Elife Holdings Limited — Proxy Solicitation & Information Statement 2003

Jul 25, 2003

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 your stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

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

KENFAIR INTERNATIONAL (HOLDINGS) LIMITED （建發國際（控股）有限公司）

(incorporated in Cayman Islands with limited liability)

DISCLOSEABLE TRANSACTION IN RELATION TO AN OPTION AGREEMENT AND AN UNDERTAKINGS AGREEMENT

Financial Adviser to the Company

A letter from the Board is set out in page 3 of the circular.

25 July 2003

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8

DEFINITIONS

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

• “Business” : the exhibition business which comprises the organization of trade fairs, trade shows and related activities to promote and facilitate trades between buyers and manufacturers to be carried on within the PRC;

• “Company” : Kenfair International (Holdings) Limited （建發國際（控股）有限 公司）, a company incorporated under the laws of the Cayman Islands with limited liability, the shares of which are listed on the main board of the Stock Exchange;

• “Completion” : completion under the Option Agreement;

• “Completion Date” : 31 December 2003 (or such other date as mutually agreed by the Company and the Independent Third Party in writing);

• “Consideration” : HK$9,434,000 which is equivalent to RMB10,000,000, being the consideration payable by the Company to the Independent Third Party for the grant of the Option;

• “Directors” : the directors of the Company;

• “Group” : the Company and its subsidiaries;

• “HK$” : Hong Kong dollar, the lawful currency of Hong Kong;

• “Hong Kong” : The Hong Kong Special Administrative Region of the PRC;

• “Independent Third Party” :

• a limited company incorporated in the PRC which, together with its beneficial owner, are independent of and not connected with Director, chief executive or substantial shareholder of the Company or any of its subsidiaries or an associate of any of them (as defined in the Listing Rules);

• “Kenfair (China)” : Kenfair (China) Limited (or such other name if already registered by another enterprise), a company with limited liability to be incorporated in the PRC and will be a wholly owned subsidiary of the Independent Third Party upon incorporation;

• “Latest Practicable Date” : 22 July 2003;

• “Listing Rules” : Rules Governing the Listing of Securities on the Stock Exchange;

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DEFINITIONS

“Option”	:	the option granted by the Independent Third Party to the Company
		to acquire up to but not exceeding 90% equity interest in Kenfair
		(China) pursuant to the terms and conditions of the Option
		Agreement;
“Option Agreement”	:	the option agreement entered into by and between the Independent
		Third Party and the Company on 24 June 2003, pursuant to which
		the Independent Third Party has agreed to grant the Option to the
		Company pursuant to the terms and conditions thereof;
“PRC”	:	The People’s Republic of China;
“RMB”	:	Renminbi yuan, the lawful currency of the PRC;
“SFO”	:	The Securities and Futures Ordinance (Cap 571);
“Share(s)”	:	share(s) of HK$0.01 each in the share capital of the Company;
“Shareholder(s)”	:	The holder(s) of the Share;
“Stock Exchange”	:	The Stock Exchange of Hong Kong Limited;
“Undertakings Agreement”	:	the agreement entered into by and between the Company and the
		Independent Third Party on 24 June 2003, pursuant to which the
		Independent Third Party has given warranties and undertakings to
		the Company.

In this circular, the exchange rate of HK$1 = RMB1.06 is used.

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LETTER FROM THE BOARD

KENFAIR INTERNATIONAL (HOLDINGS) LIMITED （建發國際（控股）有限公司）

(incorporated in Cayman Islands with limited liability)

Executive Directors: Ip Ki Cheung (Chairman) Cheung Shui Kwai (Managing Director) Chan Siu Chung

Independent non-executive Directors: Wong Tat Tong Chan Wing Yau, George

Registered office: Century Yard Cricket Square Hutchins Drive P.O. Box 2681 GT George Town Grand Cayman British West Indies

Principal place of business in Hong Kong:

Suite 2803, Tower 6 The Gateway, Harbour City 9 Canton Road Tsim Sha Tsui Kowloon Hong Kong

