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 you should take, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in i-CABLE Communications 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, licensed securities dealer or registered institution in securities 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.

The circular is for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Company.

i-CABLE COMMUNICATIONS LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 1097)

CONNECTED TRANSACTION IN RELATION TO

THE PROPOSED ISSUE OF

UNLISTED LONG-TERM CONVERTIBLE SECURITIES TO FOREVER TOP (ASIA) LIMITED UNDER SPECIFIC MANDATE

Financial adviser to the Company

SOMERLEY CAPITAL LIMITED

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

A letter from the Board is set out on pages 4 to 18 of this circular. A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 19 to 20 of this circular. A letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages 21 to 52 of this circular.

A notice of the GM to be convened at 3:00 p.m. on Tuesday, 23 March 2021 at Ballroom, Lobby Floor, Hyatt Regency Hong Kong, Tsim Sha Tsui, 18 Hanoi Road, Tsim Sha Tsui, Kowloon, Hong Kong is set out on pages GM-1 to GM-3 of this circular. If a Shareholder is not able to attend the GM in person, such Shareholder is requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon together with any power of attorney or other authority (if any) under which it is signed or a certified copy of such power of attorney to the Company's share registrar and transfer office, Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong, as soon as possible and in any event not less than 48 hours (exclusive of any part of a day that is a public holiday) before the time appointed for holding the GM. Completion and return of the form of proxy will not preclude a Shareholder from attending and voting in person at the GM should the Shareholder so desire.

Shareholders are advised to read the section headed ''Precautionary measures for the general meeting'' in this circular for further details of our precautionary measures for the GM in relation to COVID-19, and monitor the development of COVID-19. Subject to the development of COVID-19, the Company may implement further changes and precautionary measures and may issue further announcement(s) regarding such measures as appropriate.

2 March 2021

CONTENTS

Page

Definitions ........................................................................

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

1 4

Letter from the Independent Board Committee .................................... 19

Letter from the Independent Financial Adviser .................................... 21

Appendix I - The adjustment mechanism of the Conversion Price pursuant

to the 2021 LCS Instrument ..................................

I-1

Appendix II

- General information ............................................

II-1

Notice of general meeting ......................................................... GM-1

Precautionary measures for the general meeting ................................... PM-1

- i -

In this circular, unless the context otherwise requires, the following terms shall have the meanings set out below:

''2019 LCS''

''2019 LCS Subscription

Agreement''

''2021 LCS''

''2021 LCS Instrument''

''2021 LCS Subscription

Agreement''

''Board''

''Communications Authority''

''Company''

''connected person(s)''

''Control''

''Controlling Shareholder'' or ''Forever Top''

''Conversion Price''

''Conversion Shares''

the unlisted long-term convertible bonds issued by the Company to the Controlling Shareholder in the principal amount of HK$568 million in June 2019

the agreement dated 25 January 2019 entered into between the Company and the Controlling Shareholder in relation to the subscription of the 2019 LCS

the unlisted long-term convertible bonds to be issued by the Company in the principal amount of HK$200 million pursuant to the 2021 LCS Subscription Agreement

the instrument constituting the 2021 LCS to be executed by the Company upon issuance of the 2021 LCS

the agreement dated 27 January 2021 entered into between the Company and the Controlling Shareholder in relation to the Subscription

the board of Directors

the Communications Authority of Hong Kong, an independent statutory body established under the Communications Authority Ordinance (Cap. 616) on 1 April 2012

i-CABLE Communications Limited (stock code: 1097), a company incorporated under the laws of Hong Kong and the shares of which are listed on the Main Board of the Stock Exchange

has the same meaning ascribed to it under the Listing Rules acquisition or control of more than 50% of the voting rights of the issued share capital of the Company or the right to appoint and/or remove all or the majority of the members of the Company's board of directors or other governing body, whether obtained directly or indirectly, and whether obtained by ownership of share capital, the possession of voting rights, contract or otherwise

Forever Top (Asia) Limited, a company incorporated in Hong Kong with limited liability

the conversion price of HK$0.068 per Conversion Share pursuant to the 2021 LCS Subscription Agreement

the new Shares to be issued upon exercise of the conversion rights under the 2021 LCS

''COVID-19''

''Director(s)''

''Free TV Licence''

''FTV''

''GM''

''Group''

''HK$''

''HKCTV''

''HKSCC''

''Hong Kong''

''Independent Board

Committee''

''Independent Financial

Adviser''

''Independent Shareholder(s)''

coronavirus disease 2019

the director(s) of the Company

domestic free television programme service licence issued to FTV

Fantastic Television Limited, a private company incorporated in Hong Kong, which is a consolidated structured entity of the Company and the Company holds 14.9% of its voting rights

the general meeting of the Company to be convened to approve, among other things, the 2021 LCS Subscription Agreement and the Specific Mandate

the Company, its subsidiaries and consolidated structured entities of the Company

Hong Kong dollar(s), the lawful currency of Hong Kong

Hong Kong Cable Television Limited, a private company incorporated in Hong Kong and a wholly-owned subsidiary of the Company

Hong Kong Securities Clearing Company Limited

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

the independent committee of the Board comprising all independent non-executive Directors, namely, Mr. Lam Kin-Fung, Jeffrey, Dr. Hu Shao Ming Herman, Mr. Luk Koon Hoo, Roger and Mr. Tang Sing Ming Sherman, which is established to advise to the Independent Shareholders in relation to the Subscription

Yue Xiu Capital Limited, a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), being the independent financial adviser appointed by the Independent Board Committee for the purpose of advising the Independent Board Committee and the Independent Shareholders in relation to the Subscription

Shareholders other than (i) the Controlling Shareholder; (ii)

the associates of the Controlling Shareholder; and (iii) Shareholders who are involved in, or interested in, the Subscription, who are required under the Listing Rules to abstain from voting in the GM

''Independent Third Party(ies)''

''Last Trading Day''

''Latest Practicable Date''

''Listing Committee''

''Listing Rules''

''NAV''

''Optionholder(s)''

''Pay TV Licence''

''Redemption Amount''

''Share(s)''

''Shareholder(s)''

''Share Option(s)''

''Specific Mandate''

''Stock Exchange''

''Subscription''

''subsidiary(ies)''

''Takeovers Code''

''TV''

third party(ies) independent of the Company and any connected person(s) of the Company and not a connected person of the Company

27 January 2021, being the last trading day for the Shares before the publication of the announcement in relation to the Subscription

24 February 2021, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular

has the same meaning ascribed to it under the Listing Rules the Rules Governing the Listing of Securities on the Stock Exchange

net asset value

holder(s) of the Share Option(s)

the domestic pay television programme service licence issued to HKCTV

100% of the outstanding principal amount of the 2021 LCS, together with all accrued but unpaid interest

ordinary share(s) of the Company

the holder(s) of the Share(s)

a right to subscribe for Shares pursuant to the share option scheme of the Company adopted on 24 May 2018 or any share option granted thereunder

the specific mandate to be sought from the Independent Shareholders at the GM to allot, issue and deal in the Conversion Shares

The Stock Exchange of Hong Kong Limited

the subscription of the 2021 LCS by the Controlling Shareholder pursuant to the 2021 LCS Subscription Agreement

has the same meaning ascribed to it under the Listing Rules the Hong Kong Code on Takeovers and Mergers

television

''%''

per cent. or percentage

i-CABLE COMMUNICATIONS LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 1097)

Non-executive Directors:

Registered Office:

Tan Sri Dato' David Chiu (Chairman)

Dr. Cheng Kar-Shun, Henry GBM, GBS (Vice-chairman) Mr. Tsang On Yip, Patrick

7th Floor, Cable TV Tower, 9 Hoi Shing Road,

Tsuen Wan,

Mr. Hoong Cheong Thard

Hong Kong

Mr. Lie Ken Jie Remy Anthony Ket Heng Ms. Ng Yuk Mui Jessica

Executive Director:

Mr. Andrew Wah Wai Chiu

Independent non-executive Directors:

Mr. Lam Kin-Fung, Jeffrey GBS, JP Dr. Hu Shao Ming Herman SBS, JP Mr. Luk Koon Hoo, Roger BBS, JP Mr. Tang Sing Ming Sherman

2 March 2021

To the Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION IN RELATION TO

THE PROPOSED ISSUE OF

UNLISTED LONG-TERM CONVERTIBLE SECURITIES TO FOREVER TOP (ASIA) LIMITED UNDER SPECIFIC MANDATE

(A) INTRODUCTION

Reference is made to the announcement of the Company dated 27 January 2021 in relation to, among other things, the Subscription Agreement. It was announced that the Company entered into the 2021 LCS Subscription Agreement with the Controlling Shareholder, pursuant to which the Company has conditionally agreed to issue, and the Controlling Shareholder has conditionally agreed to subscribe for the 2021 LCS. Under the 2021 LCS Subscription Agreement, the Company will procure the Controlling Shareholder to subscribe for the 2021

LCS with a principal amount of HK$200 million.

As at the Latest Practicable Date, the Controlling Shareholder was interested in an aggregate of 3,083,722,894 Shares, representing approximately 43.2% of the total number of the issued Shares and was a substantial Shareholder and therefore a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the transaction contemplated under the 2021 LCS Subscription Agreement (including the grant of the Specific Mandate) constitutes a connected transaction of the Company under the Listing Rules and the 2021 LCS Subscription Agreement is subject to the reporting, announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

Pursuant to Rule 13.39(6) of the Listing Rules, the Board has established the Independent Board Committee, comprising all independent non-executive Directors, namely Mr. Lam Kin-Fung, Jeffrey, Dr. Hu Shao Ming Herman, Mr. Luk Koon Hoo, Roger and Mr. Tang Sing Ming Sherman, to advise the Independent Shareholders in relation to the Subscription and how to vote on the relevant resolution at the GM. Yue Xiu Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Subscription and such appointment has been approved by the Independent Board Committee.

The purpose of this circular is to provide you with, among other things, (i) details of the 2021 LCS Subscription Agreement; (ii) a letter of recommendation from the Independent Board Committee to the Independent Shareholders in relation to the Subscription; (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Subscription; and (iv) a notice of the GM.

(B) PROPOSED ISSUE OF UNLISTED LONG-TERM CONVERTIBLE SECURITIES

On 27 January 2021 (after trading hours), the Company entered into the 2021 LCS Subscription Agreement with the Controlling Shareholder, pursuant to which the Company has conditionally agreed to issue, and the Controlling Shareholder has conditionally agreed to subscribe for, the 2021 LCS. The principal amount of the 2021 LCS is HK$200 million. Principal terms of the 2021 LCS Subscription Agreement are set out below:

Date:

27 January 2021

Issuer:

The Company

Subscriber:

The Controlling Shareholder

Principal amount:

HK$200 million

Conversion Price:

The initial Conversion Price (subject to adjustments as set out

in the paragraph headed ''Adjustments to the Conversion

Price'' below) shall be HK$0.068 per Conversion Share, which

is/represents:

(i) equivalent to the closing price of HK$0.068 per Share as

quoted on the Stock Exchange on the Latest Practicable

Date;

  • (ii) a premium of approximately 13.3% over the closing price of HK$0.060 per Share as quoted on the Stock Exchange on the Last Trading Day;

  • (iii) a premium of approximately 13.0% over the average closing price of approximately HK$0.0602 per Share as quoted on the Stock Exchange over the 5 consecutive trading days ended on and including the Last Trading

    Day;

  • (iv) a premium of approximately 12.8% over the average closing price of approximately HK$0.0603 per Share as quoted on the Stock Exchange over the 10 consecutive trading days ended on and including the Last Trading Day;

  • (v) a discount of approximately 24.4% to the audited consolidated NAV attributable to the Shareholders as at 31 December 2019 as extracted from the annual report of the Company for the year ended 31 December 2019 of approximately HK$0.090 per Share; and

  • (vi) a premium of approximately 4.6% over the unaudited consolidated NAV attributable to the Shareholders as at 30 June 2020 as extracted from the interim report of the Company for the six months ended 30 June 2020 of approximately HK$0.065 per Share.

Based on the initial Conversion Price, the 2021 LCS is convertible into 2,941,176,470 Conversion Shares, representing

(i) approximately 41.2% of the total number of the existing issued Shares as at the Latest Practicable Date; (ii) approximately 29.2% of the total number of issued Shares as enlarged by the issue of the Conversion Shares in full (assuming no other Shares are issued and no repurchase of

Shares by the Company on or before the conversion of the 2021 LCS); and (iii) approximately 19.8% of the total number of issued Shares as enlarged by the issue of the Conversion

Shares in full (assuming new Shares are issued pursuant to the full exercises of all outstanding Share Options and the conversion rights attached to the 2019 LCS, but otherwise no other Shares are issued and no repurchase of Shares by the Company on or before the conversion of the 2021 LCS). The Conversion Price was determined after arm 's length negotiations between the Company and the Controlling Shareholder based on, among others, the market prices of the Shares prior to the date of the 2021 LCS Subscription

Agreement. Given that the Conversion Price represents premiums over the market prices of the Shares prior to the date of the 2021 LCS Subscription Agreement as well as the unaudited consolidated NAV attributable to the Shareholders as at 30 June 2020, the Board considers that the Conversion Price is fair and reasonable.

Adjustments to the Conversion Price:

The initial Conversion Price will be subject to adjustment for share consolidations, share subdivisions, re-classification of share into other securities (upon which the Conversion Price will be adjusted proportionately such that holders would receive the number of Shares and/or such other securities which they would have been entitled to had they been converted before the re-classification), capitalisation issues, capital distributions, rights issues, and certain other market standard dilutive events. Details of the adjustment mechanism of the Conversion Price are set out in appendix I to this circular.

Coupon rate: 2.0% per annum, payable quarterly.

Maturity date:

The end of tenth (10th) year from the date of issue of the 2021 LCS. On the maturity date, all of the remaining outstanding 2021 LCS will be redeemed by the Company at 100% of the outstanding principal amount of the 2021 LCS together with any interest accrued but unpaid thereon.

Early redemption by the Company:

The Company may at any time on or after the date of issue of the 2021 LCS by giving not less than ten (10) business days' written notice to the holder(s) of the 2021 LCS to redeem all or part of the 2021 LCS at the Redemption Amount.

Mandatory redemption by the holder(s) of the 2021 LCS:

Any holder(s) of the 2021 LCS shall have the right at its option to require the Company to redeem all, but not some only, of the 2021 LCS held by such holder at the Redemption Amount (i) when the Shares cease to be listed or admitted to trading or suspend for a period equal to or exceeding ten (10) consecutive trading days on the Stock Exchange, or if applicable, other alternative stock exchange; or (ii) when there is a change of control of the Company. A ''change of control'' occurs when:

(i) Forever Top ceases to own (directly or indirectly) 30% or more of the voting rights of the issued share capital of the Company; or

(ii) any person or persons acting together acquires Control of the Company if such person or persons does not or do not have, and would not be deemed to have Control of the Company on the date of issue of the 2021 LCS; or

(iii) the Company consolidates with or merges into or sells or transfers all or substantially all of the assets of the Company to any other person, unless the consolidation, merger, sale or transfer will not result in other person or persons acquiring Control over the Company.

Conversion:

The outstanding 2021 LCS is convertible into Shares at any time during the period from the date of the issue of the 2021 LCS up to the close of business on the maturity date at an integral multiple of HK$1 million, subject to the conversion restrictions as set out in the paragraph headed ''Conversion restrictions'' below.

Conversion restrictions: The holder(s) of the 2021 LCS may exercise a conversion right only if such conversion:

(A) (where applicable) has been approved or consented to by

the Communications Authority; and

(B) will not cause the Company to be unable to meet the

minimum public float requirement under the Listing

Rules.

For the avoidance of doubt and subject to the conversion restrictions set out above, the holder(s) of the 2021 LCS may also exercise a conversion right if the conversion of the 2021 LCS triggers any obligation under the Takeovers Code. In the event that the conversion of the 2021 LCS triggers any obligation under the Takeovers Code, the Company will comply with the relevant requirements under the Takeovers Code as appropriate.

Voting:

The holders of the 2021 LCS shall not be entitled to receive notices of, attend or vote at any general meetings of the Company or any meetings of any class of Shares, by reason only of it being a holder of the 2021 LCS.

Listing:

The 2021 LCS will not be listed on the Stock Exchange or any other stock exchange. No application will be made for the listing of the 2021 LCS on the Stock Exchange or any other stock exchange. No application will be made for the admissibility, deposit, clearance or settlement of the 2021 LCS in the Central Clearing and Settlement System established and operated by HKSCC. No transfer, clearing or settlement services will be provided by HKSCC in respect of the 2021

LCS.

An application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares to be issued upon the exercise of the conversion rights attached to the 2021 LCS.

Transferability:

The 2021 LCS is transferable to other Independent Third Parties except that the transfer would result in the Company being obliged to comply with the obligations prescribed under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong) in relation to issue of prospectus or initial public offering of securities or (where applicable) a grant by the Communications Authority of the requisite notice of wavier(s) as a result of such transfer of the 2021 LCS has not been obtained.

The 2021 LCS cannot be transferred to any connected persons of the Company.

Ranking of the

Conversion Shares:

The Conversion Shares shall be duly and validly issued, fully paid and registered, and free from encumbrances and all such Conversion Shares shall rank pari passu in all respects with the fully paid Shares in issue on the relevant date of conversion of the Conversion Shares on the Company's register of members (after issue of the Conversion Shares upon conversion of the 2021 LCS) respectively and shall accordingly entitle the holders thereof to participate in full in all future dividends or other distributions the record date for which falls on a date on or after the relevant conversion date.

