GBA Holdings Limited - Proxy Solicitation & Information Statement 2018

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your securities in CCT Land Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser(s), the transferee(s) or to the bank, licensed securities dealer or registered institution in securities, or other agent through whom the sale or transfer was effected for onward transmission to the purchaser(s) or the transferee(s).

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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(Incorporated in Bermuda with limited liability)

(Stock Code: 00261)

CONTINUING CONNECTED TRANSACTIONS

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

A letter from the Board is set out on pages 5 to 22 of this circular.

A letter from the Independent Board Committee is set out on pages 23 to 24 of this circular.

A letter from Gram Capital containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 25 to 42 of this circular.

A notice convening the SGM to be held at 18/F., CCT Telecom Building, 11 Wo Shing Street, Fotan, Shatin, New Territories, Hong Kong on Monday, 31 December 2018 at 10:30 a.m. is set out on pages 49 to 51 of this circular. A form of proxy for use by the Independent Shareholders at the SGM is enclosed with this circular. Whether or not you intend to attend and vote at the SGM in person, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar and transfer office of the Company in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable but in any event, not later than 48 hours before the time appointed for holding the SGM (i.e. not later than 10:30 a.m. on Saturday, 29 December 2018, Hong Kong time). Such form of proxy for use at the SGM is also published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.cctland.com/eng/investor/statutory.php). Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM should you so wish.

12 December 2018

CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from	the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Letter from	Gram Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Appendix I	— General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43
Notice of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		49

– i –

DEFINITIONS

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

‘‘Announcement’’
the Company’s announcement dated 15 November 2018, which set out, among others, the entering of the New Component Agreement and the New Child Products Agreement and the terms and conditions of the transactions contemplated under the New Component Agreement and New Child Products Agreement respectively which constitute continuing connected transactions for the Company under the Listing Rules;
‘‘associate’’
has the same meaning as ascribed to it under the Listing Rules;
‘‘Board’’
the board of the Directors;
‘‘CCT Fortis’’
CCT Fortis Holdings Limited (stock code: 00138), a company incorporated in the Cayman Islands and continued in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange;
‘‘CCT Fortis Group’’
CCT Fortis and its subsidiaries from time to time;
‘‘Child Products’’
feeding, health care, hygiene, safety, toy and other related products for infants and babies, which are the child products currently traded by CCT Fortis Group;
‘‘Company’’
CCT Land Holdings Limited (stock code: 00261), a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange;
‘‘Component Products’’
plastic components and any other component products to be manufactured and supplied by the CCT Fortis Group for the Group pursuant to the New Component Agreement;
‘‘connected person’’
has the same meaning as ascribed to it under the Listing Rules;
‘‘controlling shareholder’’
has the same meaning as ascribed to it under the Listing Rules;
‘‘Director(s)’’ the director(s) of the Company;
‘‘Former Agreements’’ collectively, the Former Component Agreement and the Former Child Products Agreements;

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DEFINITIONS

‘‘Former Child Products Agreements’’
‘‘Former Component Agreement’’
‘‘Gram Capital’’
‘‘Group’’
‘‘HK$’’
‘‘Hong Kong’’
‘‘Independent Board Committee’’
‘‘Independent Shareholders’’
‘‘Latest Practicable Date’’
‘‘Listing Rules’’
the agreement dated 3 August 2016 entered into between CCT Tech Global Holdings Limited and CCT Fortis, as amended and supplemented by the first supplemental agreement dated 31 August 2016, the second supplemental agreement dated 14 September 2016 and the third supplemental agreement dated 4 October 2016, governing the terms and conditions for the supply of the Child Products by the Group to the CCT Fortis Group for the period ending 31 December 2018;
the agreement dated 9 November 2015 entered into between the Company and CCT Fortis governing the terms and conditions for the manufacture and supply of the Component Products and the toolings by the CCT Fortis Group to the Group for the two years ended 31 December 2016 and 2017 and for the year ending 31 December 2018;
Gram Capital Limited, a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO, being the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the New Agreements, the New Transactions, and the New Transaction Caps;
the Company and its subsidiaries from time to time;
Hong Kong dollar(s), the lawful currency of Hong Kong;
the Hong Kong Special Administrative Region of the People’s Republic of China;
the independent board committee of the Company comprising Mr. Lau, who does not have any material interest in the New Agreements, the New Transactions and the New Transaction Caps, which has been formed for the purpose of advising the Independent Shareholders on the New Agreements, the New Transactions and the New Transaction Caps;
Shareholders other than CCT Fortis and its associates;
10 December 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;

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DEFINITIONS

‘‘Model Code’’
‘‘Mr. Chow’’
‘‘Mr. Kenny Tam’’
‘‘Mr. Lau’’
‘‘Mr. Mak’’
‘‘New Agreements’’
‘‘New Child Products Agreement’’
‘‘New Child Products Transaction Caps’’
‘‘New Child Products Transactions’’
‘‘New Component Agreement’’

the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules;

Mr. Chow Siu Ngor, who is an independent non-executive director of each of the Company and CCT Fortis;
Mr. Tam King Ching, Kenny, who is an independent nonexecutive director of each of the Company and CCT Fortis;
Mr. Lau Ho Kit, Ivan, who is an independent non-executive Director;
Mr. Mak Shiu Tong, Clement, an executive director of the Company and CCT Fortis and a controlling shareholder of CCT Fortis;
collectively, the New Component Agreement and the New Child Products Agreement;
the agreement dated 15 November 2018 entered into between the Company and CCT Fortis governing the terms and conditions for the supply of the Child Products by the Group to the CCT Fortis Group for the three years ending 31 December 2019, 2020 and 2021;
the respective new cap amounts in relation to the New Child Products Transactions for each of the three financial years ending 31 December 2019, 2020 and 2021 as set out in the section headed ‘‘New child products cap amounts for the New Child Products Transactions’’ contained in the Letter from the Board in this circular;
the continuing connected transactions as contemplated under the New Child Products Agreement entered into between the Group and the CCT Fortis Group in relation to the supply of the Child Products by the Group to the CCT Fortis Group;
the agreement dated 15 November 2018 entered into between the Company and CCT Fortis governing the terms and conditions for the manufacture and supply of the Component Products for the production of telecom, electronic and child products by the CCT Fortis Group for the Group for the three years ending 31 December 2021;

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DEFINITIONS

‘‘New Component Transaction the respective new cap amounts in relation to the New Caps’’ Component Transactions for each of the three financial years ending 31 December 2019, 2020 and 2021 as set out in the section headed ‘‘New component cap amounts for the New Component Transactions’’ contained in the Letter from the Board in this circular;
‘‘New Component Transactions’’ the continuing connected transactions as contemplated under the New Component Agreement entered into between the Group and the CCT Fortis Group in relation to the manufacture and supply of the Component Products by the CCT Fortis Group for the Group;
‘‘New Transaction Caps’’ collectively, the New Component Transaction Caps and the New Child Products Transaction Caps;
‘‘New Transactions’’ collectively, the New Component Transactions and the New Child Products Transactions;
‘‘percentage ratios’’ has the same meaning as ascribed to it under the Listing Rules;
‘‘SFO’’ Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time;
‘‘SGM’’ the special general meeting of the Company to be convened and held on Monday, 31 December 2018, to consider and, if thought fit, approve, inter alia, the New Transactions and the New Transaction Caps or any adjournment thereof (as the case may be);
‘‘Share(s)’’ the ordinary share(s) of HK$0.01 each in the share capital of the Company;
‘‘Shareholder(s)’’ the holder(s) of the issued Share(s); ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited; ‘‘U.S.’’ The United States of America; and ‘‘%’’ per cent.

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LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability)

(Stock Code: 00261)

Executive Directors: Mak Shiu Tong, Clement Cheng Yuk Ching, Flora Tam Ngai Hung, Terry

Independent non-executive Directors: Chow Siu Ngor Lau Ho Kit, Ivan Tam King Ching, Kenny

Registered office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Head office and principal place of business in Hong Kong: 18/F., CCT Telecom Building, 11 Wo Shing Street, Fotan, Shatin, New Territories, Hong Kong

12 December 2018

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

Reference is made to the Announcement.

It was set out in the Announcement that the Company entered into the New Component Agreement and the New Child Products Agreement with CCT Fortis to renew the terms and conditions of the New Component Transactions and the New Child Products Transactions respectively.

As at the Latest Practicable Date, CCT Fortis held indirectly 28,467,100,000 Shares, representing approximately 15.48% of the existing total number of issued shares of the Company. CCT Fortis is a substantial shareholder of the Company and hence is a connected person of the Company under Chapter 14A of the Listing Rules. As such, each of the New Component Transactions and the New Child Products Transactions between the Group and the CCT Fortis Group constitute continuing connected transactions for the Company under the Listing Rules.

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LETTER FROM THE BOARD

All of the relevant percentage ratios applicable to each of the New Component Transactions and the New Child Products Transactions are less than 25% on an annual basis and the annual consideration for each of the New Component Transactions and the New Child Products Transactions is more than HK$10,000,000 in accordance with Rule 14A.76 of the Listing Rules. As such, the New Transactions and the New Transaction Caps will be subject to announcement, circular, approval by the Independent Shareholders by way of poll at the SGM and annual reporting under Chapter 14A of the Listing Rules. CCT Fortis and its associates will abstain from voting in respect of the resolution(s) to approve the New Transactions and the New Transaction Caps at the SGM.

The Directors are of the view that the terms of the New Agreements have been negotiated and will be conducted on an arm’s length basis and on normal commercial terms and are in the best interests of the Group and the Shareholders as a whole.

The SGM will be convened to consider and if, thought fit, approve the New Transactions and the New Transaction Caps. They are subject to approval of the Independent Shareholders by way of poll at the SGM. CCT Fortis and its associates will abstain from voting in respect of the resolution(s) to approve the New Transactions and the New Transaction Caps at the SGM.

As each of Mr. Chow and Mr. Kenny Tam is a common independent non-executive director of both the Company and CCT Fortis, each of Mr. Chow and Mr. Kenny Tam is not eligible to act as a member of the Independent Board Committee to advise on the terms of the New Agreements, the New Transactions and the New Transaction Caps. The Independent Board Committee comprising Mr. Lau (who does not have any material interest in the New Agreements, the New Transactions and the New Transaction Caps) has been formed to advise the Independent Shareholders as to whether or not the terms of the New Agreements, the New Transactions and the New Transaction Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

An independent financial adviser, Gram Capital, has been appointed to advise the Independent Board Committee and the Independent Shareholders as to whether or not the terms of the New Agreements, the New Transactions and the New Transactions Caps are fair and reasonable so far as the Independent Shareholders are concerned, on normal commercial terms and the interests of the Company and the Shareholders as a whole and whether the Independent Shareholders should vote in favour of the New Transactions.

The purpose of this circular is to:

(i) provide the Shareholders with details of the New Agreements, the New Transactions and the New Transactions Caps;
(ii) to set out the opinion of Gram Capital to the Independent Board Committee and the Independent Shareholders in respect of the terms of the New Agreements, the New Transactions and the New Transactions Caps;
(iii) to set out the recommendation of the Independent Board Committee to the Independent Shareholders in respect of the terms of the New Agreements, the New Transactions and the New Transactions Caps; and
(iv) to give the Shareholders the notice of the SGM to consider and, if thought fit, to approve the New Transactions and the New Transactions Caps.

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LETTER FROM THE BOARD

DETAILS OF THE CONTINUING CONNECTED TRANSACTIONS

(A) New Component Agreement

Date: 15 November 2018

Parties: (1) the Company; and (2) CCT Fortis

CCT Fortis is a substantial shareholder of the Company as it held indirectly 28,467,100,000 Shares, representing approximately 15.48% of the existing total number of shares of the Company as at the as at the Latest Practicable Date. As such, CCT Fortis is a connected person of the Company. Mr. Mak is the controlling shareholder of CCT Fortis and is therefore an associate of CCT Fortis.