25 July 2003

To all Shareholders

Dear Sir and Madam,

DISCLOSEABLE TRANSACTION IN RELATION TO AN OPTION AGREEMENT AND AN UNDERTAKINGS AGREEMENT

INTRODUCTION

The Directors announced on 2 July 2003 that the Company entered into the Option Agreement and the Undertakings Agreement (hereinafter referred to as “the Agreements”) with the Independent Third Party on 24 June 2003, pursuant to which the Company will pay the Consideration to the Independent Third Party and will be granted the Option to acquire up to but not exceeding 90% of the equity interest in Kenfair (China), a wholly owned subsidiary of the Independent Third Party to be set up in the PRC. The exercise of the Option to acquire up to but not exceeding 90% equity interest (or any part thereof) in Kenfair (China) is, however, subject to the relaxation of the restrictions imposed by the relevant PRC

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LETTER FROM THE BOARD

laws, rules and regulations against foreign investments in PRC enterprises engaged in the Business. Subject to the exercise of the Option (wholly or partly) by the Company, the Company’s equity interest in Kenfair (China) will increase gradually upon lifting of such restrictions.

The entering into of the Agreements by the Company constitutes a discloseable transaction under the Listing Rules. The purpose of this circular is to provide you with further information relating to the Agreements.

THE OPTION AGREEMENT

Date of the Option Agreement: 24 June 2003

Parties: (1) the Independent Third Party (as grantor), and (2) the Company (as grantee)

Assets to be acquired

Pursuant to the Option Agreement, the Company will be granted by the Independent Third Party the Option to acquire up to but not exceeding 90% of the equity interest in Kenfair (China), a wholly owned subsidiary of the Independent Third Party to be set up in the PRC for the sole purpose of carrying on the Business. Under the current PRC laws, rules and regulations, a foreign enterprise cannot carry on the Business in the PRC. The exercise of the Option to acquire up to but not exceeding 90% equity interest (or any part thereof) in Kenfair (China) is, however, subject to the relaxation of the restrictions imposed by the relevant PRC laws, rules and regulations against foreign investments in PRC enterprises engaged in the Business. As the relaxation and lifting of the aforementioned restrictions will be subject to the policy of the PRC Government, the Directors are in no position to advise when these restrictions will be fully lifted. Subject to the exercise of the Option (wholly or partly) by the Company, the Company’s equity interest in Kenfair (China) will increase gradually upon the lifting of the restrictions imposed by the relevant PRC laws, rules and regulations against foreign investments in PRC enterprises engaged in the Business.

Upon exercise of the Option (wholly or partly) (which will be subject to the fulfillment of all the conditions of Completion and the lifting of the restrictions imposed by the relevant PRC laws, rules and regulations against foreign investment in PRC enterprises engaged in the Business), up to but not exceeding 90% equity interest (or any part thereof) in Kenfair (China) shall be transferred at no additional consideration to the Company free from any liens, charges or other encumbrances whatsoever and together with the benefit of all rights attaching thereto at the time of the exercise of the Option, including the right to all dividend and other distributions thereafter declared, paid or made in respect thereof.

Reason for keeping counter – party’s identity anonymous

Given that it is not yet certain when the Company will be able to exercise the Option (wholly or partly) and there is no certainty that the transactions contemplated under the Option Agreement would be a success, the Independent Third Party is reluctant to disclose its identity to the public and the Company has agreed with the Independent Third Party that its identity should remain anonymous until the Company’s exercise of the Option (wholly or partly), or else the Agreements will lapse accordingly. Due to the

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LETTER FROM THE BOARD

aforementioned uncertainties, in order to avoid enterprises, which are engaging or planning to engage in the Business, to approach the Independent Third Party for entering into similar transaction with better commercial terms, it is to the interest of the Company to minimize the competition by keeping the counter-party’s identity anonymous.

The Company will not issue separate announcement upon incorporation of Kenfair (China). To keep the Shareholders fully informed of the progress and information of the transactions contemplated under the Agreements, the Company will forthwith disclose the identity of the Independent Third Party upon the Company’s exercise of the Option (wholly or partly) in a separate announcement.

Consideration

The Consideration payable by the Company for the grant of the Option to acquire up to but not exceeding 90% equity interest in Kenfair (China) is HK$9,434,000 (which is equivalent to RMB10,000,000), the total amount of which will be paid in cash by the Company to the Independent Third Party using its internal resources. With reference to the purported registered capital of Kenfair (China), the Consideration is the results of arm’s length negotiation between the parties. The Company will pay the Consideration on or around 31 July 2003.

