DIT Group Limited — Capital/Financing Update 2003

Nov 19, 2003

IMPORTANT

If you are in any doubt as to any aspect of this circular, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

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

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.

SOUTH EAST GROUP LIMITED 東南國際集團有限公司[*]

(Incorporated in Bermuda with limited liability)

DISCLOSEABLE TRANSACTION

Acquisition of Interests in Land for Residential Purpose

* For identification purposes only

19th November, 2003

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Transfer of Equity Interests Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Supplemental Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Payment Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Termination of the Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Particulars of Assets being Acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Reasons for the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Effect of the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Principal Business Activities of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Other information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Appendix – Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7

DEFINITIONS

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

“Acquisition”	The acquisition of the Property by BPDL under the Agreements
“Agreements”	The Transfer of Equity Interests and the Supplemental Agreement,
	the latter forms an integral part of the former
“BPDL”	Benelux Property Development (Shanghai) Limited, a company
	incorporated in the PRC and a wholly owned subsidiary of the
	Company
“Company”	South East Group Limited, a company incorporated in Bermuda
	with limited liability whose shares are listed on the Stock Exchange
“Group”	The Company and its subsidiaries
“Invested Entity”	A company incorporated on 29 April 2003 in the PRC, which was
	owned as to 100% by the Investing Company immediately before
	the transfer of equity interests pursuant to the Transfer of Equity
	Interests Agreement, and is owned as to 67% by the Investing
	Company and 33% by BPDL immediately thereafter
“Investing Company”	A company incorporated in the PRC, whose ultimate beneficial
	owners being two state-owned enterprises are an independent third
	party not connected with and independent of any of the directors,
	chief executive or substantial shareholders of the Company or
	any of its subsidiaries or any of their respective associates (as
	defined under the Listing Rules)
“Latest Practicable Date”	19th November 2003, the lastest practicable date prior to the
	printing of this circular for the purpose of ascertaining certain
	information contained herein
“Listing Rules”	The Rules Governing the Listing of Securities on the Stock
	Exchange
“Property”	Part and parcel of land of approximately 50 acres out of a piece
	of land of approximately 150 acres in Song Jiang, Shanghai for
	residential purposes
“PRC”	The People’s Republic of China
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)

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DEFINITIONS

“Share(s)”	Existing share(s) of HK$0.10 each in the share capital of the
	Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Supplemental Agreement”	Supplemental agreement in relation to the Transfer of Equity
	Interests Agreement dated 23 October 2003
“Transfer of Equity	Agreement for the transfer of 33% equity interests in the capital
Interests Agreement”	of the Invested Entity dated 23 October 2003
“acres”	Measuring units of land in the PRC, with one unit equivalent to
	approximately 666.67 square meters
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC
“%”	Per cent

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LETTER FROM THE BOARD

SOUTH EAST GROUP LIMITED 東南國際集團有限公司[*]

(Incorporated in Bermuda with limited liability)

Executive Directors:

Mr. Budiman Rahardja (Chairman) Mr. Kwan Kei Chor, Samuel

Non-Executive Directors:

Mr. Chen Zhi Yung Ms. Chen Lee Mui

Independent Non-Executive Directors: Mr. Lo Yuk Lam Mr. Wong Kam Wah

Registered Office: Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Principal place of business in Hong Kong: Room 2705, 27th Floor The Centrium 60 Wyndham Street Central, Hong Kong

19th November 2003

To the shareholders for information only

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION

INTRODUCTION

It was announced on 29 October 2003 that BPDL, a wholly owned subsidiary of the Company, entered into the Transfer of Equity Interests Agreement and the Supplemental Agreement on 23 October 2003. Pursuant to the Listing Rules, the Acquisition contemplated under the Agreements constitutes a discloseable transaction for the Company.

Pursuant to the Transfer of Equity Interests Agreement, the Investing Company agreed to sell and BPDL agreed to purchase 33% of the equity interests in the capital of the Invested Entity at a consideration of RMB2,640,000 (equivalent to approximately HK$2,481,600) (the “Sale Equity Consideration”). The Sale Equity Consideration is pro-rated on the basis of the registered capital of the Invested Entity being RMB8,000,000.

The Supplemental Agreement was executed pursuant to the terms of the Transfer of Equity Interests Agreement.

Pursuant to the Supplemental Agreement, the Invested Entity shall submit a tender to the authorized property development company (which is municipal government owned) (the “Authorized Developer”) of a piece of land of approximately 150 acres in Song Jiang, Shanghai for residential purposes (the “Lot”). The Authorized Developer shall invite tender for the Lot in/around November/December 2003.

