HKBN Ltd. — Proxy Solicitation & Information Statement 2017

Nov 15, 2017

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in HKBN Ltd., you should at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank or stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of HKBN Ltd.

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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HKBN Ltd. 香港寬頻有限公司

(Incorporated in the Cayman Islands with limited liability) Stock Code: 1310

(1) PROPOSED RE-ELECTION OF RETIRING DIRECTORS; (2) GENERAL MANDATES TO ISSUE AND TO REPURCHASE SHARES;

(3) PROPOSED ADOPTION OF THE CO-OWNERSHIP PLAN III; (4) SCHEME MANDATE TO ISSUE NEW SHARES UNDERLYING THE RSUS TO BE GRANTED UNDER THE CO-OWNERSHIP PLAN III; (5) PROPOSED CONNECTED TRANSACTIONS INVOLVING THE POTENTIAL GRANT OF RSUS TO CONNECTED PARTICIPANTS; AND (6) NOTICE OF ANNUAL GENERAL MEETING

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

A notice convening the annual general meeting of the Company to be held at 10:00 a.m., on 15 December 2017, Friday at Awesome Space, 14th Floor, Trans Asia Centre, 18 Kin Hong Street, Kwai Chung, New Territories, Hong Kong is set out on pages 59 to 63 in this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the office of the Company’s Hong Kong branch share registrar, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the annual general meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting, or any adjournment thereof, should you so wish.

A letter from the Board is set out on pages 8 to 19 of this circular, a letter from the Independent Board Committee is set out on page 20 of this circular and a letter from Altus Capital Limited containing its recommendation to the Independent Shareholders is set out on pages 21 to 33 of this circular.

16 November 2017

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
**LETTER FROM **	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
**LETTER FROM **	THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . .	20
**LETTER FROM **	THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . .	21
APPENDIX I	– PARTICULARS OF DIRECTORS SUBJECT
	TO RE-ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	34
APPENDIX II	– EXPLANATORY STATEMENT
	ON THE REPURCHASE MANDATE . . . . . . . . . . . . . .	36
APPENDIX III	– PRINCIPAL TERMS OF THE CO-OWNERSHIP
	PLAN III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	39
APPENDIX IV	– GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .	53
NOTICE OF ANNUAL GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . .		59

This circular is published in both English and Chinese. Where the English and the Chinese texts conflict, the English text prevails.

– i –

DEFINITIONS

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

• “Adjusted Available Cash per Share for Distribution”

in respect of a Financial Year, a pro forma amount equal to the ‘Adjusted Free Cash Flow’ amount as determined based on the information in the Company’s latest published annual report for such Financial Year on a consistent basis as compared to the determination of this amount in prior Financial Years, as adjusted by (i) excluding any non-cash accounting adjustment, loss, expense or cost arising from or in connection with the Co-Ownership Plan III; (ii) excluding the principal investment amount or one-off financing or acquisition fee, cost or expense relating to or arising from the investment in or acquisition of real property (including but not limited to any office building or network operation centres) by the Group for self-use and in the normal line of business of the Group; and (iii) adjusting the impact of any upfront transaction fees incurred for any debt financing (whether in the form of loan facility or issuance of debt securities) by the Group so that only the following items would affect the determination of the adjusted available cash per share for distribution: (A) the annual amortised portion of such transaction fees (instead of the immediate cash outflow); and (B) any unamortised annual portion of such transaction fees which would need to be recognised on an accelerated basis as a result of any re-financing or early repayment or redemption arrangement, and then divided by the aggregate number of Shares in issue on the date of the Company’s annual report for such Financial Year

• “Adoption Conditions”

has the meaning ascribed to it in paragraph 4(a) of Appendix III, being the conditions for the adoption of the Co-Ownership Plan III to become effective

• “Annual General Meeting” or “AGM”

the annual general meeting of the Company to be convened at 10:00 a.m. on Friday, 15 December 2017 at Awesome Space, 14th Floor, Trans Asia Centre, 18 Kin Hong Street, Kwai Chung, New Territories, Hong Kong, notice of which is set out on pages 59 to 63 of this circular

– 1 –

DEFINITIONS

• “Annual Remuneration Package”

• with respect to a Talent, the higher of: (i) the total income reported by such Talent in his/her latest employee’s tax return filed with the Inland Revenue Department prior to the date of the relevant invitation; and (ii) the basic monthly salary of such Talent as an employee of the Group as at the date of the relevant invitation, multiplied by 12

• “Articles” the articles of association of the Company, as amended, supplemented or otherwise modified from time to time

• “associate”

• has the meaning ascribed to it in the Listing Rules

• “Award Share”

• a new Share which a Grantee becomes entitled to receive upon the vesting of an RSU

• “Bad Leaver” any leaver who is not a Good Leaver

• “Board”

• the board of Directors from time to time or a duly authorised committee of the Board or such other committee as the Board may authorise

• “Business Day”

• any day on which the Stock Exchange is open for the business of dealing in securities

• “Co-Ownership Plan II�

• the restricted share unit scheme adopted by the Company on 21 February 2015, a summary of the principal terms of which is set out in the prospectus of the Company dated 27 February 2015

• “Co-Ownership Plan III�

• the restricted share unit scheme proposed to be adopted by the Company, a summary of the principal terms of which is set out in Appendix III of this circular

• “Commencement Date”

• the date on which the Co-Ownership Plan III becomes effective, which shall be 30 April 2018 subject to the satisfaction of the Adoption Conditions

• “Companies Law” the Cayman Islands Companies Law, as amended and restated from time to time

• “Company”

• HKBN Ltd., a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Stock Exchange

– 2 –

DEFINITIONS

• “Connected Grant”

• the proposed grant of RSUs to the Connected Participants who will become Grantees under the Co-Ownership Plan III

• “Connected Participant”

• an Eligible Participant who is a Director or chief executive of the Company or a director or chief executive of any of its subsidiaries as of the Latest Practicable Date and whose details are set out in the “Letter from the Board” of this circular

• “connected person” has the meaning ascribed to it in the Listing Rules

• “Director” a director of the Company

• “Eligible Participant” or “Talent”

• (i) an executive Director of the Company; or (ii) an employee of the Company or any member of the Group that is of Point 3 grade or above and whose probation period (if applicable) has expired and who has not given a notice of resignation to any member of the Group or who has not been given a notice of termination of employment by any member of the Group

• “Financial Year”

• in respect of any calendar year, the Company’s financial year ending on 31 August of the relevant year

• “Good Leaver”

• a leaver who ceases to be employed or engaged by the Company or any Group Company, or ceases to be a Director or a director of any Group Company, by reason of: (i) death; (ii) retirement at or after the age of 60; (iii) permanent ill health or physical or mental disability which renders him incapable of continued employment in his current position carrying out the normal duties for that position, as certified by a general medical practitioner, or other specialist medical professional; or (iv) who has been deemed by the Board as a Good Leaver according to the terms of the Co-Ownership Plan III

• “Grant” or “Proposed Grant”

the grant (including the Connected Grant) of an RSU to the Participants (including the Connected Participants) under the Co-Ownership Plan III

– 3 –

DEFINITIONS

“Grant Date”

the earlier of: (i) the date on which the cumulative Adjusted Available Cash per Share for Distribution amount since the beginning of the 2018 Financial Year reaches HK$2.40; and (ii) the date on which the Company’s annual report for the 2020 Financial Year is published

• “Grantee”

• any Participant to whom a Grant is made in accordance with the terms of the Co-Ownership Plan III or, where the context so permits, any person entitled to any such RSU in consequence of the death of the original Grantee as a Good Leaver or the legal personal representative of such person

• “Group” the Company and its subsidiaries and a “Group Company” means any of the aforesaid companies

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong”

• the Hong Kong Special Administrative Region of the People’s Republic of China

• “Independent Board Committee”

• the independent board committee comprising all independent non-executive Directors who do not have a material interest in the Co-Ownership Plan III, which was established to advise the Independent Shareholders in relation to the adoption of the Co-Ownership III, the grant of the Scheme Mandate and the Connected Grant

• “Independent Financial Adviser”

• Altus Capital Limited, a licensed corporation to carry out Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO, being the independent financial adviser to the Independent Board Committee and Independent Shareholders in respect of the adoption of the Co-Ownership III, the grant of the Scheme Mandate and the Connected Grant

• “Independent Shareholders”

Shareholders other than those who have a material interest in the adoption of the Co-Ownership Plan III, the grant of the Scheme Mandate and the Connected Grant and are required to abstain from voting on the relevant resolutions at the Annual General Meeting

– 4 –

DEFINITIONS

• “Investment Amount”

• “Invitation Period”

• “Latest Practicable Date”

• “Listing Rules”

• “M&A Event”

• “Participant”

• “Plan Trustee”

• “Purchased Share(s)”

• “Reorganisation of Capital Structure”

• “Repurchase Mandate”

• the monetary amount nominated by the Participant for the purchase of Shares

• each of the following periods: (i) the period of 20 Business Days from the Commencement Date; (ii) the period of 10 Business Days from the date of publication of the Company’s 2018 annual report; and (iii) the period of 10 Business Days from the date of publication of the Company’s 2019 annual report

• 10 November 2017, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information referred to in this circular

• the Rules Governing the Listing of Securities on the Stock Exchange, as amended from time to time

• any transaction by the Group which constitutes a ‘major transaction’, ‘very substantial acquisition’ or ‘very substantial disposal’ of the Company (such terms having the meaning given to them in Chapter 14 of the Listing Rules)

• a Talent who has accepted an invitation to participate in the Co-Ownership Plan III and whose acceptance is accepted by the Board pursuant to the terms thereof

• the professional trustee appointed by the Company from time to time of the Co-Ownership Plan III

• has the meaning ascribed to it in paragraph 5(b) of Appendix III

• an alteration in the capital structure of the Company as described in paragraph 13 of Appendix III

• a general and unconditional mandate enabling Directors to repurchase Shares as described in the section headed “General Mandates to Repurchase Shares” in the Letter from the Board in this circular

– 5 –

DEFINITIONS

• “RSU”

• “Scheme Mandate”

• “Scheme Mandate Limit”

• “SFO”

• “Shareholder(s)”

• “Shares”

• “Shares Issue Mandate”

• “Stock Exchange”

• “subsidiary”

• “Takeovers Code”

• a contingent right which entitles a Grantee to receive one Award Share to be awarded pursuant to the terms and conditions of the Co-Ownership Plan III

• a mandate to be sought from the Shareholders at a general meeting of the Company to authorise the Directors to allot and issue new Shares pursuant to the vesting of the RSUs under the Proposed Grant pursuant to the terms and conditions of the Co-Ownership Plan III up to the Scheme Mandate Limit

• the total maximum number of new Shares that may underlie the RSUs to be granted pursuant to the CoOwnership Plan III, being 3% of the Shares in issue on the day of the general meeting approving the CoOwnership Plan III (as may be adjusted in the event of a Reorganisation of Capital Structure)

• Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• holder(s) of Shares

• fully paid ordinary shares with a nominal value of HK$0.0001 each in the share capital of the Company or, if there has been a sub-division, reduction, consolidation, reclassification or reconstruction of the share capital of the Company, the shares forming part of the ordinary share capital of the Company of such nominal amount as shall result from any such sub-division, reduction, consolidation, reclassification or reconstruction

• a general and unconditional mandate enabling Directors to issue Shares as described in the section headed “General Mandates to Issue Shares” in the Letter from the Board in this circular

• The Stock Exchange of Hong Kong Limited

• has the meaning ascribed to it in the Listing Rules

• The Codes on Takeovers and Mergers and Share Buybacks

– 6 –

DEFINITIONS

“Term”		has the meaning ascribed to it in paragraph 4(b) of
		Appendix III
“vest”		with respect to a Grantee, the time when the Grantee
		becomes entitled to receive all or such proportion of the
		Award Shares underlying the RSU(s) granted to him in
		accordance with the terms of the Co-Ownership Plan III
“Vesting	Conditions”	has the meaning ascribed to it in paragraph 10(b) of
		Appendix III
“Vesting	Date”	with respect to an RSU granted to a Grantee, the date on
		which the RSU vests, being the date falling one year from
		the Grant Date in respect of such RSU subject to
		satisfaction of the Vesting Conditions
“%”		per cent

– 7 –

LETTER FROM THE BOARD

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HKBN Ltd. 香港寬頻有限公司

(Incorporated in the Cayman Islands with limited liability)

Stock Code: 1310

Board of Directors:

Chairman and Independent Non-executive Director Mr. Bradley Jay HORWITZ

Executive Directors Mr. William Chu Kwong YEUNG Mr. Ni Quiaque LAI

Non-executive Director

Ms. Deborah Keiko ORIDA

Independent Non-executive Directors Mr. Stanley CHOW Mr. Quinn Yee Kwan LAW, SBS, JP

Registered Office:

P.O. Box 309 Ugland House Grand Cayman KY1-1104 Cayman Islands

Principal Place of Business in Hong Kong:

12th Floor, Trans Asia Centre 18 Kin Hong Street, Kwai Chung New Territories Hong Kong

16 November 2017

To the Shareholders

Dear Sir or Madam,

(1) PROPOSED RE-ELECTION OF RETIRING DIRECTORS;

(2) GENERAL MANDATES TO ISSUE AND TO REPURCHASE SHARES;

(3) PROPOSED ADOPTION OF THE CO-OWNERSHIP PLAN III; (4) SCHEME MANDATE TO ISSUE NEW SHARES UNDERLYING THE RSUS TO BE GRANTED UNDER THE CO-OWNERSHIP PLAN III; (5) PROPOSED CONNECTED TRANSACTIONS INVOLVING THE POTENTIAL GRANT OF RSUS TO CONNECTED PARTICIPANTS;

AND

(6) NOTICE OF ANNUAL GENERAL MEETING

1. INTRODUCTION

The purpose of this circular is to provide you with information reasonably necessary to enable you to make a decision on whether to vote for or against the resolutions to be proposed at the Annual General Meeting for the approval of, inter alia :

• (a) re-election of retiring Directors;

– 8 –

LETTER FROM THE BOARD

• (b) the grant of the Shares Issue Mandate and Repurchase Mandate to the Directors to issue new Shares and repurchase Shares;

• (c) the proposed adoption of the Co-Ownership Plan III and the grant of the Scheme Mandate to issue new Shares underlying the RSUs to be granted under the Co-Ownership Plan III; and

• (d) the potential grant of RSUs and issuance of the Award Shares to the Connected Participants under the Co-Ownership Plan III.

Further, this circular provides the Shareholders with a letter from the Independent Board Committee and a letter from Altus Capital Limited, the Independent Financial Adviser, to advise the Independent Board Committee and the Independent Shareholders, for the Independent Shareholders to make an informed decision as to whether to vote for or against the proposed resolutions to approve the adoption of the Co-Ownership Plan III, the grant of the Scheme Mandate to issue new Shares underlying the RSUs to be granted under the Co-Ownership Plan III and the Connected Grant.

2. PROPOSED RE-ELECTION OF RETIRING DIRECTORS

Pursuant to Article 16.18 of the Articles, at every annual general meeting of the Company, one-third of the Directors for the time being (or, if their number is not three or a multiple of three, then the number nearest to, but not less than, one-third) shall retire from office by rotation provided that every Director (including those appointed for a specific term) shall be subject to retirement by rotation at least once every three years.

According to the above provision, Mr. William Chu Kwong YEUNG, an executive Director of the Company, and Mr. Stanley CHOW, an independent non-executive Director of the Company, shall retire from office at the Annual General Meeting and shall be eligible for re-election.

Details of the Directors proposed to be re-elected at the Annual General Meeting are set out in Appendix I to this circular.

3. GENERAL MANDATES TO ISSUE SHARES

An ordinary resolution will be proposed at the Annual General Meeting which, if passed, will give the Directors the Shares Issue Mandate to exercise the powers of the Company to allot, issue and otherwise deal with additional Shares up to, when aggregated with the maximum number of new Shares issuable under the Scheme Mandate (if approved), a maximum of 10% of the number of the Shares in issue at the date of passing of the resolution, details of which are set out in the ordinary resolution no. 5 in the Notice of Annual General Meeting. In addition, conditional upon the proposed ordinary resolution to grant to the Directors the Repurchase Mandate being passed, an ordinary resolution will be proposed to authorise the Directors to allot, issue and otherwise deal with new Shares up to an amount equal to the aggregate number of the Shares repurchased by the Company in order to provide flexibility for issuing new Shares when it is in the interests of the Company.

