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 securities dealer, bank manager, solicitor, professional accountant or other professional advisers.

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

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

中 國 全 通 (控 股) 有 限 公 司

China All Access (Holdings) Limited

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 633)

VERY SUBSTANTIAL DISPOSAL

IN RELATION TO

THE DEEMED DISPOSAL OF INTEREST IN SHENZHEN LEAD

AND

NOTICE OF EGM

A notice convening the EGM to be held on Tuesday, 21 January 2020 at 11:00 a.m. at Room 805, 8/F, Greenfield Tower, Concordia Plaza, 1 Science Museum Road, TST., Kowloon, Hong Kong is set out on pages 49 to 50 of this circular. A form of proxy for use at the EGM is also enclosed with this circular.

Whether or not you intend to attend the EGM, you are advised to read the notice of EGM and complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company's share registrar and transfer office in Hong Kong, Union Registrars Limited at Suites 3301-04, 33th Floor, Two Chinachem Exchange Square, 338 King's Road, North Point, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for the holding of the EGM (i.e. at or before 11:00 a.m. on Sunday, 19 January 2020 (Hong Kong time)) or any adjournment thereof. Completion and delivery of the form of proxy will not preclude you from attending and voting in person at the EGM should you so wish.

31 December 2019

CONTENTS

Page

Definitions . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

Appendix I

- Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . .

11

Appendix II

- Financial Information of Shenzhen Lead . . . . . . . . . . . . . . . . . . . . .

19

Appendix III

- Unaudited Pro Forma Financial Information of the Group . . . . . .

27

Appendix IV

- General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

43

Notice of EGM

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49

− i −

DEFINITIONS

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

"associate(s)"

has the meaning ascribed to it under the Listing Rules

"Board"

the board of Directors

"Business Day"

a day on which banks are generally open for business in Hong

Kong and the PRC (other than a Saturday, Sunday or a public

holiday or a day on which a tropical cyclone warning No. 8

or above or a "black" rainstorm warning signal is or remains

hoisted in Hong Kong at any time between 9:00 a.m. and 5:00

p.m.)

"Capital Injection"

the proposed subscription for approximately RMB214.3

million of the registered capital of Shenzhen Lead

(representing approximately 30% of the enlarged registered

capital of Shenzhen Lead) by way of capital contribution of

RMB300 million in cash pursuant to the Capital Investment

Agreement

"Capital Investment Agreement"

the conditional capital investment agreement dated 26

November 2019 entered into between Lide and the Investor in

relation to, amongst other things, the Capital Injection

"Company"

China All Access (Holdings) Limited, an exempted company

incorporated in the Cayman Islands with limited liability and

the issued Shares of which are listed on the Main Board of the

Stock Exchange

"Completion"

completion of the Capital Injection in accordance with the

terms and conditions of the Capital Investment Agreement

"Completion Date"

the date on which Completion takes place

"connected person(s)"

has the meaning as ascribed to it in the Listing Rules

"Construction"

the construction of the headquarters building of Shenzhen

Lead in Nanshan District, Shenzhen

"Deemed Disposal"

the deemed disposal of the Company's interest in Shenzhen

Lead as a result of the Capital Injection

"Director(s)"

director(s) of the Company

− 1 −

DEFINITIONS

"EGM"

the extraordinary general meeting of the Company to be

convened and held at 11:00 a.m. on Tuesday, 21 January 2020

at Room 805, 8/F, Greenfield Tower, Concordia Plaza, 1

Science Museum Road, TST., Kowloon, Hong Kong, the

notice of which is set out on pages 49 to 50 of this circular,

and any adjournment thereof for the purpose of considering,

and if thought fit, approve (among other matters) the Capital

Injection

"Group"

the Company and its subsidiaries

"Hong Kong"

The Hong Kong Special Administrative Region of the PRC

"HK$"

Hong Kong dollars, the lawful currency of Hong Kong

"ICT"

information and communication technology

"Investor"

CRC-YJ INDUSTRY LIMITED (中鐵友嘉實業有限公司), a

company incorporated in Hong Kong with limited liability

"Latest Practicable Date"

23 December 2019, being the latest practicable date prior for

ascertaining certain information contained in this circular

"Lide"

Lide Global Limited, a company incorporated in Hong Kong

and an indirect wholly-owned subsidiary of the Company as

at the date of this circular

"Listing Rules"

the Rules Governing the Listing of Securities on the Stock

Exchange

"Nanshan Bureau"

Shenzhen Nanshan District Industrial and Information

Technology Bureau* (深圳市南山區工業和信息化局)

"PRC"

the People's Republic of China

"RMB"

Renminbi, the lawful currency of the PRC

"SFO"

Securities and Futures Ordinance (Chapter 571 of the Laws of

Hong Kong) as amended from time to time

"Share(s)"

ordinary share(s) of HK$0.01 each in the share capital of the

Company

"Shareholder(s)"

holders of the Shares

"Shenzhen Lead"

Shenzhen Lead Communications Limited* (深圳市立德通訊

器材有限公司), an indirect wholly-owned subsidiary of the

Company as at the date of this circular

"Stock Exchange"

The Stock Exchange of Hong Kong Limited

"%"

per cent.

− 2 −

DEFINITIONS

  • The English translation of the Chinese name is for information only, and should not be regarded as the official English translation of such name.

In this circular, for illustration purpose only, amounts quoted in RMB has been converted into HK$ at the rate of HK$1.00 to RMB0.89458. Such exchange rate has been used, where applicable, for illustration only and does not constitute a representation that any amounts were or may have been exchanged at this or any other rates or at all.

This circular has been printed in English and Chinese. In the event of any inconsistency, the English text of this circular shall prevail over its Chinese text.

− 3 −

LETTER FROM THE BOARD

中 國 全 通 (控 股) 有 限 公 司

China All Access (Holdings) Limited

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 633)

Executive Directors:

Registered office:

Mr. Chan Yuen Ming

Cricket Square

Mr. Shao Kwok Keung

Hutchins Drive

P.O. Box 2681

Non-executive Director:

Grand Cayman KYl-1111

Mr. Bao Tiejun

Cayman Islands

Independent non-executive Directors:

Head office and principal place of business

Mr. Wong Che Man Eddy

in Hong Kong:

Mr. Lam Kin Hung Patrick

Room 805, 8/F

Mr. Tam Sui Kwan

Greenfield Tower, Concordia Plaza

1 Science Museum Road

Tsim Sha Tsui

Kowloon

Hong Kong

31 December 2019

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL DISPOSAL IN RELATION TO

THE DEEMED DISPOSAL OF INTEREST IN SHENZHEN LEAD

1. INTRODUCTION

Reference is made to the announcement of the Company dated 26 November 2019 in relation to, among others, the Capital Injection.

The purpose of this circular is to provide you with information regarding the resolutions to be proposed at the EGM to approve the Capital Investment Agreement and the Capital Injection.

− 4 −

LETTER FROM THE BOARD

2. THE CAPITAL INVESTMENT AGREEMENT

Date

26 November 2019

Parties

  1. Lide, an indirect wholly-owned subsidiary of the Company as at the date of this circular; and
  2. the Investor.

The Investor is principally engaged in investment holding. It is also the cooperative partner to the strategic cooperation agreement as referred to in the announcement of the Company dated 16 October 2019 pursuant to which the Investor had agreed to provide funding of US$500 million to the Group to support development of projects in the aspects of new energy solutions, LCD display solutions, plastic injection molding solutions and investment projects on the application of 5G technology, medicine and education, whereas the Company will be responsible for the development of the projects for a period of ten years from the date of the strategic cooperation agreement (the "Investment Period"). The Company will issue shares or bonds or provide any other agreed forms of collaterals as guarantee for the investment by the Investor. Shenzhen Lead is principally engaged in manufacturing of handset screen which is catagorised as providing LCD display solutions. To implement such strategic cooperation plan, the Investor has conditionally agreed to invest in Shenzhen Lead by way of the Capital Injection. The Capital Injection will not lead to any change in business of Shenzhen Lead or board composition in the Company and/or Shenzhen Lead. As at the Latest Practicable Date, the Company has not entered into other agreements with the Investor in relation to the future development or corporate management of Shenzhen Lead.

As at the Latest Practicable Date, the Group and the Investor have not agreed on the use of the remaining funding balance under the strategic cooperation agreement. The Investor will from time to time during the Investment Period assess the investment opportunities in the Group on a project by project basis.

The ultimate beneficial owner of the Investor is Mr. Wang Zhenyu ("Mr. Wang"), who is an individual investor in the PRC. Mr. Wang, as the representative of the Investor, was introduced to Mr. Tam Sui Kwan, the independent non-executive Director, and Mr. Shao Kwok Keung, the executive Director, through a friend of Mr. Tam Sui Kwan in September 2019, when Mr. Wang first learnt about the investment opportunity in the Group and was interested in investing in the Group and its projects.

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, save for the said strategic cooperation agreement, the Investor and/or Mr. Wang does not have any current or historical relationships, agreements, understandings, arrangements and otherwise with the following persons:

  1. the Company and its connected persons;

− 5 −

LETTER FROM THE BOARD

  1. the counterparties of the Company's previous transactions (including but not limited to the various subscribers as mentioned in the announcements of the Company dated 30 May 2019, 11 July 2019 and 25 October 2019);
  2. Prosper Talent Limited, the plaintiff as mentioned in the announcement of the Company dated 1 July 2019; and
  3. Ease Wellness International Group Limited, which was mentioned in the announcement of the Company dated 25 October 2019.

Capital Injection

As at the date of this circular, the registered capital of Shenzhen Lead is RMB500 million (representing approximately HK$558.92 million). Pursuant to the Capital Investment Agreement, the Investor has conditionally agreed to subscribe for approximately RMB214.3 million of the registered capital of Shenzhen Lead (representing approximately 30% of the enlarged registered capital of Shenzhen Lead) by way of capital contribution in cash for the sum of RMB300 million (representing approximately HK$335.35 million).

The amount of the Capital Injection was determined after arm's length negotiations between parties to the Capital Investment Agreement with reference to the initial capital requirement for the Construction. Upon Completion, Shenzhen Lead will have an increased registered capital of approximately RMB714.3 million (representing approximately HK$798.48 million) and its equity interest will be owned as to approximately 70% by Lide and as to approximately 30% by the Investor. As agreed by the parties to the Capital Investment Agreement, Shenzhen Lead shall apply the amount of the Capital Injection to the Construction and business development of the Group.