Subject:

Pursuant to the New Component Agreement, CCT Fortis will procure other members of the CCT Fortis Group to manufacture and supply the Component Products for the Group based on orders to be placed by member(s) of the Group from time to time. The Component Products to be manufactured by the CCT Fortis Group will be manufactured and supplied in accordance with the specifications and requirement of the Group.

Conditions precedent:

The New Component Agreement and the New Component Transactions and the New Component Transaction Caps are conditional upon:

(a) the passing by the Independent Shareholders at the SGM with CCT Fortis and its associates abstaining from voting at the SGM of an ordinary resolution(s) approving (i) the New Component Transactions; and (ii) the New Component Transaction Caps; and
(b) the Company having fully complied with all other rules and regulations under the Listing Rules that are relevant to the proposed arrangements under the New Component Agreement and the New Component Transactions.

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LETTER FROM THE BOARD

Above conditions cannot be waived. If above conditions precedent are not fulfilled on or before 31 December 2018 (or such later date as may be agreed between CCT Fortis and the Company in writing), the New Component Agreement will cease to be in force and effect and the parties hereto will be released from all obligations thereunder.

Term:

The New Component Agreement has a fixed initial term of not exceeding three (3) years as provided under Rule 14A.52 of the Listing Rules. It will be effective as from 1 January 2019 after the conditions precedent have been fulfilled and will continue until 31 December 2021 (both dates inclusive). Both parties may renew the New Component Agreement in writing upon expiry on 31 December 2021 for another three (3) years subject to compliance with the Listing Rules and either party will have the right to terminate the New Component Agreement without cause by serving the other party with not less than six (6) months’ prior written notice.

Price and terms of payment:

In respect of the transactions contemplated under the New Component Agreement, the price of the Component Products to be manufactured and supplied by the CCT Fortis Group to the Group will be determined on an arm’s length basis and will be fixed on a case-by-case basis, depending on the model to be produced provided that the price of the Component Products will be capped by the amount of direct material costs plus a mark-up of no more than 250%. The sale price in respect of specific models of the Component Products payable by the Group will be comparable to that charged by the members of the CCT Fortis Group to the independent third party customers of the CCT Fortis Group. Quotations from at least two independent third party suppliers for similar products will be solicited by the Company to determine that the price offered by the CCT Fortis Group is in accordance with the above pricing policy and is comparable to or not less favourable than price offered by unrelated third parties.

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LETTER FROM THE BOARD

The amount of the sale price for the Component Products will be payable by the Group by cheque, bank transfer or by deposit directly by member(s) of the Group into the designated bank accounts of the member(s) of the CCT Fortis Group, and unless otherwise agreed, will be payable within 150 days from the date of monthly statements which set out the outstanding invoices. The terms of payment are comparable to or not worse than those credit terms granted to the independent third party customers of the CCT Fortis Group.

Internal Control Measures Relating to Pricing of the Component Products

The purchasing department of the Group is familiar with the cost information of the Component Products based on their experience in the industry, the specification of the Component Products and their knowledge of the price of the raw materials and costs for production of these products. The purchasing department will check and ensure that the above price caps will not be exceeded. Furthermore, the purchasing department of the Group would solicit quotations from at least two independent third party suppliers for similar products to determine if the price offered by the CCT Fortis Group is in accordance with the above pricing policy and is comparable to or not less favourable than price offered by unrelated third parties. The head of the purchasing department will review the price and approve the purchase orders for Component Products.

The accounting department of the Company will conduct regular check on the pricing terms of the Component Products on a quarterly basis to ensure that the pricing terms of each of the New Component Transactions are determined in accordance with the pricing policies or mechanisms under the New Component Agreement, are on normal commercial terms or no less favourable to the Group than those comparable products that could be purchased by the Group from independent third parties. The accounting department will also be responsible for ensuring that the annual caps of the New Component Transactions will not be exceeded. The accounting department will consult with the Group’s internal audit department (responsible for reviewing the effectiveness of the Group’s enterprise risk management and internal control system) in respect of the continuing connected transactions compliance issues, which will report annually to the audit committee of the Company and the audit committee will consider and confirm whether the New Component Transactions have been entered into (a) in the ordinary and usual course of business of the Group; (b) on normal commercial terms or better; and (c) in accordance with the New Component Agreement on terms that are fair and reasonable and in the interests of the Shareholders as a whole; and that the Group’s internal control procedures applicable to the continuing connected transactions are adequate and effective to ensure that such transactions were so conducted.

Further internal control measures of the Group in compliance with the annual review requirements under Chapter 14A of the Listing Rules during the term of the New Component Agreement in relation to the New Component Transactions are also set out in the section titled ‘‘MEASURES TO ENSURE COMPLIANCE WITH THE LISTING RULES IN RELATION TO THE NEW COMPONENT TRANSACTIONS’’ of this circular.

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LETTER FROM THE BOARD

In view of the above, the Group considers that adequate internal control measures are in place to ensure that the transactions under the New Component Agreement will be conducted, and the price of the Component Products will be fixed under the New Component Agreement, on normal commercial terms and is fair and reasonable to the Company and the Independent Shareholders.

Historical figures for the Component Products transactions

The financial information regarding the sale of the Component Products by the CCT Fortis Group to the Group for each of the year ended 31 December 2016 and 2017 and for the 11 months ended 30 November 2018 is set out as follows:

		Previously
	Historical	approved
	amount of	annual cap
Financial year/period	the transactions	amounts
	HK$ million	HK$ million
Year ended 31 December 2016 (Note)	74	135
Year ended 31 December 2017 (Note)	55	160
For the 11 months ended 30 November 2018 (Note)	35	200

Note: The historical figures of the transactions for each of the year ended 31 December 2016 and 2017 and for the 11 months ended 30 November 2018 were lower than the previously approved annual cap amounts. This is due to the deteriorating operating environment of the products trading business of the Group (to which the CCT Fortis Group supplied the Component Products) in the past three years, which was mainly led by the shortage of labour in the Guangdong Province, China, rising product costs, declining demand of cordless phones and escalating trade tensions between the U.S. and China. It is confirmed that the existing annual cap for the year ending 31 December 2018 will not be exceeded.

New component cap amounts for the New Component Transactions

Pursuant to the New Component Agreement, the aggregate value of the Component Products to be sourced from the CCT Fortis Group for the Group under the New Component Agreement will not exceed the following respective amounts:

(a) in respect of the financial year ending 31 December 2019, HK$15 million;
(b) in respect of the financial year ending 31 December 2020, HK$16 million; and
(c) in respect of the financial year ending 31 December 2021, HK$17 million (each of the caps in (a), (b) and (c) is the ‘‘New Component Transaction Caps’’).

The basis of the New Component Transaction Caps for the three years ending 31 December 2019, 2020 and 2021 are determined with reference to: (i) the historical figures of the sales of the Component Products by the CCT Fortis Group to the Group and the declining trend based on historical figures; (ii) the expectation of the further declining sales of the products trading business of the Group in 2019 due to increasing operational difficulties and challenges, which will require less Component Products in 2019; and (iii) expectation of

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LETTER FROM THE BOARD

plastic components of certain products models will be sourced directly by independent third party manufacturer from independent third party suppliers instead of through the Company. It is expected the supply needs of the Component Products will stabilise after 2019 and will increase by approximately HK$1 million or 6.6% in 2020 compared with 2019 and a further approximately HK$1 million or 6.2% in 2021 compared with 2020. The forecast of supply needs of the Component Products was based on discussions with the Company’s major customers and the Company’s knowledge of the product trading market.

MEASURES TO ENSURE COMPLIANCE WITH THE LISTING RULES IN RELATION TO THE NEW COMPONENT TRANSACTIONS

In compliance with the annual review requirements under Chapter 14A of the Listing Rules, the Company will comply with the following requirements during the term of the New Component Agreement in relation to the New Component Transactions:

(i) each year the independent non-executive Directors must review the New Component Transactions and confirm in annual report of the Company whether the New Component Transactions have been entered into (a) in the ordinary and usual course of business of the Group; (b) on normal commercial terms or better; and (c) according to the New Component Agreement governing the New Component Transactions on terms that are fair and reasonable and in the interest of the Company and the Shareholders as a whole;
(ii) each year the auditors of the Company must provide a letter to the Board (with a copy provided to the Stock Exchange at least 10 business days prior to the bulk printing of the annual report of the Company) confirming whether anything has come to their attention that causes them to believe that (a) the New Component Transactions have not been approved by the Board; (b) were not entered into, in all material respects, in accordance with the New Component Agreement governing the New Component Transactions; and (c) have exceeded the New Component Transaction Caps;
(iii) the Company will allow, and will ensure that CCT Fortis will allow, the auditors of the Company with sufficient access to the relevant records of the New Component Transactions for the purpose reporting on the New Component Transactions; and
(iv) the Company must promptly notify the Stock Exchange and publish an announcement in accordance with the Listing Rules if the independent non-executive Directors and/or auditors of the Company cannot confirm the matters set out in paragraphs (i) and/or (ii) above.

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LETTER FROM THE BOARD

REASONS FOR AND THE BENEFITS TO BE DERIVED BY THE COMPANY FROM THE NEW COMPONENT TRANSACTIONS

The Group is engaged, among others, in the trading of the telecom and electronic products and the supply of the Child Products. The Component Products have been manufactured and supplied by the CCT Fortis Group to the Group. The Company has been engaged in the trading of and supply of telecom, electronic and the Child Products for many years. It has outsourced the manufacturing of products to third party manufacturer and the Component Products are purchased for the production of the products by the outside manufacturer for the Group.

The Directors (including the independent non-executive Directors) consider that the New Component Transactions contemplated under the New Component Agreement are entered into, and will continue to be entered into, in the usual and ordinary course of businesses of the Group. They also consider that the terms of the New Component Agreement have been negotiated and will be conducted on an arm’s length basis and on normal commercial terms. The CCT Fortis Group has extensive experience in and has established strong reputation of manufacturing plastic components for product trading business of the Group. The Directors are of the opinion that the entering of the New Component Agreement will provide a secured and reliable source of supply of the Component Products of good quality at reasonable costs to the Group.

Mr. Mak is a controlling shareholder of CCT Fortis and hence is an associate of CCT Fortis. Therefore, Mr. Mak is deemed to have a material interest in the New Component Agreement and the transactions contemplated thereof. As such, Mr. Mak had abstained from voting at the resolutions of the Board to approve the New Component Agreement, the New Component Transactions and the New Component Transaction Caps.

Based on the above, save for Mr. Mak, the Directors (including Mr. Lau, being the sole member of the Independent Board Committee, after taking into account the opinion and advice from Gram Capital, and the other independent non-executive Directors) are of the view that the New Component Transactions contemplated under the New Component Agreement and the terms thereof are entered into in the ordinary and usual course of business of the Group and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

(B) New Child Products Agreement

Date:

15 November 2018

Parties: (1) the Company; and

(2) CCT Fortis

CCT Fortis is a substantial shareholder of the Company as it held indirectly 28,467,100,000 Shares, representing approximately 15.48% of the existing total number of shares of the Company as at the Latest Practicable Date. As such, CCT Fortis is a connected person of the Company. Mr. Mak is the controlling shareholder of CCT Fortis and therefore is an associate of CCT Fortis.

Subject:

Pursuant to the New Child Products Agreement, the Company will procure its subsidiaries to supply the Child Products for the CCT Fortis Group based on orders to be placed by member(s) of the CCT Fortis Group from time to time. The Child Products to be supplied by the Group will be supplied in accordance with the specifications and requirement of the CCT Fortis Group.

