DT Capital Limited — Proxy Solicitation & Information Statement 2002

Oct 16, 2002

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold all your shares in Interchina Holdings Company Limited, you should at once hand this circular to the purchaser or to the bank, 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.

國中控股有限公司

INTERCHINA HOLDINGS COMPANY LIMITED

(Incorporated in Hong Kong with limited liability)

DISCLOSEABLE TRANSACTION

16 October 2002

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CONTENTS

Page

Definitions 1

Letter from the Board
Introduction 4
BCI Agreement 5
IHM Agreement 5
Information on BCI 6
Information on IHM 7
Reason for the Disposals 8
Further Information 8

Appendix – General Information
Responsibility Statement 9
Directors’ Interests in Securities 9
Directors’ Interests in Contracts 10
Substantial Shareholders 10
Directors’ Interests in Assets 10
Service Contract 10
Litigation 11
Material Changes 11
Miscellaneous 11

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DEFINITIONS

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

“associates” has the meaning ascribed thereto in the Listing Rules;

“BCI” Burlingame (Chinese) Investment Limited, a company incorporated under the laws of Hong Kong, the entire issued share capital of which is beneficially owned by Burlingame International Company Limited;

“BCI Agreement” an agreement entered into between Burlingame International Company Limited, the Purchaser and the Guarantor on 26 September 2002 in respect of the disposal of the BCI Shares and BCI Debts;

“BCI Debts” the non-interest bearing shareholder’s loan owing by BCI to Burlingame International Company Limited in an amount of HK$138,305,728;

“BCI Shares” 10,000 shares of HK$1.00 each in the capital of BCI, representing 100% of the entire issued share capital of BCI;

“Board” the board of Directors;

“Business Day” a day (other than Saturdays and days on which a tropic cyclone warning No. 8 or above or a rainstorm warning signal is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m.) on which banks in Hong Kong are generally open for the transactions of normal banking business;

“Company” Interchina Holdings Company Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Stock Exchange;

“Directors” the executive directors of the Company;

“Disposals” the disposal of the BCI Shares and the BCI Debts by the Burlingame International Company Limited pursuant to the BCI Agreement and the disposal of the IHM Shares and the IHM Debts by the Company pursuant to the IHM Agreement;

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DEFINITIONS

"Guarantor"
Zhao Shijian, sole beneficial owner of the Purchaser;

"HK$"
Hong Kong dollars;

"Hong Kong"
the Hong Kong Special Administrative Region of the PRC;

"IHM"
Interchina Hotel Management Limited, a company incorporated under the laws of Hong Kong with limited liability which is a wholly owned subsidiary of the Company;

"IHM Agreement"
an agreement entered into between the Company, the Purchaser and the Guarantor on 26 September 2002 in respect of the disposal of the IHM Shares and IHM Debts;

"IHM Debts"
the non-interest bearing shareholder’s loan owing by IHM to the Company in an amount of HK$62,244,385;

"IHM Shares"
10,000 shares of HK$1.00 each in the capital of IHM, representing 100% of the entire issued share capital of IHM;

"Latest Practicable Date"
9 October 2002, being the latest practicable date for ascertaining certain information referred to herein prior to the printing of this circular;

"Listing Rules"
The Rules Governing the Listing of Securities on the Stock Exchange;

"PRC"
The People’s Republic of China, excluding Hong Kong for the purpose of this circular;

"Purchaser"
Easy Rider Group Limited, a company incorporated under the laws of British Virgin Islands with limited liability;

"SDI Ordinance"
Securities (Disclosure of Interests) Ordinance (Chapter 396 of the Laws of Hong Kong);

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DEFINITIONS

“SIH”
上海國中酒店有限公司 (Shanghai Interchina Hotel Co. Ltd.), a co-operative joint venture company duly established and existing under the laws of the PRC;

“SUC”
Shanghai Underground Centre Co. Ltd (上海地下商城有限公司), a co-operative joint venture company duly established and existing under the laws of the PRC;

“Stock Exchange”
The Stock Exchange of Hong Kong Limited; and

“%”
per cent.