– 9 –

LETTER FROM THE BOARD

The Company had an aggregate of 1,005,666,666 Shares in issue as at the Latest Practicable Date. Subject to the passing of the ordinary resolution no. 5 for the approval of the Shares Issue Mandate, the Company will therefore be allowed to allot and issue up to a maximum of 100,566,666 Shares, representing 10% of the number of the Shares in issue.

The total number of new Shares issuable under the Share Issue Mandate shall be reduced by the maximum number of new Shares remaining issuable under the Scheme Mandate (if approved).

The Shares Issue Mandate will expire on the day being the earliest of (i) the conclusion of the next annual general meeting of the Company; (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Articles or any applicable laws of Hong Kong to be held; and (iii) the date on which the authority set out in such resolution is revoked or varied by an ordinary resolution of the Shareholders in general meeting.

In addition, ordinary resolution no. 7 will be proposed to extend the Shares Issue Mandate by adding to it the number of Shares repurchased under the Repurchase Mandate (the “Extension”).

4. GENERAL MANDATES TO REPURCHASE SHARES

An ordinary resolution will be proposed at the Annual General Meeting to grant to the Directors the Repurchase Mandate, details of which are set out in the ordinary resolution no. 6 in the Notice of Annual General Meeting. The Shares which may be repurchased pursuant to Repurchase Mandate is limited to a maximum of 10% of the number of the Shares in issue at the date of passing of the resolution approving the Repurchase Mandate.

The Company had an aggregate of 1,005,666,666 Shares in issue as at the Latest Practicable Date. Subject to the passing of the ordinary resolution no. 6 for the approval of the Repurchase Mandate, the Company will therefore be allowed to repurchase up to a maximum of 100,566,666 Shares, representing 10% of the number of the Shares in issue.

The Repurchase Mandate will expire on the day being the earliest of (i) the conclusion of the next annual general meeting of the Company; (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Articles or any applicable laws of Hong Kong to be held; and (iii) the date on which the authority set out in such resolution is revoked or varied by an ordinary resolution of the Shareholders in general meeting.

The explanatory statement to provide the Shareholders with all the information reasonably necessary to enable them to make an informed decision whether to vote for or against the resolution concerning the Repurchase Mandate as required by the Listing Rules is set out in Appendix II to this circular.

– 10 –

LETTER FROM THE BOARD

5. PROPOSED ADOPTION OF THE CO-OWNERSHIP PLAN III AND SCHEME MANDATE TO ISSUE NEW SHARES UNDERLYING THE RSUS TO BE GRANTED UNDER THE CO-OWNERSHIP PLAN III

Reference is made to the announcement of the Company dated 2 November 2017, in relation to, among other things, the proposed adoption of the Co-Ownership Plan III and the Proposed Grant of RSUs under, and pursuant to the terms and conditions of, the Co-Ownership Plan III under the Scheme Mandate.

a. Proposed adoption of the Co-Ownership Plan III

On 2 November 2017, the Board considered and approved the conditional adoption of the Co-Ownership Plan III (which terms include the Proposed Grant of RSUs (including the Connected Grant)). A summary of the principal terms of the Co-Ownership Plan III is set out in Appendix III to this circular.

The effectiveness of the Co-Ownership Plan III on the Commencement Date is subject to the satisfaction of the following conditions:

• (a) the passing of a resolution by the Independent Shareholders at a general meeting to approve the adoption of the Co-Ownership Plan III and to grant a specific mandate to the Directors to allot and issue ordinary shares of the Company under the Co-Ownership Plan III up to 3% of the total number of issued Shares as at the date of the general meeting of the Company at which the adoption of the Co-Ownership Plan III is approved (as may be adjusted in the event of a Reorganisation of Capital Structure), which may underlie the RSUs to be granted pursuant to the CoOwnership Plan III; and

• (b) the Listing Committee of the Stock Exchange granting the approval for the listing of, and permission to deal in, all the new Shares which may be allotted and issued under the Scheme Mandate.

Application will be made by the Company to the Stock Exchange for the granting of the listing of, and permission to deal in, up to 30,169,999 Shares to be issued on the Vesting Date pursuant to the Scheme Mandate.

The Plan Trustee will be a third party independent from the Company and its connected persons.

– 11 –

LETTER FROM THE BOARD

• b. Scheme Mandate to issue new Shares underlying the RSUs to be granted under the Co-Ownership Plan III

As new Shares will be allotted and issued as Award Shares pursuant to the granting of the RSUs (including the Connected Grant) under the Co-Ownership Plan III, the Company will seek the Independent Shareholders’ approval at the Annual General Meeting of the Scheme Mandate for the Award Shares to be allotted and issued pursuant to the Co-Ownership Plan III. The Scheme Mandate will be subject to the following limits/restrictions:

• (a) the total number of Shares underlying the RSUs that may be granted under the Co-Ownership Plan III shall not exceed such number of Shares representing 3% of the Company’s total number of issued Shares as at the date of the Annual General Meeting (as may be adjusted in the event of a Reorganisation of Capital Structure); and

• (b) no RSU will be granted where any Director is in possession of unpublished inside information in relation to the Group or where dealings by Directors are prohibited under any code or requirement of the Listing Rules and all applicable laws from time to time.

The number of RSUs to be granted to a Participant under the Proposed Grant will be subject to the criteria and conditions specified in the Co-Ownership Plan III. Further details of the conditions of grant are set out in the section headed “5. Purchases of Shares and Grant of RSUs – (d) Grant of RSUs” in Appendix III to this circular.

As at the Latest Practicable Date, the total number of issued Shares was 1,005,666,666. On the basis that no further Shares will be allotted and issued or repurchased from the Latest Practicable Date up to the Grant Date, assuming that all conditions to the grant of the RSUs are satisfied, and subject to the passing of the resolutions approving the granting of the Scheme Mandate at the Annual General Meeting, up to 30,169,999 new Shares may be allotted and issued as Award Shares underlying the RSUs to be granted under the Co-Ownership Plan III on the basis of one Award Share for one RSU.

6. PROPOSED CONNECTED TRANSACTIONS INVOLVING THE POTENTIAL GRANT OF RSUS TO CONNECTED PARTICIPANTS UNDER THE COOWNERSHIP PLAN III

a. Eligible Participants

Pursuant to the Co-Ownership Plan III, Eligible Participants under the Co-Ownership Plan III include the Connected Participants and other Talents of the Group during the term of the Co-Ownership Plan III. As at the Latest Practicable Date, the total number of Eligible Participants under the Proposed Grant is approximately 600, representing approximately 20.5% of the total number of existing employees of the Group.

– 12 –

LETTER FROM THE BOARD

b. Connected Participants

Of all the Eligible Participants identified as at the Latest Practicable Date, seven of them are connected persons of the Company. Assuming that (i) all the Connected Participants will agree to participate, and do participate, in the Co-Ownership Plan III to the fullest extent; (ii) all conditions to the grant of the RSUs are satisfied and the maximum entitlements to the RSUs have been granted; and (iii) all the Connected Participants become grantees of RSUs and are vested with the Award Shares upon satisfaction of the Vesting Conditions, and on the basis of the 3% limit by reference to the number of the total issued Shares of the Company as of the Latest Practicable Date, the maximum number of Award Shares that will be awarded to the Connected Participants is 3,345,731 in total (the maximum number of Award Shares that will be awarded to the Connected Participants was determined on 2 November 2017 based on the closing share price of the Company on the prior trading day).

The Connected Participants are also included as Eligible Participants under the Co-Ownership Plan III as they are, in terms of their executive or management position with the Group, also of an internal grading of Point 3 or above.

Details of the Connected Participants as of the Latest Practicable Date and the maximum number of Award Shares underlying the RSUs that may be granted to these Connected Participants under the Connected Grant, based on the assumptions stated in the paragraph above, are set out in the table below.

					Approximate %
					of total issued
					share capital of
				Approximate %	the Company
			Maximum	of the total	assuming the
			number of	number of	maximum
		Position and	Award Shares	Award Shares	number of
		connected	underlying	underlying the	Award Shares
		relationship	the RSUs to	RSUs that could	has been
Number	Name	with the Group	be granted	be granted	issued
1	Mr. William	Executive Director	1,377,352	4.57%	0.13%
	Chu Kwong
	YEUNG
2	Mr. Ni Quiaque	Executive Director	931,833	3.09%	0.09%
	LAI
3	Five employees of the Group_(Note)_	directors of subsidiaries of the	1,036,546	3.44%	0.10%
		Company

Note: The five employees of the Group are Mr. Tak Wa William YEUNG, Mr. Yue Kit Andrew WONG, Ms. Yan Fen LIU, Ms. Wing Sze CHAN and Ms. Wai Han Stella YU, and the maximum number of Award Shares underlying the RSUs to be granted to each aforesaid employee are 422,024, 223,309, 91,647, 252,416 and 47,150 respectively.

Please note that the potential grant of RSUs and issue and allotment of Award Shares to the Connected Participants would vary depending on the deviations from the assumptions stated above. Provided that the number of Award Shares that underlies the RSUs that may be granted to each Connected Participant under the Co-Ownership Plan III shall not exceed the maximum number that he or she is entitled to, as disclosed in the

– 13 –

LETTER FROM THE BOARD

above table. Accordingly, information contained in the above table is provided only for illustrative purpose and has been presented on the basis of the stated assumptions.

The maximum number of the Award Shares underlying the RSUs to be granted under the Co-Ownership Plan III represents approximately 3% of the total number of issued Shares as at the date of the Annual General Meeting, and based on the number of the total issued Shares as at the Latest Practicable Date, this number equals to 30,169,999 new Shares. If the Scheme Mandate is utilised to the fullest extent, 30,169,999 new Shares will represent approximately 2.91% of the total number of issued Shares as enlarged by and immediately following such full utilisation of the Scheme Mandate and issue of the Award Shares underlying the RSUs on the Vesting Date, assuming that no other Shares are issued or repurchased by the Company before such full utilisation of the Scheme Mandate on the Vesting Date.

For the avoidance of doubt, the new Award Shares underlying the RSUs to be granted to the Connected Participants will also be allotted and issued using the Scheme Mandate to be sought in the Annual General Meeting.

7. POTENTIAL SHAREHOLDING IMPACT OF THE CO-OWNERSHIP PLAN III

The following table sets out the shareholding structure of the Company as at the Latest Practicable Date and after the Purchased Shares have been purchased and immediately following full utilisation of the Scheme Mandate and issue of the Award Shares on the Vesting Date, assuming that (i) the Eligible Participants (including the Connected Participants) identified as at the Latest Practicable Date will agree to participate, and do participate; (ii) all conditions to the grant of the RSUs are satisfied and the maximum entitlements to the RSUs have been granted; (iii) all the Eligible Participants (including the Connected Participants) become grantees of RSUs and are vested with the Award Shares upon satisfaction of the Vesting Conditions; and (iv) no other Shares are issued or repurchased by the Company before full utilisation of the Scheme Mandate on the Vesting Date on the basis of the Scheme Mandate Limit determined by reference to the number of the total issued Shares as of the Latest Practicable Date:

Substantial Shareholder Canada Pension Plan Investment Board Participants Connected Participants Other Participants Other public Shareholders Total	As at the Latest Practicable Date Number of Shares Approximate percentage (%) 181,048,500 18.00 66,283,273 (Note1) 6.59 10,923,448 (Note2) 1.09 747,411,445 74.32 1,005,666,666 100	After the Purchased Shares have been purchased and immediately upon full utilisation of the Scheme Mandate Number of Shares Approximate percentage (%) 181,048,500 17.48 72,974,735 (Note3) 7.05 64,571,984 (Note4) 6.23 717,241,446 69.24 1,035,836,665 100	After the Purchased Shares have been purchased and immediately upon full utilisation of the Scheme Mandate Number of Shares Approximate percentage (%) 181,048,500 17.48 72,974,735 (Note3) 7.05 64,571,984 (Note4) 6.23 717,241,446 69.24 1,035,836,665 100
			100

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LETTER FROM THE BOARD

Notes:

1. 66,283,273 Shares which the Connected Participants are personally interested in include the purchased Shares and the Shares underlying the restricted share units that were granted and vested pursuant to the Co-Ownership Plan II currently held by the plan trustee of the Co-Ownership Plan II, and the Shares otherwise personally held by the Connected Participants.

2. 10,923,448 Shares which the Eligible Participants (other than the Connected Participants) are personally interested in include the Shares underlying the restricted share units that were granted and vested pursuant to the Co-Ownership Plan II currently held by the plan trustee of the Co-Ownership Plan II. The information in the above table assumes that the Eligible Participants (other than the Connected Participants) do not hold any other interest in any Share, as the Company does not have any information on whether any of the Eligible Participants (other than the Connected Participants) holds any Share.

3. This assumes that the Connected Participants will receive the maximum number of Award Shares that can be awarded to them under the Co-Ownership Plan III (as explained in the sub-section headed “Connected Participants” in this “Letter from the Board”), without taking into account any adjustment that may need to be made because there is an over-subscription under the Co-Ownership Plan III by invitees who will be invited during the first Invitation Period, and that the Connected Participants will hold in aggregate, through the Plan Trustee, such number of Purchased Shares which is equivalent to the maximum number of Award Shares by investing their respective maximum Investment Amount. The description in Note 1 above also applies.

4. This assumes that the Eligible Participants (other than the Connected Participants) will receive the balance of the maximum number of Award Shares under the Scheme Mandate (after deducting the maximum entitlement of the Connected Participants), and that the Eligible Participants will hold in aggregate and through the Plan Trustee, such number of Purchased Shares which is equivalent to the aforesaid number of Award Shares. The descriptions in Notes 2 and 3 above also apply.

Please note that the potential grant of RSUs and issue and allotment of Award Shares to the Connected Participants would vary depending on the deviations from the assumptions stated above. Provided that the number of Award Shares that underlies the RSUs that may be granted to each Connected Participant under the Co-Ownership Plan III shall not exceed the maximum number that he or she is entitled to, as disclosed in the table under section 6(b) of this “Letter from the Board”. Accordingly, information contained in the above table is provided only for illustrative purpose and has been presented on the basis of the stated assumptions.

8. REASONS FOR AND BENEFITS OF THE ADOPTION OF THE CO-OWNERSHIP PLAN III, THE GRANT OF THE SCHEME MANDATE AND THE PROPOSED GRANT OF RSUS TO CONNECTED PARTICIPANTS

The Group is principally engaged in the provision of high-speed fibre broadband services and enterprise solutions in Hong Kong, offering a wide range of telecommunications solutions for residential and enterprise markets, encompassing broadband, Wi-Fi, cloud solutions, data connectivity, data facilities, system integration and voice communications. Through partnerships with over-the-top service providers and mobile facilities based carriers, it also offers over-the-top entertainment and mobile services.

The Co-Ownership Plan III forms part of the incentive schemes of the Group. The Co-Ownership Plan III, when adopted, would operate alongside the Co-Ownership Plan II, and provide an additional means for the Company to incentivise its Talents. The Board considers that the Co-Ownership Plan III would also recognise the continual support of the relevant employees to the Group and their effort in promoting the Group’s long-term growth and development.

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LETTER FROM THE BOARD

The Board considers the issue of new Shares is more cost-effective as an employee incentive without imposing additional pressure on the Group’s cash flow position.

The Board expects that there will be no material impact on the net asset value of the Company following the allotment and issue of the Shares underlying the RSUs to be granted pursuant to the Co-Ownership Plan III.

9. IMPLICATIONS UNDER THE LISTING RULES

a. Proposed adoption of the Co-Ownership Plan III

The Co-Ownership Plan III does not constitute a share option scheme pursuant to Chapter 17 of the Listing Rules. The Company will seek its Independent Shareholders’ approval at the Annual General Meeting for the adoption of the Co-Ownership Plan III.

b. Scheme Mandate to issue new Shares underlying the RSUs to be granted under the Co-Ownership Plan III

The Company will seek its Independent Shareholders’ approval at the Annual General Meeting of the Scheme Mandate for new Shares to be allotted and issued as Award Shares pursuant to the granting and vesting of the RSUs under the Co-Ownership Plan III pursuant to Rule 13.36(1) of the Listing Rules.

c. Proposed connected transactions involving the potential grant of RSUs to Connected Participants

Since each of the Connected Participants is a connected person of the Company, the Proposed Grant of RSUs to them will constitute connected transactions of the Company which are subject to the reporting, announcement and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The Independent Board Committee, comprising Mr. Bradley Jay HORWITZ, Mr. Stanley CHOW and Mr. Quinn Yee Kwan LAW, SBS, JP, being all the independent non-executive Directors, has been established to advise the Independent Shareholders in respect of the adoption of the Co-Ownership Plan III, the grant of the Scheme Mandate and the Connected Grant. Altus Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the same.