On 11 November 2019, the Group submitted an application in relation to the Construction to Nanshan Bureau. On 19 December 2019, Nanshan Bureau issued a preliminary reply which expressly supported Shenzhen Lead, as a Top 100 Industrial Enterprise in Nanshan District of Shenzhen, to build headquarters building. To facilitate expansion of Shenzhen Lead, Nanshan Bureau has also confirmed that Shenzhen Lead was shortlisted and will be given priority in its application. The Group expects that it will obtain approval from Nanshan Bureau on the Construction in the first half of 2020 and commence Construction in the second half of 2020. The Group expects that the design, engagement of contractors, construction and interior design of the headquarters building will take around 24 months to complete and the headquarters building is expected to be in use in the second half of 2022.

The headquarters building will be used as a research and development centre, administrative office and high-end industry base; whereas the existing leased office will be turned into a high-end automated production base. The Group expects that the headquarters building will be iconic in Nanshan District and represent a tangible asset of Shenzhen Lead. Moreover, the Group believes that the Construction will generate more revenue, profit and operating cashflow by way of (i) expanding the smart manufacturing portion in its manufacturing process; (ii) introducing new automation equipment of the Group; and (iii) attracting research and development talents and new technology talents to join the Group. Based on the above, the Board considers that the Construction will be in the interest of the Company and its shareholders as a whole.

− 6 −

LETTER FROM THE BOARD

Conditions precedent

Completion is conditional upon fulfilment or, as the case may be, waiver of the following conditions:

  1. the Investor having completed its due diligence in relation to Shenzhen Lead;
  2. each of the board of directors of Lide and the board of directors of the Investor having approved the Capital Investment Agreement;
  3. the passing of the requisite resolutions of the Shareholders at an extraordinary general meeting of the Company approving the Capital Investment Agreement and the transactions contemplated thereunder, and all other requisite approval and permit procedures (including approval by or filing with the relevant government or administrative department) having been completed; and
  4. the warranties given by Lide in the Capital Investment Agreement remaining true and accurate in all material respects.

The Investor has absolute discretion to waive conditions (a), (b) and (d) above whilst condition

(c) is incapable of being waived.

If any of the conditions above is not satisfied or waived within 6 months after the date of the Capital Investment Agreement (or such other date as Lide and the Investor may agree in writing), the Capital Investment Agreement shall lapse and there shall be no further liability on the parties (save in respect of any antecedent breach).

As at the Latest Practicable Date, save for conditions (a) and (b), none of the above conditions precedent had been satisfied.

Completion

Completion shall take place within 10 Business Days following the fulfilment or waiver (as the case may be) of the conditions precedent. Upon Completion, the Investor shall settle the Capital Injection amount in full, after which, Lide shall arrange for the completion of the requisite registration for the change in the shareholding at the relevant administrative office for industry and commerce in the PRC.

INFORMATION ON SHENZHEN LEAD

As at the date of this circular, the Company indirectly holds the entire issued share capital in Lide, which in turn holds the entire equity interest in Shenzhen Lead. Shenzhen Lead is an indirect wholly foreign-owned enterprise established in the PRC with registered capital of RMB500 million (representing approximately HK$558.92 million). Upon Completion, Shenzhen Lead's total registered capital will be increased to approximately RMB714.3 million (representing approximately HK$798.48 million), which will be held as to approximately 70% by Lide and approximately 30% by the Investor.

− 7 −

LETTER FROM THE BOARD

Shenzhen Lead is principally engaged in manufacturing of handset screen.

According to the unaudited financial statements of Shenzhen Lead which was prepared under the generally accepted accounting principles in Hong Kong, Shenzhen Lead's net asset value amounted to approximately RMB664.45 million (representing approximately HK$742.75 million) as at 31 December 2018. Set out below is the unaudited financial information of Shenzhen Lead for each of the years ended 31 December 2017 and 2018:

For the year ended

31 December

2017

2018

RMB'000

RMB'000

Revenue

1,796,523

1,635,020

Net profit before taxation

65,717

66,141

Net profit after taxation

58,999

48,738

FINANCIAL EFFECT OF THE CAPITAL INJECTION

Upon Completion, the Company's equity interest in Shenzhen Lead will be reduced from 100% to approximately 70%, resulting in a deemed disposal of approximately 30% interest in Shenzhen Lead by the Company. Shenzhen Lead will remain a subsidiary of the Company, and its results, assets and liabilities will continue to be consolidated into the consolidated financial statements of the Company. Given the Deemed Disposal does not result in a change of control, it will not recognise any gain or loss in the Company's income statement. After taking into account the unaudited consolidated net asset value of Shenzhen Lead and its subsidiaries as at 30 June 2019 which amounted to approximately RMB661.65 million (representing approximately HK$739.62 million), and subject to changes, events and the provisions to be made, if any, subsequent to 30 June 2019, the Deemed Disposal as a result of the Capital Injection is estimated to have a surplus of approximately RMB11.5 million to be recognised in equity and attributed to the owners of the Company in the Company's consolidated financial statements prepared under HKFRS for the corresponding financial period.

PROPOSED USE OF PROCEEDS

The net proceeds from the Capital Injection is estimated to be approximately HK$333.78 million. The Company intends to apply such net proceeds as to (i) approximately HK$268.28 million to the Construction; and (ii) the remaining balance of approximately HK$65.49 million as business development of Shenzhen Lead, which mainly includes (a) upgrading its plant and machinery to strengthen its core competence; and (b) expanding its production capacity to cater for business expansion on ICT segment. As the Capital Injection is made by way of capital contribution to Shenzhen Lead, the net proceeds from the Capital Injection will only be applied for its business development, and cannot be used for the payment of the final dividend of HK5.0 cents per Share for the year ended 31 December 2017. In the event that Nanshan Bureau does not approve the Construction, Shenzhen Lead will consider, which the Investor agreed, applying the net proceeds from the Capital Injection to acquire the existing manufacturing site in Ganzhou City of Jiangxi Province which is being leased by Ganzhou Lide Electronics Company Limited* (贛州立德電子有限公司), a 100% subsidiary of Shenzhen Lead.

− 8 −

LETTER FROM THE BOARD

REASONS FOR THE ENTERING INTO THE CAPITAL INVESTMENT AGREEMENT

The Group is a leading ICT solution provider, which focuses on the new ICT research and development and high-end manufacturing, whilst spearheading into three different business segments, namely ICT, new energy and investment activities. Going forward, as part of the Group's business strategies related to its existing business, the Group intends to strengthen its production capacity and research and development capability on the ICT segment by introducing artificial intelligence and high-end manufacturing equipment. The new energy segment is undergoing market development by introducing new technology invented by the Group. The Group is also exploring investment opportunities to expand its investment segment.

The Board considers that entering into the Capital Investment Agreement to be an important and efficient source of capital for Shenzhen Lead to finance the Construction and to improve liquidity of Shenzhen Lead and the Group as a whole. The Construction reinforces the position of Shenzhen Lead as an Industrial Top 100 Enterprise in Nanshan District of Shenzhen. The Construction and the upgrading of the plant and machinery and production capacity of Shenzhen Lead will empower Shenzhen Lead to further strengthen its research and development capability and will enable Shenzhen Lead to migrate to high end manufacturing, which in turn is expected to improve the Group's profitability and operating cashlow in a long run. Accordingly, the Directors (including the independent non-executive Directors) consider that the terms of the Capital Investment Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Despite the Group has not obtained approval from Nanshan Bureau for the Construction as at the Latest Practicable Date, (i) taking into account that Shenzhen Lead was shortlisted and will be given priority in its application for the Construction; (ii) in contemplation of obtaining the approval from Nanshan Bureau for the Construction in the first half of 2020; (iii) considering the time required from the issuance of this circular to realising the proceeds from the Capital Injection in order to provide funding proof for the Construction to Nanshan Bureau; and (iv) in order to achieve the Group's timetable for the Construction, the Directors (including the independent non-executive Directors) consider that the timing of the Capital Investment Agreement are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

IMPLICATIONS UNDER THE LISTING RULES

The Capital Injection constitutes a deemed disposal of the Group's equity interest in Shenzhen Lead under Rule 14.29 of the Listing Rules and the Deemed Disposal constitutes a very substantial disposal for the Company under the Listing Rules. The Capital Investment Agreement and the transactions contemplated thereunder are therefore subject to the reporting, announcement and shareholders' approval requirement under the Listing Rules. An EGM will be convened by the Company to consider and, if thought fit, approve the Capital Investment Agreement and the transactions contemplated thereunder.

− 9 −

LETTER FROM THE BOARD

3. EGM

The Company will convene the EGM at Room 805, 8/F, Greenfield Tower, Concordia Plaza, 1 Science Museum Road, TST., Kowloon, Hong Kong at 11:00 a.m. on Tuesday, 21 January 2020 to consider and, if thought fit, approve the Capital Investment Agreement and the transactions contemplated thereunder. A notice of the EGM is set out on pages 49 to 50 of this circular.

To the best knowledge of the Directors after making all reasonable enquiries, as at the Latest Practicable Date, no Shareholder is required to abstain from voting on the resolutions approving the Capital Investment Agreement and the transactions contemplated thereunder. Pursuant to Rule 13.39(4) of the Listing Rules, all resolutions to be proposed at the EGM will be taken by poll, the results of which will be announced after the EGM.

A form of proxy for use at the EGM is also enclosed. Whether or not you are able to attend the EGM in person, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon to the Company's share registrar and transfer office in Hong Kong, Union Registrars Limited at Suites 3301-04, 33th Floor, Two Chinachem Exchange Square, 338 King's Road, North Point, Hong Kong as soon as possible and, in any event not later than 48 hours before the time appointed for the holding of the EGM (i.e. at or before 11:00 a.m. on Sunday, 19 January 2020 (Hong Kong time)) or any adjourned meeting thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment meeting thereof.

4. RECOMMENDATION

The Directors consider that the terms of the Capital Investment Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend you to vote in favour of the resolutions in the terms as set out in the notice of the EGM.

5. ADDITIONAL INFORMATION

Your attention is also drawn to the information contained in the appendices to this circular.

Yours faithfully

By order of the Board

China All Access (Holdings) Limited

Shao Kwok Keung

Chief Executive Officer

− 10 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION

Financial information of the Group for each of the three years ended 31 December 2016, 2017 and 2018 are disclosed on pages 69-192,67-186 and 78-203, respectively, in the annual reports of the Company for the three years ended 31 December 2016, 2017 and 2018, which are published on both the websites of HKExnews (www.hkexnews.hk) and the Company (www.chinaallaccess.com). The auditors of the Company have not issued any qualified opinion on the Group's financial statements for the financial years ended 31 December 2016, 2017 and 2018.

