first shanghai investments limited for any loss howsoever ar s ng from or n rel ance upon the whole...

THis CiRCULAR is iMPORTANT AND REQUiREs YOUR iMMEDiATE ATTENTiON

The Stock Exchange of Hong Kong L�m�ted takes no respons�b�l�ty for the contents of th�s c�rcular, makes no representat�on as to �ts accuracy or completeness and expressly d�scla�ms any l�ab�l�ty whatsoever for any loss howsoever ar�s�ng from or �n rel�ance upon the whole or any part of the contents of th�s c�rcular.

Th�s c�rcular appears for �nformat�on purposes only and does not const�tute an �nv�tat�on or offer to acqu�re, purchase or subscr�be for secur�t�es of F�rst Shangha� Investment L�m�ted.

if you are in doubt as to any aspect of th�s c�rcular, you should consult your stockbroker or other reg�stered dealer �n secur�t�es, bank manager, sol�c�tor, profess�onal accountant or other profess�onal adv�ser.

if you have sold all your shares �n F�rst Shangha� Investment L�m�ted you should at once hand th�s c�rcular together w�th the accompany�ng form of proxy to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transm�ss�on to the purchaser.

FiRsT sHANGHAi iNVEsTMENTs LiMiTED(Incorporated inHongKongwith limited liability)

(Stock Code: ��)

ACQUisiTiON OF AssETsDisCLOsEABLE AND CONNECTED TRANsACTiON

iNDEPENDENT FiNANCiAL ADVisERTO THE iNDEPENDENT BOARD COMMiTTEE

AND THE iNDEPENDENT sHAREHOLDERs

CHiNA EVERBRiGHT CAPiTAL LiMiTED

A not�ce conven�ng an extraord�nary general meet�ng of F�rst Shangha� Investments L�m�ted to be held at �:00 p.m. on ��nd June, �00� at ��th Floor, W�ng On House, �� Des Voeux Road Central, Hong Kong �s set out on pages �� to �� of th�s c�rcular. Whether or not you are able to attend the meet�ng, please complete and return the enclosed form of proxy �n accordance w�th the �nstruct�ons pr�nted thereon as soon as poss�ble and �n any event by no later than �� hours before the t�me appo�nted for the hold�ng of the meet�ng. Complet�on and del�very of the form of proxy shall not preclude you from attend�ng and vot�ng at the meet�ng or any adjournment thereof should you so w�sh.

�th June, �00�

- � -

CONTENTs

Page

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �

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

Letter from the independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ��

Letter from China Everbright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ��

Appendix i – summary of the terms of the Convertible Bonds . . . . . . . . . . . . . . . . . . �0

Appendix ii – Property valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ��

Appendix iii – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �0

Notice of extraordinary general meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ��

- � -

DEFiNiTiONs

In this circular, the following expressions have the following meanings unless the context

requiresotherwise:

“Agreement” the agreement dated ��th May, �00� between the Vendors and the

Company relat�ng to the sale and purchase of the ent�re �ssued

share cap�tal of, and the benef�t of loans of HK$�0,��,��0

advanced by the Vendors to, HK Sunsh�ne

“Ass�gned Loan” the loans �n the total sum HK$�0,��,��0 advanced by the

Vendors to HK Sunsh�ne to be ass�gned to the Company pursuant

to the Agreement

“assoc�ate” has the mean�ng ascr�bed to �t under the L�st�ng Rules

“Balance Purchaser Pr�ce” RMB��,�00,000, be�ng the balance of the purchase pr�ce due

under the Land Transfer Agreement

“Balance Shareholder’s Loan” HK$��,��,000, be�ng the balance of loans advanced by the

Vendors to HK Sunsh�ne after deduct�ng the Ass�gned Loan

“Bureau” 無錫市國土資源局 (Wux� Mun�c�pal State Land Resources

Bureau)

“Ch�na Assets” Ch�na Assets (Hold�ngs) L�m�ted, a company �ncorporated �n

Hong Kong w�th l�m�ted l�ab�l�ty whose shares are l�sted on the

Stock Exchange

“Ch�na Everbr�ght” Ch�na Everbr�ght Cap�tal L�m�ted, a corporat�on l�censed to

conduct type � (deal�ng �n secur�t�es), type � (adv�s�ng on

secur�t�es) and type � (adv�s�ng on corporate f�nance) regulated

act�v�t�es under the SFO

“Board” the board of D�rectors

“Company” F�rst Shangha� Investments L�m�ted, a company �ncorporated �n

Hong Kong w�th l�m�ted l�ab�l�ty and whose shares are l�sted on

the Stock Exchange

“Convert�ble Bonds” Convert�ble bonds of the Company to be �ssued to the Vendors

pursuant to the Agreement

“D�rectors” the d�rectors of the Company

- � -

DEFiNiTiONs

“EGM” the extraord�nary general meet�ng of the Company to be held

at �:00 p.m. on ��nd June, �00�, not�ce of wh�ch �s set out on

pages �� to �� of th�s c�rcular

“Group” the Company and �ts subs�d�ar�es

“HK Sunsh�ne” HK Sunsh�ne Real Estate L�m�ted, a company �ncorporated �n

Hong Kong

“Hong Kong” the Hong Kong Spec�al Adm�n�strat�ve Reg�on of the PRC

“Independent Board Comm�ttee” an �ndependent comm�ttee of the Board compr�s�ng Messrs. Woo

Ch�a We�, L�u J� and Yu Q� Hao, formed for the purpose of adv�s�ng

the Independent Shareholders regard�ng the Agreement

“Independent Shareholders” shareholders of the Company other than Mr Lao, Ms Lao and

the�r respect�ve assoc�ates

“Land” a p�ece of land �n south of Gaolang Road and west of X�sh�

Road, Wux�, J�angsu Prov�nce, the PRC w�th a s�te area of

��,��.� sq.m.

“Land Transfer Agreement” an agreement dated ��th December, �00� between HK Sunsh�ne

and the Bureau, as supplemented by an agreement dated ��th

March, �00� between them and Wux� Sunsh�ne relat�ng to the

grant of use of the Land

“Latest Pract�cable Date” 1st June, �00�, be�ng the latest pract�cable date pr�or to pr�nt�ng

of th�s c�rcular for ascerta�n�ng certa�n �nformat�on for �nclus�on

�n th�s c�rcular

“L�st�ng Rules” the Rules Govern�ng the L�st�ng of Secur�t�es on the Stock

Exchange

“Mr Lao” Lao Yuan Y� al�as Lo Yuen Yat

“Ms Lao” Lao Yuan, V�v�an al�as Lao Yuan Yuan

“Outstand�ng Opt�on(s)” outstand�ng opt�on(s) granted under the share opt�on scheme of

the Company as at the Latest Pract�cable Date

“PRC” People’s Republ�c of Ch�na

“SFO” Secur�t�es and Futures Ord�nance (Chapter �� of the Laws of

Hong Kong)

- � -

DEFiNiTiONs

“Share(s)” share(s) of HK$0.�0 each �n the share cap�tal of the Company

“sq.m.” square meter(s)

“Stock Exchange” The Stock Exchange of Hong Kong L�m�ted

“Valuer” DTZ Debenham T�e Leung L�m�ted

“Vendors” Mr Lao and Ms Lao

“Wux� Sunsh�ne” Wux� Sunsh�ne Real Estate L�m�ted (無錫香山置業發展有限公司), a wholly owned fore�gn enterpr�se �n the PRC and a wholly

owned subs�d�ary of HK Sunsh�ne

“HK$” and “cent(s)” Hong Kong dollar(s) and cent(s) respect�vely

“RMB” Renm�nb�, the lawful currency of the PRC

“US$” Un�ted States dollar(s), the lawful currency of the Un�ted States

of Amer�ca

- � -

LETTER FROM THE BOARD



Directors: Registeredoffice:

Mr Lao Yuan Y� (Chairman) Room ��0�

Mr X�n Shul�n, Steve W�ng On House

Mr Yeung Wa� K�n �� Des Voeux Road Central

Mr Hu Y� M�ng Hong Kong

Mr Kwok Lam Kwong, Larry, J.P.*

Prof. Woo Ch�a We�**

Mr L�u J�**

Mr Yu Q� Hao**

* Non-executiveDirector

** Independentnon-executiveDirectors


Totheshareholders

Dear S�r or Madam,

ACQUisiTiON OF AssETsDisCLOsEABLE AND CONNECTED TRANsACTiONs

iNTRODUCTiON

It was announced on ��th May, �00� that the Company entered �nto an agreement w�th the

Vendors on ��th May, �00� for the acqu�s�t�on of the ent�re �ssued share cap�tal of, and the benef�t

of loans of HK$�0,��,��0 advanced to, HK Sunsh�ne for an aggregate cons�derat�on of HK$��.��

m�ll�on. The Agreement const�tutes a connected transact�on under the L�st�ng Rules wh�ch requ�res

the approval of the Independent Shareholders.

An �ndependent board comm�ttee compr�s�ng Messrs. Woo Ch�a We�, L�u J� and Yu Q� Hao (all

be�ng �ndependent non-execut�ve D�rectors) has been appo�nted to adv�se the Independent Shareholders

�n respect of the Agreement. The Company has appo�nted Ch�na Everbr�ght as the �ndependent

f�nanc�al adv�ser to adv�se the Independent Board Comm�ttee and the Independent Shareholders �n

th�s respect.

- � -


The purpose of th�s c�rcular �s to g�ve you further deta�ls of the Agreement and to convene an extraord�nary general meet�ng to cons�der and, �f thought f�t, pass the necessary resolut�on to approve the Agreement.

AGREEMENT DATED 11TH MAY, 2007

Parties:

Vendors: Mr Lao and Ms Lao

Purchaser: the Company

Assets acquired:

�0 shares of HK$� each (represent�ng the ent�re �ssued share cap�tal) of, and the benef�t of loans of HK$�0,��,��0 advanced by the Vendors to, HK Sunsh�ne wh�ch are owned by Mr Lao and Ms Lao �n the proport�on of �0% and �0% respect�vely. Upon complet�on of the Agreement, HK Sunsh�ne w�ll become a wholly owned subs�d�ary of the Company and accounts of wh�ch w�ll be consol�dated �nto that of the Company.

HK Sunsh�ne �s a company �ncorporated �n Hong Kong on �th December, �00�. It and �ts wholly owned subs�d�ary are pr�nc�pally engaged �n property �nvestment.

On ��th December, �00�, HK Sunsh�ne and the Bureau entered �nto an agreement (wh�ch �s supplemented by an agreement dated ��th March, �00� between the Bureau, HK Sunsh�ne and Wux� Sunsh�ne) whereby Wux� Sunsh�ne �s granted the use of a p�ece of land �n Wux� of J�angsu Prov�nce, the PRC at the pr�ce of RMB��,�00,000 (HK$��,��,��0), RMB�0,000,000 (HK$�0,��0,000) of wh�ch have been pa�d. The balance of RMB��,�00,000 (HK$��,��,��0) was payable on ��st May, �00�. The Company has been �nformed by the Vendors that the due date for payment of the balance purchase pr�ce for the Land has been extended to �0th June, �00�.

Part�culars of the Land are as follows:-

�. Locat�on : South of Gaolang Road and west of X�sh� Road, Wux�, J�angsu Prov�nce, the PRC

�. S�te area : ��,��.� sq.m.

�. Usage of the Land : Commerc�al, off�ce (� star hotel), res�dent�al (serv�ce apartment only, wh�ch shall not exceed �0% of the total gross floor area)

�. Land use per�od : Commerc�al �0 years Res�dent�al �0 years Others �0 years

�. He�ght l�m�t : �0 meters

- � -


�. T�metable for development stated �n the Land Transfer Agreement:

��st August, �00� commencement of construct�on work

��st March, �00� complet�on of construct�on work for not less than ��% of

the total construct�on area

��st December, �00� complet�on of construct�on work

The unaud�ted consol�dated total assets value of HK Sunsh�ne as at �0th May, �00� �s

approx�mately HK$�� m�ll�on, wh�ch assets ma�nly compr�se depos�t payment for acqu�s�t�on of the

Land of about HK$�0.� m�ll�on and bank balance of about HK$�0.� m�ll�on. The unaud�ted net asset

value of HK Sunsh�ne as at �0th May, �00� was at a negat�ve f�gure of HK$��,�00 as HK Sunsh�ne’s

�ssued share cap�tal �s only HK$�0 wh�le all of �ts �nvestments and payments made have been f�nanced

by shareholders’ loans. After exclud�ng the Ass�gned Loan wh�ch w�ll be ass�gned to the Company

upon complet�on, the net asset value of HK Sunsh�ne �s approx�mately HK$�� m�ll�on.

Consideration:

HK$��.�� m�ll�on, HK$��.� m�ll�on of wh�ch �s to be pa�d �n cash and the balance of HK$��.��

m�ll�on to be sat�sf�ed by the �ssue of the Convert�ble Bonds, a summary of the terms of wh�ch �s set

out �n Append�x I. There �s no pr�or transact�on cons�derat�on wh�ch has to be aggregated w�th that

under the Agreement pursuant to Rules ��.�� and ��A.�� of the L�st�ng Rules. The cons�derat�on

�n cash and the pr�nc�pal amount of the Convert�ble Bonds to be pa�d and �ssued to the Vendors

respect�vely at complet�on are as follows:

Principal amount of Cash Convertible Bonds

Mr Lao HK$�,��0,000 HK$�,��,000

Ms Lao HK$��,��0,000 HK$��,��,000

The Valuer, an �ndependent valuer, has valued the cap�tal value of the Land �n ex�st�ng state based

on the d�rect compar�son approach at RMB��.�� m�ll�on as at ��st March, �00� on the assumpt�on

that the Cert�f�cate for the Use of State-owned Land �s obta�ned. The cons�derat�on was arr�ved at

after arm’s length negot�at�ons and w�th reference to the sa�d valuat�on of the Land by the Valuer w�th

deduct�on of the Balance Purchase Pr�ce (�n the sum of RMB��,�00,000 (HK$��,��,��0)). On th�s

bas�s the D�rectors cons�der that the terms of acqu�s�t�on are fa�r and reasonable and �n the �nterests

of the Shareholders as a whole.