Completion

Completion of the Option Agreement is conditional upon the following conditions being fulfilled on or before the Completion Date:

• (a) The Independent Third Party providing the Company with documents (including but not limited to the business certificate of Kenfair (China), the licence for operating exhibition business, articles of association of Kenfair (China), evidence of capital contributions by the shareholders of Kenfair (China), the approval certificate, the financial verification report and the corporation seal), proving that:

• (i) the Independent Third Party is the beneficial owner of the entire equity interest in Kenfair (China);

• (ii) the registered capital of Kenfair (China) in the sum of RMB10,000,000 be fully paid up by the Independent Third Party;

• (iii) the scope of business of Kenfair (China) includes the Business;

• (iv) Kenfair (China) has obtained all necessary consents, approvals, licences from the relevant PRC authorities in respect of carrying on the Business;

• (b) the Company obtaining a PRC legal opinion issued by an independent PRC lawyer stating that the signing of the Option Agreement and the completion thereof is not in breach of any PRC laws and (where applicable) all necessary approvals from the relevant PRC authorities have been obtained; and

• (c) such other documents as the Company may reasonably request.

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LETTER FROM THE BOARD

Upon Completion and before the Company’s exercise of its Option, Kenfair (China) will become a wholly-owned subsidiary of the Independent Third Party. Upon incorporation of Kenfair (China), the board of Kenfair (China) will consist of eight members, seven of which will be nominated by the Company and one of which will be appointed by the Independent Third Party. The composition of the board of Kenfair (China) will remain the same regardless of the Company’s exercise level of the Option. Where the restrictions imposed by the relevant PRC laws, rules and regulations against foreign investment in PRC enterprises engaged in the Business have been lifted, the Company may exercise the Option (wholly or partly) and Kenfair (China) will become an associated company or subsidiary of the Company if the Company has acquired up to 30% or 50% equity interest in Kenfair (China) (as the case may be).

If any of the above conditions is not fulfilled (or waived by the Company) on or before Completion, the Company is entitled to rescind the Option Agreement without liabilities whatsoever on its part whilst the Independent Third Party will have to forthwith refund the Consideration in the sum of RMB10,000,000 (which is equivalent to HK$9,434,000) to the Company.

Where there is only a partial lifting of the restrictions imposed by the PRC laws, rules and regulations against foreign investment in PRC enterprises engaged in the Business within 5 years from the Completion Date, the remaining and unexercised portion of the Option will lapse and the Independent Third Party has to refund the Consideration in proportion. Where there is no lifting of the restrictions imposed by the relevant PRC laws, rules and regulations against foreign investments in PRC enterprises engaged in the Business within 5 years from the Completion Date or such other date as may be agreed between the parties, the Option will lapse and the Independent Third Party has to refund the Consideration.

THE UNDERTAKINGS AGREEMENT

Date of the Undertakings Agreement: 24 June 2003

Parties: The Company and the Independent Third Party

In connection with the Option Agreement, the Company and the Independent Third Party entered into the Undertakings Agreement on 24 June 2003 (duration of which will be consistent with that of the Option Agreement), pursuant to which the Independent Third Party has given warranties and undertakings to the Company in relation to Kenfair (China) (among other things) as follows:

• (a) upon the incorporation of Kenfair (China), the Independent Third Party will be the sole beneficial owner of Kenfair (China), and Kenfair (China) will not have any liabilities other than those acknowledged in advance by the Company;

• (b) other than the nomination of one director, the Independent Third Party will not participate in the management of Kenfair (China);

• (c) the registered capital of Kenfair (China) will be RMB10,000,000 and will be paid up within a month from the date of signing of the Undertakings Agreement;

• (d) the Independent Third Party undertakes not to take actions which will affect the Option in any way; and

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LETTER FROM THE BOARD

• (e) the board of Kenfair (China) will consist of eight members, seven of which will be nominated by the Company and one of which will be nominated by the Independent Third Party.

INFORMATION ON KENFAIR (CHINA)

Kenfair (China) will be set up in the PRC as a PRC enterprise with limited liability to carry on the Business. Kenfair (China) will have a registered capital of RMB10,000,000 and will be a wholly owned subsidiary of the Independent Third Party upon its incorporation. As at the date of this letter, the Independent Third Party is in the process of setting up Kenfair (China) and in this regard the audited/ unaudited assets of Kenfair (China) are not available.

