Guotai Haitong Securities Co., Ltd. — Proxy Solicitation & Information Statement 2005

Aug 22, 2005

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Sinolink Worldwide Holdings Limited , you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer 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.

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(Stock Code: 1168)

DISCLOSEABLE AND CONNECTED TRANSACTION

ACQUISITION OF 30% INTEREST IN SHENZHEN FUHUADE ELECTRIC POWER CO., LIMITED

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

SOMERLEY LIMITED

A letter from the Board is set out on pages 3 to 8 of this circular.

A letter from the Independent Board Committee containing its advice to the Independent Shareholders is set out on page 9 of this circular.

A letter from Somerley containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 10 to 27 of this circular.

22 August 2005

* for identification purpose only

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
THE EQUITY TRANSFER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
REASONS FOR AND BENEFITS OF THE EQUITY TRANSFER . . . . . . . . . . . . . . . . . . . .	6
INFORMATION ON THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
INFORMATION ON ENERCHINA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
INFORMATION ON SHENZHEN HUISHEN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
INFORMATION ON SHENZHEN FUHUADE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
FINANCIAL EFFECT OF THE EQUITY TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
INDEPENDENT SHAREHOLDERS’ APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . .	9
LETTER FROM SOMERLEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28

• i -

DEFINITIONS

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

“Announcement”

the joint announcement of the Company and Enerchina dated 24 June 2005 in relation to, among other things, the Equity Transfer

• “Asia Pacific”

Asia Pacific Promotion Limited, a private company incorporated in the British Virgin Islands and wholly-owned by Mr. Ou Yaping

• “Board” the board of directors of the Company

• “Company” or “Sinolink” Sinolink Worldwide Holdings Limited (Stock Code: 1168), a company incorporated in Bermuda with limited liability whose shares are listed on the Main Board of the Stock Exchange

• “Consideration” the consideration for the purchase of the Equity Interest

• “Directors” the directors of the Company

• “Enerchina” Enerchina Holdings Limited (Stock Code: 622), a company incorporated in Bermuda whose shares are listed on the Main Board of the Stock Exchange

• “Equity Interest” 30% of the registered capital of Shenzhen Fuhuade

• “Equity Transfer” the transfer of the Equity Interest from Shenzhen Huishen to Goodunited for a total consideration of RMB250,000,000, which is equivalent to approximately HK$233,863,000

• “Equity Transfer Agreement” an equity transfer agreement dated 23 June 2005 entered into between Shenzhen Huishen and Goodunited in relation to the Equity Transfer

• “Fuhuade Power Plant” Shenzhen Fuhuade which operates the Dapeng Power Plant

• “GEM” the Growth Enterprise Market of the Stock Exchange

• “Goodunited” Goodunited Holdings Limited (合好控股有限公司 ), a limited liability company incorporated in the British Virgin Islands and an indirect wholly-owned subsidiary of Enerchina

• “Group” the Company and its subsidiaries

• “Hong Kong” Hong Kong Special Administrative Region of the PRC “Hong Kong dollars” or “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Independent Board Committee” an independent committee of the Board comprising Messrs. Tian Jin, Xin Luo Lin and Davin A. Mackenzie who are the independent non-executive Directors of the Company

• 1 -

DEFINITIONS

“Independent Financial Adviser”	Somerley Limited, (i) a corporation licensed under the SFO for
or “Somerley”	type 1 (dealing in securities), type 4 (advising on securities), type
	6 (advising on corporate finance) and type 9 (asset management)
	regulated activities as defined under the SFO and (ii) the
	independent financial adviser to the Independent Board Committee
	and the Independent Shareholders in relation to the Equity Transfer
“Independent Shareholders” or	the shareholders of the Company
“Shareholders”
“Latest Practicable Date”	17 August 2005, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information referred
	to in this circular
“Listing Rules”	The Rules Governing the Listing of Securities on the Stock
	Exchange
“MW”	Megawatt
“Panva Gas”	Panva Gas Holdings Limited (Stock Code: 8132), a company
	incorporated in the Cayman Islands whose shares are listed on
	GEM
“PRC”	People’s Republic of China
“RMB”	Renminbi, the lawful currency of the PRC
“SFO”	the Securities and Futures Ordinance (Cap. 571 of the Laws of
	Hong Kong)
“Share(s)”	ordinary share(s) of HK$0.10 each in the capital of the Company
“Shenzhen Fuhuade”	深圳福華德電力有限公司(Shenzhen Fuhuade Electric Power
	Co., Limited), a sino-foreign equity joint venture established in
	the PRC in which Enerchina has an indirect equity interest of
	70% prior to the Equity Transfer
“Shenzhen Huishen”	深圳市惠深電力投資有限公司(Shenzhen Huishen Electric
	Power Company Limited), a company incorporated in the PRC
	with limited liability
“Sinolink Electric”	Sinolink Electric Power Company Limited, a limited liability
	company incorporated in Hong Kong and an indirect wholly-owned
	subsidiary of Enerchina
“Smart Orient”	Smart Orient Investments Limited, a company incorporated in the
	British Virgin Islands and a wholly-owned subsidiary of the
	Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited

Note: the figures in RMB are converted into HK$ at the rate of RMB1.069 = HK$1.00 throughout this circular for indication purposes only.

• 2 -

LETTER FROM THE BOARD

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(Stock Code: 1168)

Board of Directors

Executive Directors OU Yaping (Chairman) TANG Yui Man Francis (Chief Executive Officer) CHEN Wei LAW Sze Lai

Independent Non-executive Directors Davin A. MACKENZIE TIAN Jin XIN Luo Lin

Registered office:

Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal place of business in Hong Kong: 28th Floor, Vicwood Plaza 199 Des Voeux Road Central Hong Kong

22 August 2005

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION ACQUISITION OF 30% INTEREST IN SHENZHEN FUHUADE ELECTRIC POWER CO., LIMITED

INTRODUCTION

The Directors announced on 24 June 2005 that Goodunited, an indirect wholly-owned subsidiary of Enerchina, entered into the Equity Transfer Agreement, whereby Goodunited agreed to purchase, and Shenzhen Huishen agreed to sell, the Equity Interest, constituting 30% of the registered capital of Shenzhen Fuhuade, a non-wholly owned subsidiary of Enerchina and the Company, for a total consideration of RMB250,000,000, which is equivalent to approximately HK$233,863,000. Sinolink Electric, an indirect wholly-owned subsidiary of Enerchina, holds the remaining 70% of the registered capital of Shenzhen Fuhuade. Upon completion of the Equity Transfer, Shenzhen Fuhuade will become an indirect whollyowned subsidiary of Enerchina.

The Equity Transfer constitutes a discloseable and connected transaction for the Company under the Listing Rules and will accordingly be subject to the approval of the Independent Shareholders.

* for identification purpose only

• 3 -

LETTER FROM THE BOARD

Since Shenzhen Huishen is a substantial shareholder (as defined in the Listing Rules) of Shenzhen Fuhuade, an indirect subsidiary of Enerchina and the Company, pursuant to Rule 14A.11(1) of the Listing Rules, it is a connected person (as defined in the Listing Rules) of Enerchina and the Company. As such, the Equity Transfer which was entered into between Goodunited (an indirect subsidiary of Enerchina and the Company) and Shenzhen Huishen (a connected person of the Company and Enerchina) is a connected transaction of the Company and therefore subject to the approval of the independent shareholders of the Company at a special general meeting of the Company. If a special general meeting of the Company were to be held, the voting in respect of the approval of the resolution(s) regarding the Equity Transfer will be conducted by way of poll.

An independent board committee of the Company comprising Messrs. Davin A. MacKenzie, Xin Luo Lin and Tian Jin has been formed to give recommendation to the Independent Shareholders in respect of the Equity Transfer.

Pursuant to Rule 14.44(2) and Rule 14A.43(2) of the Listing Rules, a written approval has been obtained from Asia Pacific which, as at the Latest Practicable Date, held approximately 58.45% in nominal value of the Shares giving it the right to attend and vote at a special general meeting to approve the Equity Transfer. As no Shareholder has a material interest in the Equity Transfer, no Shareholder is required to abstain from voting if the Company were to convene a special general meeting for the approval of the Equity Transfer. Based on the above, the Company has met all the conditions set out in Rule 14.44 and Rule 14A.43 of the Listing Rules. Pursuant to Rule 14A.53 of the Listing Rules, the Company has applied to the Stock Exchange to waive, and the Stock Exchange has granted the Company a waiver to, the requirement for the Company to hold a shareholders’ meeting and permitting the Independent Shareholders’ approval to be given in writing in relation to the Equity Transfer.

This circular contains, amongst other things, (a) details relating to the Equity Transfer; (b) a letter from the Independent Board Committee containing its recommendation to the Independent Shareholders; and (c) a letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders.

THE EQUITY TRANSFER AGREEMENT

Date

23 June 2005

Parties

(1) Seller: Shenzhen Huishen

• (2) Buyer: Goodunited, an indirect wholly-owned subsidiary of Enerchina

Asset to be acquired

The Equity Interest constitutes 30% of the total registered capital of Shenzhen Fuhuade.