Conditions precedent:

The New Child Products Agreement, the New Child Products Transactions and the New Child Products Transaction Caps are conditional upon:

(a) the passing by the Independent Shareholders at the SGM with CCT Fortis and its associates abstaining from voting at the SGM of an ordinary resolution(s) approving (i) the New Child Products Transactions; and (ii) the New Child Products Transaction Caps; and
(b) the Company having fully complied with all other rules and regulations under the Listing Rules that are relevant to the proposed arrangements under the New Child Products Agreement and the New Child Products Transactions.

Above conditions cannot be waived. If the above conditions precedent are not fulfilled on or before 31 December 2018 (or such later date as may be agreed between the Company and CCT Fortis in writing), the New Child Products Agreement will cease to be in force and effect and the parties hereto will be released from all obligations thereunder.

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LETTER FROM THE BOARD

Term:

The New Child Products Agreement has a fixed initial term of not exceeding three (3) years as provided under Rule 14A.52 of the Listing Rules. It will be effective as from 1 January 2019, after all the conditions precedent have been fulfilled and will continue until 31 December 2021 (both dates inclusive). Both parties may mutually renew the New Child Products Agreement in writing upon expiry on 31 December 2021 for another three (3) years subject to compliance with the Listing Rules and either party will have the right to terminate the New Child Products Agreement without cause by serving the other party with not less than six (6) months’ prior written notice.

Price and terms of payment:

In respect of the transactions contemplated under the New Child Products Agreement, the price of the Child Products to be supplied by the Group to the CCT Fortis Group will be determined on a case-by-case basis. The parties to the New Child Products Agreement will take into account the following non-exhaustive factors in determining the price of each Child Product model payable by the CCT Fortis Group:

(a) The sale price in respect of specific models of the Child Products payable by the CCT Fortis Group to the Group (the ‘‘Sale Price’’) will be the higher of the prices determined under the following two bases:
(i) the sum of the direct material costs of each specific model of the Child Products plus a mark-up of up to 250% of the direct material costs (the ‘‘Cost-plus Basis’’); and
(ii) the selling prices for specific models of the Child Products that the CCT Fortis Group sells to independent third party distributors or retailers (the ‘‘Third Party Prices’’) less a discount of up to 10%, which discount is intended to cover the product development costs, sales and marketing costs, the customer’s credit risk, administrative costs and profit margin of the Child Products trading business; and

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LETTER FROM THE BOARD

(b) the projected orders that are to be placed by the CCT Fortis Group in respect of the relevant Child Product model for each calendar year.

The CCT Fortis Group will provide documentary evidence (such as sales quotation and sales invoices) to the Group to support the Third Party Prices.

The direct material costs as a percentage of total costs of the Child Products is in the range of 50% to 70% and as such, the pricing policy of direct material costs plus a mark-up of up to 250% will ensure that the Sale Price will cover the total product costs of the Child Product plus a reasonable margin to the Company. The Company does not supply the Child Products to any other customers other than to CCT Fortis. The Sale Price determined on the basis of the selling prices for specific models of the Child Products that the CCT Fortis Group sells to its independent third party customers less a discount of up to 10% (the ‘‘Discount’’) is to ensure that the Sale Price is not less favourable than the Third Party Prices as adjusted by the Discount. The Discount (limit to 10%) is to cover all the costs (as specified above) and profit margin of the Child Products trading business of the CCT Fortis Group and is considered to be fair and reasonable. Furthermore, as the determination of the Sale Price will take into account both the costs and Third Party Prices of the Child Products, the Company considers that the pricing terms and policies under the New Child Products Agreement are on normal commercial terms and fair and reasonable to the Company and its Independent Shareholders.

The amount of the Sale Price for the Child Products will be payable by the CCT Fortis Group by cheque, bank transfer or by deposit directly by member(s) of the CCT Fortis Group into the designated bank accounts of the member(s) of the Group, and unless otherwise agreed, will be payable within 120 days from the date of monthly statements which set out the outstanding invoices. The terms of payment are comparable to or not worse than those credit terms granted to the independent third party customers of the Group.

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LETTER FROM THE BOARD

Priority of Purchase:

The CCT Fortis Group will give priority to the Group in the supplying of the Child Products. In the event that the Group rejects any purchase order for the Child Product(s) from the CCT Fortis Group because the Sale Price offered is not satisfactory to the Group, the CCT Fortis Group cannot purchase the Child Product(s) from any other parties at a price lower than the Sale Price offered to the Group. In this connection, the CCT Fortis Group is required to provide purchase orders and invoices to evidence that the price of its purchasing (if any) from other suppliers is not less than the Sale Price offered to the Group.

Internal control measures relating to the New Child Products Transactions

The Group has adopted the following internal control procedures over the New Child Products Transactions, including the pricing of the Child Products:

Before entering into a transaction under the New Child Products Transactions, the sales and marketing department of Group will negotiate on the provisional sale price of the specific model of the Child Products with the CCT Fortis Group, and review and check whether the sale price is fair and reasonable adhering to the pricing terms and details set out in the New Child Products Agreement. In the event that the sale price for a specific purchase order for a model of the Child Products is not in compliance with the pricing terms set out in the New Child Products Agreement, the Group is entitled to reject such purchase order from the CCT Fortis Group. In reviewing whether the sale price is in accordance with the pricing terms under the New Child Products Agreement, the Company will request the CCT Fortis Group to provide documentary evidence (such as sales quotation and sales invoices) to the Group to support the Third Party Prices. In addition to reviewing the sale price before entering into a transaction under the New Child Products Transactions or where the pricing terms under the New Child Products Agreement for a specific model of Child Products are applied for the first time or the pricing terms are different from those used previously, the accounting department of the Group will review the aforesaid works carried out by the sales and marketing department on a quarterly basis.

The accounting department of the Company is primarily responsible to review and monitor the New Child Products Transactions ensuring that the annual caps of the New Child Products Transactions are not exceeded and the New Child Products Transactions have been conducted in accordance with the pricing policies or mechanisms under the New Child Products Agreement. The accounting department of the Company will consult with the Group’s internal audit function (responsible for reviewing the effectiveness of the Group’s enterprise risk management and internal controls system) in respect of continuing connected transaction compliance issues, which will report annually to the audit committee of the Company and the audit committee will consider and confirm that the continuing connected transactions of the Company which are subject to the annual review and disclosure requirements under the Listing Rules have been entered into (a) in the ordinary and usual course of business of the Group; (b) on normal commercial terms or better; and (c) in accordance with the New Child Product

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LETTER FROM THE BOARD

Agreement on terms that are fair and reasonable and in the interests of the Shareholders as a whole; and that the Group’s internal control procedures applicable to continuing connected transactions are adequate and effective to ensure that such transactions were so conducted.

Further internal control measures of the Group in compliance with the annual review requirements under Chapter 14A of the Listing Rules during the term of the New Child Products Agreement in relation to the New Child Products Transactions are also set out in the section titled ‘‘MEASURES TO ENSURE COMPLIANCE WITH THE LISTING RULES IN RELATION TO THE NEW CHILD PRODUCTS TRANSACTIONS’’ of this circular.

In view of the above, the Group considers that adequate internal control measures are in place to ensure that the transactions under the New Child Products Agreement will be conducted, and the price of the Child Products will be fixed under the New Child Products Agreement, on normal commercial terms and is fair and reasonable to the Company and its Independent Shareholders.

Historical figures for the Child Products transactions

The financial information regarding the supply of the Child Products by the Group to the CCT Fortis Group for each of the year ended 31 December 2016 and 2017 and for the 11 months ended 30 November 2018 is set out as follows:

		Previously
	Historical	approved
	amount of the	annual cap
Financial year/period	the transactions	amounts
	HK$ million	HK$ million
Period ended 31 December 2016 (Notes 1 and 2)	21	50
Year ended 31 December 2017 (Note 2)	143	190
For the 11 months ended 30 November 2018 (Note 2)	120	250

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LETTER FROM THE BOARD

Notes:

(1) The historical figure of the transactions for the period ended 31 December 2016 represents the transaction amount for the supply of Child Products by the Group to the CCT Fortis Group from 14 October 2016 (being the date on which the disposal of the business of trading and sale of the Child Products by the Company to CCT Fortis was completed) to 31 December 2016.
(2) The historical figures of the transactions for each of the period/year ended 31 December 2016 and 2017 and for the 11 months ended 30 November 2018 were lower than the previously approved annual cap amounts. This is mainly due to keen competition in the Child Products market, rising product costs, increasing operating challenges faced by the Child Products trading business and escalating trade tensions between the U.S. and China. It is confirmed that the existing annual cap for the year ending 31 December 2018 will not be exceeded.

New child products cap amounts for the New Child Products Transactions

Pursuant to the New Child Products Agreement, the aggregate value of the Child Products to be sourced from the Group for the CCT Fortis Group under the New Child Products Agreement will not exceed the following respective amounts:

(a) in respect of the financial year ending 31 December 2019, HK$80 million;
(b) in respect of the financial year ending 31 December 2020, HK$82 million; and
(c) in respect of the financial year ending 31 December 2021, HK$85 million (each of the caps in (a), (b) and (c) is the ‘‘New Child Products Transaction Caps’’).

The basis of the New Child Products Transaction Caps for the three years ending 31 December 2021 are determined with reference to: (i) the historical figures of the supply of the Child Products by the Group to the CCT Fortis Group; and (ii) the expectation of further declining supply of the Child Products in 2019 as compared to 2018, due to increasing operational difficulties and challenges faced by this business. These operational difficulties and challenges include rising product costs, keen competition in the Child Product market which have affected the major customers of CCT Fortis and the trade tensions between the US and China. It is expected that the sales of the Child Products will stabilise after 2019 and will increase marginally by approximately 2.5% in 2020 as compared with 2019 and a further 3.6% in 2021 as compared with 2020. The aforesaid analysis and the revenue forecast in the next three years is based on discussions with CCT Fortis (whose view is based on discussions between CCT Fortis and its major customer) and the Company’s knowledge of the Child Products market.

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LETTER FROM THE BOARD

MEASURES TO ENSURE COMPLIANCE WITH THE LISTING RULES IN RELATION TO THE NEW CHILD PRODUCTS TRANSACTIONS

In compliance with the annual review requirements under Chapter 14A of the Listing Rules, the Company will comply with the following requirements during the term of the New Child Products Agreement in relation to the New Child Products Transactions:

(i) each year the independent non-executive Directors must review the New Child Products Transactions and confirm in annual report of the Company whether the New Child Products Transactions have been entered into (a) in the ordinary and usual course of business of the Group; (b) on normal commercial terms or better; and (c) according to the New Child Products Agreement governing the New Child Products Transactions on terms that are fair and reasonable and in the interest of the Company and the Shareholders as a whole;
(ii) each year the auditors of the Company must provide a letter to the Board (with a copy provided to the Stock Exchange at least 10 business days prior to the bulk printing of the annual report of the Company) confirming whether anything has come to their attention that causes them to believe that (a) the New Child Products Transactions have not been approved by the Board; (b) were not entered into, in all material respects, in accordance with the New Child Products Agreement governing the New Child Products Transactions; and (c) have exceeded the New Child Products Transaction Caps;
(iii) the Company will allow the auditors of the Company with sufficient access to the relevant records of the New Child Products Transactions for the purpose reporting on the New Child Products Transactions; and
(iv) the Company must promptly notify the Stock Exchange and publish an announcement in accordance with the Listing Rules if the independent non-executive Directors and/or auditors of the Company cannot confirm the matters set out in paragraphs (i) and/or (ii) above.

REASONS FOR AND THE BENEFITS TO BE DERIVED BY THE COMPANY FROM THE NEW CHILD PRODUCTS TRANSACTIONS

The Group is engaged, among others, in the trading of the telecom and electronic products and the supply of the Child Products. The Group has carried on this business for many years. The Group has outsourced the manufacture of the telecom products and the Child Products to third party manufacturers. The New Child Products Agreement and the New Child Products Transactions will enable the Group to continue to supply the Child Products to the CCT Fortis Group.