INFORMATION ON COMPANY AND ITS SUBSIDIARIES

The principal business of the Company is investment holding. Its subsidiaries are principally engaged in the organization of trade fairs, trade shows and related activities to promote and facilitate trades between international buyers and manufacturers.

REASONS FOR ENTERING INTO THE AGREEMENTS

PRC is a potential huge market for the exhibition business in terms of its large number of manufacturers and buyers. The Directors are of the view that the setting up of Kenfair (China) by the Independent Third Party in the PRC with all requisite approvals and licences to carry on the Business and the proposed investment of acquiring up to but not exceeding 90% equity interest in Kenfair (China) by the Company pursuant to the terms and conditions of the Agreements can help the Group further develop the exhibition market and enhance its business profile in the PRC.

GENERAL

Your attention is drawn to the general information set out in the Appendix of this circular.

Yours faithfully, By Order of the Board Ip Ki Cheung Chairman

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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 Company. The Directors jointly and severally 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 not contained in this circular, the omission of which would make any statement in this circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Interests and short positions of Directors in the share capital of the Company and its associated corporation

Save as disclosed below, as at the Latest Practicable Date, none of the Directors had any interest or short position in the Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would be required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including the interests and short positions which they would be deemed to taken to have under Sections 344 and 345 of the SFO) or which would be required to be disclosed pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the register referred therein pursuant to Section 352 of the SFO.

Directors’ interests in the Shares

			Approximate
	Number of Shares		percentage
Name of Director	in which interested	Capacity	holding of Shares
Mr. Ip Ki Cheung_(1)_	108,000,000	Interest of controlled	51.5%
		corporation
Mr. Cheung Shui Kwai_(2)_	1,382,000	Beneficial owner and	16.1%
	+	interest of controlled
	32,400,000	corporation
Mr. Chan Siu Chung_(3)_	21,600,000	Interest of controlled	10.3%
		corporation

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GENERAL INFORMATION

APPENDIX

Notes:

• (1) Mr. Ip Ki Cheung is beneficially interested in 50% of the entire issue share capital of Capital Concord Profit’s Limited (“Capital Concord” ) which in turn holds 108,000,000 Shares representing 51.5% of the entire issued shares of the Company as at the Latest Practicable Date. Accordingly, Mr. Ip Ki Cheung is deemed to be interested in these 108,000,000 Shares under the SFO.

• (2) In addition to his personal interests of 1,382,000 Shares, Mr. Cheung Shui Kwai is beneficially interested in 30% of the entire issued share capital of Capital Concord, which in turn holds 108,000,000 shares representing 51.5% of the entire issued shares of the Company as at the Latest Practicable Date.

• (3) Mr. Chan Siu Chung is beneficially interested in 20% of the entire issued share capital of Capital Concord which in turn holds 108,000,000 shares representing 51.5% of the entire issued shares of the Company as at the Latest Practicable Date.

• (b) Notifiable interests and short positions in Shares of persons under the provisions of Divisions 2 and 3 of Part XV of the SFO and persons who are “substantial shareholders” in the Company for the purposes of the Listing Rules

Save as disclosed below, as at the Latest Practicable Date, none of the Directors are aware of any other person who had an interest or short position in the Shares or the underlying shares 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.

Notifiable interests in Shares

	Number of		Approximate
	Shares on		percentage
Name	which interested	Capacity	holding of Shares
Capital Concord_(1)_	108,000,000	Beneficial owner	51.5%
Best Aims Finance Limited	108,000,000	Interest of controlled	51.5%
(“Best Aims”)(1, 2 and 5)		corporation
Harbour Rich Finance Limited	32,400,000	Beneficial owner	15.5%
(“Harbour Rich”)
(1, 3 and 6)
Pace Maker Finance Limited	21,600,000	Beneficial owner	10.3%
(“Pace Maker”)(1, 4 and 7)
Mr. Ip Ki Cheung	108,000,000	Interest of controlled	51.5%
(1, 2, 5 and 8)		corporation
Mr. Cheung Shui Kwai	1,382,000	Beneficial owner and	16.1%
(1, 3, 6 and 9)	+	interest of controlled
	32,400,000	corporation

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GENERAL INFORMATION

APPENDIX

	Number of		Approximate
	Shares on		percentage
Name	which interested	Capacity	holding of Shares
Mr. Chan Siu Chung	21,600,000	Interest of controlled	10.3%
(1, 4, 7 and 10)		corporation
Value Partners Limited	15,236,000	Investment manager	7.3%
Mr. Cheah Cheng Hye_(11)_	15,236,000	Interest of controlled	7.3%
		corporation

Notes:

• (1) The entire issued share capital of Capital Concord is beneficially owned as to 50% by Best Aims, 30% by Harbour Rich and 20% by Pace Maker.