• 4 -

LETTER FROM THE BOARD

As at 31 December 2004, the audited net asset value of Shenzhen Fuhuade was approximately RMB365,349,000, which is equivalent to approximately HK$341,767,000, which was prepared in accordance with Hong Kong Financial Reporting Standards. Under PRC Accounting Standards, the audited net asset value of Shenzhen Fuhuade was approximately RMB452,632,000, which is equivalent to approximately HK$423,416,000.

For the year ended 31 December 2003, Shenzhen Fuhuade recorded an audited profit before and after tax of approximately RMB122,651,000 and RMB113,138,000 respectively, which is equivalent to approximately HK$114,734,000 and HK$105,835,000 respectively. For the year ended 31 December 2004, Shenzhen Fuhuade recorded an audited profit before and after tax of approximately RMB144,640,000, which is equivalent to approximately HK$135,304,000. Upon completion of the Equity Transfer, Shenzhen Fuhuade will become an indirect wholly-owned subsidiary of Enerchina.

The original cost of the Equity Interest to the Shenzhen Huishen was approximately RMB170,000,000, which is equivalent to approximately HK$159,027,000.

Basis of the Consideration

The Consideration shall be RMB250,000,000, which is equivalent to approximately HK$233,863,000, which was arrived at after arm’s length negotiation. The Consideration was determined with reference to the audited net asset value of Shenzhen Fuhuade as at 31 December 2004. The audited net asset value of Shenzhen Fuhuade which was calculated in accordance with the PRC Accounting Standards, amounted to approximately RMB452,632,000, which is equivalent to approximately HK$423,416,000. The Consideration represents a premium of about 84.1% of the audited net asset value of Shenzhen Fuhuade as at 31 December 2004. The Directors consider that the latest audited net asset value of Shenzhen Fuhudae is an appropriate reference point of assessing the value of the Equity Interest after taking into account the nature of the power plant industry.

The original cost of investments contributed by Shenzhen Huishen in 2003 was approximately RMB170,000,000, which is equivalent to approximately HK$160,377,000. In 2003, the total installed capacity of Shenzhen Fuhuade was approximately 305 MW whereas the current total installed capacity is approximately 665 MW. In addition, the potential growth of Shenzhen Fuhuade is another factor that the Directors have taken account into when determining the consideration.

The Consideration shall be satisfied in cash and shall be paid by Goodunited to Shenzhen Huishen in four installments. The first installment, being RMB60,000,000, which is equivalent to approximately HK$56,127,000, representing 24% of the Consideration, shall be payable within three working days from the date following the date of the notarisation of the Equity Transfer Agreement. The second installment, being RMB70,000,000, which is equivalent to approximately HK$65,482,000, representing 28% of the Consideration, shall be payable within three working days from the date of obtaining the approval of the Equity Transfer from the relevant foreign investment approval authorities and upon the application for the registration of the Equity Transfer being accepted by the Shenzhen Administration of Industry and Commerce. The third and fourth installment, being RMB30,000,000, which is equivalent to approximately HK$28,064,000 and RMB90,000,000, which is equivalent to approximately HK$84,191,000, representing 12% and 36% of the Consideration respectively, shall be payable within three months and six months respectively, from the date of completion of the registration in respect of the Equity Transfer.

The entire Consideration will be financed by internal resources of the Group.

• 5 -

LETTER FROM THE BOARD

Condition precedent and Termination

Full payment of the Consideration is conditional upon obtaining the necessary approval from the relevant authorities in the PRC. Such condition has not imposed any long-stop date before which such conditions must be fulfilled. In the event that the relevant authorities in the PRC refuse to grant the necessary approval in relation to the Equity Transfer, the Equity Transfer Agreement shall automatically lapse from the date whereby the parties to the Equity Transfer Agreement receives notification of the failure in obtaining the necessary approval. In addition, in the event of any variation or termination or non-performance of the Equity Transfer Agreement resulting from any failure in satisfying any condition set out in the Equity Transfer Agreement, each party shall fully return all consideration received by such party to the other party within seven working days upon the occurrence of such variation or termination or non-performance.

REASONS FOR AND BENEFITS OF THE EQUITY TRANSFER

Shenzhen Huishen, being a local partner of Shenzhen Fuhuade, has been contributing to Enerchina’s Phase I and Phase II expansion of the power plant in Shenzhen. Since Enerchina has gained the required experience and acquired the skills for further expansion, Enerchina plans to expand its installed capacity subject to the required approvals from the relevant government authorities, the Directors believe that it should seize this opportunity to acquire the remaining 30% equity interest of Shenzhen Fuhuade from Shenzhen Huishen through the Equity Transfer in order to consolidate and further strengthen Enerchina’s focus and future investment in the energy sector. As the energy sector in the PRC is growing rapidly to match the country’s economic growth, the Directors believe that the Company will benefit from the Equity Transfer.

The Directors also believe that the potential of, further expansion of Enerchina’s power plant, and converting heavy oil into natural gas as fuel, will provide Enerchina with a competitive position in the power supply sector in the PRC. In view of the above, the Directors believe that the Equity Transfer will also provide more flexibility to optimally manage the future development of Enerchina’s power business through Shenzhen Fuhuade in the future.

INFORMATION ON THE COMPANY

The Company is listed on the Main Board of the Stock Exchange. The Company and its subsidiaries are principally engaged in property development, the generation and supply of electricity in the PRC, the sale and distribution of liquefied petroleum gas and natural gas, and the construction of gas pipelines in the PRC.

INFORMATION ON ENERCHINA

Enerchina, a company listed on the Main Board of the Stock Exchange and a subsidiary of Sinolink, together with its subsidiaries, are principally engaged in the generation and supply of electricity in the PRC, the sale and distribution of liquefied petroleum gas and natural gas and the construction of gas pipelines in the PRC and investment holdings.

• 6 -

LETTER FROM THE BOARD

INFORMATION ON SHENZHEN HUISHEN

Shenzhen Huishen is a company incorporated in the PRC as a limited liability company, the principal business include its investment holding of the Equity Interest and other investment in the PRC energy sector. As far as the directors of Sinolink is aware, Shenzhen Huishen does not have any shareholding interest in Sinolink or Enerchina.

INFORMATION ON SHENZHEN FUHUADE

Shenzhen Fuhuade is a sino-foreign equity joint venture established in Shenzhen, the PRC. Enerchina has an indirect equity interest of 70% in Shenzhen Fuhuade prior to the Equity Transfer through its indirect wholly owned subsidiary, Sinolink Electric. Shenzhen Fuhuade’s principal business is to operate the Dapeng Power Plant. The Dapeng Power Plant is located in Dapeng Town, Longgang District, Shenzhen, the PRC and is engaged in the business of electricity generation and supply. The Dapeng Power Plant consists of four generating units, with the installed capacity of approximately 665,000 kilowatts.

FINANCIAL EFFECT OF THE EQUITY TRANSFER

The funds required for the Equity Transfer will be sourced from internal financial resources of Enerchina. Immediately before the Equity Transfer, Shenzhen Fuhuade is an indirect non-wholly owned subsidiary of the Company, and will remain an indirect wholly-owned subsidiary of the Company immediately after the Equity Transfer. As such, the operating results of Shenzhen Fuhuade have been and will continue to be consolidated in the Group’s financial statements immediately before and after the Equity Transfer, respectively.

By comparing with the Group’s audited consolidated net asset value as at 31 December 2004, the Board believes that the completion of the Equity Transfer will have no material adverse effect on the earnings or assets and liabilities of the Group.

LITIGATION

A supplier filed an arbitration in August 2003 against Fuhuade Power Plant claiming for additional contract price in the amount of approximately HK$28.0 million. The arbitration is still in progress and the outcome of such cannot be ascertained. No provision for the amount claimed had been made by the Group as at 31 December 2004.

The Board shares the view of the board of directors of Enerchina that the arbitration does not affect its view on the Equity Transfer including the Consideration because prior to the Equity Transfer, Enerchina, its subsidiary, already had to bear 70% of the pro-rata share of the exposure of this arbitration and the Equity Transfer will only result in Enerchina being exposed to an additional 30% of the potential maximum liabilities of the arbitration filing. This amount represents approximately HK$8.4 million which is approximately 3.6% of the Consideration.

In light of the above, the Directors shares the view of the board of directors of Enerchina that such additional exposure is not material in considering the fairness and reasonableness of the Equity Transfer.