The convers�on pr�ce of HK$�.�� per Share (the “Convers�on Pr�ce”) (subject to adjustment)

under the Convert�ble Bonds represents (�) a d�scount of about 0.��% to the clos�ng pr�ce of HK$�.��

per Share quoted on the Stock Exchange on ��th May, �00�; (��) a prem�um of about ��.�% over

the average clos�ng pr�ce of HK$�.�� per Share for the f�ve trad�ng days from �th May, �00� to

��th May, �00� (both dates �nclus�ve); (��) a prem�um of about ��.��% over the average clos�ng

pr�ce of HK$�.�� per Share for the �0 trad�ng days from ��th Apr�l, �00� to ��th May, �00� (both

dates �nclus�ve); and (�v) a d�scount of about ��.�% to the clos�ng pr�ce of HK$�.�� per Share on

- � -


the Latest Pract�cable Date. If the holders of the Convert�ble Bonds exerc�se the convers�on r�ght �n

full at the �n�t�al convers�on pr�ce of HK$�.�� per Share, a total of ��,��,�� Shares (wh�ch may

be d�fferent �n case of adjustment to the convers�on pr�ce) w�ll be �ssued, represent�ng about �.��%

of the ex�st�ng �ssued share cap�tal of the Company and �.��% of the �ssued share cap�tal of the

Company as enlarged by such �ssue.

Appl�cat�on has been made to the L�st�ng Comm�ttee of the Stock Exchange for a l�st�ng of and

perm�ss�on to deal �n the new shares of the Company to be �ssued upon exerc�se of the convers�on

r�ghts under the Convert�ble Bonds.

settlement of outstanding and further shareholders’ loans:

The ex�st�ng �nterest free shareholders’ loans advanced by the Vendors to HK Sunsh�ne amount to

HK$��,��,��0 �n total. Upon complet�on, the Company w�ll be ass�gned the benef�ts of the Ass�gned

Loan w�th the balance of shareholders’ loans �n the total sum of HK$��,��,000 left outstand�ng.

The Company has undertaken to procure HK Sunsh�ne to repay the Balance Shareholders’ Loan

and further �nterest free shareholders’ loans of not more than RMB��,0��,000 (HK$��,��,��)

wh�ch may be advanced by the Vendors to HK Sunsh�ne and Wux� Sunsh�ne pr�or to complet�on of

the Agreement for payment of the Balance Purchase Pr�ce and deed tax for the Land, the total of

wh�ch w�ll not be more than HK$��,0�0,�� (based on the exchange rate of HK$�.0�� for RMB�),

w�th�n � months after complet�on.

The or�g�nal purchase cost of the assets to be sold to the Company, wh�ch compr�ses the ent�re

�ssued share cap�tal of HK Sunsh�ne and the Ass�gned Loan only, to the Vendors �s about HK$�0.�

m�ll�on as at ��th May, �00�.

Payment terms:

The cash port�on of the purchase pr�ce w�ll be pa�d and the Convert�ble Bonds (under wh�ch

the Company has no redempt�on r�ght) w�ll be �ssued on complet�on.

Funding:

The purchase pr�ce to be pa�d �n cash w�ll be funded from �nternal resources and ava�lable

bank�ng fac�l�t�es.

Conditions of the Agreement:

Complet�on of the Agreement �s cond�t�onal upon:

(a) the approval of the Independent Shareholders at an extraord�nary general meet�ng of the

Company as requ�red by the L�st�ng Rules; and

(b) the grant�ng by the L�st�ng Comm�ttee of the Stock Exchange of a l�st�ng of and perm�ss�on

to deal �n the new Shares upon exerc�se of the Convert�ble Bonds.

- � -


if the conditions are not fulfilled on or before 30th June, 2007 (or such other date as the parties may mutually agree) the Agreement will lapse.

Completion date:

The Agreement �s expected to be completed on the �rd bus�ness day follow�ng the Agreement

becom�ng uncond�t�onal.

Financial effect on the Group

As development of the Land �s expected to complete �n the end of �00� to early �00�, the

Company does not expect the acqu�s�t�on of the subject assets w�ll br�ng earn�ngs to the Group �n the

near future. After Complet�on, HK Sunsh�ne w�ll become a wholly owned subs�d�ary of the Company

and accounts of wh�ch w�ll be consol�dated �nto that of the Company. Hence, both assets and l�ab�l�t�es

of the Group w�ll �ncrease by approx�mately HK$�� m�ll�on.

POTENTiAL CHANGE OF sHAREHOLDiNG sTRUCTURE

As at the Latest Pract�cable Date, there were Outstand�ng Opt�ons to subscr�be for an aggregate

of ��,��,000 Shares held by the follow�ng persons:

NumberofShares entitled toOptionholders Subscribefor

ExecutiveDirectors

Mr Lao Yuan Y� ��,��,000

Mr X�n Shul�n, Steve ��,��,000

Mr Yeung Wa� K�n ��,��,000

Non-executiveDirector

Mr Kwok Lam Kwong, Larry, J.P. �,000,000

IndependentNon-executiveDirectors

Prof. Woo Ch�a We� �,000,000

Mr Yu Q� Hao �,000,000

Mr L�u J� �00,000

Ms Lao �,000,000

Other employees ��,��,000

��,��,000

- � -


The sharehold�ng structure of the Company as at the Latest Pract�cable Date (wh�ch w�ll be the

same as that upon complet�on of the Agreement assum�ng no further new Shares are �ssued up to the

complet�on date); that upon full exerc�se of the convers�on r�ghts under the Convert�ble Bonds by the

Vendors (w�th all Outstand�ng Opt�ons unexerc�sed); and that upon full exerc�se of the Convert�ble

Bonds and the Outstand�ng Opt�ons �s set out below:

Upon full exercise Upon full exercise of the Convertible As at the of the Convertible Bonds Bonds and the shareholders Latest Practicable Date (Note1) Outstanding Options Number Approximate Number Approximate Number Approximate

ofShares % ofShares % ofShares %

ExecutiveDirectors

Mr Lao Yuan Y� ��,��,000 ��.0� ��,��,�� .�� ,��,�� .0�

(Note �)

Mr X�n Shul�n, Steve �,�0�,��0 0.�� ,�0�,��0 0.�� ,��,��0 �.��

Mr Yeung Wa� K�n �,00�,�0� 0.�� ,00�,�0� 0.�� ,��,�0� �.��


Mr Kwok Lam Kwong,

Larry,J.P. – – – – �,000,000 0.0�


Prof. Woo Ch�a We� – – – – �,000,000 0.0�

Mr Yu Q� Hao – – – – �,000,000 0.0�

Mr L�u J� – – – – �00,000 0.0�

Ch�na Assets ��,��,�00 ��.�� ,��,�00 ��.�� ,��,�00 ��.��

Ms Lao - - ��,��,�� .�0 ��,��,�� .��

��,��,�� .�� ,��,�0� ��.�� 0�,��,�0� ��.��

Publ�c shareholders

(other than

stated above) ��,��0,�0� ��.�� ,��0,�0� ��.�� 0,��,�0� ��.��

Total �,��,��,�� 00.00 �,��,��,0�� 00.00 �,��0,��,0�� 00.00

- �0 -


Notes:

�. On the assumpt�on that none of the Outstand�ng Opt�ons �s exerc�sed up to the date on wh�ch the convers�on

r�ghts under Convert�ble Bonds are exerc�sed �n full.

�. ��,��,000 Shares are held by K�nmoss Enterpr�ses L�m�ted, the �ssued share cap�tal of wh�ch �s wholly benef�c�ally

owned by Mr Lao. The balance of �0,��,000 Shares are d�rectly benef�c�ally owned by h�m.

The exerc�se �n full of the convers�on r�ghts under the Convert�ble Bonds w�ll not result �n a

change of control of the Company.

REAsONs FOR THE TRANsACTiON

The proposed acqu�s�t�on of the Land w�ll enable the Company to expand �ts land bank �n Ch�na

at a reasonable pr�ce. The Company has present �ntent�on of develop�ng commerc�al property, hotel

and serv�ce apartments on the Land.

CONNECTiON BETWEEN THE PARTiEs

Mr Lao �s the cha�rman, an execut�ve D�rector and a substant�al Shareholder of the Company.

Ms Lao, an execut�ve d�rector of Ch�na Assets (Hold�ngs) L�m�ted (an assoc�ate of the Company) and

the daughter of Mr Lao, �s an assoc�ate of Mr Lao under Rule ��A.��(�)(b) of the L�st�ng Rules. The

Vendors therefore are connected persons of the Company.

iNFORMATiON FOR sHAREHOLDERs

The Group �s pr�nc�pally engaged �n property development, secur�t�es trad�ng and �nvestment,

corporate f�nance and stockbrok�ng, conta�ner transportat�on and fre�ght forward�ng serv�ces, sales of

motor veh�cles meters and components, �nvestment hold�ng, property hold�ng and management.

The exchange rate for Hong Kong dollars and Renm�nb� adopted �n th�s c�rcular �s HK$�.0��

for RMB�.

EXTRAORDiNARY GENERAL MEETiNG

You w�ll f�nd on pages �� to �� of th�s c�rcular a not�ce of the EGM to be held at �:00 p.m. on

��nd June, �00� at ��th Floor, W�ng On House, �� Des Voeux Road Central, Hong Kong at wh�ch

an ord�nary resolut�on w�ll be proposed to approve the Agreement (w�th any amendment as may be

approved by the Board) and the �ssue of the Convert�ble Bonds, vot�ng of wh�ch w�ll be taken on a

poll.

There �s enclosed a form of proxy for use at the EGM. You are requested to complete the form

of proxy and return �t to the reg�stered off�ce of the Company �n accordance w�th the �nstruct�ons

pr�nted thereon not less than �� hours before the t�me f�xed for hold�ng the meet�ng, whether or not

you �ntend to be present at the meet�ng. The complet�on and return of the form of proxy w�ll not

prevent you from attend�ng and vot�ng �n person should you so w�sh.

- �� -


Accord�ng to the Art�cles of Assoc�at�on of the Company, before or upon the declarat�on of

the result of vot�ng on a show of hands on a resolut�on at the EGM, a poll may be demanded by or

on behalf of:

(a) by or on behalf of at least two members; or

(b) by or on behalf of any member ent�tled to vote at the meet�ng, and hold�ng �n aggregate

not less than �0 per cent. of the pa�d up share cap�tal of the Company, carry�ng the r�ght

to vote at the meet�ng; or

(c) by or on behalf of any member represent�ng not less than one-tenth of the total vot�ng

r�ghts of all the members hav�ng a r�ght to vote at the meet�ng.

As at the Latest Pract�cable Date, to the extent that the Company �s aware hav�ng made all

reasonable enqu�r�es, Mr Lao, Ms Lao and the�r assoc�ates had benef�c�al �nterests �n a total of

��,��,000 Shares. They w�ll be requ�red to absta�n from vot�ng �n respect of the resolut�on approv�ng

the Agreement at the EGM under the L�st�ng Rules.

GENERAL

You are adv�sed to read carefully the letters from the Independent Board Comm�ttee and Ch�na

Everbr�ght respect�vely as conta�ned �n th�s c�rcular before dec�d�ng whether or not to vote �n favour

of the resolut�on to be proposed at the EGM to approve the Agreement.

Your attent�on �s also drawn to the add�t�onal �nformat�on set out �n the append�ces to th�s

c�rcular.

Yours fa�thfully,

Yeung Wai KinDirector

- �� -

LETTER FROM THE iNDEPENDENT BOARD COMMiTTEE




TotheIndependentShareholders

Dear S�r or Madam,

ACQUisiTiON OF AssETsDisCLOsEABLE AND CONNECTED TRANsACTiONs

We refer to the documents dated �th June, �00� �ssued by the Company (the “C�rcular”), of

wh�ch th�s letter forms part. Terms def�ned �n the C�rcular shall bear the same mean�ngs when used

here�n unless the context requ�res otherw�se.

We have been appo�nted to const�tute the Independent Board Comm�ttee to cons�der the

Agreement and Ch�na Everbr�ght has been appo�nted as the �ndependent f�nanc�al adv�ser to adv�se

us �n th�s respect.

Your attent�on �s drawn to the letter from the Board and the letter from Ch�na Everbr�ght

conta�n�ng �ts adv�ce to us as set out �n the C�rcular respect�vely.

Tak�ng �nto account the adv�ce from Ch�na Everbr�ght, we cons�der that the terms of the Agreement

are fa�r and reasonable so far as the Independent Shareholders are concerned and the Agreement �s

�n the �nterests of the Company and �ts shareholders as a whole, and so recommend the Independent

Shareholders to vote for the resolut�on to be proposed at the EGM.

Yours fa�thfully,

Woo Chia Wei Liu Ji Yu Qi HaoIndependentBoardCommittee

- �� -

LETTER FROM CHiNA EVERBRiGHT

ThefollowingisthetextoftheletterfromChinaEverbrightCapitalLimitedsettingoutitsadvice

totheIndependentBoardCommitteeandtheIndependentShareholdersinrespectoftheAcquisition

for inclusion in thiscircular.