Conditions of the issuance of the 2021 LCS

The obligation of the Controlling Shareholder to subscribe for the 2021 LCS is subject to the fulfilment or waiver of the following conditions:

(i) The warranties made by the Company in the 2021 LCS Subscription Agreement being true and correct in all material respects when made, and being true, and correct in all material respects as of the date of the completion of the 2021 LCS Subscription Agreement with the same force and effect as if they had been made on and as of such date.

(ii) The Company having performed and complied with in all respects all agreements, obligations and conditions contained in the 2021 LCS Subscription Agreement and the other transaction documents set out in the 2021 LCS Subscription Agreement that are required to be performed or complied with by it on or before the date of the completion of the 2021 LCS Subscription Agreement and having obtained all approvals, consents and qualifications necessary to complete the transactions contemplated thereby at the completion of the 2021 LCS Subscription Agreement.

  • (iii) The Company having delivered to the Controlling Shareholder a counterpart of the 2021 LCS Subscription Agreement and each of the other duly executed transaction documents set out in the 2021 LCS Subscription Agreement on or prior to the completion of the 2021 LCS Subscription Agreement.

  • (iv) The Company having obtained, on or before the completion of the 2021 LCS Subscription Agreement, as the case may be, any and all approvals, consents and waivers necessary for consummation of the transactions contemplated by the 2021 LCS Subscription Agreement and the other transaction documents set out in the 2021 LCS Subscription Agreement, including but not limited to:

    • (a) the approval from the Independent Shareholders at the GM for the consummation of the 2021 LCS Subscription Agreement and the transactions contemplated thereunder, the grant of the Specific Mandate to allot, issue and deal with the Conversion Shares;

    • (b) the approval from the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares which fall to be issued upon conversion of the 2021 LCS; and

    • (c) the grant by the Communications Authority of the relevant notice of waiver(s) in respect of the revised shareholding structure of the Company as a result of the issues of the 2021 LCS and the Conversion Shares, if applicable.

  • (v) There having not occurred any change (nor any development or event involving a prospective change) in the financial or business condition, prospects, results of operations or general affairs of the Company and the Group taken as a whole, which, in the opinion of the Controlling Shareholder, is material and adverse in the context of the issue of the 2021 LCS. The Company shall deliver an officer's certificate providing confirmation of the foregoing to the Controlling Shareholder on the completion date of the 2021 LCS Subscription Agreement.

  • (vi) The Shares shall remain listed on the Stock Exchange at all times prior to the completion of the 2021 LCS Subscription Agreement and the current listing of the Shares not having been withdrawn or the trading of the Shares not having been suspended for a consecutive period of more than three trading days after the date of the 2021 LCS Subscription Agreement up to the completion date of the 2021 LCS Subscription Agreement (or such longer period as the Company and the Controlling Shareholder may agree); and no indication being received before or on the completion date of the 2021 LCS Subscription Agreement from the Stock Exchange to the effect that such listing may be withdrawn or objected to (or conditions will or may be attached thereto) including but not limited to as a result of or in connection with the terms of the 2021 LCS Subscription Agreement or for any other reason.

All of the above conditions precedent are required to be satisfied (or waived, if applicable) by 5:00 p.m. on 30 September 2021 (or such later date as may be mutually agreed by the parties in writing). Save for condition precedent (iv) set out above, the Controlling Shareholder has the sole discretion to waive the conditions precedent (i) to (iii), (v) and (vi) set out above in whole or in part by written notice to the Company.

As at the Latest Practicable Date, none of the conditions precedent above was fulfilled.

(C) EFFECT OF THE SUBSCRIPTION ON SHAREHOLDINGS IN THE COMPANY

Set out below are the shareholdings in the Company (i) as at the Latest Practicable Date; (ii) immediately after the 2021 LCS is converted in full; and (iii) immediately after the 2021 LCS and the 2019 LCS are converted and all outstanding Share Options are exercised in full.

Immediately after the 2021 LCS and the 2019

LCS are converted and

Immediately after the all outstanding Share

As at the Latest

2021 LCS is converted in Options are exercised

Practicable Date

full (Note 1) in full (Notes 1 and 2)

Number of

Number of Number of

issued Shares

%

issued Shares % issued Shares %

Controlling Shareholder Forever Top

3,083,722,894

  • 43.2% 6,024,899,364

    59.8% 10,568,899,364 71.1%

    Other Shareholders Mr. Ng Hung Sang, Ms.

    Ng Lai King Pamela, South China Finance and Management Limited and South China Securities Limited (Note 3)

    715,988,000

  • 10.0% 715,988,000

    7.1% 715,988,000 4.8%

    Other public

    Shareholders

    3,334,912,626

  • 46.8% 3,334,912,626

    33.1% 3,334,912,626 22.4%

    Optionholders

    -

    0.0%

    -

    0.0% 241,562,240 1.6%

    Total (Note 4)

    7,134,623,520

  • 100.0% 10,075,799,990

100.0% 14,861,362,230 100.0%

Notes:

  • 1. Pursuant to the terms of the 2021 LCS and the 2019 LCS, the holder(s) of the 2021 LCS and the 2019 LCS may only exercise a conversion right if the issue of the conversion shares pursuant to the exercise of the conversion right of the 2021 LCS and the 2019 LCS, respectively, would not cause the Company to be unable to meet the minimum public float requirement under the Listing Rules. Accordingly, the scenarios above are shown for illustrative purpose only.

  • 2. As at the Latest Practicable Date, the Company had outstanding Share Options convertible into 241,562,240 Shares.

  • 3. Based on the information available to the Company, the number of Shares represents the aggregate number of Shares held by Mr. Ng Hung Sang, Ms. Ng Lai King Pamela (the spouse of Mr. Ng Hung Sang) and two companies ultimately controlled by him (namely, South China Finance and Management Limited and South China Securities Limited). Mr. Ng Hung Sang personally beneficially owns 156,089,500 Shares. Ms. Ng Lai King Pamela personally and beneficially owns 96,022,500 Shares. South China Finance and Management Limited beneficially owns 876,000 Shares and South China Securities Limited beneficially owns 463,000,000 Shares, both of which are wholly owned by South China Financial Holdings Limited (stock code: 619), which in turn is ultimately and beneficially owned as to approximately 29.36% by Mr. Ng Hung Sang, among which 25.66% is held through his 100%-owned corporations and 3.70% is held by him as beneficial owner. Ms. Ng Yuk Mui Jessica, a non-executive Director, is the daughter of Mr. Ng Hung Sang and Ms. Ng Lai King Pamela.

  • 4. The sum of the shareholding percentages of the Shareholders in the table above may not add up to 100.0% due to rounding adjustments.

(D) FUND-RAISING EXERCISE OF THE COMPANY IN THE PAST 12 MONTHS

The Company had not conducted any fund-raising activities involving issue of securities in the twelve months prior to the Latest Practicable Date.

(E) INFORMATION ON THE CONTROLLING SHAREHOLDER

The Controlling Shareholder, Forever Top (Asia) Limited, is a company incorporated in Hong Kong with limited liability on 9 January 2015 whose principal business is investment holding. As at the Latest Practicable Date, the Controlling Shareholder was held by Tan Sri Dato' David Chiu (as to 24.5%), Dr. Cheng Kar-Shun, Henry (through Celestial Pioneer Limited, his wholly-owned company, as to 31.5%), Chow Tai Fook Enterprises Limited (through Celestial Channel Limited, a company wholly owned by Chow Tai Fook Enterprises Limited, as to 14.0%), Mr. John Huan Zhao (through Hony Communications Limited, his wholly-owned company as sole general partner of Expand Ocean L.P., as to 14.0%) and Mr. Li Sze Lim (through Profit Surge Investments Limited, his wholly-owned company, as to 16.0%).

(F) REASONS FOR AND BENEFITS OF THE SUBSCRIPTION

The Group is an integrated communication services provider in Hong Kong, commanding a large television viewer and communications services user base in town. It owns and operates a near universal wireline telecommunications network in Hong Kong to provide media and telecommunications services to over two million households. It is also one of the producers of television and multimedia content based in Hong Kong for distribution over conventional and new media, with a particular focus on news, information, sports and entertainment.

The Group had been loss-making in the recent years and it has been formulating an organisational restructuring which includes, among other things, (i) cost-saving initiatives; (ii) introduction of new contents and channels; (iii) new television content co-operation models; and (iv) strategic review on possible restructuring of the Group's business portfolio to achieve cost-saving and improve profitability as well as the financial performance of the Group. Owing to the early successes of the aforesaid initiatives, the Group's 2019 financial performance improved as compared to that for the previous financial year. In particular, operating costs shrank by approximately HK$128 million and net cash used in operating activities also reduced by approximately 13% to approximately HK$160 million for the year ended 31 December 2019. Since the net proceeds raised from the rights issue and the issuance of the 2019 LCS completed in June 2019 have been fully utilised as intended and in order to ensure the Group has sufficient funds to operate and for business expansion including the enhancement of the network infrastructure, the acquisition of programmes and programmes production, the Company entered into the 2021 LCS Subscription Agreement with the Controlling Shareholder and the Board is of the view that the entering into of the 2021 LCS Subscription Agreement is necessary to recapitalise the business to allow sufficient time for the restructuring initiatives to be fully implemented.

The Board (excluding the members of the Independent Board Committee whose opinion is set out in the letter from the Independent Board Committee in this circular) considers that the Subscription is in the interests of the Company and its Shareholders as a whole and it will provide additional funding for the Group's capital and operating expenditure, meet the cash flow needs of the Group and provide additional funding to fulfill the investment requirements under the TV licences of the Group in the medium to long term as the business of the Group undergoes restructuring in order to turnaround the operations.

The issue of the 2021 LCS provides further protection to the Independent Shareholders from immediate dilution while guarantees fund raising of HK$200 million. As the 2021 LCS does not carry any voting or dividend rights with a long-term maturity (10 years), there is no immediate dilution for the Independent Shareholders.

Other fund-raising methods including debt financing and equity placement have been considered by the Board. However, commercial debt financing (even if available) will put further pressure on the already weak financial position and cashflow of the Group. Because of the weak financial performance of the Group, an equity placement to Independent Third Parties may require a higher discount on issue price and result in more dilution for the Shareholders.

The Board has considered but decided not to conduct a rights issue for the proposed fund-raising exercise due to, among other things: (i) the low subscription rate of the rights shares by the then Independent Shareholders in the rights issue conducted by the Company in 2019; (ii) the subscription price of a rights issue being at a discount to the market prices as compared to the premium of the Conversion Price over the market prices and the unaudited consolidated NAV attributable to the Shareholders as at 30 June 2020; (iii) a more lengthy timetable for conducting a rights issue; and (iv) the more immediate dilution to the shareholding of the Shareholders who do not participate in the rights issue as compared to that of the issue of the 2021 LCS, which will mitigate the immediate dilution impact to the Independent Shareholders.

Having considered the above factors, the Board considers that the Subscription is a well-balanced option for the Company, improving the liquidity of the Group while mitigating immediate dilution for the Independent Shareholders. On this basis, the Directors (excluding the members of the Independent Board Committee whose opinion is set out in the letter from the Independent Board Committee in this circular) are of the view that the Subscription is in the interests of the Company and the Shareholders as a whole and the terms of the Subscription are fair and reasonable.

(G) PROPOSED USE OF PROCEEDS

The estimated net proceeds from the Subscription (after deducting the expenses) are approximately HK$198 million. Based on the estimated net proceeds and the total number of the Conversion Shares (assuming conversion of the 2021 LCS in full at the initial Conversion Price of HK$0.068 per Conversion Share), the net price to be received by the Company for each Conversion Share will be approximately HK$0.067.

The Company intends to apply the net proceeds from the Subscription as to:

(i) approximately HK$100 million for investments in capital expenditure for the enhancement of network infrastructure and other relevant capital expenditures in the 18 months following the completion of the Subscription. The reasons for incurring such capital expenditure are, including but not limited to, (a) enhancement of the Group's overall competitiveness of network coverage in the market; and (b) enhancement of network infrastructure as customers are constantly demanding for better quality and higher-speed internet services which enable subscribers to enjoy more stable and faster internet access.

(ii) approximately HK$80 million for acquisition of programmes from Independent Third

Parties and programme production including but not limited to the followings in the 18 months following the completion of the Subscription:

- acquired channels amounting to approximately HK$40 million;

- live programmes, movies and dramas, and other entertainment programmes amounting to approximately HK$20 million; and

-

self-produced programmes amounting to approximately HK$20 million.

The Group will acquire rights for channels and/or programmes and produce programmes for broadcasting on the Group's pay television channels and provide the domestic free television programme service (as respectively required under the Pay TV Licence and the Free TV Licence) from time to time. The programming content includes news, finance, sports, lifestyle, documentary, children, movies, dramas and general entertainment. It is expected that payments for the committed acquired channels and programmes will be amounting to approximately HK$42 million during the first 6 months after completion of the Subscription and approximately HK$38 million between the seventh to twelfth months after completion of the Subscription. The proposed use ofproceeds for acquisition of programmes and programme production of approximately HK$80 million as stated above will be applied towards satisfying the investment requirements under the TV licences of the Group.

Save for certain programming commitments, mainly acquired channels, the Company has not yet identified any other acquisition or investment opportunities regarding the acquisition of programmes from Independent Third Parties. Despite the Group had yet to identify any acquisition or investment opportunities regarding the acquisition of programmes, to continue to update the Group's programming library, sourcing for new programmes have been on-going on a continuing basis. With sufficient funding on hand, the Group will be able to commit to ideal programmes once they are identified. Acquired channels committed by the Group included a variety of the programmes such as world-class sports, entertainment, lifestyle and news contents.

Set out below are the investment requirements under the TV licences of the Group:

Pay TV Licence

Upon acceptance of the renewal of the Pay TV Licence of HKCTV for the period of 12 years from 1 June 2017 to 31 May 2029, HKCTV will be subject to a commitment of a six-year investment plan of HK$3,447 million from 2017 to 2023, comprising HK$251 million of capital investment and HK$3,196 million of programming investment in content including in-house channels containing self-produced and/or acquired programmes as well as in acquired channels.

Free TV Licence

In accordance with the terms of the Free TV Licence, FTV is required to issue a performance bond in favour of the Hong Kong Government in the sum of HK$20 million. Under the terms of the performance bond, unless the Communications Authority otherwise approves or determines:

  • - within 18 months from the commencement date of the Free TV Licence (being 31 May 2016) (the ''Free TV Commencement Date''), FTV shall incur not less than HK$168 million as the capital and programming expenditure for providing the domestic free television programme service;

  • - within 30 months from the Free TV Commencement Date, FTV shall incur not less than HK$336 million as the cumulative capital and programming expenditure for providing the domestic free television programme service; and

  • - within 42 months from the Free TV Commencement Date, FTV shall incur not less than HK$504 million as the cumulative capital and programming expenditure for providing the domestic free television programme service.

The Group has already satisfied the investment requirements under the Free TV Licence as stated above. In addition, the programming investment of HK$3,196 million under the Pay TV Licence was being monitored by the Group on an on-going basis in the ordinary course of Pay TV businesses. The Board considers that, based on the information currently available and having made all necessary enquiries, the Group is able to fulfill the investment requirements under the TV licences of the Group and other commitments including programming commitments in the next 12 months after completion of the Subscription taking into account the future performance of the Group, the credit facility currently available to the Group (which carries interest at variable rates and is repayable on demand subject to annual review) and the net proceeds of approximately HK$80 million raised from the 2021 LCS in relation to the acquired channels, acquisition of programmes and programme production as stated above. The Board considers that, based on the information currently available and having made all necessary enquiries, no further fund-raising activity is expected in the next 12 months after completion of the Subscription.

(iii) approximately HK$18 million for general working capital including but not limited to salaries and benefits, rental and utilities, government/music licence fees, other general and administrative expenses for the Group in the 12 months following the completion of the Subscription.

(H) CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from Thursday, 18 March 2021 to Tuesday, 23 March 2021 (both days inclusive) for determining the identity of the Shareholders entitled to attend and vote at the GM.

No transfer of Shares will be registered during the above book closure period.

In order to qualify for the entitlement to attend and vote at the GM, all transfer forms accompanied by the relevant share certificates must be lodged with the share registrar of the Company, Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong, not later than 4:30 p.m. on Wednesday, 17 March 2021 for registration.

(I) THE LISTING RULES IMPLICATIONS

As at the Latest Practicable Date, the Controlling Shareholder was interested in an aggregate of 3,083,722,894 Shares, representing approximately 43.2% of the total number of the existing issued Shares, and was a substantial Shareholder and therefore a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the transaction contemplated under the 2021 LCS Subscription Agreement (including the grant of the Specific Mandate) constitute a connected transaction of the Company under the Listing Rules and the 2021 LCS Subscription Agreement is subject to the reporting, announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

The 2021 LCS Subscription Agreement was approved by the Board on 27 January 2021 (after trading hours). As Tan Sri Dato' David Chiu, Dr. Cheng Kar-Shun, Henry and Mr. Hoong Cheong Thard are also the directors of Forever Top and by reason of Mr. Tsang OnYip, Patrick's family relationship with Dr. Cheng Kar-Shun, Henry and Mr. Andrew Wah Wai Chiu's family relationship with Tan Sri Dato' David Chiu, the above-mentioned Directors were required to and (other than Dr. Cheng Kar-Shun, Henry who was absent) have abstained from voting at the Board meeting to approve the 2021 LCS Subscription Agreement and the transactions contemplated thereunder.