The Directors consider that the New Child Products Transactions contemplated under the New Child Products Agreement are entered into, and will continue to be entered into, in the usual and ordinary course of businesses of the Group. They also consider that the terms of the New Child Products Agreement have been negotiated and will be conducted on an arm’s length basis and on normal commercial terms.

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LETTER FROM THE BOARD

Mr. Mak is a controlling shareholder of CCT Fortis and hence is an associate of CCT Fortis. Therefore, Mr. Mak is deemed to have a material interest in the New Child Products Agreement and the transactions contemplated thereof. As such, Mr. Mak had abstained from voting at the resolutions of the Board to approve the New Child Products Agreement, the New Child Products Transactions and the New Child Products Transaction Caps. As at the Latest Practicable Date, Mr. Mak did not hold any Shares and he is an associate of CCT Fortis and as such, Mr. Mak will be abstained from voting at the SGM if he holds any Shares on the date of the SGM.

Based on the above, save for Mr. Mak, the Directors (including Mr. Lau, being the sole member of the Independent Board Committee, after taking into account the opinion and advice from Gram Capital, and the other independent non-executive Directors) are of the view that the New Child Products Transactions contemplated under the New Child Products Agreement and the terms thereof are entered into in the ordinary and usual course of business of the Group and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

INFORMATION ON THE COMPANY, THE GROUP AND CCT FORTIS

The Company is the holding company of the Group. As at the Latest Practicable Date, the Group is principally engaged in (i) the trading of the telecom and electronic products and the supply of the Child Products; (ii) the development and sale of properties in the mainland China; (iii) finance business in the mainland China; (iv) money lender business in Hong Kong; and (v) electric vehicles business.

CCT Fortis is the holding company of the CCT Fortis Group, which is principally engaged in (i) property development and property trading; (ii) property investment and holding; (iii) securities business; (iv) Ferrari dealership; (v) classic car trading and investment and car logistic business; (vi) investment and trading in time pieces; (vii) multimedia business; (viii) cultural entertainment business; and (ix) the manufacturing of plastic components and trading and sale of the Child Products.

LISTING RULES IMPLICATIONS

As at the Latest Practicable Date, CCT Fortis held indirectly 28,467,100,000 Shares, representing approximately 15.48% of the existing total number of issued shares of the Company. CCT Fortis is a substantial shareholder of the Company and hence is a connected person of the Company under the Listing Rules. As such, each of the New Component Transactions and the New Child Products Transactions between the Group and the CCT Fortis Group constitute continuing connected transactions for the Company under the Listing Rules.

All of the relevant percentage ratios applicable to each of the New Component Transactions and the New Child Products Transaction are less than 25% on an annual basis and the annual consideration for each of the New Component Transactions and the New Child Products Transaction is expected to be more than HK$10,000,000 in accordance with Rule 14A.76 of the Listing Rules. As such, the New Transactions and the New Transaction Caps will be subject to announcement, circular, approval by the Independent Shareholders by way of

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LETTER FROM THE BOARD

poll at the SGM and annual reporting under Chapter 14A of the Listing Rules. CCT Fortis and its associates will abstain from voting in respect of the resolution(s) to approve the New Transactions and the New Transaction Caps at the SGM.

GENERAL

SGM

A notice convening the SGM to be held at 18/F., CCT Telecom Building, 11 Wo Shing Street, Fotan, Shatin, New Territories, Hong Kong on Monday, 31 December 2018 at 10:30 a.m. is set out on pages 49 to 51 of this circular. At the SGM, ordinary resolutions will be proposed for the Independent Shareholders to consider and, if thought fit, approve, the New Transactions and the New Transaction Caps.

A form of proxy for use by the Independent Shareholders at the SGM is enclosed with this Circular. Whether or not you intend to attend and vote at the SGM in person, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar and transfer office of the Company in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable but in any event, not later than 48 hours before the time appointed for holding the SGM (i.e. not later than 10:30 a.m. on Saturday, 29 December 2018, Hong Kong time) or at any adjournment thereof (as the case may be). Such form of proxy for use at the SGM is also published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.cctland.com/eng/investor/statutory.php). Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM should you so wish.

Pursuant to Rule 13.39(4) of the Listing Rules, voting at the SGM will be conducted by way of poll. The chairman of the SGM will therefore demand a poll on the resolution put forward at the SGM pursuant to bye-law 70 of the bye-laws of the Company. As at the Latest Practicable Date, CCT Fortis held indirectly 28,467,100,000 Shares, representing approximately 15.48% of the existing total number of issued shares of the Company, through which CCT Fortis controlled the voting rights of those Shares. CCT Fortis together with its associates will abstain from voting in respect of resolution(s) to approve, each of the (i) the New Component Transactions and the New Component Transaction Caps and (ii) the New Child Products Transaction and the New Child Products Transaction Caps. The proposed

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LETTER FROM THE BOARD

resolutions at the SGM will be taken by way of poll. An announcement on the poll results of the SGM will be published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.cctland.com/eng/investor/statutory.php) after the SGM.

RECOMMENDATION

Your attention is drawn to (i) the letter from the Independent Board Committee as set out on pages 23 to 24 of this circular which contains its recommendation to the Independent Shareholders on the terms of the New Agreements, the New Transactions and the New Transaction Caps; and (ii) the letter of advice from Gram Capital as set out on pages 25 to 42 of this circular which contains, amongst other matters, its advice to the Independent Board Committee and the Independent Shareholders in relation to the terms of the New Agreements, the New Transactions and the New Transaction Caps and the principal factors and reasons considered by it in concluding its advice.

Having considered the factors mentioned above, the Directors (including Mr. Lau, being the sole member of the Independent Board Committee, after taking into account the opinion and advice from Gram Capital, and the other independent non-executive Directors) are of the view that the terms of the New Agreements, the New Transactions and the New Transaction Caps are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, and are in the interest of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the SGM to approve each of (i) the New Component Transactions and the New Component Transaction Caps and (ii) the New Child Products Transactions and the New Child Products Transaction Caps.

OTHER INFORMATION

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

Yours faithfully, For and on behalf of the Board of CCT LAND HOLDINGS LIMITED Tam Ngai Hung, Terry Executive Director

– 22 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [309 x 41] intentionally omitted <==

(Incorporated in Bermuda with limited liability)

(Stock Code: 00261)

The Independent Board Committee: Lau Ho Kit, Ivan

Registered office: Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda

Head office and principal place of business in Hong Kong: 18/F., CCT Telecom Building, 11 Wo Shing Street, Fotan, Shatin, New Territories, Hong Kong

12 December 2018

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

I refer to the circular of the Company to the Shareholders dated 12 December 2018 (the ‘‘Circular’’), in which this letter forms part. Unless the context requires otherwise, capitalised terms used in this letter will have the same meanings as given to them in the section headed ‘‘Definitions’’ of this Circular.

I have been appointed by the Board as the Independent Board Committee to advise the Independent Shareholders on whether the terms of each of (i) the New Component Agreement, the New Component Transactions and the New Component Transaction Caps and (ii) the New Child Products Agreement, the New Child Products Transactions and the New Child Products Transaction Caps (each of the New Component Transactions and the New Child Products Transactions constitute continuing connected transactions under the Listing Rules) are fair and reasonable so far as the Independent Shareholders are concerned and are in the interest of the Company and the Shareholders as a whole. Gram Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the New Agreements, the New Transactions and the New Transaction Caps.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

I wish to draw your attention to the letter of advice from the independent financial adviser, Gram Capital, as set out on pages 25 to 42 of this Circular and the letter from the Board as set out on pages 5 to 22 of this Circular.

Having considered, amongst other matters, the factors and reasons considered by, and the opinion of Gram Capital as stated in its letter of advice, I consider that the terms of each of (i) the New Component Agreement, the New Component Transactions and the New Component Transaction Caps; and (ii) the New Child Products Agreement, the New Child Products Transactions and the New Child Products Transaction Caps are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and are in the interest of the Company and the Shareholders as a whole.

I recommend the Independent Shareholders to vote in favour of the ordinary resolution(s) to approve each of (i) the New Component Agreement, the New Component Transactions and the New Component Transaction Caps; and (ii) the New Child Products Agreement, the New Child Products Transactions and the New Child Products Transaction Caps to be proposed at the SGM.

Yours faithfully,

The Independent Board Committee of CCT LAND HOLDINGS LIMITED Lau Ho Kit, Ivan Independent non-executive Director

– 24 –

LETTER FROM GRAM CAPITAL

Set out below is the text of a letter received from Gram Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the New Transactions for the purpose of inclusion in this circular.

Room 1209, 12/F. Nan Fung Tower 88 Connaught Road Central/ 173 Des Voeux Road Central Hong Kong

12 December 2018

To: The Independent Board Committee and the Independent Shareholders of CCT Land 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 in respect of the New Transactions, details of which are set out in the letter from the Board (the ‘‘Board Letter’’) contained in the circular dated 12 December 2018 issued by the Company to the Shareholders (the ‘‘Circular’’), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 15 November 2018, the Company entered into the New Component Agreement and the New Child Products Agreement with CCT Fortis to renew the terms and conditions of the New Component Transactions and the New Child Products Transactions respectively.

With reference to the Board Letter, the New Transactions constitute continuing connected transactions of the Company and will be subject to announcement, circular, approval by the Independent Shareholders by way of poll at the SGM and annual reporting under Chapter 14A of the Listing Rules.

The Independent Board Committee comprising Mr. Lau Ho Kit, Ivan (being an independent non-executive Director) has been established to advise the Independent Shareholders on (i) whether the terms of the New Transactions are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the New Transactions are in the interests of the Company and the Shareholders as a whole and are conducted in the ordinary and usual course of business of the Group; and (iii) how the Independent Shareholders should vote in respect of the resolution(s) to approve the New Transactions at the SGM. We, Gram Capital Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

– 25 –

LETTER FROM GRAM CAPITAL

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors. We have assumed that all information and representations that have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have 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 Company, its advisers and/or the Directors, which have been provided to us. Our opinion is based on the Directors’ representation and confirmation that there are no undisclosed private agreements/ arrangements or implied understanding with anyone concerning the New Transactions. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules.

The 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 the 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 the Circular misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company, CCT Fortis or their respective subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the New Transactions. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. In addition, nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, it is the responsibility of Gram Capital to ensure that such information has been correctly extracted from the relevant sources while we are not obligated to conduct any independent in-depth investigation into the accuracy and completeness of those information.

– 26 –

LETTER FROM GRAM CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the New Transactions, we have taken into consideration the following principal factors and reasons:

1. Background of and reasons for the New Transactions

Information on the Group

With reference to the Board Letter, the Company is the holding company of the Group. As at the Latest Practicable Date, the Group is principally engaged in (i) the trading of the telecom and electronic products and the supply of the Child Products; (ii) the development and sale of properties in the mainland China; (iii) finance business in the mainland China; (iv) money lender business in Hong Kong; and (v) electric vehicles business.