CHiNA EVERBRiGHT CAPiTAL LiMiTEDRoom ��0�-0�, Far East F�nance Centre, �� Harcourt Road, Hong Kong


TotheIndependentBoardCommitteeand

theIndependentShareholders

Dear S�rs or Madam,

DisCLOsEABLE AND CONNECTED TRANsACTiONRELATiNG TO THE ACQUisiTiON OF HK sUNsHiNE

iNTRODUCTiON

We refer to our appo�ntment as the �ndependent f�nanc�al adv�ser to adv�ce the Independent Board

Comm�ttee and the Independent Shareholders w�th regard to the proposed acqu�s�t�on of the ent�re

�ssued share cap�tal of, and the benef�t of the loans (“initial Assigned Loan”) of about HK$�0,��,��0

advanced by the Vendors to, HK Sunsh�ne (“Acquisition”). Deta�ls of the Acqu�s�t�on are conta�ned �n

the letter from the Board (the “Letter from the Board”) as set out �n the c�rcular to the Shareholders

dated �th June, �00� (the “Circular”), of wh�ch th�s letter forms part. Terms def�ned �n th�s letter

shall have the same mean�ngs as def�ned �n the C�rcular unless the context otherw�se requ�res.

As at the Latest Pract�cable Date, HK Sunsh�ne was owned by Mr. Lao Yuan Y� al�as Lo Yuen

Yat (“Mr. Lao”) and Ms. Lao Yuan, V�v�an al�as Lao Yuan Yuan (“Ms. Lao”) (collect�vely, “Vendors”)

as to �0% and �0% respect�vely. On ��th May, �00�, the Company and the Vendors entered �nto the

sale and purchase agreement (“Acquisition Agreement”) �n relat�on to the Acqu�s�t�on.

The relevant rat�os of the Acqu�s�t�on exceed �% but are less than ��%. Therefore, the Acqu�s�t�on

const�tutes a d�scloseable transact�on of the Company under Rule ��.0�(�) of the L�st�ng Rules. In

add�t�on, Mr. Lao (be�ng the cha�rman, an execut�ve D�rector and a substant�al shareholder of the

Company) and Ms. Lao (be�ng an execut�ve d�rector of Ch�na Assets (Hold�ngs) L�m�ted (an assoc�ate

of the Company) and the daughter of Mr. Lao) are regarded as connected persons of the Company

under the L�st�ng Rules. As the cons�derat�on of the Acqu�s�t�on exceeds �.�% of the relevant rat�o

or HK$�0 m�ll�on �n absolute terms, the Acqu�s�t�on therefore const�tutes a non-exempt connected

transact�on of the Company under the L�st�ng Rules, and �s subject to the approval from the Independent

Shareholders at the EGM by way of poll where Mr. Lao, Ms. Lao and the�r respect�ve assoc�ates w�ll

absta�n from vot�ng accord�ng to the prov�s�ons of the L�st�ng Rules.

- �� -


Our role as the �ndependent f�nanc�al adv�ser to the Independent Board Comm�ttee and the

Independent Shareholders �s to g�ve our op�n�on as to whether the Acqu�s�t�on �s: (�) �n the ord�nary

and usual course of bus�ness of the Company; (��) on normal commerc�al terms; and (��) fa�r and

reasonable and �n the �nterests of the Company and the Independent Shareholders as a whole.

Ch�na Everbr�ght �s �ndependent from and not connected w�th the Company and �ts subs�d�ar�es

or any of the�r respect�ve substant�al shareholders, d�rectors or ch�ef execut�ve, or any of the�r

respect�ve assoc�ates, and �s accord�ngly qual�f�ed to g�ve �ndependent adv�ce to the Independent

Board Comm�ttee and the Independent Shareholders regard�ng the Acqu�s�t�on.

We hereby conf�rm that we have performed all necessary steps as requ�red under Rules ��.�0 of

the L�st�ng Rules (�nclud�ng the notes thereto). As the �ndependent f�nanc�al adv�ser to the Independent

Board Comm�ttee and the Independent Shareholders, we were not �nvolved �n the negot�at�ons �n respect

of the terms of the Acqu�s�t�on Agreement. Our op�n�ons w�th regard to the Acqu�s�t�on have been

made on the assumpt�on that the terms of the Acqu�s�t�on as st�pulated �n the Acqu�s�t�on Agreement

have been fully performed �n accordance w�th the terms thereof.

In formulat�ng our recommendat�on, we have rel�ed on the statements, �nformat�on and

representat�ons prov�ded by the management of the Company (the “Management”). We have assumed

that all such statements, �nformat�on and representat�ons conta�ned or referred to �n the C�rcular

prov�ded by the Management, for wh�ch the D�rectors and the Management have collect�vely and

�nd�v�dually accepted full respons�b�l�ty, are true, accurate, and complete �n all mater�al respects at

the t�me they were made and cont�nue to be so as at the date hereof.

We have also rel�ed on our d�scuss�ons w�th the D�rectors and the Management regard�ng

the statements, �nformat�on and representat�ons conta�ned �n the c�rcular. We have been adv�sed by

the D�rectors and the Management that no mater�al facts have been w�thheld or om�tted from the

�nformat�on prov�ded and referred to �n the c�rcular. The D�rectors and the Management have further

conf�rmed, hav�ng made all reasonable enqu�r�es, that to the best of the�r knowledge and bel�ef, there

are no other facts or representat�ons the om�ss�on of wh�ch would make any statement �n the c�rcular,

�nclud�ng th�s letter, m�slead�ng �n any mater�al respects.

We cons�der that we have rev�ewed suff�c�ent �nformat�on to reach an �nformed v�ew and to

prov�de a reasonable bas�s for our recommendat�on. We have not, however, conducted an �ndependent

ver�f�cat�on of the �nformat�on nor have we conducted any form of �n-depth �nvest�gat�on �nto the

bus�nesses and affa�rs or the prospects of the Group, HK Sunsh�ne or Wux� Sunsh�ne.

- �� -


PRiNCiPAL FACTORs AND REAsONs CONsiDERED

In formulat�ng our op�n�on, we have taken �nto cons�derat�on the follow�ng pr�nc�pal factors

and reasons as a whole:

1 The Acquisition

1.1 Businessandstrategyof theGroup

The Company and �ts subs�d�ar�es are pr�nc�pally engaged �n property development,

secur�t�es trad�ng and �nvestment, corporate f�nance and stockbrok�ng, conta�ner transportat�on

and fre�ght forward�ng serv�ces, sales of motor veh�cles meters and components, �nvestment

hold�ng, property hold�ng and management.

As stated �n the Company’s annual report for the f�nanc�al year ended ��st December, �00�

(“2006 Annual Report”), the Group has establ�shed sol�d track record �n property development

and property �nvestment bus�ness �n the PRC, and �t �ntends to speed up �ts expans�on plan for

property development bus�ness, target�ng �n Yangtze R�ver Delta and Pearl R�ver Delta. Currently,

the Group has engaged �n three new property development projects: a health care and recreat�on

property development project �n Zhongshan (near Macau) and two property development projects

�n Kunshan (border�ng w�th Shangha�) for off�ce and res�dent�al use.

1.2 BackgroundofHKSunshineandWuxiSunshine

HK Sunsh�ne �s a company �ncorporated �n Hong Kong on �th December, �00� and �s

pr�nc�pally engaged �n property �nvestment. As at the Latest Pract�cable Date, HK Sunsh�ne

was owned as to �0% by Mr. Lao and �0% by Ms. Lao, respect�vely.

Pursuant to the land transfer agreement (“Land Transfer Agreement”) s�gned between

Wux� Mun�c�pal State Land Resources Bureau (無錫市國土資源局) (“Land Resources Bureau”)

and HK Sunsh�ne on ��th December, �00�, HK Sunsh�ne was granted the use of a p�ece of

land �n Wux� c�ty, the PRC (the “Land Use Rights”) at the pr�ce of RMB��,�00,000, of wh�ch

RMB�0,000,000 have been pa�d and the balance of RMB��,�00,000 (“Balance Purchase Price”)

was payable by ��st May, �00�.

S�nce the rules and regulat�ons on property �nvestment/development �n PRC by fore�gn

compan�es requ�res the establ�shment of fore�gn �nvestment enterpr�se �n the PRC for the property

development, HK Sunsh�ne establ�shed a wholly owned fore�gn enterpr�se, Wux� Sunsh�ne,

�mmed�ately after the grant of the Land Use R�ghts. On ��th March, �00�, a supplemental

agreement to the Land Transfer Agreement (the “supplemental Agreement”) was entered �nto

between the Land Resources Bureau, HK Sunsh�ne and Wux� Sunsh�ne. Pursuant to wh�ch, the

three part�es thereto agreed to change the grantee of the Land Use R�ghts from HK Sunsh�ne

to Wux� Sunsh�ne w�th the rest of the terms and cond�t�ons of the Land Transfer Agreement

rema�ned unchanged.

- �� -


1.3 TheLandUseRightsandpropertydevelopmentplan

Accord�ng to the Land Transfer Agreement and the Supplemental Agreement, Wux�

Sunsh�ne (a wholly owned fore�gn enterpr�se of HK Sunsh�ne) was granted the use of a p�ece

of land (“Land”) �n Wux� New D�str�ct (“WND”), Wux� c�ty, J�angsu Prov�nce, the PRC. WND

locates �n the suburbs of Wux� c�ty, approx�mately ��0 k�lometers west of Shangha�.

The Land �s located to the south of Gaolang Road (高浪路) and west of X�sh� Road

(錫士路), WND, Wux� c�ty (無錫市), J�angsu Prov�nce, the PRC. Accord�ng to the property

valuat�on report �ssued by DTZ Debenham T�e Leung L�m�ted (“DTZ”) on �th June, �00�, the

Land has a s�te area of ��,��.� square meters, and a total gross floor area of approx�mately

��,�� square meters.

As adv�sed by the Management, the follow�ng table sets out the prel�m�nary development

plan of the Land:

Land use purpose Gross Floor Area (sq.m.) (Note)

�. �-star Hotel ��,000

�. Off�ce �0,000

�. Serv�ced apartment ��,000

�. Commerc�al �,��

Total ��,��

Note:

The des�gned gross floor area for each of the land use purpose �s based on the prel�m�nary conceptual des�gn of

the development project, wh�ch may be subject to further changes and rev�s�on.

As adv�sed by the Management, after obta�n�ng the approval from the Independent

Shareholders w�th respect to the Acqu�s�t�on, the construct�on works of the property development

project w�ll commence �n the fourth quarter of �00�.

1.4 Economic indicatorsofWuxicity

Wux� c�ty �s located at the centre of PRC’s Yangtze Delta, reach�ng up north to the Yangtze

R�ver, bounded on the south by Lake Ta�hu, w�th Shangha� to �ts south-east and Nanj�ng to �ts

north-west.

- �� -


Source:www.wnd.gov.cn

Accord�ng to the stat�st�cs publ�shed by J�angsu Bureau of Stat�st�cs (江蘇省統計局),

Wux� c�ty had a populat�on of approx�mately �.�� m�ll�on as at ��st December, �00�, up

approx�mately �.�% from �.�� m�ll�on as at ��st December, �00�.

The table below sets out some econom�c �nd�cators of Wux� c�ty from �00� to �00�:

Year 2001 2002 2003 2004 2005 CAGR

(%)

Nom�nal GDP (RMBinbillion) ��.0 ��.� ��0.� ��.0 ��0.� ��.�

Per cap�ta GDP (RMB) ��,�� ,�� ,�� ,�� ,�� .��

F�xed �nvestment for propert�es

(RMBinbillion) �.� �.� ��.� ��.� ��.� ��.��

Source:JiangsuBureauofStatistics(江蘇省統計局)

As �llustrated above, Wux� c�ty has exper�enced substant�al econom�c growth �n the

recent years. The per cap�ta GDP �ncreased from RMB��,�� n �00� to RMB��,�� n �00�,

w�th CAGR of approx�mately ��.��% between �00� and �00�. In add�t�on, Wux� c�ty posted

a nom�nal GDP of approx�mately RMB��0.� b�ll�on to rank second h�ghest among c�t�es �n

J�angsu Prov�nce �n �00�.

The table below sets out the top � c�t�es �n J�angsu Prov�nce �n term of nom�nal GDP

�n �00�:

Nominal GPD in 2005 (RMBinbillion)

Suzhou c�ty (蘇州市) �0�.�

Wuxi city (無錫市) 280.5Nanj�ng c�ty (南京市) ��.�

Nantong c�ty (南通市) ��.�

Changzhou c�ty (常州市) ��0.�

- �� -


Wux� c�ty has exper�enced a tremendous growth �n the demand for res�dent�al and commerc�al

bu�ld�ng �n the past decade due to a rap�d r�se �n per cap�ta GDP and r�s�ng urban�zat�on rate. As

a result, the f�xed �nvestment for propert�es �ncreased from RMB�.� b�ll�on �n �00� to RMB��.�

b�ll�on �n �00�, w�th CAGR of approx�mately ��.��% between �00� and �00�.

Accord�ng to stat�st�cs released by Wux� Stat�st�cs Bureau (無錫市統計局) on ��th

March, �00�, there was an �ncreas�ng contr�but�on from tour�sm �ndustry to Wux� economy. In

�00�, the total number of fore�gn tour�sts and domest�c tour�sts v�s�t�ng Wux� c�ty �ncreased

by ��.�% and ��.0% to approx�mately ��,�00 persons and �0.� m�ll�on persons, respect�vely.

The revenue contr�buted by tour�sm �ndustry �ncreased by ��.�% to approx�mately RMB��.�

b�ll�on �n �00�. Accord�ng to Wux� Stat�st�cs Bureau (無錫市統計局), as at the end of �00�,

there were a total of �� star-rated hotels �n Wux� c�ty, among wh�ch � were rated as f�ve-star

and �� were rated as four-star.