The Independent Board Committee comprising all the independent non-executive Directors has been established to advise the Independent Shareholders as to whether the entering into of the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) are in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole and the terms of the 2021 LCS Subscription Agreement (including the grant of the Specific Mandate) are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned, and to advise the Independent Shareholders on how to vote at the GM. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

The Company will announce in a timely manner in the event of any change in the terms of the 2021 LCS (including any adjustment of the Conversion Price according to the terms of the 2021 LCS) and the effect of the change.

(J) THE GENERAL MEETING

The GM will be held to consider and, if thought fit, approve, among others, the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate). Notice of the general meeting is set out on pages GM-1 to GM-3 of this circular. The Controlling Shareholder and its associates shall abstain from voting in respect of the resolution relating to the 2021 LCS Subscription Agreement at the GM.

Except as disclosed above, no other Shareholder is required to abstain from voting on the resolution to approve the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) at the GM.

(K) RECOMMENDATION

You are advised to read carefully the letter from the Independent Board Committee on pages 19 to 20 of this circular. The Independent Board Committee, having taken into account the advice of the Independent Financial Adviser, the text of which is set out on pages 21 to 52 of this circular, consider that the terms of the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) are on normal commercial terms, and are fair and reasonable so far as the Independent Shareholders are concerned and the entering into of the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) are in the interests of the Company and the Shareholders as a whole, although they are not in the ordinary or usual course of business of the Group due to the nature of such transaction. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the resolution to approve the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) at the GM.

The Board considers that the terms of the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) are on normal commercial terms, fair and reasonable and the entering into of the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) are in the interests of the Company and the Shareholders as a whole, and recommends the Independent Shareholders to vote in favour of the relevant resolution to be proposed at the GM.

(L) ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Yours faithfully,

For and on behalf of the Board i-CABLE COMMUNICATIONS LIMITED

Tan Sri Dato' David Chiu

Chairman

i-CABLE COMMUNICATIONS LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 1097)

2 March 2021

To the Independent Shareholders:

Dear Sir or Madam,

CONNECTED TRANSACTION IN RELATION TO

THE PROPOSED ISSUE OF

UNLISTED LONG-TERM CONVERTIBLE SECURITIES TO FOREVER TOP (ASIA) LIMITED UNDER SPECIFIC MANDATE

We refer to the circular dated 2 March 2021 issued by the Company to its Shareholders (the ''Circular''), of which this letter forms part. Unless the context otherwise requires, terms defined in the Circular shall have the same meanings when used in this letter.

We have been appointed by the Board as the members of the Independent Board Committee to advise the Independent Shareholders as to whether, in our opinion, the entering into of the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) are in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole and the terms of the 2021 LCS Subscription Agreement (including the grant of the Specific Mandate) are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned. None of the members of the Independent Board Committee have any direct or indirect interest in the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate).

In addition, Yue Xiu Capital Limited has been appointed as independent financial adviser to advise the Independent Board Committee and Independent Shareholders in respect of the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate). Details of its advice, together with the principal factors taken into consideration in arriving at such, are set out in its letter set out on pages 21 to 52 of the Circular. Your attention is also drawn to the letter from the Board set out on pages 4 to 18 of the Circular and other information set out in the Circular. Having considered the terms of the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) and the advice of the Independent Financial Adviser, we are of the opinion that the terms of the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) are on normal commercial terms, and are fair and reasonable so far as the Independent Shareholders areconcerned and the entering into of the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) are in the interests of the Company and the Shareholders as a whole, although they are not in the ordinary or usual course of business of the Group due to the nature of such transactions. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution approving the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) to be proposed at the GM.

Yours faithfully,

For and on behalf of

the Independent Board Committee

Lam Kin-Fung, Jeffrey Luk Koon Hoo, Roger

Hu Shao Ming Herman Tang Sing Ming Sherman

Independent non-executive DirectorsThe following is the text of a letter of advice from Yue Xiu Capital Limited to the Independent Board Committee and the Independent Shareholders which has been prepared for the purpose of inclusion in this circular.

28/F., Siu On Centre,

188 Lockhart Road, Wanchai, Hong Kong

2 March 2021

To: the Independent Board Committee and the Independent Shareholders of i-CABLE Communications Limited

Dear Sirs or Madams,

CONNECTED TRANSACTION IN RELATION TO

THE PROPOSED ISSUE OF

UNLISTED LONG-TERM CONVERTIBLE SECURITIES TO FOREVER TOP (ASIA) LIMITED UNDER SPECIFIC MANDATE

I. INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Subscription, details of which are set out in the letter from the Board (the ''Letter from the Board'') contained in the circular dated 2 March 2021 issued by the Company to the Shareholders (the ''Circular''), of which this letter forms part. Unless otherwise stated, terms used in this letter shall have the same meanings as those defined in the Circular.

1. Background of the Subscription

On 27 January 2021 (after trading hours), the Company entered into the 2021 LCS Subscription Agreement with the Controlling Shareholder, pursuant to which the Company has conditionally agreed to issue, and the Controlling Shareholder has conditionally agreed to subscribe for, the 2021 LCS in aggregate principal amount of HK$200 million, which can be converted into 2,941,176,470 Conversion Shares at the initial Conversion Price of HK$0.068 per Conversion Share. Assuming there is no change in the issued Shares of the Company, the 2,941,176,470 Conversion Shares to be allotted and issued upon full conversion of the 2021 LCS represent approximately 41.2% of the total number of the existing issued Shares as at the Latest Practicable Date and approximately 29.2% of the total number of issued Shares as enlarged by the issue of the Conversion Shares in full (assuming no other Shares are issued and no repurchase of Shares by the Company on or before the conversion of the 2021 LCS).

As at the Latest Practicable Date, the Controlling Shareholder is interested in an aggregate of 3,083,722,894 Shares, representing approximately 43.2% of the total number of the existing issued Shares, and is a substantial Shareholder and therefore a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the transactions contemplated under the 2021 LCS Subscription Agreement (including the grant of the Specific Mandate) constitute a connected transaction of the Company under the Listing Rules and the 2021 LCS Subscription Agreement is subject to the requirements of the reporting, announcement and Independent Shareholders' approval under Chapter 14A of the Listing Rules.

2. The Independent Board Committee

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Lam Kin-Fung, Jeffrey, Dr. Hu Shao Ming Herman, Mr. Luk Koon Hoo, Roger and Mr. Tang Sing Ming Sherman, has been established to advise the Independent Shareholders as to whether the entering into of the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate) are in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole, and whether the terms of the 2021 LCS Subscription Agreement (including the grant of the Specific Mandate) are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned, and to advise the Independent Shareholders on how to vote at the GM.

3. Our Independence

We do not have any relationship with or interest in the Company or any other parties that could reasonably be regarded as relevant to our independence as at the Latest Practicable Date. In the past two years and up to the Latest Practicable Date, there was no engagement between the Group and Yue Xiu Capital Limited. Apart from normal professional fees paid or payable to us in connection with this appointment as the Independent Financial Adviser, no arrangements exist whereby we have received or will receive any fees or benefits from the Company or any other party to the transactions. Accordingly, we are qualified to give independent advice in respect of the Subscription.

II. BASIS OF OUR ADVICE

In formulating our advice and recommendation, we have relied solely on (i) the statements, information, opinions and representations referred to in the Circular; (ii) the interim report of the Company for the six months ended 30 June 2020 (the ''2020 Interim Report'') and the annual report of the Company for the financial year ended 31 December 2019 (the ''2019 Annual Report''), respectively; (iii) other information provided by the Directors and/or the senior management of the Company (the ''Management''); (iv) the opinions expressed by and the representations of the Directors and the Management; and (v) our review of the relevant public information. We have assumed that all the information provided and representations made and opinions expressed to us or contained or referred to in the Circular were true, accurate and complete in all respects as at the date thereof and may be relied upon. We have also sought and received confirmation from the Directors that nomaterial facts have been omitted or withheld from the information provided and referred to in the Circular and that all information or representations provided to us by the Directors, for which they are solely and wholly responsible, are true, accurate, complete and not misleading in all respects at the time they were made and continued to be so until the Latest Practicable Date.

The Circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

We consider that we have reviewed sufficient information currently available to enable us to reach an informed view and the Management has assured us no material information has been withheld from us to allow us to reasonably rely on the information provided so as to provide a reasonable basis for our advice. We have no reason to doubt the truth, accuracy and completeness of the statements, information, opinions, beliefs and representations provided to us by the Group and/or the Directors and/or the Management and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out any independent verification of the information provided, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of the Group.

This letter is issued for advising the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the Subscription (including the grant of the Specific Mandate) and, except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

III. PRINCIPAL FACTORS AND REASONS CONSIDERED

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

1. Background and recent developments of the Group

(a) Background information on the Group

The Group is an integrated communication services provider in Hong Kong, commanding a large TV viewer and communications services user base in town. It owns and operates a near universal wireline telecommunications network in Hong Kong to provide media and telecommunications services to over two million households. It is also one of the producers of TV and multimedia content based in Hong Kong for distribution over conventional and new media, with a particular focus on news, information, sports and entertainment.

The Group's revenue is primarily derived from two segments, namely (i) media and (ii) telecommunications. The Group's media segment includes operations related to the TV subscription business, domestic free TV programme services, advertising, channel carriage, TV relay services, programme licencing, theatrical release and other TV related businesses. The Group's telecommunications segment includes operations related to broadband internet access services, portal operation, mobile content licencing, telephony services, network leasing, network construction, mobile wholesale and agency service as well as other related businesses.

(b) Industry background

TV broadcast market

Based on the information extracted from the 2019/20 annual report of the Communications Authority (the ''Communications Authority Annual Report'') and data and statistics set out in the official website of Communications Authority (https://www.coms-auth.hk), the number of subscribers of domestic licenced pay TV services recorded a gradual decrease since 2015 from approximately 2.4 million subscribers to approximately 2.1 million subscribers as at June 2020, with household penetration rate of licenced pay TV services of approximately 79.8% as at June 2020. Following the withdrawal of TVB Network Vision Limited from providing domestic pay TV services from June 2017, this has left the Company and PCCW Media Limited (''PCCW'') as the only two service providers in pay TV services in Hong Kong with PCCW holding the largest subscriber base.

Based on the data and statistics set out in the official website of the Communications Authority (https://www.coms-auth.hk), in November 2020, there were a total of 36 TV programme licences in Hong Kong, of which, domestic free TV programme services accounted for three licences, domestic pay TV programme services accounted for two licences, non-domestic TV programme services accounted for 10 licences, and other licensable TV programme service licences accounted for 21 licences. In respect of domestic free TV business, there are currently three service licencees, namely Fantastic Television Limited (''FTV'', a consolidated structured entity of the Company which launched its service in May 2017), HK Television Entertainment Company Limited (''HKTVE'') and Television Broadcasts Limited (''TVB''), with network coverage of approximately 99.0%, 99.0% and 93.0% of total households in Hong Kong as at 31 March 2020, respectively.

As set out in the 2020 Interim Report, the TV broadcast business of the Group is experiencing intense competition in a crowded marketplace with a super dominant operator and changing user behaviour. The proliferation and abundance of a wide range of online contents available on new internet-based media platforms and various mobile devices, allowing users to select and view anytime and anywhere, also present competition with the Group's subscription contents. At the same time, the increasingly keen competition for exclusive contents has raised acquisition costs, and the entire internet and multimedia segment has to cope with fast technology changes and customers demand for better quality and higher-speed internet service. Pressure on subscription and viewership persists as competition is expected to remain keen, thus the TV broadcast business remains challenging.

As set out in the Communications Authority Annual Report, the TV broadcast market has implemented several key investment initiatives in recent years, which include (i) digitisation of the terrestrial broadcasting network; (ii) high definition TV content and production technology; (iii) interactive TV services; and (iv) regular network maintenance and upgrades that are required to maintain or expand the ever-advancing scope of services. Furthermore, FTV, HKTVE and TVB have respectively committed to investing a total of HK$1.2 billion for the six-year period from 2016 to 2022, HK$1.5 billion for the six-year period from 2015 to 2021 and HK$6.3 billion for the six-year period from 2016 to 2021 for the provision of free TV services. Investment commitments of FTV, HKTVE and TVB comprise capital expenditures and programming expenditures.

Against the backdrop of the withdrawal of TVB Network Vision Limited in 2017 which commanded a market share of 28% of the total subscribers base of the domestic TV programme services in 2016, the Group has been engaging in intense and continuing efforts to, among other things, restructure its business, rearrange its channels to achieve higher efficiency and reinforcement as the best choice of news and infotainment platform, in order to achieve resources optimisation, provide more targeted content to subscribers, highlight the Group's unique strength of genres and improve the Group's competitiveness.

Broadband market

Hong Kong has a high internet penetration and according to the official website of the Communications Authority (https://www.coms-auth.hk), there were 263 internet service providers licenced to provide broadband services in November 2020. In September 2020, there was approximately 2.86 million registered subscriptions from customers using broadband services in Hong Kong.

The Group's revenue attributable to telecommunications segment accounted for approximately 36.3% and 35.2% of the Group's total revenue for the six months ended 30 June 2020 and for the year ended 31 December 2019, respectively. The Group provides its internet broadband services through the backbone of the Group's domestic TV broadcasting infrastructure, which provides the Group with a substantial catchment base of user-customers. Despite a highly matured market, internet broadband users are sensitive to the speed and quality of services of broadband services providers and technological innovations. In order to improve business competitiveness, it is essential for the Group to continue investment of its network and upgrade converters and modems, and to actively seek collaborative opportunities with leading technology and communication providers to deliver first-in-class services and solutions to its customers.

(c) The 2019 Rights Issue and the 2019 LCS Subscription

On 25 January 2019, the Company proposed and announced (i) a non-underwritten rights issue at the subscription price of HK$0.100 per rights share on the basis of three (3) rights shares for every four (4) existing shares (the ''2019 Rights Issue''), and in conjunction with it, (ii) the entering of the subscription agreement in respect of the 2019 LCS (the ''2019 LCS Subscription'') with the Controlling Shareholder pursuant to which the Company has conditionally agreed to issue, and the Controlling Shareholder has conditionally agreed to subscribe for the 2019 LCS. The initial conversion price of the 2019 LCS was HK$0.125 per conversion Share with a coupon rate of 2.0% per annum, payable quarterly. The maturity of the 2019 LCS is ten years. The Company announced on 31 May 2019 that approximately 54.55% of the rights shares available for subscription under the 2019 Rights Issue was taken up, and none of the remaining Rights Shares (primarily approximately 45.44% of the right shares available for subscription) was placed by the appointed bookrunner under the compensatory arrangements made. Accordingly, the size of the 2019 Rights Issue was scaled down and from which the Company raised a gross amount of approximately HK$92.9 million before expenses, and the principal amount of HK$568 million was raised under the 2019 LCS Subscription.

As disclosed in the Letter from the Board, the net proceeds raised from the 2019 Rights Issue and the 2019 LCS Subscription, which were completed in June 2019, had been fully utilised as intended.

2. Financial information of the Group

In the following section, we shall discuss the financial performance of the Group covering the two years ended 31 December 2019 and the first half of 2020.

(a) Consolidated statements of profit or loss

Set out below is the summary of the consolidated statements of profit or loss of the Group for the six months ended 30 June 2019 (''1H2019'') and 2020 (''1H2020'') as extracted from the 2020 Interim Report, and for the two financial years ended 31 December 2018 (''FY2018'') and 2019 (''FY2019'') as extracted from the 2019 Annual Report.

Table A: Summary of consolidated statements of profit or loss of the Group

For the six months ended For the year ended

(unaudited)

(unaudited)

Segment revenue

- Media

334,260

385,631

751,867

842,832

- Telecommunications

190,633

186,249

408,970

320,478

Revenue

524,893

571,880

1,160,837

1,163,310

Cost of services

- Programming costs

(325,489)

(373,799)

(739,268)

(868,610)

- Network expenses

(152,655)

(161,144)

(320,790)

(334,679)

- Cost of sales

(44,672)

(56,269)

(124,267)

(86,941)

Selling, general and administrative

and other operating expenses

(157,130)

(178,576)

(340,647)

(362,307)

Operating costs

(679,946)

(769,788)

(1,524,972)

(1,652,537)

Loss from operations

(155,053)

(197,908)

(364,135)

(489,227)

Interest income

360

1,046

4,870

2,327

Finance costs

(21,544)

(12,443)

(37,807)

(10,238)

Non-operating income/(expense)

243

(143)

393

42,373

Loss before taxation

(175,994)

(209,448)

(396,679)

(454,765)

Income tax

(229)

(152)

(287)

(823)

Loss for the period/year attributable

to the Shareholders

(176,223)

(209,600)

(396,966)

(455,588)

- 27 -

30 June

31 December

2020

2019

2019 2018

HK$'000

HK$'000

HK$'000 HK$'000

(audited) (audited)

Comparison between FY2019 and FY2018

Revenue of the Group declined by approximately 0.2% year-on-year, from approximately HK$1,163.3 million for FY2018 to approximately HK$1,160.8 million for FY2019. As stated in the 2019 Annual Report, the slight decrease in revenue was primarily attributable to (i) the highly competitive market which led to a contraction of subscription customer base in the Group's pay TV services while the advertising revenue from Pay TV and the Hong Kong Open TV( ''Open TV'') has been improved with efficacious marketing campaign; (ii) social events during the year inflamed negative sentiments to the Hong Kong economy and adversely affecting the average subscription revenue per user of pay TV. As further stated in the 2019 Annual Report, one of the major developments in the Group's sources of revenue was the entering into of the network development agreement (the ''Network Development Agreement'' )on 5 December 2018 between i-CABLE Network Operations Limited, an indirect wholly-owned subsidiary of the Company, and China Mobile Hong Kong Company Limited (''CMHK''), to introduce a cross-platform collaboration in telecommunications services and multi-media content. The cross-platform collaboration would dynamically integrate the strengths and creativity of the two companies, develop higher-quality, diversified telecommunications services, and strengthen sales channels. The addition of new revenue streams from various collaborations with CMHK and the growth in subscribers from the Group's telecommunications segment during FY2019 offset the decrease in revenue from the Group's media segment, and overall contributed to an improvement in the Group's financial performance when compared to the financial performance for FY2018.