Set out below are the consolidated financial information of the Group for the six months ended 30 June 2018 (‘‘HY2018’’) and the two years ended 31 December 2017 as extracted from the interim report of the Company for the six months ended 30 June 2018 (the ‘‘2018 Interim Report’’) and the annual report of the Company for the year ended 31 December 2017 (the ‘‘2017 Annual Report’’):

	For the
	six months	For the	For the
	ended	year ended	year ended
	30 June	31 December	31 December	Change from
	2018	2017	2016	2016 to 2017
	(unaudited)	(audited)	(audited)
	HK$’million	HK$’million	HK$’million	%
Revenue from continuing
operations	250	580	735	(21.09)
— Products trading business	193	414	510	(18.82)
— Mainland property business	52	156	217	(28.11)
— Mainland finance business	5	10	8	25.00
Gross profit from continuing
operations	10	27	49	(44.90)
Loss for the period/year from
continuing operations	31	155	69	124.64

As illustrated in the above table, the revenue and gross profit of the Group from continuing operation amounted to approximately HK$580 million and HK$27 million respectively for the year ended 31 December 2017 (‘‘FY2017’’), representing a decrease of approximately 21.09% and 44.90% respectively as compared to those for the year ended 31 December 2016 (‘‘FY2016’’). Revenue from products trading business from continuing operation amounted to approximately HK$414 million for FY2017, representing a decrease of approximately 18.82% as compared to that for FY2016 and contributing approximately 71.38% to the Group’s total revenue for

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LETTER FROM GRAM CAPITAL

FY2017. With reference to the 2018 Interim Report, revenue from products trading business from continuing operation for HY2018 represented a decrease of approximately 28.52% as compared to that for the six months ended 30 June 2017 (‘‘HY2017’’). With reference to the 2017 Annual Report and the 2018 Interim Report, the products trading business segment represented the sale of telecom and electronic products and supply of infant and baby products.

For FY2017, the Group recorded loss from continuing operation of approximately HK$155 million, representing an increase of approximately 124.64% as compared to that for FY2016. With reference to the 2017 Annual Report and as advised by the Directors, such increase in loss was mainly caused by (i) the share option expenses due to the granting of 5,940,000,000 share options in January 2017; (ii) impairment provisions against the property development projects; and (iii) impairment of goodwill.

Information on CCT Fortis

With reference to the Board Letter, CCT Fortis is the holding company of the CCT Fortis Group, which is principally engaged in (i) property development and property trading; (ii) property investment and holding; (iii) securities business; (iv) Ferrari dealership; (v) classic car trading and investment and car logistic business; (vi) investment and trading in time pieces; (vii) multimedia business; (viii) cultural entertainment business; and (ix) the manufacturing of plastic components and trading and sale of the Child Products.

Reasons for and benefits of the New Transactions

The New Component Transactions

With reference to the Board Letter, the Group is engaged, among others, in the trading of the telecom and electronic products and the supply of the Child Products. As shown in the section above, revenue from the products trading business (i.e. the sale of telecom and electronic products and supply of infant and baby products) represented a major part of the Group’s total revenue from continuing operation for FY2016, FY2017 and HY2018. As mentioned in the Board Letter, the Component Products have been manufactured and supplied by the CCT Fortis Group to the Group. The Company has been engaged in the trading of and supply of telecom, electronic and the Child Products for many years. It has outsourced the manufacturing of products to third party manufacturer and the Component Products are purchased for the production of the products by the outside manufacturer for the Group.

As further mentioned in the Board Letter, the Directors consider that (i) the terms of the New Component Agreement have been negotiated and will be conducted on an arm’s length basis and on normal commercial terms; (ii) the CCT Fortis Group has extensive experience in and has established strong reputation of manufacturing

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LETTER FROM GRAM CAPITAL

plastic components for products trading business of the Group and (iii) the entering of the New Component Agreement will provide a secured and reliable source of supply of the Component Products of good quality at reasonable costs to the Group.

As it would be (i) impracticable to negotiate for numerous agreements with CCT Fortis, and (ii) costly and impracticable to make regular disclosure of each of the relevant transactions and obtain the prior approval from the Independent Shareholders, as required by the Listing Rules, if necessary, the Directors are of the view that the entering into of the New Component Transactions will be beneficial to the Company and the Shareholders as a whole. We concur with the Directors in this regard.

In light of the above, we concur with the Directors that the New Component Transactions are entered into in the usual and ordinary course of businesses of the Group and are in the interests of the Company and the Shareholders as a whole.

The New Child Products Transactions

With reference to the Board Letter, the Group is engaged, among others, in the trading of the telecom and electronic products and the supply of the Child Products. As shown in the section above, revenue from the products trading business (i.e. the sale of telecom and electronic products and supply of infant and baby products) represented a major part of the Group’s total revenue from continuing operation for FY2016, FY2017 and HY2018. As further mentioned in the Board Letter, the Group has carried on the business for many years. The Group has outsourced the manufacture of the telecom products and the Child Products to third party manufacturers. The New Child Products Agreement and the New Child Products Transactions will enable the Group to continue to supply the Child Products to the CCT Fortis Group.

As it would be (i) impracticable to negotiate for numerous agreements with CCT Fortis, and (ii) costly and impracticable to make regular disclosure of each of the relevant transactions and obtain the prior approval from the Independent Shareholders, as required by the Listing Rules, if necessary, the Directors are of the view that the entering into of the New Child Products Transactions will be beneficial to the Company and the Shareholders as a whole. We concur with the Directors in this regard.

In light of the above, we concur with the Directors that the New Child Products Transactions are entered into in the usual and ordinary course of businesses of the Group and are in the interests of the Company and the Shareholders as a whole.

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LETTER FROM GRAM CAPITAL

2. Principal terms of the New Transactions

i. The New Component Transactions

Date

15 November 2018

Parties

the Company and CCT Fortis

Subject

Term

The New Component Agreement will be effective as from 1 January 2019 after the conditions precedent have been fulfilled and will continue until 31 December 2021 (both dates inclusive). Both parties may renew the New Component Agreement in writing upon expiry on 31 December 2021 for another three (3) years subject to compliance with the Listing Rules and either party will have the right to terminate the New Component Agreement without cause by serving the other party with not less than six (6) months’ prior written notice.

Price and terms of payment

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date of monthly statements which set out the outstanding invoices. The terms of payment are comparable to or not worse than those credit terms granted to the independent third party customers of the CCT Fortis Group.

With reference to the Board Letter, the sale price in respect of specific models of the Component Products payable by the Group will be comparable to that charged by the members of the CCT Fortis Group to the independent third party customers of the CCT Fortis Group. Quotations from at least two independent third party suppliers for similar products will be solicited by the Company to determine that the price offered by the CCT Fortis Group is in accordance with the pricing policy and is comparable to or not less favourable than price offered by unrelated third parties.

For our due diligence purpose, we obtained (i) invoices for the supply of Component Products by CCT Fortis Group to the Group; and (ii) quotation of similar models of Component Products made by independent third party suppliers during 2016 to 2018. We noted from such documents that (i) the unit prices of offered by CCT Fortis were not higher than those offered by independent third parties; and (ii) the payment terms offered by CCT Fortis were no less favourable to the Group than those offered by independent third parties.

As mentioned above, the price of the Component Products will be capped by the amount of direct material costs plus a mark-up of no more than 250% (the ‘‘Component Price Cap(s)’’). For our due diligence purpose, we have enquired into the management of CCT Fortis regarding the Component Price Cap and understood that prices of similar component products charged by CCT Fortis Group to independent third parties will not be limited to any pricing cap.

With reference to the Board Letter, the Group has adopted certain measures in relation to the New Component Transactions, details of which are set out in the sections headed ‘‘Internal Control Measures Relating to Pricing of the Component Products’’ and ‘‘Measures to Ensure Compliance with the Listing Rules in relation to the New Component Transactions’’ of the Board Letter. Having considered, in particular, that

(i) the purchasing department will check and ensure that the Component Price Caps will not be exceeded;
(ii) the purchasing department of the Group will solicit quotations from at least two independent third parties for similar products to determine if the price offered by the CCT Fortis Group is in accordance with the pricing policy and is comparable to or not less favourable than price offered by unrelated third parties;
(iii) the head of the purchasing department will review the price and approve the purchase orders for Component Products; and

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LETTER FROM GRAM CAPITAL

(iv) the accounting department of the Company will conduct regular check on the pricing terms of the Component Products on a quarterly basis to ensure that the pricing terms of each of the New Component Transactions are determined in accordance with the pricing policies or mechanisms under the New Component Agreement, are on normal commercial terms or no less favourable to the Group than those comparable products that could be purchased by the Group from independent third parties,

we consider the effective implementation of such internal control measures would help to ensure fair pricing of the New Component Transactions.

With reference to the annual report of the Company for the year ended 31 December 2016 and the 2017 Annual Report, the independent non-executive Directors had reviewed the continuing connected transactions of the Company during FY2016 and FY2017, and confirmed that such continuing connected transactions (a) did not exceed the approved annual cap; (b) were entered into in the ordinary and usual course of business of the Group; (c) were conducted in normal commercial terms or better; and (d) were conducted in accordance with the terms of the agreements governing such transactions, which are fair and reasonable and in the interests of the Company and the Shareholders as a whole (the ‘‘INED’s Confirmation’’).

In addition, the Company’s independent auditor was engaged to report on the Group’s continuing connected transaction in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) ‘‘Assurance Engagements Other Than Audits or Reviews of Historical Financial Information’’ and with reference to Practice Note 740 ‘‘Auditor’s Letter on Continuing Connected Transactions under the Hong Kong Listing Rules’’ issued by the Hong Kong Institute of Certified Public Accountants. For the purpose of Rule 14A.56 of the Listing Rules, the auditor of the Company, provided a letter to the Board regarding the continuing connected transactions during FY2016 and FY2017 confirming that: (i) nothing has come to their attention that causes them to believe that the continuing connected transactions have not been approved by the Board; (ii) for transactions involving the provisions of goods or services by the Group, nothing has come to their attention that causes them to believe that the transactions were not, in all material respects, in accordance with the pricing policies of the Group; (iii) nothing has come to their attention that causes them to believe that the transactions were not entered into, in all material respects, in accordance with the agreements governing the transactions; and (iv) with respect to the aggregate amount of each of the continuing connected transactions, nothing has come to their attention that causes them to believe that the continuing connected transactions have exceeded the annual cap as set by the Company (the ‘‘Auditor’s Confirmation’’).

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LETTER FROM GRAM CAPITAL

In light of the above, we are of the view that the terms of the New Component Transactions are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

ii. The New Child Products Transactions

Date

15 November 2018

Parties

the Company and CCT Fortis

Subject

Term

The New Child Products Agreement will be effective as from 1 January 2019, after all the conditions precedent have been fulfilled and will continue until 31 December 2021 (both dates inclusive). Both parties may mutually renew the New Child Products Agreement in writing upon expiry on 31 December 2021 for another three (3) years subject to compliance with the Listing Rules and either party will have the right to terminate the New Child Products Agreement without cause by serving the other party with not less than six (6) months’ prior written notice.

Pricing basis and payment terms

In respect of the transactions contemplated under the New Child Products Agreement, the price of the Child Products to be supplied by the Group to the CCT Fortis Group will be determined on a case-by-case basis. The parties to the New Child Products Agreement will take into account the following nonexhaustive factors in determining the price of each Child Product model payable by the CCT Fortis Group:

(a) The sale price in respect of specific models of the Child Products payable by the CCT Fortis Group to the Group (the ‘‘Sale Price’’) will be the higher of the prices determined under the following two bases (the ‘‘Sale Price Bases’’):

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(i) the sum of the direct material costs of each specific model of the Child Products plus a mark-up of up to 250% of the direct material costs (the ‘‘Cost-plus Basis’’); and
(ii) the selling prices for specific models of the Child Products that the CCT Fortis Group sells to independent third party distributors or retailers (the ‘‘Third Party Prices’’) less a discount of up to 10% (the ‘‘Discount’’), which discount is intended to cover the product development costs, sales and marketing costs, the customer’s credit risk, administrative costs and profit margin of the Child Products trading business; and
(b) the projected orders that are to be placed by the CCT Fortis Group in respect of the relevant Child Product model for each calendar year.

The CCT Fortis Group will provide documentary evidence (such as sales quotation and sales invoices) to the Group to support the Third Party Prices.

