Beijing Enterprises Water Group Limited — Proxy Solicitation & Information Statement 2004

Aug 26, 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular or as to the action to be taken, you should consult a stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Shang Hua Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee.

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

==> picture [39 x 54] intentionally omitted <==

==> picture [39 x 3] intentionally omitted <==

----- Start of picture text -----

SHANG HUA HOLDINGS
----- End of picture text -----

SHANG HUA HOLDINGS LIMITED 上華控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock code: 371)

DISCLOSEABLE TRANSACTION

DISPOSAL OF PROPERTIES

20 August, 2004

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Background of the Disposal of the Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Reasons for the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5

DEFINITIONS

In this circular, the following terms have the following meanings:

“Board”

The board of Directors

“Company”

Shang Hua Holdings Limited, a company incorporation in Bermuda with limited liability

• “Directors”

The directors of the Company

“Disposal” The proposed disposal of the Properties pursuant to the Provisional Agreement

“Formal Agreement”

The agreement has been entered pursuant to the Provisional Agreement relating to the Disposal on 12 August, 2004

• “Group” The Company and its subsidiaries

• “HK$”

Hong Kong Dollars, the lawful currency of Hong Kong

“Independent Third Party”

Any person who is not connected to any director, chief executive or substantial share holder of the Company or its subsidiaries or any of their respective associates (as defined in the Listing Rules) and is not a connected person of the Company (as defined in the Listing Rules)

“Listing Rules” The Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited

“Properties”

Workshop Nos. 1, 2 and 40 on 7th Floor and Car Parking Spaces Nos. P14 and P17 on the Basement, Sino Industrial Plaza, No. 9 Kai Cheung Road, Kowloon Bay, Kowloon

“Provisional Agreement”

A provisional agreement for sale and purchase dated 29 July, 2004 between the Vendor and the Purchase in relation to, inter alia, the disposal of the Properties

• “Vendor”

Wanon Industries Limited, a wholly-owned subsidiary of the Company

– 1 –

LETTER FROM THE BOARD

==> picture [39 x 54] intentionally omitted <==

SHANG HUA HOLDINGS

SHANG HUA HOLDINGS LIMITED 上華控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock code: 371)

Directors:

Ms. Zhou Liping Mr. Huang Flynn Xuxian Ms. Guan Mei Mr. Shea Chun Lok, Quadrant Mr. Chan Yiu Kwong Mr. Ngai Chi Yung*

• Independent non-executive Director

Registered office: Cedar House 41 Cedar Avenue Hamilton HM12 Bermuda

Principal Office in Hong Kong: Room 701, 7th Floor, Sino Industrial Plaza, No. 9 Kai Cheung Road, Kowloon Bay, Kowloon, Hong Kong

20 August, 2004

To the Shareholders of the Company

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION DISPOSAL OF PROPERTIES

INTRODUCTION

By an announcement dated 3 August, 2004, the Directors announced that on 29 July, 2004, a binding provisional agreement for the sale and purchase of the was entered into between the Vendor and the Purchaser. Pursuant to the terms of the Provisional Agreement, a Formal agreement between the Vendor and the Purchase was signed on 12 August, 2004. The Consideration for the Disposal of the Properties is HK$2,850,000.00.

The Disposal constitutes a discloseable transaction of the Company under the Listing Rules. The purpose of this circular is to provide Shareholders with further information on the Disposal and other information in compliance with the requirements of Chapter 14 of the Listing Rules.

– 2 –

LETTER FROM THE BOARD

BACKGROUND OF THE DISPOSAL OF THE PROPERTIES

Date of the Provisional Agreement

29 July, 2004

Parties

Vendor: Wanon Industries Limited, a wholly owned subsidiary of the Company.

Purchaser: To the Best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the Purchaser and the ultimate beneficiary owner of the Purchaser are Independent Third Parties.

Properties

Workshop Nos. 1, 2 and 40 on 7th Floor and Car Parking Spaces Nos. P14 and P17 on the Basement, Sino Industrial Plaza, No. 9 Kai Cheung Road, Kowloon Bay, Kowloon. The Properties are wholly used by the Group for office purposes and are not pledged. Therefore, there is no effect of transactions on the liabilities of the Group.

Consideration

The disposal price for the Properties is HK$2,850,000 which has been determined at normal commercial terms and arm’s length negotiation between the parties with reference to the market value. According to the valuation report from LCH (Asia-Pacific) Surveyors Limited, an independent professional valuer, the open market value of the Properties as at 21 July, 2004 was HK$2,700,000. The net book value of the Properties as shown in the audited accounts of the Company for the year ended 30 June, 2003 was HK$3,480,503. Upon completion of the Disposal, the Group will realize a loss of approximately HK$660,000 net expenses on its profits and loss accounts, and the assets value of the Group will reduced by the said loss.. The Directors including the independent non-executive directors consider that the terms of the transaction including the consideration are fair and reasonable and in the interests of the shareholders as a whole. The disposal price shall be paid by the Purchaser to the Vendor in the following manner:

• (a) Initial deposit of HK$84,000 has been paid in cash upon signing of the Provisional Agreement:

• (b) A further deposit of HKD201,000 has been paid in cash on 12 August, 2004 upon signing of the Formal Agreement; and

• (c) The balance of the purchase price of HK$2,565,000 shall be paid in cash upon completion which should take place on or before 30 October, 2004.