1.5 Reasons for theAcquisition

As stated �n the �00� Annual Report, the D�rectors �ntend to speed up �ts expans�on plan

for property development bus�ness, target�ng �n Yangtze R�ver Delta and Pearl R�ver Delta. The

D�rectors bel�eve that g�ven the strong potent�al of Wux� c�ty as one of the growth centres �n

Yangtze R�ver Delta, the c�ty’s property market has opt�m�st�c prospects and w�ll ma�nta�n a

fast growth rate �n the com�ng years. Therefore, the Acqu�s�t�on prov�des the Group w�th an

opportun�ty to capture the growth potent�al of the develop�ng property market �n Wux� c�ty on

a long-term bas�s.

Based on the above factors, we are of the view that the Acquisition is consistent with the overall corporate strategy of the Group and is in the interests of the Company and its independent shareholders as a whole.

2 Valuation of the Land Use Rights

As set out �n the valuat�on report (“Valuation Report”) �n Append�x II to th�s c�rcular,

assum�ng all relevant land use r�ght documents �nclud�ng the state-owned land use r�ghts

cert�f�cates (“Certificate”) have been obta�ned, the est�mated market value of Land Use R�ghts

as at ��st March, �00� would be approx�mately RMB��,��0,000. As stated �n the Valuat�on

Report, DTZ has compl�ed w�th the requ�rements as set out �n (�) The HKIS Valuat�on Standards

on Propert�es (F�rst Ed�t�on �00�) of the Hong Kong Inst�tute of Surveyors; and (��) Chapter �

and Pract�ce Note �� of the L�st�ng Rules �n prepar�ng the Valuat�on Report.

Upon rev�ew on the Valuat�on Report, we noted that DTZ has adopted the d�rect compar�son

approach by mak�ng reference to comparable land sales ev�dence as ava�lable �n the relevant

market. We have d�scussed w�th the DTZ on the valuat�on approach and understand that the

�ncome approach, wh�ch mostly represent propert�es under development and are asset-based �n

nature, would be �nappl�cable for valu�ng the Land. In add�t�on, the DRC Approach, wh�ch �s

best for the est�mat�on of the market value for completed bu�ld�ngs would also be �nappropr�ate

due to the undeveloped nature of the Land. Upon rev�ew, we cons�der that the valuat�on

methodology adopted by DTZ �s generally �n l�ne w�th market pract�ce of valu�ng the market

value of undeveloped land.

- �� -


3 The major terms of the Acquisition Agreement

3.1 TheConsideration,basisof theConsiderationandpayment terms

Pursuant to the Acqu�s�t�on Agreement, the Company agreed to acqu�re the ent�re �ssued

share cap�tal of, and the benef�t of the In�t�al Ass�gned Loan of HK$�0,��,��0 advanced

by the Vendors to, HK Sunsh�ne from the Vendors at the cons�derat�on of HK$��,��0,000

(“Consideration”), HK$��,�00,000 of wh�ch �s to be pa�d �n cash and the rema�n�ng balance

of HK$��,��0,000 to be sat�sf�ed by the �ssue of the Convert�ble Bonds.

The cash cons�derat�on and the pr�nc�pal amount of the Convert�ble Bonds to be pa�d and

�ssued to the Vendors respect�vely at complet�on are as follows:–

Principal amount of Cash consideration Convertible Bonds

Mr. Lao HK$�,��0,000 HK$�,��,000

Ms. Lao HK$��,��0,000 HK$��,��,000

As adv�sed by the D�rectors, the Cons�derat�on has been determ�ned after arm’s length

negot�at�ons between the Company and the Vendors by reference to d�fference between (�)

�ndependent valuat�on of the Land Use R�ghts of RMB��,��0,000 as at ��st March, �00�

performed by DTZ; and (��) the Balance Purchase Pr�ce payable to the Land Resources Bureau

�n accordance w�th the Land Transfer Agreement.

As per our d�scuss�on w�th the Management, both HK Sunsh�ne and Wux� Sunsh�ne have

not carr�ed out any bus�nesses s�nce establ�shment save for that �nc�dental to the�r establ�shments

and the acqu�s�t�on of the Land Use R�ghts.

3.2 Settlementofoutstandingand furthershareholders’ loan

As set out �n the Letter from the Board, other than the benef�t of the In�t�al Ass�gned Loan

wh�ch w�ll be transferred by the Vendors to the Company after the complet�on of the Acqu�s�t�on,

HK Sunsh�ne was �ndebted to the Vendors (“Remaining shareholders’ Loan”) �n the aggregate

pr�nc�pal amount of approx�mately H$��,��,000 as at �0th May, �00�. As adv�sed by the

Management, the In�t�al Ass�gned Loan and the Rema�n�ng Shareholders’ Loan were prov�ded

by the Vendors ma�nly for purposes of (�) payment of Land Use R�ghts of RMB�0 m�ll�on; (��)

payment of the reg�stered share cap�tal of Wux� Sunsh�ne of approx�mately US$�.� m�ll�on; and

(��) establ�shment cost and runn�ng expenses of HK Sunsh�ne and Wux� Sunsh�ne.

Accord�ng to the Land Transfer Agreement, Wux� Sunsh�ne �s requ�red to pay the Balance

Purchase Pr�ce to the Land Resources Bureau by ��st May, �00�. As stated �n the Letter from

the Board, Company has also been �nformed by the Vendors that the due date for the payment of

the Balance Purchase Pr�ce has been extended to �0th June, �00�. Tak�ng �nto account that the

- �0 -


expected complet�on date of the Acqu�s�t�on �s very close to the due date on �0th June, �00�,

the Vendors agreed to advance not more than RMB��,0��,000 (HK$��,��,��) to HK Sunsh�ne

as shareholders’ loan (“Further shareholders’ Loan”) for the purpose of the settlement of

the Balance Purchase Pr�ce and related deed tax, �f HK Sunsh�ne cannot arrange the payment

of the Balance Purchase Pr�ce on t�me.

No collateral secur�ty or �nterest payment was requ�red by the Vendors for the prov�s�on of

the above shareholders’ loan. As stated �n the Letter from the Board, the Company has undertaken

to procure HK Sunsh�ne to repay the Rema�n�ng Shareholders’ Loan and Further Shareholders’

Loan, �f any, to the Vendors w�th�n � months after the complet�on of the Acqu�s�t�on.

Tak�ng �nto account the Cons�derat�on �s determ�ned by reference to the market value

of the Land Use R�ghts of RMB��.�� m�ll�on (or equ�valent to HK$��.�� m�ll�on) wh�ch was

assessed by DTZ, , w�th deduct�on of the Balance Purchase Pr�ce, we are of the v�ew that the

Cons�derat�on �s fa�r and reasonable to the Company and the Independent Shareholders as a

whole.

3.3 Major termsof theConvertibleBonds

The Convert�ble Bonds �n the pr�nc�pal amount of HK$��,��0,000 w�ll be �ssued to

sat�sfy part of the Cons�derat�on. Upon full convers�on of the convers�on r�ghts attached to the

Convert�ble Bonds at the convers�on pr�ce of HK$�.�� (the “Conversion Price”) per convers�on

share (“Conversion share”), a total of ��,��,�� Convers�on Shares w�ll be �ssued, represent�ng

approx�mately �.��% of the ex�st�ng �ssued share cap�tal of the Company or approx�mately �.��%

of the �ssued share cap�tal of the Company as enlarged by the �ssue of the Convers�on Shares.

The �n�t�al Convers�on Pr�ce �s subject to subsequent adjustments. Adjustment events w�ll �nclude

changes �n the share cap�tal of the Company, such as consol�dat�on or sub-d�v�s�on of shares,

cap�tal�sat�on of prof�ts or reserves, cap�tal d�str�but�on �n cash or spec�e or subsequent �ssue of

secur�t�es �n the Company at a d�scount to market pr�ce subject to the terms and cond�t�ons of

the Convert�ble Bonds. The Convert�ble Bonds bear an �nterest of �% payable yearly �n arrear

and mature two years after the �ssue date of the Convert�ble Bonds (the “Conversion Period”).

The holders of the Convert�ble Bonds may convert the whole or part of the Convert�ble Bonds

�nto Convers�on Shares at the Convers�on Pr�ce dur�ng the Convers�on Per�od. Deta�ls of the

pr�nc�pal terms of the Convert�ble Bonds are set out �n the Letter from the Board.

- �� -


For the purpose of assess�ng the reasonableness and fa�rness of the Convers�on Pr�ce,

we plot out the clos�ng pr�ce level of the Shares traded on the Stock Exchange from �nd May,

�00� to ��th May, �00� (be�ng the Last Trad�ng Day) and further up to the Latest Pract�cable

Date (the “Review Period”) as follows:

Share price (HK$)

Initial conversion price of HK$1.32

1/3/20

07

8/3/20

07

15/3/

2007

22/3/

2007

29/3/

2007

5/4/20

07

12/4/

2007

19/4/

2007

26/4/

2007

3/5/20

07

10/5/

2007

17/5/

2007

24/5/

2007

31/5/

2007

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Source:WebsiteoftheStockExchange

Dur�ng the Rev�ew Per�od, we note that the Shares were traded on the Stock Exchange

w�th�n a range of a h�gh of HK$�.�� on ��th May, �00� to a low of HK$�.0� on �th May, �00�.

In essence, the Convers�on Pr�ce of HK$�.�� per Convers�on Share represents:

– a d�scount of approx�mately ��.�% to the clos�ng pr�ce of HK$�.�� per Share as

quoted on the Stock Exchange on �st June, �00�, be�ng the Latest Pract�cable

Date;

– a d�scount of approx�mately 0.�% to the clos�ng pr�ce of HK$�.�� per Share as

quoted on the Stock Exchange on ��th May, �00�, be�ng the clos�ng pr�ce on the

date of the Agreement;

– a prem�um of approx�mately ��.�% to the average clos�ng pr�ce of HK$�.��

per Share as quoted on the Stock Exchange for the last � trad�ng days up to and

�nclud�ng ��th May, �00�;

– a d�scount of approx�mately �.0% to the net asset value per Share of HK$�.�� based

on the aud�ted net assets of the Company of approx�mately HK$�,�� m�ll�on as at

��st December, �00� and a total of approx�mately �,��,��,�� Shares �n �ssue

as at ��st December, �00�.

- �� -


In order to access to the fa�rness and reasonableness of the Convers�on Pr�ce, we also

have made reference to the convert�ble notes/bonds/debentures �ssued or proposed to be �ssue

by l�sted compan�es on the Ma�n Board of the Stock Exchange recently. To the best of our

knowledge, we have �dent�f�ed the follow�ng l�sted compan�es wh�ch has entered �nto agreement

�n relat�on to �ssuance or proposed �ssuance of convert�ble notes/bonds/debentures from �st

March, �00� to ��st May, �00� (the “Comparable issues”):

Premium/ Premium/ (discount) (discount) represented represented by the initial by the initial conversion conversion price price to the to the average closing price closing price of of the last the last five trading day trading day immediately immediately prior to prior to the date of the date of Date of Principal the respective the respective agreement issuer amount Coupon Maturity announcement announcement

�-Mar-0� Skyfame Realty (Hold�ngs) L�m�ted US$�00 m�ll�on �% � years �.�0% �.�0%

�-Mar-0� Softbank Investment Internat�onal HK$��.� m�ll�on �% � years ��.��% ��.��% (Strateg�c) L�m�ted

�-Mar-0� Ch�na Spec�al Steel Hold�ngs HK$�� m�ll�on �% � years �.��% ��.�0% Company L�m�ted

��-Mar-0� W�ll�e Internat�onal Hold�ngs L�m�ted HK$�00 m�ll�on N�l � years (��.��)% (��.��)%

��-Mar-0� Ch�na R�ch Hold�ngs L�m�ted HK$�� m�ll�on N�l � years (��.��)% (��.��)%

��-Mar-0� Fushan Internat�onal Energy Group HK$�00 m�ll�on N�l � years (�.�0)% 0.��% L�m�ted

��-Mar-0� Wonson Internat�onal Hold�ngs L�m�ted HK$��0 m�ll�on �% � years 0.00% (�.�0)%

��-Mar-0� TCL Commun�cat�on Technology US$�� m�ll�on N�l � years ��.��% ��.00% Hold�ngs L�m�ted

��-Mar-0� Teem Foundat�on Group L�m�ted HK$��.� m�ll�on �% �0 years ��.��% ��.0�%

��-Mar-0� Hong Kong Health Check and HK$��0 m�ll�on �% � years �0.��% �.��% Laboratory Hold�ngs Company L�m�ted

�0-Apr-0� Ch�na Infrastructure Mach�nery US$�� m�ll�on N�l � years ��.��% ��.��% Hold�ngs L�m�ted

�0-Apr-0� Cosmopol�tan Internat�onal Up to HK$�0� m�ll�on N�l � years (��.��)% (�.0�)% Hold�ngs L�m�ted

��-Apr-0� Ch�na Petroleum & Chem�cal HK$��,�00 m�ll�on N�l � years �0.0�% ��.��% Corporat�on

��-Apr-0� SPG Land (Hold�ngs) L�m�ted RMB�,�� m�ll�on �% � years ��.�0% ��.00%

- �� -


Premium/ Premium/ (discount) (discount) represented represented by the initial by the initial conversion conversion price price to the to the average closing price closing price of of the last the last five trading day trading day immediately immediately prior to prior to the date of the date of Date of Principal the respective the respective agreement issuer amount Coupon Maturity announcement announcement

�0-Apr-0� Mae Hold�ngs L�m�ted HK$��.� m�ll�on > �% � years (�0.00)% (��.��)% (Note1) (Note1)

��-Apr-0� Hong Kong Pharmaceut�cal HK$�00 m�ll�on �% � years (��.�0)% (��.��)% Hold�ngs L�m�ted (Note2) (Note2)

�0-Apr-0� New Focus Auto Tech Hold�ngs US$�� m�ll�on �.�% � years (�.��)% (�0.00)% L�m�ted

�0-Apr-0� Henry Group Hold�ngs L�m�ted Approx�mately �.��% � years (�.��)% 0% HK$�� m�ll�on

�-May-0� Ch�na Veloc�ty Group L�m�ted HK$��0 m�ll�on N�l � years 0.00% �.0�%

�-May-0� New World Ch�na Land L�m�ted RMB�,�00 m�ll�on N�l � years ��.�0% ��.�0%

�-May-0� W�ng H�ng Internat�onal (Hold�ngs) HK$�� m�ll�on �% � years �.��% (0.��)% L�m�ted

�0-May-0� Greentown Ch�na Hold�ngs L�m�ted RMB�,��0 m�ll�on N�l � years ��.00% �0.00%

��-May-0� M�das Internat�onal Hold�ngs L�m�ted HK$��.� m�ll�on �.�% � years ��.�0% ��.�0%

��-May-0� Gome Electr�cal Appl�ances Hold�ng RMB�,�00 m�ll�on N�l � years �0.00% ��.00% L�m�ted

��-May-0� New World Development Company HK$�,000 m�ll�on N�l � years ��.00% ��.��% L�m�ted

��-May-0� Ch�na Petroleum & HK$��,�00 m�ll�on N�l � years �0.0�% ��.��% Chem�cal Corporat�on

��-May-0� Ch�a Ta� Enterpr�ses Internat�onal Approx�mately �% � years �0.�0% ��.�0% L�m�ted HK$�,�� m�ll�on

��-May-0� TCL Mult�med�a Technology US��0 m�ll�on �.�% � years (��.��)% (�0.��)% Hold�ngs L�m�ted

��-May-0� W�ng Sh�ng Internat�onal HK$�00 m�ll�on 0.�% � years ��.��% ��.��% Hold�ngs L�m�ted

11-May-07 The Company HK$31.86 million 1% 2 years (0.75)% 15.60%

- �� -


Notes:

(�) Mae Hold�ngs L�m�ted was �n a loss mak�ng pos�t�on cont�nuously for s�x years and recorded def�c�ency

�n net assets as at the latest balance sheet date.

