Telecom Service One : Continuing Connected Transactions – Surrender Agreements

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Telecom Service One Holdings Limited

電 訊 首 科 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 3997)

CONTINUING CONNECTED TRANSACTIONS

SURRENDER AGREEMENTS

SURRENDER AGREEMENTS

On 6 May 2019, TSO (a wholly-owned subsidiary of the Company) has entered into the Surrender Agreements with GEL and ORL to surrender the Surrendered Premises under the Fourth 2019/20 Tenancy Agreement and Fifth 2019/20 Tenancy Agreement respectively.

GEL and ORL are indirectly wholly-owned by the Cheung Family Trust which indirectly holds 51.43% of the shares of the Company in issue. As such, GEL and ORL are connected persons of the Company under the Listing Rules. Accordingly, the Surrender Agreements constitute continuing connected transactions for the Company.

Pursuant to the Surrender Agreements, TSO shall surrender the Surrendered Premises under the Fourth 2019/20 Tenancy Agreement and Fifth 2019/20 Tenancy Agreement to GEL and ORL respectively on 31 May 2019. Accordingly, the Company is subject to the announcement requirement under the Note to Rule 14A.35 of the Listing Rules.

As one or more applicable percentage ratios (other than the profits ratio) in respect of the revised aggregate annual rental under the Surrender Agreements and 2019/20 Tenancy Agreements are less than 5% but the revised aggregate annual rental is more than HK$3,000,000, such tenancy agreements and the revised aggregate annual rental are subject to the announcement, annual review and reporting requirements, but exempt from the independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

SURRENDER AGREEMENTS

Reference is made to the announcement of the Company dated 31 March 2019 in relation to the 2019/20 Tenancy Agreements entered into between GEL, GIL and ORL with TSO (a wholly-owned subsidiary of the Company) respectively in which setting out the terms and conditions for leasing of properties for a term up to 31 March 2020.

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On 6 May 2019, TSO has entered into the Surrender Agreements with GEL and ORL to surrender the Surrendered Premises under the Fourth 2019/20 Tenancy Agreement and Fifth 2019/20 Tenancy Agreement respectively.

Pursuant to the Surrender Agreements, TSO shall surrender the Surrendered Premises under the Fourth 2019/20 Tenancy Agreement and Fifth 2019/20 Tenancy Agreement to GEL and ORL respectively on 31 May 2019, the tenancies of the Surrender Premises shall be absolutely ceased and terminated and both parties shall release each other from all liabilities and obligations in relation to the Surrender Premises thereof.

Details of the tenancies of the Surrender Premises under the Surrender Agreements are as follows:

		Date of tenancy			Usage and
Address	Landlord	agreement	Term	Monthly rent	area
Fourth 2019/20 Tenancy Agreement
Portion of Unit A,	GEL	30 March 2019	from 1 April 2019	HK$21,120	repair center
23/F., Kyoto Plaza,			to 31 March 2020	(exclusive of
Nos. 491-499			(tenancy will be	government rates,	saleable
Lockhart Road,			terminated in advance	government rent	area:
Causeway Bay,			on 31 May 2019)	and building	640 sq. ft.
Hong Kong				management fee)	(gross)
Fifth 2019/20 Tenancy Agreement
Unit B, 23/F.,	ORL	30 March 2019	from 1 April 2019	HK$42,372	repair center
Kyoto Plaza,			to 31 March 2020	(exclusive of
Nos. 491-499			(tenancy will be	government rates,	saleable
Lockhart Road,			terminated in advance	government rent	area:
Causeway Bay,			on 31 May 2019)	and building	1,284 sq. ft.
Hong Kong				management fee)	(gross)

REVISED AGGREGATE ANNUAL CAP

The revised aggregate annual cap of the Surrender Agreements and 2019/20 Tenancy Agreements based on the aggregate annual rental payable thereunder during their respective terms of tenancy for the year ending 31 March 2020 will be as follows:

		For the year
		ending
		31 March 2020
		HK$'000
First 2019/20 Tenancy Agreement	953
Second 2019/20 Tenancy Agreement	392
Third 2019/20 Tenancy Agreement	1,830
Fourth 2019/20 Tenancy Agreement	42
Fifth 2019/20 Tenancy Agreement		85
	3,302
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Further details of the Other Tenancy Agreements are as follows:

		Date of
		tenancy
Address	Landlord	agreement	Term	Monthly rent	Usage and area
First 2019/20 Tenancy Agreement
Unit 1807, 18/F.,	ORL	30 March 2019 from 1 April 2019	HK$79,420	head office,
Riley House,			to 31 March 2020	(exclusive of	repair center and
No.88 Lei Muk Road,				government rates,	warehouse
Kwai Chung,				government rent and
New Territories,				building management	saleable area:
Hong Kong				fee)	7,220 sq. ft.
					(gross)
Second 2019/20 Tenancy Agreement
Portion B of Unit	GIL	30 March 2019 from 1 April 2019	HK$32,626	head office,
1806, 18/F.,			to 31 March 2020	(exclusive of	repair center and
Riley House,				government rates,	warehouse
No.88 Lei Muk Road,				government rent and
Kwai Chung,				management fee)	saleable area:
New Territories,					2,966 sq. ft.
Hong Kong					(gross)
Third 2019/20 Tenancy Agreement
Units 1201-1203 and	ORL	30 March 2019 from 1 April 2019	HK$152,495	repair center
Units 1205-1206,			to 31 March 2020	(exclusive of building
12/F., Ginza Plaza,				management fee and	saleable area:
No. 2A Sai Yeung				air-conditioning	4,357 sq. ft.
Choi Street South,				charges but inclusive	(gross)
Mongkok, Kowloon,				of government rates
Hong Kong				and government rent)