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LETTER FROM THE BOARD

d. Annual General Meeting

The adoption of the Co-Ownership Plan III, the grant of the Scheme Mandate and the Connected Grant are subject to (i) the approval of the same by the Independent Shareholders respectively at the Annual General Meeting; and (ii) the grant of the listing approval by the Listing Committee in respect of the new Shares which may underlie the RSUs to be granted pursuant to the Co-Ownership Plan III.

Pursuant to the Co-Ownership Plan II, the plan trustee holds, as of the Latest Practicable Date, a total of 17,307,317 Shares, representing 11,756,782 Shares purchased by the participants under the Co-Ownership Plan II through the plan trustee, 1,738,867 Shares underlying restricted share units granted to and vested with participants, and 3,299,580 Shares underlying restricted shares units that are granted but unvested or not yet granted. Such 17,307,317 Shares represent approximately 1.72% of the total issued share capital of the Company as of the Latest Practicable Date. Pursuant to the scheme rules of the Co-Ownership Plan II, the plan trustee is restricted by the scheme rules from exercising the voting rights attached to the aforesaid total number of 17,307,317 Shares and accordingly the holder of such number of Shares will not vote on any of the resolutions put to the vote at the Annual General Meeting (including the resolutions relating to the adoption of the Co-Ownership Plan III).

As the executive Directors are included as the Connected Participants, they have abstained from voting on the relevant board resolutions of the Company to approve the proposed adoption of the Co-Ownership Plan III, grant the Scheme Mandate and approve the Connected Grant.

So far as the Company is aware, other than the Eligible Participants (including the Connected Participants) who are Shareholders and are required to abstain from voting on the resolutions approving the adoption of the Co-Ownership Plan III, the grant of the Scheme Mandate and the Connected Grant to be proposed at the Annual General Meeting, as they may consider to be materially interested in the adoption of the Co-Ownership Plan III, the grant of the Scheme Mandate and the Connected Grant to be proposed at the Annual General Meeting, no other Shareholders are required to abstain from voting on the resolutions in respect of the adoption of the Co-Ownership Plan III, the grant of the Scheme Mandate and the Connected Grant to be proposed at the Annual General Meeting.

Based on the knowledge and information of the Company as of the Latest Practicable Date, (i) the Connected Participants are interested in a total of 66,283,273 Shares (among which 2,572,201 Shares are held by the plan trustee on their respective behalf pursuant to the Co-Ownership Plan II); (ii) the other Eligible Participants (other than the Connected Participants) are interested in a total of 10,923,448 Shares (all of which are held by the plan trustee on their respective behalf pursuant to the Co-Ownership Plan II); (iii) with respect to the voting rights attached to the aforesaid 13,495,649 Shares held by the plan trustee pursuant to the Co-Ownership Plan II (representing 1.34% of the total issued share capital of the Company as of the Latest Practicable Date), the plan trustee is restricted by the scheme rules from exercising such voting rights; and (iv) the Connected Participants hold a total of

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LETTER FROM THE BOARD

63,711,072 Shares (representing 6.34% of the total issued share capital of the Company as of the Latest Practicable Date) outside the Co-Ownership Plan II and they are entitled to exercise the voting rights with respect to their respective Shares.

As the above total number of 77,206,721 Shares (representing 7.68% of the total issued share capital of the Company as of the Latest Practicable Date) represent Shares in which, to the Company’s knowledge and information, the Eligible Participants are interested, they are required to abstain from voting with respect to such Shares on the resolutions concerning the adoption of the Co-Ownership Plan III, the grant of the Scheme Mandate and the Connected Grant to be proposed at the Annual General Meeting. As 13,495,649 Shares are held by the plan trustee pursuant to the Co-Ownership Plan II (representing 1.34% of the total issued share capital of the Company as of the Latest Practicable Date) and for which the plan trustee is restricted from exercising the respective voting rights, regarding the 63,711,072 Shares (representing 6.34% of the total issued share capital of the Company as of the Latest Practicable Date) held by the Connected Participants, they are required to abstain from voting at the Annual General Meeting on the resolutions concerning the adoption of the Co-Ownership Plan III.

10. RECOMMENDATIONS

The Directors consider that the re-election of retiring Directors, the grant of the Shares Issue Mandate and Repurchase Mandate and the Extension are in the best interest of the Company and the Shareholders. Accordingly, the Directors recommend that the Shareholders vote in favour of the relevant resolutions to be proposed at the Annual General Meeting.

The Directors (other than the independent non-executive Directors whose views are set out in the Letter from the Independent Board Committee in this circular) are of the view that the terms of the Co-Ownership Plan III, the Scheme Mandate and the Connected Grant are fair and reasonable and in the interests of the Company and its Shareholders as a whole and in the ordinary and usual course of business of the Group and on normal commercial terms. Accordingly, the Directors recommend that the Independent Shareholders vote in favour of the relevant resolutions to be proposed at the Annual General Meeting.

Your attention is drawn to (a) the letter from the Independent Board Committee set out on page 20 of this circular which contains its recommendation to the Independent Shareholders in relation to the adoption of the Co-Ownership Plan III, the grant of the Scheme Mandate and the Connected Grant; (b) the letter from Altus Capital Limited set out on pages 21 to 33 of this circular which contains its advice to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Co-Ownership Plan III, the grant of the Scheme Mandate and the Connected Grant; and (c) additional information set out in the appendices to this circular.

WARNING: The information set out in this circular relating to the Co-Ownership Plan III, including the proposed bases for determining whether the respective conditions for the granting and vesting of the RSUs are satisfied, are for the purpose of considering

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LETTER FROM THE BOARD

the resolutions to be presented at the Annual General Meeting only. Nothing in this circular shall represent a forecast or projection of the Company’s share price, future performance, cash flow or profitability. As the adoption of the Co-Ownership Plan III is subject to approval by the Independent Shareholders, the Co-Ownership Plan III may or may not be implemented and such bases for granting and vesting may or may not materialise. Accordingly, Shareholders and potential investors of the Company should exercise caution when dealing in the securities of the Company.

11. ACTION TO BE TAKEN

A form of proxy at the Annual General Meeting is enclosed herewith. Whether or not you intend to attend the Annual General Meeting, you are requested to complete the form of proxy and return it to the office of the Company’s Hong Kong branch share registrar, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for holding the Annual General Meeting or any adjournment thereof. Completion and return of a form of proxy will not preclude you from attending and voting in person at the Annual General Meeting, or any adjournment thereof, should you so wish.

12. ANNUAL GENERAL MEETING

Notice of the Annual General Meeting is set out on pages 59 to 63 of this circular. The Annual General Meeting to be held on 15 December 2017, Friday at 10:00 a.m. for the purpose of considering and, if thought fit, passing the resolutions set out therein.

According to Rule 13.39(4) of the Listing Rules, any vote of Shareholders at a general meeting must be taken by poll. Therefore, all the resolutions put to the vote at the Annual General Meeting will be taken by way of poll.

Please refer to section 9(d) of this “Letter from the Board” for details on the number of Shares with which the holders thereof will be required to abstain from voting or will be restricted from voting (as the case may be) on the relevant resolutions put to vote at the Annual General Meeting.

Yours faithfully, For and on behalf of HKBN Ltd. Bradley Jay HORWITZ Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

16 November 2017

==> picture [81 x 61] intentionally omitted <==

HKBN Ltd. 香港寬頻有限公司

(Incorporated in the Cayman Islands with limited liability)

Stock Code: 1310

To the Independent Shareholders,

Dear Sir or Madam,

(1) PROPOSED ADOPTION OF THE CO-OWNERSHIP PLAN III; (2) SCHEME MANDATE TO ISSUE NEW SHARES UNDERLYING THE RSUS TO BE GRANTED UNDER THE CO-OWNERSHIP PLAN III; AND (3) PROPOSED CONNECTED TRANSACTIONS INVOLVING THE POTENTIAL GRANT OF RSUS TO CONNECTED PARTICIPANTS

We refer to the circular of the Company dated 16 November 2017 (the “ Circular ”) of which this letter forms part. Capitalised terms defined in the Circular have the same meanings when used herein unless the context otherwise requires.

We, being the independent non-executive Directors, have been appointed by the Board to form the Independent Board Committee and advise you in respect of the Co-Ownership Plan III, the Scheme Mandate and the Connected Grant and to recommend whether or not the Independent Shareholders should vote on the resolutions in respect of the same to be proposed at the Annual General Meeting.

Altus Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

We wish to draw your attention to the “Letter from the Board” set out on pages 8 to 19 of the Circular and the “Letter from the Independent Financial Adviser” set out on pages 21 to 33 of the Circular to the Independent Board Committee and the Independent Shareholders which contains its advice to you and us in relation to the Co-Ownership Plan III, the Scheme Mandate, and the Connected Grant.

Having taken into account the principal reasons and factors considered by, and the advice of, Altus Capital Limited as set out in its letter of advice to you and us in the Circular, we are of the opinion that the adoption of the Co-Ownership Plan III, the grant of the Scheme Mandate and the Connected Grant are in the ordinary and usual course of business of the Group and on normal commercial terms, and are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant ordinary resolutions to be proposed at the Annual General Meeting to approve the Co-Ownership Plan III, grant the Scheme Mandate and approve the Connected Grant.

Yours faithfully,

For and on behalf of the Independent Board Committee

Mr. Bradley Jay HORWITZ, Mr. Stanley CHOW and Mr. Quinn Yee Kwan LAW, SBS, JP

Independent non-executive Directors

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the text of the letter from Altus Capital Limited to the Independent Board Committee and the Independent Shareholders in respect of the proposed connected transactions involving the potential grant of RSUs to Connected Participants under the Co-Ownership Plan III prepared for inclusion in this circular.

Altus Capital Limited 21 Wing Wo Street Central, Hong Kong

16 November 2017

To the Independent Board Committee and the Independent Shareholders

HKBN Ltd.

12th Floor, Trans Asia Centre 18 Kin Hong Street, Kwai Chung New Territories Hong Kong

Dear Sirs,

PROPOSED CONNECTED TRANSACTIONS INVOLVING THE GRANT OF RSUS TO CONNECTED PARTICIPANTS UNDER THE CO-OWNERSHIP PLAN III

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 potential Connected Grant, particulars of which are set out in the “Letter from the Board” contained in the circular of the Company dated 16 November 2017 (the “ Circular ”) of which this letter forms part. On 2 November 2017, the Board considered and approved the conditional adoption of the Co-Ownership Plan III (the “ Scheme ”), the terms of which include the Grant of RSUs (including the Connected Grant).

Eligible Participants under the Scheme include Connected Participants, being any person who is a Director or chief executive of the Company or a director or executive of any of its subsidiaries as at the Latest Practicable Date. The Connected Participants are two executive directors of the Company, namely Mr. William Chu Kwong YEUNG and Mr. Ni Quiaque LAI, and five directors of the Company’s subsidiaries, namely Mr. Tak Wa William YEUNG, Mr. Yue Kit Andrew WONG, Ms. Yan Fen LIU, Ms. Wing Sze CHAN and Ms. Wai Han Stella YU. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IMPLICATIONS UNDER THE LISTING RULES

Since each of the Connected Participants is a connected person of the Company, the Connected Grant to them will constitute connected transactions of the Company which are subject to the reporting, announcement and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

So far as the Company is aware, other than the Eligible Participants who are Shareholders and are required to abstain from voting on the resolution (the “ Resolutions ”) approving the adoption of the Co-Ownership Plan III, the grant of the Scheme Mandate to issue new Shares underlying the RSUs to be granted under the Co-Ownership Plan III and the Connected Grant to be proposed at the Annual General Meeting, as they may be considered to be materially interested in the Scheme, the Scheme Mandate and the Connected Grant, no other Shareholders are required to abstain from voting on the Resolutions.

The Directors, who are, as at the Latest Practicable Date, Connected Participants, have abstained from voting on the Resolutions.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee (comprising all the independent non-executive Directors, namely Mr. Bradley Jay HORWITZ, Mr. Stanley CHOW and Mr. Quinn Yee Kwan LAW, SBS, JP, has been formed to advise the Independent Shareholders as to whether (i) the terms of the Connected Grant are fair and reasonable; (ii) the Connected Grant is in the interests of the Company and its Shareholders as a whole; (iii) the Connected Grant is in the ordinary and usual course of business of the Group and on normal commercial terms; and (iv) how to vote in respect of the Resolutions to be proposed at the Annual General Meeting, taking into account the recommendation of the Independent Financial Adviser.

INDEPENDENT FINANCIAL ADVISER

As the Independent Financial Adviser, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders as to whether (i) the terms of the Connected Grant are fair and reasonable; (ii) the Connected Grant is in the interests of the Company and its Shareholders as a whole; (iii) the Connected Grant is in the ordinary and usual course of business of the Group and on normal commercial terms; and (iv) how to vote in respect of the Resolutions.

We have not acted as an independent financial adviser for any transaction of the Company in the last two years prior to the date of the Circular. Pursuant to Rule 13.84 of the Listing Rules, and given that the remuneration for our engagement to opine on the Connected Grant is at market level and not conditional upon successful passing of the Resolutions at the Annual General Meeting, and that our engagement is on normal commercial terms, we are independent of and not associated with the Company, its substantial shareholder(s) or its connected person(s).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR ADVICE

In formulating our opinion, we have reviewed, amongst others, (i) the Rules of the Scheme (the “ Rules ”); (ii) the 2016 annual report of the Company (the “ 2016 Annual Report ”); (iii) the 2017 interim report of the Company (the “ 2017 Interim Report ”); and (iv) the announcement of the Company dated 2 November 2017 in relation to, amongst other things, the proposed adoption of the Scheme and the Proposed Grant under, and pursuant to the terms and conditions of, the Scheme under the Scheme Mandate (the “ Announcement ”). We have relied on the statements, information, opinions and representations contained or referred to in the Circular and/or provided to us by the Company, the Directors and the management of the Company (the “ Management ”).

We have assumed that all statements, information, opinions and representations contained or referred to in the Circular and/or provided to us were reasonably made after due and careful enquiry and were true, accurate and complete at the time they were made and continued to be so as at the date of the Circular. We have no reason to believe that any such statements, information, opinions or representations is untrue, inaccurate or misleading, nor are we aware of any material facts the omission of which would render any such statements, information, opinions or representations untrue, inaccurate or misleading.

We consider that we have been provided with, and have reviewed, sufficient information to reach an informed view and provide a reasonable basis for our opinion. We have not, however, conducted an independent investigation into the business, financial conditions and affairs or future prospects of the Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation, we have considered the principal factors and reasons set out below.

1. Background and outlook of the Group

The Group is principally engaged in the provision of residential high speed fibre broadband services and enterprise solutions in Hong Kong. It offers a wide range of telecommunications solutions for residential and enterprise markets, encompassing broadband, Wi-Fi, cloud solutions, data connectivity, data facilities, system integration and voice communications. Through partnerships with over-the-top service providers and mobile facilities based carriers, it also offers over-the-top entertainment and mobile services.

The Management considers that its talents, more than any other factor, are essential to the Group’s success. We note from the 2017 Interim Report that the Company plans to drive sustainable growth in revenue, EBITDA and “Adjusted Free Cash Flow” through, amongst other initiatives, continuing to cultivate its talent-oriented co-ownership culture by enlarging the base of co-owners via its co-ownership scheme.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Reasons for and benefits of the adoption of the Scheme

Reference is made to the 2017 Interim Report containing summary information on the share incentive scheme of the Company adopted on 21 February 2015, the Co-Ownership Plan II (the “ Earlier Scheme ”), under which talents of supervisor or above level purchase Shares at market price with two to twelve months of their annual remuneration, which the Company will match with restricted share units granted at a certain ratio to vest over three years. Its purpose is the attraction, retention and motivation of skilled and experienced talents for the future development and expansion of the Group, by providing them the opportunity to acquire equity interests in the Company, while encouraging them to be long-term holders of the Shares.