The Group recorded an approximately 7.7% year-on-year decrease of operating costs, from approximately HK$1,652.5 million for FY2018 to approximately HK$1,525.0 million for FY2019, primarily attributable to the decreases in programming costs and network expenses for FY2019. As a result, the improvement in managing operating costs during FY2019 contributed to a decrease in loss from operations of approximately 25.6%, from approximately HK$489.2 million for FY2018 to approximately HK$364.1 million for FY2019.

Finance costs of the Group increased to approximately HK$37.8 million for FY2019 from those of approximately HK$10.2 million for FY2018, representing a year-on-year increase of approximately 269.3%, primarily due to interest expenses attributable to the Group's borrowings (approximately HK$14.5 million), lease liabilities (approximately HK$7.9 million) and the 2019 LCS (approximately HK$15.4 million) for FY2019, respectively. In addition, the Group recorded gains on disposal of a property holding subsidiary of approximately HK$31.6 million during FY2018 whereas no such income was recorded for FY2019. In light of the foregoing, the Group recorded an approximately 12.9% year-on-year decrease in loss attributable to the Shareholders, from approximately HK$455.6 million for FY2018 to approximately HK$397.0 million for FY2019.

Comparison between 1H2020 and 1H2019

Revenue of the Group decreased by approximately 8.2% period-on-period, from approximately HK$571.9 million for 1H2019 to approximately HK$524.9 million for 1H2020. As stated in the 2020 Interim Report, the decline in revenue was primarily attributable to (i) lower subscription customer base of pay TV service due to the intensifying competition from free TV, digital and over-the-top platforms; (ii) social and economic challenges in Hong Kong during the period which contributed to the negative sentiment of the economy; and (iii) the average subscription revenue per user of pay TV service decreased during the period. Though there was a decrease in revenue for 1H2020 as compared to that for 1H2019, the advertising revenue from Pay TV and Open TV recorded an improvement during 1H2020 as compared to 1H2019 as integrated marketing solutions were introduced to capture more business opportunities and expand revenue sources. Moreover, more revenue was generated from the various collaborations with CMHK including network development and service provisions during 1H2020 as compared to 1H2019. As set out in the 2020 Interim Report, the Company and CMHK will continue to work together to take the development of the local telecommunications and media market to a new level and the partnership with CMHK represents a significant step forward in the future development of the Group.

The Group recorded an approximately 11.7% period-on-period decrease of operating costs, from approximately HK$769.8 million for 1H2019 to approximately HK$679.9 million for 1H2020, primarily attributable to the decreases in programming costs, cost of sales and selling, general and administrative and other operating expenses for 1H2020, respectively. As a result, the improvement in managing operating costs contributed to a decrease in loss from operations of approximately 21.7%, from approximately HK$197.9 million for 1H2019 to approximately HK$155.1 million for 1H2020.

Finance costs of the Group increased by approximately 73.1% period-on-period, from approximately HK$12.4 million for 1H2019 to approximately HK$21.5 million for 1H2020. However, as a result of (i) the Group's effective cost saving initiatives; (ii) new revenue streams from various collaborations with CMHK through the Network Development Agreement; and (iii) continuous growth in the Group's telecommunications segment mainly due to the increase in the number of subscribers for broadband services, the Group recorded an approximately 15.9% period-on-period decrease in loss attributable to the Shareholders, from approximately HK$209.6 million for 1H2019 to approximately HK$176.2 million for 1H2020.

(b) Consolidated statements of financial position

Set out below is the summary of the consolidated statements of financial position of the Group as at 30 June 2020 and 31 December 2019 as extracted from the 2020 Interim Report.

Table B: Summary of consolidated statements of financial position of the Group

Total assets

As at

As at

30 June

31 December

2020

2019

HK$'000

HK$'000

(unaudited)

(audited)

1,633,358

1,878,747

10,550

18,320

85,174

241,899

95,724

260,219

1,169,769

1,238,730

-

Bank borrowings

295,000

345,000

-

Lease liabilities

107,777

114,879

-

Convertible bonds

360,503

352,587

(b)

Total interest-bearing debts

763,280

812,466

(c)

Net current liabilities

(372,530)

(252,021)

(d)

Net assets/total equity

463,589

640,017

(e)

Net debt ((a) less (b))

(667,556)

(552,247)

(f)

Gearing ratio ((b) divided by (d))

164.6%

126.9%

  • - Restricted bank balances

  • - Cash and bank balances

(a) Total bank deposits and cash

Total liabilities

As at 30 June 2020 and 31 December 2019, the Group had total bank deposits and cash, which comprised restricted bank balances and cash and bank balances, of approximately HK$95.7 million and HK$260.2 million, respectively, representing a decrease of approximately 63.2% in the balance from 31 December 2019 to 30 June 2020.

As set out in Table B above, the Group's net debt position has further increased from approximately HK$552.2 million as at 31 December 2019 to approximately HK$667.6 million as at 30 June 2020. The Group's non-equity financing mainly comprised bank borrowings and convertible bonds. As disclosed in the 2020 Interim Report, as at 30 June 2020, a corporate guarantee of HK$400.0 million had been provided by the Company to a bank in respect of the facility of borrowing up to HK$400.0 million to a wholly-owned subsidiary of the Company, of which HK$295.0 million has been utilised by that subsidiary of the Company. The drawn down amount of HK$295.0 million as at 30 June 2020 was subject to repayment on demand. The carrying amount of the Group's convertible bonds amounted toapproximately HK$360.5 million and approximately HK$352.6 million as at 30 June 2020 and 31 December 2019, respectively, which represented the liability component of the 2019 LCS. The Group's net current liabilities increased from approximately HK$252.0 million as at 31 December 2019 to approximately HK$372.5 million as at 30 June 2020. Moreover, the Group's gearing ratio increased from approximately 126.9% as at 31 December 2019 to approximately 164.6% as at 30 June 2020.

Given the long loss-making history of the Group and its net current liabilities as at 30 June 2020, and the continuing business and organisation restructuring and investment by the Group in the quest to improve the performance of the Group, the Board considers that it is challenging for the Group to raise further bank borrowings at acceptable terms, if at all possible. Accordingly, we concur with the Board's view that it is in the interests of the Company and the Shareholders as a whole to raise long-term financing to fund its liquidity and investments requirements, with the view to improve the Group's performance and profitability in future.

3. Information on the Controlling Shareholder

The Controlling Shareholder, Forever Top (Asia) Limited, is a company incorporated in Hong Kong with limited liability on 9 January 2015 whose principal business is investment holding. As at the Latest Practicable Date, the Controlling Shareholder was held by Tan Sri Dato' David Chiu (as to 24.5%), Dr. Cheng Kar-Shun, Henry (through Celestial Pioneer Limited, his wholly-owned company, as to 31.5%), Chow Tai Fook Enterprises Limited (through Celestial Channel Limited, a company wholly owned by Chow Tai Fook Enterprises Limited, as to 14.0%), Mr. John Huan Zhao (through Hony Communications Limited, his wholly-owned company as sole general partner of Expand Ocean L.P., as to 14.0%) and Mr. Li Sze Lim (through Profit Surge Investments Limited, his wholly-owned company, as to 16.0%).

4. Reasons for and benefits of the Subscription

The Group had been loss-making in recent years and has been formulating an organisational restructuring which includes, among other things, (i) cost saving initiatives; (ii) introduction of new contents and channels; (iii) new TV content co-operation models; and (iv) strategic review on possible restructuring of the Group's business portfolio to achieve cost saving and improve profitability, and to enhance the competitiveness and long-term sustainability of the Group.

Owing to the early successes of the aforesaid initiatives, the Group's financial performance for FY2019 improved as compared to that of FY2018. In particular, operating costs shrank by approximately HK$128 million and net cash used in operation has also reduced by approximately 13% to approximately HK$160 million for FY2019. Since the net proceeds raised from the 2019 Rights Issue and the 2019 LCS Subscription completed in June 2019 have been fully utilised as intended and in order to ensure the Group has sufficient funds to operate and for business expansion including the enhancement of the network infrastructure, the acquisition of programmes and programmes production, the Company entered into the 2021 LCS Subscription Agreement with the Controlling Shareholder and the Board is of the view that the entering into of the 2021 LCS Subscription Agreement is necessary to recapitalise the business to allow sufficient time for the restructuring initiatives to be fully implemented.

(a) Rationale behind the structuring of the Subscription

Under the terms of the 2021 LCS, it seeks to provide long-term finance of approximately HK$200 million, this is so structured to cover the Group's funding needs as envisaged in the Letter from the Board. The Board considers that the 2021 LCS further underscores the long-term commitment of the Controlling Shareholder to the Company and given the Group's present financial circumstances and the inability to secure additional financing or equity funding as explained in the Letter from the Board, the Subscription represents the only tangible fall back funding solution presently available to the Group.

The issue of the 2021 LCS provides further protection to the Independent Shareholders from immediate dilution while guarantees fund raising of approximately HK$200 million. As the 2021 LCS does not carry any voting or dividend rights with a long-term maturity (10 years), there is no immediate dilution for the Independent Shareholders.

(b) Financing alternatives

As set out in the Letter from the Board, the Board has assessed and considered other fund-raising methods under the prevailing market conditions, including debt financing and equity placement. The Board considers that the Subscription provides, subject to, among others, approval of the Independent Shareholders, the execution certainty on the outcome of the fund-raising and it also signifies the support and confidence of the Controlling Shareholder on the Group's future prospects.

In respect to commercial debt financing (even if available), such means of financing will place further pressure on the already weak financial position of the Group, as evidenced by the Group's net current liabilities position and gearing as at 30 June 2020 and 31 December 2019, respectively. Furthermore, the Company has considered financing through equity placement of new shares to Independent Third Parties, however, equity placements are normally conducted on best-effort basis which provides little certainty as to the outcome.

As set out in the Letter from the Board, an equity placement to Independent Third Parties, even if possible, may require a higher discount on issue price and result in more dilution for the Shareholders due to the loss-marking financial track records of the Group. The Board has also decided not to conduct a rights issue for the proposed fund-raising exercise due to, among other things: (i) the low subscription rate of the rights shares by the then Independent Shareholders in the 2019 Rights Issue; (ii) the subscription price of a rights issue being at a discount to the market prices as compared to the premium of the Conversion Price over the market prices and the unaudited consolidated NAV attributable to the Shareholders as at 30 June 2020; (iii) a more lengthy timetable for conducting a rights issue; and (iv) the more immediate dilution to the shareholding of the Shareholders who do not participate in the rights issue as compared to that of the issue of the 2021 LCS, which will mitigate the immediate dilution impact to the Independent Shareholders. Based on the unsuccessful experience of the appointed bookrunner to place any of the available right shares under the 2019 Rights Issue at the end of May 2019, the Board considers that it is not a right time for the Company to return to the equity market at this stage.

Moreover, as discussed above in this letter, the Group's current liquidity position is relatively weak, which had interest-bearing bank borrowings of HK$295.0 million repayable on demand with a net debt position of approximately HK$667.6 million as at 30 June 2020, it would be beneficial to the Company to secure a long-term financing from the Controlling Shareholder and alleviate its liquidity pressure.

In light of the financial performance of the Group for the recent financial years and the thin liquidity of the Shares, if the Company were to raise the necessary funds by way of placing or rights issue or open offer of new Shares, the subscription price would have to be set at a deeper discount to the market price of the Shares so as to attract subscription by the potential investors or Shareholders. In addition, the Board is also mindful of the fact that the 2019 Rights Issue attracted a fairly low level of take up by the then independent Shareholders, which led them to consider that an equity offering is not an appropriate funding channel to pursue at this point.

Having considered the above, the Board is of the view that the Subscription to be a cost-effective way of raising long-term capital. Notwithstanding that the Subscription is subject to the approval of Independent Shareholders, the implementation of which is not susceptible to short-term market uncertainties and it can be executed with relatively higher certainty on the outcome of the fund-raising as compared to other fund-raising alternatives such as rights issue or open offer. In addition, considering the fact that the 2021 LCS carries a 10-year tenor, it would likely not to result in an immediate shareholding dilution to the existing Independent Shareholders.

Having considered the above, we are of the view that the Subscription (i) meets the imminent funding and liquidity needs for the Group; (ii) mitigates the costs and lengthy negotiation processes required to seek for other financing alternatives, (iii) provides the maximum certainty on the outcome of the fund-raising; and (iv) would not have any immediate dilution impact to the Group's existing shareholding structure, we concur with the view of the Board that the Subscription is a well-balanced option for the Company, improving the liquidity of the Group while mitigating immediate dilution for the Independent Shareholders.

5.

Principal terms of the 2021 LCS Subscription Agreement

Set out in the following are the principal terms of the 2021 LCS SubscriptionAgreement:

Date

  • : 27 January 2021

    Issuer

  • : The Company

    Subscriber

  • : The Controlling Shareholder

    Principal amount

  • : HK$200 million

    Conversion Price

  • : The initial Conversion Price (subject to adjustment as set out in the paragraph headed ''Adjustments to the Conversion Price'' below) shall be HK$0.068 per Conversion Share.

Based on the initial Conversion Price, the 2021 LCS is convertible into 2,941,176,470 Conversion Shares, representing (i) approximately 41.2% of the total number of the existing issued Shares as at the Latest Practicable Date; (ii) approximately 29.2% of the total number of issued Shares as enlarged by the issue of the Conversion Shares in full (assuming no other Shares are issued and no repurchase of Shares by the Company on or before the conversion of the 2021 LCS); and (iii) approximately 19.8% of the total number of issued Shares as enlarged by the issue of the Conversion Shares in full (assuming new Shares are issued pursuant to the full exercises of all outstanding Share Options and the conversion rights attached to the 2019 LCS, but otherwise no other Shares are issued and no repurchase of Shares by the Company on or before the conversion of the 2021 LCS). The Conversion Price was determined after arm's length negotiations between the Company and the Controlling Shareholder based on, among others, the market prices of the Shares. Given that the Conversion Price represents premiums over the market prices of the Shares prior to the date of the 2021 LCS Subscription Agreement as well as the unaudited consolidated NAV attributable to the Shareholders as at 30 June 2020, the Board considers that the Conversion Price is fair and reasonable.

Adjustments to the

Conversion Price

  • : The initial Conversion Price will be subject to adjustment for share consolidations, share subdivisions, re-classification of share into other securities (upon which the Conversion Price will be adjusted proportionately such that holders would receive the number of Shares and/or such other securities which they would have been entitled to had they been converted before the re-classification), capitalisation issues, capital distributions, rights issues, and certain other market standard dilutive events. For details of adjustment mechanism of Conversion Price pursuant to the 2021 LCS Instrument, please refer to Appendix I to the Circular.

    Coupon rate/Interest

  • : 2.0% per annum, payable quarterly.

    Maturity date

  • : The end of tenth (10th) year from the date of issue of the 2021 LCS. On the maturity date, all of the remaining outstanding 2021 LCS will be redeemed by the Company at 100% of the outstanding principal amount of the 2021 LCS together with any interest accrued but unpaid thereon.

    Early redemption by the Company

  • : The Company may at any time on or after the date of issue of the 2021 LCS by giving not less than ten (10) business days' written notice to the holder(s) of the 2021 LCS to redeem all or part of the 2021 LCS at the Redemption Amount.

    Mandatory redemption by the holder(s) of the 2021 LCS

  • : Any holder(s) of the 2021 LCS shall have the right at its option to require the Company to redeem all, but not some only, of the 2021 LCS held by such holder at the Redemption Amount (i) when the Shares cease to be listed or admitted to trading or suspend for period equal to or exceeding ten (10) consecutive trading days on the Stock Exchange, or if applicable, other alternative stock exchange; or (ii) when there is a change in control of the Company.

    A ''change in control'' occurs when:

    (i) Forever Top ceases to own (directly or indirectly)

30% or more of the voting rights of the issued

share capital of the Company; or

  • (ii) any person or persons acting together acquires Control of the Company if such person or persons does not or do not have, and would not be deemed to have Control of the Company on the date of issue of the 2021 LCS; or

  • (iii) the Company consolidates with or merges into or sells or transfers all or substantially all of the assets of the Company to any other person, unless the consolidation, merger, sale or transfer will not result in other person or persons acquiring Control over the Company.