Formal Agreement

Pursuant to the terms of the Provisional Agreement, a Formal Agreement for the Disposal was signed on 12 August, 2004.

– 3 –

LETTER FROM THE BOARD

Completion Date

The sale and purchase pursuant to the Provision Agreement is scheduled to be completed on or before 30 October, 2004.

REASONS FOR THE DISPOSAL

The Company is principally engaged in the trading of mobile phones, in-door telephones and computer & related products. The Principal activities of the Vendor are trading of telephones, computers and related products. The Properties, which are wholly used for office purposes, has a total gross floor area of approximately 4,689 square feet (sq.ft.). The Board considers that leasing a smaller office with an area of approximately 1,500 sq.ft. can reduce the overhead cost after reduction of the staff employed in Hong Kong. The Company is now searching a new office and expects to move in on or before 30 October, 2004. The Properties, except car parks, were acquired in 1992, and the annual average impairment loss was about HK$280,000. The Properties are 17 years old, the Board foresees that the impairment loss will progressively increase. Currently, there is an increasing pressure in Hong Kong to raise interest rate. The Board is uncertain how much interest rate will be raised in the coming year and what the impact in the Property Market. However, it is expected that the downward correction will be happened in the Property Market in the coming future. Taking the devaluation of the Properties and the uncertainty uncertainly in the Property Market into account, the Board does not want to lose the opportunities to realize its assets at the reasonable market price. Therefore, the Disposal is in the interests of the Company and the considerations of the Disposal are fair and reasonable. The Board will try to reallocate net proceeds generated from the Disposal of approximately HK$2,820,000 to better opportunities with higher returns. At present, the Company does not have any designated use for the net proceeds which will be deposited in bank in Hong Kong. If any appropriate investment opportunity arises, the Board will consider to apply part or all of the net proceeds on the new investment.

GENERAL

The Disposal constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules.

Yours faithfully, Zhou Liping Chairman

– 4 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2. DIRECTORS’ INTERESTS

As at the Latest Practicable Date, the following Directors of the Company were interested, or were deemed to be interested in the following long and short positions in the shares, underlying shares and debentures of the Company or any associated corporation (within the meaning of the SFO) which(a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO; or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors adopted by the Company to be notified to the Company and the Stock Exchange.

Long Position in the Shares:

			Approximate
			Percentage of
Name	Capacity	Number of Shares held	Shareholding
Ms. Guan Mei	Interest of a controlled	9,250,000	16.66%
	corporation	(Note)

Note: These shares were beneficially owned by Aster Well Limited, a company incorporated in the British Virgin Islands, whose entire issued share capital is beneficially owned by Ms. Guan Mei.

Save as disclosed in this Circular, as at the Latest Practicable Date, none of the Directors and Chief Executive of the Company were interested, or were deemed to be interested in the long and short position in the shares, underlying shares and debentures of the Company or any associated corporation (within the meaning of SFO) which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO; or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors adopted by the Company to be notified to the Company and the Stock Exchange. There is no completing interests of each of the directors of the Group and his/her respective associates.

– 5 –

GENERAL INFORMATION

APPENDIX

3. SUBSTANTIAL SHAREHOLDER’S INTERESTS

Save as disclosed below, as at the Latest Practicable Date, so far as is known to the Directors, no other person had, or was deemed or taken to have an interest or short position in the Shares or underlying shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO:

Long positions in Shares

			Approximate
			percentage of
Name of shareholders	Capacity	Number of Shares	holding
Pioneer Wealth Ltd.(Note 1)	Beneficial owner	13,477,250	24.27%
Deng Hong_(Note 1)_	Interest of a controlled	13,477,250	24.27%
	corporation
Aster Well Limited_(Note 2)_	Beneficial owner	9,250,000	16.66%
Guan Mei_(Note 2)_	Interest of a controlled	9,250,000	16.66%
	corporation

Note 1: The entire share capital of Pioneer Wealth Ltd. is beneficially owned by Ms. Deng Hong.

Note 2: The entire share capital of Aster Well Limited is beneficially owned by Ms. Guan Mei.

Save as disclosed in this Circular, the Directors are not aware of any other persons as at the Latest Practicable Date, who (i) was directly or indirectly interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group; (ii) had any long position or short position in the shares, underlying shares or debentures of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO; and (iii) held any option in respect of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group.

4. SERVICE CONTRACT

None of the Directors has any existing or proposed service contract with the Company or any of its subsidiaries other than contracts expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation).

5. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

– 6 –

GENERAL INFORMATION

APPENDIX

6. GENERAL

• (a) The registered office of the Company is located at Cedar House, 41 Cedar Avenue, Hamilton HM 12, Bermuda and its principal place of business in Hong Kong is located at Room 701, 7th Floor, Sino Industrial Plaza, 9 Kai Cheung Road, Kowloon Bay, Kowloon, Hong Kong.

• (b) The share registrars of the Company is Tengis Limited, situated at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (c) The secretary and the qualified accountant of the Company is Mr. Tsang Yui Fan. He is a fellow member of the Association of Chartered Certified Accountants and an associate member of the Hong Kong Society of Accountants.

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

– 7 –