRECTOR; AND

(III) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

(I) CONTINUING CONNECTED TRANSACTIONS – THE NEW MASTER AGREEMENT

Conditions Precedent to the New Master Agreement

The Proposed Annual Caps

For Category I Transactions

LETTER FROM THE BOARD

For Category II Transactions

For Category III Transactions

LETTER FROM THE BOARD

Pricing Policies

Category I Transactions

Category II Transactions

Category III Transactions

Internal Control Measures

Historical Transactions Amount and Annual Caps under the Existing Master Agreement

REASONS FOR AND BENEFITS OF ENTERING INTO THE NEW MASTER AGREEMENT

LISTING RULES IMPLICATIONS

(II) PROPOSED RE-ELECTION OF RETIRING DIRECTOR

GENERAL

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RECOMMENDATIONS

ADDITIONAL INFORMATION

Cinda International Holdings Limited

Lau Mun Chung

CONTINUING CONNECTED TRANSACTIONS

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

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THE INDEPENDENT BOARD COMMITTEE

OUR INDEPENDENCE

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Information on the Group and the CCAM Group

1.1 The Group

1.2 The CCAM Group

2. Background of and reasons for entering into the New Master Agreement

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3. The New Master Agreement

3.1 Principal terms of the New Master Agreement

3.2 Basis for service fees and factors to be considered

(i) Category I Transactions

(ii) Category II Transactions

(iii) Category III Transactions

3.3 Pricing policies

(i) Category I Transactions

(ii) Category II Transactions

(iii) Category III Transactions

3.4 Internal control measures

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4. Analysis on the Proposed Annual Caps

4.1 The Proposed Annual Caps

4.2 Basis of the Proposed Annual Caps

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Table 3: Brokerage and placing/underwriting commission rates of the Comparable Companies

(ii) Category II Transactions

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(iii) Category III Transactions

Companies

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS OF DIRECTORS AND CHIEF EXECUTIVE

3. SUBSTANTIAL SHAREHOLDERS

4. INTEREST OF DIRECTORS IN COMPETING BUSINESS

5. DIRECTORS’ INTEREST IN ASSETS AND CONTRACTS OF THE GROUP

6. DIRECTORS’ SERVICE CONTRACTS

7. MATERIAL ADVERSE CHANGE

8. EXPERT AND CONSENT

Qualification

9. GENERAL

Concord New Energy Group Ltd. Proxy Solicitation & Information Statement 2018