Conversion

  • : The outstanding 2021 LCS is convertible into Shares at any time during the period from the date of the issue of the 2021 LCS up to the close of business on the maturity date at an integral multiple of HK$1 million, subject to the conversion restrictions as set out in the paragraph headed ''Conversion restrictions'' below.

    Conversion restrictions

  • : The holder(s) of the 2021 LCS may exercise a conversion right only if such conversion:

    (A)

    (where applicable) has been approved or consented to by the Communications Authority; and

    (B) will not cause the Company to be unable to meet the minimum public float requirement under the Listing Rules.

    For the avoidance of doubt and subject to the conversion restrictions set out in the above, the holder(s) of the 2021 LCS may also exercise a conversion right if the conversion of the 2021 LCS triggers any obligation under the Takeovers Code. In the event that the conversion of the 2021 LCS triggers any obligation under the Takeovers Code, the Company will comply with the relevant requirements under the Takeovers Code as appropriate.

    Voting

  • : The holders of the 2021 LCS shall not be entitled to receive notices of, attend or vote at any general meetings of the Company or any meetings of any class of Shares, by reason only of it being a holder of the 2021 LCS.

ListingTransferabilityRanking of the

Conversion Shares

  • : The 2021 LCS will not be listed on the Stock Exchange or any other stock exchange. No application will be made for the listing of the 2021 LCS on the Stock Exchange or any other stock exchange. No application will be made for the admissibility, deposit, clearance or settlement of the 2021 LCS in the Central Clearing and Settlement System established and operated by HKSCC. No transfer, clearing or settlement services will be provided by HKSSC in respect of the 2021 LCS.

    An application will be made to the Listing Committee

    of the Stock Exchange for the listing of, and

    permission to deal in the Conversion Shares to be

    issued upon the exercise of the conversion rights

    attached to the 2021 LCS.

  • : The 2021 LCS is transferrable to other Independent Third Parties except that the transfer would result in the Company being obliged to comply with the obligations prescribed under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong) in relation to issue of prospectus or initial public offering of securities or (where applicable) a grant by the Communications Authority of the requisite notice or waiver(s) as a result of such transfer of the 2021 LCS has not been obtained.

    The 2021 LCS cannot be transferred to any connected persons of the Company.

  • : The Conversion Shares shall be duly and validly issued, fully paid and registered, and free from encumbrances and all such Conversion Shares shall rank pari passu in all respects with the fully paid Shares in issue on the relevant date of conversion of the Conversion Shares on the Company's register of members (after issue of the Conversion Shares upon conversion of the 2021 LCS) respectively and shall accordingly entitle the holders thereof to participate in full in all future dividends or other distributions the record date for which falls on a date on or after the relevant conversion date.

As set out in the Letter from the Board, the Company will announce in a timely manner in the event of any change in the terms of the 2021 LCS (including any adjustment of the Conversion Price according to the terms of the 2021 LCS) and the effect of the change.

6. Evaluation of the principal terms of the 2021 LCS Subscription Agreement

(i) Conversion Price

As set out in the Letter from the Board, the Conversion Price was determined after arm's length negotiations between the Company and the Controlling Shareholder based on, among others, the market prices of the Shares prior to the date of the 2021 LCS Subscription Agreement.

The Conversion Price of HK$0.068 per Conversion Share is/represents:

  • (i) equivalent to the closing price of HK$0.068 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

  • (ii) a premium of approximately 13.3% over the closing price of HK$0.060 per Share as quoted on the Stock Exchange on the Last Trading Day;

  • (iii) a premium of approximately 13.0% over the average closing price of approximately HK$0.0602 per Share as quoted on the Stock Exchange over the five consecutive trading days ended on and including the Last Trading Day;

(iv) a premium of approximately 12.8% over the average closing price of approximately HK$0.0603 per Share as quoted on the Stock Exchange over the ten consecutive trading days ended on and including the Last Trading Day;

(v) a discount of approximately 24.4% to the audited consolidated NAV attributable to the Shareholders as at 31 December 2019 as extracted from the 2019 Annual Report of approximately HK$0.090 per Share; and

(vi) a premium of approximately 4.6% over the unaudited consolidated NAV attributable to the Shareholders as at 30 June 2020 as extracted from the 2020 Interim Report of approximately HK$0.065 per Share.

As disclosed above, the Conversion Price was determined after arm's length negotiations between the Company and the Controlling Shareholder based on, among others, the market prices of the Shares prior to the date of the 2021 LCS Subscription Agreement. Having considered that the market prices of the Shares prior to the date of the 2021 LCS Subscription Agreement should have already factored and priced in the latest published financial performance and position of the Group, it appears that the Conversion Price has been determined on reasonable basisat premiums over (i) the market prices of the Shares prior to the date of the 2021 LCS Subscription Agreement; and (ii) the unaudited consolidated NAV attributable to the Shareholders as at 30 June 2020.

In further assessing the reasonableness and fairness of the Conversion Price, we have performed the analyses set out below.

(a) Historical Share price performance

As illustrated in Graph A below, we have reviewed the daily closing price of the Shares as quoted on the Stock Exchange during the period from 2 January 2020 to 27 January 2021, being an approximate twelve-month period prior to and including the Last Trading Day (the ''Review Period''). We consider that the Review Period represents a reasonable period of time within which the market price of the Shares can be illustrated. Graph A below illustrates the closing price of the Shares as quoted on the Stock Exchange during the Review Period:

Graph A: Historical closing price of the Shares during the Review Period

0.1

Conversion price of HK$0.068 per

0.09 0.08 0.07 0.06

Conversion ShareClosingShare price 0.05

HK$

0.04

0.03

0.02

0.01

0

2020/01/02

2020/01/22

2020/02/13

2020/03/04

2020/03/24

2020/04/15

Closing priceConversion Price

Source: the website of the Stock Exchange

From mid of January 2020 to early of August 2020, the closing prices of the Shares generally demonstrated a downward trend and decreased from HK$0.086 to HK$0.062. The closing price of the Shares increased from HK$0.062 on 7 August 2020 to HK$0.074 on 10 August 2020, and further increased to HK$0.094 on 11 August 2020. We have discussed with the Management and we were advised that the Management was not aware of any reasons which reasonably led to such increase in the closing price of the Shares. However, the increase in closing price of the Shares was not sustained as the closing price of the Shares decreased to HK$0.074 on 12 August 2020 and since then, the closing price of the Shares demonstrated a general declining trend and oscillated between HK$0.057 to HK$0.074 from September 2020 to December 2020, and prior to the date of the 2021 LCS Subscription Agreement.

During the Review Period, the closing price of the Shares ranged from the lowest of HK$0.051 on 19 March 2020, 8 June 2020 and 11 June 2020 to the highest of HK$0.094 on 11 August 2020, and the average closing price of the Shares was approximately HK$0.063. The Conversion Price of HK$0.068 per Conversion Share represents a premium of approximately 8.14% over average closing price of the Shares of approximately HK$0.063 during the Review Period. During the Review Period, there were 203 out of 266 trading days on which the closing price of the Shares was below the Conversion Price.

(b) Trading liquidity of the Shares

We have reviewed the trading liquidity of the Shares during the Review Period. Table C below sets out the trading volume of the Shares on the Stock Exchange during the Review Period.

Table C: Trading volume of the Shares during the Review Period

Total trading

Number of volume of the trading days Shares duringMonthduring the month/periodthe month/ period Number of

Shares

Percentage of

average daily

trading

Average daily

Percentage of

volume to

trading

average daily

total number

volume of the

trading

of Shares in

Shares during

volume to

issue held by

the month/

total number

public

period

of Shares in

Shareholders

(Note 1)

issue (Note 2)

(Note 3)

Number of

Shares Approximate % Approximate %

2020

January (commencing from

2 January 2020) February

20

272,949,809

13,647,490

0.19% 0.41%

20

53,194,701

2,659,735

0.04% 0.08%

March April May June July August September October November December 2021

22

73,123,517

3,323,796

0.05% 0.10%

19

85,734,422

4,512,338

0.06% 0.14%

20

71,002,083

3,550,104

0.05% 0.11%

21

270,852,418

12,897,734

0.18% 0.39%

22

78,876,297

3,585,286

0.05% 0.11%

  • 21 1,757,153,262

83,673,965

1.17% 2.51%

22 18 21 22

112,474,535 29,561,675 121,679,964 122,587,953

5,112,479

0.07% 0.15%

1,642,315

0.02% 0.05%

5,794,284

0.08% 0.17%

5,572,180

0.08% 0.17%

January (up to and including the Last Trading Day)

18

59,869,300

3,326,072

0.05% 0.10%

Source: the website of the Stock Exchange

Notes:

  • 1. Average daily trading volume is calculated by dividing the total monthly trading volume of the Shares for the respective month/period by the total number of trading days during the corresponding month/period.

  • 2. Based on the total Shares in issue as at the end of respective month/period or the Last Trading Day.

  • 3. Based on 3,334,912,626 Shares held by the public Shareholders as at Last Trading Day.

We noted from Table C above that the average daily trading volume in the Review Period ranged approximately 0.02% to approximately 1.17% of total number of Shares in issue as at the end of respective month/period or the Last Trading Day, and approximately 0.05% to approximately 2.51% of total number of Shares held by the public Shareholders as at the Last Trading Day. As illustrated in Table C above, save for the month of August 2020, during which the Company published its unaudited interim results for the six months ended 30 June 2020 on 24 August 2020 with relatively higher trading volume of the Shares, the trading volume of the Shares was rather thin during the entire Review Period. As such, the liquidity of the Shares was generally low as revealed by the above statistics.

(c) Market comparables analysis

In order to assess the principal terms of the 2021 LCS Subscription Agreement, for comparison purpose, we have, on a best effort basis, conducted a search on the website of the Stock Exchange in connection with the transactions involving the issuance of convertible bonds/notes which were announced during the Review Period (being a twelve-month period prior to and including the Last Trading Day) with the criteria that (i) the issuance of convertible bonds/notes were announced by companies listed on the Main Board of the Stock Exchange (excluding the issuance of convertible bonds/notes as consideration for acquisition and/or involving general offer or whitewash waiver); (ii) the principal amount of the convertible bonds/notes is not more than HK$1,000 million; and (iii) the maturity period of the convertible bonds/ notes is at least five years or longer. Based on such criteria, we have identified eight comparable issues (the ''CS Comparables''), which to the best of our knowledge, efforts and endeavours, is an exhaustive list. Similar to the 2021

LCS, the CS Comparables are all unlisted, carrying no voting rights before conversion and are unsecured on the assets of the relevant issuers. Details of the eight CS Comparables are set out in Table D below.

Table D: List of CS Comparables

Date of announcement

  • 1 26 January 2021

  • 2 18 November 2020

  • 3 18 November 2020

  • 4 7 October 2020

  • 5 29 June 2020

  • 6 4 June 2020

  • 7 22 January 2020

  • 8 13 January 2020

Company (stock code)

Target Insurance (Holdings)

Limited (6161)

Union Medical Healthcare

Limited (2138) (Note 3)

Union Medical Healthcare

Limited (2138) (Note 3) iDreamSky Technology

Holdings Limited (1119) China Logistics Property

Holdings Co., Ltd

(1589)

Asiaray Media Group

Limited (1993)

China Huajun Group Limited

(377)

(Note 4)

Best Food Holdings

Company Limited (1488)

Premium/

(discount) over/(to) thePremium/

(discount) over/(to) theclosing price respective thenof the last trading day/ date of

consolidated

NAV per shareConnected transaction

(Yes/No)Early redemptionPrincipal amount HK$'million

relevant attributable toagreement(s)Coupon rate % per annumshareholders

(Yes/No)Maturity

(Note 1)

(Note 2)Years Approximate % Approximate %

Yes

400.0

0.00

Yes

5

(8.06) 2.30

No

265.2

2.50

Yes

5

7.77 435.72

No

39

2.50

Yes

5

1.33 390.53

No

775.0

3.125

No

5

0.00 40.94

No

780.0

6.95

No

5

(5.06) (21.26)Yes

20.0

4.00

NoPerpetuity

15.00 500.62

Yes

1,000.0

0.00

No

5

208.94 (27.06)Yes

780.0

0.00

Yes

5

7.27 75.52

The Company

200.0

2.00

Yes

10

13.30 4.60

Maximum Minimum Average

6.95 0.00 2.38

208.94 500.62

(8.06) (27.06)

28.07 174.29

Source: the website of the Stock Exchange, announcement and circular, and annual reports of the respective CS Comparables as published on the website of the Stock Exchange

Notes:

  • 1. The relevant conversion premium/discount was extracted from the respective announcement or circular of the respective CS Comparables.

  • 2. Calculated based on the consolidated NAV attributable to shareholders of the respective CS Comparables as set out in their respective annual/interim reports, divided by the total number of shares in issue as at the respective year/period end.

  • 3. As disclosed in the announcement of Union Medical Healthcare Limited dated 18 November 2020, convertible bonds with different initial conversion prices of HK$5.69 and HK$5.21 per conversion share were proposed to be issued.

  • 4. The company was formerly known as Huajun International Group Limited.

In connection with the premium/discount of the conversion price over/to the closing price per share on the last trading day or date of relevant agreement(s) (''Conversion Premium/Discount''), the CS Comparables recorded a range from a Conversion Discount of 8.06% to a Conversion Premium of 208.94%, with an average Conversion Premium of approximately 28.07%. The Conversion Premium of the 2021 LCS, being approximately 13.30%, falls within the range of Premium/(Discount) of the CS Comparables and is lower than the average Conversion Premium of the CS Comparables. We noted that the conversion price of HK$38.00 per conversion share of China Huajun Group Limited (''China Huajun'') represented a substantial Conversion Premium of approximately 208.94%. As disclosed in the circular of China Huajun dated 29 April 2020, the conversion price of HK$38.0 per conversion share was arrived at after arm's length negotiations between China Huajun and the subscriber with reference to the then market prices of the shares of China Huajun. The board of directors of China Huajun had also noted that the shares of China Huajun had been traded at deep discount to its then NAV per share of approximately HK$48.6 over a period prior to the date of the relevant subscription agreement. In order to maximise and protect the interest of China Huajun and its shareholders as a whole, the board of directors of China Huajun insisted to set the conversion price at a substantial high premium as compared to its then market price. Excluding China Huajun from the CS Comparables, (i) the remaining seven CS Comparables would have recorded a range from a Conversion Discount of 5.06% to a Conversion Premium of 15.0%, with an average Conversion Premium of approximately 2.23%; and (ii) the Conversion Premium of the 2021 LCS of approximately 13.3% falls within the range of and is well above the average Conversion Premium of the remaining seven CS Comparables.

As set out in Table D above, the premium/discount of the conversion price over/to the respective then NAV per share attributable to shareholders (''NAV Premium/Discount'') of the CS Comparables ranged from a NAV Discount of approximately 27.06% to a NAV Premium of approximately 500.62%, with an average NAV Premium of approximately 174.29%. Notwithstanding that the NAV Premium of the 2021 LCS of approximately 4.60% is lower than the average NAV Premium of the CS Comparables, it falls within the range of the NAV Premium/Discount of the CS Comparables. Independent Shareholders should note that as each of the CS Comparable has their own characteristics, share price dynamics, industry specific factors and/or prospects, the comparisons between NAV Premium/Discount of the Subscription and CS Comparables are, in our view, not conclusive benchmarking, and are only one of the reference points in our overall assessment of the Conversion Price.

Having taken into account that (i) the Conversion Price represents a premium over the closing price of the Shares on the Last Trading Day, the average closing prices of the Shares during the Review Period, as well as the unaudited consolidated NAV per Share attributable to the Shareholders as at 30 June 2020; (ii) the trading liquidity of the Shares had been relatively low duringthe Review Period; and (iii) the Conversion Premium of the 2021 LCS falls within the range of and is well above the average of the CS Comparables (excluding China Huajun), we consider that the Conversion Price was determined on fair and reasonable bases.

In addition, based on Table D above, the coupon rate of the CS Comparables ranged from nil to 6.95% per annum with an average of approximately 2.38% per annum. We noted that (i) the coupon rate of the 2021 LCS of 2.0% per annum falls within the range of the coupon rates of the CS Comparables and is slightly lower than the average coupon rate of approximately 2.38% of the CS Comparables; (ii) save for the comparable of Asiaray Media Group Limited with no maturity, all the CS Comparables have a maturity period of five years; and (iii) the maturity period of ten years for the 2021 LCS was not unreasonable having regard to the Company's continuous loss-making history and uncertainty as to the Company's turnaround to profitability.

Furthermore, we have reviewed the conversion price adjustment provisions of the CS Comparables as disclosed in their respective announcement and/or circular, and we noted that the conversion price adjustment provisions set out under the section headed ''Principal terms of the 2021 LCS Subscription Agreement'' of this letter are generally in line with those of the CS Comparables.

We have also reviewed the other principal terms of the 2021 LCS and noted that they are customary terms and features of convertible instruments.

7. Fund-raising exercise of the Company in the past 12 months

The Company had not conducted any fund-raising activities involving issue of securities in the twelve months prior to the date of the 2021 LCS Subscription Agreement.

The net proceeds raised from the 2019 Rights Issue and the 2019 LCS Subscription, which were completed in June 2019, had been fully utilised as intended.

8. Use of proceeds from the Subscription

The estimated net proceeds from the Subscription (after deducting the expenses) are approximately HK$198 million.