• 7 -

LETTER FROM THE BOARD

INDEPENDENT SHAREHOLDERS’ APPROVAL

Pursuant to Rule 14.44(2) and Rule 14A.43(2) of the Listing Rules, a written approval has been obtained from Asia Pacific which, as at the Latest Practicable Date, held approximately 58.45% in nominal value of the Shares giving it the right to attend and vote at a special general meeting to approve the Equity Transfer. As no Independent Shareholder has a material interest in the Equity Transfer, no Independent Shareholder is required to abstain from voting if the Company were to convene a special general meeting for the approval of the Equity Transfer. Based on the above, the Company has met all the conditions set out in Rule 14.44 and Rule 14A.43 of the Listing Rules and pursuant to Rule 14A.53 of the Listing Rules, the Company has applied to the Stock Exchange to waive, and the Stock Exchange has granted the Company a waiver to, the requirement for the Company to hold a shareholders’ meeting and permitting independent shareholders’ approval to be given in writing in relation to the Equity Transfer.

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, comprising Messrs. Tian Jin, Xin Luo Lin and Davin A. Mackenzie who are not interested or involved in the Equity Transfer, has been formed to advise the Independent Shareholders in respect of the Equity Transfer and the transaction contemplated thereunder. Your attention is drawn to the advice from the Independent Board Committee set out in its letter dated 22 August 2005 on page 9 of this circular.

INDEPENDENT FINANCIAL ADVISER

Somerley has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Equity Transfer and the transaction contemplated thereunder. Your attention is drawn to the letter from Somerley dated 22 August 2005 on pages 10 to 27 of this circular.

RECOMMENDATION

The Board believes that the Equity Transfer is on normal commercial terms and the terms of the Equity Transfer, the transaction contemplated under the Equity Transfer Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

The Directors therefore would recommend the Independent Shareholders to vote in favour of the resolutions to be proposed if Sinolink were to convene a special general meeting for the approval of the Equity Transfer.

ADDITIONAL INFORMATION

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

By Order of the Board Sinolink Worldwide Holdings Limited

OU Yaping

Chairman

• 8 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Stock Code: 1168)

22 August 2005

To the Independent Shareholders

Dear Sir/Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION ACQUISITION OF 30% INTEREST IN SHENZHEN FUHUADE ELECTRIC POWER CO., LIMITED

As the Independent Board Committee, we have been appointed to advise you as to whether, in our opinion, the terms of the Equity Transfer are fair and reasonable so far as the Independent Shareholders are concerned and the Equity Transfer is in the interests of the Company and the Shareholders as a whole. We refer to the circular to the Shareholders dated 22 August 2005 (the “Circular”), of which this letter forms part. Capitalised terms used herein shall have the same meanings as defined in the Circular unless the context requires otherwise.

Somerley has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Equity Transfer.

Having considered the terms and conditions of the Equity Transfer and the opinion and advice of Somerley in relation thereto as set out on pages 10 to 27 of the Circular, we are of the opinion that the terms of the Equity Transfer are fair and reasonable so far as the Independent Shareholders are concerned and the Equity Transfer is in the interests of the Company and the Shareholders as a whole. We would therefore recommend you to vote in favour of the ordinary resolutions if the Company were to convene a special general meeting for the approval of the Equity Transfer.

.

Yours faithfully,

For and on behalf of the Independent Board Committee

Tian Jin, Xin Luo Lin and Davin A. Mackenzie

Independent Non-executive Directors

* for identification purpose only

• 9 -

LETTER FROM SOMERLEY

Somerley Limited

Suite 2201, 22nd Floor Two International Finance Centre 8 Finance Street Central Hong Kong

22 August 2005

• To: The Independent Board Committee and the Independent Shareholders of Sinolink Worldwide Holdings Limited

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION ACQUISITION OF 30% INTEREST IN SHENZHEN FUHUADE ELECTRIC POWER CO., LIMITED

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders in connection with the acquisition by the Group of the remaining 30% interest in Shenzhen Fuhuade not already owned by the Group. Details of this Equity Transfer are contained in the circular to the Shareholders dated 22 August 2005 (the “Circular”), of which this letter forms a part. Unless otherwise defined, terms used in this letter shall have the same meanings as defined in the Circular.

On 24 June 2005, the Company and Enerchina jointly announced that Goodunited, an indirect wholly-owned subsidiary of Enerchina, had entered into the Equity Transfer Agreement, in connection with the proposed acquisition by Enerchina Group (defined as Enerchina and its subsidiaries) of the remaining 30% interest in Shenzhen Fuhuade not held by the Enerchina Group from Shenzhen Huishen. As Enerchina is a 74.79% owned subsidiary of the Company, the entering of the Equity Transfer Agreement is also an acquisition by the Group.

Since Shenzhen Huishen is a substantial shareholder (as defined in the Listing Rules) of Shenzhen Fuhuade, an indirect subsidiary of the Company, pursuant to Rule 14A.11(1) of the Listing Rules, it is a connected person (as defined in the Listing Rules) of the Company. As such, the Equity Transfer which was entered into between Goodunited and Shenzhen Huishen is a connected transaction of the Company, and is subject to the approval of the Independent Shareholders at a special general meeting of the Company.

• 10 -

LETTER FROM SOMERLEY

The Equity Transfer also constitutes a discloseable transaction for the Company under the Listing Rules. However, pursuant to Rule 14.44(2) and Rule 14A.43(2) of the Listing Rules, a written approval has been obtained from Asia Pacific which, as at the Latest Practicable Date, held approximately 58.45% in nominal value of the Shares with the right to attend and vote at a special general meeting to approve the Equity Transfer. As no Shareholder has a special interest in the Equity Transfer, no Shareholder is required to abstain from voting. Based on the above, the Company has met all the conditions set out in Rule 14.44 and Rule 14A.43 of the Listing Rules. Pursuant to Rule 14A.53 of the Listing Rules, the Company has applied for a waiver, and the Stock Exchange has granted the Company a waiver, of the requirement for the Company to hold a Shareholders’ meeting, permitting the Independent Shareholders’ approval to be given in writing in relation to the Equity Transfer.

The Board currently consists of seven Directors. Mr. Ou Yaping is the Chairman and an executive Director. Mr. Tang Yui Man Francis is the Chief Executive Officer and an executive Director. Mr. Chen Wei and Mr. Law Sze Lai are executive Directors. Mr. Davin A. MacKenzie, Mr. Tian Jin and Mr. Xin Luo Lin are independent non-executive Directors. The Independent Board Committee comprising the three independent non-executive Directors has been formed to advise the Independent Shareholders in respect of the Equity Transfer and the transactions contemplated thereunder. We, Somerley Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on the terms of the Equity Transfer and the transactions contemplated thereunder.

We are not connected with the Company, Shenzhen Huishen or their respective substantial shareholders or associates and accordingly are considered suitable to give independent financial advice on the above matters. Apart from the normal professional fees payable to us in connection with this appointment and our appointment as advisers to the Independent Board Committee of Enerchina regarding the Equity Transfer, no arrangement exists whereby we will receive any fees or benefits from the Company and/or Shenzhen Huishen or their respective substantial shareholders or associates.

In formulating our advice, we have relied on the information and facts supplied, and the opinions expressed, by the Directors, which we have assumed to be true, accurate and complete. We have considered the financial information of the Group, the Enerchina Group and the Panva Gas Group (defined as Panva Gas and its subsidiaries), including their 2002, 2003 and 2004 annual reports and accounts, and financial information of Shenzhen Fuhuade.

We have sought and received confirmation from the Directors that all material relevant information has been supplied to us and to the best knowledge of the Directors, no material facts have been omitted from the information supplied and opinions expressed by them. We consider that the information we have received is sufficient for us to reach our advice and recommendation as set out in this letter and to justify our relying on such information and we have no reason to doubt the truth and accuracy of the information provided to us or to believe that any material information has been omitted or withheld. However, we have not conducted any independent investigation into the business and affairs of the Group or Shenzhen Fuhuade. We have assumed that all information and representations contained or referred to in the Circular are true at the date of the Circular.

• 11 -

LETTER FROM SOMERLEY

PRINCIPAL FACTORS AND REASONS TAKEN INTO ACCOUNT

In arriving at our opinion, we have taken into account the following principal factors and reasons:

1. Background information on the Group

• (i) Business of the Group

The Group is principally engaged in property development, the generation and supply of electricity in the PRC, the sale and distribution of liquefied petroleum gas (“LPG”) and natural gas and the construction of gas pipelines in the PRC.

• (a) Property development

The Group is a well established residential property developer in the PRC, with major focus on property developments in Shenzhen, the PRC. The operating results of the property development unit of the Company continues to benefit from the fast-growing economy of the special economic zone. The Group recorded a turnover from property development of HK$478.3 million for year ended 31 December 2004, representing an increase of 44.5% as compared to last year. The total floor area sold in 2004 was 67,272 square metres while it was 50,034 square metres in 2003. The turnover in 2004 was mainly derived from the sales of residential properties including The Oasis, The Mandarin House and the Sinolink No. 8.

As at 31 December 2004, the Group had a number of properties under development including Sinolink Garden Phase Four and Phase Five and The Mangrove West Coast. These properties have a total gross floor area of over 600,000 square metres.

