CSC Holdings Limited — M&A Activity 2000

Jun 8, 2000

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

This announcement appears for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for shares.

(incorporated in the Cayman Islands with limited liability)

SHARE TRANSACTION

CCT(PRC), an indirect wholly-owned subsidiary of the Company, has agreed to acquire from Panoramic View 490 shares of US$1.00 each in the issued share capital of Worthwhile (to be renamed as "China Optical Telecom Limited" after the Acquisition). The Sales Shares represent 49% of the issued share capital of Worthwhile. Worthwhile is principally engaged in the sale and implementation of optical network products and other telecommunication products supplied by Lucent Technologies and the provision of maintenance and after-sales services for Lucent Technologies in the PRC. Panoramic View is an independent third party not connected with the chief-executive, directors or substantial shareholders of the Company or its subsidiaries or their respective associates. The total consideration payable by CCT(PRC) for the Sale Shares is HK$50,000,000 which will be settled by the allotment and issue by the Company of 25,000,000 new Shares of the Company to two wholly-owned subsidiaries of Panoramic View. The Issue Price represents the average closing price of the Shares for the last ten consecutive trading days up to the date of the Acquisition Agreement. Pursuant to the Acquisition Agreement, Panoramic View has agreed to guarantee that the audited profit of Worthwhile for the year ended 31st December, 2000 shall not be less than US$5,000,000. Panoramic View has also agreed not to dispose of or create any security or other encumbrance over the Consideration Shares within one year after the Completion Date without the prior written consent of CCT(PRC). CCT(PRC) and Panoramic View intend to continue to develop the existing business of Worthwhile after the Acquisition. CCT(PRC) and Panoramic View have agreed to use their best endeavours to procure a listing of Worthwhile on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited on or before 31st December, 2000 which may or may not materialise. Accordingly, Shareholders should exercise caution when trading in the Shares of the Company. The Acquisition is subject to the conditions as detailed below. The Acquisition constitutes a share transaction on the part of the Company.

Acquisition Agreement dated 7th June, 2000

Parties

(a) The Purchaser: CCT(PRC), an indirect wholly-owned subsidiary of the Company

(b) The Vendor: Panoramic View, a company wholly and beneficially owned by Mr. Lo Chun Hing Stanton

Asset acquired

Pursuant to the Acquisition Agreement, CCT(PRC) agreed to purchase the Sale Shares from Panoramic View. At present, Worthwhile is wholly-owned by Panoramic View.

Consideration

The Consideration of HK$50,000,000 will be settled by the allotment and issue of 25,000,000 new Shares of HK$0.50 each in the capital of the Company by the Company at HK$2.00 per Consideration Share to Playle Properties Limited and High Grange Properties Limited, both wholly-owned subsidiaries of Panoramic View, in equal proportions.

The Issue Price is equivalent to the average closing price of the Shares for the last ten consecutive trading days up to 7th June, 2000, the date of the Acquisition Agreement, and represents a discount of approximately 14.89 per cent. over the closing price of HK$2.35 of the Share as at the date of the Acquisition Agreement.

The Consideration Shares represents approximately 1.62 per cent. of the issued share capital of the Company as at the date of the Acquisition Agreement and approximately 1.59 per cent. of the issued share capital of the Company as enlarged by the issue of the Consideration Shares. Panoramic View and its associate(s) do not currently hold any Shares in the Company. The Consideration Shares will be allotted and issued to Playle Properties Limited and High Grange Properties Limited pursuant to the general mandate granted to the Directors at the extraordinary general meeting of the Company held on 14th January, 2000. The Consideration Shares, when issued, will rank pari passu in all respects with the existing Shares.

The Consideration was negotiated on an arm's length basis between the parties involved and was determined with reference to the guarantee given by Panoramic View in respect of the profits of Worthwhile as described below and the price earnings ratio of 2.6 of Worthwhile. The Directors consider that the terms of the Acquisition Agreement are based on normal commercial terms and are fair and reasonable so far as the Shareholders are concerned.

Pursuant to the Acquisition Agreement, Panoramic View has agreed to guarantee that the audited profit of Worthwhile for the year ended 31st December, 2000 shall not be less than US$5,000,000. If the audited profit of Worthwhile for the year ended 31st December, 2000 shall be less than US$5,000,000, Panoramic View will pay to Worthwhile a cash amount equal to the shortfall. The Company will make a further announcement if the audited profit of Worthwhile for the year ended 31st December, 2000 shall be less than US$5,000,000. Panoramic View has also agreed not to dispose of or create any security or other encumbrance over the Consideration Shares within one year after the Completion Date without the prior written consent of CCT(PRC).

Completion Date

The third Business Day after all the conditions below have been fulfilled, which is expected to be on or before 7th September, 2000, or such other date as CCT(PRC) and Panoramic View may agree on.