Conversion of Renminbi into Hong Kong dollars is based on the exchange rate of RMB1.00 = HK$0.9346

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LETTER FROM THE BOARD

國中控股有限公司

INTERCHINA HOLDINGS COMPANY LIMITED

(Incorporated in Hong Kong with limited liability)

Executive Directors:

Mr. Zhang Yang (Chairman)
Mr. Liu Shunxin (Honorary Chairman)
Mr. Lam Cheung Shing, Richard
Mr. Chan Wing Yuen, Hubert
Mr. Jack Jiyei Zhang

Registered Office:

45th Floor
Far East Finance Centre
16 Harcourt Road
Admiralty
Hong Kong

Non-executive Director:

Mr. Hui Ho Ming, Herbert

Independent Non-executive Directors:

Mr. Lee Peng Fei, Allen
Mr. Wu Wai Chung
Mr. Wong Hon Sum
Ms. Ha Ping

16 October 2002

To the Shareholders

Dear Sir or Madam,

DISCLOSABLE TRANSACTION

INTRODUCTION

It was announced on 27 September 2002 by the Company that on 26 September 2002, Burlingame International Company Limited, a wholly owned subsidiary of the Company, has entered into an unconditional sale and purchase agreement for the disposal of the entire issued share capital of Burlingame (Chinese) Investment Limited together with a non-interest bearing shareholder's loan at a total consideration of HK$180,000,000 and the Company has entered into a conditional sale and purchase agreement for the disposal of the entire issued share capital of Interchina Hotel Management Limited together with a non-interest bearing shareholder's loan at a total consideration of HK$80,000,000 with the Purchaser and the Guarantor.

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LETTER FROM THE BOARD

The Disposals constitutes a discloseable transaction for the Company under the Listing Rules. The purpose of this circular is to provide the Shareholders with further information of the Disposals.

BCI AGREEMENT

Date : 26 September 2002

Parties :
(1) Burlingame International Company Limited, a company incorporated in Hong Kong which is a wholly owned subsidiary of the Company;
(2) the Purchaser, the Purchaser and its sole beneficial owner are independent third parties not connected with any of the directors, chief executives or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates (as defined in the Listing Rules). As at the date of this circular, the Purchaser does not hold any interest in the share capital of the Company; and
(3) the Guarantor, an independent third party not connected with any of the directors, chief executives or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates (as defined in the Listing Rules). As at the date of this circular, the Guarantor does not hold any interest in the share capital of the Company.

Assets to be disposed: the BCI Shares and the BCI Debts

Consideration : HK$180,000,000, HK$41,694,272 of which shall be the consideration for the BCI Shares and the remaining balance of HK$138,305,728 shall be the consideration for the BCI Debt. The consideration was determined with reference to the market value of Shanghai Underground Centre (上海地下商城) in Shanghai and will be settled by cash payment by the Purchaser.

IHM AGREEMENT

Date : 26 September 2002

Parties :
(1) the Company;

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LETTER FROM THE BOARD

(2) the Purchaser, the Purchaser and its beneficial owner are independent third parties not connected with any of the directors, chief executives or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates (as defined in the Listing Rules). As at the date of this circular, the Purchaser does not hold any interest in the share capital of the Company; and

(3) the Guarantor, an independent third party not connected with any of the directors, chief executives or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates (as defined in the Listing Rules). As at the date of this circular, the Guarantor does not hold any interest in the share capital of the Company.

Assets to be disposed: the IHM Shares and the IHM Debts

Consideration : HK$80,000,000, HK$17,755,615 of which shall be the consideration for the IHM Shares and the remaining balance of HK$62,244,385 shall be the consideration for the IHM Debt. The consideration was determined with reference to the market value of the piece of land situated at 10 Heng Feng Road, Shanghai which is currently held by SIH and will be settled by the Purchaser by cash payment.