(b) Electricity generation

Enerchina represents the Group’s only existing interest in the business of electricity generation. Through Shenzhen Fuhuade, a 70%-owned subsidiary of Enerchina, the Group operates Dapeng Power Plant (the “Plant”) to generate and supply electricity mainly in Shenzhen, the PRC. Details of information on Shenzhen Fuhuade and the Plant are set out in the paragraphs headed “Background information on Shenzhen Fuhuade” below.

• (c) Sale and distribution of LPG and natural gas and construction of gas pipelines

Panva Gas is the Company’s investment arm in the gas fuel market. Panva Gas is a company listed on the GEM of the Stock Exchange, together with its subsidiaries, is principally engaged in the sale and distribution of natural gas and LPG and construction of gas pipelines in the PRC. For the year ended 31 December 2004, the consolidated turnover of Panva Gas amounted to approximately HK$1,800.3 million, representing an increase of approximately 23.5% compared to the previous year. Profit attributable to shareholders amounted to approximately HK$264.1 million, representing an increase of approximately 26.3% over the previous year.

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LETTER FROM SOMERLEY

On 7 April 2005, the Company, Enerchina and Panva Gas jointly announced a restructuring whereby the Enerchina Group acquired a 58.45% interest in Panva Gas from the Group for a consideration of approximately HK$1,753.2 million. The acquisition was completed on 2 June 2005. Upon completion of the acquisition, Panva Gas was still a subsidiary of the Company, but it was held indirectly through Enerchina. Details of the acquisition were provided in a circular of the Company to the Shareholders dated 17 May 2005.

(ii) Financial results and position of the Group

(a) Profit and loss accounts

Set out below are the audited consolidated profit and loss accounts of the Company for each of the three years ended 31 December 2004.

Turnover Cost of sales Gross profit Other operating income Distribution costs Administrative expenses Other operating expenses Profit from operations Finance costs Gain on disposal of subsidiaries Loss on deemed disposal arising from dilution of interest in a subsidiary Loss on deemed disposal arising from dilution of interest in an associate Gain (loss) on disposal of associates Release of deferred gain on disposal of a subsidiary Gain on partial disposal of an associate Share of results of associates Amortisation of goodwill of associates Profit before taxation Taxation Profit before minority interests Minority interests Net profit for the year

For the year ended 31 December 2004 2003 2002 HK$’000 HK$’000 HK$’000 2,406,388 1,815,356 1,525,406 (1,755,793) (1,336,630) (1,156,903) 650,595 478,726 368,503 33,566 25,511 20,953 (72,691) (52,512) (46,380) (148,231) (130,649) (117,081) (34,118) (15,159) (3,509) 429,121 305,917 222,486 (34,721) (10,630) (4,350) 90,705 293,817 195,908 (3,266) – – (432) – – – 133,209 (234) – 77,000 – – 2,677 – 26,482 5,981 (22,749) (2,615) (2,724) (1,816) 505,274 805,247 389,245 (39,385) (48,654) (16,068) 465,889 756,593 373,177 (151,412) (126,658) (78,748) 314,477 629,935 294,429

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The Group achieved turnovers of approximately HK$2,406.4 million and HK$1,815.4 million in 2004 and 2003 respectively, representing increases of approximately 32.6% and 19.0% compared to 2003 and 2002 respectively. Gross profit has increased by 36% and 30% in 2004 and 2003 respectively. The management attributed these remarkable results to the significant progress of the gas fuel business, improved property development business and consolidation of the electricity business since 2004.

The Group accomplished a net profit of approximately HK$314.5 million for 2004, an increase of approximately 155% over 2003, after excluding one-off gains on disposals of subsidiaries and associates of approximately HK$507 million.

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(b) Balance sheets

Set out below are the audited consolidated balance sheets of the Company as at 31 December 2004, 2003 and 2002.

Non-current assets Property, plant and equipment Intangible asset Goodwill Negative goodwill Interests in associates Investment in securities Trade receivable Current assets Stock of properties Inventories Trade and other receivables Investments in securities Amount due from an associate Amounts due from minority shareholders Pledged bank deposits Bank balances and cash Current liabilities Trade and other payables Amounts due to minority shareholders Taxation Borrowings – amount due within one year Net current assets Total assets less current liabilities Non-current liabilities Borrowings – amount due after one year Deferred gain on disposal of a subsidiary Minority interests Net assets Capital and reserves Share capital Reserves Shareholders’ funds	As at 31 December 2004 2003 HK$’000 HK$’000 2,374,254 668,403 9,160 9,662 180,120 21,443 (40,125) (18,022) 70,677 184,552 146,099 83,917 – – 2,740,185 949,955 2,082,615 1,639,994 102,102 36,417 870,798 619,385 49,576 50,126 – 75,000 28,064 11,246 72,467 – 3,546,256 1,309,473 6,751,878 3,741,641 681,804 327,912 30,773 6,523 79,470 61,156 811,559 669,056 1,603,606 1,064,647 5,148,272 2,676,994 7,888,457 3,626,949 (3,570,142) (565,655) – – (3,570,142) (565,655) 4,318,315 3,061,294 (1,888,445) (874,556) 2,429,870 2,186,738 233,345 191,104 2,196,525 1,995,634 2,429,870 2,186,738	2002 HK$’000 432,675 – 22,659 (26,585) 129,882 117,949 1,269 677,849 1,644,354 23,751 278,720 31,455 197,000 41,276 – 470,641 2,687,197 280,658 23,537 30,822 14,599 349,616 2,337,581 3,015,430 (904,480) (77,000) (981,480) 2,033,950 (454,734) 1,579,216 184,944 1,394,272 1,579,216

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The Group’s size has been increasing throughout the three years ended 31 December 2004. The audited net assets of the Group were approximately HK$1,579.2 million, HK$2,186.7 million and HK$2,429.9 million as at 31 December 2002, 2003 and 2004 respectively. As at 31 December 2004, the Group had outstanding bank borrowings of approximately HK$4,381.7 million and capital commitments of HK$1,394.9 million. To finance its aggressive expansion with the addition of several power generating units in the last few years, the Enerchina Group raised significant bank borrowings and also equity financing by way of open offer and rights issues. The significant amount of bank borrowings by the Enerchina Group increased the debt to equity ratio (calculated as total borrowings over Shareholder’s funds) of the Group to approximately 180.3% as at 31 December 2004. Taking into account bank balances and cash of approximately HK$3,546.3 million and net borrowings of approximately HK$835.4 million, we consider the liquidity position of the Group is satisfactory.

2. Background information on Shenzhen Fuhuade

(i) Business

Shenzhen Fuhuade was established in 1994 in the PRC as a Sino-foreign equity joint venture with an operating period of 30 years commencing from November 1994. Shenzhen Fuhuade operates the Plant, which is located in Dapeng Town, Longgang District, Shenzhen, the PRC. The Group acquired an initial stake of 70% in Shenzhen Fuhuade when it was established. In December 2001, the Group acquired the remaining 30% stake in Shenzhen Fuhuade through its 80%-owned subsidiary, Shenzhen Sinolink Enterprises Co., Ltd. The Enerchina Group acquired its initial 70% stake in Shenzhen Fuhuade in March 2002 from the Group. The remaining 30% interest in Shenzhen Fuhuade held by the Group was acquired by Shenzhen Huishen in 2003. There was no change in shareholdings of Shenzhen Fuhuade since then.

Based on our understanding from the management of Shenzhen Fuhuade, the Plant is an oilfired peak-load power plant. It was originally designed for generation and supply of electricity only during peak demand periods. However, due to the strong demand for power in the area, it currently supplies electricity for an average of about 16 hours per day. It is complementary to other base-load coal-fired power plants in Shenzhen or the nearby region, which generally provide electricity round-the-clock.

With the commencement of commercial operation of the second combined cycle generator unit in May 2003, the Plant’s installed capacity had increased from 70,800 kilowatts to 305,000 kilowatts. A further 180,000 kilowatt capacity was added in 2004 which resulted in the total installed capacity reaching 485,000 kilowatts. By the end of June 2005, it had four generating units, with total installed capacity of approximately 665,000 kilowatts. With the increase in the installed capacity, the Plant achieved the delivery of a total power output of 994.4 million kWh in 2003 and 1,501.2 million kWh in 2004, representing increases of approximately 2.7 times and 51.0% over the previous year respectively.

The increased power output in the last few years translated into considerable improvement in Shenzhen Fuhuade’s results. It recorded a net profit of approximately HK$14.3 million in 2002 and approximately HK$105.8 million in 2003. The net profit was further enhanced to HK$135.3 million in 2004. Further details of the financial information relating to Shenzhen Fuhuade for the three years ended 31 December 2004 are set out in section headed “Financial results and position of Shenzhen Fuhuade” below.