Quick links to the said annual reports of the Company are available at the following internet links:

http://www.hkexnews.hk/listedco/listconews/SEHK/2017/0427/LTN201704271522.pdf

http://www.hkexnews.hk/listedco/listconews/SEHK/2018/0426/LTN201804261793.pdf

https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0429/ltn201904291370.pdf

2. INDEBTEDNESS STATEMENT

As at the close of business on 30 November 2019, being the latest practicable date for the purpose of preparing this statement of indebtedness prior to the printing of this circular, the indebtedness of the Group was as follows:

  1. Bank borrowings

Bank borrowings of approximately RMB19.7 million (equivalent to approximately HK$21.9 million) were guaranteed by the Company and its subsidiaries and RMB150 million (equivalent to approximately HK$167.0 million) were unsecured.

  1. Promissory notes

Promissory note with principal amount of approximately RMB475.9 million (equivalent to approximately HK$530.0 million) was guaranteed by a Director. The promissory note was due since August 2018 and remains unsettled. The Company entered into a non-legally binding term sheet on 17 November 2019 and intended to issue, subject to conditions, redeemable and convertible secured notes, in the aggregate principal amount of US$67,700,189 as a refinancing arrangement to fully settle the entire outstanding principal and interest.

Promissory note with principal amount of approximately RMB852.0 million (equivalent to approximately HK$948.8 million) was guaranteed by a Director. The promissory note was due since December 2018 and remains unsettled.

− 11 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(iii) Other borrowings

Other borrowings of approximately RMB3.2 million (equivalent to approximately HK$3.6 million) were secured by property, plant and equipment held by the Group, RMB50 million (equivalent to approximately HK$55.7 million) was guaranteed by a Director, RMB9 million (equivalent to approximately HK$10.0 million) was seamed by shares of a subsidiary of the Company and approximately RMB26.9 million (equivalent to HK$30 million) were unsecured.

  1. Capital commitments
    As at 30 November 2019, the Group did not have any capital commitments.
  2. Contingent liabilities
    As at 30 November 2019, the Group had no material contingent liabilities.

Apart from intra-Group liabilities and save as aforesaid, and apart from intra-group liabilities and normal trade payables, the Group did not have any outstanding bank overdrafts, loans, debt securities, borrowings or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, finance lease, hire purchases commitments, which were either guaranteed, unguaranteed, secured or unsecured, guarantees or other material contingent liabilities at the close of business on 30 November 2019.

To the best knowledge of the Directors, having made all reasonable enquiries, there has been no material change in indebtedness or contingent liabilities of the Group since 30 November 2019 and up to the Latest Practicable Date.

3. WORKING CAPITAL

The Directors, after due and careful consideration, are of the opinion that, in the absence of unforeseeable circumstances and after taking into account of financial resources available to the Group, the Group has sufficient working capital for its present requirements, that is for at least 12 months from the date of this circular.

4. FUTURE PLANS AND PROSPECTS

Looking ahead, the Group will direct all resources to further develop its two major business segments, i.e. ICT and New Energy segments. The Company expects these two business segments to provide very strong impetus for its growth in the future.

Latest development in the ICT segment

On 30 April 2019, the Group entered into a sale and purchase agreement with each of Hongda Capital Limited, Primawin Limited and Eastman Ventures Limited in respect of the acquisition of the Metro Ethernet Telecommunication Network, comprising of sectors one, two and three, within the Klang Valley of Kuala Lumpur, Malaysia (the "Acquisition").

− 12 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Company is exploring expansion into new markets and believes that by acquiring a newly completed network infrastructure, it will mitigate the risk of uncompleted network. The Acquisition will support the Company's expansion plan into fiber infrastructure and will enable the Company to offer telecommunication connectivity in the greater Klang Valley in Kuala Lumpur, Malaysia. Although the network is currently non-revenue generating, acquiring these completed network will allow the Company to jump start into this business, alleviating the project construction time if the Company chooses to build the network on its own. This Acquisition is the beginning of a long journey for the Company towards achieving its strategic venture in building its Association of Southeast Asian Nations ("ASEAN") connectivity. The Company believes that the growth of the telecommunication industry in this region is amongst the highest in the world and it expects to benefit from this underserved market.

In addition, the Directors consider that it is in the interest of the Company and its Shareholders as a whole to retain more cash for general working capital requirements and the future business development of the Group after the completion of the Acquisition. The settlement of the Consideration in full by the issue of Consideration Shares allows the Group to (i) minimise immediate cash outflow;

  1. avoid increasing its liabilities; (iii) complete the Acquisition without cash outlay; and (iv) maintain its liquidity position and financial leverage with readily available and accessible cash resources for its daily operations and future development demands for capital.

For details, please refer to the Company's announcements dated 30 April 2019, 9 May 2019 and 24 May 2019.

Latest development in the New Energy segment

The Group's Chief Technology Officer, Dr. Li Hiu Yeung, and the team led by him, has invented another patented technology, mirror array photovoltaic technology ("MA-PV"). This technology can increase the power generation efficiency of photovoltaic power plant. The Group is making use of MA-PV in its development of the New Energy business.

The Group entered into a strategic cooperation agreement with Hongda Energy and Telecom Sdn Bhd. in relation to, among others, the appointment of Hongda to exclusively represent the Group in application for certification of the MA-PV and marketing of MA-PV in ASEAN, Australia and New Zealand.

The Board is of the view that entering into the agreement is beneficial to the Company as this innovative technology can be implemented in a massive territory outside China rapidly. The increase in power generation efficiency will enable the photovoltaic power plant to become as competitive as conventional thermo power plant in terms of power generation cost. Its environmental friendliness and renewability characteristics confirm its major role in power generation method in many years to go. For details, please refer to the Company's announcement dated 19 August 2018.

− 13 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

5. MATERIAL ADVERSE CHANGE

Save for the Group's involvement as defendants in the litigation proceedings as referred to in the section headed "5. Material Litigations" in Appendix IV to this circular, the Directors are not aware of any material adverse change in the financial position or trading position of the Group since 30 June 2019, being the date to which the latest published unaudited financial statements of the Group was made up.

6. MANAGEMENT DISCUSSION AND ANALYSIS

Business Review

Following the completion of the business transforming of the Group in 2018, during the first half of 2019, the Group focuses on developing its businesses in the Information and Communication Technology ("ICT") and the New Energy segments. During the six months ended 30 June 2019, the major business highlights for the period are as follows:

  1. Revenue for the six months ended 30 June 2019 increased by approximately 175.84% to approximately RMB1,994,326,000 as compared to the corresponding period in 2018 from continuing operations;
  2. Gross profit for the six months ended 30 June 2019 decreased by approximately 90.43% to approximately RMB11,715,000 as compared to the corresponding period in 2018 from continuing operations; and
  3. Loss attributable to owners of the Company arises from continuing operations for the six months ended 30 June 2019 was approximately RMB514,214,000, compared to a profit of approximately RMB25,132,000 as compared to the corresponding period in 2018.

ICT

Revenue generated from ICT during the six months ended 30 June 2019 increased by approximately 172.68% to approximately RMB1,967,326,000 as compared to the corresponding period in last year from continuing operations, which accounted for approximately 98.65% of the Group's total revenue for the six months ended 30 June 2019.

In view of the Sino-US trade war and increasing challenges in the global market, our ICT business actually realized very encouraging increase in product shipment and revenue generation. This was mainly attributable to the Group's effort in securing a number of new customers who are the major market leaders in the mobile phone market. These included both very famous international brands and local brands. It also reinforced the success of implementing the Group's strategy in diversifying our customer base from very high customer concentration to more wide spread number of customers. Moreover, the Group also enlarged our product portfolio from very focused on mobile phone to tablet, motor vehicle electronic application, electronic label, AMOLED panel and wearable. Benefitted from the expansion of customer base and increase in sales orders, we demonstrated positive growth momentum in first half of 2019.

− 14 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

New Energy

In 2018, with the advancement of technology, the Group found that the first generation products still have rooms for upgrade to achieve better performance. The upgrade of the product has been completed and the commissioning phase is undergoing. The Group also installed the first generation products in the solar power station in Nanning, Guangxi Province, for field experiment, product testing and product display purpose.

Through the continuous research and development of our new technology, sales and marketing effort of the business team and the production facility which was built up in Shandong Province, we accomplished some initiatives in the aspects of entering into partnership agreements with some industry players as well as market development. The foundation laid by us in the market opened very good sales and marketing opportunities to our products and solutions in the new energy segment. As a result, we delivered very promising result in first half of 2019.

Revenue generated from New Energy segment for the six months ended 30 June 2019 was approximately RMB27,000,000, accounting for approximately 1.35% of the Group's total revenue for the six months ended 30 June 2019.

Investment Activities

Owing to the adverse situation in the market, the Group did not rollout any investment activity during the six months ended 30 June 2019. Revenue generated from investment activities was nil for the six months ended 30 June 2019, compared to a revenue of RMB1,528,000 for the six months ended 30 June 2018 from continuing operations.

Financial Review

Revenue

Revenue increased from approximately RMB723,004,000 for the six months ended 30 June 2018 to approximately RMB1,994,326,000 for the six months ended 30 June 2019, representing an increase of approximately 175.84%. The increase in revenue in the period under review was mainly attributable to the factors below:

  • ICT recorded an increase in revenue from approximately RMB728,958,000 for the six months ended 30 June 2018 to approximately RMB1,967,326,000 for the six months ended 30 June 2019, representing an increase of approximately 169.88%. The increase was mainly attributable to the effort in securing a number of new customers who are the major market leaders in the mobile phone market.
  • Revenue generated from New Energy segment for the six months ended 30 June 2019 was approximately RMB27,000,000. It was mainly due to the continuous research and development of our new technology, sales and marketing effort of the business team and the production facility which was built up in Shandong Province.

− 15 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Gross profit

Gross profit decreased from approximately RMB122,406,000 for the six months ended 30 June 2018 to approximately RMB11,715,000 for the six months ended 30 June 2019, representing a decrease of approximately 90.43%. Gross profit margin decreased from approximately 16.93% for the six months ended 30 June 2018 to approximately 0.59% for the six months ended 30 June 2019. The decrease was mainly attributable to the entry costs in gaining new customers in a highly competitive market. By rapidly growing the volume, we believe the gross profit margin will be gradually improved.

Other revenue

Other revenue decreased from approximately RMB56,606,000 for the six months ended 30 June 2018 to approximately RMB15,704,000 for the six months ended 30 June 2019, representing a decrease of approximately 72.26%. It was mainly attributable to the one-off significant amount of compensation received from customer in 2018.