The Company intends to apply the net proceeds from the Subscription as to:

(i) approximately HK$100 million for investments in capital expenditure for the enhancement of network infrastructure and other relevant capital expenditures in the 18 months following the completion of the Subscription:

As disclosed in the Letter from the Board, the reasons for incurring the capital expenditure are included but not limited to (i) enhancement of the Group's overall competitiveness of network coverage in the market; and (ii) enhancement of network infrastructure as customers are constantly demanding for better quality and high-speed internet services which enable subscribers to enjoy more stable and faster internet access.

(ii) approximately HK$80 million for acquisition of programmes from Independent

Third Parties and programme production including but not limited to the follow in the 18 months following the completion of the Subscription:

- acquired channels (amounting to approximately HK$40 million);

- live programmes, movies and dramas, and other entertainment programmes amounting to approximately HK$20 million; and

-

self-produced programmes amounting to approximately HK$20 million.

The Group will acquire rights for channels and/or programmes and produce programmes for broadcasting on the Group's pay TV channels and provide domestic free TV programme service (as respectively required under the Pay TV Licence and Free TV Licence) from time to time. The programming content includes news, finance, sports, lifestyle, documentary, children, movies, dramas and general entertainment. It is expected that payments for the committed acquired channels and programmes will be amounting to approximately HK$42 million during the first 6 months after completion of the Subscription and approximately HK$38 million between the seventh to twelfth months after completion of the Subscription. The proposed use of proceeds of HK$80 million for acquisition of programmes and programme production as stated above will be applied towards satisfying the investment requirements under the TV licences of the Group.

Save for certain programming commitments, mainly acquired channels, the Company has not yet identified any other acquisition or investment opportunities regarding the acquisition of programmes from Independent Third Parties. Despite the Group had yet to identify any acquisition or investment opportunities regarding the acquisition of programmes, to continue to update the Group's programming library, sourcing for new programmes have been on-going on a continuing basis. With sufficient funding on hand, the Group will be able to commit to ideal programmes once they are identified. Acquired channels committed by the Group included a variety of the programmes such as world-class sports, entertainment, lifestyle and news contents.

Set out below are the investment requirements under the TV licences of the Group:

Pay TV Licence

Upon acceptance of the renewal of the Pay TV Licence of HKCTV for the period of 12 years from 1 June 2017 to 31 May 2029, the HKCTV will be subject to a commitment of a six-year investment plan of HK$3,447 million from 2017 to 2023, comprising HK$251 million of capital investment and HK$3,196 million of programming investment in content including in-house channels containing self-produced and/or acquired programmes as well as in acquired channels.

Free TV Licence

In accordance with the terms of the Free TV Licence, FTV is required to issue a performance bond in favour of the Hong Kong Government in the sum of HK$20 million. Under the terms of the performance bond, unless the Communications Authority otherwise approves or determines:

  • - within 18 months from the commencement date of the Free TV Licence (being 31 May 2016) (the ''Free TV Commencement Date''), FTV shall incur not less than HK$168 million as the capital and programming expenditure for providing the domestic free TV programme service;

  • - within 30 months from the Free TV Commencement Date, FTV shall incur not less than HK$336 million as the cumulative capital and programming expenditure for providing the domestic free TV programme service; and

  • - within 42 months from the Free TV Commencement Date, FTV shall incur not less than HK$504 million as the cumulative capital and programming expenditure for providing the domestic free TV programme service.

The Group has already satisfied the investment requirements under the Free TV Licence as stated above. In addition, HK$3,196 million of programming investment under the Pay TV Licence was being monitored by the Group on an on-going basis in the ordinary course of Pay TV businesses. The Board considers that, based on the information currently available and having made all necessary enquiries, the Group is able to fulfill the investment requirements under the TV licences of the Group and other commitments including programming commitments in the next 12 months after completion of the Subscription taking into account the future performance of the Group, the credit facility currently available to the Group (which carries interest at variable rates and is repayable on demand subject to annual review) and the net proceeds of approximately HK$80 million raised from the 2021 LCS in relation to the acquired channels, acquisition of programmes and programme production asstated above. The Board considers that, based on the information currently available and having made all necessary enquiries, no further fund-raising activity is expected in the next 12 months after completion of the Subscription.

(iii) approximately HK$18 million for general working capital including but not limited to salaries and benefits, rental and utilities, government/music licence fees, other general and administrative expenses, for the Group in the 12 months following the completion of the Subscription.

According to the ''Key Statistics on Wireless Service in Hong Kong'' issued by the Communications Authority in December 2020, mobile data usage (MBytes) per capita increased from 8,980.3 as of September 2019 to 10,819.4 as of August 2020 which indicated that the mobile data usage has been increasing in Hong Kong. The recent commercial rollout of the 5th generation (5G) mobile network during April 2020 and the COVID-19 pandemic have further accelerated mobile data consumption. In addition, based on the report titled ''Global Entertainment & Media Outlook 2020-2024: Hong Kong Summary'' published by PricewaterhouseCoopers in October 2020, the number of fixed broadband subscribers is expected to increase to 3 million subscribers by the end of 2020 and unique mobile internet subscribers is expected increase to 7 million subscribers by the end of 2020. Furthermore, the entertainment and media industry in Hong Kong which comprised, among others, internet access, data consumption, traditional TV and TV advertising, which are the Group's businesses, is projected to grow 4.4% from 2020 to 2024. Based on the aforementioned, we concur with the Board's views that it is reasonable to apply for a portion of the net proceeds from the Subscription to enhance the network infrastructure in order to capture the market demand and growth opportunities.

We have reviewed the working capital forecast of the Group prepared by the Management for the period covering at least 12 months from the Latest Practicable Date, and discussed the said forecast and its underlying bases and assumptions with the Management. We note that in preparation of the Group's working capital forecast, the Management has taken into account, amongst other items (i) the schedule of repayment of the Group's existing debt over the next twelve months; (ii) the operational needs of the Group over the next twelve months; (iii) the recent strategic plan of the Group to invest in TV and network related businesses; (iv) the expected investment requirements under the TV licences to be satisfied by the Group; and (v) the current level of cash and bank balances. We further understand that the Group can only satisfy the aforementioned funding needs in the next 12 months after taking into account the net proceeds from the Subscription.

As disclosed in the Letter from the Board and based on our discussion with the Management, we understand that (i) the Group has already satisfied the investment requirements under the Free TV Licence as stated above; (ii) the investment requirements under the Pay TV Licence represent a cumulative six-year investment plan of HK$3,447 million from 2017 to 2023; (iii) HK$3,196 million out of the six-year investment plan of HK$3,447 million represents programming investment which was being monitored by theGroup on an on-going basis in the ordinary course of Pay TV businesses; (iv) part of the proceeds from the Subscription will be applied towards satisfying the investment requirements under the TV licences of the Group.

Having regard to the foregoing, we (i) consider that the proceeds from the Subscription will enable the Group to continue and further satisfying the investment requirements under its TV licences, and meeting its ongoing working capital requirement; and (ii) concur with the view of the Board that the intended use of proceeds as outlined above is fair and reasonable and would serve the interests of the Company as well as the Shareholders as a whole.

9. Effect of the Subscription on the shareholding interests of the existing public Shareholders

Set out below in Table E are the shareholding of the Company (i) as at the Latest

Practicable Date; (ii) immediately after the 2021 LCS is converted in full; and (iii) immediately after the 2021 LCS and the 2019 LCS are converted and all outstanding Share Options are exercised in full.

Table E: Effect of the Subscription to the Company's shareholding

issued Shares %

(A)

(B)

(C)

Immediately after

the 2021 LCS and

the 2019 LCS are

converted and all

Immediately after the

outstanding Share

As at the Latest

2021 LCS is converted

Options are exercised in

Practicable Date

in full (Note 1)

full (Notes 1 and 2)

Number of

Number of

Number of

issued Shares %

issued Shares %

Controlling Shareholder Forever Top

3,083,722,894

  • 43.2 6,024,899,364

    59.8 10,568,899,364 71.1

    Other Shareholders Mr. Ng Hung Sang, Ms.

    Ng Lai King Pamela, South China Finance and Management Limited and South China Securities Limited (Note 3)

    715,988,000

  • 10.0 715,988,000

    7.1 715,988,000 4.8

    Other public

    Shareholders

    3,334,912,626

  • 46.8 3,334,912,626

33.1 3,334,912,626 22.4

Optionholders

-

-

-

-

241,562,240 1.6

Total (Note 4)

7,134,623,520

100.0

10,075,799,990

100.0

14,861,362,230 100.0

Notes:

  • 1. Pursuant to the terms of the 2021 LCS and the 2019 LCS, the holder(s) of the 2021 LCS and the 2019 LCS may only exercise a conversion right if the issue of the conversion shares pursuant to the exercise of the conversion right of the 2021 LCS and the 2019 LCS, respectively, would not cause the Company to be unable to meet the minimum public float requirement under the Listing Rules. Accordingly, the scenarios above are shown for illustrative purpose only.

  • 2. As at the Latest Practicable Date, the Company had outstanding Share Options convertible into 241,562,240 Shares.

  • 3. Based on the information available to the Company, the number of Shares represents the aggregate number of Shares held by Mr. Ng Hung Sang, his spouse Ms. Ng Lai King Pamela and two companies ultimately controlled by him (namely, South China Finance and Management Limited and South China Securities Limited). Mr. Ng Hung Sang personally beneficially owns 156,089,500 Shares, Ms. Ng Lai King Pamela personally beneficially owns 96,022,500 Shares, South China Finance and Management Limited beneficially owns 876,000 Shares and South China Securities Limited beneficially owns 463,000,000 Shares, both of which are wholly owned by South China Financial Holdings Limited (stock code: 619), which in turn is ultimately and beneficially owned as to approximately 29.36% by Mr. Ng Hung Sang, among which 25.66% is held through his 100%-owned corporations and 3.7% is held by him as beneficial owner. Ms. Ng Yuk Mui Jessica, a non-executive Director, is the daughter of Mr. Ng Hung Sang and Ms. Ng Lai King Pamela.

  • 4. The sum of the shareholding percentages of the Shareholders in the table above may not add up to 100% due to rounding adjustments.

As shown in Table E above, the shareholding in the Company held by the existing public Shareholders would theoretically be diluted from approximately 46.8% as at the Latest Practicable Date to approximately 33.1% immediately after the allotment and issue of the Conversion Shares upon full conversion of the 2021 LCS (assuming that there will be no other change in the shareholding in the Company). It should be noted that pursuant to the terms of the 2021 LCS, the holder(s) of the 2021 LCS may only exercise a conversion right if the issue of the Conversion Shares pursuant to the exercise of the conversion right of the 2021 LCS would not cause the Company to be unable to meet the minimum public float requirement under the Listing Rules.

As set out in the Letter from the Board, subject to the conversion restrictions, the holder(s) of the 2021 LCS may also exercise a conversion right if the conversion of the 2021 LCS triggers any obligation under the Takeovers Code. With reference to Table E above, in the event that the 2021 LCS are fully converted, the shareholding of the Controlling Shareholder in the Company will increase from approximately 43.2% to approximately 59.8% which may trigger any obligation under the Takeovers Code. The Company will comply with the relevant requirements under the Takeovers Code as appropriate.

Having considered that the principal terms of the 2021 LCS Subscription Agreement are fair and reasonable so far as the Independent Shareholders are concerned, and the reasons for and benefits of the Subscription as mentioned above, we concur with the view of the Management that the potential dilution effect of the Subscription on the shareholding of existing public Shareholders to be acceptable.

10. Possible financial effects of the Subscription

(i) Effect on earnings

The 2021 LCS is interest bearing instrument and will mature on the date falling on the tenth anniversary from the date of issue of the 2021 LCS. As such, it is expected that the future earnings of the Company will be reduced by the amount of the interest expenses on the 2021 LCS. On the other hand, assuming the conversion option derivative measured at fair value with changes in fair value was recognised in consolidated statement of profit or loss of the Company, there would be impact on the Group's earnings due to the fair value measurement at each of the financial year ended upon the maturity of 2021 LCS. The fair value of the conversion option derivative component of the 2021 LCS and its financial impacts to the Group will be subject to the assessment and valuation by a professional valuer.

(ii) Effect on liquidity and working capital

The current ratio (being current assets divided by current liabilities) of the Group was approximately 47.58% as at 30 June 2020. The estimated net proceeds from the Subscription is expected to increase both the cash and bank balances and total liabilities of the Group. Given that the liability component of the 2021 LCS will be classified as a non-current liability due to its ten-year maturity, it is expected that the current ratio of the Group will increase. As such, the liquidity and working capital position of the Group is expected be improved upon completion of the Subscription.

(iii) Effect on gearing ratio

Gearing ratio of the Group was approximately 164.6% as at 30 June 2020 (measured in terms of total interest-bearing debts (as set out in Table B) divided by the total equity). Upon completion of the Subscription, gearing ratio of the Group is expected to change, and the total interest-bearing debts and total equity of the Group in the computation of gearing ratio will increase by the liability component and equity component of the 2021 LCS, respectively, which will be subject to the assessment and valuation of the 2021 LCS by a professional valuer.

It should be noted that the aforementioned analyses are for illustrative purpose only and do not purport to represent how the financial results or position of the Group will be after completion of the Subscription.

IV. OUR RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that, although the Subscription was not entered into in the ordinary and usual course of the Group's business, (i) the terms of the 2021 LCS Subscription Agreement (including the grant of the Specific Mandate) are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the Subscription is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the relevant resolution(s) to be proposed at the GM to approve the 2021 LCS Subscription Agreement and the transactions contemplated thereunder (including the grant of the Specific Mandate), and we recommend the Independent Shareholders to vote in favour of the resolution(s) in this regard.

Yours faithfully,

For and on behalf of YUE XIU CAPITAL LIMITED

Kenneth Sit Managing Director

Mr. Kenneth Sit is a licensed person registered with the Securities and Futures Commission and a responsible officer of Yue Xiu Capital Limited to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. He has over 16 years of experience in corporate finance industry.

The adjustment mechanism of the Conversion Price pursuant to the 2021 LCS Instrument is set out below:

(A) Consolidation, subdivision or reclassification

If and whenever there shall be an alteration to the nominal value of the Shares as a result of consolidation, subdivision or reclassification, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such alteration by the following fraction:

A B

where:

  • A is the nominal amount of one Share immediately after such alteration; and

  • B is the nominal amount of one Share immediately before such alteration.

Such adjustment shall become effective on the date the alteration takes effect.

(B) Capitalisation of profits or reserves

(1)

If and whenever the Company shall issue any Shares credited as fully paid to the Shareholders by way of capitalisation of profits or reserves (including any share premium account) including Shares paid up out of distributable profits or reserves and/or share premium account issued, save where Shares are issued in lieu of the whole or any part of a specifically declared cash dividend (the ''Relevant Cash Dividend''), being a dividend which the Shareholders concerned would or could otherwise have received (a ''Scrip Dividend'') and which would not have constituted a Capital Distribution (as defined below), the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue by the following fraction:

A

B

where:

  • A is the aggregate nominal amount of the issued Shares immediately before such issue; and

  • B is the aggregate nominal amount of the issued Shares immediately after such issue.

  • (2) In the case of an issue of Shares by way of a Scrip Dividend where the Current Market Price (as defined below) of such Shares exceeds 105 per cent. of the amount of the Relevant Cash Dividend or the relevant part thereof and which would not have constituted a Capital Distribution, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before the issue of such Shares by the following fraction:

    A+B

    A+C

    where:

    • A is the aggregate nominal amount of the issued Shares immediately before such issue;

    • B is the aggregate nominal amount of Shares issued by way of such Scrip Dividend multiplied by a fraction of which (i) the numerator is the amount of the whole, or the relevant part, of the Relevant Cash Dividend and (ii) the denominator is the Current Market Price of the Shares issued by way of Scrip Dividend in respect of each existing Share in lieu of the whole, or the relevant part, of the Relevant Cash Dividend; and

    • C is the aggregate nominal amount of the Shares issued by way of such Scrip Dividend;

    OR by making such other adjustment as an Expert (as defined below) shall certify to the holders of the 2021 LCS is fair and reasonable.

    Such adjustment shall become effective on the date of issue of such Shares or if a record date is fixed therefor, immediately after such record date.

  • (3) Capital distribution

    If and whenever the Company shall pay or make any Capital Distribution

(including, for the avoidance of doubt, an Extraordinary Dividend (as defined below)) to the Shareholders (except where the Conversion Price falls to be adjusted under paragraph (B) above), the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such Capital Distribution by the following fraction:

A-B

A

where:

A is the Current Market Price of one Share on the last Trading Day (as defined below) preceding the date on which the Capital Distribution is publicly announced; and

B is the Fair Market Value (as defined below) on the date of such announcement, as determined in good faith by an Expert, of the portion of the Capital Distribution attributable to one Share.

Such adjustment shall become effective on the date that such Capital Distribution is made.

When the Capital Distribution is by means of distribution of an Extraordinary Dividend, only such portion of distribution which constitutes the Extraordinary Dividend shall be regarded as a Capital Distribution and only the Extraordinary Dividend shall be taken into account in the determination of the Fair Market Value of the portion of the Capital Distribution attributable to one Share.