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As stated in the 2003 and 2004 annual reports and accounts of Enerchina, the total power generation in Guangdong Province was approximately 178.3 billion kWh and 202.3 billion kWh respectively. Shenzhen Fuhuade’s power output, therefore, represented approximately 0.56% and 0.74% of the total power generation in the Province in the respective year. Based on the monthly Shenzhen Economic and Trade Bulletin (the “Shenzhen Bulletin”) issued by the Trade and Industrial Bureau of Shenzhen Municipal Government in July 2005, Shenzhen Fuhuade has accomplished a total power output of approximately 994.3 million kWh in the first half of 2005, representing approximately 5.3% of the aggregate power output in Shenzhen City. The management expects the strong demand to continue in 2005, which provided opportunities for Shenzhen Fuhuade to improve both its productivity and further expand power generating units.

All the electricity generated by the Plant has been sold to Shenzhen Power Supply Bureau under a power purchase contract, pursuant to which the total capacity of the Plant will be set at a pre-determined level for on-grid generation. Electricity generated at the Plant is sold at such tariff determined by the Shenzhen Price Bureau in conjunction with various local government authorities. Different tariffs apply to different plants based on the type of fuel they use to generate electricity. Generally speaking, the tariff of electricity for oil-fired plants is higher than for coal-fired due to higher cost of oil than coal. In addition, oil-fired plants receive a fuel subsidy from the government to partly compensate for increasing fuel costs.

Heavy oil, a refined product of crude oil, is the primary source of fuel to generate electricity at the Plant. While the prices of heavy oil has increased in the last two years ended 30 June 2005 by approximately 15%, such increase is substantially lower than the increase for international crude oil prices for the same period of over 100%. The management is carrying out a feasibility study to change from oil to LPG upon completion of the Guangdong Liquefied Natural Gas Terminal, which is in close proximity to the Plant. Moreover, due to the increasing emphasis by the PRC government on protecting the environment, the Group has expanded into the clean energy sector and is also considering development of the coal gasification business.

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LETTER FROM SOMERLEY

• (ii) Financial results and position of Shenzhen Fuhuade

• (a) Profit and loss accounts

The audited profit and loss accounts of Shenzhen Fuhuade for each of the three years ended 31 December 2004 and for three months ended 31 March 2004 and 2005, prepared in accordance with the Hong Kong Financial Reporting Standards (the “HKFRS”), are set out in below.

Three months ended 31 March 2005 HK$’000 Turnover 288,158 Cost of sales (224,101) Gross profit 64,057 Other operating income 3,345 Administrative expenses (6,481) Profit from operations 60,921 Finance costs (9,593) Profit before taxation 51,328 Taxation – Net profit for the period/year 51,328	Year ended 31 December 2004 2003 2002 HK$’000 HK$’000 HK$’000 846,613 559,797 155,266 (667,274) (415,470) (133,402) 179,339 144,327 21,864 3,353 890 4,145 (22,992) (14,662) 9,033 159,700 130,555 16,976 (24,396) (15,821) (2,669) 135,304 114,734 14,307 – (8,899) – 135,304 105,835 14,307

Shenzhen Fuhuade achieved turnovers of approximately HK$846.6 million and HK$559.8 million in 2004 and 2003 respectively, representing increases of approximately 51.2% and 3.61 times compared to 2003 and 2002 respectively. These remarkable results were principally due to strong market demand for power in the PRC and significantly increased capacity of the Plant by additions of new electricity generation units in May 2003 and September 2004.

Gross profit percentage has dropped from approximately 25.8% in 2003 to 21.2% in 2004. The management attributed such decrease mainly to an increase in fuel costs in line with world crude oil prices in 2004. Notwithstanding this, Shenzhen Fuhuade achieved a net profit of approximately HK$135.3 million for 2004, an increase of approximately HK$29.5 million or 27.8% over 2003, as a result of increased electricity output by the Group.

Based on the audited accounts of Shenzhen Fuhuade for the three years ended 31 December 2004 and for three months ended 31 March 2005, Shenzhen Fuhuade has not paid any PRC Foreign Enterprise Income Tax (“FEIT”) as it was entitled to an eight-year tax holiday with the first two years totally exempt and the remaining six years being subject to

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a 50% reduction. This holiday is expected to be renewed following the increase in share capital in 2004. Accordingly, a two-year total exemption is expected to be applicable for 2004 and 2005 and from 2006 to 2011, Shenzhen Fuhuade will be subject to a 50% FEIT, the rate of which is 15% currently.

For the three months ended 31 March 2005, Shenzhen Fuhuade continued its strong performance and recorded a turnover of HK$288.2 million, an increase of 59.7% as compared to the corresponding period in the previous year. In terms of profitability, Shenzhen Fuhuade recorded a profit after taxation of approximately HK$51.3 million as compared to approximately HK$30.9 million for the corresponding period in the previous year, an increase of 66.0%. Such performances reflect the additional contribution from the third power generation unit. It should be noted that contribution from the fourth power generation unit, which was launched in June 2005, has yet to be reflected.

(b) Balance sheets

The audited balance sheets of Shenzhen Fuhuade as at 31 December 2004, 2003 and 2002 and 31 March 2005, prepared in accordance with the HKFRS, are set out in below.

Non-current assets Property, plant and equipment Land use right Current assets Inventories Trade and other receivable, deposit and prepayments Pledged bank deposits Bank balances and cash Current liabilities Trade and other payables Amount due to a shareholder Amount due to a former shareholder Amount due to immediate holding company Taxation payable Bank borrowings – due within one year Net current (liabilities) assets Total assets less current liabilities	As at 31 March 2005 HK$’000 1,253,927 22,730 1,276,657 125,240 266,574 – 137,637 529,451 93,493 12,161 15,140 60,880 8,684 320,015 510,373 19,078 1,295,735	Year ended 31 December 2004 2003 2002 HK$’000 HK$’000 HK$’000 1,221,965 593,326 530,069 22,892 22,167 21,740 1,244,857 615,493 551,809 62,367 38,700 23,942 185,935 93,055 21,183 – 13,861 3,981 354,746 127,372 53,088 603,048 272,988 102,194 103,608 86,430 96,189 12,161 12,161 27,301 15,140 15,181 – 60,880 73,846 68,800 8,684 8,899 – 364,166 147,821 – 564,639 344,338 192,290 38,409 (71,350) (90,096) 1,283,266 544,143 461,713

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LETTER FROM SOMERLEY

Non-current liabilities Bank borrowings – due after one year Net assets Capital and reserves Registered capital Reserves	As at 31 March 2005 HK$’000 902,640 393,095 208,982 184,113 393,095	Year ended 31 December 2004 2003 2002 HK$’000 HK$’000 HK$’000 941,499 337,680 361,085 341,767 206,463 100,628 208,982 92,518 92,518 132,785 113,945 8,110 341,767 206,463 100,628	Year ended 31 December 2004 2003 2002 HK$’000 HK$’000 HK$’000 941,499 337,680 361,085 341,767 206,463 100,628 208,982 92,518 92,518 132,785 113,945 8,110 341,767 206,463 100,628
			100,628
			92,518 8,110
			100,628

The net asset value of Shenzhen Fuhuade as at 31 December 2004 and 2003 were approximately HK$341.8 million and HK$206.5 million respectively, representing increases of approximately HK$135.3 million or 65.5% and HK$105.8 million or 105.2% over the net asset values year-on-year respectively.

As at 31 March 2005, Shenzhen Fuhuade recorded net assets of approximately HK$393.1 million. A further increase of approximately HK$51.3 million or 15.0% over the amount as at 31 December 2004. As illustrated in its financial statements, Shenzhen Fuhuade has made significant expansion by investing in new power generating units and financed such additions by way of bank borrowings. Increments in its net assets predominantly arose from Shenzhen Fuhuade’s annual retained earnings as such earnings have not been distributed.

(iii) Future plans of Shenzhen Fuhuade

As discussed with the management of Shenzhen Fuhuade, significant expansion plans have been put in place for Shenzhen Fuhuade to increase the power generation capacity as well as to control cost. In the immediate term, Shenzhen Fuhuade is considering installing equipment to convert the fuel consumption of the Plant from oil to natural gas, a significantly cheaper source of fuel with substantially less pollution. The expected amount of capital expenditure in this regard is RMB130 million. In addition, Shenzhen Fuhuade intends to install a fifth electricity generating unit with an installed capacity of 785MW (as compared to the Group’s exiting total installed capacity of 665MW) with an estimated cost of approximately RMB2.5 billion.

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3. Reasons for and benefits of the Equity Transfer

• (i) Investment in the energy generation and supply sector

The Group has invested in the businesses of power generation and supply in the PRC since the establishment of Shenzhen Fuhuade in 1994. Furthermore, as stated in the Company’s 2004 annual report, the Company would continue to diversify its investment by exploring new projects in regions where strong demand for energy exist.

As the Chinese economy and the demand for energy continued to grow strongly in the past few years, the Group, through its investment of 70% interest in the Plant, has produced significant returns in 2004 by contributing approximately HK$38.9 million to the profit before taxation.

• (ii) Strong demand for power in the PRC

As stated in the Company’s 2004 annual report, the management of the Company anticipates the demand for power in Guangdong Province as well as the PRC would continue to be strong.