Other net (loss)/gain

The Group recorded other net loss of approximately RMB664,000 for the six months ended 30 June 2019 as compared to approximately RMB3,703,000 other net gain recorded for the six months ended 30 June 2018. The changes in other net (loss)/gain was mainly due to the net exchange loss recognised in 2019.

Distribution costs, administrative expenses and research and development expenses

Distribution costs, administrative expenses and research and development expenses decreased from approximately RMB67,040,000 for the six months ended 30 June 2018 to approximately RMB61,078,000 for the six months ended 30 June 2019, representing a decrease of approximately 8.89%. The decrease was mainly attributed to the decrease in administrative expenses incurred during the six months ended 30 June 2019. The Group will continue to take all necessary measures to control the costs to improve profitability of the Group in the future.

The percentage of distribution costs, administrative expenses and research and development expenses as a percentage of the Group's total revenue decreased from approximately 9.27% for the six months ended 30 June 2018 to approximately 3.06% for the six months ended 30 June 2019, representing a decrease of approximately 6.21 percentage points. The decrease was mainly due to the increase of revenue in the six months ended 30 June 2019.

Finance income and finance costs

Finance income increased from approximately RMB10,755,000 for the six months ended 30 June 2018 to approximately RMB92,188,000 for the six months ended 30 June 2019, representing an increase of approximately 757.16%. The increase was mainly attributable to the increase of imputed interest income from other receivables during the six months period ended 30 June 2019 as compared with that of 2018.

− 16 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Finance costs increased from approximately RMB63,239,000 for the six months ended 30 June

2018 to approximately RMB360,172,000 for the six months ended 30 June 2019, representing an increase of approximately 469.54%. The increase was mainly caused by overdue interests amounting to approximately RMB349,197,000.

Income tax

Income tax decreased from approximately RMB17,543,000 for the six months ended 30 June

2018 to approximately RMB3,251,000 for the six months ended 30 June 2019, representing a decrease of approximately 81.47%. The decrease in income tax was mainly due to the decrease in taxable income in the six months ended 30 June 2019.

(Loss)/profit for the period attributable to owners of the Company

Loss for the period attributable to owners of the Company for the six months ended 30 June 2019 was RMB514,214,000, compared to a profit of RMB25,132,000 of the corresponding period in 2018.

Liquidity and Capital Resources

Liquidity, financial resources and capital structure

As at 30 June 2019, the Group had cash and cash equivalents of approximately RMB23,760,000

(31 December 2018: RMB70,731,000), restricted cash of approximately RMB256,545,000 (31

December 2018: RMB154,729,000), borrowings of approximately RMB1,411,843,000 (31 December

2018: RMB1,392,251,000). The gearing ratio (calculated by dividing borrowings by total assets) as

at 30 June 2019 was approximately 21.60% (31 December 2018: 23.56%). As at 30 June 2019, the Group had current assets of approximately RMB5,132,927,000 (31 December 2018: RMB4,353,205,000) and current liabilities of approximately RMB3,426,998,000 (31 December 2018: RMB2,547,849,000). The current ratio (which is calculated by dividing current assets by current liabilities) was approximately 1.50 as at 30 June 2019, as compared with the current ratio of approximately 1.71 as at 31 December 2018. The decrease of the current ratio was mainly attributable to the increase in trade and other payables.

The approach of the board of directors of the Company to manage liquidity is to ensure, as far as possible, that the Group will always have sufficient liquidity to meet its liabilities when due, without incurring unacceptable losses or risking damage to the Group's reputation.

Foreign exchange exposure

The Group's sales and purchases were mainly denominated in Renminbi. Therefore, the Group is not exposed to significant foreign currency exchange risks. The Group does not employ any financial instruments for hedging purposes. While the Board currently does not expect currency fluctuations to materially impact the Group's operations, the Board will review the foreign exchange exposure of the Group from time to time as appropriate.

− 17 −

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Capital expenditure

During the six months ended 30 June 2019, the Group's total capital expenditure amounted to approximately RMB369,365,000 (31 December 2018: RMB158,143,000), which was mainly used for procurement for upgrading plant, machinery and equipment.

Capital commitment

As at 30 June 2019, the Group had capital commitment amounting to nil (31 December 2018: RMB72,084,000). The decrease was mainly attributable to the cancellation of the procurement of additional plant and equipment.

Charge on material assets

As at 30 June 2019, assets of the Group amounting to approximately RMB234,118,000 (31 December 2018: RMB214,891,000) were pledged for the Group's borrowings and bills payables.

Human Resources

As at 30 June 2019, the Group had 1,988 employees (31 December 2018: 1,172 employees). The increase in the number of employees was mainly due to the increase in the production scale. The Group offers its employees competitive salary packages, as well as contribution to defined retirement plans.

Share Option Scheme

On 12 June 2019, the shareholders of the Company approved and adopted a new share option scheme and terminated the share option scheme adopted on 28 August 2009.

On 10 June 2015, a total of 50,000,000 share options (each share option entitling the holder to subscribe for one Share) were granted to eligible participants including two Directors and the rest were employees of the Group. Please refer to the Company's announcement dated 10 June 2015 for further information. As at 30 June 2019, 80,000,000 share options remained outstanding.

− 18 −

APPENDIX II

FINANCIAL INFORMATION OF SHENZHEN LEAD

UNAUDITED CONSOLIDATED FINANCIAL INFORMATION OF THE TARGET GROUP

Set out below are the unaudited consolidated statement of financial position of 深圳市立德通訊 器材有限公司 (Shenzhen Lead Communications Limited*) ("Shenzhen Lead") and its subsidiaries (the "Target Group") as at 31 December 2016, 2017 and 2018 and 30 June 2019 and the unaudited consolidated statement of profit or loss and other comprehensive income, unaudited consolidated statement of changes in equity and unaudited consolidated statements of cash flows of the Target Group for each of the years ended 31 December 2016, 2017 and 2018 and six months ended 30 June 2018 and 2019 and certain explanatory notes of the Target Group (collectively the "Unaudited Consolidated Financial Information"), which have been prepared by the directors of the Company.

The Unaudited Consolidated Financial Information has been prepared and presented on the basis as set out in note 2 to the Unaudited Consolidated Financial Information and prepared in accordance with the significant accounting policies adopted by the Company as shown in its annual report for the year ended 31 December 2018, and paragraph 14.68(2)(a)(i)(A) of the Listing Rules. The Unaudited Consolidated Financial Information is prepared by the directors of the Company solely for the purpose of inclusion in this circular in connection with the proposed deemed disposal of interest in Shenzhen Lead. The reporting accountants of the Company, HLB Hodgson Impey Cheng Limited, were engaged to review the Unaudited Consolidated Financial Information of the Target Group in accordance with the Hong Kong Standard on Review Engagements 2410 Review of Interim Unaudited Consolidated Financial Information Performed by the Independent Auditor of the Entity and with reference to Practice Note 750 Review of Unaudited Consolidated Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA").

A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the reporting accountants to obtain assurance that the reporting accountants would become aware of all significant matters that might be identified in an audit. Accordingly, the reporting accountants do not express an audit opinion.

Based on the review, nothing has come to the reporting accountants' attention that causes them to believe that the Unaudited Consolidated Financial Information is not prepared, in all material respects, in accordance with the basis of preparation set out in note 2 to the Unaudited Consolidated Financial Information.

* for identification purposes only

− 19 −

APPENDIX II

FINANCIAL INFORMATION OF SHENZHEN LEAD

UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended

For the year ended 31 December

30 June

2016

2017

2018

2018

2019

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Revenue

1,345,086

1,796,523

1,635,020

689,264

1,960,631

Cost of sales

(1,250,766)

(1,677,092)

(1,537,146)

(583,621)

(1,950,307)

Gross profit

94,320

119,431

97,874

105,643

10,324

Other revenue

14,102

18,472

31,666

27,812

14,873

Other net (loss)/gain

(1,857)

(945)

3,676

(2,403)

(343)

Distribution expenses

(7,161)

(5,447)

(4,231)

(1,526)

(2,051)

Administrative expenses

(30,587)

(40,911)

(39,793)

(6,735)

(10,119)

Impairment on trade and

other receivables

(5,889)

(6,191)

(16,917)

(2,151)

(7,043)

Profit from operations

62,928

84,409

72,275

120,640

5,641

Finance income

1,131

2,137

1,304

652

279

Finance costs

(21,768)

(20,829)

(8,147)

(6,105)

(4,517)

Share of results of

associates

-

-

709

-

(982)

Profit before taxation

42,291

65,717

66,141

115,187

421

Income tax expense

(4,509)

(6,718)

(17,403)

(10,935)

(3,226)

Profit/(loss) and total

comprehensive

income/(loss) for the

year/period

37,782

58,999

48,738

104,252

(2,805)

Profit/(loss) and total comprehensive income/(loss) for the year/period attributable to:

Owners of the Company

37,782

58,999

48,738

104,252

(2,805)

− 20 −

APPENDIX II

FINANCIAL INFORMATION OF SHENZHEN LEAD

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

31 December

30 June

2016

2017

2018

2019

RMB'000

RMB'000

RMB'000

RMB'000

Non-current assets

Property, plant and equipment

27,797

29,586

50,750

64,078

Goodwill

-

1,157

1,157

1,157

Interests in associates

-

-

1,709

3,134

Other receivables

10,000

-

-

-

Deposit paid for acquisition of property, plant

and equipment

-

-

135,580

-

Deferred tax assets

-

-

800

800

37,797

30,743

189,996

69,169

Current assets

Inventories

477,919

139,999

232,627

258,624

Trade and other receivables

179,448

477,794

425,346

858,953

Prepayments

266,813

354,736

206,771

205,758

Discounted bills receivable

9,387

58,100

169,607

210,871

Bills receivable

40,731

52,906

16,944

14,660

Available-for-sale financial assets

-

10,000

-

-

Factored trade receivables

544,815

-

-

-

Amount due from fellow subsidiaries

-

4,234

201,974

201,974

Restricted cash

132,406

120,260

122,339

226,244

Cash and cash equivalents

15,935

74,192

63,987

20,349

1,667,454

1,292,221

1,439,595

1,997,433

− 21 −

APPENDIX II

FINANCIAL INFORMATION OF SHENZHEN LEAD

31 December

30 June

2016

2017

2018

2019

RMB'000

RMB'000

RMB'000

RMB'000

Current liabilities

Trade and other payables

929,666

593,338

582,982

975,472

Deferred income

12,192

7,748

3,630

3,077

Borrowings

98,100

53,678

-

-

Bank advances on discounted bills receivable

9,387

58,100

170,321

210,871

Bank advances on factored trade receivable

544,815

-

-

-

Amount due to a immediate holding company

-

21,683

21,309

21,309

Amount due to fellow subsidiaries

-

10,000

10,205

10,050

Income tax payable

4,958

7,677

18,542

7,269

1,599,118

752,224

806,989

1,228,048

Net current assets

68,336

539,997

632,606

769,385

Total assets less current liabilities

106,133

570,740

822,602

838,554

Non-current liabilities

Deferred income

7,184

7,105

8,152

6,909

Borrowings

-

150,000

150,000

170,000

7,184

157,105

158,152

176,909

NET ASSETS

98,949

413,635

664,450

661,645

CAPITAL AND RESERVES

Share capital

6,450

262,137

464,214

464,214

Reserves

92,499

151,498

200,236

197,431

TOTAL EQUITY

98,949

413,635

664,450

661,645

− 22 −

APPENDIX II

FINANCIAL INFORMATION OF SHENZHEN LEAD

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Statutory

Share

general

Retained

Total

capital

reserves

earnings

equity

RMB'000

RMB'000

RMB'000

RMB'000

Balance at 1 January 2016

6,450

6,069

48,648

61,167

Profit and total comprehensive income for the

year

-

-

37,782

37,782

Balance at 31 December 2016 and at

1 January 2017

6,450

6,069

86,430

98,949

Profit and total comprehensive income for

the year

-

-

58,999

58,999

Capital injection

255,687

-

-

255,687

Appropriation of reserve

-

5,137

(5,137)