The Management stated its view in the 2016 Annual Report that co-owners under the Earlier Scheme, through their dual role as both investor and talent, perform with an unmatched level of responsibility and passion. Further, as stated in the 2017 Interim Report, the Management considers co-ownership a powerful expression by talents of their commitment and belief that they have in the Group.

We note that the purpose of the Scheme (as discussed in the paragraph headed “3.1 Purpose of the Scheme” below); the Eligible Participants of the Scheme (as discussed in the paragraph headed “3.3 Invitation and Share purchasing under the Scheme” below); the Share purchases and Grants to be made pursuant to the Scheme (as discussed in the paragraphs headed “3.3 Invitation and Share purchasing under the Scheme” and “3.4 Granting and Vesting Conditions of RSUs under the Scheme” below) are similar to those of the Earlier Scheme and that the Management considers that the Scheme would provide an additional means to incentivise the Talents without imposing additional pressure on the Group’s cash flow position and would recognise the continual support of Talents to the Group and their effort in promoting the Group’s long-term growth and development. As at the Latest Practicable Date, the total number of Eligible Participants is approximately 600, representing approximately 20.5% of the total number of existing employees of the Group.

Having considered (i) the Management’s view on the importance of talents to the Group’s success (as mentioned in the paragraph headed “1. Background and outlook of the Group” above); (ii) the Company’s strategy to drive sustainable growth through, amongst other initiatives, increasing co-ownership (also mentioned in the paragraph headed “1. Background and outlook of the Group” above); and (iii) the Management’s view that co-ownership motivates talents to perform, we consider that the adoption of the Scheme is in the ordinary and usual course of business of the Group and in the interests of the Company and its Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Key terms of the Scheme

For the purpose of considering the fairness and reasonableness of the Connected Grant, we have taken into account the following terms of the Scheme.

3.1 Purpose of the Scheme

Like the Earlier Scheme, the purpose of the Scheme is to incentivise skilled and experienced Talents to remain with the Group and to motivate them to strive for the future development and expansion of the Group in order to create value for the Shareholders, by providing them with a co-investment opportunity to acquire equity interests in the Company, while encouraging them to be long-term holders of the Shares. As discussed in the paragraph headed “2. Reasons for and benefits of the adoption of the Scheme” above, we consider that the purpose of the Scheme is in the interests of the Company and the Shareholders as a whole.

3.2 Life of the Scheme

Subject to the Adoption Conditions, the Scheme shall be valid and effective for the period commencing on the Commencement Date and expiring on the earlier of (i) the date falling three years from the Commencement Date; (ii) the date on which all granted RSUs have either vested or been cancelled; or (iii) such earlier date as the Scheme is terminated in accordance with its terms. We note that the Board’s discretion to terminate the Scheme is limited to certain events, such as an M&A Event. As such, it does not have general discretion to terminate the Scheme prematurely and thus preclude Eligible Participants from participating in the Scheme.

As (i) the number of RSUs to be granted under the Scheme positively correlates to the total cumulative Adjusted Available Cash per Share for Distribution during the period from the Commencement Date to and including the date on which the Company publishes its annual report for the 2020 Financial Year (the “ Reference Period ”) above HK$2.10 and up to HK$2.40 per Share (the “ Range ”) (as discussed in the paragraph headed “3.4 Granting and Vesting Conditions of RSUs under the Scheme” below); (ii) the Management believes, and we concur, that the Reference Period is appropriate for the Scheme and the Company (also discussed in the paragraph headed “3.4 Granting and Vesting Conditions of RSUs under the Scheme” below); and (iii) the Board has limited discretion to terminate the Scheme, we consider that the life of the Scheme is fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3.3 Invitation and Share purchasing under the Scheme

Like the Earlier Scheme, the Scheme is open to talents of Point 3 grade or above levels. Under paragraph 3.1 of the Rules, the Board shall, (i) during each of the Invitation Periods, invite any Talent (“ Invitee ”) who, as at the start of each applicable Invitation Period, has not been previously invited to participate in the Scheme; and (ii) accept the purchase of Shares by Invitees in accordance with the terms of the Scheme. The Connected Participants are also included as eligible participants under the Co-Ownership Plan III as they are, in terms of their executive or management position with the Group, also of an internal grading of Point 3 or above. As such, we consider their inclusion fair and reasonable.

The Participants will therefore be in a position of responsibility. Given the purpose of the Scheme (as discussed in the paragraph headed “3.1 Purpose of the Scheme” above) to, amongst other things, motivate skilled and experienced Talents, we consider that the eligibility criteria for the Participants, including the Connected Participants, are appropriate and note that the Board effectively has no discretion in respect of the eligibility, invitation and Participation of Talents.

Pursuant to paragraphs 3.2 and 3.3 of the Rules, each invitation to participate in the Scheme (“ Invitation ”) shall remain open for acceptance for the same period of time and be subject to the same restrictions and conditions, amongst others, the aggregate monetary amount for the purchase of Shares (that is, the Investment Amount) in respect of any one Invitee being equal to or more than one-sixth of, but not more than, the Annual Remuneration Package of such Invitee. Pursuant to paragraph 3.2 of the Rules, the Invitation will be issued in a prescribed form. The Management confirms that the terms and conditions contained therein will be standardised for all Invitees.

Pursuant to paragraph 3.6 of the Rules, the Company shall direct and procure the Plan Trustee, a third party independent from the Company and its connected persons, to endeavour to make on-market purchases of Shares at the prevailing market prices of the Shares until the aggregate Investment Amounts remitted by those new Participants have been utilised over a fixed period determined by the Board (“ Share Purchase Period ”) on behalf of all new Participants who have accepted Invitations in the same Invitation Period.

We note that the Board in determining the Share Purchase Period will take into account factors including, but not limited to, the aggregate number of Shares to be purchased by the Plan Trustee, the average daily trading volume of the Shares during such fixed period, and the market price of the Shares during such fixed period. The Management takes the view, and we concur, that affording the Board flexibility to determine the Share Purchase Period is appropriate given the possible volatility in the daily trading volume or market price of the Shares during the Term. Further, as noted above in this paragraph, the Board effectively has no discretion in respect of the eligibility, Invitation and Participation of Talents, and therefore, no discretion over which Participants would be affected by the duration of any one Share Purchase Period.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pursuant to paragraph 3.7 of the Rules, the Purchased Shares shall be allocated to the new Participants for the Invitation Period on a pro rata basis with reference to their respective Investment Amounts.

As the abovementioned paragraphs of the Rules provide for the Invitation of all Talents; the purchase of Shares on the same, prescribed terms and conditions for all Participants; and the allocation of Purchased Shares (“ Allocation ”) to all Participants on a pro rata basis, we consider the relevant provisions fair and reasonable. Further, the Shares will be purchased on-market and therefore, on normal commercial terms.

3.4 Granting and Vesting Conditions of RSUs under the Scheme

The number of RSUs to be granted to a Participant shall be determined on the Grant Date in accordance with the formula (the “ Formula ”) below:

==> picture [38 x 8] intentionally omitted <==

where:

• AFF – 2.1

• A = 2.4 – 2.1

• AFF = the total cumulative Adjusted Available Cash per Share for Distribution of the Company during the period from the beginning of the 2018 Financial Year to and including the date on which the Company publishes its annual report for the 2020 Financial Year; and

• B = the Participant’s total number of Purchased Shares,

provided that:

• (a) where the value of A is less than 0, it shall be deemed to be 0; or

• (b) where the value of A is more than 1, it shall be deemed to be 1.

According to the Management, if the Adjusted Available Cash per Share for Distribution, on a cumulative basis, over the 2018, 2019 and 2020 financial years of the Company reaches HK$2.40, RSUs will be granted on the basis that the Participants would be granted with one RSU for every Purchased Share that is purchased by the Plan Trustee on behalf of the Participants, and the Participants would, subject to the satisfaction of the vesting conditions and on the vesting date, receive one Award Share for every RSU that it is granted. A cumulated Adjusted Available Cash per Share for Distribution in excess of HK$2.40 will not give rise to any further entitlement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Also according to the Management, if the Adjusted Available Cash per Share for Distribution, on a cumulative basis, over the 2018, 2019 and 2020 financial years of the Company reaches a value in excess of HK$2.10 and up to HK$2.40, RSUs will be granted to the Participants on a pro rata basis, and the number of RSUs to be granted will be determined on a linear scale between zero RSU and one RSU for every Purchased Share that is purchased by the Plan Trustee on behalf of the Participants (with more RSUs to be granted the closer the actual achieved level is to HK$2.40).

In short, the number of RSUs to be granted per Purchase Share positively correlates to the total cumulative Adjusted Available Cash per Share for Distribution for the Reference Period above HK$2.10 and up to HK$2.40 per Share.

According to the 2016 Annual Report, the “Adjusted Free Cash Flow” for the 2015 and 2016 Financial Years were approximately HK$391.6 million and HK$406.4 million, respectively, representing approximately HK$0.39 and HK$0.40 per Share as at 31 August 2015 and 2016, respectively. Taking into consideration that the “Adjusted Free Cash Flow” of the Group as at 31 August 2015 and 2016 of approximately HK$0.39 and HK$0.40 per Share, respectively, represent approximately 55.7% and 57.1%, respectively, of the yearly average of the lower end of the Range (as defined in the paragraph headed “3.2 Life of the Scheme” above) during the Reference Period of approximately HK$0.70 per Share, being equal to HK$2.10 over three years, the Management takes the view that only with the sustained efforts of the Talents over the Reference Period would a cumulative Adjusted Available Cash per Share for Distribution within the Range be achieved. Having considered the purpose of the Scheme (as discussed in the paragraph headed “3.1 Purpose of the Scheme” above) and the Company’s strategy to drive sustainable growth in, amongst other things, “Adjusted Free Cash Flow” through, amongst other initiatives, increasing co-ownership (as mentioned in the paragraph headed “1. Background and outlook of the Group” above), the Management takes the view, and we concur, that the Reference Period and cumulative approach to the Adjusted Available Cash per Share for Distribution are appropriate for the Scheme and the Company.

The Scheme provides additional formulas for the number of RSUs to be granted upon the occurrence of an M&A Event, which we consider fair and reasonable given the potential distortive effect of an M&A Event on the Adjusted Available Cash per Share for Distribution. We note that the Board would have no discretion in respect of the number of RSUs to be granted in an M&A Event.

We note that the number of RSUs to be granted will be pro rated by a Participant’s period of Participation if his period of Participation commences after the Commencement Date or he becomes a Good Leaver prior to the Grant Date. Given that pro rating by period of Participation reflects the period during which the Participant, in his position of responsibility, was contributing to the Group and had chosen to participate in the Scheme, we consider such pro rating fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Paragraph 2.3 of the Rules provides that where a Grant is proposed to a Director or his or her associate, such Director shall not form part of any vote or resolution to determine whether the Grant shall be made or the terms and conditions of such Grant. Paragraph 4.9 of the Rules provides that any Grant to any executive Director, chief executive or any director of any member of the Group or any of their respective associates shall be subject to the approval of the independent non-executive Directors. We consider that such additional measures in respect of the Connected Grant are fair and reasonable insofar as the Independent Shareholders are concerned and being forms of good corporate governance, in the interests of the Company and its Shareholders as a whole.

The Grant Date is the date on which the Company’s annual report for the 2020 Financial Year is published or the cumulative Adjusted Available Cash per Share for Distribution amount since the beginning of the 2018 Financial Year reaches HK$2.40, whichever is the earlier. As (i) the Reference Period ends on the date on which the Company publishes its annual report for the 2020 Financial Year; and (ii) the number of RSUs to be granted based on the Formula stops increasing once the cumulative Adjusted Available Cash per Share for Distribution reaches HK$2.40, and the Scheme would have served its purpose as set out in the paragraph headed “3.1 Purpose of the Scheme” above, we consider the Grant Date fair and reasonable.

Under paragraph 6.2 of the Rules, vesting of an RSU is conditional upon the following Vesting Conditions being satisfied:

• (a) the arithmetic average of the closing share price of the Shares for each of the 60 trading days of the Stock Exchange prior to the Vesting Date is greater than HK$9.27; and

• (b) the cumulative capital expenditure of the Group during the 2018, 2019 and 2020 Financial Years is not less than HK$1.2 billion (provided that the annual capital expenditure of the Group during each of the 2018, 2019 and 2020 Financial Years is not less than HK$250 million).

We understand from the Management that (i) the basis for setting HK$9.27 as the minimum average closing Share price in Vesting Condition (a) above is the final offer price per offer Share of HK$9.00 at the listing of the Company on the Stock Exchange, multiplied by 103% in consideration of the potential enlargement of the issued share capital of the Company upon full utilisation of, and issue of the Award Shares under, the Scheme Mandate Limit of 3%; (ii) the basis for the minimum cumulative capital expenditure of the Group during the 2018, 2019 and 2020 Financial Years in Vesting Condition (b) above is the capital expenditure of approximately HK$400 million for the 2017 Financial Year.

Having considered that the basis for the minimum average closing Share price addresses the potential dilutive impact of the issue of the Award Shares on existing Shareholders, and that setting the minimum cumulative capital expenditure of the Group during the 2018, 2019 and 2020 Financial Years is in line with the purpose of the Scheme to incentivise growth and entails the maintenance of capital expenditure at a historical level, we consider that the Vesting Conditions are fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3.5 Scheme Mandate Limit

The Scheme Mandate Limit is 3% of the Shares in issue on the day of the Annual General Meeting (as may be adjusted in the event of a Reorganisation in Capital Structure pursuant to paragraph 12 of the Rules). Accordingly, the maximum dilutive impact of the Scheme on existing Shareholders is 3%.

We understand from the Management that the Scheme Mandate Limit is based on the Annual Remuneration Packages of the Talents as at the Latest Practicable Date in the aggregate amount of approximately HK$364 million and the assumption based on the participation rate of the Earlier Scheme that approximately two-thirds of the Invitees will elect to participate in the Scheme. Two-thirds of HK$364 million is equal to HK$240 million, being approximately 3% of the Company’s market capitalisation as at the Latest Practicable Date. As such, we consider that the Scheme Mandate Limit is fair and reasonable.

3.6 Section summary

Having considered the key terms of the Scheme above; that the Rules apply to the Connected Participants as they apply to the other Participants and are no more favourable to the Connected Participants than the other Participants; and that under paragraph 15.4 of the Rules, any alterations to the terms and conditions of the Scheme which are of a material nature or any changes to the terms of the RSUs granted must be approved by the Shareholders in general meeting, we consider the Scheme to be fair and reasonable insofar as the Independent Shareholders are concerned and in the interests of the Company and its Shareholders as a whole.