In recent times, widespread power shortages have been experienced in the PRC nationally and also in Guangdong Province. This has led to regular power cut and other measures to limit the use of power. In addition, according to the Shenzhen Bulletin issued in June 2005, there were frequent and considerable power shortages in Shenzhen amounting to approximately 400 million kWh for the first five months of 2004. This Shenzhen Bulletin estimated the maximum power requirement would be about 7.4 million kW while the shortfall would reach 1 million kW in June 2004. The management of Shenzhen Fuhuade predicted that the power shortage would continue at least till 2006. The management believed such environment would provide opportunities for the Group to improve both its productivity and further expand its power generation capacity.

(iii) Maximise operating flexibility

As stated in the letter from the Board, the Directors consider that Enerchina has gained the required experience and acquired the skills for further expansion. The acquisition of the remaining 30% interest would enable the Group to operate the business of Shenzhen Fuhuade with maximum flexibility in conjunction with the rest of the Group without the need to be limited by the existence of a minority shareholder. Additionally, we consider the Equity Transfer is less risky given that the business of Shenzhen Fuhuade has been a major business operations of the Group for more than 10 years. Upon the completion of the Equity Transfer Agreement, the Group can benefit from earnings enhancement. In these circumstances, we concur with the Directors’ view that it makes commercial sense to buy out the minority stakes so that the Group can maximise the benefit generated from its electricity operations.

• (iv) Converting heavy oil into natural gas as the fuel

The Directors also believe that the further expansion of the Plant and converting from heavy oil to natural gas as fuel will provide the Company with a competitive advantage in the power supply sector in the PRC. Even if the recent increase in heavy oil price reverses, natural gas is still

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LETTER FROM SOMERLEY

likely to have a cost advantage to heavy oil. In addition, the Shenzhen government has encouraged power plants to use natural gas to generate electricity since it causes less pollution.

Having considered (i) the Group’s proven track record and investment in the energy generation and supply sector; (ii) the strong demand for power in the PRC; (iii) operating efficiency being maximised through the Equity Transfer; and (iv) the benefits of converting from heavy oil to natural gas as fuel, we concur with the view of the Directors that the Equity Transfer is in line with the business strategy of the Group.

4. Terms of the Equity Transfer

Pursuant to the Equity Transfer, the Group will acquire the remaining 30% interest in Shenzhen Fuhuade from Shenzhen Huishen at a consideration of RMB250,000,000.

• (i) Consideration

The Consideration of RMB250,000,000 has been arrived at after arm’s length negotiation. The Consideration shall be satisfied in cash and shall be paid by Goodunited to Shenzhen Huishen in four instalments.

The Consideration was determined with reference to the audited net asset value of Shenzhen Fuhuade as at 31 December 2004 and represents a premium of about 84.1% to such audited net asset value of Shenzhen Fuhuade as at 31 December 2004 prepared in accordance with the PRC accounting standards. The Directors consider that the latest audited net asset value of Shenzhen Fuhuade is an appropriate reference point of assessing the value of the Equity Interest after taking into the nature of the power plant industry.

Based on the audited accounts of Shenzhen Fuhuade prepared in accordance with the HKFRS as shown in above, the net asset value of Shenzhen Fuhuade was approximately HK$393.1 million as at 31 March 2005, to which the Consideration represents a premium of approximately 104%. Based on the 2004 net profit of Shenzhen Fuhuade, the Consideration represents a price earnings multiple of 5.91 times.

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LETTER FROM SOMERLEY

We have assessed the Consideration against comparable companies in the sector. We have identified the following listed companies in Hong Kong which are engaged in the generation and supply of electricity in the PRC that are broadly comparable to Shenzhen Fuhuade. Their relevant price to earnings multiples and price to book ratios are as follows:

		Price to
		earnings	Price to book	Attributable
		multiple as at	ratio as at	power
		the Latest	the Latest	generating
	Market	Practicable	Practicable	capacity
Company name	capitalisation	Date	Date	(Note 3)
	(HK$ million)			(MW)
Huaneng Power International,
Inc.(Note 1)	75,702	13.74	2.01	21,418
Datang International Power
Generation Co., Ltd.(Note 1)	30,203	13.86	1.84	10,410
China Resources Power
Holdings Co. Ltd.	15,902	12.17	1.57	2,949
Huadian Power International
Corporation Ltd.(Note 1)	17,536	11.52	1.22	7,416
China Power International
Development Ltd.	8,073	9.58	1.35	3,016
Enerchina Holdings Ltd.	3,769	19.50	1.33	340
Average		13.40	1.55
Maximum		19.50	2.01
Minimum		9.58	1.22
Shenzhen Fuhuade_(Note 2)_		5.91	2.04

Notes:

1. Computations of relevant parameters of the companies (Huaneng Power International, Inc., Datang International Power Generation Co., Ltd. and Huadian Power International Corporation Ltd.) in the table above are based on the prices of their H shares.

2. The evaluation parameters for Shenzhen Fuhuade were based on the audited accounts for the year ended and as at 31st December 2004 prepared in accordance with the HKFRS.

3. The figures are based on the latest published annual reports of the respective companies.

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LETTER FROM SOMERLEY

We have also looked at the transactions involving the sales and purchase of the Chinese electric power generation plants which have taken place in the last year. We have summarised the transactions in the following table:

Price Date of to earnings announcement Acquirer Seller multiple June 2005 Huadian Power China Huadian Not applicable International Corporation and Corporation Limited other third parties June 2005 China Power China Power 4.9 International Limited Development Limited June 2005 Huaneng Power Jiangsu Yueda 10.7 International, Inc. Investment Company Limited January 2005 China Huaneng Group Siemens/HEW 12.5 and CITIC November 2004 Huaneng Power China Huaneng Group 10.8 International Inc. August 2004 Huadian Energy Co. Ltd. China Huadian negligible Corporation Average 9.7 Maximum 12.5 Minimum 4.9 Shenzhen Fuhuade 5.91

Price to book ratio 1.3 1.3 1.4 3.6 2.2 3.7

2.3 3.7 1.3 2.04

Source: respective company’s public filing Note: The plant was loss-making in its last financial year.

On the basis of the annual profits of Shenzhen Fuhuade for 2004 of approximately HK$135.3 million, the consideration of RMB250,000,000 for a 30% stake represented a historic price to earnings multiple of approximately 5.91 times. Such multiple represents a significant discount to the average of the price to earnings multiples of the comparable companies and comparable transactions of approximately 13.40 times and approximately 9.7 times respectively and is also significantly below the price to earnings multiple of the Company and at the lower end of the range of the comparable companies and comparable transactions. As discussed with the management of Shenzhen Fuhuade, the financial results of 2004 only reflect the performance of the third electricity generation unit for part of the year (the third electricity generation unit only commenced operations in September 2004) and none of the performance for the fourth electricity generation unit (which commenced operations in mid 2005). Such results have therefore not reflected the full potential of the power generating capacity of the Group. In this regard, we consider the valuation for the 30% stake in Shenzhen Fuhuade is fair.

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Based on the audited balance sheet prepared in accordance with the HKFRS, Shenzhen Fuhuade had net asset value as at 31 March 2005 of approximately HK$393,095,000. The Consideration of RMB250,000,000 for a 30% interest represents a premium of approximately 104% to the attributable net asset value of Shenzhen Fuhuade of approximately HK$117,928,500.

In terms of price to book value ratio, the ratio represented by the Consideration is approximately 2.04 times. The average for the comparable companies and comparable transactions are approximately 1.55 times and 2.3 times respectively, while the range is between 1.22 times and 2.01 times for comparable companies and between 1.3 times and 3.7 times for comparable transactions. While the price to book ratio for the Equity Transfer represents a premium of approximately 1% to the upper end of the range for comparable companies, it nevertheless falls within the range represented by the comparable transactions and we consider this to be acceptable. Taking into account the high level of profitability generated by Shenzhen Fuhuade’s assets, we consider the Consideration to be fair and reasonable.

(ii) Method of payment

The consideration will be entirely satisfied in cash by four instalments payable within six months from the date of completion of the registration in respect of the Equity Transfer, according to the following schedule:

		As a %
		of the
Instalment	Amount	Consideration	Payable
First	RMB60,000,000	24%	Within 3 working days following the date of
Instalment			the notarisation of the Equity Transfer
			Agreement
Second	RMB70,000,000	28%	Within 3 working days from the date of
Instalment			obtaining the approval from the relevant
			foreign investment approval authorities on the
			Equity Transfer and upon application for the
			registration of the Equity Transfer being
			accepted by the Shenzhen Administration of
			Industry and Commerce
Third	RMB30,000,000	12%	Within 3 months from the date of completion
Instalment			of the registration of the Equity Transfer
Fourth	RMB90,000,000	36%	Within 6 months from the date of completion
Instalment			of the registration of the Equity Transfer

The above mode of payment will draw on the financial resources of the Company, as further analysed in the paragraph headed “Cashflow” below. However, payment by cash has the benefit of avoiding dilution in Shareholder’s percentage interest in the Company.