(��) Convers�on pr�ce of Hong Kong Pharmaceut�cal Hold�ngs L�m�ted represents a prem�um of approx�mately

��0.�% over the pro forma unaud�ted net asset value per share.

As set out above, the convers�on pr�ces of the Comparable Issues, exclud�ng (�) Mae

Hold�ngs L�m�ted and (��) Hong Kong Pharmaceut�cal Hold�ngs L�m�ted, both be�ng outl�ners

w�th extreme d�scount to �ts recent clos�ng pr�ces among the Comparable Issues, range from

(�) a d�scount of approx�mately ��.��% to a prem�um of approx�mately �0.�0% to/over

the clos�ng pr�ce of the shares of the Comparable Issues on the�r respect�ve last

trad�ng day; and

(��) a d�scount of approx�mately �0.��% to a prem�um of approx�mately ��.�0% to/over

the average clos�ng pr�ce of the shares of the Comparable Issues on the�r respect�ve

last f�ve trad�ng days.

For those Comparable Issues w�th a two-year matur�ty, the�r convers�on pr�ces range

from:

(�) a d�scount of approx�mately ��.��% to a prem�um of approx�mately ��.��% to/over

the clos�ng pr�ce of the shares of such Comparables Issues on the�r respect�ve last

trad�ng day; and

(��) a d�scount of approx�mately ��.��% to a prem�um of approx�mately ��.��% to/over

the average clos�ng pr�ce of the shares of the Comparable Issues on the�r respect�ve

last f�ve trad�ng days.

The prem�um/(d�scount) represented by the Convers�on Pr�ce over (�) the clos�ng pr�ce

of the Shares as at the Last Trad�ng Date; and (��) the average clos�ng pr�ce for the last �

trad�ng days up to and �nclud�ng ��th May, �00� �s w�th�n the abovement�oned ranges of the

Comparable Issues.

It �s also set out �n the above table that the �nterest/coupon rate of the Comparable Issues

range from n�l to �.�% per annum. The �nterest rate of the Convert�ble Bonds of �% per annum

�s w�th�n the range of that of the Comparable Issues. We also note that the �nterest rate of the

Convert�ble Bonds �s below the s�x-month Hong Kong Interbank Offered Rate (“HIBOR”) of

�.��% as at the Latest Pract�cable Date.

Desp�te the sharehold�ng of the publ�c Shareholders �n the Company may be d�luted by

the �ssue of the Convert�ble Bonds, g�ven that (�) the prem�um represented by the Convers�on

Pr�ce �s w�th�n the abovement�oned ranges of the Comparable Issues; (��) the coupon rate of

the Convert�ble Bonds of �% per annum �s w�th�n the range of that of the Comparable Issues;

(��) the �nterest rate of the Convert�ble Bonds �s below the s�x-month HIBOR of �.��%; and

- �� -


(�v) the �ssue of the Convert�ble Bonds allows the Group to save or delay the cash payment of

the Cons�derat�on and ma�nta�n a h�gher level of work�ng cap�tal for other future �nvestment

or expans�on of land bank should any k�nds of such opportun�t�es ar�se, we are of the v�ew

that the �ssue of the Convert�ble Bonds �s �n the �nterest of the Company and the Independent

Shareholders as a whole.

4 Financial impacts of the Acquisition

4.1 Netassetsvalueandearnings

Upon complet�on of the Acqu�s�t�on, HK Sunsh�ne and Wux� Sunsh�ne w�ll become wholly

owned subs�d�ar�es of the Company. As such the f�nanc�al performance of HK Sunsh�ne and

Wux� Sunsh�ne w�ll be accounted for us�ng the consol�dat�on method under wh�ch the assets

and l�ab�l�t�es, �ncome and expenses and cash flows of HK Sunsh�ne and Wux� Sunsh�ne w�ll be

consol�dated on a �00% bas�s and be �ncluded �n the relevant components of the consol�dated

accounts of the Group.

As at the Latest Pract�cable Date, the valuat�on of the Land Use R�ghts was not reflected

�n the consol�dated balance sheet of HK Sunsh�ne because the Balance Purchase Pr�ce has not

been pa�d by Wux� Sunsh�ne to the Land Resources Bureau �n accordance w�th the Land Transfer

Agreement. Upon the payment of the Balance Purchase Pr�ce and the grant of the relevant land

use r�ght documents �nclud�ng the state-owned land use r�ghts cert�f�cates, HK Sunsh�ne can

recogn�se the valuat�on of the Land Use R�ghts �n �ts consol�dated balance sheet.

G�ven that the Cons�derat�on was determ�ned w�th reference to the valuat�on of the Land

Use R�ghts, wh�ch was assessed by DTZ, w�th deduct�on of the Balance Purchase Pr�ce, we

cons�der that there w�ll not be any mater�al adverse �mpact ar�s�ng from the Acqu�s�t�on on the

net assets value of the Group.

Accord�ng to the management account of HK Sunsh�ne, we note that HK Sunsh�ne has not

generated any prof�t s�nce �ts �ncorporat�on on �th December, �00�. Based on our d�scuss�ons

w�th the Management, we understood that, the construct�on work of the development project

w�ll commence �n the fourth quarter of �00�. Therefore, there �s no s�gn�f�cant �mmed�ate effect

to the earn�ngs of the Group as a result of the Acqu�s�t�on.

However, Shareholders should note that part of the Cons�derat�on w�ll be sat�sf�ed by the

�ssue of Convert�ble Bonds. Assum�ng the Vendors fully exerc�se the convers�on r�ghts attached

to the Convert�ble Bonds, the bas�c earn�ngs per share of the Company w�ll drop sl�ghtly from

HK��.�� cents per Share to HK��.�� cents per Share �mmed�ately after the complet�on of

the Acqu�s�t�on, based on the prof�t for the year ended ��st December, �00�. However, upon

the full convers�on of the Convert�ble Bonds �nto the Convers�on Shares, the consol�dated net

assets of the Group w�ll be �ncreased by the aggregate pr�nc�pal amount the Convert�ble Bonds

of HK$��.�� m�ll�on.

- �� -


4.2 WorkingCapitalandgearing

Accord�ng to the Acqu�s�t�on Agreement, HK$��.� m�ll�on w�ll be payable by the Company

to the Vendors �n cash as part of the Cons�derat�on. Accord�ngly, the cash pos�t�on of the Group

w�ll be reduced by approx�mately HK$��.� m�ll�on �mmed�ately upon the complet�on of the

Acqu�s�t�on.

In add�t�on, the Company has undertaken to procure HK Sunsh�ne to repay the Rema�n�ng

Shareholders’ Loan and Further Shareholders’ Loan to the Vendors. As adv�sed by the Management,

they �ntends to f�nance (�) the cash port�on of the Cons�derat�on; and (��) the repayment of

Rema�n�ng Shareholders’ Loan and Further Shareholders’ Loan, �f any, by �nternal resources

and bank loans. As adv�sed by the Management, they expect not more than HK$�0 m�ll�on new

bank loans w�ll be used to f�nance the Acqu�s�t�on and the above repayment obl�gat�ons.

Accord�ng to the �00� Annual Report, the Group had cash and cash equ�valents of

approx�mately HK$��,��,000 as at ��st December, �00�. Tak�ng �nto account of the cash

pos�t�on of the Group as at ��st December, �00�, we cons�der that the Acqu�s�t�on should not

have any mater�al adverse �mpact to the l�qu�d�ty and cash flow pos�t�on of the Group.

Accord�ng to the �00� Annual Report, the Group had aggregate �nterest-bear�ng

borrow�ngs of approx�mately HK$��,��,000, represent�ng a gear�ng rat�o (wh�ch �s calculated

as the total of the �nterest-bear�ng borrow�ngs d�v�ded by the net assets value of the Group)

of approx�mately �.��%. Tak�ng �nto account of the poss�ble new bank loan and the pr�nc�ple

amount of the Convert�ble Bonds ar�s�ng from the Acqu�s�t�on, we cons�der that the Acqu�s�t�on

and the repayment of Rema�n�ng Shareholders’ Loan and Further Shareholders’ Loan, �f any,

would not have s�gn�f�cant �mpact to the gear�ng level of the Group.

5 Dilution effect to the public shareholders

Upon full convers�on of the convers�on r�ghts attached to the Convert�ble Bonds at the

convers�on pr�ce of HK$�.�� per convers�on share, a total of ��,��,�� Convers�on Shares w�ll

be �ssued, represent�ng approx�mately �.��% of the ex�st�ng �ssued share cap�tal of the Company

or approx�mately �.��% of the �ssued share cap�tal of the Company as enlarged by the �ssue of the

Convers�on Shares.

- �� -


As stated �n the Letter from the Board, the Company has granted share opt�ons to subscr�be for

an aggregate of ��,��,000 shares of the Company to the follow�ng ent�t�es and wh�ch are outstand�ng

(the “Outstanding Options”):–

NumberofShares entitled toOptionholders Subscribefor

ExecutiveDirectors

Mr. Lao Yuan Y� ��,��,000

Mr. X�n Shul�n, Steve ��,��,000

Mr. Yeung Wa� K�n ��,��,000


Mr. Kwok Lam Kwong, Larry, J.P. �,000,000


Prof. Woo Ch�a We� �,000,000

Mr. Yu Q� Hao �,000,000

Mr. L�u J� �00,000

Ms. Lao �,000,000

Other employees ��,��,000

��,��,000

- �� -


The table below sets out the sharehold�ng structure of the Company at the Latest Pract�cable

Date and �mmed�ately upon the complet�on of the Acqu�s�t�on, the full exerc�se of the Outstand�ng

Opt�ons and the full convers�on of convers�on r�ghts attached to the Convert�ble Bonds:

Upon full exercise Upon full exercise of the Convertible As at the of the Convertible Bonds Bonds and the shareholders Latest Practicable Date (Note1) Outstanding Options Number Approximate Number Approximate Number Approximate

ofShares % ofShares % ofShares %

ExecutiveDirectors

Mr. Lao Yuan Y� ��,��,000 ��.0� ��,��,�� .�� ,��,�� .0�

(Note2)

Mr. X�n Shul�n, Steve �,�0�,��0 0.�� ,�0�,��0 0.�� ,��,��0 �.��

Mr. Yeung Wa� K�n �,00�,�0� 0.�� ,00�,�0� 0.�� ,��,�0� �.��


Mr. Kwok Lam Kwong,

Larry,J.P. – – – – �,000,000 0.0�


Prof. Woo Ch�a We� – – – – �,000,000 0.0�

Mr. Yu Q� Hao – – – – �,000,000 0.0�

Mr. L�u J� – – – – �00,000 0.0�

Ch�na Assets ��,��,�00 ��.�� ,��,�00 ��.�� ,��,�00 ��.��

Ms. Lao – – ��,��,�� .�0 ��,��,�� .��

��,��,�� .�� ,��,�0� ��.�� 0�,��,�0� ��.��

Publ�c shareholders

(other than

stated above) ��,��0,�0� ��.�� ,��0,�0� ��.�� 0,��,�0� ��.��

Total �,��,��,�� 00.00 �,��,��,0�� 00.00 �,��0,��,0�� 00.00

- �� -


Notes:

�. On the assumpt�on that none of the Outstand�ng Opt�ons �s exerc�sed up to the date on wh�ch the convers�on

r�ghts under the Convert�ble Bonds are exerc�sed �n full.

�. ��,��,000 shares are held by K�nmoss Enterpr�ses L�m�ted, the �ssued share cap�tal of wh�ch �s wholly benef�c�ally

owned by Mr. Lao. The balance of �0,��,000 shares are d�rectly benef�c�ally owned by h�m.

As shown �n the table above, the sharehold�ng of publ�c Shareholders w�ll be d�luted sl�ghtly

from approx�mately ��.��% to approx�mately ��.��% �mmed�ately upon complet�on of the Acqu�s�t�on

and full convers�on of convers�on r�ghts attached to the Convert�ble Bonds.