4. Potential effects of the Scheme

4.1 Potential shareholding impact of the Scheme

According to the Management, assuming that (i) all the Connected Participants will agree to participate, and do participate, in the Co-Ownership Plan III to the fullest extent; (ii) all conditions to the grant of the RSUs are satisfied and the maximum entitlements to the RSUs have been granted; and (iii) all the Connected Participants become grantees of RSUs and vested with the Award Shares upon satisfaction of the vesting conditions, and on the basis of the 3% limit by reference to the number of the total issued Shares of the Company as of the Latest Practicable Date, the maximum number of Award Shares that will be awarded to the Connected Participants is 3,345,731 in total. The maximum number of Award Shares underlying the RSUs to be granted to Mr. William Chu Kwong YEUNG and Mr. Ni Quiaque LAI, the two executive Directors of the Company, and Mr. Tak Wa William YEUNG, Mr. Yue Kit Andrew WONG, Ms. Yan Fen LIU, Ms. Wing Sze CHAN and Ms. Wai Han Stella YU, the five directors of the Company’s subsidiaries, are 1,377,352, 931,833, 422,024, 233,309, 91,647, 252,416 and 47,150, respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As mentioned in the paragraph headed “3.5 Scheme Mandate Limit” above, the maximum dilutive impact on existing Shareholders is 3%. The following table sets out the shareholding structure of the Company as at the Latest Practicable Date and after the Purchased Shares have been purchased and immediately following full utilisation of the Scheme Mandate and issue of the Award Shares on the Vesting Date, assuming that (i) the Eligible Participants (including the Connected Participants) identified as at the Latest Practicable Date will agree to participate, and do participate; (ii) all conditions to the grant of the RSUs are satisfied and the maximum entitlements to the RSUs have been granted; (iii) all the Eligible Participants (including the Connected Participants) become grantees of RSUs and are vested with the Award Shares upon satisfaction of the Vesting Conditions; and (iv) no other Shares are issued or repurchased by the Company before full utilisation of the Scheme Mandate on the Grant Date on the basis of the Scheme Mandate Limit by reference to the number of the total issued Shares as of the Latest Practicable Date:

Substantial Shareholder Canada Pension Plan Investment Board Participants Connected Participants Other Participants Other public Shareholders Total	As at the Latest Practicable Date Number of Shares Approximate percentage (%) 181,048,500 18.0 66,283,273 (Note1) 6.59 10,923,448 (Note2) 1.1 747,411,445 74.32 1,005,666,666 100.0	After the Purchased Shares have been purchased and immediately upon full utilisation of the Scheme Mandate Number of Shares Approximate percentage (%) 181,048,500 17.5 72,974,735 (Note3) 7.05 64,571,984 (Note4) 6.2 717,241,446 69.24 1,035,836,665 100.0	After the Purchased Shares have been purchased and immediately upon full utilisation of the Scheme Mandate Number of Shares Approximate percentage (%) 181,048,500 17.5 72,974,735 (Note3) 7.05 64,571,984 (Note4) 6.2 717,241,446 69.24 1,035,836,665 100.0
			100.0

Notes:

1. 66,283,273 ordinary shares which the Connected Participants are personally interested in include the purchased Shares and the Shares underlying the restricted share units that were granted and vested pursuant to the Co-Ownership Plan II currently held by the plan trustee of the Co-Ownership Plan II, and the Shares otherwise personally held by the Connected Participants.

2. 10,923,448 ordinary shares which the Eligible Participants (other than the Connected Participants) are personally interested in include the shares underlying the restricted share units that were granted and vested pursuant to the Co-Ownership Plan II currently held by the plan trustee of the Co-Ownership Plan II. The information in the above table assumes that the Eligible Participants (other than the Connected Participants) do not hold any other interest in any Share, as the Company does not have any information on whether any of the Eligible Participants (other than the Connected Participants) holds any Share.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1. This assumes that the Connected Participants will receive the maximum number of Award Shares that can be awarded to them under the Co-Ownership Plan III, without taking into account any adjustment that may need to be made because there is an over-subscription under the Co-Ownership Plan III by invitees who will be invited during the first Invitation Period and that the Connected Participants will hold in aggregate, through the Plan Trustee, such number of Purchased Shares which is equivalent to the maximum number of Award Shares by investing their respective maximum Investment Amount. The description in Note 1 above also applies.

2. This assumes that the Eligible Participants (other than the Connected Participants) will receive the balance of the maximum number of Award Shares under the Scheme Mandate (after deducting the maximum entitlement of the Connected Participants) and that the Eligible Participants will hold in aggregate, through the Plan Trustee, such number of Purchased Shares which is equivalent to the aforesaid number of Award Shares. The descriptions in Notes 2 and 3 above also apply.

Please note that the potential grant of RSUs and issue and allotment of Award Shares to the Connected Participants would vary depending on the deviations from the assumptions stated above. Provided that the maximum number of Award Shares that underlie the RSUs that may be granted to each Connected Participant under Co-Ownership Plan III shall not exceed the maximum number that he or she is entitled to, as disclosed above in this paragraph. Accordingly, information contained in the above table is provided only for illustrative purpose and has been presented on the basis of the stated assumptions.

As noted in the paragraph headed “3.4 Granting and Vesting Conditions of RSUs under the Scheme” above, no Grants will be made if the total cumulative Adjusted Available Cash per Share for Distribution for the Reference Period is equal to or less than HK$2.10 per Share. As such, assuming that no other Shares are issued or repurchased by the Company before full utilisation of the Scheme Mandate on the Vesting Date, the total cumulative Adjusted Available Cash per Share for Distribution for the Reference Period will be equal to or greater than approximately HK$2.04, being HK$2.10 divided by the maximum enlargement factor of the issued share capital of the Company of 103% under the Scheme Mandate Limit. For illustrative purposes, assuming that the Group records the same “Adjusted Free Cash Flow” per Share as at 31 August 2016 of approximately HK$0.40 per Share during the Reference Period, it would have recorded a cumulative “Adjusted Free Cash Flow” of approximately HK$1.20 per Share for the Reference Period. As the “Adjusted Free Cash Flow” per Share will have increased upon Grant, including the Connected Grant, we consider that the potential shareholding impact of the Scheme as illustrated in the table above to be acceptable insofar as the Independent Shareholders are concerned and that the benefits of the operational growth of the Group to the Company and its Shareholders as a whole outweigh the potential shareholding impact.

4.2. Potential financial effect of the Scheme

The Management expects that the accounting treatment of the Scheme will be similar to that of the Earlier Scheme, whereby the estimated fair value of RSUs, taking into account the probability that the RSUs will vest, will be recognised as talent costs with a corresponding increase in a capital reserve within equity from the date of Allocation until the Vesting Date, when the amount recognised as an expense will be

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

adjusted to reflect the actual number of RSUs that vest (with a corresponding adjustment to the capital reserve). As such, we expect that the Company will incur non-cash talent expenses upon Allocation, the amount of which will depend on various factors, including but not limited to, the number of Shares purchased and fair value of each RSU as at the date of Allocation. For reference, equity-settled share-based payment expenses of approximately HK$1.5 million, HK$11.6 million and HK$7.3 million were recognised as talent costs for the year ended 31 August 2015 and 2016 and the six months ended 28 February 2017, respectively, in respect of the approximately 5.1 million restricted share units granted as at 28 February 2017, the underlying Shares of which representing approximately 0.55% of the issued Shares as at 28 February 2017.

As mentioned above in this paragraph, we expect that the Company will incur non-cash talent expenses upon the Allocation, and as such, we do not expect that the Scheme will have any immediate material adverse impact on the Group at the time of its adoption or commencement. Having considered that the total estimated fair value of the RSUs takes into account the probability that the RSUs will vest, the Management takes the view, and we concur, that the recognition of the equity-settled share-based payment expenses upon the Allocation, being essentially based on the probability of rewarding the Participants, including the Connected Participants, for their contribution to the development and expansion of the Group, is fair and reasonable.

5. Opinion and recommendation

Having considered the above principal factors and reasons, we are of the view that (i) the terms of the Scheme (including the potential grants to Connected Participants, who are eligible Participants, that is the Connected Grant) are fair and reasonable; (ii) the Scheme (including the Connected Grant) is in the interests of the Company and its Shareholders as a whole; and (iii) the adoption of the Scheme (including the Connected Grant) is in the ordinary and usual course of business of the Group and on normal commercial terms. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the Resolutions at the Annual General Meeting.

Yours faithfully, For and on behalf of Altus Capital Limited Jeanny Leung Executive Director

Ms. Jeanny Leung (“Ms. Leung”) is a Responsible Officer of Altus Capital Limited licensed to carry on Type 6 (advising on corporate finance) regulated activity under the SFO and permitted to undertake work as a sponsor. She is also a Responsible Officer of Altus Investments Limited licensed to carry on Type 1 (dealing in securities) regulated activity under the SFO. Ms. Leung has about 30 years of experience in corporate finance advisory and commercial field in Greater China, in particular, she has participated in sponsorship work for initial public offerings and acted as financial adviser or independent financial adviser in various corporate finance advisory transactions.

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APPENDIX I PARTICULARS OF DIRECTORS SUBJECT TO RE-ELECTION

Pursuant to the Listing Rules, particulars of retiring Directors subject to re-election at the AGM according to the Articles and will be proposed to be re-elected at the AGM are set out below:

EXECUTIVE DIRECTOR

Mr. William Chu Kwong YEUNG

Mr. William Chu Kwong YEUNG , aged 56, is the Chief Executive Officer of the Group, an executive Director, the Chairman of the Nomination Committee and a member of the Remuneration Committee of the Company. Mr. Yeung joined the Group in October 2005 as the Chief Operating Officer, overseeing customer engagement, relationship management and network development. In November 2008, Mr. Yeung was appointed as the Chief Executive Officer with the responsibility of developing corporate strategies and overseeing operations. Prior to joining the Group, Mr. Yeung was a Director of customers division at SmarTone Mobile Communications Limited, and served as a police inspector with the Hong Kong Police Force. Mr. Yeung obtained a Bachelor of Arts Degree from Hong Kong Baptist University in December 1992 and obtained a Master of Business Administration Degree from the University of Strathclyde, U.K. in November 1995 and a Master of Science Degree in Electronic Commerce and Internet Computing from the University of Hong Kong in November 2001. Save as disclosed above, Mr. Yeung did not hold any directorship in other listed public companies in the last three years up to the Latest Practicable Date.

Save as disclosed above, Mr. Yeung is not connected with any Director, senior management, substantial shareholders or controlling shareholders of the Company. Apart from being an executive Director, Mr. Yeung is also a Director in various subsidiaries of the Group. As at the Latest Practicable Date, Mr. Yeung is interested in 27,086,427 Shares within the meaning of Part XV of the SFO, including 265,221 Shares granted by the Company with vesting conditions pursuant to the Co-Ownership Plan II adopted by the Company on 21 February 2015.

Mr. Yeung entered into a service contract with the Company on 6 February 2015. He is subject to retirement by rotation and re-election in accordance with the Articles and the Listing Rules. Mr. Yeung is not entitled to any Director’s fee under the service contract. His salary is to be determined by the Board with reference to his duties and responsibilities with the Company, the Company performance and the prevailing market situation. For the year ended 31 August 2017, Mr. Yeung is entitled to receive salaries (including allowances and retirement scheme contributions), discretionary bonus and share-based payments of HK$13,368,627.

There is no information which is required to be disclosed pursuant to any of the requirements of the provisions under Rules 13.51(2)(h) to 13.51(2)(v) of the Listing Rules.

There is no other matter that needs to be brought to the attention of the Shareholders in respect of Mr. Yeung’s re-election.

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APPENDIX I PARTICULARS OF DIRECTORS SUBJECT TO RE-ELECTION

INDEPENDENT NON-EXECUTIVE DIRECTOR

Mr. Stanley CHOW

Mr. Stanley CHOW , aged 53, was appointed as an independent non-executive Director, the Chairman of the Remuneration Committee and a member of the Audit Committee and the Nomination Committee of the Company on 6 February 2015. Mr. Chow has over 21 years of experience as a corporate lawyer in Hong Kong and Canada, including over 18 years of experience in dealing with the Listing Rules during his time in private practice and as a senior manager in the Stock Exchange’s Listing Division. Mr. Chow was a partner in the Hong Kong office of Latham & Watkins, an international law firm, from March 2009 to February 2014 where he was the local department chair of the corporate department in Hong Kong. He was also a member of the firm’s Initiatives Committee from March 2012 to February 2014. Prior to joining Latham & Watkins, Mr. Chow practised law with Allen & Overy, another international law firm, from November 1996 to January 2009 where he was a partner in its Hong Kong office for over 8 years. As a corporate lawyer in Hong Kong, Mr. Chow has advised on a broad range of corporate finance and mergers and acquisitions transactions, including in the context of the Stock Exchange and the Listing Rules. Prior to Mr. Chow’s time in private practice, he was a senior manager in the Stock Exchange’s Listing Division from May 1995 to October 1996 and also practised law with Canadian law firms in Hong Kong and Canada. Mr. Chow is a member of The Law Society of Hong Kong’s Company Law Committee and was admitted as a solicitor in Hong Kong in 1995 and in England and Wales in 1994. He was also admitted as a barrister and solicitor in British Columbia, Canada in 1994 and in Ontario, Canada in 1991. Mr. Chow graduated from Queen’s University, Canada with a Bachelor of Commerce (Honours) Degree in May 1986 and obtained a Juris Doctor with Honour Standing from the University of Toronto, Canada in June 1989. Save as disclosed above, Mr. Chow did not hold any directorship in other listed public companies in the last three years up to the Latest Practicable Date.

Save as disclosed above, Mr. Chow is not connected with any Director, senior management, substantial shareholders or controlling shareholders of the Company. As at the Latest Practicable Date, Mr. Chow is not interested in the Shares within the meaning of Part XV of the SFO.

Mr. Chow has signed a letter of appointment issued by the Company on 6 February 2015. He is subject to retirement by rotation and re-election in accordance with the Articles and the Listing Rules. According to the letter of appointment, Mr. Chow is entitled to a Director’s fee of HK$388,000 per annum for services as an independent non-executive Director.

There is no information which is required to be disclosed pursuant to any of the requirements of the provisions under Rules 13.51(2)(h) to 13.51(2)(v) of the Listing Rules.

There is no other matter that needs to be brought to the attention of the Shareholders in respect of Mr. Chow’s re-election.

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APPENDIX II EXPLANATORY STATEMENT ON THE REPURCHASE MANDATE

This appendix contains information required under the Listing Rules to be included in an explanatory statement to accompany the notice of a general meeting at which a resolution in relation to the repurchase by the Company of its own Shares is to be proposed. Its purpose is to provide Shareholders with all the information reasonably necessary for them to make an informed decision on whether to vote for or against the ordinary resolution approving the Repurchase Mandate at the AGM.

REPURCHASE MANDATE

At the AGM, an ordinary resolution will be proposed to approve the Repurchase Mandate. Under the Repurchase Mandate, the number of Shares that the Company may repurchase shall not exceed 10% of the share capital of the Company in issue on the date the resolution granting the Repurchase Mandate is passed. As at the Latest Practicable Date, there were in issue an aggregate of 1,005,666,666 Shares. Exercise in full of the Repurchase Mandate, on the basis that no further Shares are issued or repurchased prior to the date of the AGM, would accordingly result in up to 100,566,666 Shares being repurchased by the Company.

The Listing Rules permit companies with a primary listing on the Stock Exchange to repurchase their shares on the Stock Exchange subject to certain restrictions, the most important of which are summarized below:

(a) Shareholders’ approval

The Listing Rules provide that all proposed repurchases of shares by a company with a primary listing on the Stock Exchange must be approved in advance by an ordinary resolution, either by way of general mandate or by specific approval of a specific transaction. The Shares to be repurchased must be fully paid up.

(b) Source of funds

Repurchases must be funded out of funds legally available for the purpose in accordance with the Company’s memorandum of association and Articles and the applicable laws in the Cayman Islands. A listed company may not repurchase its own shares on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange from time to time.

It is presently proposed that any repurchase of Shares would be made out of capital paid up on the repurchased Shares, funds of the Company which would otherwise be available for dividend or distribution or out of the proceeds of a fresh issue of Shares made for the purpose and, in the case of any premium payable on such repurchase, from funds of the Company otherwise available for dividend or distribution or from the Company’s share premium account.

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EXPLANATORY STATEMENT ON THE REPURCHASE MANDATE

APPENDIX II

(c) Impact on working capital or gearing position

There might be a material adverse impact on the working capital requirements of the Company or the gearing level (as compared with the position disclosed in the audited financial statements of the Company for the year ended 31 August 2017 as set out in the Company’s 2017 annual report) in the event that the Repurchase Mandate is exercised in full. However, the Directors do not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

(d) Reasons for repurchases

The Directors believe that it is in the best interests of the Company and its Shareholders for the Directors to have a general authority from Shareholders to enable the Company to repurchase Shares in the market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per Share of the Company and its earnings per Share and will only be made when the Directors believe that such repurchases will benefit the Company and its Shareholders.

(e) General

None of the Directors or, to the best of their knowledge having made all reasonable enquiries, any of their associates have any present intention to sell any Shares to the Company or its subsidiaries if the Repurchase Mandate is approved by the Shareholders of the Company.

(f) Undertaking of the Directors

The Directors have undertaken to the Stock Exchange that they will exercise the Repurchase Mandate in accordance with the Listing Rules and the applicable laws of the Cayman Islands.