Condition : documents showing that all necessary approvals and consents for the transfer of IHM's interest in its another subsidiary, the only other asset of IHM, to another member of the Group having been duly obtained have been provided to the Purchaser.

Completion : completion of the IHM Agreement has been taken place on 30 September 2002.

INFORMATION OF BCI

BCI is a company with limited liability incorporated in Hong Kong on 4 March 1993 and beneficially holds a 50% interest in SUC. SUC owns and operates a shopping mall named Shanghai Underground Centre (上海地下商城) in Shanghai. Save for the interest in SUC, BCI does not hold any asset.

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LETTER FROM THE BOARD

Based on the latest management accounts of BCI, the unaudited consolidated profit before and after taxation of BCI for the financial year ended 31 March 2002 were HK$17,031,679 and HK$16,866,175 respectively. The unaudited consolidated loss before and after taxation of BCI for the financial year ended 31 March 2001 were both HK$3,177,767. The unaudited consolidated net liability of BCI as at 31 March 2001 and 31 March 2002 were HK$32,094,224 and HK$16,743,549 respectively.

Based on the latest management accounts of BCI, the unaudited consolidated profit before and after taxation of BCI for the five months ended 31 August 2002 were both HK$4,490,590. There are no extraordinary items for the two years ended 31 March 2002 and for the period ended 31 August 2002.

The surplus of the consideration for the BCI Shares under the BCI Agreement of HK$41,694,272 over the unaudited consolidated net liability of BCI as at 31 August 2002 of HK$12,253,229 is HK$53,947,501. Upon completion of the BCI Agreement, the Company or any of its subsidiaries no longer hold any interest in the capital of BCI.

INFORMATION OF IHM

IHM is a company with limited liability incorporated in Hong Kong on 24 November 2000. IHM indirectly holds 100% interest in SIH. SIH currently holds a piece of undeveloped vacant land situated at 10 Heng Feng Road, Shanghai.

Based on the latest audited accounts of IHM, the audited consolidated loss before and after taxation of IHM for the financial year ended 31 March 2002 were both HK$14,239,998. The audited consolidated loss before and after taxation of IHM for the financial year ended 31 March 2001 were both HK$22,634. The audited consolidated net liability of IHM as at 31 March 2001 and 31 March 2002 were HK$12,634 and HK$14,572,300 respectively.

Based on the latest management accounts of IHM, the unaudited consolidated loss before and after taxation of IHM for the five months ended 31 August 2002 were both HK$8,669,626. There are no extraordinary items for the two years ended 31 March 2002 and for the period ended 31 August 2002.

The surplus of the consideration for the IHM Shares under the IHM Agreement of HK$17,755,615 over the proforma consolidated net liability of IHM as at 31 August 2002 of HK$3,410,038, which is accounting for the transfer of its entire interest in its another subsidiary to another member of the Group, is HK$21,165,653. The unaudited consolidated net liability of IHM as at 31 August 2002 before the transfer of its entire interest in its another subsidiary to another member of the Group is HK$23,056,528.

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LETTER FROM THE BOARD

As a condition precedent for the completion of the IHM Agreement, IHM has transferred its entire interest in its another subsidiary, the only other asset of IHM, to another member of the Group. Completion of the IHM Agreement has been taken place on 30 September 2002, no asset or interest other than the interest in SIH was transferred to the Purchaser pursuant to the IHM Agreement. Upon completion of the IHM Agreement, the Company or any of its subsidiaries no longer hold any interest in the capital of IHM.

REASON FOR THE DISPOSALS

The Company is principally engaged in the investment in environmental and water treatment operation and city development and investment operation as well as property investment and development in the PRC. The Disposals allow the Company to reallocate its internal resources and optimize its assets to facilitate future financing activities for the expansion of the Group's business operation. The Board intends that approximately HK$100,000,000 out of the sale proceeds will be used for city development and investment operation in the PRC and the remaining balance of the sale proceeds will be used for working capital of the Company. In addition, as a result of the Disposals, there is no adverse effect on the assets and liabilities of the Group. The Board considers that the terms of the BCI Agreement as well as the IHM Agreement which was determined by the parties after arm's length negotiations are fair and reasonable in the current market conditions and in the interests of the Group.