* for identification only

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LETTER FROM THE BOARD

Pursuant to the Supplemental Agreement, BPDL shall pay an additional sum of RMB26,060,000 (equivalent to approximately HK$24,496,400) in cash to the Invested Entity. This amount together with the Sale Equity Consideration in aggregate shall be applied to acquire the land use right of a parcel of land of approximately 50 acres out of the Lot, which is in proportion to the stockholding of BPDL in the Invested Entity. A certificate of the land use right for the Lot as a whole shall be issued to the Invested Entity if it is ultimately successful in the tender. Notwithstanding that, there are provisions in the Supplemental Agreement setting out that all costs and profits/losses in relation to the Property are on the account of BPDL and those in relation to the remaining portion of the Lot are on the account of the Investing Company.

The Property shall be principally developed by BPDL for residential purposes. Accordingly, BPDL shall bear all development costs incurred from the development of the Property and receive all revenues from the unit sales of the residential buildings constructed thereon. However, BPDL shall not be responsible for the development of the remaining portion of the Lot, nor be entitled to share any profits attributable to that portion of land. Subject to the occurrence of the events mentioned in the paragraph headed “Termination of the Agreement”, completion of the development of the Property and selling of all residential units provided thereon is expected to fall in/about the last quarter of 2004 and the first quarter of 2005 respectively. After completion of the development of the Property and selling of all residential units, BPDL shall be entitled to return the 33% equity interests in the Invested Entity back to the Investing Company for RMB2,640,000 in cash. Such right is only exercisable until all residential units developed by BPDL on the Property are sold, otherwise there is no specified time limit for its exercise. The reason for this arrangement is that BPDL is intended to acquire the Property for residential development as a stand-alone project. As a result, BPDL is able to sell its 33% equity interests in the Invested Entity after completion of the property development project as mentioned above.

TRANSFER OF EQUITY INTERESTS AGREEMENT

Date: 23 October 2003 Parties: (a) The Investing Company as the transferor and (b) BPDL as the Transferee

SUPPLEMENTAL AGREEMENT

Date: 23 October 2003 Parties: (a) The Investing Company, (b) BPDL and (c) The Invested Entity

CONSIDERATION

The total consideration (subject to certain adjustments) for procuring the acquisition of the Property amounting to RMB28,700,000 (equivalent to approximately HK$26,978,000) (including the Sale Equity Consideration) (the “Consideration”), which was determined after arm’s length negotiation based on current market conditions in Song Jiang District as a result of analysis of market intelligence. The

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LETTER FROM THE BOARD

Consideration may be so adjusted as to reflect the actual stated price in the accepted tender. In any event, the tender price shall not exceed the upper ceiling as defined in paragraph (1) headed “Termination of Agreements” below.

PAYMENT TERMS

The Consideration is to be satisfied by BPDL in the following manner:

• (1) A sum of RMB27,500,000 (equivalent to approximately HK$25,850,000) in cash funded by internal resources was paid on 27 October 2003 and

• (2) The remaining sum of RMB1,200,000 (equivalent to approximately HK$1,128,000) in cash from internal resources to be paid when the Bureau of Industrial and Commercial Administration gives approval to the transfer of the 33% equity interests from the Investing Company to BPDL.

TERMINATION OF THE AGREEMENTS

The Investing Company undertakes to refund the Consideration in full to BPDL and to terminate the Agreements in the occurrence of the following events:

• (1) if the tender for the Lot made by the Invested Entity is accepted but at an average price per acre that exceeds the predetermined upper limit (approximately 25% higher than the price on which computation of the Consideration is based) as specified in the Supplemental Agreement; or

• (2) if the tender for the Lot (including the Property) is rejected.

PARTICULARS OF ASSETS BEING ACQUIRED

Pursuant to the Transfer of Equity Interests Agreement, BPDL shall procure the acquisition of 33% equity interests in the capital of the Invested Entity. The Invested Entity was incorporated on 29 April 2003 in the PRC for carrying on business in property development in Shanghai. It has a registered capital of RMB8,000,000. The board of directors of the Invested Entity is composed of five members. After its acquisition of equity interests in the Invested Entity, BPDL can nominate a director to the board to represent its interests. The Invested Entity is going to make a tender for the Lot. However, it has not commenced any business at this stage.

Through investing in 33% equity interests the Invested Entity at a consideration of RMB2,640,000, BPDL shall further invest RMB26,060,000 into the Invested Entity to acquire the Property for the purpose of residential development (subject to the occurrence of the events mentioned in the paragraph headed “Termination of the Agreements”). Pursuant to the Supplemental Agreement, BPDL shall be entitled to the land use right for the development of the Property. As regards, it shall bear all development costs incurred from the development of the Property and receive all revenues from the unit sales of the residential buildings constructed thereon. After completion of development project in connection with the Property, BPDL shall be entitled to return the 33% equity interests in the Invested Entity back to the

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LETTER FROM THE BOARD

Investing Company for RMB2,640,000. Such right is only exercisable until all residential units developed by BPDL on the Property are sold, otherwise there is no specified time limit for its exercise.