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5. Effects of the Equity Transfer

• (i) Earnings

The Company currently owns 70% of the equity interests in Shenzhen Fuhuade and thus has been accounting for 70% of Shenzhen Fuhuade’s profit or loss in its results after taking out the minority’s share. Upon completion of the Equity Transfer as Shenzhen Fuhuade will become wholly owned by Enerchina, the consolidated profit and loss accounts of Enerchina will account for entire results of Shenzhen Fuhuade. For illustration purposes, assuming that the completion of the Equity Transfer had taken place on 1 January 2004, the net profit of Enerchina will be increased by approximately HK$32 million or 9.1% for 2004. On this basis, the profit attributable to the Shareholders will be enhanced accordingly after the Equity Transfer. Nevertheless, it should be noted that such earnings enhancement will be partially offset by the loss of interest income derived from the cash paid for the Equity Transfer.

(ii) Net assets value

Upon completion of the Equity Transfer, Shenzhen Fuhuade will become a wholly-owned subsidiary of Enerchina. Based on the audited results of the Group for the year ended 31 December 2004, the Group has a consolidated net tangible asset of HK$2,281 million, and had the Equity Transfer been completed on 31 December 2004, the goodwill arisen would have amounted to approximately HK$126 million. As a result, the net tangible asset would be approximately HK$2,155 million, which represents a decrease of approximately 6%.

(iii) Gearing

The entire Consideration will be financed by internal resources of the Group. Therefore, the gearing ratio of the Group (calculated as total borrowings over total assets) would only have a minimal increase as at 31 December 2004 owing to the slight decrease in assets of the Group from approximately HK$9,492 million to HK$9,384 million.

(iv) Cashflow

Based on the audited consolidated balance sheet as at 31 December 2004, the Group had cash and bank balances of approximately HK$3,546 million and working capital of approximately HK$5,148 million. On the basis of the Group’s position as at 31 December 2004, upon the completion of the Equity Transfer, the payment of the Consideration of approximately HK$234 million will reduce the cash and bank balances to approximately HK$3,312 million and working capital to HK$4,914 million. The Group still had proportionate outstanding capital commitments of approximately HK$1,338 million, and there will be additional capital commitment of approximately HK$57 million of Shenzhen Fuhuade upon the completion of the Equity Transfer. This may reduce the cash balances and liquidity of the Group, but given the significant amount of cash reserves, we consider that the Group’s cashflow position will not be significantly adversely affected.

• 26 -

LETTER FROM SOMERLEY

RISK FACTOR

As disclosed in the Company’s 2004 annual report and accounts, Shenzhen Fuhuade is involved in a dispute whereby a supplier filed a claim against Shenzhen Fuhuade in August 2003 for additional contract price in the amount of HK$28.0 million. Arbitration is still in progress and the outcome cannot be ascertained. No provision for the amount claimed has been made by the Group as at 31 December 2004. The dispute does not affect the Directors’ view on entering into of the Equity Transfer.

Upon the completion of the Equity Transfer, the additional contingent liability relating to the dispute, on a pro-rata basis, to be borne by the Company will only be a maximum of HK$8.4 million. Compared to the Consideration of approximately HK$234 million, we consider the contingent liability is not a significant factor in our consideration of the Equity Transfer.

DISCUSSION AND ANALYSIS

Since the investment of its initial stake in Shenzhen Fuhuade back in 1994, the performance of Shenzhen Fuhuade has continued to improve. The Group had continued to invest in Shenzhen Fuhuade with the addition of new generation units in 2003 through to 2005.

With the acquisition of the remaining interest in Shenzhen Fuhuade, the Group stands to benefit from enhanced earnings by the elimination of the minority interest. Coupled with a strong market for electricity, the Equity Transfer is in line with the acquisition strategy of the Enerchina Group as a means of growth and represents a strong division of the Group’s operations.

The Equity Transfer, by reference to the earnings of Shenzhen Fuhuade, has in our opinion been priced conservatively, at a price earnings multiple of 5.91 times, compared to 13.40 times for comparable companies and 9.7 times for comparable transactions. By reference to price to book ratio, the Consideration is positioned towards the upper range for valuation of comparable companies listed on the Stock Exchange but is close to the average price at which sales and purchase of substantial stakes in power plants are priced, coupled with the low price earnings multiple, we find it is acceptable.

The Consideration will be paid in cash, which will not adversely affect the Group as it has significant cash reserves of approximately HK$3,546 million as at 31 December 2004. However, management does have aggressive expansion plans with its significant capital commitments in the future. Accordingly, the Acquisition will increase the financial commitments of the Group.

RECOMMENDATION

Based on the above principal factors and reasons and taking these factors and reasons as a whole as summarised in the section above headed “Discussion and analysis”, we consider that the terms of the Equity Transfer Agreement and the transactions contemplated under the Equity Transfer are fair and reasonable to the Independent Shareholders and that the entering into of the Equity Transfer Agreement is in the ordinary and usual course of business, on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

Yours faithfully, for and on behalf of

SOMERLEY LIMITED

M.N. Sabine

Chairman

• 27 -

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 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. DISCLOSURE OF DIRECTORS’ INTEREST

As at the Latest Practicable Date, the interests of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which (i) 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 or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required to be entered in the register maintained by the Company pursuant to section 352 of the SFO; or (iii) were required to be notified to the Company and the Stock Exchange pursuant to the Appendix 10 of the Model Code for Securities Transactions by Directors of Listed Companies as contained in the Listing Rules, were as follows:

(a) Long positions in Shares and underlying Shares

						Interest in		Approximate
						underlying		percentage
						shares		of the
		Interests	in Shares		Total	pursuant to		Company’s
Name of		Family	Corporate		interest	share	Aggregate	issued
Directors	Capacity	interest	interest		in Shares	options	interest	share capital
Chen Wei	Beneficial owner	–		–	–	12,000,000	12,000,000	0.51%
Law Sze Lai	Beneficial owner	–		–	–	8,000,000	8,000,000	0.34%
Ou Yaping	Joint interest and	6,475,920	1,374,222,000		1,380,697,920	–	1,380,697,920	58.73%
	interest of controlled		(Note	1)
	corporation
Tang Yui Man	Beneficial owner	–		–	–	19,000,000	19,000,000	0.81%
Francis
Davin A.	Beneficial owner	–		–	–	2,000,000	2,000,000	0.09%
Mackenzie
Xin Luo Lin	Beneficial owner	–		–	–	2,000,000	2,000,000	0.09%

Note 1: These Shares are held by Asia Pacific, a company incorporated in the British Virgin Islands, which is legally and beneficially owned by Mr. Ou Yaping, the chairman of the Company.

• 28 -

GENERAL INFORMATION

APPENDIX

• (b) Directors’ interests or short positions in shares and underlying shares of associated corporations

							Approximate
				Total	Interest in		percentage
				interest in	underlying		of the
				shares long	shares	Aggregate	issued share
	Name of			positions/	pursuant to	interest/	capital of
Name of	associated		Nature of	(short	share	(short	associated
Directors	**corporations **	Capacity	interest	positions)	options	positions)	corporations
Chen Wei	Panva Gas	Beneficial owner	Personal	4,160,000	8,040,000	12,200,000	1.29%
Law Sze Lai	Enerchina	Beneficial owner	Personal	510,000	–	510,000	0.01%
Davin A.	Enerchina	Beneficial owner	Personal	–	2,288,000	2,288,000	0.05%
Mackenzie
Ou Yaping	Panva Gas	Interest of	Corporate/	575,806,587	3,600,000	579,406,587	61.49%
		controlled	Personal	(19,230,769)	–	(19,230,769)	(2.04%)
		corporation and		(Note 1)
		beneficial owner
	Enerchina	Interest of	Corporate/	3,617,895,635	2,288,000	3,620,183,635	74.83%
		controlled	Personal	(Note 2)
		corporation and
		beneficial owner
Tang Yui Man	Panva Gas	Beneficial owner	Personal	5,440,000	3,960,000	9,400,000	1.00%
Francis	Enerchina	Beneficial owner	Personal	–	22,880,000	22,880,000	0.47%
Xin Luo Lin	Enerchina	Beneficial owner	Personal	–	2,288,000	2,288,000	0.05%

Notes:

1. The 575,806,587 shares in Panva Gas represent (i) 401,233,462 shares held by Kenson, a whollyowned subsidiary of Enerchina. 74.79% interests of Enerchina are held by the Company and 58.45% interests of the Company are held by Asia Pacific. Mr. Ou Yaping is the sole beneficial owner of Asia Pacific. Mr. Ou Yaping is deemed under the SFO to be interested in these shares; (ii) 5,081,600 shares held by Asia Pacific directly. The entire issued share capital of Asia Pacific is legally and beneficially held by Mr. Ou Yaping; and (iii) 169,491,525 shares held by Supreme All. Supreme All is a wholly-owned subsidiary of Enerchina. Mr. Ou is deemed under the SFO to be interested in these shares.