(g) Effect of the Takeovers Code

If as a result of a repurchase of Shares an ordinary shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purpose of the Takeovers Code. Accordingly, a Shareholder or a group of Shareholders acting in concert, depending on the level of increase of ordinary shareholders’ interest, could obtain or consolidate control of the Company and become obliged to make a mandatory general offer in accordance with Rule 26 of the Takeovers Code. If the Company were to repurchase Shares up to the permitted maximum of 10% of the issued ordinary share capital of the Company, such parties may together with any other parties acting in concert with them become obliged to make a mandatory general offer in accordance with Rule 26 of the Takeovers Code.

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APPENDIX II EXPLANATORY STATEMENT ON THE REPURCHASE MANDATE

The Directors are not aware of any such consequences which would arise under the Takeovers Code as a consequence of any exercise of the Repurchase Mandate. In the event that any exercise of the Repurchase Mandate would, to the knowledge of the Directors, have such a consequence, the Directors do not propose to exercise the Repurchase Mandate to such an extent as would trigger a mandatory general offer obligation for any Shareholder or group of Shareholders.

Assuming that no further Shares are issued between the Latest Practicable Date and the date of repurchase under the Repurchase Mandate, the Directors exercise in whole or in part the Repurchase Mandate will not result in less than 25% of the issued share capital of the Company being held by the public as required by Rule 8.08 of the Listing Rules. The Directors have no intention to exercise the Repurchase Mandate to an extent as may result in a public shareholding of less than such prescribed percentage.

No core connected person (as defined in the Listing Rules) of the Company has notified the Company that he/she/it has a present intention to sell Shares in the Company, nor has he/she/it undertaken not to do so if the Repurchase Mandate is approved by the Shareholders of the Company.

(h) Share repurchase made by the Company

During each of the six months preceding the date of this circular, no Share has been repurchased by the Company.

(i) Share prices

The highest and lowest prices at which the Shares were traded on the Stock Exchange in each month since November 2016 up to the Latest Practicable Date were as follows:

	**Traded **	**price **	**per **	share
	Highest			Lowest
	HK$			HK$
2016
November	9.23			8.43
December	8.90			8.28
2017
January	9.49			8.18
February	9.60			8.80
March	9.09			8.64
April	8.88			8.13
May	8.52			8.05
June	8.49			7.80
July	8.17			7.52
August	7.80			7.50
September	8.38			7.40
October	8.28			7.80
November*	9.90			7.94

• Up to and including the Latest Practicable Date

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APPENDIX III PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

The following is a summary of the principal terms of the Co-Ownership Plan III proposed to be approved at the Annual General Meeting but does not form part of, nor was it intended to be, part of the Co-Ownership Plan III nor should it be taken as affecting the interpretation of the Co-Ownership Plan III.

THE CO-OWNERSHIP PLAN III AND ITS SUMMARY

The terms of the Co-Ownership Plan III are not subject to the provisions of Chapter 17 of the Listing Rules as the Co-Ownership Plan III does not involve the grant of options by the Company to subscribe for new Shares.

If the Co-Ownership Plan III is approved by the Independent Shareholders at the Annual General Meeting, the Company will appoint the Plan Trustee prior to the Commencement Date to assist with the administration and vesting of RSUs granted pursuant to the Co-Ownership Plan III. The Company will direct and procure the Plan Trustee to endeavour to purchase Shares on-market over a fixed period of time on behalf of all new Participants who have accepted invitations in the same Invitation Period at the prevailing market prices of the Shares.

The granting of the RSUs to the Participants will depend on the level of the Adjusted Available Cash per Share for Distribution achieved, on an aggregated basis, during the 2018, 2019 and 2020 Financial Years. Unless the Board resolves to early terminate the Co-Ownership Plan III by reason of the occurrence of an M&A Event, the minimum level of the Adjusted Available Cash per Share for Distribution required to be achieved by the Company before any RSU will be granted is an amount in excess of HK$2.10 on a cumulative basis over the 2018, 2019 and 2020 Financial Years of the Company. If the Adjusted Available Cash per Share for Distribution, on a cumulative basis, over the 2018, 2019 and 2020 Financial Years of the Company reaches HK$2.40, RSUs will be granted to the Grantees on the basis that the Grantees would, subject to the satisfaction of the Vesting Conditions and on the Vesting Date, receive one Award Share for every Purchased Share that it holds through the Plan Trustee (and this would represent the maximum entitlement of the Grantees, subject to an adjustment as a result of any Reorganisation of Capital Structure). The granting of the RSUs will occur earlier than the publication of the annual report of the Company for the 2020 Financial Year if the maximum targeted accumulated Adjusted Available Cash per Share for Distribution is achieved prior to the end of the 2020 Financial Year. A cumulated Adjusted Available Cash per Share for Distribution in excess of HK$2.40 will not give rise to any further entitlement.

If the Adjusted Available Cash per Share for Distribution, on a cumulative basis, over the 2018, 2019 and 2020 Financial Years of the Company reaches a value in excess of HK$2.10 and up to HK$2.40, RSUs will be granted to the Participants on a pro rata basis, and the number of RSUs to be granted will be determined on a linear scale between zero RSU and one RSU for every Purchased Share that is purchased by the Plan Trustee on behalf of the Participants (with more RSUs to be granted the closer the actual achieved level is to HK$2.40).

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APPENDIX III PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

The Company will allot and issue, upon the satisfaction of the Vesting Conditions and on the Vesting Date, up to such number (as may be adjusted in the event of a Reorganisation of Capital Structure) of Shares representing 3% of the total issued share capital of the Company on the date of the general meeting of the Company approving the Co-Ownership Plan III.

WARNING: The information set out in this circular relating to the Co-Ownership Plan III, including the proposed bases for determining whether the respective conditions for the granting and vesting of the RSUs are satisfied, are for the purpose of considering the resolutions to be presented at the Annual General Meeting only. Nothing in this circular shall represent a forecast or projection of the Company’s share price, future performance, cash flow or profitability. As the adoption of the Co-Ownership Plan III is subject to approval by the Independent Shareholders, the Co-Ownership Plan III may or may not be implemented and such bases for granting and vesting may or may not materialise. Accordingly, Shareholders and potential investors of the Company should exercise caution when dealing in the securities of the Company.

1. PURPOSE OF THE CO-OWNERSHIP PLAN III

The purpose of the Co-Ownership Plan III is to incentivise skilled and experienced talents to remain with the Group and to motivate them to strive for the future development and expansion of the Group in order to create value to the Shareholders, by providing them with a co-investment opportunity to acquire equity interests in the Company, while encouraging them to be long term holders of the Company’s Shares.

2. RESTRICTED SHARE UNITS

An RSU is a contingent right to receive an Award Share which is awarded to a Participant pursuant to the Co-Ownership Plan III. The granting of the RSUs to the Participants is subject to the accumulated level of the Adjusted Available Cash per Share for Distribution achieved during the term of the Co-Ownership Plan III (with entitlements capped at an accumulated Adjusted Available Cash per Share for Distribution of HK$2.40 since the beginning of the 2018 Financial Year until the expiry of the term of the Co-Ownership Plan III). The RSUs granted under the Co-Ownership Plan III will be subject to a vesting period and the satisfaction of the Vesting Conditions.

3. PARTICIPANTS OF THE CO-OWNERSHIP PLAN III AND BASIS FOR DETERMINING THE ELIGIBILITY OF THE PARTICIPANTS

The Board will grant RSUs pursuant to the Co-Ownership Plan III to Participants upon the satisfaction of conditions set out in the terms of the Co-Ownership Plan III. Any executive Director of the Company, or any employee of the Company or any member of the Group that is of Point 3 grade or above and whose probation period (if applicable) has expired and who has not given a notice of resignation to any member of the Group or who has not been given a notice of termination of employment by any member of the Group will be an Eligible Participant receiving an invitation from the Board during the relevant Invitation Period, and such person will become a Participant upon the acceptance of an invitation to participate in the Co-Ownership Plan III in accordance with paragraph 5(a) .

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APPENDIX III PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

4. STATUS OF THE CO-OWNERSHIP PLAN III

(a) Conditions of the Co-Ownership Plan III

The adoption of the Co-Ownership Plan III will take effect subject to (i) the approval by the Independent Shareholders at a general meeting of the Company of the terms and conditions of the Co-Ownership Plan III and the proposed allotment and issuance of new Shares underlying the RSUs of the Company; and (ii) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the new Shares underlying the RSUs of the Company (the “ Adoption Conditions ”).

(b) Term of the Co-Ownership Plan III

Subject to the Adoption Conditions being satisfied, the Co-Ownership Plan III shall be valid and effective for the period commencing on the Commencement Date and expiring on the earlier of (i) the date falling three years from the Commencement Date (provided that no RSU has been granted on or prior to such date); (ii) the date on which all granted RSUs have either vested or been cancelled; (iii) the date of termination of the Co-Ownership Plan III as determined by the Board in the case where the Board in its absolute discretion resolves to terminate the Co-Ownership Plan III upon the occurrence of an M&A Event; and (iv) such earlier date as the Co-Ownership Plan III is terminated in accordance with its terms (the “ Term ”), after which period no further RSUs shall be offered or granted but the provisions of the Co-Ownership III shall remain in full force and effect in all other respects.

5. PURCHASES OF SHARES AND GRANT OF RSUS

RSUs will only be granted on a matching basis to Participants who purchase Shares in accordance with the terms of the Co-Ownership Plan III. The matching ratio shall be determined in accordance with the formula in paragraph 5(d)(i) below and the maximum entitlement (if any) is one RSU (representing a conditional entitlement to one Award Share) for every one Purchased Share.

(a) Invitation to Purchase Shares and to be Granted RSUs

The Board will, within the Invitation Period, invite any Talent who, as at the start of each applicable Invitation Period, has not been previously invited to participate in the CoOwnership Plan III (including, for the avoidance of doubt, any individual who has joined the Group as a Talent, or has been promoted and has become a Talent, prior to the start of any Invitation Period) to purchase Shares and agree to be granted with RSUs in accordance with the terms of the Co-Ownership Plan III.

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PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

APPENDIX III

The aggregate monetary amount for the purchase of Shares by any Talent must: (i) be equal to or exceed 1/6 of the Annual Remuneration Package of such invitee; and (ii) not more than the Annual Remuneration Package of such Talent. The maximum number of Shares available for purchase by all Participants shall not at any time exceed the limit calculated in accordance with paragraph 6 and the number of Award Shares that the Company is obliged to allot and issue to Participants who are connected persons at the time of the Board’s acceptance of their purchase of Shares shall not exceed the maximum number of Shares which the Company is authorised to allot and issue under any valid mandate granted by the Shareholders at a general meeting of the Company from time to time in compliance with the Listing Rules. A Talent will need to specify the monetary amount for the purchase of Shares by him/her, being the Investment Amount, in the letter of acceptance to participate in the Co-Ownership Plan III.

The Board will accept the purchase of Shares by any Eligible Participant and will communicate such acceptance by notice to the Eligible Participant and will require the Participant to remit the Investment Amount to the Plan Trustee via the Company within 15 Business Days of the issue of the acceptance notice. The Board may, by reason of time required to comply with relevant foreign exchange regulations, at its discretion extend the period for the remittance of the Investment Amount to the Plan Trustee via the Company and, if it is so extended, the participation of the relevant Participants in the Co-Ownership Plan III will be treated to commence on the date of the remittance of their respective Investment Amount to the Plan Trustee via the Company.

(b) Purchase of Shares

After the receipt of the Investment Amounts, the Company will direct and procure the Plan Trustee to endeavour to purchase Shares on-market over a fixed period of time as determined by the Board on behalf of all new Participants who have accepted an invitation in the same Invitation Period at the prevailing market prices of the Shares until the aggregate Investment Amounts remitted by those new Participants have been utilised. The Shares purchased by the Plan Trustee (the “ Purchased Shares ”) during any one share purchase period will be allocated among the new Participants who have accepted an invitation in the same Invitation Period preceding that share purchase period on a pro rata basis, based on their respective Investment Amounts, provided that the number of Purchased Shares allocated to each of those new Participants will be rounded down to the nearest number of Shares. Any individual surplus Investment Amounts will be refunded to the Participants on a pro rata basis to their respective Investment Amounts.

(c) Transfer of Purchased Shares and Purchased Shares Released on the Granting of RSUs

The Plan Trustee will hold the relevant Purchased Shares on trust for each Participant until the issue of a valid transfer notice by the relevant Participant or deemed issue of a valid transfer notice on the Grant Date.

A Participant may only issue a transfer notice to the Plan Trustee in respect of the Purchased Shares to which the Participant holds the beneficial title.

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PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

APPENDIX III

A transfer notice which purports to require the Plan Trustee to transfer any Purchased Share prior to the Grant Date shall be valid but such Participant shall cease to participate in the Co-Ownership Plan III and shall not be entitled to any grant of RSUs (this shall not, however, affect any rights such Participant may have in his Purchased Shares), provided that the Board shall have the power in their absolute discretion to designate such Participant as a Good Leaver if such Participant is in financial difficulty or if there are exceptional circumstances as determined by the Board. A Good Leaver who issues a transfer notice with respect to all his Purchased Shares shall still be entitled to the grant of RSUs pursuant to paragraph 5(e)(ii) .

Participants whose Purchased Shares are held by the Plan Trustee shall be entitled to cash dividends, distributions and bonus shares (but not other distributions such as nil-paid rights) made by the Company with respect to the Purchased Shares. Where there is a choice between scrip or cash dividends arising from such Purchased Shares, the Plan Trustee shall always elect cash dividends (and Participants shall have no right of election). The Plan Trustee shall not take voting instructions from the Participants with respect to their Purchased Shares held by the Plan Trustee and the Plan Trustee shall not exercise any voting rights attached to such Purchased Shares held by it.

(d) Grant of RSUs

On and subject to the terms of the Co-Ownership Plan III, where a Participant has Purchased Shares held by the Plan Trustee and all the Purchased Shares of such Participant remain continued to be held at all times by the Plan Trustee until the Grant Date, the Board shall make a Grant with respect to those RSUs after the Grant Date in accordance with the following provisions.

• (i) Subject to the adjustments set out in paragraph 5(e) , the number of RSUs to be granted to a Participant shall be determined on the Grant Date in accordance with the formula below:

A x B

where:

==> picture [101 x 24] intentionally omitted <==

• AFF = the total cumulative Adjusted Available Cash per Share for Distribution of the Company during the period from the beginning of the 2018 Financial Year to and including the date on which the Company publishes its annual report for the 2020 Financial Year; and

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PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

APPENDIX III

• B = the Participant’s total number of Purchased Shares,

• provided that:

• (a) where the value of A is less than 0, it shall be deemed to be 0; or

• (b) where the value of A is more than 1, it shall be deemed to be 1.

• (ii) If an M&A Event occurs prior to the Grant Date and the Board in its absolute discretion resolves to terminate the Co-Ownership Plan III, the Board shall determine the number of RSUs to be granted in accordance with paragraph 5(d)(iv) and the following matters:

• (A) the time of Grant of any of the RSUs; and

• (B) the time of vesting of the RSUs and whether or not the Vesting Conditions shall apply in such a case and if so, to determine the reference time period for determining the satisfaction of such Vesting Conditions.

• (iii) If an M&A Event occurs after the Grant Date but prior to the Vesting Date and the Board in its absolute discretion resolves to terminate the Co-Ownership Plan III, the Board shall have absolute discretion to waive any or all Vesting Conditions (and upon the Board exercising such discretion to waive the relevant conditions to vesting, the RSUs shall vest in accordance with the other applicable terms and conditions of the Co-Ownership Plan III).