REASON FOR ENTERING INTO SURRENDER AGREEMENTS

Given the uncertainties and challenges faced by the world's major economies, the Group keep implementing stricter financial control, streamlining structure and expenditure austerity. The Group decided to restructure its repair centers and close the Surrendered Premises in May 2019. The Surrender Agreements were entered to surrender the Surrendered Premises.

The terms of the Surrender Agreements are arrived at after arm's length negotiation and are on normal commercial terms. The Directors (except the Cheung Brothers being the Directors who have material interests in the Surrender Agreements and who abstained from participating in the approval of the relevant Board resolutions due to conflict of interest), including the independent non-executive Directors, considered that the terms of the Surrender Agreements are fair and reasonable and the Surrender Agreements are on normal commercial terms, in the ordinary and usual course of business of the Group, and in the interests of the Company and its shareholders as a whole.

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IMPLICATIONS UNDER THE LISTING RULES

GEL and ORL, the property holding companies, are indirectly wholly-owned by the Cheung Family Trust which indirectly holds 51.43% of the shares of the Company in issue. As such, GEL and ORL are connected persons of the Company under the Listing Rules. Accordingly, the Surrender Agreements constitute continuing connected transactions for the Company.

Upon entering into the Surrender Agreements, the tenancies of the Surrender Premises under the Surrender Agreements are to be terminated in advance. Accordingly, the Company is subject to the announcement requirement under the Note to Rule 14A.35 of the Listing Rules.

As one or more applicable percentage ratios (other than the profits ratio) in respect of the revised aggregate annual rental under the Surrender Agreements and 2019/20 Tenancy Agreements are less than 5% but the revised aggregate annual rental is more than HK$3,000,000, such tenancy agreements and the revised aggregate annual rental are subject to the announcement, annual review and reporting requirements, but exempt from the independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

GENERAL INFORMATION

The Company is listed on Main Board of the Stock Exchange and is principally engaged in investment holding. The principal activities of the Group (including TSO) are provision of repair and refurbishment services for mobile phones and personal electronic products and the sales of related accessories therefor.

DEFINITIONS

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

"2019/20 Tenancy Agreements"	the First to Fifth 2019/20 Tenancy Agreements dated 30
	March 2019 entered into between GEL, GIL and ORL with
	TSO respectively in relation to the tenancies of properties
"Board"	board of the Directors
"Cheung Brothers"	Mr. Cheung King Shek, Mr. Cheung King Shan, Mr. Cheung
	King Chuen Bobby and Mr. Cheung King Fung Sunny
"Cheung Family Trust"	a discretionary trust established for the benefit of certain
	family members of the Cheung family, the discretionary
	beneficiary includes the Cheung Brothers, all being Directors

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"Company"	Telecom Service One Holdings Limited, a company
	incorporated in the Cayman Islands with limited liability, the
	shares of which are listed on Main Board of the Stock
	Exchange (Stock Code: 3997)
"connected person(s)"	has the meaning ascribed to it under the Listing Rules
"Director(s)"	Director(s) of the Company
"Fifth 2019/20 Tenancy	the tenancy agreement dated 30 March 2019 entered into
Agreement"	between ORL and TSO in relation to the tenancy of Unit B,
	23/F., Kyoto Plaza, Nos. 491-499 Lockhart Road, Causeway
	Bay, Hong Kong
"Fourth 2019/20 Tenancy	the tenancy agreement dated 30 March 2019 entered into
Agreement"	between GEL and TSO in relation to the tenancy of Portion of
	Unit A, 23/F., Kyoto Plaza, Nos. 491-499 Lockhart Road,
	Causeway Bay, Hong Kong
"GEL"	Glossy Enterprises Limited, a company incorporated in Hong
	Kong with limited liability and indirectly wholly-owned by
	the Cheung Family Trust which indirectly holds 51.43% of
	the shares of the Company in issue, and thus a connected
	person of the Company
"GIL"	Glossy Investment Limited, a company incorporated in Hong
	Kong with limited liability and indirectly wholly-owned by
	the Cheung Family Trust which indirectly holds 51.43% of
	the shares of the Company in issue, and thus a connected
	person of the Company
"Group"	the Company and its subsidiaries
"HK$"	Hong Kong dollars, the lawful currency of Hong Kong
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
	Exchange
"ORL"	Oceanic Rich Limited, a company incorporated in Hong Kong
	with limited liability and indirectly wholly-owned by the
	Cheung Family Trust which indirectly holds 51.43% of the
	shares of the Company in issue, and thus a connected person
	of the Company
"Other Tenancy Agreements"	the tenancy agreements dated 30 March 2019 entered into
	between GIL and ORL with TSO respectively in relation to
	the tenancies of the premises under the First 2019/20 Tenancy
	Agreement, Second 2019/20 Tenancy Agreement and Third
	2019/20 Tenancy Agreement
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