For �llustrat�on purpose, the sharehold�ng of publ�c Shareholders w�ll be further d�luted to

approx�mately ��.��% �mmed�ately upon complet�on of the Acqu�s�t�on, full exerc�se of the Outstand�ng

Opt�on and full convers�on of convers�on r�ghts attached to the Convert�ble Bonds.

Tak�ng �nto account of (�) the Acqu�s�t�on prov�des the Group w�th an opportun�ty to capture

the growth potent�al of the develop�ng property market �n Wux� c�ty on a long term bas�s; and (��)

the Acqu�s�t�on �s cons�stent w�th the overall corporate strategy of the Group, we cons�der that such

�mmater�al d�lut�on effect to publ�c Shareholders, wh�ch ar�s�ng from the full convers�on of convers�on

r�ghts attached to the Convert�ble Bonds, �s acceptable so far as the Independent Shareholders are

concerned.

RECOMMENDATiON

Hav�ng cons�dered the above pr�nc�pal factors and reasons, we cons�der that Acqu�s�t�on �s on

normal commerc�al terms and �n the �nterests of the Company and the Independent Shareholders as

a whole and the terms of the Acqu�s�t�on Agreement are fa�r and reasonable, and �n the �nterests of

the Company and the Shareholders as a whole. Accord�ngly, we recommend the Independent Board

Comm�ttee to adv�se the Independent Shareholders to vote �n favour of the ord�nary resolut�ons to

approve the Acqu�s�t�on and spec�al mandate for the �ssue of the Convert�ble Bonds pursuant to the

Acqu�s�t�on Agreement, as deta�led �n the not�ce of EGM as set out at the end of the c�rcular.

Yours fa�thfully,

For and on behalf of

China Everbright Capital LimitedJacky Ho

ManagingDirector

- �0 -

APPENDiX i sUMMARY OF THE TERMs OF THE CONVERTiBLE BONDs

interest

The Convert�ble Bonds w�ll bear �nterest from the date of �ssue at the rate of �% per annum,

wh�ch w�ll be payable yearly �n arrears each year. The y�eld to matur�ty of the Convert�ble Bond �s

�% per annum.

Repayment

The Company shall repay such pr�nc�pal and �nterests accrued up to and �nclud�ng the date

of repayment under the Convert�ble Bonds on the second ann�versary of the date of �ssue of the

Convert�ble Bonds (the “Matur�ty Date”).

Conversion right

The holder of the Convert�ble Bonds shall have the r�ght at any t�me from the date of �ssue of

the Convert�ble Bonds unt�l the Matur�ty Date to convert all or part of the Convert�ble Bonds up to

the pr�nc�pal amount of the Convert�ble Bonds, outstand�ng at any t�me �nto Shares at the Convers�on

Pr�ce (subject to adjustment) prov�ded that a m�n�mum amount of HK$�,000,000 of the Convert�ble

Bonds can be exerc�sed at any one t�me at the opt�on of the holder of the Convert�ble Bonds. Shares

�ssued on convers�on w�ll rank par� passu �n all respects w�th the ex�st�ng Shares outstand�ng at the

date on wh�ch the convers�on not�ce �s served on the Company.

Adjustment of conversion price

The Convert�ble Bonds w�ll conta�n deta�led prov�s�ons relat�ng to adjustment of the Convers�on

Pr�ce. The follow�ng �s a summary of the adjustment prov�s�ons conta�ned �n the Convert�ble

Bonds:

(a) The Convers�on Pr�ce shall be subject to adjustment �n the follow�ng c�rcumstances:

(�) an alterat�on of the nom�nal amount of the Shares by reason of any consol�dat�on

or subd�v�s�on;

(��) an �ssue (other than �n l�eu of a cash d�v�dend) by the Company of Shares cred�ted

as fully pa�d by way of cap�tal�sat�on of prof�ts or reserves (�nclud�ng any share

prem�um account or cap�tal redempt�on reserve fund);

(��) a cap�tal d�str�but�on (as def�ned �n the cert�f�cate of the Convert�ble Bonds) be�ng

made by the Company, whether on a reduct�on of cap�tal or otherw�se, to holders

of Shares �n the�r capac�ty as such;

(�v) an offer or grant be�ng made by the Company to holders of �ts Shares of Shares by

way of r�ghts or of opt�ons or warrants to subscr�be for Shares at a pr�ce wh�ch �s

less than �0% of the market pr�ce (calculated as prov�ded �n the cert�f�cate of the

Convert�ble Bonds);

- �� -


(v) an �ssue wholly for cash be�ng made by the Company or any other company of

secur�t�es convert�ble �nto or exchangeable for or carry�ng r�ghts of subscr�pt�on

for new Shares, �f �n any case the total Effect�ve Cons�derat�on (as def�ned �n the

cert�f�cate of the Convert�ble Bonds) per Share �s less than �0% of the market pr�ce

(calculated as prov�ded �n the cert�f�cate of the Convert�ble Bonds), or the terms of

any such �ssue be�ng altered so that the sa�d total Effect�ve Cons�derat�on �s less

than �0% of the market pr�ce;

(v�) an �ssue be�ng made wholly for cash of Shares (other than pursuant to an execut�ve

share scheme as def�ned �n the cert�f�cate of the Convert�ble Bonds) at a pr�ce

less than �0% of the market pr�ce (calculated as prov�ded �n the cert�f�cate of the

Convert�ble Bonds); and

(v��) an �ssue be�ng made for the acqu�s�t�on of asset at a total Effect�ve Cons�derat�on

per Share (as def�ned �n the cert�f�cate of the Convert�ble Bonds) wh�ch �s less than

�0% of the market pr�ce (calculated as prov�ded �n the cert�f�cate of the Convert�ble

Bonds).

(b) no such adjustment as �s referred to �n sub-paragraph (a) above w�ll be made �n respect

of:

(�) an �ssue of fully pa�d Shares upon the exerc�se of any convers�on r�ghts attached

to secur�t�es convert�ble �nto Shares or upon exerc�se of any r�ghts (�nclud�ng any

convers�on of the Convert�ble Bonds) to acqu�re Shares;

(��) an �ssue of Shares or other secur�t�es of the Company or any subs�d�ary of the

Company wholly or partly convert�ble �nto, or r�ghts to acqu�re, Shares to off�cers

or employees of the Company or any of �ts subs�d�ar�es pursuant to any employee

or execut�ve share scheme;

(��) an �ssue by the Company of Shares or by the Company or any subs�d�ary of the

Company of secur�t�es wholly or partly convert�ble �nto or r�ghts to acqu�re Shares,

�n any such case �n cons�derat�on or part cons�derat�on for the acqu�s�t�on of any

other secur�t�es, assets or bus�ness;

(�v) an �ssue of fully pa�d Shares by way of cap�tal�sat�on of all or part of any subscr�pt�on

r�ght reserve, or any s�m�lar reserve wh�ch has been or may be establ�shed pursuant

to the terms of any secur�t�es wholly or partly convert�ble �nto or r�ghts to acqu�re

Shares; or

(v) an �ssue of Shares pursuant to a scr�p d�v�dend scheme where an amount not less

than the nom�nal amount of the Shares so �ssued �s cap�tal�sed and the market value

of such Shares �s not more than ��0% of the amount of d�v�dend wh�ch holders of

the Shares could elect to or would otherw�se rece�ve �n cash.

- �� -


(c) Any adjustment to the Convers�on Pr�ce shall be made to the nearest one cent so that

any amount under half a cent shall be rounded down and any amount of half a cent or

more shall be rounded up and �n no event shall any adjustment (otherw�se than upon the

consol�dat�on of Shares �nto Shares of a larger nom�nal amount) �nvolve an �ncrease �n

the Convers�on Pr�ce.

(d) Notw�thstand�ng the prov�s�ons referred to �n sub-paragraphs (a) and (b) above, �n any

c�rcumstances where the d�rectors of the Company shall cons�der that an adjustment to

the Convers�on Pr�ce prov�ded for under the sa�d prov�s�ons should not be made or should

be calculated on a d�fferent bas�s or that an adjustment to the Convers�on Pr�ce should

be made notw�thstand�ng that no such adjustment �s requ�red under the sa�d prov�s�ons or

that an adjustment should take effect on a d�fferent date or w�th a d�fferent t�me from that

prov�ded for under the prov�s�ons, the Company may appo�nt an approved merchant bank

to cons�der whether for any reason whatever the adjustment to be made (or the absence

of adjustment) would or m�ght not fa�rly and appropr�ately reflect the relat�ve �nterests of

the persons affected thereby and, �f such approved merchant bank shall cons�der th�s to

be the case, the adjustment shall be mod�f�ed or null�f�ed or an adjustment made �nstead

of no adjustment �n such manner (�nclud�ng w�thout l�m�tat�on, mak�ng an adjustment

calculated on a d�fferent bas�s) and/or the adjustment shall take effect from such other

date and/or t�me as shall be cert�f�ed by such approved merchant bank to be �n �ts op�n�on

appropr�ate.

(e) No adjustment shall be made to the Convers�on Pr�ce such that the convers�on Shares

shall fall to be �ssued at a d�scount to the�r nom�nal value.

Other rights

If wh�lst any part of the Convert�ble Bonds rema�ns outstand�ng, a general offer or proposal �s

made to shareholders of the Company to acqu�re or cancel the whole or any part of the �ssued share

cap�tal of the Company, the Company w�ll forthw�th g�ve not�ce of such offer to the holder of the

Convert�ble Bonds and use �ts best endeavours to procure that a s�m�lar offer or proposal �s made to

the holder of the Convert�ble Bonds on the bas�s that the Convert�ble Bonds had been converted �n

full on the day �mmed�ately preced�ng the date on wh�ch the offer or proposal was made.

Voting

The holder of the Convert�ble Bonds w�ll not be ent�tled to attend or vote at general meet�ngs

of the Company.

Transferability

The holder of the Convert�ble Bonds shall not have r�ght to or agree to sell, ass�gn or transfer

the Convert�ble Bonds to any party and the Convert�ble Bonds are not ass�gnable or transferable to

any th�rd party except w�th the pr�or wr�tten consent of the board of d�rectors of the Company.

- �� -


Events of default

The pr�nc�pal amount of the Convert�ble Bonds outstand�ng together w�th all �nterest shall

become �mmed�ately repayable by the Company �f:

(a) the Company fa�ls to pay any �nterest accrued w�th�n seven days of the due date for

payment thereof; or

(b) the Company mater�ally defaults �n performance or observance or compl�ance w�th any

of �ts other obl�gat�ons set out �n the Convert�ble Bonds wh�ch default �s �ncapable of

remedy or, �f capable of remedy, �s not remed�ed w�th�n �0 days after not�ce of such

default shall have been g�ven to the Company by the holder of the Convert�ble Bonds;

or

(c) the Shares (as a class) are suspended from be�ng or cease to be l�sted on the Stock

Exchange or a recogn�sed stock exchange for a cont�nuous per�od of �� days due to the

default of the Company.

Governing law

The terms and cond�t�ons of the Convert�ble Bonds w�ll be governed by and construed �n

accordance w�th laws of Hong Kong.

- �� -

APPENDiX ii PROPERTY VALUATiON

The following is the text of the letter and valuation certificate received from DTZ Debenham

TieLeungLimitedandaddressedtotheCompanyinconnectionwithitsvaluationasat31stMarch,

2007of theproperty for thepurposeof inclusion in thiscircular.

�0th Floor,

Jard�ne House,

� Connaught Place,

Central,

Hong Kong


The D�rectors

F�rst Shangha� Investments L�m�ted

Room ��0�

W�ng On House

�� Des Voeux Road

Central

Hong Kong

Dear S�rs,

Re: Lot No. XDG (XQ) – 2006 – 34, south of Gaolang Road, West of Xishi Road, New District, Wuxi, Jiangsu Province, the PRC

instructions, Purpose & Date of Valuation

We refer to your �nstruct�ons for us to value the �nterest �n the capt�oned property wh�ch �s s�tuated

�n the People’s Republ�c of Ch�na (the “PRC”). We conf�rm that we have carr�ed out �nspect�on, made

relevant enqu�r�es and obta�ned such further �nformat�on as we cons�der necessary for the purpose of

prov�d�ng F�rst Shangha� Investments L�m�ted (referred to as the “Company”) w�th our op�n�on of the

market value of the property �nterest as at ��st March, �00� (the “Date of Valuat�on”).

Basis of Valuation

Our valuat�on of the property �nterest �s our op�n�on of �ts market value wh�ch �n accordance

w�th The HKIS Valuat�on Standards on Propert�es (F�rst Ed�t�on �00�) publ�shed by the Hong Kong

Inst�tute of Surveyors �s def�ned as the est�mated amount for wh�ch a property should exchange on the

date of valuat�on between a w�ll�ng buyer and a w�ll�ng seller �n an arm’s-length transact�on after proper

market�ng where�n the part�es had each acted knowledgeably, prudently and w�thout compuls�on.

- �� -


Valuation Assumptions

Our valuat�on excludes an est�mated pr�ce �nflated or deflated by spec�al terms or c�rcumstances

such as atyp�cal f�nanc�ng, sale and leaseback arrangement, spec�al cons�derat�ons or concess�ons

granted by anyone assoc�ated w�th the sale, or any element of spec�al value.

We have rel�ed on the �nformat�on g�ven by HK Sunsh�ne Real Estate L�m�ted and the op�n�on

of the PRC legal adv�ser, Da Cheng Law F�rm 大成律師事務所, of the Company, regard�ng the t�tle

of the property and the �nterest of Wux� Sunsh�ne Real Estate L�m�ted �n the property. The status of

t�tles and grants of major approvals and l�cences, �n accordance w�th the �nformat�on prov�ded by

HK Sunsh�ne Real Estate L�m�ted and the PRC legal op�n�on are set out �n the notes �n the valuat�on

cert�f�cate.