REASONS FOR THE ACQUISITION

It has become the Group’s strategy to focus its business development in the PRC markets, in particular, property development and investment. The property development project in Pudong, Shanghai, which is the only project currently remains in the property portfolio of the Group, is scheduled to complete by the end of this year, the management considers the Acquisition a right opportunity for the furtherance of the business of property development and investment in the PRC. It has been taken into consideration the property market in Shanghai as well as the experience of the Investing Company in the field. The Investing Company has more then ten years of experience in property development in Shanghai. The new development (including costs of acquisition of the Property and future costs of development in an estimation of RMB85,000,000) is planned to be financed as to 70% by internal resources and the remaining 30% by existing banking facilities.

EFFECT OF THE ACQUISITION

In view of the development potential of the Property, the Directors consider that the Acquisition may bring in reasonable yield to the Group in the medium term. It is believed that the Acquisition will strengthen the asset and income base of the Group.

PRINCIPAL BUSINESS ACTIVITIES OF THE GROUP

The Company is an investment holding company with its subsidiaries are principally engaged in property development and investment, manufacturing and trading of magnetic media products, manufacturing and trading of grape wine and other strategic investment projects.

OTHER INFORMATION

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

Yours faithfully, For and on behalf of the Board Kwan Kei Chor, Samuel Director

** RMB1 = HK$0.94

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ADDITIONAL 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 enquires, 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. DISCLOSURE OF INTERESTS

(i) Directors

As at the Latest Practicable Date, the interests of each Director and chief executive of the Company in the equity or debt securities 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 (including interests and short positions which the Director is taken or deemed to have under such provisions 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 of Listed Companies (“Model Code”) to be notified to the Company and the Stock Exchange were as follows:

		Number of shares
	Personal	Family	Corporate
Name of Director	interests	interests	interests
Mr. Budiman RAHARDJA	4,982,001	–	130,982,130_(Note)_

Note: The 130,982,130 Shares were owned by Fortune Grand Investment Limited (“Fortune Grand”), which in turn was owned as to 50% by Mr. Budiman Rahardja and 50% by Madam Sri Wasi Hastuti.

Save as disclosed herein and other than certain nominee shares in the subsidiaries held in trust for the Group by certain Directors, as at the Latest Practicable Date, none of the Directors and chief executive of the Company was interested in the equity or debt securities of the Company or any associated corporations (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 (including interests and short positions which the Director is taken or deemed to have under such provisions 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 to be notified the Company and the Stock Exchange.

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ADDITIONAL INFORMATION

APPENDIX

(ii) Substantial Shareholders

As at the Latest Practicable Date, so far as is known to the Directors, the following parties, other than a Director or chief executive of the Company, had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of the Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

Name Number of Shares

Fortune Grand Investment Limited	130,982,130 (Note)
Madam Sri Wasi Hastuti	130,982,130 (Note)

Note: These shareholdings are duplicated and refer to the same parcel of Shares as set out in the note in respect of Directors’ interests above.

As far as the Directors are aware, save as disclosed herein, no other person was directly or indirectly beneficially interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group as at the Latest Practicable Date.

3. DIRECTOR’S SERVICE CONTRACTS

Mr. Budiman Rahardja, under his appointment of Executive Director and Chairman of the Company, has entered into a service agreement with the Company with monthly basic salary of HK$100,000 for a period of four years with effect from 1 April 2003 and will continue thereafter unless and until terminated by either party by two months’ prior notice.

Mr. Kwan Kei Chor, Samuel, under his appointment of Executive Director of the Company, has entered into a service agreement with the Company with monthly basic salary of HK$37,000 for a period of one year with effect from 1 December 2002 and will continue thereafter unless and until terminated by either party by two months’ prior notice.

Save as disclosed, no Director has any unexpired service contract with any member of the Group nor is any such contract proposed (excluding contracts expiring or determinable within one year without payment of compensation other than statutory compensation).

4. LITIGATION

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 against the Company or any of its subsidiaries.

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ADDITIONAL INFORMATION

APPENDIX

5. GENERAL

• (a) The secretary of the Company is Ms. Chan Sau Chee who is an associate member of the Hong Kong Institute of Company Secretaries and the Institute of Chartered Secretaries and Administrators.

• (b) The Hong Kong share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

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

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