-

Balance at 31 December 2017 and at

1 January 2018

262,137

11,206

140,292

413,635

Profit and total comprehensive income for

the year

-

-

48,738

48,738

Capital injection

202,077

-

-

202,077

Appropriation of reserve

-

10,565

(10,565)

-

Balance at 31 December 2018 and at

1 January 2019

464,214

21,771

178,465

664,450

Loss and total comprehensive loss for

the period

-

-

(2,805)

(2,805)

Balance at 30 June 2019

464,214

21,771

175,660

661,645

Balance at 1 January 2018

262,137

11,206

140,292

413,635

Profit and total comprehensive income for

the period

-

-

104,252

104,252

Capital injection

202,077

-

-

202,077

Balance at 30 June 2018

464,214

11,206

244,544

719,964

− 23 −

APPENDIX II

FINANCIAL INFORMATION OF SHENZHEN LEAD

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the year ended

For the six months

31 December

ended 30 June

2016

2017

2018

2018

2019

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Cash flows from operating activities

Profit/(loss) before taxation

42,291

65,717

66,141

115,187

421

Adjustment for:

Depreciation of property, plant and

equipment

2,460

2,580

4,806

1,602

4,280

Impairment loss recognised in respect

of trade and other receivables

5,889

6,191

16,917

2,151

7,043

Write-down of obsolescence

inventories

925

7,235

8,043

2,140

1,337

Interest income from bank deposits

(1,131)

(2,137)

(1,304)

(652)

(279)

Finance cost

21,768

20,829

8,147

6,105

4,517

Share of result of associates

-

-

(709)

-

982

Government subsidy

(11,855)

(17,602)

(22,304)

(12,522)

(10,144)

Loss on disposal of property, plant

and equipment

11

22

-

-

-

Operating cash flows before

movements in working capital

60,358

82,835

79,737

101,801

(877)

(Increase)/decrease in inventories

(319,327)

274,324

(82,628)

(14,663)

(25,997)

Decrease/(increase) in trade and other

receivables

61,588

(291,310)

52,448

(164,286)

(426,378)

(Increase)/decrease in prepayments

(199,797)

(87,923)

147,965

90,680

1,013

(Increase)/decrease in amount due from

fellow subsidiaries

-

(4,234)

(197,740)

(200,000)

-

Decrease/(increase) in bills receivable

156,517

(12,237)

35,962

(6,644)

2,284

Decrease/(increase) in restricted cash

37,179

12,146

(2,079)

260

103,905

Increase/(decrease) in trade and other

payables

308,377

(72,997)

181,565

170,510

316,008

Increase/(decrease) in amount due to

immediate holding company

-

21,683

(374)

(374)

-

Increase in amount due to fellow

subsidiaries

-

10,000

205

5,200

(155)

Cash generated from operations

104,895

(67,713)

215,061

(17,516)

(30,197)

Tax paid:

- PRC Enterprise Income Tax paid

(8,056)

(3,999)

(6,538)

(2,314)

(14,499)

Net cash generated from/(used in)

operating activities

96,839

(71,712)

208,523

(19,830)

(44,696)

Investing activities

− 24 −

APPENDIX II

FINANCIAL INFORMATION OF SHENZHEN LEAD

For the year ended

For the six months

31 December

ended 30 June

2016

2017

2018

2018

2019

RMB'000 RMB'000 RMB'000 RMB'000 RMB'000

Purchase of property, plant and

equipment

(11,829)

(3,491)

(22,970)

(10,080)

(12,306)

Prepayment for purchase of property,

plant and equipment

-

-

(135,580)

-

-

Investments in associates

-

-

(1,000)

-

(2,407)

Interest received from bank deposits

731

2,790

1,204

600

271

Net cash inflow from acquisition of

subsidiaries

-

55,126

-

-

-

Investment in available-for-sale

financial assets

-

(10,000)

-

-

-

Net cash (used in)/generated from

investing activities

(11,098)

44,515

(158,346)

(9,480)

(14,442)

Financing activities

Proceeds from borrowings

-

150,000

-

-

20,000

Repayment of borrowings

(141,900)

(44,422)

(53,678)

(26,564)

-

Interest paid

(22,068)

(20,124)

(6,704)

(3,257)

(4,500)

Net cash (used in)/generated from

financing activities

(163,968)

85,454

(60,382)

(29,821)

15,500

Net increase/(decrease) in cash and

cash equivalents

(78,227)

58,257

(10,205)

(59,131)

(43,638)

Cash and cash equivalents at the

beginning of the reporting period

94,162

15,935

74,192

74,192

63,987

Cash and cash equivalents at the end

of the reporting period

15,935

74,192

63,987

15,061

20,349

− 25 −

APPENDIX II

FINANCIAL INFORMATION OF SHENZHEN LEAD

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL INFORMATION OF THE TARGET GROUP

1. GENERAL INFORMATION

Shenzhen Lead is a limited liability company incorporated in the People's Republic of China (the "PRC"). The Target Group principally engaged in manufacturing of handset screen.

On 26 November 2019, Lide Global Limited ("Lide") and CRC-YJ INDUSTRY LIMITED (the

"Investor") entered into the conditional capital investment agreement, pursuant to which the Investor has conditionally agreed to subscribe for approximately RMB214.3 million of the registered capital of Shenzhen Lead by way of capital contribution in cash for a sum of RMB 300 million (the "Capital Injection").

As at 26 Novmeber 2019, Lide held 100% equity interest in Shenzhen Lead. Upon the completion of the Capital Injection, the shareholding of Lide in Shenzhen Lead will be diluted from 100% to approximately 70% of the enlarged registered capital of Shenzhen Lead and constitutes a deemed disposal of equity interest in Shenzhen Lead (the "Deemed Disposal").

2. BASIS OF PREPARATION

The Unaudited Consolidated Financial Information of the Target Group has been prepared solely for the purpose of inclusion in the circular to be issued by the Company in connection with the Deemed Disposal in accordance with Rule 14.68(2)(a)(i) of the Listing Rules and in accordance with the significant accounting policies adopted by the Company as set out in its annual report for the year ended 31 December 2018, which conform with Hong Kong Financial Reporting Standards issued by the HKICPA.

The Unaudited Consolidated Financial Information of the Target Group has been prepared under the historical cost convention. The Unaudited Consolidated Financial Information of the Target Group is presented in Renminbi ("RMB") and all values are rounded to the nearest thousand (RMB'000) except when otherwise indicated.

The Unaudited Consolidated Financial Information of the Target Group does not contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong Accounting Standard 1 (Revised) Presentation of Financial Statements issued by the HKICPA nor an interim financial report as defined in Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the HKICPA, and that it should be read in connection with the relevant published annual report and interim report of the Company.

− 26 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

INTRODUCTION TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Introduction

The following is a summary of an illustrative and unaudited pro forma consolidated statement of financial position, the unaudited pro forma consolidated statement of profit or loss, the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma consolidated statement of cash flows of China All Access (Holdings) Limited (the "Company") and its subsidiaries (hereinafter collectively referred to as the "Group") (the "Unaudited Pro Forma Financial Information"), which have been prepared on the basis of the notes set out below for the purpose of illustrating the effects of the possible deemed disposal of equity interests in 深圳市立德通訊器材有限公司 (Shenzhen Lead Communications Limited*) ("Shenzhen Lead") and its subsidiaries (collectively referred to as the "Target Group") (the "Deemed Disposal") on the financial position of the Group as if the Deemed Disposal has been completed on 30 June 2019, and the effects of the Deemed Disposal on the financial performance and cash flows of the Group as if the Deemed Disposal had taken place on 1 January 2018.

The Unaudited Pro Forma Financial Information of the Group has been prepared by the directors of the Company in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") for illustrative purposes only, based on their judgments, estimations and assumptions, and because of its hypothetical nature, it may not give a true picture of the financial position, the financial performance and cash flows of the Group had the Deemed Disposal had been completed as at 30 June 2019 or taken place on 1 January 2018, where applicable, or any future dates.

The Unaudited Pro Forma Financial Information is prepared based on the unaudited condensed consolidated statement of financial position of the Group as at 30 June 2019 which extracted from the published interim report for the six months ended 30 June 2019 on which no audit or review report has been published, the audited consolidated statement of profit or loss, the audited consolidated statement of profit or loss and other comprehensive income and the audited consolidated statement of cash flows of the Group for the year ended 31 December 2018 which extracted from the published annual report for the year ended 31 December 2018, after giving effect to the pro forma adjustments relating to the Deemed Disposal as described in the accompanying notes. Narrative description of the pro forma adjustments that are (i) directly attributable to the transactions and not relating to future events or decisions; and (ii) factually supported, is summarised in the accompanying notes.

The Unaudited Pro Forma Financial Information should be read in conjunction with the financial information of the Group as set out in Appendix I to this circular, the published annual report of the Company for the year ended 31 December 2018, the published interim report of the Company for the six months ended 30 June 2019 which no audit or review report has been published, the financial information of the Target Group as set out in Appendix II to this circular, the Company's announcement dated 26 November 2019 and other financial information included elsewhere in this circular. The Unaudited Pro Forma Financial Information does not take into account any trading or other transactions subsequent to the dates of the respective financial statements of the companies comprising the Group.