No allowance has been made �n our valuat�on of the property �nterest for any charges, mortgages

or amounts ow�ng on the property �nterest nor for any expenses or taxat�on wh�ch may be �ncurred �n

effect�ng a sale. Unless otherw�se stated, �t �s assumed that the property �s free from encumbrances,

restr�ct�ons and outgo�ngs of any onerous nature wh�ch could affect �ts value.

Method of Valuation

In valu�ng the property �nterest we have adopted the d�rect compar�son approach by mak�ng

reference to comparable sales ev�dence as ava�lable �n the relevant market.

The property valuat�on compl�es w�th the requ�rements set out �n Chapter � and Pract�ce Note

�� of the Rules Govern�ng the L�st�ng of Secur�t�es on The Stock Exchange of Hong Kong L�m�ted

and The HKIS Valuat�on Standards on Propert�es (F�rst Ed�t�on �00�) of The Hong Kong Inst�tute

of Surveyors.

source of information

In the course of our valuat�on, we have rel�ed to a very cons�derable extent on the �nformat�on

g�ven by the HK Sunsh�ne Real Estate L�m�ted and the legal adv�ser on PRC law and have accepted

adv�ce g�ven to us on such matters as plann�ng approvals or statutory not�ces, easements, tenure,

�dent�f�cat�on of property, development schemes, s�te and floor areas and all other relevant matters.

D�mens�ons, measurements and areas �ncluded �n the valuat�on cert�f�cate are based on

�nformat�on prov�ded to us and are therefore only approx�mat�ons. We have no reason to doubt the

truth and accuracy of the �nformat�on prov�ded to us by the HK Sunsh�ne Real Estate L�m�ted wh�ch

�s mater�al to the valuat�on. We were also adv�sed by the HK Sunsh�ne Real Estate L�m�ted that no

mater�al facts have been om�tted from the �nformat�on prov�ded.

Title investigation

In respect of the subject property �nterest, we have been prov�ded w�th extracts of documents

�n relat�on to �ts t�tle. However, we have not �nspected the or�g�nal documents to ascerta�n any

amendments wh�ch may not appear on the cop�es handed to us.

- �� -


site inspection

We have �nspected the exter�or and wherever poss�ble, the �nter�or, of the property. However, we

have not carr�ed out �nvest�gat�ons on s�te to determ�ne the su�tab�l�ty of the so�l cond�t�ons and the

serv�ces etc. for any development. Our valuat�ons are prepared on the assumpt�on that these aspects

are sat�sfactory and that no extraord�nary expenses or delays w�ll be �ncurred dur�ng the construct�on

per�od. Unless otherw�se stated, we have not been able to carry out deta�led on-s�te measurements

to ver�fy the s�te and floor areas of the property and we have assumed that the areas shown on the

documents handed to us are correct.

Currency

Unless otherw�se stated, all sums stated �n our valuat�on cert�f�cate are �n Renm�nb�, the off�c�al

currency of the PRC.

Our valuat�on cert�f�cate �s attached.

Yours fa�thfully,

for and on behalf of

DTZ Debenham Tie Leung LimitedPhilip C. Y. TsangRegisteredProfessionalSurveyor(GP)

ChinaRealEstateAppraiser

Msc.,M.H.K.I.S.,M.R.I.C.S

SeniorAssociateDirector

Note: Mr. Ph�l�p C. Y. Tsang �s a Reg�stered Profess�onal Surveyor who has over �� years’ of exper�ence �n the valuat�on of

propert�es �n the PRC.

- �� -


VALUATiON CERTiFiCATE

Property interest held for future development in the PRC

Property Description and tenureParticulars of occupancy

Capital Value inexisting state as at

31st March, 2007

Lot No.

XDG(XQ)-�00�-

��,

South of

Gaolang Road,

West of X�sh�

Road,

New D�str�ct,

Wux�,

J�angsu Prov�nce,

the PRC

The property compr�ses a

p�ece of s�te w�th a s�te area

of ��,��.�0 sq.m. (��,0��

sq.ft.).

The property �s planned to be

developed �nto a compos�te

development �nclud�ng

commerc�al, off�ce, hotel-

type apartment and hotel w�th

a total gross floor area of

approx�mately ��,�� sq.m.

(��,0�� sq.ft.).

The land use r�ghts of the

property have been granted for

a term �0 years for commerc�al

use, �0 years for res�dent�al use

and �0 years for other use from

the date of hand�ng-over the

s�te to the grantee.

The property

�s currently a

vacant s�te.

No commerc�al

value

(Please see Note �)

Notes:

(�) The Cert�f�cate for the Use of State-owned Land has not been obta�ned, we have ass�gned no commerc�al value to the

property. On the assumpt�on that the Cert�f�cate for the Use of State-owned Land �s obta�ned, the cap�tal value �n ex�st�ng

state as at ��st March, �00� of the property was RMB��,��0,000.

We had also �ssued to the Company a Property Valuat�on Cert�f�cate dated �nd May, �00� �n respect of the valuat�on of

the property as at ��st March, �00� at the same value.

(�) Accord�ng to Grant Contract of State-owned Land Use R�ghts No. (�00�) �� entered �nto between Wux� Mun�c�pal Land

Resources Bureau (“the Grantor”) and HK Sunsh�ne Real Estate L�m�ted 香山置業發展有限公司 (see Note � below)

(“the Grantee”) on ��th December �00�, the land use r�ghts of the property, compr�s�ng a s�te area of approx�mately

��,��.�0 sq.m., has been granted to the Grantee for a term of �0 years for commerc�al use, �0 years for res�dent�al use

and �0 years for other use from the date of hand�ng-over the s�te to the grantee. The deta�ls are shown below:–

(�) Locat�on : south s�de of Gaolang Road and west s�de of X�sh� Road

(��) Plot rat�o : Not exceed�ng �.0

- �� -


(��) Nature of bu�ld�ng : commerc�al, off�ce (�-star hotel), res�dent�al (hotel-type apartment)

(�v) Land Grant Fee : RMB��,�00,000

(v) Payment Schedule : �0% (RMB�0,��0,000) as depos�t

On or before �0th December, �00� RMB�,��0,000

On or before ��st May, �00� RMB��,�00,000

(v�) Upon full payment of land grant fee, the grantee may process the land t�tle reg�strat�on and then obta�n the

Cert�f�cate for the Use of State-owned Land w�th�n �0 days.

(v��) Bu�ld�ng Covenant : The Grantee should commence the construct�on before ��st August, �00� and

complete construct�on works for not less than ��% of the total gross floor area

of the development before ��st March, �00� and complete all the construct�on

works before ��st December, �00�.

(�) Accord�ng to Supplement to Grant Contract of State-owned Land Use R�ghts No. (�00�) �� entered �nto between Wux�

Mun�c�pal Land Resources Bureau, HK Sunsh�ne Real Estate L�m�ted and Wux� Sunsh�ne Real Estate L�m�ted 無錫香山置業發展有限公司 on ��th March, �00�, �t was agreed that Wux� Sunsh�ne Real Estate L�m�ted shall replace HK

Sunsh�ne Real Estate L�m�ted as the Grantee �n Grant Contract of State-owned Land Use R�ghts No. (�00�) ��.

(�) Accord�ng to Bus�ness L�cence No. 00�� dated ��th February, �00�, Wux� Sunsh�ne Real Estate L�m�ted was establ�shed

on ��th February, �00� w�th a reg�stered cap�tal of US$��,000,000 w�th a val�d operat�on per�od from ��th February,

�00� to ��th February, �00�. Its �nvestor �s HK Sunsh�ne Real Estate L�m�ted w�th �00% cap�tal contr�but�on.

(�) The op�n�on of the Company’s legal adv�ser on PRC law states, �nter al�a, that:

(�) Accord�ng to Contract for Grant of State-owned Land Use R�ghts No. (�00�) �� dated ��th December, �00�

and �ts Supplement dated ��th March, �00�, Wux� Sunsh�ne Real Estate L�m�ted has been granted the land use

r�ghts of the property w�th deta�ls as follows:

(a) S�te area : ��,��.�0 sq.m.

(b) Lot No. : XDG (XQ) – �00� – ��

(c) Land use term : The land use r�ghts of the property have been granted for a term �0 years

for commerc�al use, �0 years for res�dent�al use and �0 years for other

use from the date of hand�ng-over the s�te to the grantee.

(d) Plot Rat�o : Not exceed�ng �.0

(e) Land grant fee : RMB��,�00,000

(f) Payment Schedule : �0% (RMB�0,��0,000) as depos�t

On or before �0th December, �00� RMB�,��0,000

On or before ��st May, �00� RMB��,�00,000

(g) Bu�ld�ng Covenant : The Grantee should commence the construct�on before ��st August, �00�

and complete construct�on works for not less than ��% of the total gross

floor area of the development before ��st March, �00� and complete all

the construct�on works before ��st December, �00�.

- �� -


(��) The Contract for Grant of State-owned Land Use R�ghts No. (�00�) �� and �ts Supplement are legal, val�d and

are b�nd�ng to the part�es concerned.

(��) The depos�t and f�rst payment of land grant fee have been pa�d accord�ng to the payment schedule. The rema�n�ng

balance of RMB��,�00,000 �s payable on or before ��st May, �00�.

(�v) Upon full payment of land grant fee �n accordance w�th the Grant Contract of State-owned Land Use R�ghts No.

(�00�) �� and �ts Supplement, and proceed�ng w�th the land t�tle reg�strat�on and obta�n�ng the Cert�f�cate for

the Use of Sate-owned Land, Wux� Sunsh�ne Real Estate L�m�ted shall be ent�tled to the land use r�ghts over the

property.

(v) After Wux� Sunsh�ne Real Estate L�m�ted has obta�ned the Cert�f�cate for the Use of Sate-owned Land, Wux�

Sunsh�ne Real Estate L�m�ted has the r�ghts to transfer (�nclud�ng sale and exchange), lease and mortgage the

property, subject to the covenant to �nvest ��% or above of the total �nvestment amount �n the development.

(v�) Wux� Sunsh�ne Real Estate L�m�ted �s legally establ�shed accord�ng to the PRC laws. HK Sunsh�ne Real Estate

L�m�ted wholly owns Wux� Sunsh�ne Real Estate L�m�ted.

(�) The status of the t�tle and grant of major approvals and l�cences �n accordance w�th the PRC legal op�n�on and the

�nformat�on prov�ded to us �s as follows:–

Cert�f�cate for the Use of State-owned Land No

Grant Contract of State-owned Land Use R�ghts & �ts Supplement Yes

Red-l�ne Draw�ng No

Bus�ness L�cence Yes

- �0 -

APPENDiX iii GENERAL iNFORMATiON

REsPONsiBiLiTY sTATEMENT

Th�s c�rcular �ncludes part�culars g�ven �n compl�ance w�th the L�st�ng Rules for the purpose

of g�v�ng �nformat�on w�th regard to the Group. The D�rectors collect�vely and �nd�v�dually accept

full respons�b�l�ty for the accuracy of the �nformat�on conta�ned �n th�s c�rcular and conf�rm, hav�ng

made all reasonable �nqu�r�es, that to the best of the�r knowledge and bel�ef there are no other facts

the om�ss�on of wh�ch would make any statement here�n m�slead�ng.

DisCLOsURE OF iNTEREsTs

interests of Directors

As at the Latest Pract�cable Date, the �nterests of the D�rectors �n the share cap�tal of the

Company wh�ch were requ�red to be not�f�ed to the Company and the Stock Exchange pursuant to

D�v�s�ons � and � of Part XV of the SFO (�nclud�ng �nterests wh�ch they were taken or deemed to

have under such prov�s�ons of the SFO), or were requ�red, pursuant to sect�on �� of the SFO, to be

entered �n the reg�ster referred to there�n, or were requ�red, pursuant to the Model Code for Secur�t�es

Transact�ons by D�rectors of L�sted Issuers �n the L�st�ng Rules, to be not�f�ed to the Company and

the Stock Exchange were as follows:

(a) Shares (excludingoptionsmentioned in (b)belowand theConvertibleBonds)

Number of Nature of Percentage ofName shares interest shareholding

Mr Lao Yuan Y� ��,��,000 Note ��.0�

Mr X�n Shul�n, Steve �,�0�,��0 Personal 0.��

Mr Yeung Wa� K�n �,00�,�0� Personal 0.��

Note: ��,��,000 Shares were held by K�nmoss Enterpr�ses L�m�ted, wh�ch �ssued share cap�tal �s benef�c�ally

wholly owned by Mr Lao, who �s also �ts sole d�rector. The balance of �0,��,000 Shares were personally

owned by h�m.

- �� -


(b) Options tosubscribe forShares

Number of Exercise shares entitled price per Date ofName to subscribe for share grant Exercise period (HK$)

Mr Lao Yuan Y� ��,��,000 �.��0 ��/0�/�00� ��/��/�00�-��/0�/�0��

Mr X�n Shul�n, Steve ��,��0,000 0.�� 0/��/�00� �0/0�/�00�-��/��/�0��

�,0��,000 �.��0 ��/0�/�00� ��/��/�00�-��/0�/�0��

Mr Yeung Wa� K�n �,��0,000 0.�� 0�/0�/�� 0�/0�/��-��/0�/�00�

��,��0,000 0.�� 0/��/�00� �0/0�/�00�-��/��/�0��

�,0��,000 �.��0 ��/0�/�00� ��/��/�00�-��/0�/�0��

Mr Kwok Lam Kwong, �,000,000 �.��0 ��/0�/�00� ��/��/�00�-��/0�/�0��

Larry, J.P.