• (iv) Subject to the adjustments set out in paragraph 5(e) , the number of RSUs to be granted by the Board upon the occurrence of an M&A Event pursuant to paragraph 5(d)(ii) shall be determined in accordance with the below formulas:

• (A) if the M&A Event occurs during the period from the Commencement Date to (but excluding) the date on which the Company publishes its annual report for the 2018 Financial Year, the number of RSUs to be granted shall be zero;

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PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

APPENDIX III

• (B) if the M&A Event occurs during the period from (and including) the date on which the Company publishes its annual report for the 2018 Financial Year to (but excluding) the date on which the Company publishes its annual report for the 2019 Financial Year, the Board shall determine the number of RSUs to be granted in accordance with the formula below:

A x B

where:

• AFF

• A = ; 2.4

• AFF = the total cumulative Adjusted Available Cash per Share for Distribution of the Company from the beginning of the 2018 Financial Year up to and including the date of occurrence of the M&A Event; and

• B = the Participant’s total number of Purchased Shares,

provided that:

• (a) where the value of AFF is less than 0.6 [(Note][1)] , A shall be deemed to be 0; and

• (b) where the value of A is more than 1, it shall be deemed to be 1;

• (C) if the M&A Event occurs during the period from (and including) the date on which the Company publishes its annual report for the 2019 Financial Year to (but excluding) the date on which the Company publishes its annual report for the 2020 Financial Year:

• (i) if the AFF is below 1.3, the number of RSUs to be granted shall be zero;

• (ii) if the AFF is 1.3 [(Note][2)] or above but below 1.4 [(Note][1)] , the Board shall determine the number of RSUs to be granted in accordance with the formula below:

A x B

where:

==> picture [158 x 23] intentionally omitted <==

AFF = the total cumulative Adjusted Available Cash per Share for Distribution of the Company from the beginning of the 2018 Financial Year up to and including the date of occurrence of the M&A Event; and

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PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

APPENDIX III

  - **B** = the Participant’s total number of Purchased Shares; or

• (iii) if the AFF is 1.4 or above, the formula in paragraph 5(d)(iv)(B) shall apply; or

• (D) if the M&A Event occurs after the Grant Date but prior to the Vesting Date, paragraph 5(d)(iii) shall apply.

Any Grant to any Connected Participant or any of their respective associates, shall be subject to the prior approval of the independent non-executive Directors.

• Note 1: The objective of the Co-Ownership Plan III is to make grants of RSUs if the minimum level of the Adjusted Available Cash per Share for Distribution required to be achieved by the Company before any RSU will be granted is an amount in excess of HK$2.10 on a cumulative basis over the 2018, 2019 and 2020 Financial Years of the Company, and the Participants will receive the maximum entitlement of RSU (namely one RSU) for every Purchased Share if the Adjusted Available Cash per Share for Distribution reaches HK$2.40 over the aforesaid period. With this objective in mind, if an M&A Event occurs during the aforesaid period and the Board resolves to early terminate the Co-Ownership Plan III, it was considered appropriate to make early grants of RSUs if the Adjusted Available Cash per Share for Distribution reaches HK$0.60 for the 2018 Financial Year or HK$1.40 on an accumulated basis for the 2018 and 2019 Financial Years. By reference to the aspirational high-end target of an accumulated Adjusted Available Cash per Share for Distribution of HK$2.40 over the 2018, 2019 and 2020 Financial Years, the Company considers it appropriate to determine the progressive targets of Adjusted Available Cash per Share for Distribution for the 2018 Financial Year as HK$0.60 and for the 2018 and 2019 Financial Years as an accumulated amount of HK$1.40 (namely HK$0.60 + HK$0.80). By way of comparison, the adjusted free cash flow per Share of the Company for the 2015 Financial Year, the 2016 Financial Year and the 2017 Financial Year was approximately HK$0.39, HK$0.40 and HK$0.45, respectively.

• Note 2: If an M&A Event occurs during the period between the 2019 Financial Year and the 2020 Financial Year and the Board resolves to early terminate the Co-Ownership Plan III, HK$1.40 is the optimal cumulative target of the Adjusted Available Cash per Share for Distribution for the 2018 and 2019 Financial Years that needs to be met before RSUs can be granted. However, if the actual achieved cumulative Adjusted Available Cash per Share for Distribution is in excess of HK$1.30 (but below HK$1.40), as the achieved Adjusted Available Cash per Share for Distribution is sufficiently close to the aspirational accumulated target for the 2018 and 2019 Financial Years, the Participants would also be entitled to be granted with some RSUs. The number of RSUs to be granted in this situation will be determined on a linear scale, with more RSUs to be granted the closer the actual achieved level is to HK$1.40.

(e) Adjustments

Subject to paragraph 12 below:

• (i) if a Participant (who is not an invitee during the first Invitation Period, namely the period of 20 Business Days from the Commencement Date, or whose period for remittance of Investment Amount has been extended pursuant to paragraph 5(a) ) participates in the Co-Ownership Plan III on a date falling after the Commencement Date and prior to the Grant Date, the number of RSUs to be granted to such Participant (if eligible) shall be determined in accordance with the formula in paragraphs 5(d)(i) or 5(d)(ii) (as the case may be) but pro rated by dividing the number of calendar days during which such Participant has participated in the Co-Ownership Plan III by the total number of calendar days in the period from and including the Commencement Date until and including the Grant Date; or

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PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

APPENDIX III

• (ii) if a Participant becomes a Good Leaver prior to the Grant Date, the number of RSUs to be granted shall be determined in accordance with the formula in paragraphs 5(d)(i) or 5(d)(ii) (as the case may be) but pro rated by dividing the number of calendar days during which such Participant has participated in the Co-Ownership Plan III by the total number of calendar days in the period from and including the Commencement Date until and including the Grant Date.

Upon the grant of the RSUs after the occurrence of an M&A Event and the Board resolving to terminate the Co-Ownership Plan III, the Participants shall have the right to issue the transfer notice to the Company in accordance with paragraph 5(c) .

(f) Timing Restrictions

The Company may not make an invitation to purchase Shares and any invitee may not accept any invitation during any of the following periods:

• (i) the date of the meeting of the Board (as such date is first notified to the Stock Exchange in accordance with the Listing Rules) for the approval of the Company’s results for any year, half-year, quarterly or any other interim period (whether or not required under the Listing Rules) and ending on the date of the results announcement;

• (ii) the deadline for the Company to publish an announcement of its results for any year or half-year under the Listing Rules, or quarterly or any other interim period (whether or not required under the Listing Rules) and ending on the date of the results announcement;

• (iii) 60 days immediately preceding the publication date of the annual results or, if shorter, the period from the end of the relevant financial year up to the publication date of the results; and

• (iv) 30 days immediately preceding the publication date of the quarterly results (if any) and half-year results or, if shorter, the period from the end of the relevant quarterly or half-year period up to the publication date of the results.

If the Company is in possession of unpublished inside information (as such term is defined in the SFO, it may not (i) make any invitation; (ii) accept an invitation; (iii) direct and procure the Plan Trustee to make on-market purchases of Shares; (iv) grant any RSU; or (v) allot and issue any Award Share, until that inside information is published in accordance with the SFO or ceases to be inside information.

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PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

APPENDIX III

6. MAXIMUM NUMBER OF SHARES UNDERLYING THE RSUs

At any time during the Term, the maximum aggregate number of new Shares that may underlie the RSUs granted pursuant to the Co-Ownership Plan III shall be calculated in accordance with the following formula:

X = A – B

where:

• X = the maximum aggregate number of Shares that may underlie the RSUs granted pursuant to the Co-Ownership Plan III;

• A = the Scheme Mandate Limit; and

• B = the maximum aggregate number of Shares underlying the RSUs already granted pursuant to the Co-Ownership Plan III.

Shares underlying the RSUs which have been cancelled or transferred to the Participants in accordance with the terms of the Co-Ownership Plan III will not be counted for the purposes of determining the maximum aggregate number of Shares that may underlie the RSUs granted pursuant to the Co-Ownership Plan III.

7. RIGHTS ATTACHED TO THE RSUS

The RSUs do not carry any right to vote at general meetings of the Company, or any dividend, transfer or other rights (including those arising on the winding-up of the Company).

No Grantee shall enjoy any of the rights of a Shareholder by virtue of the Grant of an RSU pursuant to Co-Ownership Plan III, unless and until the legal and beneficial title of the Award Share underlying the RSU have been allotted and issued to the Grantee.

8. RIGHTS ATTACHED TO THE SHARES

Subject to the foregoing, the Purchased Shares and Award Shares will be subject to all the provisions of the memorandum of association and articles of association of the Company for the time being in force and shall rank pari passu in all respects with, and shall have the same voting, dividend, transfer and other rights (including those rights arising on a winding-up of the Company) as, the other fully paid Shares in issue on the date on which those Shares are released upon the vesting of the RSUs granted and, without prejudice to the generality of the foregoing, shall entitle the holders to participate in all dividends or other distributions paid or made on or after the date on which Shares are allotted and issued or transferred (as the case may be) other than any dividends or distributions previously declared or recommended or resolved to be paid or made if the record date thereof shall be before the date on which the Shares are allotted and issued or transferred (as the case may be).

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APPENDIX III PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

9. ASSIGNMENT OF RSUS

An RSU shall be personal to the Grantee and shall not be assignable or transferable by the Grantee, provided that:

• (i) during the validity period of the RSU and with the prior written consent of the Board, the Grantee may transfer RSUs to his family members by gift or pursuant to a court order relating to the settlement of marital property rights; and

• (ii) subject to paragraph 12 below, following the Grantee’s death, RSUs may be transferred by will or by the laws of testacy and distribution.

Subject to the foregoing, a Grantee shall not in any way sell, transfer, charge, mortgage, encumber or create any interests in favour of any third party over or in relation to any RSU.

10. VESTING OF RSUS

(a) General

Subject to the terms of Co-Ownership Plan III, an RSU that has been granted shall vest on the Vesting Date in respect of the Shares underlying the RSU provided that the Vesting Conditions have been satisfied.

(b) Vesting Conditions

Vesting of an RSU is conditional upon the following conditions (the “ Vesting Conditions ”) being satisfied:

• (i) the arithmetic average of the closing share price of the Shares for each of the 60 trading days of the Stock Exchange which immediately precedes the Vesting Date is greater than HK$9.27; and

• (ii) the cumulative capital expenditure of the Company during the 2018, 2019 and 2020 Financial Years is not less than HK$1,200,000,000 (provided that the annual capital expenditure of the Group during each of the 2018, 2019 and 2020 Financial Years is not less than HK$250,000,000).

Upon the vesting of one RSU, the Company shall promptly allot and issue one Award Share to the Grantee.

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APPENDIX III PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

11. CORPORATE EVENTS

If:

• (a) a general offer by way of takeover or otherwise (other than by way of scheme of arrangement pursuant to paragraph 11(b) below) is made to all the Shareholders (or all such Shareholders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or concert with the offeror) by any person and such offer becomes or is declared unconditional prior to the granting of RSUs or the Vesting Date of any RSU, prior to the offer becoming or being declared conditional; or

• (b) a general offer for Shares by way of scheme of arrangement is made by any person to all the Shareholders and has been approved by the necessary number of Shareholders at the requisite meetings prior to the granting of RSUs or the Vesting Date of any RSU, prior to such meetings; or

• (c) pursuant to the Companies Law, a compromise or arrangement (other than a scheme of arrangement contemplated in paragraph 11(b) above) between the Company and the Shareholders and/or the creditors of the Company is proposed for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies prior to the granting of RSUs or the Vesting Date of any RSU; or

• (d) a notice is given by the Company to the Shareholders to convene a general meeting for the purpose of considering and, if thought fit, approving a resolution to voluntarily wind-up the Company prior to the granting of RSUs or the Vesting Date of any RSU,

the Board shall determine at its absolute discretion but treating all Participants fairly and taking into account the number of calendar days during which such Participant has participated in the Co-Ownership Plan III, whether the Participant is a Good Leaver or a Bad Leaver (where applicable) and the formula in paragraph 5(d)(i) , the number of RSUs that shall be granted or vest (as the case may be provided that a Participant shall only be entitled to receive up to a maximum of one Award Share for each RSU granted to him), the period within which such RSUs shall be granted or vest (as the case may be) and the condition (if any) to vesting or the waiver of any or all such conditions, of any of the RSUs and shall notify the Participants of the same.

12. CANCELLATION AND CLAWBACK OF RSUs

A granted but unvested RSU shall be cancelled automatically upon the earliest of:

• (a) the date on which the Grantee becomes a Bad Leaver:

• (b) the date on which the Grantee (whether intentionally or otherwise) commits a breach of paragraph 9 or any other provision of the rules of the Co-Ownership Plan III; and

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PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

APPENDIX III

• (c) any Vesting Condition becomes incapable of satisfaction.

The Board shall have the right to determine whether the Participant or Grantee is a Good Leaver or a Bad Leaver and such determination by the Board shall be final and conclusive.

If a Grantee is a Good Leaver after the Grant Date but prior to the Vesting Date of any of his/her RSU, the Board shall notify the Grantee when such RSU shall vest.

13. REORGANISATION OF CAPITAL STRUCTURE

In the event of an alteration in the capital structure of the Company by way of a capitalisation of profits or reserves, bonus issue, rights issue, open offer, subdivision or consolidation of shares or reduction of the share capital of the Company in accordance with applicable laws and the Listing Rules (other than any alteration in the capital structure of the Company as a result of an issue of Shares as consideration in a transaction to which the Company or any of its subsidiaries is a party or in connection with any share option, restricted share or other equity-based incentive schemes of the Company) while any RSU has not been vested, such corresponding adjustments (if any) shall be made to: (i) the Scheme Mandate Limit; and (ii) the number or nominal value of Shares underlying the RSU so far as unvested (such adjustment shall be proportionate to the change in the share capital of the Company), provided that any such adjustments give a Grantee no less proportion of the share capital of the Company as that to which that Grantee was previously entitled. In respect of any such adjustments, the auditors or an independent financial adviser to the Company (as the case may be) must confirm to the Board in writing that the adjustments are in their opinion fair and reasonable.

14. ALTERATION OF THE CO-OWNERSHIP PLAN III

Subject to that provided in this paragraph 14 , the Board may alter any of the terms of Co-Ownership Plan III at any time. Any changes to the authority of the Board in relation to any alteration of the terms of Co-Ownership Plan III shall not be made without the prior approval of Shareholders in general meeting. If any alteration may affect the power or authority of the Plan Trustee, or its role in the operation of the Co-Ownership Plan III, it will require the prior written consent of the Plan Trustee.

Any alterations to the terms and conditions of Co-Ownership Plan III which are of a material nature or any changes to the terms of the RSUs granted must be approved by the Shareholders in general meeting, except where the alterations or changes take effect automatically under the existing terms of Co-Ownership Plan III. The Board’s determination as to whether any proposed alteration to the terms and conditions of Co-Ownership Plan III is material shall be conclusive.

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APPENDIX III PRINCIPAL TERMS OF THE CO-OWNERSHIP PLAN III

15. TERMINATION OF THE CO-OWNERSHIP PLAN III

The Company by ordinary resolution in general meeting may at any time terminate Co-Ownership Plan III and in such event, no further RSUs may be granted but in all other respects the terms of Co-Ownership Plan III shall remain in full force and effect in respect of RSUs which are granted during the Term and which remain unvested immediately prior to the termination of Co-Ownership Plan III.

Upon termination of Co-Ownership Plan III, the Plan Trustee shall return all Purchased Shares to the Participants. RSUs granted during the Term shall continue to be valid in accordance with their terms of Grant after the end of the Term.

16. ADMINISTRATION OF THE CO-OWNERSHIP PLAN III

Co-Ownership Plan III shall be subject to the administration of the Board whose decision as to all matters arising in relation to Co-Ownership Plan III or its interpretation or effect shall (save as otherwise provided herein) be final and binding on all parties.

17. GENERAL

As of the Latest Practicable Date, no RSU had been granted or agreed to be granted by the Company pursuant to the Co-Ownership Plan III.

Details of the Co-Ownership Plan III, including particulars and movement of the RSUs granted on the Grant Date, and its employee costs arising from the grant of the RSUs will be disclosed in the Company’s annual report.

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GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY OF THE DIRECTORS

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

As at the Latest Practicable Date, the interests and short positions, if any, of each Director and chief executive of the Company in the Shares, underlying Shares and debentures of the Company and 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 the Directors and chief executive were deemed or taken to have under provisions of the SFO), or which were required to be and are recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies adopted by the Company were as follows:

Long Position

		Number		Percentage
		of underlying		of the issued
		shares held	Total	share capital
	Number	under equity	number of	of the
Name of Director	of shares held	derivatives	shares held	Company
		(Note 1)
Mr. Bradley Jay HORWITZ
(Note 2)	250,000	–	250,000	0.02%
Mr. William Chu Kwong
YEUNG (Note 3)	26,821,206	265,221	27,086,427	2.69%
Mr. Ni Quiaque LAI (Note 4)	32,817,375	179,747	32,997,122	3.28%

Notes:

1. These represent the number of RSUs which will be vested in such Directors under the Co-Ownership Plan II adopted by the Company on 21 February 2015.