* for identification purposes only

− 27 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE GROUP

Unaudited

Unaudited

pro forma

condensed

condensed

consolidated

consolidated

statement of

statement of

financial

financial

position of the

Unaudited

position of the

Group as at

pro forma

Group as at

30 June 2019

adjustments

30 June 2019

RMB'000

RMB'000

Notes

RMB'000

(Note 1)

Non-current assets

Property, plant and equipment

395,740

395,740

Intangible assets

350,296

350,296

Goodwill

93,892

93,892

Interests in associates

3,134

3,134

Other receivables

487,286

487,286

Prepayments

72,968

72,968

Deferred tax assets

800

800

1,404,116

1,404,116

Current assets

Inventories

277,741

277,741

Trade and other receivables

3,303,385

3,303,385

Prepayments

1,045,877

1,045,877

Discounted bills receivable

210,871

210,871

Bills receivable

14,660

14,660

Financial asset at fair value through

profit or loss

88

88

Restricted cash

256,545

256,545

Cash and cash equivalents

23,760

300,000

4

323,760

5,132,927

5,432,927

Current liabilities

Trade and other payables

1,747,518

1,203

3

1,748,721

Contract liabilities

87,704

87,704

Deferred income

3,077

3,077

Borrowings

1,191,843

1,191,843

− 28 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

Unaudited

Unaudited

pro forma

condensed

condensed

consolidated

consolidated

statement of

statement of

financial

financial

position of the

Unaudited

position of the

Group as at

pro forma

Group as at

30 June 2019

adjustments

30 June 2019

RMB'000

RMB'000

Notes

RMB'000

(Note 1)

Bank advances on discounted bill

receivable

210,871

210,871

Lease liabilities

4,111

4,111

Income tax payable

181,874

181,874

3,426,998

3,428,201

Net current assets

1,705,929

2,004,726

Total assets less current liabilities

3,110,045

3,408,842

Non-current liabilities

Borrowings

220,000

220,000

Deferred income

6,909

6,909

Lease liabilities

2,020

2,020

Deferred tax liabilities

6,648

6,648

235,577

235,577

NET ASSETS

2,874,468

3,173,265

CAPITAL AND RESERVES

Share Capital

19,520

19,520

Reserves

2,854,948

11,506

5

(1,203)

3

2,865,251

Total equity attributable to

owners of the Company

2,874,468

2,884,771

Non-controlling interests

-

288,494

5

288,494

TOTAL EQUITY

2,874,468

3,173,265

− 29 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF PROFIT OR LOSS OF THE GROUP

Unaudited

Audited

pro forma

consolidated

consolidated

statement of

statement of

profit or loss

profit or loss

of the Group

of the Group

for the year

for the year

ended 31

Unaudited

ended

December

pro forma

31 December

2018

adjustments

2018

RMB'000

RMB'000

Notes

RMB'000

(Note 2)

Continuing operations

Revenue

1,702,670

1,702.670

Cost of sales

(1,594,253)

(1,594,253)

Gross profit

108,417

108,417

Other revenue

68,808

68,808

Other net gain/(loss)

(15,923)

(15,923)

Distribution costs

(6,512)

(6,512)

Administrative expenses

(246,384)

(1,203)

3

(247,587)

Research and development expenses

(9,415)

(9,415)

Loss from operations

(101,009)

(102,212)

Finance income

29,295

29,295

Finance costs

(218,853)

(218,853)

Share of results of associates

709

709

Loss before taxation

(289,858)

(291,061)

Income tax expense

(6,833)

(6,833)

Loss for the year from continuing

operations

(296,691)

(297,894)

− 30 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

Unaudited

Audited

pro forma

consolidated

consolidated

statement of

statement of

profit or loss

profit or loss

of the Group

of the Group

for the year

for the year

ended 31

Unaudited

ended

December

pro forma

31 December

2018

adjustments

2018

RMB'000

RMB'000

Notes

RMB'000

(Note 2)

Discontinued operation

Loss for the year from discontinued

operation

(381,416)

(381,416)

Loss for the year

(678,107)

(679,310)

Loss for the year attributable to:

Owners of the Company

(678,107)

(14,621)

6

(693,931)

Non-controlling interests

-

14,621

6

14,621

(678,107)

(679,310)

− 31 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF THE GROUP

Unaudited

Audited

pro forma

consolidated

consolidated

statement of

statement of

profit or loss

profit or loss

and other

and other

comprehensive

comprehensive

income of the

income of the

Group for the

Group for the

year ended 31

Unaudited

year ended

December

pro forma

31 December

2018

adjustments

2018

RMB'000

RMB'000

Notes

RMB'000

(Note 2)

Loss for the year

(678,107)

(679,310)

Other comprehensive loss for the

year (after tax and

reclassification adjustments):

Items that may be reclassified

subsequently to profit or loss:

Exchange differences arising on

translation of financial statements

(8,048)

(8,048)

Other comprehensive loss for the

year

(8,048)

(8,048)

Total comprehensive loss for the

year

(686,155)

(687,358)

Total comprehensive loss for the

year attributable to:

Owners of the Company

(686,155)

(14,621)

6

(701,979)

Non-controlling interests

-

14,621

6

14,621

(686,155)

(687,358)

− 32 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE

GROUP

Unaudited

Audited

pro forma

consolidated

consolidated

statement of

statement of

cash flows of

cash flows of

the Group for

the Group for

the year ended

Unaudited

the year ended

31 December

pro forma

31 December

2018

adjustments

2018

RMB'000

RMB'000

Notes

RMB'000

(Note 2)

Cash flows from operating

activities

Loss before taxation for continuing

operations

(289,858)

(1,203)

3

(291,061)

Loss before taxation for

discontinued operation

(221,628)

(221,628)

Adjustment for:

Exchange (gain)/loss, net

15,497

15,497

Depreciation of property, plant

and equipment

27,971

27,971

Amortisation of intangible assets

37,063

37,063

Impairment loss recognised in

respect of trade receivables and

other receivables

131,672

131,672

Impairment loss recognised in

respect of bills receivables

72

72

Impairment loss recognised in

respect of discounted bills

receivable

714

714

Reversal of impairment loss

recognised in respect of trade

receivables

(30,715)

(30,715)

Write-down of obsolete

inventories

10,543

10,543

Interest income from entrusted

loans

(11,977)

(11,977)

Interest income from bank

deposits

(19,315)

(19,315)

Interest income from structured

deposits and other receivables

(36,393)

(36,393)

− 33 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

Unaudited

Audited

pro forma

consolidated

consolidated

statement of

statement of

cash flows of

cash flows of

the Group for

the Group for

the year ended

Unaudited

the year ended

31 December

pro forma

31 December

2018

adjustments

2018

RMB'000

RMB'000

Notes

RMB'000

(Note 2)

Gain on disposal of property,

plant and equipment

(5,387)

(5,387)

Finance costs

218,853

218,853

Written-off of property, plant and

equipment

1,148

1,148

Loss on disposal of subsidiaries

228,653

228,653

Share of results of associates

(709)

(709)

Loss on fair value change of

financial assets at fair value

through profit or loss

(1,788)

(1,788)

Government subsidy

(24,504)

(24,504)

Loss on fair value change of

investment property

4,029

4,029

Share-based payment expenses

3,783

3,783

Operating cash flows before

movements in working capital

37,724

36,521

Increase in inventories

(157,454)

(157,454)

Decrease in trade and other

receivables

938,097

938,097

Increase in prepayments

(589,004)

(589,004)

Decrease in financial assets at fair

value through profit or loss

8,147

8,147

Decrease in bills receivable

45,934

45,934

Decrease in restricted cash

171,036

171,036

Decrease in trade and other

payables

(40,270)

1,203

3

(39,067)

Decrease in contract liabilities

(13,540)

(13,540)

− 34 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

Unaudited

Audited

pro forma

consolidated

consolidated

statement of

statement of

cash flows of

cash flows of

the Group for

the Group for

the year ended

Unaudited

the year ended

31 December

pro forma

31 December

2018

adjustments

2018

RMB'000

RMB'000 Notes

RMB'000

(Note 2)

Cash generated from operations

400,670

400,670

Tax paid:

  • Hong Kong Profits Tax paid
  • PRC Enterprise Income Tax paid

Net cash generated from operating activities

Cash flows from investing activities

Purchase of property, plant and equipment

Proceeds from disposal of property, plant and equipment

Prepayment for purchase of property, plant and equipment

Proceeds from disposal of investment property

Net cash outflow from disposal of subsidiaries

Advance to entrusted loans

Repayment from entrusted loans

Withdrawal of bank deposits with original maturities over three months, net

Investment in associates

Interest received from bank deposits

Interest received from structured deposits

(2,879)

(16,632)

381,159

(99,086)

31,087

(135,580)

27,168

(247)

280,000

(50,000)

80,985

(1,000)

18,526

11,977

(2,879)

(16,632)

381,159

(99,086)

31,087

(135,580)

27,168

(247)

280,000

(50,000)

80,985

(1,000)

18,526

11,977

− 35 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

Unaudited

Audited

pro forma

consolidated

consolidated

statement of

statement of

cash flows of

cash flows of

the Group for

the Group for

the year ended

Unaudited

the year ended

31 December

pro forma

31 December

2018

adjustments

2018

RMB'000

RMB'000

Notes

RMB'000

(Note 2)

Interest received from entrusted

loans and other receivables

35,004

35,004

Net cash generated from investing

activities

198,834

198,834

Cash flows from financing

activities

Proceeds from deemed disposal of a

subsidiary without lost of control

-

300,000

4

300,000

Proceeds from borrowings

50,000

50,000

Repayment of borrowings

(559,367)

(559,367)

Interest paid

(52,941)

(52,941)

Redemption of convertible bonds

(100,080)

(100,080)

Repurchase of shares

(74,821)

(74,821)

Net cash used in financing

activities

(737,209)

(437,209)

Net (decrease)/increase in cash

and cash equivalents

(157,216)

142,784

Cash and cash equivalents at the

beginning of the reporting

period

204,420

204,420

Effect of foreign exchange rate

changes

23,527

23,527

Cash and cash equivalents at the

end of the reporting period

70,731

370,731

− 36 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

  1. The amounts are extracted from the unaudited condensed consolidated statement of financial position of the Group as at 30 June 2019 as set out in the Company's published interim report for the six months ended 30 June 2019 which no audit or review report has been published.
  2. The amounts are extracted from the audited consolidated statement of profit or loss, the audited consolidated statement of profit or loss and other comprehensive income and the audited consolidated statement of cash flows of the Group for the year ended 31 December 2018 as set out in the published annual report of the Company for the year ended 31 December 2018.
  3. The adjustment represents the provision for transaction cost for the Deemed Disposal of approximately HKD1,340,000 (equivalent to RMB1,203,000).
  4. The proceed of the Deemed Disposal represents the capital contribution in cash for the sum of RMB300,000,000 to be received from the Investor.
  5. The adjustments represent the resulting estimated effect on disposal as if the Deemed Disposal had taken place on 30 June 2019, which is as follows:

RMB'000

Cash consideration

300,000

The equity interests of Shenzhen Lead's non-controlling

shareholders after the Deemed Disposal

30%

(A)

90,000

Net assets of the Target Group before the Deemed Disposal

as at 30 June 2019 (note (a))

661,645

Dilution of the Group's equity interests in Shenzhen Lead

from 100% to 70% arising from the Deemed Disposal

30%

Dilution of non-controlling interests

(B)

198,494

Effect on non-controlling interests

(C) = (A) + (B)

288,494

Note:

  1. The amount of net assets of the Target Group before the Deemed Disposal was extracted from the unaudited consolidated statement of financial position of Shenzhen Lead as at 30 June 2019, set out in the unaudited consolidated financial information of Shenzhen Lead included in Appendix II to this circular.