(4) Rights issues of Shares or options over Shares

If and whenever the Company shall issue Shares to all or substantially all Shareholders as a class by way of rights, or issue or grant to all or substantially all Shareholders as a class, by way of rights, of options, warrants or other rights to subscribe for or purchase any Shares, in each case at less than 80 per cent. of the Current Market Price per Share on the Trading Day last preceding the date of the announcement of the terms of such issue or grant, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue or grant by the following fraction:

A+B A+C

where:

  • A is the number of Shares in issue immediately before such announcement;

  • B is the number of Shares which the aggregate amount (if any) payable for the Shares issued by way of rights or for the options or warrants or other rights issued by way of rights and for the total number of Shares comprised therein would purchase at such Current Market Price per Share; and

  • C is the aggregate number of Shares issued or, as the case may be, comprised in the issue or grant.

Such adjustment shall become effective on the date of issue of such Shares or issue or grant of such options, warrants or other rights (as the case may be).

(5) Rights issues of other securities

If and whenever the Company shall issue any securities (other than Shares or options, warrants or other rights to subscribe for or purchase Shares) to all or substantially all Shareholders as a class, by way of rights, or the grant to all or substantially all Shareholders as a class by way of rights, of any options, warrants or other rights to subscribe for or purchase, any securities (other than Shares or options, warrants or other rights to subscribe or purchase Shares), the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue or grant by the following fraction:

A-B

A

where:

  • A is the Current Market Price of one Share on the last Trading Day preceding the date on which such issue or grant is publicly announced; and

  • B is the Fair Market Value on the date of such announcement, as determined in good faith by an Expert, of the portion of the rights attributable to one Share.

Such adjustment shall become effective on the date of issue of the securities or grant of such rights, options or warrants (as the case may be).

(6) Issues at less than Current Market Price

If and whenever the Company shall issue (otherwise than as mentioned in paragraph (B)(4) above) wholly for cash any Shares (other than Shares issued on the exercise of the conversion rights attached to the 2021 LCS or on the exercise of any other existing rights of conversion into, or exchange or subscription for, Shares) or if and whenever the Company shall issue or grant (otherwise as mentioned in paragraph (B)(4) above) options, warrants or other rights to subscribe or purchase Shares, in each case at a price per Share which is less than 80 per cent. of the Current Market Price on the last Trading Day preceding the date of announcement of the terms of such issue or grant, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue by the following fraction:

A+B

C

where:

A is the number of Shares in issue immediately before the issue of such additional Shares or the grant of such options, warrants or other rights to subscribe for or purchase any Shares;

  • B is the number of Shares which the aggregate consideration receivable for the issue of such additional Shares would purchase at such Current Market Price per Share; and

  • C is the number of Shares in issue immediately after the issue of such additional Shares.

References to additional Shares in the above formula shall, in the case of an issue by the Company of options, warrants or other rights to subscribe or purchase Shares, mean such Shares to be issued, or otherwise made available, assuming that such options, warrants or other rights are exercised in full at the initial exercise price (if applicable) on the date of issue of such options, warrants or other rights.

Such adjustment shall become effective on the date of issue of such additional Shares or, as the case may be, the issue or grant of such options, warrants or other rights.

(7) Other issues at less than Current Market Price

Save in the case of an issue of securities arising from a conversion or exchange of other securities in accordance with the terms applicable to such securities themselves falling within the provisions of this paragraph (B)(7), in the event of the issue wholly for cash by the Company or any subsidiary (otherwise than as mentioned in paragraphs (B)(4), (B)(5) or (B)(6) above) or (at the direction or request of or pursuant to any arrangements with the Company or any subsidiary) by any other company, person or entity of any securities (other than the 2021 LCS) which by their terms of issue carry rights of conversion into, or exchange or subscription for, Shares to be issued by the Company upon conversion, exchange or subscription at a consideration per Share which is less than 80 per cent. of the Current Market Price on the last Trading Day preceding the date of announcement of the terms of issue of such securities, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue by the following fraction:

A+B A+C

where:

  • A is the number of Shares in issue immediately before such issue;

  • B is the number of Shares which the aggregate consideration receivable by the Company for the Shares to be issued on conversion or exchange or on exercise of the right of subscription attached to such securities would purchase at such Current Market Price per Share; and

C is the maximum number of Shares to be issued on conversion or exchange of such securities or on the exercise of such rights of subscription attached thereto at the initial conversion, exchange or subscription price or rate.

Such adjustment shall become effective on the date of issue of such securities.

(8) Modification of rights of conversion etc.

If and whenever there shall be any modification of the rights of conversion, exchange or subscription attaching to any such securities as are mentioned in paragraph (B)(7) above (other than in accordance with the terms applicable to such securities) so that the consideration per Share (for the number of Shares available on conversion, exchange or subscription following the modification) is less than 80 per cent. of the Current Market Price on the last Trading Day preceding the date of announcement of the proposals for such modification, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such modification by the following fraction:

A+B A+C

where:

  • A is the number of Shares in issue immediately before such modification;

  • B is the number of Shares which the aggregate consideration (if any) receivable by the Company for the Shares to be issued, or otherwise made available, on conversion or exchange or on exercise of the right of subscription attached to the securities, in each case so modified, would purchase at such Current Market Price per Share or, if lower, the existing conversion, exchange or subscription price of such securities; and

  • C is the maximum number of Shares to be issued, or otherwise made available, on conversion or exchange of such securities or on the exercise of such rights of subscription attached thereto at the modified conversion, exchange or subscription price or rate but giving credit in such manner as an Expert, selected by the Company and approved in writing by the holder(s) of the 2021 LCS, considers appropriate (if at all) for any previous adjustment under this paragraph (B)(8) or paragraph (B)(7) above.

Such adjustment shall become effective on the date of modification of the rights of conversion, exchange or subscription attaching to such securities.

(9) Other offers to Shareholders

If and whenever the Company or any subsidiary or (at the direction or request of or pursuant to any arrangements with the Company or any subsidiary) any other company, person or entity issues, sells or distributes any securities in connection with an offer by or on behalf of the Company or any subsidiary or such other company, person or entity pursuant to an offer in which the Shareholders generally (meaning for these purposes the holders of at least 60 per cent. of the Shares outstanding at the time such offer is made) are entitled to participate in arrangements whereby such securities may be acquired by them (except where the Conversion Price falls to be adjusted under paragraphs (B)(4), (B)(5), (B)(6) or (B)(7) above), the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue by the following fraction:

A-B

A

where:

  • A is the Current Market Price of one Share on the last Trading Day preceding the date on which such issue is publicly announced; and

  • B is the Fair Market Value on the date of such announcement, as determined in good faith by an Expert, selected by the Company and approved in writing by the holder(s) of the 2021 LCS, of the portion of the rights attributable to one Share.

Such adjustment shall become effective on the date of issue of the securities.

(10) Other events

If the Company determines that an adjustment should be made to the Conversion Price as a result of one or more events or circumstances not referred to in this paragraph (B) or paragraph (A) above (such as any demerger, spin-off or similar arrangement in respect of any business of the Company and the Group), the Company shall at its own expense request an Expert to determine as soon as practicable what adjustment (if any) to the Conversion Price is fair and reasonable to take account thereof, if the adjustment would result in a reduction in the Conversion Price, and the date on which such adjustment should take effect and upon such determination such adjustment (if any) shall be made and shall take effect in accordance with such determination PROVIDED THAT where the circumstances giving rise to any adjustment pursuant to this paragraph (B) and/or paragraph (A) above have already resulted or will result in an adjustment to the Conversion Price or where the circumstances giving rise to any adjustment arise by virtue of circumstances which have already given rise or will give rise to an adjustment to the Conversion Price, such modification (if any) shall be made to the operation of theprovisions of this paragraph (B) and/or paragraph (A) above as may be advised by an Expert, selected by the Company and approved in writing by the holder(s) of the 2021 LCS, to be in their opinion appropriate to give the intended result.

The adjustment mechanism as stipulated under this paragraph (B)(10) is to cater for circumstances which are currently unforeseen, whereby it will provide a mechanism for the Company to adjust the Conversion Price, which may result in an upward or downward adjustment of the Conversion Price. Since an adjustment (if any) shall only be made if determined by an Expert to be fair and reasonable, the Directors consider that the adjustment mechanism under this paragraph (B)(10) is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

(11) If the Company determines that a downward adjustment should not be made to the Conversion Price, or that the effective date for the relevant adjustment should be a date other than mentioned in the preceding paragraphs, the Company shall, at its own cost and expense, consult an Expert to determine as soon as practicable (i) what adjustment (if any) to the Conversion Price is fair and reasonable to take account thereof and is appropriate to give the result which the Expert considers in good faith to reflect the intentions of the provisions of this paragraph (B) and/or paragraph (A) above; and (ii) the date on which such adjustment should take effect; and upon such determination by the Expert such adjustment (if any) shall be made and shall take effect in accordance with such determination, provided that where the events or circumstances giving rise to any adjustment pursuant to this paragraph (B) and/ or paragraph (A) above have already resulted or will result in an adjustment to the Conversion Price or where the events or circumstances giving rise to any adjustment arise by virtue of events or circumstances which have already given rise or will give rise to an adjustment to the Conversion Price, such modification (if any) shall be made to the operation of the provisions of this paragraph (B) and/or paragraph (A) above as may be advised by the Expert to be in their opinion appropriate to give the intended result.

For the purposes of this Appendix I:

''Alternative Stock Exchange'' means at any time, in the case of the Shares, if they are not at that time listed and traded on the Stock Exchange, the principal stock exchange or securities market on which the Shares are then listed or quoted or dealt in.

''Capital Distribution'' means:

(i) any distribution of assets in specie by the Company for any financial period whenever paid or made and however described (and for these purposes a distribution of assets in specie includes without limitation an issue of Shares or other securities credited as fully or partly paid (other than Shares credited as fully paid) by way of capitalisation of reserves); and

(ii) any cash dividend or distribution of any kind by the Company for any financial period (whenever paid and however described) which is an Extraordinary Dividend.

''Closing Price'' for the Shares for any Trading Day shall be the price published in the Daily Quotation Sheet published by the Stock Exchange or, as the case may be, the equivalent quotation sheet of an Alternative Stock Exchange for such day.

''Current Market Price'' means, in respect of a Share at a particular time on a particular date, the average of the closing prices quoted by the Stock Exchange or as the case may be, by the Alternative Stock Exchange for one Share (being a Share carrying full entitlement to dividend) for the fifteen (15) consecutive Trading Days ending on the Trading Day immediately preceding such date; provided that if at any time during the said 15 Trading Day period the Shares shall have been quoted ex-dividend and during some other part of that period the Shares shall have been quoted cum-dividend then:

(i) if the Shares to be issued in such circumstances do not rank for the dividend in question, the quotations on the dates on which the Shares shall have been quoted cum-dividend shall for the purpose of this definition be deemed to be the Fair Market Value thereof reduced by an amount equal to the amount of that dividend per Share; or

(ii) if the Shares to be issued in such circumstances rank for the dividend in question, the quotations on the dates on which the Shares shall have been quoted ex-dividend shall for the purpose of this definition be deemed to be the amount thereof increased by such similar amount;

(iii) and provided further that if the Shares on each of the said fifteen (15) Trading

Days have been quoted cum-dividend in respect of a dividend which has been declared or announced but the Shares to be issued do not rank for that dividend, the quotations on each of such dates shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal to the Fair Market Value of that dividend per Share,

and provided further that:

  • (1) if such closing prices are not available on each of the fifteen (15) Trading Days during the relevant period, then the arithmetic mean of such closing prices which are available in the relevant period shall be used (subject to a minimum of two such closing prices); and

  • (2) if only one or no such closing price is available in the relevant period, then the Current Market Price shall be determined in good faith by an Expert.

''Dividend'' means any dividend or distribution, whether of cash, assets or other property, and whenever paid or made and however described (and for these purposes a distribution of assets includes, without limitation, an issue of Shares or other securities credited as fully or partly paid up) provided that:

(i) where a cash Dividend is announced which is to be, or may at the election of a holder or holders of Shares be, satisfied by the issue or delivery of Shares or other property or assets, then, the Dividend in question shall be treated as a Dividend of (a) the cash Dividend so announced or (b) the Current Market Price on the date of announcement of such Dividend, of such Shares or the Fair Market Value of other property or assets to be issued or delivered in satisfaction of such Dividend (or which would be issued if all holders of Shares elected therefor, regardless of whether any such election is made) if the Current Market Price of such Shares or the Fair Market Value of other property or assets is greater than the cash Dividend so announced; and

(ii) any issue of Shares falling within paragraph (B) above shall be disregarded.

''Expert'' means an independent bank of international repute (acting as an expert), selected by the Company and approved in writing by the holder(s) of the 2021 LCS.

''Extraordinary Dividend'' occurs if, at the relevant date of determination, the total amount of:

  • (i) any cash dividends paid or declared by the Company on the Shares; and

  • (ii) all other cash dividends paid or declared on the Shares in the period beginning on the day immediately after the prior anniversary of the relevant date of determination (other than any cash dividend or portion thereof previously deemed to be an Extraordinary Dividend in respect of which an adjustment had already been made to the Conversion Price) (the ''previous dividends''), except that where the date of announcement or payment for cash dividends for two different fiscal years has occurred in such period, such cash dividends relating to the earlier fiscal year will be disregarded for the purpose of determining the previous dividends exceeds on a per Share basis 2.0 per cent. of the Average Closing Price (as defined below) of the Shares during the Relevant Period (as defined below). For the avoidance of doubt, all amounts are on a per Share basis. For the purposes of paragraphs (A) and (B) above, ''Average Closing Price'' means the arithmetic mean of the closing price per Share for each Trading Day during the Relevant Period.

''Fair Market Value'' means, with respect to any assets, security, option, warrants or other right on any date, the fair market value of that asset, security, option, warrant or other right as determined by an Expert; provided that: (i) the fair market value of a cash dividend paid or to be paid per Share shall be the amount of such cash dividend per Share determined as at the date of announcement of such dividend; (ii) the fair market value of any other cash amount shall be the amount of such cash; (iii) where securities, spin-offsecurities, options, warrants or other rights are publicly traded in a market of adequate liquidity (as determined by such Expert) the fair market value of such securities, spin-off securities, options, warrants or other rights shall equal the average of the closing price for each such securities, spin-off securities, option, warrant or other rights during the period of five (5) Trading Days on the relevant market commencing on the first such Trading Day such securities, spin-off securities, options, warrants or other rights are publicly traded; and (iv) where securities, spin-off securities, options, warrants or other rights are not publicly traded on a stock exchange or securities market of adequate liquidity (as aforesaid), the fair market value of such securities, spin-off securities, options, warrants or other rights shall be determined by an Expert, on the basis of a commonly accepted market valuation method and taking account of such factors as it considers appropriate, including the market price per Share, the dividend yield of a Share, the volatility of such market price, prevailing interest rates and the terms of such securities, spin-off securities, options, warrants or other rights, including as to the expiry date and exercise price (if any) thereof. Such amounts shall, in the case of (i) above, be translated into Hong Kong Dollar (if declared or paid or payable in a currency other than the Hong Kong Dollar) at the rate of exchange used to determine the amount payable to Shareholders who were paid or are to be paid or are entitled to be paid the cash dividend in the Hong Kong Dollar; and in any other case, shall be translated into the Hong Kong Dollar (if expressed in a currency other than the Hong Kong Dollar) at the prevailing exchange rate on that date. In addition, in the case of (i) and (ii) above, the fair market value shall be determined on a gross basis and disregarding any withholding or deduction required to be made on account of tax, and disregarding any associated tax credit.

''Relevant Period'' means the period beginning on the 30th Trading Day prior to the Trading Day (the ''relevant Trading Day'') immediately preceding the date on which the Shares are quoted ex-dividend on the Stock Exchange in respect of the cash dividend which caused the adjustment to the Conversion Price pursuant to paragraph (B)(3) above and ending on the relevant Trading Day.

''Trading Day'' means a day when the Stock Exchange or, as the case may be, an Alternative Stock Exchange is open for dealing business, provided that if no Closing Price is reported for one or more consecutive dealing days such day or days will be disregarded in any relevant calculation and shall be deemed not to have existed when ascertaining any period of dealing days.

(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 Group. 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) SHARE CAPITAL

The Company does not have any authorised share capital nor any nominal value in its Shares.

The number of issued Shares (i) as at the Latest Practicable Date; and (ii) immediately after the 2021 LCS is converted in full are set out as follows:

  • (i) As at the Latest Practicable Date

    Type Number Status

    Existing Shares 7,134,623,520 Issued and fully paid-up

  • (ii) Immediately after the 2021 LCS is converted in full based on the initial Conversion Price

    Type

    Number

    Status

    Existing Shares

    7,134,623,520

    Issued and fully paid-up

    Conversion Shares

    2,941,176,470

    To be issued and fully

    paid-up

    Total

    10,075,799,990

    The Conversion Shares shall rank pari passu in all respects with the fully paid

Shares in issue on the relevant date of conversion of the Conversion Shares on the Company's register of members (after issue of the Conversion Shares upon conversion of the 2021 LCS) and shall accordingly entitle the holders thereof to participate in full in all future dividends or other distributions the record date for which falls on a date on or after the relevant conversion date.

No Shares have been issued since 31 December 2019, being the date on which the latest audited financial statements of the Group were made up.

As at the Latest Practicable Date, the Company had the 2019 LCS convertible into 4,544,000,000 Shares and outstanding Share Options convertible into 241,562,240 Shares. Save for the 2019 LCS and the Share Options, the Company has no other outstanding options, warrants, derivatives or other convertible securities in issue which are convertible or exchangeable into Shares as at the Latest Practicable Date.