The amount of the Sale Price for the Child Products will be payable by the CCT Fortis Group by cheque, bank transfer or by deposit directly by member(s) of the CCT Fortis Group into the designated bank accounts of the member(s) of the Group, and unless otherwise agreed, will be payable within 120 days from the date of monthly statements which set out the outstanding invoices (the ‘‘Settlement Period’’). The terms of payment are comparable to or not worse than those credit terms granted to the independent third party customers of the Group.

Priority of purchase

With reference to the Board Letter, the direct material costs as a percentage of total costs of the Child Products is in the range of 50% to 70% and as such, the pricing policy of direct material costs plus a mark-up of up to 250% will ensure that the Sale Price will cover the total product costs of the Child Product plus a reasonable margin to the Company. The Company does not supply the Child Products to any other customers other than to CCT Fortis. The Sale Price determined on the basis of the selling prices for specific models of the Child Products that the CCT Fortis Group sells to its independent third party customers less a discount of up to 10% (i.e. the Discount) is to ensure that the Sale Price is not less favourable than the Third Party Prices as adjusted by the

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LETTER FROM GRAM CAPITAL

Discount. The Discount (limit to 10%) is to cover all the costs (as specified above) and profit margin of the Child Products trading business of the CCT Fortis Group and is considered to be fair and reasonable by the Company. Furthermore, as the determination of the Sale Price will take into account both the costs and Third Party Prices of the Child Products, the Company considers that the pricing terms and policies under the New Child Products Agreement are on normal commercial terms and fair and reasonable to the Company and its Independent Shareholders.

As advised by the Directors, after completion of the disposal of Suremark Holdings Limited and its subsidiaries (the ‘‘Target Group’’) to CCT Fortis on 14 October 2016, the Group has not supplied Child Products to independent third parties (i.e. the Group only supplies Child Products to CCT Fortis Group after the disposal). In this regard, we noted from the circular of the Company dated 27 September 2016 regarding among others, the disposal of the entire issued share capital of Suremark Holdings Limited to CCT Fortis, that the Target Group was principally engaged in the trading and sale of the Child Products which were all sold to independent third parties.

As further advised by the Directors, the Sale Price Bases were determined after an arm’s length negotiation with CCT Fortis. For our due diligence purpose, we also enquired into the Directors regarding the basis of determining the Sale Price Bases and were advised by the Directors that (i) the Cost-plus Basis is intended to cover to costs incurred by the Group in supplying the Child Products; and (ii) the application of the Discount to the Third Party Prices is intended to cover the product development costs, sales and marketing costs, the customer’s credit risk, administrative costs and profit margin of the child products trading business of CCT Fortis. The Company expects that Sale Price determined based on the higher of the ‘‘Cost-plus Basis’’ and the ‘‘Third Party Prices less the Discount’’ will exceed the total product costs with a reasonable margin to the Group. The Company considers that the pricing terms and policies under the New Child Products Agreement, which take into account both the product costs and the Third Party Prices, will enable the Group to negotiate and obtain the best possible sale price acceptable to the Group.

We also obtained (i) invoices for the supply of Child Products by the Group to CCT Fortis Group; and (ii) documents showing the relevant Third Party Prices for Child Products sold by CCT Fortis Group to independent third parties during 2016 to 2018. We noted from such documents that the unit Sale Prices of Child Products sold by the Group were not lower than the respective Third Party Prices less a discount of up to 10%.

In respect of the payment terms under the New Child Products Agreement, with reference to the 2018 Interim Results, the Group allows an average credit period of 30 to 120 days to its trade customers. In addition, according to the aged analysis of the trade receivables of the Group, trade receivables with credit period of 91 to 120 days constituted approximately 7% of the Group’s total

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LETTER FROM GRAM CAPITAL

trade receivables as at 30 June 2018, while trade receivables with credit period of over 120 days constituted approximately 18% of the Group’s total trade receivables as at 30 June 2018. The Settlement Period is within the said average credit period allowed by the Group to its trade customers. Accordingly, we considered that the Settlement Period is justifiable.

With reference to the Board Letter, the Group has adopted certain measures in relation to the New Child Products Transactions, details of which are set out in the sections headed ‘‘Internal Control Measures Relating to the New Child Products Transactions’’ and ‘‘Measures to Ensure Compliance with the Listing Rules in relation to the New Child Products Transactions’’ of the Board Letter. Having considered, in particular, that

(i) before entering into a transaction under the New Child Products Transactions, the sales and marketing department of Group will negotiate on the provisional sale price of the specific model of the Child Products with the CCT Fortis Group, and review and check whether the sale price is fair and reasonable adhering to the pricing terms and details set out in the New Child Products Agreement. In the event that the sale price for a specific purchase order for a model of the Child Products is not in compliance with the pricing terms set out in the New Child Products Agreement, the Group is entitled to reject such purchase order from the CCT Fortis Group;
(ii) the Company will request the CCT Fortis Group to provide documentary evidence (such as sales quotation and sales invoices) to the Group to support the Third Party Prices; and
(iii) in addition to reviewing the sale price before entering into a transaction under the New Child Products Transactions or where the pricing terms under the New Child Products Agreement for a specific model of Child Products are applied for the first time or the pricing terms are different from those used previously, the accounting department of the Group will review the works carried out by the sales and marketing department on a quarterly basis,

we consider the effective implementation of such internal control measures would help to ensure fair pricing of the New Child Products Transactions.

In light of the above (in particular (i) that the Group supplies Child Products only to CCT Fortis Group after the disposal of the Target Group; (ii) that the Sale Price Bases were determined after an arm’s length negotiation with CCT Fortis; and (iii) the aforementioned internal control measures to ensure the fair pricing of the New Child Products Transactions) and the INED’s Confirmation and the Auditor’s Confirmation, we are of the view that the terms of the New Child Products Transactions are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM GRAM CAPITAL

3. New Transaction Caps

i. The New Component Transaction Caps

Set out below are (i) the historical annual caps for the two years ended 31 December 2017 and the year ending 31 December 2018; (ii) the historical transaction amount for the two years ended 31 December 2017 and the 11 months ended 30 November 2018; and (iii) the New Component Transaction Caps for the three years ending 31 December 2021:

	For the	For the	For the
	year ending	year ended	year ended
	31 December	31 December	31 December
	2018	2017	2016
	HK$’million	HK$’million	HK$’million
Historical annual caps	200	160	135
Historical transaction amount	35 (Note)	55	74
Utilisation rate	N/A	34.38%	54.81%
	For the	For the	For the
	year ending	year ending	year ending
	31 December	31 December	31 December
	2021	2020	2019
	HK$’million	HK$’million	HK$’million
New Component Transaction
Caps	17	16	15

Note: For the 11 months ended 30 November 2018

With reference to the Board Letter, the basis of the New Component Transaction Caps are determined with reference to (i) the historical figures of the sales of the Component Products by the CCT Fortis Group to the Group and the declining trend based on historical figures; and (ii) the expectation of the further declining sales of the products trading business of the Group in 2019, which will require less Component Products in 2019 due to increasing operational difficulties and challenges, which will require less Component Products in 2019; and (iii) expectation of plastic components of certain products models will be sourced directly by independent third party manufacturer from independent third party suppliers instead of through the Company. As advised by the Directors, it is expected the supply needs of the Component Products will stabilize after 2019 and will increase by approximately HK$1 million or 6.6% in 2020 (as compared to 2019) and a further approximately HK$1 million or 6.2% in 2021 (as compared to 2020). The forecast of supply needs of the Component Products was based on discussions with the Company’s major customers and the Company’s knowledge of the products trading market.

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LETTER FROM GRAM CAPITAL

For the year ending 31 December 2019, we note that the New Component Transaction Cap represents a decrease to the historical annual cap for FY2018 and is lower than the historical transaction amount for the 11 months ended 30 November 2018. Nonetheless, having considered (i) the low utilization rates of the transaction for FY2016 and FY2017, (ii) the declining historical transaction amount of the transaction for FY2017; (iii) the declining revenue from the products trading business of the Group (from continuing operation) for FY2017 and for HY2018 (as compared to that for HY2017); and (iv) that the forecast of needs of the Component Products is based on, among others, the discussions with the Company’s major customers, we consider the New Component Transaction Cap for the year ending 31 December 2019 to be justifiable.

As mentioned above, the Directors expected that the supply needs of the Component Products will stabilize after 2019 and will increase by approximately HK$1 million or 6.6% in 2020 and a further approximately HK$1 million or 6.2% in 2021. With reference to the 2018 Interim Report, despite decreasing revenue, the products trading business of the Group recorded an operating profit of approximately HK$1 million for HY2018, as compared to a loss of approximately HK$36 million for HY2017 (of which approximately HK$35 million was attributable to the discontinued business). The Directors considered that such improvement in operating performance was due to the Company’s ongoing initiatives to restructure, resize and revive the products trading business. As further mentioned in the 2018 Interim Report, despite facing increasing difficulties and challenges, the Company will strive to improve the performance of the products trading business. The Company will explore opportunities to expand and diversify its product lines and will try to seek new customers with a view to broaden the revenue and improve the profitability of the products trading business. Taking into account the above, the Directors expect that the supply needs of the Component Products will stabilize after 2019, while a small buffer is applied (HK$1 million for each of the two years ending 31 December 2021 respectively) for circumstances such as (a) the unexpected increase in demand of Component Products and (b) inflation. Accordingly, we consider the said estimation of supply needs and buffers for each of the two years ending 31 December 2021 justifiable.

In light of the above, we consider that the New Component Transaction Caps are fair and reasonable.

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LETTER FROM GRAM CAPITAL

ii. The New Child Products Transaction Caps

Set out below are (i) the historical annual caps for the two years ended 31 December 2017 and the year ending 31 December 2018; (ii) the historical transaction amount for the two years ended 31 December 2017 and the 11 months ended 30 November 2018; and (iii) the New Child Products Transaction Caps for the three years ending 31 December 2021:

	For the	For the	For the
	year ending	year ended	year ended
	31 December	31 December	31 December
	2018	2017	2016
	HK$’million	HK$’million	HK$’million
Historical annual caps	250	190	50
Historical transaction amount	120 (Note 2)	143	21 (Note 1)
Utilisation rate	N/A	75.26%	42.00%
	For the	For the	For the
	year ending	year ended	year ended
	31 December	31 December	31 December
	2021	2020	2019
	HK$’million	HK$’million	HK$’million
New Child Products Transaction
Caps	85	82	80
Notes:

From 14 October 2016 to 31 December 2016
For the 11 months ended 30 November 2018

With reference to the Board Letter, the basis of the New Child Products Transaction Caps are determined with reference to (i) the historical figures of the supply of the Child Products by the Group to the CCT Fortis Group; and (ii) the expectation of further declining supply of the Child Products in 2019 as compared to 2018, due to increasing operational difficulties and challenges faced by this business. These operational difficulties and challenges include rising product costs, keen competition in the Child Product market which have affected the major customers of CCT Fortis and the trade tensions between the US and China. As advised by the Directors, it is expected that the sales of the Child Products will stabilize after 2019 and will increase marginally by approximately 2.5% in 2020 (as compared to 2019) and a further approximately 3.6% in 2021 (as compared to 2020). The aforesaid analysis and the revenue forecast in the next three years are based on discussions with CCT Fortis (whose view is based on discussions between CCT Fortis and its major customer) and the Company’s knowledge of the Child Products market.

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LETTER FROM GRAM CAPITAL

For the year ending 31 December 2019, we note that the New Child Products Transaction Cap represents a decrease to the historical annual cap for FY2018. The New Child Products Transaction Cap for the year ending 31 December 2019 is HK$80 million while the historical transaction amount for the 11 months ended 30 November 2018 already reaches HK$120 million. As mentioned above and as advised by the Directors, the adjustment of the New Child Products Transaction Cap for the year ending 31 December 2019 is based on the discussion with CCT Fortis. As notified by CCT Fortis, after discussion with its major customer, the management of CCT Fortis expected purchase demand for Child Products for the three years ending 31 December 2021 would be significantly lower than the historical figures.