− 37 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

The adjustment of reserve of approximately RMB11,506,000 is measured as the excess of cash consideration of RMB300,000,000 over (C) above.

The actual amount of non-controlling interests arising from the Deemed Disposal may be different from the amount described above and would be subject to the carrying amount of the net assets of the Target Group on the date of completion of the Disposal.

6. The adjustments represent the resulting estimated effect on disposal as if the Deemed Disposal had taken place on 1 January 2018, which is as follows:

RMB'000

Profit and total comprehensive income of the Target Group before the

Deemed Disposal for the year ended 31 December 2018 (note (b))

48,738

Dilution of the Group's equity interests in Shenzhen Lead from 100% to

70% arising from the Deemed Disposal

30%

Profit and total comprehensive income of the Target Group reallocated to

non-controlling interests of the Company

14,621

Note:

  1. The amount of profit and total comprehensive income of the Target Group before the Deemed Disposal was extracted from the unaudited consolidated statement of profit or loss and other comprehensive income of Shenzhen Lead for the year ended 31 December 2018, set out in the unaudited consolidated financial information of Shenzhen Lead included in Appendix II to this circular.

The actual amount of non-controlling interests arising from the Deemed Disposal may be different from the amount described above and would be subject to the carrying amount of the net assets of the Target Group on the date of completion of the Disposal.

7. The adjustment in relation to share of results with non-controlling in respect of the unaudited pro forma consolidated statement of profit or loss and unaudited pro forma consolidated statement of profit or loss and other comprehensive income will have a continuing effect on the Group. Other adjustments in respect of the unaudited pro forma consolidated statement of cash flows are not expected to have a continuing effect on the Group.

− 38 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

8. No adjustment has been made to reflect any trading results or other transaction of the Group entered into subsequent to 30 June 2019 for the unaudited pro forma consolidated of financial position and 31 December 2018 for the unaudited pro forma consolidated statement of profit or loss, unaudited pro forma consolidated statement of profit or loss and other comprehensive income and unaudited pro forma consolidated statement of cash flows.

In particular, no adjustments have been made in respect of the following events, (i) disposal of a property at a consideration of HK$80,800,000 on 26 August 2019 which further details are set out in the Company's announcement date 3 October 2019, (ii) allot and issue 30,000,000 subscription shares for a cash consideration of HK$8,400,000 which details are set out in the Company's announcement date 25 October 2019, and (iii) entered into a non-legally binding term sheet to issue redeemable and convertible secured notes which details are set out in the Company's announcement date 18 November 2019.

− 39 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

The following is the text of a report received from the reporting accountants of the Company, HLB Hodgson Impey Cheng Limited, Certified Public Accountants, Hong Kong, in respect of the Group's unaudited pro forma financial information for the purpose of incorporation in this Circular.

31st Floor

Gloucester Tower

The Landmark

11 Pedder Street

Central

Hong Kong

31 December 2019

INDEPENDENT REPORTING ACCOUNTANTS' ASSURANCE REPORT ON THE COMPILATION OF THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

TO THE BOARD OF DIRECTORS OF CHINA ALL ACCESS (HOLDINGS) LIMITED

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of China All Access (Holdings) Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") by the directors of the Company for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma condensed consolidated statement of financial position as at 30 June 2019, the unaudited pro forma consolidated statement of profit or loss, the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma consolidated statement of cash flows for the year ended 31 December 2018, and related notes (the "Unaudited Pro Forma Financial Information") are set out in Appendix III of the circular issued by the Company (the "Circular"). The applicable criteria on the basis of which the directors of the Company have compiled the Unaudited Pro Forma Financial Information are described in Appendix III of the Circular.

The Unaudited Pro Forma Financial Information has been complied by the directors of the Company to the impact of the Deemed Disposal on the Group's financial position as at 30 June 2019 and the Group's financial performance and cash flows for the year ended 31 December 2018 as if the Deemed Disposal had taken place as at 30 June 2019 and 1 January 2018 respectively. As part of this process, information about the Group's financial position, financial performance and cash flows has been extracted by the directors of the Company from the Group's financial positions as at 30 June 2019 on which no audit or review report has been published and the Group's financial performance and cash flows for the year ended 31 December 2018, on which audited report has been published.

− 40 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

Directors' Responsibility for the Unaudited Pro Forma Financial Information

The directors of the Company are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and with reference to Accounting Guideline 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars ("AG 7") issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA").

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

The firm applies Hong Kong Standard on Quality Control 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements, and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountant's Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus, issued by the HKICPA. This standard requires that the reporting accountants plan and perform procedures to obtain reasonable assurance about whether the directors of the Company have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of Unaudited Pro Forma Financial Information included in this circular is solely to illustrate the impact of Deemed Disposal on unadjusted financial information of the Group as if the Deemed Disposal had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Deemed Disposal as at 30 June 2019 or 1 January 2018 would have been as presented.

− 41 −

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

A reasonable assurance engagement to report on whether the Unaudited Pro Forma Financial Information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors of the Company in the compilation of the Unaudited Pro Forma Financial Information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

  • The related pro forma adjustments give appropriate effect to those criteria; and
  • The Unaudited Pro Forma Financial Information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants' judgement, having regard to the reporting accountants' understanding of the nature of the Group, the Deemed Disposal in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

  1. the Unaudited Pro Forma Financial Information has been properly compiled on the basis stated;
  2. such basis is consistent with the accounting policies of the Group; and
  3. the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Yours faithfully,

HLB Hodgson Impey Cheng Limited

Certified Public Accountants

Yu Chi Fat

Practising Certificate Number: P05467

Hong Kong

31 December 2019

− 42 −

APPENDIX IV

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

2. DIRECTORS' AND CHIEF EXECUTIVES' INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY OR ANY ASSOCIATED CORPORATION

As at the Latest Practicable Date, the interests or short positions of the Directors and chief executive of the Company in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) (a) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") to be notified to the Company and the Stock Exchange, were as follows:

Percentage of

relevant class

of issued share

Company /

capital of the

name of

Number of

Company /

associated

Nature of

shares

associated

Name of Director

corporation

interest

interested

corporation

(Note 1)

(Note 2)

Mr. Chan Yuen Ming

The Company

Interest of a

589,501,546

25.50%

("Mr. Chan")

controlled

ordinary Shares

corporation

(L)

(Note 3)

Beneficial

1,000,000

0.04%

owner

ordinary Shares

(L)

Mr. Shao Kwok Keung

The Company

Beneficial

15,800,000

0.68%

("Mr. Shao")

owner (Note 4)

ordinary Shares

(L)

− 43 −

APPENDIX IV

GENERAL INFORMATION

Notes:

  1. The letter "L" denotes a long position in the shares or underlying shares of the Company or any of its associated corporations and the letter "S" denotes a short position in the shares or underlying shares of the Company or any of its associated corporations.
  2. On the basis of 2,311,890,683 Shares in issue as at the Latest Practicable Date.
  3. These Shares were held by Creative Sector Limited, the entire issued share capital of which was owned by Mr. Chan, an executive Director. Mr. Chan was deemed to be interested in all the Shares in which Creative Sector Limited was interested by virtue of the SFO.
  4. On 26 September 2018, a total of 15,800,000 share options (each share option entitling the holder to subscribe for one Share) were granted to Mr. Shao under the share option scheme of the Company. As at the Latest Practicable Date, all these share options remained outstanding.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short positions in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

Since 30 June 2019 (being the date to which the latest published audited consolidated financial statements of the Group are made up) and up to the Latest Practicable Date, none of the Directors or proposed directors of the Company (if any) had any interest, direct or indirect, in any assets which had been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

None of the Directors or proposed directors of the Company (if any) was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date and which is significant in relation to the business of the Group taken as a whole.

− 44 −

APPENDIX IV

GENERAL INFORMATION

3. SUBSTANTIAL SHAREHOLDERS' INTERESTS IN SHARES AND UNDERLYING SHARES

As at the Latest Practicable Date, so far as is known to any Directors or chief executive of the Company, the persons (other than a Director or chief executive of the Company) who (a) had an interest or short position in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO; or (b) were, directly or indirectly, interested in 10% or more in the shares of the Company carrying rights to vote in all circumstances at the general meetings of the Company or any other members of the Group, were as follows:

Capital / number

of shares /

Approximate

Capacity /

underlying

percentage of

Name of shareholder

Nature of interest

shares held

shareholding

(Note 1)

(Note2)

Creative Sector Limited

Beneficial owner

589,501,546

25.50%

ordinary Shares

(L)

Li Hiu Yeung ("Dr. Li")

Beneficial owner

184,056,000

9.65%

(Note 3)

ordinary Shares

(L)

Light Group Field Sci-Tech

Beneficial owner

148,000,000

7.76%

Limited ("Light Group")

(Note 3)

ordinary Shares

(L)

Notes:

  1. The letter "L" denotes a person's long position in the Shares or underlying Shares and the letter "S" denotes a person's short position in the Shares or underlying Shares.
  2. On the basis of 2,311,890,683 Shares in issue as at the Latest Practicable Date.
  3. Based on the Disclosure of Interest Notice filed by Light Group and Dr. Li under Part XV of the SFO in respect of their respective interests in Shares and underlying Shares as of 11 November 2019, the entire issued share capital in Light Group is owned by Dr. Li. Dr. Li is deemed to be interested in all the Shares in which Light Group is interested by virtue of the SFO..