• (2) The entire issued share capital of Best Aims is beneficially owned by Mr. Ip Ki Cheung.

• (3) The entire issued share capital of Harbour Rich is beneficially owned by Mr. Cheung Shui Kwai.

• (4) The entire issued share capital of Pace Maker is beneficially owned by Mr. Chan Siu Chung.

• (5) These shares are attributable to Best Aims in respect of its 50% interest in Capital Concord, which in turn holds 108,000,000 Shares representing 51.5% of the entire issued shares of the Company as at the Latest Practicable Date. Best Aims is deemed to be interested in these 108,000,000 Shares under the SFO.

• (6) These shares are attributable to Harbour Rich in respect of its 30% interest in Capital Concord, which in turn holds 108,000,000 Shares representing 51.5% of the entire issued shares of the Company as at the Latest Practicable Date.

• (7) These shares are attributable to Pace Maker in respect of its 20% interest in Capital Concord, which in turn holds 108,000,000 Shares representing 51.5% of the entire issued shares of the Company as at the Latest Practicable Date.

• (8) These shares are attributable to Mr. Ip Ki Cheung in respect of his 100% interest in Best Aims. Accordingly, Mr. Ip Ki Cheung is deemed to be interested in the 108,000,000 Shares (in which Best Aims is deemed to be interested) under the SFO.

• (9) These shares are attributable to Mr. Cheung Shui Kwai in respect of his 100% interest in Harbour Rich and his personal interest of 1,382,000 Shares.

• (10) These shares are attributable to Mr. Chan Siu Chung in respect of his 100% interest in Pace Maker.

• (11) Mr. Cheah Cheng Hye is deemed to be interested in the Shares through his 32.53% interest in Value Partners Limited, an investment manager.

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GENERAL INFORMATION

APPENDIX

3. MATERIAL CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March 2003 (being the date to which the latest published audited accounts of the Group were made up).

4. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration proceedings of material importance known to the Directors to be pending or threatened against any member of the Group.

5. SERVICE CONTRACTS

Each of Mr. Ip Ki Cheung, Mr. Cheung Shui Kwai and Mr. Chan Siu Chung has entered into a director’s service agreement dated 18 March 2002 with the Company under which he has been appointed to act as an executive Directors for an initial term of three years commencing from 1 April 2002 and thereafter until the agreement is terminated by either party giving to the other not less than six calendar months’ notice in writing, such notice to expire not earlier than 31 March 2005.

Save as disclosed therein, none of the Directors has any existing or proposed service contracts with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

6. GENERAL

• (a) As at the Latest Practicable Date, the authorized share capital of the Company was HK$10,000,000 divided into 1,000,000,000 shares of HK$0.01 each of which 209,800,000 Shares had been issued and fully paid up.

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GENERAL INFORMATION

APPENDIX

• (b) On 16 July 2003, the Company entered into a subscription agreement with Galaxy Global Opportunity Fund, a fund registered in the Cayman Islands and an independent investor, for the subscription of a total of 6,000,000 new Shares to be issued pursuant to the terms of the subscription agreement (the “Subscription Shares”) at a price of HK$1.20 per Subscription Share. The Subscription Shares will be issued under the general mandate granted to the Directors at the annual general meeting of the Company held on 21 June 2003. The subscription of the Subscription Shares is conditional upon the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in the Subscription Shares. Completion will take place on or before the third business day after such condition precedent has been satisfied, or such other date as the parties may agree in writing. The Subscription Shares amount to approximately 2.9% of the existing issued share capital (that is, 209,800,000 Shares) of the Company and approximately 2.8% of the issued share capital of the Company as enlarged (that is, 215,800,000 Shares) by the issue of the Subscription Shares.

• (c) The secretary of the Company is Ms. Leung Chui Wan, AHKSA.

• (d) The share registrar and transfer office of the Company in Hong Kong is located at Tengis Limited, Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (e) In the event of any inconsistency, the English text of this circular shall prevail over the Chinese text.

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