FURTHER INFORMATION

Your attention is drawn to the additional information set out in the Appendix.

Yours faithfully,

On behalf of the Board

Yip Kar Hang, Raymond

Company Secretary

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APPENDIX

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. 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. DIRECTORS' INTERESTS IN SECURITIES

As at the Latest Practicable Date, the interests of the Directors and chief executives of the Company in the equity and debt securities of the Company and its associated corporations (within the meaning of the SDI Ordinance) which require notification to the Company and the Stock Exchange pursuant to Section 28 of the SDI Ordinance (including interests which any such Director is deemed or taken to have under Section 31 or Part I of the Schedule to the SDI Ordinance) or which are required to be entered into the register maintained by the Company under Section 29 of the SDI Ordinance or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to be notified to the Company and the Stock Exchange were as follows:

Name of Directors	Nature of interests	Number of Shares
Zhang Yang	Corporate	1,612,025,000 (Note)
Jack Jiyei Zhang	Personal	5,000

Note: The ordinary shares were held through Wealth Land Development Corp., a company beneficially and wholly owned by Mr. Zhang Yang.

As at the Latest Practicable Date, the following Directors had interests in respect of options granted under the share option scheme adopted by the Company on 25 July 2000:

Name of Directors	Date of grant	Exercise Price (HK$)	Number of Share Options outstanding
Zhang Yang	29 March 2001	0.161	109,000,000
Jack Jiyei Zhang	29 March 2001	0.161	7,000,000
Lam Cheung Shing, Richard	2 August 2001	0.540	20,000,000

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APPENDIX

GENERAL INFORMATION

Save as disclosed above, none of the Directors or their associates had any interests in the equity and debt securities of the Company or any of its associated corporations as defined in the SDI Ordinance as at the Latest Practicable Date.

3. DIRECTORS' INTERESTS IN CONTRACTS

None of the directors is materially interested in any contract or arrangement entered into by any member of the Group subsisting at the date of this circular and which is significant in relation to the business of the Group.

4. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, according to the register kept by the Company pursuant to section 16(1) of the SDI Ordinance, and so far as is known to the Directors, the shareholders who were directly or indirectly interested in 10 per cent. or more of the issued share capital of the Company carrying rights to vote in all circumstances at general meetings of the Company together with the number of shares in which they were deemed to be interested were :

Name	Number of Shares	Percentage of holding
Wealth Land Development Corp. (Note)	1,612,025,000	35.08%

Note: Wealth Land Development Corp. is wholly owned by Mr. Zhang Yang, a Director.

5. DIRECTORS' INTERESTS IN ASSETS

None of the directors has or has had any direct or indirect material interest in any assets which have been acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2002, being the date to which the latest published audited consolidated financial statements of the Company were made up.

6. SERVICE CONTRACT

There is no service contract between any proposed Directors and members of the Group which does not expire or is not determinable by the employer within one year without payment of compensation other than statutory compensation.

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APPENDIX

GENERAL INFORMATION

7. LITIGATION

No member of the Group is engaged in any litigation or arbitration of material importance and the Directors are not aware of any litigation or claims of material importance pending or threatened against any member of the Group.

8. MATERIAL CHANGES

Save as disclosed in the annual report to Shareholders for the financial year ended 31 March 2002, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March 2002, the date to which the latest published audited consolidated financial statements of the Company were made up.

9. MISCELLANEOUS

(a) The registered office of the Company is at 45th Floor, Far East Finance Centre, 16 Harcourt Road, Admiralty, Hong Kong.

(b) The Share Registrars is Tengis Limited at 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong.

(c) The secretary of the Company is Mr. Yip Kar Hang, Raymond, who is a member of the American Institute of Certified Public Accountants and the Hong Kong Society of Accountants.

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

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