(3) DISCLOSURE OF INTERESTS (a) Interests of Directors

Save as disclosed below, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong (the ''SFO'')), which were required to be notified to the Company and the Stock Exchange pursuant to the provisions of Divisions 7 and 8 of Part XV of the SFO, including interests or short positions which they were taken or deemed to have under such provisions of the SFO, or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors adopted by the Company, to be notified to the Company and the Stock Exchange.

Long positions in underlying Shares - Share Options

Number of Shares issuable under the Share Options granted

Balance as at AdjustedName of Director

Date of grantExercisable period

the Latest exercise pricePracticable Dateper Share

HK$ (Note 2)

Tan Sri Dato' David Chiu Dr. Cheng Kar-Shun, Henry Mr. Tsang On Yip, Patrick Mr. Hoong Cheong Thard

15 June 2018

(Note 1)

63,785,600 0.204

15 June 2018

(Note 1)

63,785,600 0.204

15 June 2018

(Note 1)

27,006,000 0.204

15 June 2018

(Note 1)

27,006,000 0.204

Mr. Lie Ken Jie Remy Anthony

15 June 2018

(Note 1)

3,600,800 0.204

Ket Heng

Mr. Andrew Wah Wai Chiu

15 June 2018

(Note 1)

36,522,400 0.204 221,706,400

Notes:

  • (1) 50% of the Share Options are exercisable from 15 June 2018 to 14 June 2028 (both dates inclusive); and 50% of the Share Options are exercisable from 15 June 2019 to 14 June 2028 (both dates inclusive).

  • (2) The exercise price per Share payable upon exercise of the outstanding Share Options granted under the share option scheme of the Company adopted on 24 May 2018 was adjusted from HK$0.210 to HK$0.204 as a result of the rights issue of the Company completed in June 2019.

(b) Substantial Shareholders

Save as disclosed below, as at the Latest Practicable Date, so far as is known to the Directors or the chief executive of the Company, the Company had not been notified by any persons (other than the Directors or chief executive of the Company) who had interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were recorded in the register required to be kept by the Company under Section 336 of the SFO.

Long position in the Shares

Number of SharesName of shareholderBeneficial ownerSpouse interest

Interest of a controlled corporation

Other interest

TotalApproximate percentage of the number of issued Shares

Forever Top (Asia) Limited

10,568,899,364

-

-

  • - 10,568,899,364 148.14%

(Note 1)

NG Hung Sang

  • 156,089,500 96,022,500

    463,876,000

    -

    715,988,000 10.04%

    (Note 2)

    (Note 3)

    NG Lai King Pamela

  • 96,022,500 619,965,500

-

-

715,988,000 10.04%

(Note 4)

South China Securities Limited

463,000,000

-

-

-

463,000,000 6.49%

(Note 3)

Notes:

  • 1. These 10,568,899,364 Shares represent 3,083,722,894 Shares owned by the Controlling

    Shareholder, 4,544,000,000 new Shares to be issued by the Company upon full exercise of the conversion rights under the 2019 LCS in the principal amount of HK$568 million based on the initial conversion price of HK$0.125 per conversion share, and 2,941,176,470 new Shares to be issued by the Company upon full exercise of the conversion rights under the 2021 LCS in the principal amount of HK$200 million based on the initial Conversion Price of HK$0.068 per Conversion Share.

  • 2. Ng Hung Sang, the spouse of Ng Lai King Pamela, was deemed to be interested in 96,022,500

    Shares in which Ng Lai King Pamela is interested under the SFO.

  • 3. Ng Hung Sang was deemed to be interested in 463,876,000 Shares in which his controlled corporations are interested under the SFO. South China Finance and Management Limited directly held 876,000 Shares, while South China Securities Limited directly held 463,000,000 Shares.

    Both of these companies were 100% held by South China Financial Holdings Limited. South China Financial Holdings Limited was held as to 29.36% by Ng Hung Sang, among which 25.66% was held through his 100%-owned corporations, while according to publicly available information, 3.7% was held by him as beneficial owner.

  • 4. Ng Lai King Pamela, the spouse of Ng Hung Sang, was deemed to be interested in 619,965,500 Shares in which Ng Hung Sang is interested under the SFO.

(4) MATERIAL ADVERSE CHANGE

As disclosed in the interim report for the six months ended 30 June 2020 of the Company, the Company has been focusing on formulating an organisational restructuring which included, among other things, (i) cost saving initiative; (ii) introduction of new contents and channels; (iii) new television content co-operation models; and (iv) strategic review on possible restructuring of the Group's business portfolio to achieve cost saving and improve profitability, as well as the financial performance of the Group. The Group recorded an unaudited loss of approximately HK$176 million for the six months ended 30 June 2020, as compared with that of approximately HK$210 million for the six months ended 30 June 2019, which was mainly attributable to the effective cost saving initiatives. The unaudited consolidated net asset value of the Group as at 30 June 2020 was approximately HK$464 million, representing a decrease of approximately 28%, as compared with the audited consolidated net asset value of the Group as at 31 December 2019 of approximately HK$640 million.

Save as disclosed above, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2019, being the date to which the latest published audited consolidated financial statements of the Group were made up, up to and including the Latest Practicable Date.

(5) OTHER DIRECTORS' INTERESTS

(a) Interests in competing business

As at the Latest Practicable Date, none of the Directors nor their respective associates had any material interest in any business which compete or is likely to compete, either directly or indirectly, with the businesses of the Group.

(b) Interests in assets

As at the Latest Practicable Date, none of the Directors had any material direct or indirect interest in any assets which have been acquired or disposed of by, or leased, or which were proposed to be acquired or disposed of by, or leased to any member of the Group since 31 December 2019 (the date to which the latest published audited consolidated financial statements of the Group were made up).

(c) Interests in contract or arrangement

As at the Latest Practicable Date, save for the bond instrument dated 4 June 2019 made by the Company relating to the 2019 LCS and the 2021 LCS Subscription Agreement, none of the Directors was materially interested in any contract or arrangement subsisting and which is significant in relation to the business of the Group.

(d) Directors' service contracts

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

(6) MATERIAL CONTRACTS

The following contracts, not being contracts entered into in the ordinary course of business of the Group, have been entered into by members of the Group within two years immediately preceding the Latest Practicable Date and are or may be material:

  • (a) the 2021 LCS Subscription Agreement, details of which are set out in the section headed ''(B) Proposed issue of unlisted long-term convertible securities'' in the Letter from the Board in this circular; and

  • (b) the placing agreement dated 8 April 2019 entered between the Company and China Galaxy International Securities (Hong Kong) Co., Limited (the ''Bookrunner'' ) in relation to the placing of the unsubscribed rights shares and the non-qualifying Shareholders' unsold rights shares by the Bookrunner with a commission of the higher of HK$200,000 or 1.75% of the gross proceeds from the subscription of the unsubscribed rights shares and the non-qualifying Shareholders' unsold rights shares, details of which are set out in the Letter from the Board contained in the circular of the Company dated 8 April 2019.

(7) EXPERT'S QUALIFICATION AND CONSENT

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

Name Qualification

Yue Xiu Capital Limited

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

As at the Latest Practicable Date, Yue Xiu Capital Limited was not beneficially interested in the share capital of any member of the Group nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any Shares, convertible securities, warrants, options or derivatives which carry voting rights in any member of the Group nor did it have any interest, either direct or indirect, in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2019, being the date to which the latest published audited financial statements of the Group were made up.

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

(8) GENERAL

(a) The company secretary of the Company is Mr. Kwok Chi Kin, a fellow of the Hong

Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants, a Chartered Secretary, a Chartered Governance Professionaland an associate member of the Hong Kong Institute of Chartered Secretaries and the Chartered Governance Institute (formerly known as the Institute of Chartered Secretaries and Administrators).

(b) The registered office of the Company is 7th Floor, Cable TV Tower, 9 Hoi Shing

Road, Tsuen Wan, Hong Kong. The share registrar of the Company is Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong.

(c) The English text of this circular shall prevail over the Chinese text.

(9) DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection in the office of the Company at 7th Floor, Cable TV Tower, 9 Hoi Shing Road, Tsuen Wan, Hong Kong during normal business hours from the date of this circular up to and including the date of the GM:

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

  • (b) the letter from the Board, the text of which is set out on pages 4 to 18 of this circular;

  • (c) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 19 to 20 of this circular;

  • (d) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 21 to 52 of this circular;

  • (e) the written consent referred to in the paragraph headed ''Expert's qualification and consent'' in this appendix;

  • (f) the annual reports of the Company for each of the three years ended 31 December 2017, 2018 and 2019;

  • (g) the interim report of the Company for the six months ended 30 June 2020;

  • (h) the bond instrument dated 4 June 2019 and the 2021 LCS Subscription Agreement referred to in the sub-paragraph headed ''(c) Interests in contract or arrangement'' in the paragraph headed ''(5) Other Directors' interests'' in this appendix;

  • (i) the material contracts referred to in the paragraph headed ''(6) Material contracts'' in this appendix; and

  • (j) this circular.

i-CABLE COMMUNICATIONS LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 1097)

NOTICE OF GENERAL MEETING

NOTICE IS HEREBY GIVEN that a general meeting of i-CABLE Communications Limited (the ''Company'') will be held at 3:00 p.m. on Tuesday, 23 March 2021 at Ballroom, Lobby Floor, Hyatt Regency Hong Kong, Tsim Sha Tsui, 18 Hanoi Road, Tsim Sha Tsui, Kowloon, Hong Kong for the purpose of considering and, if thought fit, passing with or without amendments, the following resolution of the Company (unless otherwise indicated, capitalised terms used in this notice shall have the same meanings as those defined in the circular of the Company dated 2 March 2021):

ORDINARY RESOLUTION

1. ''THAT:

  • a. the Subscription Agreement dated 27 January 2021 entered into between the Company and Forever Top (Asia) Limited (the ''2021 LCS Subscription Agreement'') pursuant to which Company has conditionally agreed to issue and Forever Top (Asia) Limited has conditionally agreed to subscribe for the unlisted long-term convertible bonds (''2021 LCS'') in the principal amount of HK$200 million subject to the terms and conditions thereof, be and is hereby approved, confirmed and ratified, and all the transactions contemplated under the 2021 LCS Subscription Agreement be and are hereby approved, confirmed and ratified and that the board of Directors (the ''Board'') be and is hereby authorised to make changes or amendments to the 2021 LCS Subscription Agreement as it may in its absolute discretion think fit (a copy of the 2021 LCS Subscription Agreement marked ''A'' is produced to the meeting and initialled by the chairman of the meeting for the purpose of identification);

  • b. the directors of the Company (the ''Directors'') be and are hereby granted a specific mandate to exercise powers of the Company to allot and issue such number of shares of the Company (the ''Shares'') as may be required to be allotted and issued upon exercise of the conversion rights attaching to the 2021 LCS; and

  • c. any one or more Directors be and is/are hereby authorised to take such actions, do all such acts and things and execute all such further documents or deeds as he/she/ they may, in his/her/their absolute discretion, consider necessary, appropriate, desirable or expedient for the purpose of, or in connection with, the implementation of or giving effect to the 2021 LCS Subscription Agreement and all transactions

contemplated thereunder and all other matters incidental thereto or in connection therewith, and to agree to and make such variations, amendments or waivers of any of the matters relating thereto or in connection therewith.''

By Order of the Board i-CABLE COMMUNICATIONS LIMITED

Kwok Chi Kin

Company Secretary

Hong Kong, 2 March 2021

Registered office:

7th Floor, Cable TV Tower, 9 Hoi Shing Road,

Tsuen Wan,

Hong Kong

Notes:

  • (1) Any member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him/her. A proxy need not be a member of the Company. He/she may appoint separate proxies to represent respectively such number of Shares registered under his/her name. In light of the continuing risks posed by the coronavirus disease 2019 (''COVID-19'') pandemic, the Company, however, strongly encourages shareholders of the Company (the ''Shareholders'') NOT to attend this meeting in person, and advises Shareholders to appoint the chairman of the general meeting of the Company held on Tuesday, 23 March 2021 rather than a third party as their proxy to vote according to their indicated voting instructions as an alternative to attending this meeting (or any adjournment thereof) in person.

  • (2) The instrument appointing a proxy shall be in writing under the hand of the appointor or of his/her attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of any officer, attorney or other person duly authorised to sign the same.

  • (3) In order to be valid, the form of proxy together with the power of attorney or other authority, if any, under which it is signed (or a notarially certified copy of such power or authority), must be deposited with the share registrar of the Company, Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong, not less than 48 hours (exclusive of any part of a day that is a public holiday) before the time appointed for holding the meeting or any adjourned meeting thereof (as the case may be). Forms of proxy sent electronically or by any other data transmission will not be accepted.

  • (4) The register of members of the Company will be closed from Thursday, 18 March 2021 to Tuesday, 23 March 2021 (both days inclusive) to determine the entitlement to attend and vote at the above meeting. During such period no transfer of Shares will be registered. In order to qualify for the entitlement to attend and vote at the above meeting, all transfer forms accompanied by the relevant share certificates must be lodged with the share registrar of the Company, Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong, not later than 4:30 p.m. on Wednesday, 17 March 2021 for registration.

  • (5) Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting or at any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.

  • (6) Where there are joint registered holders of any Share, any one of such joint holders may vote, either in person or by proxy, in respect of such Share as if he/she was solely entitled thereto, but if more than one of such joint holders are present at the meeting, whether in person or by proxy, the joint registered holder present whose name stands first on the register of members of the Company in respect of the shares shall be accepted to the exclusion of the votes of the other registered holders.

  • (7) Considering of the recent development of the epidemic caused by COVID-19, the Company will implement the following precautionary measures at the meeting to protect the health and safety of the Shareholders who might be attending the meeting in person:

    • a. Compulsory body temperature checks will be conducted on every Shareholder, proxy and other attendee at the entrance of the meeting venue. Any person with a body temperature of over 37.3 degrees Celsius will be requested to stay in an isolated place for completing the voting procedures;

    • b. Every attendee will be required to wear a surgical face mask throughout the meeting. Please note that no masks will be provided at the meeting venue and attendees should bring and wear their own masks;

    • c. Seating at the meeting will be arranged so as to maintain appropriate social distance among the attendees;

    • d. Attendees will be accommodated in separate partitioned rooms or areas of not more than 20 persons (or such number as may be allowed under the Prevention and Control of Disease (Prohibition or Group Gathering) Regulation (Chapter 599G of the Laws of Hong Kong)) each; and

    • e. No refreshments or drinks will be served.

  • (8) Due to the constantly evolving COVID-19 pandemic situation in Hong Kong, the Company may be required to change the arrangements of this meeting at short notice. Shareholders should check any future announcement(s) which may be published by the Company.

    As at the date of this notice, the Board comprises eleven Directors, namely Tan Sri Dato'

David Chiu (Chairman), Dr. Cheng Kar-Shun, Henry (Vice-chairman), Mr. Tsang On Yip, Patrick, Mr. Hoong Cheong Thard, Mr. Lie Ken Jie, Remy Anthony Ket Heng and Ms. Ng Yuk Mui Jessica as non-executive Directors, Mr. Andrew Wah Wai Chiu as an executive Director, and Mr. Lam Kin-Fung, Jeffrey, Dr. Hu Shao Ming Herman, Mr. Luk Koon Hoo, Roger and Mr. Tang Sing Ming Sherman as independent non-executive Directors.

PRECAUTIONARY MEASURES FOR THE GENERAL MEETING

PRECAUTIONARY MEASURES FOR THE GENERAL MEETING

With the outbreak and spreading of COVID-19 pandemic and the heightened requirements for the prevention and control of its spreading, to safeguard the health and safety of the Shareholders who might be attending the GM in person, the Company will implement the following precautionary measures at the GM:

  • (1) There will be compulsory body temperature screening for all attendees of the GM before entering the GM venue. Any person with a temperature of over 37.3 degrees Celsius will be required to stay in an isolated place for completing the voting procedures.

  • (2) All attendees of the GM will be required to wear surgical face masks before they are permitted to attend, and during their attendance of, the GM. Please note that no masks will be provided at the GM and attendees should bring and wear their own masks. Attendees are advised to maintain appropriate social distance with each other at all times when attending the GM. Hand sanitizer will be provided.

  • (3) No refreshments or drinks will be served.

  • (4) Attendees will be accommodated in separate partitioned room or areas of not more than 20 persons (or such number as may be allowed under the Prevention and Control of Disease (Prohibition or Group Gathering) Regulation (Chapter 599G of the Laws of Hong Kong)) each.

Attendees are requested to observe and practise good personal hygiene at all times at the GM venue. Attendees who do not comply with the precautionary measures (1) and (2) above may be denied entry to the GM venue, at the discretion of the Company to the extent permitted by law.

In light of the continuing risks posed by the COVID-19 pandemic, the Company strongly encourages Shareholders NOT to attend the GM in person, and advises Shareholders to appoint the chairman of the GM as their proxy to vote according to their indicated voting instructions as an alternative to attending the GM in person.

Shareholders are advised to read this section carefully and monitor the development of COVID-19. Subject to the development of COVID-19, the Company may implement further changes and precautionary measures and may issue further announcement(s) regarding such measures as appropriate.

Health education materials and up-to-date development on COVID-19 can be found on the Centre for Health Protection website (www.chp.gov.hk) and the website of the HKSAR Government on COVID-19 (www.coronavirus.gov.hk).

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i-CABLE Communications Limited published this content on 01 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 March 2021 12:20:02 UTC.