2. Mr. Bradley Jay HORWITZ is personally interested in 250,000 ordinary shares.

3. Among 27,086,427 ordinary shares which Mr. William Chu Kwong YEUNG are personally interested in, 265,221 RSUs that were granted to him pursuant to the Co-Ownership Plan II adopted by the Company on 21 February 2015, which were subject to certain vesting conditions, remained unvested.

4. Among 32,997,122 ordinary shares which Mr. Ni Quiaque LAI are personally interested in, 179,747 RSUs that were granted to him pursuant to the Co-Ownership Plan II adopted by the Company on 21 February 2015, which were subject to certain vesting conditions, remained unvested.

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GENERAL INFORMATION

APPENDIX IV

(b) Substantial Shareholders

So far as is known to any Director or the chief executive of the Company, as at the Latest Practicable Date, Shareholders who had interests or short positions in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO were as follows:

Long Position

			Percentage
		Number	of the issued
		of Shares	voting shares
		beneficially	of the
Name of Shareholder	Note	held	Company
Canada Pension Plan Investment Board	(a)	181,048,500	18.00%
GIC Private Limited	(b)	91,096,297	9.06%
The Capital Group Companies, Inc.	(c)	80,435,000	7.99%
Matthews International Capital
Management, LLC	(d)	60,350,000	6.00%
Mondrian Investment Partners Limited	(e)	56,390,500	5.61%

Notes:

• (a) Canada Pension Plan Investment Board is the beneficial owner of 181,048,500 ordinary shares of the Company.

• (b) 91,096,297 ordinary shares are held by GIC Private Limited in the capacity of investment manager.

• (c) The Capital Group Companies, Inc. through its subsidiaries, namely Capital International, Inc., Capital International Limited, Capital International Sarl, and Capital Research and Management Company held 194,500 ordinary shares, 1,910,500 ordinary shares, 132,500 ordinary shares, and 78,197,500 ordinary shares in the Company respectively, and is accordingly deemed to be interested in the respective shares held by the aforesaid companies.

• (d) 60,350,000 ordinary shares are controlled by Matthews International Capital Management, LLC in the capacity of investment manager.

• (e) 56,390,500 ordinary shares are controlled by Mondrian Investment Partners Limited in the capacity of investment manager.

Save as disclosed above, so far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, no other person (other than a Director or chief executive of the Company) had, or was deemed or taken to have, an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, 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 or held any option in respect of such capital.

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GENERAL INFORMATION

APPENDIX IV

As at the Latest Practicable Date, none of the Directors is a director or employee of a company which has an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. MATERIAL ADVERSE CHANGES

The Directors confirm that, as at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since the date to which the latest published audited accounts for the twelve months ended 31 August 2017 of the Group were made up.

4. DIRECTORS’ SERVICE CONTRACTS

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

5. DIRECTORS’ INTEREST IN THE GROUP’S ASSETS

As at the Latest Practicable Date, none of the Directors had any interest in any assets which have been, since 31 August 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 member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors had any material interest in any contract or arrangement which was subsisting and significant in relation to the business of the Group.

6. COMPETING INTERESTS

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

7. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation, arbitration or claim of material importance and, so far as the Directors are aware, no litigation, arbitration or claim of material importance was pending or threatened against any member of the Group.

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GENERAL INFORMATION

APPENDIX IV

8. EXPERT AND CONSENT

The following is the qualifications of the expert who has given opinion or advice, which is contained or referred to in this circular:

Name

Qualification

Altus Capital Limited A licensed corporation to carry out Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO

Altus Capital Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusions of its letter dated 16 November 2017 and references to its name, in the form and context in which it appears.

As at the Latest Practicable Date, Altus Capital Limited did not have (i) any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group; and (ii) any direct or indirect interest in any assets which have, since 31 August 2017 (being the date to which the latest published audited consolidated financial statements of the Company were made up), been 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.

9. MATERIAL CONTRACTS

In the two years immediately preceding the date of this circular and up to the Latest Practicable Date, the following contracts, not being contracts entered into in the ordinary course of business, were entered into by the Company or any of its subsidiaries which are or may be material:

• (a) the share purchase agreement entered into on 18 February 2016 between the Company, HKBN Group Limited, New World Development Company Limited and New World Telephone Holdings Limited in relation to the acquisition of the entire issued share capital in Concord Ideas Ltd. and Simple Click Investments Limited from New World Telephone Holdings Limited, details of which are disclosed in the announcement of the Company dated 18 February 2016 and the circular of the Company dated 1 March 2016;

• (b) the rebate agreement entered into on 31 March 2016 between HKBN Group Limited and New World Telephone Holdings Limited, details of which are disclosed in the announcement of the Company dated 18 February 2016 and the circular of the Company dated 1 March 2016;

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GENERAL INFORMATION

APPENDIX IV

• (c) the sale and purchase agreement entered into on 6 July 2016 between HKBN Group Limited and Dynamic Team Holdings Limited in relation to the disposal of shares representing 51% of the entire issued share capital of Simple Click Investments Limited to Dynamic Team Holdings Limited, details of which are disclosed in the announcement of the Company dated 6 July 2016;

• (d) the sale and purchase agreement entered into on 31 May 2017 between HKBN Group Limited, Main Victory Ventures Limited and Champion Epoch Ventures Limited in relation to the disposal of the remaining 49% of the entire issued share capital of Simple Click Investments Limited to Main Victory Ventures Limited and Champion Epoch Ventures Limited;

• (e) the sale and purchase agreement entered into on 21 June 2017 between HKBN Enterprise Solutions Limited and Loyal Act Limited in relation to the disposal of Unit 1 on Second Floor, Cornell Centre, Chai Wan, Hong Kong;

• (f) the sale and purchase agreement entered into on 21 June 2017 between HKBN Enterprise Solutions Limited and Unique Sky Limited in relation to the disposal of Unit 2 on Second Floor, Cornell Centre, Chai Wan, Hong Kong;

• (g) the sale and purchase agreement entered into on 21 June 2017 between HKBN Enterprise Solutions Limited and Merit Gear Limited in relation to the disposal of Unit 3 on Second Floor, Cornell Centre, Chai Wan, Hong Kong; and

• (h) the sale and purchase agreement entered into on 21 June 2017 between HKBN Enterprise Solutions Limited and On Step Creation Limited in relation to the disposal of Unit 3 on Third Floor and Flat Roof, Cornell Centre, Chai Wan, Hong Kong.

10. MISCELLANEOUS

• (a) The registered office of the Company is situated at P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands and the principal place of business in Hong Kong at 12th Floor, Trans Asia Centre, 18 Kin Hong Street, Kwai Chung, New Territories, Hong Kong.

• (b) The Company’s Hong Kong branch share registrar and transfer office is Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (c) The company secretary of the Company is Ms. Maria Amy TAM, a solicitor qualified in Hong Kong.

• (d) This circular is prepared in both English and Chinese. In the event of inconsistency, the English text shall prevail.

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GENERAL INFORMATION

APPENDIX IV

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection by Shareholders during normal business hours at the principal place of business of the Company in Hong Kong at 12th Floor, Trans Asia Centre, 18 Kin Hong Street, Kwai Chung, New Territories, Hong Kong for a period of 14 days from the date of this circular:

• (a) the memorandum and articles of association of the Company;

• (b) the Rules of the Co-Ownership Plan III;

• (c) the material contracts referred to in the section headed “MATERIAL CONTRACTS” in this appendix;

• (d) this circular;

• (e) the Letter from the Independent Financial Adviser, the text of which is set out on pages 21 to 33 of this circular; and

• (f) the written consent from Altus Capital Limited referred to in the section headed “EXPERT AND CONSENT” in this appendix.

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NOTICE OF ANNUAL GENERAL MEETING

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HKBN Ltd. 香港寬頻有限公司

(Incorporated in the Cayman Islands with limited liability) Stock Code: 1310

NOTICE IS HEREBY GIVEN that the annual general meeting of HKBN Ltd. will be held at 10:00 a.m., on 15 December 2017, Friday at Awesome Space, 14th Floor, Trans Asia Centre, 18 Kin Hong Street, Kwai Chung, New Territories, Hong Kong for the following purposes. Unless otherwise indicated, capitalised terms used herein shall have the same meaning as those defined in the circular of the Company dated 16 November 2017.

ORDINARY RESOLUTIONS

As ordinary business:

1. To receive and consider the audited financial statements and the reports of the Directors and auditors for the year ended 31 August 2017.

2. To declare a final dividend of 23 HK cents per share for the year ended 31 August 2017.

3. 3(a) (i) To re-elect Mr. William Chu Kwong YEUNG as an executive Director of the Company.

4. (ii) To re-elect Mr. Stanley CHOW as an independent non-executive Director of the Company.

5. 3(b) To authorise the board of Directors to fix the Directors’ remuneration for the year ended 31 August 2017.

6. To re-appoint KPMG, Certified Public Accountants , as the independent auditor of the Company to hold office until the conclusion of the next annual general meeting and to authorise the board of Directors to fix their remuneration.

As special business, to consider and, if thought fit, pass, with or without amendments, the following resolutions as ordinary resolutions:

1. “ That :

2. (a) subject to paragraph (c), the exercise by the Directors of the Company during the Relevant Period (as defined below) of all the powers of the Company to allot, issue and deal with additional shares in the capital of the Company and to make or grant offers, agreements and options which might require the exercise of such power be and is hereby generally and unconditionally approved;

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NOTICE OF ANNUAL GENERAL MEETING

• (b) the approval in paragraph (a) shall authorise the Directors of the Company during the Relevant Period (as defined below) to make or grant offers, agreements and options which might require the exercise of such power after the end of the Relevant Period (as defined below);

• (c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors of the Company pursuant to the approval in paragraph (a), otherwise than pursuant to a Rights Issue (as defined below) or the exercise of the subscription rights under the share option scheme of the Company, shall not exceed, when aggregated with the maximum number of new Shares issuable under the Scheme Mandate (if approved), 10% of the aggregate nominal amount of the shares of the Company in issue as at the date of this resolution (i.e. an aggregate nominal amount of Shares up to approximately HK$10,056 (equivalent to 100,566,666 Shares) on the basis that the issued share capital of the Company remains unchanged on the date of AGM and no further Shares are issued or repurchased before the AGM) and the said approval shall be limited accordingly;

• (d) subject to the ordinary resolution designated “8” in this notice being passed, the total number of new shares issuable under the share issue mandate pursuant to the ordinary resolution designated “5” in this notice (as extended pursuant to the ordinary resolution designated “7” in this notice) shall be reduced by the maximum number of new shares remaining issuable under the scheme mandate pursuant to the ordinary resolution designated “8” in this notice; and

• (e) for the purposes of this resolution:

“Relevant Period” means the period from the passing of this resolution until whichever is the earlier of:

• (i) the conclusion of the next annual general meeting of the Company following the passing of this resolution at which time it shall lapse unless, by ordinary resolution passed at that meeting, the authority is renewed, either unconditionally or subject to conditions; or

• (ii) the expiry of the period within which the next annual general meeting of the Company is required to be held under the laws of the Cayman Islands or the Articles of the Company or any applicable laws to be held; or

• (iii) the revocation or variation of the authority given under this resolution by an ordinary resolution of the shareholders of the Company in general meeting.

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NOTICE OF ANNUAL GENERAL MEETING

“Rights Issue” means an offer of shares open for a period fixed by the Directors of the Company to holders of shares on the register of members on a fixed record date in proportion to their then holdings of such shares (subject to such exclusions or other arrangements as the Directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in any territory outside Hong Kong).”

1. “ That :

2. (a) the exercise by the Directors of the Company during the Relevant Period (as defined below) of all powers of the Company to purchase its own shares, subject to and in accordance with all applicable laws, be and is hereby generally and unconditionally approved;

3. (b) the aggregate nominal amount of the shares of the Company purchased or agreed conditionally or unconditionally to be purchased by the Company pursuant to the approval in paragraph (a) during the Relevant Period (as defined below) shall not exceed 10% of the aggregate nominal amount of the shares of the Company in issue as at the date of this resolution (i.e. an aggregate nominal amount of Shares up to approximately HK$10,056 (equivalent to 100,566,666 Shares) on the basis that the issued share capital of the Company remains unchanged on the date of AGM and no further Shares are issued or repurchased before the AGM) and the said approval be limited accordingly; and

4. (c) for the purposes of this resolution:

“Relevant Period” means the period from the passing of this resolution until whichever is the earlier of:

• (i) the conclusion of the next annual general meeting of the Company following the passing of this resolution at which time it shall lapse unless, by ordinary resolution passed at that meeting, the authority is renewed, either unconditionally or subject to conditions; or

• (ii) the expiry of the period within which the next annual general meeting of the Company is required to be held under the laws of the Cayman Islands or the Articles of the Company or any applicable laws to be held; or

• (iii) the revocation or variation of the authority given under this resolution by an ordinary resolution of the shareholders of the Company in general meeting.”

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NOTICE OF ANNUAL GENERAL MEETING

1. “ That conditional upon ordinary resolution designated “6” set out above being duly passed, the general mandate granted to the directors of the Company to exercise the powers of the Company to allot, issue and deal with shares pursuant to ordinary resolution designated “5” be and is hereby extended by the addition to the total number of shares which may be allotted or agreed conditionally or unconditionally to be allotted and issued by the directors of the Company pursuant to such general mandate of an amount representing the total number of shares of the Company repurchased by the Company under the authority granted pursuant to ordinary resolution designated “6”, provided that such an amount shall not exceed 10 per cent of the total number of shares of the Company in issue as at the date of the passing of this ordinary resolution.”

2. “ That :

3. (a) the Co-Ownership Plan III of the Company constituted by the rules adopted by the board of Directors of the Company be and is hereby approved;

4. (b) a specific mandate be and is hereby granted to the Directors of the Company to exercise all the powers of the Company to allot and issue and otherwise deal with the new Shares underlying the RSUs to be granted to the Participants pursuant to the terms and conditions of the Co-Ownership Plan III provided that the number of new Shares allotted and issued does not exceed the Scheme Mandate Limit; and

5. (c) any one or more of the Directors be and are hereby authorised to sign or execute such other documents or supplemental agreements or deeds on behalf of the Company and to do all such things and take all such actions as considered to be necessary or desirable for the purpose of giving effect to the implementation of the Co-Ownership Plan III.”

6. “ That conditional upon ordinary resolution designated “8” set out above being duly passed, the grant of RSUs to the Connected Participants in accordance with the terms of the Co-Ownership Plan III be and is hereby approved and any Director be and is hereby authorised to take any step and execute such other documents as he/she consider necessary or desirable to carry out or give effect to or otherwise in connection with the grant of RSUs to the Connected Participants.”

By Order of the Board HKBN Ltd. Bradley Jay HORWITZ Chairman

Hong Kong, 16 November 2017

Principal Place of Business in Hong Kong:

12th Floor, Trans Asia Centre

18 Kin Hong Street, Kwai Chung New Territories

Hong Kong

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NOTICE OF ANNUAL GENERAL MEETING

Notes:

• (1) Any member of the Company entitled to attend and vote at the Meeting may appoint another person as his/her/its proxy to attend and vote instead of him/her/it. A member may appoint more than one proxy to attend on the same occasion. A proxy need not be a member of the Company.

• (2) Where there are joint registered holders of any share, any one of such persons may vote at the Meeting, either personally or by proxy, in respect of such share of the Company as if he/she/it were solely entitled thereto; but if more than one of such joint holders be present at the Meeting personally or by proxy, that one of the said persons so present whose name stands first in the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof to the exclusion of the votes of the other joint holders.

• (3) In order to be valid, the form of proxy duly completed and signed in accordance with the instructions printed thereon together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof or, in the case of a member which is a corporation, under its seal or the hand of an officer or attorney duly authorised, must be delivered to the Company’s Hong Kong branch share registrar, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.

• (4) The register of members of the Company will be closed from Tuesday, 12 December 2017 to Friday, 15 December 2017, both days inclusive, during which period no transfer of shares will be effected. All transfers, accompanied by the relevant share certificates, must be lodged with the Company’s Hong Kong branch share registrar, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, no later than 4:30 p.m. on Monday, 11 December 2017 in order to establish the identity of the shareholders who are entitled to attend and vote at the 2017 AGM (“Entitlement to AGM”). The record date for the Entitlement to AGM will be on Friday, 15 December 2017.

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