For our due diligence purpose, we noted from the annual report of CCT Fortis for FY2017 that (i) the industrial group of CCT Fortis (which is engaged in the manufacturing of plastic components and operation of CCT Fortis’ child product trading business) (the ‘‘Industrial Group’’) would face increasing difficulties and challenges amidst rising threats of trade war between US and China; (ii) rising product costs; and (iii) the bankruptcy filing by Toys R Us and its plan to close all its US stores have affected the world’s child product market as a whole. With reference to the interim report of CCT Fortis for HY2018, the Industrial Group recorded a decrease in revenue of approximately 15.38% for HY2018 as compared to that for HY2017. Having considered the above (in particular (i) that the adjustment of the New Child Products Transaction Cap for the year ending 31 December 2019 is based on the Group’s discussion with CCT Fortis; (ii) that CCT Fortis arrived at the expected purchase demand of Child Products after discussion with its major customer; (iii) the decrease in revenue of the Industrial Group for HY2018 as compared to that for HY2017; and (iv) the declining revenue from the products trading business of the Group (from continuing operation) for FY2017 and for HY2018 (as compared to that for HY2017)), we consider the New Child Products Transaction Cap for the year ending 31 December 2019 to be justifiable.

As mentioned above, the Directors expected that the sales of the Child Products will stabilize after 2019 and will increase marginally by approximately 2.5% in 2020 and a further 3.6% in 2021. As mentioned above, the operating performance of the products trading business improved for HY2018 as compared to HY2017 due to the Company’s ongoing initiatives to restructure, resize and revive the products trading business. With reference to the 2018 Interim Report, despite facing increasing difficulties and challenges, the Company will strive to improve the performance of the products trading business. The Company will explore opportunities to expand and diversify its product lines and will try to seek new customers with a view to broaden the revenue and improve the profitability of the products trading business. Taking into account the above, the Directors expect that the sales of the Child Products will stabilize after 2019, while a small buffer is applied (HK$2 million for the year ending 31 December 2020 and HK$3 million for the year ending 31 December 2021 respectively) for circumstances such as (a) the unexpected increase in demand of Child Products and (b) inflation. Accordingly, we consider the said estimation of demand and buffers for each of the two years ending 31 December 2021 justifiable.

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LETTER FROM GRAM CAPITAL

In light of the above, we consider that the New Child Products Transaction Caps are fair and reasonable.

Shareholders should note that as the New Transaction Caps are relating to future events and were estimated based on assumptions which may or may not remain valid for the entire period up to 31 December 2021, and they do not represent forecasts of cost to be incurred from the New Transactions. Consequently, we express no opinion as to how closely the actual cost to be incurred from the New Transactions will correspond with the New Transaction Caps.

4. Listing Rules implication

The Directors confirmed that the Company shall comply with the requirements of Rules 14A.53 to 14A.59 of the Listing Rules pursuant to which (i) the values of the New Transactions must be restricted by New Transaction Caps for the New Agreements; (ii) the terms of the New Transactions (including the New Transaction Caps) must be reviewed by the independent non-executive Directors annually; (iii) details of independent non-executive Directors’ annual review on the terms of the New Transactions must be included in the Company’s subsequent published annual reports and financial accounts. Furthermore, it is also required by the Listing Rules that the auditors of the Company must provide a letter to the Board confirming, among other things, whether anything has come to their attention that causes them to believe that the New Transactions (i) have not been approved by the Board; (ii) were not, in all material respects, in accordance with the pricing policies of the Group if the transactions involve the provision of goods or services by the Group; (iii) were not entered into, in all material respects, in accordance with the relevant agreement governing the transactions; and (iv) have exceeded the New Transaction Caps. In the event that the total amounts of the New Transactions are anticipated to exceed the New Transaction Caps, or that there is any proposed material amendment to the terms of the New Transactions, as confirmed by the Directors, the Company shall comply with the applicable provisions of the Listing Rules governing continuing connected transaction.

Given the above stipulated requirements for continuing connected transactions pursuant to the Listing Rules, we are of the view that there are adequate measures in place to monitor the New Transactions and thus the interest of the Independent Shareholders would be safeguarded.

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LETTER FROM GRAM CAPITAL

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of each of the New Component Transactions and the New Child Products Transactions are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) each of the New Component Transactions and the New Child Products Transactions are conducted in the ordinary and usual course of business of the Group and are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the SGM to approve each of (a) the New Component Transactions and the New Component Transaction Caps; and (b) the New Child Products Transactions and the New Child Products Transaction Caps and we recommend the Independent Shareholders to vote in favour of the resolution(s) in this regard.

Yours faithfully, For and on behalf of Gram Capital Limited Graham Lam Managing Director

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GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(a) Directors’ and chief executive’s interests and short positions in the shares and the underlying shares of the Company

As at the Latest Practicable Date, the Directors and chief executive of the Company and/or any of their respective associates had the following interests and short positions in the shares, underlying shares and debentures of the Company and/or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or were required, pursuant to section 352 of the SFO, to be entered in the register of the Company referred to therein; or which were required, pursuant to the Model Code to be notified to the Company and the Stock Exchange were as follows:

Long positions

Name of Directors Executive Directors Mak Shiu Tong, Clement Cheng Yuk Ching, Flora Tam Ngai Hung, Terry Independent Non-executive Directors Chow Siu Ngor Lau Ho Kit, Ivan Tam King Ching, Kenny	Personal Interests — — 10,000,000 — — —	Corporate Interests 28,467,100,000 (Note 1) — — — — —	Equity Derivatives Share Options 2,620,000,000 (Notes 2 & 3) 2,145,000,000 (Notes 2 & 4) 2,145,000,000 (Notes 2 & 4) 25,000,000 (Notes 2 & 5) 25,000,000 (Notes 2 & 5) 25,000,000 (Notes 2 & 5)	Total Interests 31,087,100,000 2,145,000,000 2,155,000,000 25,000,000 25,000,000 25,000,000	Approximate % of the total number of issued Shares*
					16.91% 1.16% 1.17% 0.01% 0.01% 0.01%

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GENERAL INFORMATION

APPENDIX I

The percentage was calculated based on 183,846,093,990 Shares in issue as at the Latest Practicable Date.

Notes:

The interests disclosed represented 28,467,100,000 Shares held indirectly by CCT Fortis through its indirect wholly-owned subsidiary, CCT Telecom Securities Limited. Mr. Mak was deemed to be interested in the aforesaid 28,467,100,000 Shares under the SFO as he was entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of CCT Fortis through his interest in the shareholding of approximately 53.57% of the total issued share capital in CCT Fortis as at the Latest Practicable Date.
These represent outstanding underlying Shares of the share options granted to the Directors pursuant to the 2011 share options scheme of the Company.
The 2,620,000,000 share options interested by Mr. Mak represent (i) the share options granted to Mr. Mak on 18 January 2017 to subscribe for 1,300,000,000 Shares at the exercise price of HK$0.011 per Share, during the exercisable period from 18 January 2017 to 17 January 2027; and (ii) the share options granted to Mr. Mak on 25 January 2018 to subscribe for 1,320,000,000 Shares at the exercise price of HK$0.01 per Share, during the exercisable period from 25 January 2018 to 24 January 2028.
The 2,145,000,000 share options interested by each of Ms. Cheng Yuk Ching and Mr. Tam Ngai Hung represent (i) the share options granted to each of these two executive Directors on 18 January 2017 to subscribe for 825,000,000 Shares at the exercise price of HK$0.011 per Share, during the exercisable period from 18 January 2017 to 17 January 2027; and (ii) the share options granted to each of these two executive Directors on 25 January 2018 to subscribe for 1,320,000,000 Shares at the exercise price of HK$0.01 per Share, during the exercisable period from 25 January 2018 to 24 January 2028.
The 25,000,000 share options interested by each of Mr. Chow, Mr. Lau and Mr. Kenny Tam represent (i) the share options granted to each of these three independent non-executive Directors (the ‘‘INEDs’’) on 17 January 2014 to subscribe for 5,000,000 Shares at the exercise price of HK$0.01 per Share, during the exercisable period from 17 January 2014 to 16 January 2024; (ii) the share options granted to each of these three INEDs on 18 January 2017 to subscribe for 10,000,000 Shares at the exercise price of HK$0.011 per Share, during the exercisable period from 18 January 2017 to 17 January 2027; and (iii) the share options granted to each of these three INEDs on 25 January 2018 to subscribe for 10,000,000 Shares at the exercise price of HK$0.01 per Share, during the exercisable period from 25 January 2018 to 24 January 2028.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company and/or any of their respective associates had any interest and short position in the shares, underlying shares and debentures of the Company and/or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or were required, pursuant to section 352 of the SFO, to be entered in the register of the Company referred to therein; or were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

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GENERAL INFORMATION

APPENDIX I

(b) Substantial shareholders and other persons’ interests and short positions in the Shares and the underlying shares of the Company

As at the Latest Practicable Date, so far as was known to, or could be ascertained after reasonable enquiries by, the Directors, the following persons (other than the Directors or chief executive of the Company) had interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or were, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group were as follows:

Long positions

Name of person/entity CCT Fortis Holdings Limited CCT Capital International Holdings Limited CCT Telecom Securities Limited Ever Sino Group Limited Shao Chaoou Fortunate Grow Limited Xu Jinhuan Lau Kit Ying	Personal Interests — — 28,467,100,000 (Notes 1 & 2) 25,200,000,000 (Note 3) 8,080,000 9,900,000,000 (Note 4) — —	Corporate Interests 28,467,100,000 (Notes 1 & 2) 28,467,100,000 (Notes 1 & 2) — — 25,200,000,000 (Note 3) — 9,900,000,000 (Note 4) 9,900,000,000 (Note 4)	Total Interests 28,467,100,000 28,467,100,000 28,467,100,000 25,200,000,000 25,208,080,000 9,900,000,000 9,900,000,000 9,900,000,000	Approximate % of the total number of issued Shares*
				15.48% 15.48% 15.48% 13.70% 13.71% 5.38% 5.38% 5.38%

The percentage was calculated based on 183,846,093,990 Shares in issue as at the Latest Practicable Date.

Notes:

The interests disclosed represented 28,467,100,000 Shares held by CCT Telecom Securities Limited, an indirect wholly-owned subsidiary of CCT Fortis.
CCT Telecom Securities Limited is a direct wholly-owned subsidiary of CCT Capital International Holdings Limited which is in turn a direct wholly-owned subsidiary of CCT Fortis.
The interests disclosed represented 25,200,000,000 Shares directly held by Ever Sino Group Limited. Mr. Shao Chaoou was deemed to be interested in the aforesaid 25,200,000,000 Shares under the SFO as he was entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of Ever Sino Group Limited through his interest in the shareholding of 44% of the total issued share capital in Ever Sino Group Limited as at the Latest Practicable Date.

– 45 –

GENERAL INFORMATION

APPENDIX I

The interests disclosed represented 9,900,000,000 Shares directly held by Fortunate Grow Limited. Each of Mr. Xu Jinhuan and Ms. Lau Kit Ying was deemed to be interested in the aforesaid 9,900,000,000 Shares under the SFO as he/she was entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of Fortunate Grow Limited through each of their interest in the shareholding of 50% of the total issued share capital in Fortunate Grow Limited as at the Latest Practicable Date.

Save for Mr. Mak, Ms. Cheng Yuk Ching, Flora and Mr. Tam Ngai Hung, Terry who are directors of each of CCT Fortis, CCT Capital International Holdings Limited and CCT Telecom Securities Limited, and Mr. Chow and Mr. Kenny Tam who are independent non-executive directors of CCT Fortis, no other Director is a director or employee of the above substantial Shareholders which has an interest or short position in the Shares and the underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO.