Prof. Woo Ch�a We� �,000,000 �.��0 ��/0�/�00� ��/��/�00�-��/0�/�0��

Mr Yu Q� Hao �,000,000 �.��0 ��/0�/�00� ��/��/�00�-��/0�/�0��

Mr L�u J� �00,000 �.��0 ��/0�/�00� ��/��/�00�-��/0�/�0��

(c) ConvertibleBonds

Convert�ble Bonds �n the pr�nc�pal amount of HK$�,��,000 w�ll be �ssued to Mr Lao

pursuant to the Agreement.

(d) SharesofUS$0.10eachofChinaAssets,anassociatedcorporationof theCompany

Number of shares Nature of Percentage ofName of China Assets interest shareholding

Mr Yeung Wa� K�n �00,000 Personal 0.��

- �� -


(e) Options tosubscribe forsharesofUS$0.10eachofChinaAssets (“CAShares”)

Number of CA shares Exercise entitled to price per Date ofName subscribe for CA share grant Exercise period (HK$)

Mr Lao Yuan Y� ��,000 �.�� /0�/�00� ��/0�/�00�-��/0�/�0��

��0,000 �.�� /0�/�00� ��/0�/�00�-��/0�/�0��

Mr Yeung Wa� K�n �00,000 �.�� /0�/�00� ��/0�/�00�-��/0�/�0��

��0,000 �.�� /0�/�00� ��/0�/�00�-��/0�/�0��

Save as d�sclosed above, as at the Latest Pract�cable Date, none of the D�rectors or any ch�ef

execut�ve of the Company had an �nterest or short pos�t�on �n any shares, underly�ng shares or

debentures of the Company or any assoc�ated corporat�on (w�th�n the mean�ng of Part XV of the SFO)

wh�ch would have to be not�f�ed to the Company and the Stock Exchange pursuant to D�v�s�ons �

and � of Part XV of the SFO (�nclud�ng �nterests and short pos�t�ons wh�ch he was taken or deemed

to have under such prov�s�ons of the SFO) or wh�ch was requ�red, pursuant to sect�on �� of the

SFO, to be entered �n the reg�ster referred to there�n, or pursuant to the Model Code for Secur�t�es

Transact�ons by D�rectors of L�sted Issuers �n the L�st�ng Rules to be not�f�ed to the Company and

the Stock Exchange.

interests of other persons in the share capital of the Company

As at the Latest Pract�cable Date, so far as �s known to the D�rectors, the follow�ng persons

(other than a D�rector or ch�ef execut�ve of the Company) had an �nterest �n the shares and underly�ng

shares of the Company wh�ch would fall to be d�sclosed to the Company under the prov�s�ons of

D�v�s�ons � and � of Part XV of the SFO:

Number of Percentage ofName shares Nature of interest shareholding

Ch�na Assets ��,��,�00 Benef�c�al owner ��.��

Save as d�sclosed above, as at the Latest Pract�cable Date, accord�ng to the reg�ster of �nterests

requ�red to be kept by the Company under sect�on �� of the SFO, there was no person who had any

�nterest or short pos�t�on �n the shares or underly�ng shares of the Company wh�ch would fall to be

d�sclosed to the Company under the prov�s�ons of D�v�s�ons � and � of Part XV of the SFO.

Mr Lao �s the Cha�rman and an execut�ve d�rector of Ch�na Assets. Mr Yeung Wa� K�n, an

execut�ve D�rector, �s a non-execut�ve d�rector of Ch�na Assets.

- �� -


interests in other members of the Group

As at the Latest Pract�cable Date, so far as �s known to the D�rectors, the follow�ng persons

(other than a D�rector or ch�ef execut�ve of the Company) were, d�rectly or �nd�rectly, �nterested �n

�0% or more of the nom�nal value of the share cap�tal carry�ng r�ghts to vote �n all c�rcumstances at

general meet�ngs of the follow�ng subs�d�ar�es of the Company:

(a) Mr Sh� Le� had �0% �nterest �n the �ssued share cap�tal of F�rst Shangha� Investments

Hold�ng Group L�m�ted;

(b) 長春一汽四環集團有限公司 (Changchun FAW S�huan Group Company L�m�ted) had

��% �nterest �n the �ssued share cap�tal of Changchun FAW S�huan Betung Instrument

Company L�m�ted;

(c) Tycross Internat�onal L�m�ted had ��% �nterest �n the �ssued share cap�tal of Cr�mson

Pharmaceut�cal (Hong Kong) L�m�ted;

(d) Momentus Management L�m�ted had �0% �nterest �n the �ssued share cap�tal of Fresh

Start Investments L�m�ted;

(e) Each of CVIC Internat�onal Hold�ngs L�m�ted and Un�-mark Industr�es L�m�ted had �0%

�nterest �n the �ssued share cap�tal Future Match L�m�ted;

(f) 勞渝聲先生 (Mr Lao Yu Sheng) and 鮑榮清先生 (Mr Bao Rong Q�ng) had ��% and �0%

�nterest respect�vely �n the reg�stered cap�tal of Shangha� Huan Ya Insurance Agency

Company L�m�ted;

(g) 上海亞東國際貨運有限公司 (Shangha� Yadong Internat�onal Log�st�cs Company L�m�ted) had

��% �nterest �n the reg�stered cap�tal of Shangha� Y� Hang Log�st�c Network Management

L�m�ted;

(h) 上海滬北物流發展有限公司 (Shangha� Hube� Log�st�cs Development Company L�m�ted)

and 中國汽車運輸國際貨運代理公司 (Ch�na Motor Transportat�on Internat�onal Log�st�cs

Agency L�m�ted.) had ��.��% and ��% �nterest respect�vely �n the reg�stered cap�tal of

Shangha� Zhong Chuang Internat�onal Conta�ner Storage & Transportat�on Company

L�m�ted;

(�) 湖南長豐汽車零部件控股有限責任公司 (Hunan Changfeng Motor Parts Hold�ngs Company

L�m�ted) had ��% �nterest �n the reg�stered cap�tal of Yongzhou Chang Y� Car Electron�cs

L�m�ted Company;

(j) 上海八六三信息安全產業基地有限公司 (Shangha� �� Informat�on Secur�ty Propert�es

Base Company L�m�ted) had ��% �nterest �n the reg�stered cap�tal of Shangha� Fu Heng

Propert�es Management L�m�ted; and

- �� -


(k) 深圳市海潤達電子技術有限公司 (Shenzhen Ha� Rung Da Electron�c Techn�cal Company

L�m�ted) had �0% �nterest �n the reg�stered cap�tal of F�rst Shangha� Propert�es (Kunshan)

Company L�m�ted.

Save as d�sclosed above, as at the Latest Pract�cable Date, the D�rectors were not aware of

any person (other than a D�rector or ch�ef execut�ve of the Company) who was �nterested, d�rectly

or �nd�rectly, �n �0% or more of the �ssued shares of any subs�d�ary of the Company or any opt�ons

�n respect of such cap�tal.

interests of experts in the Group

None of the experts named �n the paragraph headed “Consents” �n th�s append�x has any

sharehold�ng �n any company �n the Group or the r�ght (whether legally enforceable or not) to subscr�be

for or to nom�nate persons to subscr�be for secur�t�es �n any company �n the Group.

service contracts

There �s no ex�st�ng or proposed serv�ce contract between any member of the Group and any

D�rector or proposed D�rector (exclud�ng contracts exp�r�ng or determ�nable by the Company w�th�n

one year w�thout payment of compensat�on (other than statutory compensat�on)).

Competing business

None of the D�rectors or any of the�r respect�ve assoc�ates has any �nterest �n any bus�ness

wh�ch competes or �s l�kely to compete, e�ther d�rectly or �nd�rectly, w�th the Group’s bus�ness.

interests in assets

S�nce ��st December, �00�, the date of the latest publ�shed aud�ted f�nanc�al statements of

the Group, none of the D�rectors or the experts named �n the paragraph headed “Consents” �n th�s

append�x has any d�rect or �nd�rect �nterest �n any assets acqu�red or d�sposed of by or leased to or

proposed to be acqu�red or d�sposed of by or leased to any member of the Group except pursuant to

the Agreement.

None of the D�rectors or the experts named �n the paragraph headed “Consents” �n th�s append�x

�s mater�ally �nterested �n any contract or arrangement subs�st�ng at the date of th�s c�rcular wh�ch �s

s�gn�f�cant �n relat�on to the bus�ness of the Group taken as a whole.

MATERiAL CHANGE

The D�rectors are not aware of any mater�al adverse change �n the f�nanc�al or trad�ng pos�t�on

of the Group s�nce ��st December, �00�, be�ng the date to wh�ch �ts latest publ�shed aud�ted f�nanc�al

statements were made up.

- �� -


LiTiGATiON

Ne�ther the Company nor any of �ts subs�d�ar�es �s engaged �n any l�t�gat�on or arb�trat�on of

mater�al �mportance and no l�t�gat�on or cla�m of mater�al �mportance �s known to the D�rectors to

be pend�ng or threatened aga�nst the Company or any of �ts subs�d�ar�es.

QUALiFiCATiON OF EXPERTs

The qual�f�cat�ons of the experts who have g�ven op�n�ons �n th�s c�rcular are as follows:

Name Qualification

Ch�na Everbr�ght A corporat�on l�censed to conduct type � (deal�ng �n secur�t�es),

type � (adv�s�ng on secur�t�es) and type � (adv�s�ng on corporate

f�nance) regulated act�v�t�es under the SFO

the Valuer qual�f�ed valuer

CONsENTs

Ch�na Everbr�ght and the Valuer have g�ven and have not w�thdrawn the�r respect�ve wr�tten

consents to the �ssue of th�s c�rcular w�th cop�es of the�r reports, valuat�on or letters (as the case

may be) and the references to the�r names �ncluded here�n �n the form and context �n wh�ch they are

respect�vely �ncluded.

GENERAL

(a) The company secretary and the qual�f�ed accountant of the Company �s Mr Yeung Wa� K�n.

Mr Yeung possesses profess�onal membersh�p of the Assoc�at�on of Chartered Cert�f�ed

Accountants, the Hong Kong Inst�tute of Cert�f�ed Publ�c Accountants and the Taxat�on

Inst�tute of Hong Kong.

(b) The share reg�strar and transfer off�ce of the Company �n Hong Kong �s Computershare

Hong Kong Investor Serv�ces L�m�ted, wh�ch �s s�tuated at ��th Floor, Hopewell Centre,

�� Queen’s Road East, Hong Kong.

DOCUMENTs AVAiLABLE FOR iNsPECTiON

Cop�es of the follow�ng documents w�ll be ava�lable for �nspect�on at the off�ces of the Company

at Room ��0�, W�ng On House, �� Des Voeux Road Central, Hong Kong dur�ng normal bus�ness

hours up to and �nclud�ng ��th June, �00�:

(a) the Agreement; and

(b) the wr�tten consents referred to �n the paragraph headed “Consents” �n th�s append�x.

- �� -

NOTiCE OF EXTRAORDiNARY GENERAL MEETiNG



NOTiCE is HEREBY GiVEN that an extraord�nary general meet�ng of the abovement�oned

company (the “Company”) w�ll be held at ��th Floor, W�ng On House, �� Des Voeux Road Central,

Hong Kong on ��nd June, �00� at �:00 p.m. for the purpose of cons�der�ng and, �f thought f�t, pass�ng

the follow�ng resolut�on as an ord�nary resolut�on:

ORDiNARY REsOLUTiON

“THAT the agreement dated ��th May, �00� between Lao Yuan Y� al�as Lo Yuen Yat and Lao

Yuan, V�v�an al�as Lao Yuan Yuan (the “Vendors”) and the Company whereby the Company agrees to

acqu�re from the Vendors the ent�re �ssued share cap�tal of, and the benef�t of loans of HK$�0,��,��0

advanced to, HK Sunsh�ne Real Estate L�m�ted (“HK Sunsh�ne”) for an aggregate cons�derat�on of

HK$��.�� m�ll�on, HK$��.�0 m�ll�on of wh�ch �s to be pa�d �n cash and the balance of HK$��.��

m�ll�on to be sat�sf�ed by the �ssue of convert�ble bonds of the Company (the “Convert�ble Bonds”)

to the Vendors or the�r nom�nees (the “Agreement”) (a copy of wh�ch �s tabled at the meet�ng and

s�gned by the Cha�rman for the purpose of �dent�f�cat�on) be and �s hereby approved and that the

d�rectors of the Company be and are hereby author�sed to �mplement the transact�ons contemplated

by the Agreement, �nclud�ng mak�ng loans to HK Sunsh�ne or �ts subs�d�ary for repayment of the

balance of ex�st�ng loans of HK$��,��,000 due to the Vendors and further loans of not more than

RMB��,0��,000 wh�ch may be advanced by the Vendors to HK Sunsh�ne and �ts subs�d�ary (w�th any

amendments to the terms of the Agreement as may be approved by the d�rectors of the Company), the

�ssue of the Convert�ble Bonds pursuant to the Agreement and the �ssue of shares of the Company on

the exerc�se of any convers�on r�ghts attached to the Convert�ble Bonds.”

By order of the Board

Yeung Wai KinSecretary

Dated �th June, �00�

Registeredoffice:

Room ��0�

W�ng On House

�� Des Voeux Road Central

Hong Kong

- �� -

NOTiCE OF EXTRAORDiNARY GENERAL MEETiNG

Notes:

�. A member ent�tled to attend and vote at the meet�ng convened by the above not�ce �s ent�tled to appo�nt more than one

proxy to attend and vote �n h�s stead. A proxy need not be a member of the Company.

�. In order to be val�d, a form of proxy must be depos�ted at the Company’s reg�stered off�ce together w�th a power of

attorney or other author�ty, �f any, under wh�ch �t �s s�gned or a notar�ally cert�f�ed copy of that power of attorney or

author�ty, not less than �� hours before the t�me for hold�ng the meet�ng or adjourned meet�ng.

first shanghai investments limited for any loss howsoever ar s ng from or n rel ance upon the whole...

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