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CAF DE CORAL HOLDINGS LIMITED

大 家 樂 集 團 有 限 公 司
(Incorporated in Bermuda with Limited Liability)
(Stock Code: 341)

CONTINUING CONNECTED TRANSACTIONS

R14.

6



The Board is pleased to announce that on 14
th
November, 2007, Caf de Espressamente illy, a non
wholly-owned subsidiary of the Company, entered into the Master Franchise Agreement with illy for
exclusive franchises to develop, open and operate the Outlets in the Territory.

illy is an associate of illycaffe Asia Pacific who is a substantial shareholder of Caf de Espressamente
illy. Thus, the transactions contemplated under the Master Franchise Agreement constitute continuing
connected transactions of the Company under the Listing Rules.

As the relevant percentage ratios in respect of the Cap Amount of the continuing connected
transactions under the Master Franchise Agreement will be less than 2.5%. Accordingly, such
transactions are only subject to the reporting and announcement requirements set out in Rules 14A.45
to 14A.47 and are exempt from the independent shareholders’ approval requirement of Chapter 14A of
the Listing Rules.

MASTER FRANCHISE AGREEMENT

Date: 14
th
November, 2007

Parties: (1) Franchisor : illy
(2) Franchisee : Caf de Espressamente illy

Subject: illy granted an exclusive franchise to Caf de Espressamente illy to develop, open and
operate the Outlets in the Territory

Term: Save as terminated in accordance with the Master Franchise Agreement, it is for a period of
ten years from the date of the Master Franchise Agreement and be automatically renewed
for another ten years unless otherwise notified by either party of its intention not to renew
the same.

Consideration:

In consideration of the grant of the exclusive franchise, Caf de Espressamente illy is required to pay

(1) To illy:

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(i) an initial fee upon execution of the Master Franchise Agreement;
(ii) a deferred development fee for each Outlet (other than Rolling Store) payable within 30
days upon opening of such Outlet (in the case of Rolling Store, a deferred development
fee of another sum for each Rolling Store);
(iii) a continuing franchise fee based on certain percentage of the monthly net sales of each
Outlet, payable in arrears within 15 days of the end of each calendar month;
(iv) an one-off capped sum for checking design conformity for each of the respective design
concepts for the Outlet (other than the Rolling Store);

(2) To the authorized distributors, agents and associated companies of illy (whether being an
independent third party to illy or an associate of illy as defined under the Listing Rules) the
prices for the provisions of fittings, promotional activities, equipment, furniture and products.

The aforesaid initial fee, deferred development fee, continuing franchise fee, one-off capped sum and
prices have been and will be determined among the parties on an arm’s length basis with reference to
the market rates offered in the industry.

DURATION OF THE MASTER FRANCHISE AGREEMENT

The Company considers that, with a growing demand in coffee consumption, it is commercially
favourable for Caf de Espressamente illy to enter into the Master Franchise Agreement of duration of
more than three years, which is in line with the industry standard. The Directors of the Company
expected that for expanding its business in catering industry, the longer the duration for its operation,
the larger the market will be captured by Caf de Espressamente illy.

In addition, the expected total investment of the Outlets is at a level such that the payback period is
expected to be longer than three years and thus having a franchise agreement of three years or less is
commercially not viable.

In compliance with Rule 14A.35(1) of the Listing Rules, the Company has engaged Karl Thomson
Financial Advisory Limited as its independent financial adviser to explain why a longer period for the
Master Franchise Agreement is required and the independent financial advisor also confirms that the
duration of the Master Franchise Agreement is on normal commercial terms and is in line with normal
business contract of this type to be of such duration.

CAP AMOUNT

The Company proposes to set a Cap Amount of HK$35,000,000 for each of the financial years ending
31
st
March, 2008 to 31
st
March, 2018 of the Company for the transactions contemplated under the
Master Franchise Agreement with illy and/or the associates of illy.