Save as disclosed above, so far as was known to the Directors, as at the Latest Practicable Date, there was no other person (other than the Directors or chief executive of the Company) who had any interests or short positions in the Shares and the underlying Shares (including interests in the underlying shares of each of convertible bonds and share options, if any) which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO, or were, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

3. INTERESTS IN CONTRACT OR ARRANGEMENT

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

4. INTERESTS IN ASSETS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been, since 31 December 2017, being the date to which the latest published audited accounts of the Company were made up, acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

5. SERVICE CONTRACTS

There is no existing or proposed service contract between any member of the Group and any Director (excluding contracts expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation)).

6. COMPETING INTERESTS

Each of the Directors has confirmed that so far as they are aware of, none of the Directors nor any proposed Director or his/her respective close associates has any interest in a business, apart from the Group’s business, which competes or is likely to compete, either directly or indirectly, with the Group’s business.

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GENERAL INFORMATION

APPENDIX I

7. LITIGATION

As at the Latest Practicable Date, neither the Company nor any member of the Group was engaged in any litigation or claims of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against the Company or any member of the Group.

8. QUALIFICATION AND CONSENT OF EXPERT

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

Name Qualification

Gram Capital Limited A licensed corporation to carry out Type 6 (advising on corporation finance) regulated activity under the SFO

(i) Gram Capital did not have any shareholding, directly or indirectly, in the Company or any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in the Company or any member of the Group as at the Latest Practicable Date;
(ii) Gram Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter/report and reference to its name in the form and context in which they are included; and
(iii) Gram Capital did not have any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to the Company or any members of the Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Group since 31 December 2017, the date to which the latest published audited financial statements of the Group were made up.

9. MATERIAL ADVERSE CHANGE

The Directors have confirmed that there has been no material adverse change in the financial or trading position or prospects of the Group since 31 December 2017, being the date to which the latest published audited financial statements of the Group were made up, up to the Latest Practicable Date.

10. MISCELLANEOUS

(a) The registered office of the Company is located at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda and the head office and the principal place of business of the Company in Hong Kong is located at 18/F., CCT Telecom Building, 11 Wo Shing Street, Fotan, Shatin, New Territories, Hong Kong.

– 47 –

GENERAL INFORMATION

APPENDIX I

(b) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(c) The company secretary of the Company is Ms. Sze Suet Ling who is an associate member of both The Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and Administrators in the United Kingkom.
(d) In the event of inconsistency, the English text of this circular shall prevail over the Chinese text.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the head office and the principal place of business of the Company in Hong Kong at 18/F., CCT Telecom Building, 11 Wo Shing Street, Fotan, Shatin, New Territories, Hong Kong during normal business hours on any business day from the date of this circular up to 14 days thereafter:

(a) the memorandum of association and the bye-laws of the Company;
(b) the letter from the Board to the Shareholders, the text of which is set out on pages 5 to 22 of this circular;
(c) the letter of recommendation from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 23 to 24 of this circular;
(d) the letter of advice from Gram Capital to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 25 to 42 of this circular;
(e) the written consent from Gram Capital referred to in the section headed ‘‘8. Qualification and Consent of Expert’’ in the Appendix I;
(f) the annual reports of the Company for the three financial years ended 31 December 2015, 2016 and 2017;
(g) the interim report of the Company for the six months ended 30 June 2018;
(h) the Former Component Agreement;
(i) the New Component Agreement;
(j) the Former Child Products Agreements;
(k) the New Child Products Agreement; and
(l) this circular.

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NOTICE OF THE SGM

==> picture [309 x 41] intentionally omitted <==

(Incorporated in Bermuda with limited liability) (Stock Code: 00261)

NOTICE IS HEREBY GIVEN that a special general meeting (the ‘‘SGM’’) of the shareholders of CCT Land Holdings Limited (the ‘‘Company’’) will be held at 18/F., CCT Telecom Building, 11 Wo Shing Street, Fotan, Shatin, New Territories, Hong Kong on Monday, 31 December 2018 at 10:30 a.m. for the purpose of considering and, if thought fit, passing with or without modifications, the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

‘‘THAT:
(a) the component agreement dated 15 November 2018 (the ‘‘New Component Agreement’’) entered into between the Company and CCT Fortis Holdings Limited (‘‘CCT Fortis’’), a copy of which will be tabled at the SGM and marked ‘‘A’’ and initialled by the chairman of the meeting (the ‘‘Chairman’’) for identification purpose, pursuant to which CCT Fortis will procure its subsidiaries to supply the Component Products (as defined in the circular of the Company dated 12 December 2018, a copy of which will be tabled at the meeting and marked ‘‘B’’ and initialled by the Chairman for identification purpose (the ‘‘Circular’’)) to the Company and/or its subsidiaries and the transactions contemplated thereunder (the ‘‘New Component Transactions’’) be and are hereby approved, ratified and confirmed;
(b) the proposed caps in relation to the New Component Transactions, in the amounts of HK$15 million, HK$16 million and HK$17 million for the three financial years ending 31 December 2019, 2020 and 2021, respectively be and are hereby approved; and
(c) any one director of the Company, or any two directors of the Company if the affixation of the common seal is necessary, be and is/are hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to do all such acts or things deemed by him/her/them to be incidental to, ancillary to or in connection with the matters contemplated in and completion of the New Component Agreement and/or the New Component Transactions.’’

– 49 –

NOTICE OF THE SGM

‘‘THAT:
(a) the child products agreement dated 15 November 2018 (the ‘‘New Child Products Agreement’’) entered into between the Company and CCT Fortis, a copy of which will be tabled at the SGM and marked ‘‘C’’ and initialled by the Chairman for identification purpose, pursuant to which the Company will procure its subsidiaries to supply the Child Products (as defined in the Circular) to CCT Fortis and/or its subsidiaries and the transactions contemplated thereunder (the ‘‘New Child Products Transactions’’) be and are hereby approved, ratified and confirmed;
(b) the proposed caps in relation to the New Child Products Transactions, in the amounts of HK$80 million, HK$82 million and HK$85 million for the three financial years ending 31 December 2019, 2020 and 2021, respectively be and are hereby approved; and
(c) any one director of the Company, or any two directors of the Company if the affixation of the common seal is necessary, be and is/are hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to do all such acts or things deemed by him/her/them to be incidental to, ancillary to or in connection with the matters contemplated in and completion of the New Child Products Agreement and/or the New Child Products Transactions.’’

By Order of the Board of

CCT LAND HOLDINGS LIMITED Tam Ngai Hung, Terry Executive Director

Hong Kong, 12 December 2018

Head office and principal place of

business in Hong Kong:

18/F., CCT Telecom Building,

11 Wo Shing Street, Fotan, Shatin, New Territories, Hong Kong

Notes:

A form of proxy for use at the SGM is enclosed herewith.
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 executed under its common seal or under the hand of any officer, attorney or other person duly authorised to sign the same.

– 50 –

NOTICE OF THE SGM

Any shareholder entitled to attend and vote at the SGM or at any adjourned meeting thereof (as the case may be) is entitled to appoint another person as his/her proxy to attend and vote instead of him/her. A shareholder who is the holder of two or more shares may appoint not more than two proxies (who must be an individual or individuals) to attend and vote instead of him/her on the same occasion or if a recognised clearing house (or its nominee) is a shareholder of the Company, it may appoint the number of person(s) to act as its proxy or proxies not exceeding the number of shares held by it. A proxy need not be a shareholder of the Company but must attend the SGM in person to represent him/her.
In order to be valid, a form of proxy in the prescribed form together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, must be lodged with the branch share registrar and transfer office of the Company in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not later than 48 hours before the time appointed for holding the SGM (i.e. not later than 10:30 a.m., on Saturday, 29 December 2018, Hong Kong time) or any adjourned meeting thereof (as the case may be). Such prescribed form of proxy for use at the SGM is also published on the websites of The Stock Exchange of Hong Kong Limited at www.hkexnews.hk and the Company at www.cctland.com/eng/investor/statutory.php.
Completion and return of the form of proxy will not preclude shareholders from attending and voting in person at the SGM or at any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.
Where there are joint registered holders of any share(s), any one of such joint holders may attend and vote at the SGM or at any adjourned meeting thereof (as the case may be), either in person or by proxy, in respect of such share(s) as if he/she was solely entitled thereto, but if more than one of such joint holders are present at the SGM or at any adjourned meeting thereof (as the case may be), the most senior shall alone be entitled to vote, whether in person or by proxy. For this purpose, seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
The ordinary resolutions set out above will be determined by way of a poll.
As at the date of this notice, the executive Directors are Mr. Mak Shiu Tong, Clement, Ms. Cheng Yuk Ching, Flora and Mr. Tam Ngai Hung, Terry; and the independent non-executive Directors are Mr. Chow Siu Ngor, Mr. Lau Ho Kit, Ivan and Mr. Tam King Ching, Kenny.

– 51 –

AI assistant

GBA Holdings Limited — Proxy Solicitation & Information Statement 2018

49077_rns_2018-12-11_2dc1f500-b3a8-4ee5-9470-1a63854010c5.pdf

CONTINUING CONNECTED TRANSACTIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

(Stock Code: 00261)

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM THE BOARD

DETAILS OF THE CONTINUING CONNECTED TRANSACTIONS

(A) New Component Agreement

LETTER FROM THE BOARD

Internal Control Measures Relating to Pricing of the Component Products

Historical figures for the Component Products transactions

New component cap amounts for the New Component Transactions

MEASURES TO ENSURE COMPLIANCE WITH THE LISTING RULES IN RELATION TO THE NEW COMPONENT TRANSACTIONS

REASONS FOR AND THE BENEFITS TO BE DERIVED BY THE COMPANY FROM THE NEW COMPONENT TRANSACTIONS

(B) New Child Products Agreement

LETTER FROM THE BOARD

Internal control measures relating to the New Child Products Transactions

LETTER FROM THE BOARD

Historical figures for the Child Products transactions

New child products cap amounts for the New Child Products Transactions

MEASURES TO ENSURE COMPLIANCE WITH THE LISTING RULES IN RELATION TO THE NEW CHILD PRODUCTS TRANSACTIONS

REASONS FOR AND THE BENEFITS TO BE DERIVED BY THE COMPANY FROM THE NEW CHILD PRODUCTS TRANSACTIONS

LETTER FROM THE BOARD

INFORMATION ON THE COMPANY, THE GROUP AND CCT FORTIS

LISTING RULES IMPLICATIONS

GENERAL

SGM

RECOMMENDATION

OTHER INFORMATION

(Stock Code: 00261)

CONTINUING CONNECTED TRANSACTIONS

Yours faithfully,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of and reasons for the New Transactions

Information on the Group

Information on CCT Fortis

Reasons for and benefits of the New Transactions

The New Component Transactions

The New Child Products Transactions

2. Principal terms of the New Transactions

Term

Price and terms of payment

ii. The New Child Products Transactions

Date

Parties

Subject

Term

Pricing basis and payment terms

Priority of purchase

3. New Transaction Caps

ii. The New Child Products Transaction Caps

4. Listing Rules implication

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

(a) Directors’ and chief executive’s interests and short positions in the shares and the underlying shares of the Company

Long positions

Notes:

(b) Substantial shareholders and other persons’ interests and short positions in the Shares and the underlying shares of the Company

Long positions

3. INTERESTS IN CONTRACT OR ARRANGEMENT

4. INTERESTS IN ASSETS

5. SERVICE CONTRACTS

6. COMPETING INTERESTS

7. LITIGATION

8. QUALIFICATION AND CONSENT OF EXPERT

Name Qualification

9. MATERIAL ADVERSE CHANGE

10. MISCELLANEOUS

11. DOCUMENTS AVAILABLE FOR INSPECTION

ORDINARY RESOLUTIONS

By Order of the Board of

GBA Holdings Limited Proxy Solicitation & Information Statement 2018