Save as disclosed herein, so far as is known to any Director or chief executive of the Company, there was no other person (other than a Director or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the Shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 10% or more of the shares of the Company carrying rights to vote in all circumstances at the general meetings of the Company or any other member of the Group.

− 45 −

APPENDIX IV

GENERAL INFORMATION

4. SERVICE AGREEMENTS

As at the Latest Practicable Date, none of the Directors had a service contract with any member of the Group which was not determinable by the Company or the relevant member of the Group within one year without payment of compensation other than statutory compensation.

5. MATERIAL LITIGATIONS

As disclosed in the announcement of the Company dated 1 July 2019, Prosper Talent Limited (the "Plaintiff"), a promissory note holder of the promissory note issued by the Company, with an outstanding principal amount of US$56,000,000 was due since August 2018 and remains unsettled. On 27 June 2019, the Company, Mr. Chan, an executive director of the Company, and an indirect wholly owned subsidiary of the Company (collectively referred to as the "Defendants"), received a writ of summons issued in the Court of First Instance of High Court of Hong Kong by the Plaintiff as a plaintiff against the Defendants. According to the indorsement of claim enclosed in the writ of summons, US$95,383,187.40 (equivalent to approximately RMB654,487,000) was due and outstanding under a note purchase agreement entered into between the Plaintiff, the Company and Mr. Chan which was secured by a personal guarantee entered into by Mr. Chan and security assignment entered into by the indirect wholly owned subsidiary in favour of the Plaintiff. The Plaintiff 's claims are for (i) the sum of US$95,383,187.40 or its Hong Kong dollars equivalent at the time of payment; (ii) further interest; (iii) costs; and (iv) further and/or reliefs.

6. QUALIFICATION AND CONSENT OF EXPERT

HLB Hodgson Impey Cheng Limited ("HLB"), the reporting accountants of the Company, has given opinion or advice contained in this circular.

HLB has given and has not withdrawn its written consent to the issue of this circular with the reference to its name and its letter in the form and context in which it appears.

As at the Latest Practicable Date, HLB had no shareholding, directly or indirectly, in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for shares in any member of the Group.

HLB does not have any interest, direct or indirect, in any assets which since 31 December 2019, being the date to which the latest published audited financial statements of the Group were made up, have 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.

7. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) were entered into by the members of the Group within two years immediately preceding the date of this circular, and are or may be material:

(a) the Capital Investment Agreement;

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APPENDIX IV

GENERAL INFORMATION

  1. the strategic cooperation agreement dated 16 October 2019 entered into between the Company and a company incorporated in Hong Kong as cooperative partner, pursuant to which the cooperative partner agreed to provide funding of US$500 million to support projects to be developed by the Company for ten years from the date of such agreement;
  2. three sale and purchase agreements dated 26 August 2019 entered into between Lide as vendor in each agreement and Sunshine PCB (HK) Co., Limited, Gain Mind Limited and Goldland Limited as purchasers of Units 6, 7 and 8 on the 15th Floor of Greenfield Tower, Concordia Plaza, No.1 Science Museum Road, Kowloon, Hong Kong, respectively, at an aggregate consideration of HK$80,800,000;
  3. the subscription agreement dated 30 May 2019 entered into between the Company as issuer and Ms. Ho Sue Bia as subscriber pursuant to which the subscriber has conditionally agreed to subscribe, and the Company has conditionally agreed to allot and issue, 78,000,000 subscription Shares at the subscription price of HK$0.48 per subscription Share for a cash consideration of HK$37,440,000;
  4. the sale and purchase agreement dated 30 April 2019 entered into between the Company as purchaser and three vendors in respect of the acquisition of telecommunication networks in Malaysia at a consideration of HK$218,279,600, which was satisfied by the allotment and issue of 291,039,467 consideration Shares to the vendors. Such acquisition was completed on 24 May 2019;
  5. the placing agreement dated 20 March 2019 entered into between the Company as issuer and Ever Joy Securities Limited as placing agreement, pursuant to which the placing agent has agreed to procure investors to subscribe for 30,182,000 shares at the placing price of HK$0.48 per placing share of the Company. Such placing was completed on 29 March 2019;
  6. the disposal agreement dated 3 June 2018 (as supplemented by a disposal supplemental agreement) entered into between China All Access Group Limited (中國全通集團有限公司) as vendor and China RS Group Limited (中國榮勝集團有限公司) for the disposal of the entire equity interest in Hebei Noter Communication Technology Co., Limited* (河北諾特 通信技術有限公司) at the consideration of RMB1,750,000,000. Such disposal was completed on 7 December 2018; and
  7. the sale and purchase agreement dated 22 May 2018 entered into between Ganzhou Zhongyuan Huaxun Network Technology Co., Ltd.* (贛州中遠華訊網絡技術有限公司) as vendor and Shenzhen Lead Innovative Energy Co., Limited as purchaser in relation to the acquisition of 83.33% of the entire equity interest in Qinghai Juguang High New Technology Group Co., Ltd.* (青海聚光高新科技集團有限公司), which was subsequently terminated on 29 November 2018 by the purchaser issuing a termination notice to the vendor on the same date.

− 47 −

APPENDIX IV

GENERAL INFORMATION

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the head office and principal place of business of the Company in Hong Kong at Room 805, 8/F, Greenfield Tower, Concordia Plaza, 1 Science Museum Road, Tsim Sha Tsui, Kowloon, Hong Kong during normal business hours from 9:30 a.m. to 5:00 p.m. on any Business Day from the date of this circular up to and including the date of the EGM:

  1. the memorandum and articles of association of the Company;
  2. the consolidated audited accounts of the Company for each of the two financial years ended 31 December 2018;
  3. the Capital Investment Agreement;
  4. the letter from the Board, the text of which is set out on pages 4 to 9 to this circular; and
  5. the material contracts referred to under the paragraph headed "7. Material Contracts" in this appendix.

9. MISCELLANEOUS

  1. The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KYI-1111, Cayman Islands.
  2. The head office and principal place of business of the Company in Hong Kong is at Room 805, 8/F, Greenfield Tower, Concordia Plaza, 1 Science Museum Road, Tsim Sha Tsui, Kowloon, Hong Kong.
  3. The Company's share registrar and transfer office in Hong Kong is Union Registrars Limited at Suites 3301-04, 33th Floor, Two Chinachem Exchange Square, 338 King's Road, North Point, Hong Kong.
  4. The company secretary is Mr. Shao Kwok Keung. Mr. Shao is a fellow of the Association of Chartered Certified Accountants and a member of the Hong Kong Institute of Certified Public Accountants.
  5. The English text of this circular shall prevail over its Chinese text.

− 48 −

NOTICE OF EGM

中 國 全 通 (控 股) 有 限 公 司

China All Access (Holdings) Limited

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 633)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting of China All Access (Holdings) Limited ("Company") will be held at Room 805, 8/F, Greenfield Tower, Concordia Plaza, 1 Science Museum Road, TST., Kowloon, Hong Kong at 11:00 a.m. on Tuesday, 21 January 2020 for the purposes of considering and, if thought fit, approving the following ordinary resolution:

ORDINARY RESOLUTION

1. "THAT the capital investment agreement dated 26 November 2019 entered into between Lide Global Limited ("Lide") and CRC-YJ INDUSTRY LIMITED (the "Investor") in relation to the subscription by the Investor for approximately RMB214.3 million of the registered capital of Shenzhen Lead Communications Limited* (深圳市立德通訊器材有限 公司)("Shenzhen Lead"), representing approximately 30% of the enlarged registered capital of Shenzhen Lead by way of capital contribution in cash for the sum of RMB300 million (a copy of which has been produced to the meeting marked "A" and signed by the chairman of the meeting for the purpose of identification), on and subject to the terms and conditions thereof, and the transactions contemplated thereby be and are hereby approved and that the directors of the Company be and are hereby authorised to take any action and sign any document (under seal, if necessary) as they consider necessary, desirable or expedient in connection therewith or the transactions contemplated thereby."

By order of the Board of

China All Access (Holdings) Limited

Chan Yuen Ming

Chairman

Hong Kong, 31 December 2019

Head office and principal place of business in Hong Kong:

Room 805, 8/F

Greenfield Tower, Concordia Plaza

1 Science Museum Road

Tsim Sha Tsui

Kowloon

Hong Kong

− 49 −

NOTICE OF EGM

Notes:

  1. A member of the Company entitled to attend and vote at the meeting (the "Meeting") above is entitled to appoint in written form one or, if he is the holder of two or more shares (the "Shares") of the Company, more proxies to attend and vote instead of him. A proxy need not be a member of the Company.
  2. In the case of joint holders of Shares, any one of such joint holders may vote, either in person or by proxy, in respect of such Shares as if he/she were solely entitled thereto, but if more than one of such joint holders are present at the Meeting, whether in person or by proxy, then one of the said persons so present whose name stands first on the register in respect of such Shares shall alone be entitled to vote in respect thereof.
  3. In order to be valid, the form of proxy must be in writing under the hand of the appointor or of his/her attorney duly authorised in writing, or if the appointor is a corporation, either under seal, or under the hand of an officer or attorney duly authorised, and must be deposited with the Hong Kong share registrar and transfer office (the "Hong Kong Share Registrar") of the Company, Union Registrars Limited at Suites 3301-04, 33/F, Two Chinachem Exchange Square, 338 King's Road, North Point, Hong Kong (together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof) not less than 48 hours before the time fixed for holding of the Meeting (i.e. at or before 11:00 a.m. on Sunday, 19 January 2020 (Hong Kong time)) or any adjournment thereof.
  4. For the purpose of determining members who are qualified for attending the Meeting, the register of members of the Company will be closed from Wednesday, 15 January 2020 to Tuesday, 21 January 2020 (both days inclusive), during which period no transfer of the Shares will be effected. In order to qualify for attending the Meeting or any adjournment thereof, all transfers of Shares accompanied by the relevant share certificates must be lodged with the Hong Kong Share Registrar at the above address by no later than 4:00 p.m. on Tuesday, 14 January 2020.
  5. Delivery of an instrument appointing a proxy should not preclude a member from attending and voting in person at the Meeting or any adjournment thereof and in such event, the instrument appointing a proxy shall be deemed to be revoked.

As at the date of this notice, the executive Directors are Mr. Chan Yuen Ming and Mr. Shao Kwok Keung; the non-executive Director is Mr. Bao Tiejun; and the independent non-executive Directors are Mr. Wong Che Man Eddy, Mr. Lam Kin Hung Patrick and Mr. Tam Sui Kwan.

* for identification purposes only

− 50 −

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China All Access (Holdings) Limited published this content on 30 December 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 December 2019 10:05:04 UTC