In arriving the Cap Amount for the Master Franchise Agreement in each of the aforesaid financial
years, the Company has taken into account the anticipated scope and level of business that Caf de
Espressamente illy is going to have, which are based on performance projection of Caf de
Espressamente illy and the Cap Amount represents the maximum possible amount of fees expected to
be payable to illy and/or the associates of illy in each of the aforesaid financial years projected on the
basis of normal business outlooks, having regard to the general inflation in these years.

REASONS AND BENEFITS OF THE CONTINUING CONNECTED TRANSACTION

Exploring business opportunities in various segments of the catering industry, at home and abroad, has
always been the Company’s business objective and development strategy. The collaboration with an
international famous brand owner, illy, to establish Caf de Espressamente illy with an exclusive
franchise to operate the Outlets in the Territory will enable the Group to develop an unique chain of

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cafes for capturing the opportunities presented by the growing demand from the coffee drinking
culture in the Territory.

The Directors (including the independent non-executive directors) consider that the terms of the
Master Franchise Agreement have been entered into in the ordinary and usual course of the
Company’s business on normal commercial terms and are fair and reasonable and in the best interests
of the Company and shareholders as a whole.

GENERAL

The Group is principally engaged in the operation of quick service and specialty restaurants chain as
well as institutional catering, and the food processing and distribution business.

illy produces and markets worldwide a single, leading-quality blend of espresso coffee. In 2003, it
launched the espressamente illy project comprising a chain of Italian-style coffee bars of innovative
design.

Caf de Espressamente illy is a company owned by Vogue Asia and illycaffe Asia Pacific in the
proportion of 70% and 30% respectively and is a non wholly-owned subsidiary of the Company. illy is
an associate of illycaffe Asia Pacific as defined under the Listing Rules. Accordingly, illy is a
connected person of the Company under the Listing Rules. The transactions contemplated under the
Master Franchise Agreement constitute continuing connected transactions of the Company under the
Listing Rules.

As the relevant percentage ratios in respect of the Cap Amount of the continuing connected
transactions under the Master Franchise Agreement will be less than 2.5%. Accordingly, such
transactions are only subject to the reporting and announcement requirements set out in Rules 14A.45
to 14A.47 and are exempt from the independent shareholders’ approval requirement of Chapter 14A of
the Listing Rules.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following terms shall have the
following meanings:-

“Board” The board of directors of the Company

“Caf de Espressamente
illy”
Caf de Espressamente illy (HK) Limited, a non wholly-owned
subsidiary of the Company, incorporated in Hong Kong with limited
liability

“Cap Amount” a maximum aggregate annual amount for the consideration payable to
illy or associates of illy pursuant to the transactions contemplated under
the Master Franchise Agreement for each financial year of the Company

“Company” Caf de Coral Holdings Limited, an exempted company incorporated in
Bermuda with limited liability, the shares of which are listed on the
Stock Exchange

“Director(s)” the director(s) of the Company

“Group” the Company and its subsidiaries

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“HK$”

Hong Kong dollars, the lawful currency of Hong Kong
“illy” illycaffe SpA, a company incorporated in Italy

“illycaffe Asia Pacific” illycaffe Asia Pacific Limited, a company incorporated in Hong Kong
with limited liability

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

“Master Franchise
Agreement”
a master franchise agreement dated 14
th
November, 2007 entered into
between Caf de Espressamente illy and illy relating to an exclusive
franchise to develop, open and operate the Outlets in the Territory

“Outlet(s)” the retail outlet(s) (including but not limited to Rolling Store) developed,
opened and operated pursuant to the Master Franchise Agreement

“Rolling Store” retail outlet developed, opened and operated in accordance with the
mobile carts concept under the Master Franchise Agreement

“Stock Exchange”

Chan Yue Kwong, Michael,
Mr. Lo Hoi Kwong, Sunny, Ms. Lo Pik Ling, Anita and Mr. Lo Tak Shing, Peter as executive directors; Mr.
Lo Tang Seong, Victor, Mr. Lo Hoi Chun and Mr. Hui Tung Wah, Samuel as non-executive directors; Mr.
Choi Ngai Min, Michael, Mr. Li Kwok Sing, Aubrey and Mr. Kwok Lam Kwong, Larry as independent
non-executive directors.