Conditions of the Acquisition Agreement

The Acquisition Agreement is conditional upon fulfillment of the following conditions:

(i) the Listing Committee of the Stock Exchange granting listing of and permission to deal in the Consideration Shares; and

(ii) CCT(PRC) being satisfied with the results of the due diligence review.

If the conditions shall not have been fulfilled on or before 7th September, 2000 or such other date as CCT(PRC) and Panoramic View may agree on, the obligations of the parties to the Acquisition Agreement shall cease and determine and neither of the parties to the Acquisition Agreement shall have any claim under the Acquisition Agreement against the other save in respect of any antecedent breach of the terms of the Acquisition Agreement.

On the Completion Date or such other date as CCT(PRC) and Panoramic View may agree on, CCT(PRC) and Panoramic View shall enter into a shareholders' agreement in relation to the management of Worthwhile on such terms and conditions as are satisfactory to CCT(PRC) and Panoramic View. Worthwhile had appointed three directors to the board of Panoramic View and CCT(PRC) will appoint two additional directors on the Completion Date.

Information of Worthwhile

Worthwhile was incorporated in the British Virgin Islands and is principally engaged in the sale and implementation of optical network products and other telecommunication products supplied by Lucent Technologies and the provision of maintenance and after- sales services for Lucent Technologies in the PRC. Worthwhile started its operation in the PRC at the end of 1999. Worthwhile had incurred a small loss of approximately HK$12,000 as at 31st December, 1999. As at the date of the Acquisition Agreement, the unaudited net asset value of Worthwhile is approximately HK$55,000,000.

Reasons for the Acquisition

The principal activities of the Group include the business of manufacturing and sale of telecommunication products, the provision of internet access, internet contents, international direct-dial telephone services and other telecommunication services, trading of telecommunications and network equipment and provision of related consultancy services in Hong Kong and the PRC. The Directors consider that the investment in Worthwhile is in line with the Group's investment strategy and business strategy to expand its telecommunication business in the PRC.

CCT(PRC) and Panoramic View intend to continue to develop the existing business of Worthwhile after the Acquisition. CCT(PRC) and Panoramic View have agreed to use their best endeavours to procure a listing of Worthwhile on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited on or before 31st December, 2000 which may or may not materialise. Accordingly, Shareholders should exercise caution when trading in the Shares of the Company.

General

The Acquisition constitutes a share transaction for the Company under the Listing Rules.

Application will be made to the Stock Exchange for the listing of and permission to deal in the Consideration Shares.

Term used in this announcement:

"Acquisition" the acquisition by CCT(PRC) of the Sales Shares

"Acquisition Agreement" the conditional sale and purchase agreement dated 7th June, 2000 made between Panoramic View and CCT(PRC) in relation to the Acquisition

"Business Day" day (excluding Saturday) on which banks are open for business in Hong Kong

"CCT(PRC)" CCT Communications (PRC) Limited, an indirect wholly-owned subsidiary of the Company

"Company" CCT Telecom Holdings Limited, a company incorporated in the Cayman Islands, the shares of which are listed on the Main Board of the Stock Exchange

"Completion" the completion of the Acquisition pursuant to the terms and conditions of the Acquisition Agreement

"Completion Date" the date on which Completion takes place

"Consideration" HK$50,000,000, the aggregate acquisition price for the Sales Shares

"Consideration Shares" 25,000,000 new Shares to be issued and allotted at the Issue Price to satisfy the Consideration

"Directors" the directors of the Company

"Group" the Company and its subsidiaries

"HK$" Hong Kong dollars, the lawful currency of Hong Kong

"Hong Kong" the Hong Kong Special Administrative Region of the People's Republic of China

"Issue Price" HK$2.00 per Consideration Share

"Listing Rules" The Rules Governing the Listing of Securities on the Stock Exchange

"Lucent Technologies" Lucent Technologies Information & Communications of Shanghai Limited, a company incorporated in the PRC

"Panoramic View" Panoramic View Int'l Limited, a company incorporated in the British Virgin Islands and wholly and beneficially owned by Mr. Lo Chun Hing Stanton

"PRC" the People's Republic of China

"Sales Shares" 490 shares of US$1.00 each in the capital of Worthwhile representing 49% of the share capital of Worthwhile

"Share(s)" ordinary share(s) of HK$0.50 each in the capital of the Company

"Shareholders" shareholders of the Company

"Stock Exchange" The Stock Exchange of Hong Kong Limited

"US$" United States dollars, the lawful currency of the United States of America

"Worthwhile" Worthwhile Industries Limited, a company incorporated in the British Virgin Islands on 18th June, 1999, which will be renamed as "China Optical Telecom Limited" after the Acquisition

"%" per cent.

By Order of the Board

Clement Mak Shiu Tong

Chairman

Hong Kong, 7th June, 2000.

Please also refer to the published version of this announcement in the Hong Kong iMail.