Kenson is under an obligation to transfer 19,230,769 shares to Hutchison International Limited (“Hutchison International”) upon full exchange of a HK$62,500,000 redeemable note (the “Note”) held by Hutchison International in accordance with the terms and conditions of the Note.

• 29 -

GENERAL INFORMATION

APPENDIX

1. The 3,617,895,635 shares in Enerchina represent the aggregate of: (i) the 3,393,905,282 shares held by the Company (Mr. Ou Yaping through his wholly-owned company, Asia Pacific, holds approximately 58.45% of the existing issued share capital of the Company and is therefore deemed to be interested in all the shares in which the Company is interested); and (ii) the 223,990,353 shares held by Smart Orient. 100% interests of Smart Orient are held by the Company. Mr. Ou is deemed under the SFO to be interested in these shares.

(c) Directors’ right to acquire Shares

• (i) Interest in options to subscribe for Shares

Pursuant to the Company’s share option scheme, the Company has granted options to subscribe for Shares in favour of certain Directors, the details of which are as follows:

				Number of
				Shares
				subject to
				outstanding	Approximate
				options as	percentage of
				at Latest	the Company’s
Name of	Date of		Exercise	Practicable	issued
Directors	grant	Exercise period	price	Date	share capital
			HK$
Chen Wei	28.12.2004	31.12.2005 – 24.05.2012	1.126	3,600,000	0.15%
	28.12.2004	30.06.2006 – 24.05.2012	1.126	3,600,000	0.15%
	28.12.2004	31.12.2006 – 24.05.2012	1.126	4,800,000	0.20%
Law Sze Lai	28.12.2004	31.12.2005 – 24.05.2012	1.126	2,400,000	0.10%
	28.12.2004	30.06.2006 – 24.05.2012	1.126	2,400,000	0.10%
	28.12.2004	31.12.2006 – 24.05.2012	1.126	3,200,000	0.14%
Davin A.	28.12.2004	31.12.2005 – 24.05.2012	1.126	600,000	0.03%
Mackenzie	28.12.2004	30.06.2006 – 24.05.2012	1.126	600,000	0.03%
	28.12.2004	31.12.2006 – 24.05.2012	1.126	800,000	0.03%
Tang Yui Man	28.12.2004	31.12.2005 – 24.05.2012	1.126	5,700,000	0.24%
Francis	28.12.2004	30.06.2006 – 24.05.2012	1.126	5,700,000	0.24%
	28.12.2004	31.12.2006 – 24.05.2012	1.126	7,600,000	0.32%
Xin Luo Lin	28.12.2004	31.12.2005 – 24.05.2012	1.126	600,000	0.03%
	28.12.2004	30.06.2006 – 24.05.2012	1.126	600,000	0.03%
	28.12.2004	31.12.2006 – 24.05.2012	1.126	800,000	0.03%

Notes:

1. The vesting period of the share options is from the date of grant until the commencement of the exercise period.

2. These options represent personal interests held by the Directors as beneficial owners.

3. 30 -

GENERAL INFORMATION

APPENDIX

• (ii) Interest in options to subscribe for shares of associated corporations

						Approximate
						percentage
						of the issued
						share capital
	Name of				Number of	of the
Name of	associated	Date of		Exercise	share	associated
Directors	corporations	grant	Exercise period	price	options held	corporation
				HK$
Chen Wei	Panva Gas	04.04.2001	01.01.2003 – 03.04.2011	0.475	1,800,000	0.19%
		04.04.2001	01.01.2004 – 03.04.2011	0.475	1,800,000	0.19%
		13.11.2001	13.11.2002 – 13.02.2007	0.940	1,440,000	0.15%
		19.11.2004	31.12.2005 – 30.03.2011	3.500	900,000	0.10%
		19.11.2004	31.12.2006 – 30.03.2011	3.500	900,000	0.10%
		19.11.2004	31.12.2007 – 30.03.2011	3.500	1,200,000	0.13%
Davin A.	Enerchina	20.10.2004	20.10.2005 – 19.10.2015	0.500	2,288,000	0.05%
Mackenzie
Ou Yaping	Panva Gas	04.04.2001	01.01.2003 – 03.04.2011	0.475	1,800,000	0.19%
		04.04.2001	01.01.2004 – 03.04.2011	0.475	1,800,000	0.19%
	Enerchina	09.06.2004	09.06.2004 – 08.06.2014	0.440	2,288,000	0.05%
Tang Yui Man	Panva Gas	13.11.2001	13.11.2002 – 13.02.2007	0.940	960,000	0.10%
Francis		19.11.2004	31.12.2005 – 30.03.2011	3.500	900,000	0.10%
		19.11.2004	31.12.2006 – 30.03.2011	3.500	900,000	0.10%
		19.11.2004	31.12.2007 – 30.03.2011	3.500	1,200,000	0.13%
	Enerchina	09.06.2004	09.06.2004 – 08.06.2014	0.440	22,880,000	0.47%
Xin Luo Lin	Enerchina	09.06.2004	09.06.2004 – 08.06.2014	0.440	2,288,000	0.05%

Notes:

1. The vesting period of the share options is from the date of grant until the commencement of the exercise period.

2. These options represent personal interests held by the Directors as beneficial owners.

3. 31 -

GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions 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 were required (a) 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 they were taken or deemed to have under such provisions of the SFO); or (b) to be entered in the register required to be kept by the Company pursuant to section 352 of the SFO; or (c) to be notified to the Company and the Stock Exchange pursuant to Appendix 10 of the Model Code for Securities Transactions by Directors of Listed Companies.

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as is known to the Directors and chief executive of the Company, the following persons or corporations (not being Directors 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 Divisions 2 and 3 of Part XV of the SFO, or who were 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 other member of the Group or had any options in respect of such capital, were as follows:

(i) Long positions and short positions in Shares and underlying Shares

			Approximate
			percentage of
			the Company’s
		Interest	issued
Name of Shareholders	Capacity	in Shares	share capital
Asia Pacific	Beneficial owner	1,374,222,000	58.45%
		(Note 1)
Value Partners Limited	Investment manager	120,000,000	5.10%
		(Note 2)
Cheah Cheng Hye	Interest of controlled	120,000,000	5.10%
	corporation	(Note 2)
Pope Asset Management,	Investment manager	116,958,800	4.97%
LLC

Notes:

1. These Shares and underlying Shares are held by Asia Pacific, a company incorporated in the British Virgin Islands, which is legally and beneficially owned by Mr. Ou Yaping, the chairman of the Company.

2. These 120,000,000 Shares are held by Value Partners Limited, a company which is held by 31.82% by Mr. Cheah Cheng Hye. Accordingly, Mr. Cheah Cheng Hye is deemed to be interested in these shares.

3. 32 -

GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, the Directors are not aware of any other person who had an interest or short position in the shares or 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, 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 or had any options in respect of such capital.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, there were no existing service contracts between any of the Directors or proposed directors of the Company and any member of the Group (excluding contracts expiring or terminable by any member of the Group within one year without payment of compensation, other than statutory compensation).

5. COMPETING BUSINESS INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective associates had any interest in a business which competes or may compete with the business of the Group.

6. OTHER INTERESTS

Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors is materially interested in any contract or arrangement subsisting at the date of this circular which is significant in relation to the business of the Group.

Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors has any direct or indirect 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 December 2004, being the date up to which the latest published audited accounts of the Group were made up.

7. LITIGATION

A supplier filed an arbitration in August 2003 against Fuhuade Power Plant claiming for additional contract price in the amount of approximately HK$28.0 million. The arbitration is still in progress and the outcome of such cannot be ascertained. No provision for the amount claimed had been made by the Group as at 31 December 2004.

The existence of this arbitration claim does not affect the views of the Directors regarding the entering into of the Equity Transfer Agreement.

Save and except the above, so far as the Directors are aware, as at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was pending or threatened against the Company or any of its subsidiaries.

• 33 -

GENERAL INFORMATION

APPENDIX

8. QUALIFICATION

The following are the qualifications of the experts who have given an opinion or advice on the information contained in this circular:

Name Qualifications Somerley Limited licensed under the SFO for type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities as defined under the SFO

As at the Latest Practicable Date, Somerley was neither beneficially interested in the share capital of any member of the Group nor had any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, Somerley did not have any direct or indirect interest in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2004, the date to which the latest published audited financial statements of the Company were made up.

9. CONSENT

As at the date of this circular, Somerley Limited has given and has not withdrawn its written consent to the issue of this circular for incorporation in this circular of its opinion made on 22 August 2005 and references to its name in the form and context in which it respectively appears herein.

10. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2004, being the date of the latest published audited financial statements of the Company.

11. MISCELLANEOUS

• (a) The company secretary of the Company is Mr. Lo Tai On, member of the Hong Kong Institute of Certified Public Accountants.

• (b) The qualified accountant of the Company is Ms. Tiong Check Hiong, Jacqueline, Certified Public Accountant.

• (c) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.

• (d) The principal place of business of the Company is situated at 28th Floor, Vicwood Plaza, 199 Des Voeux Road Central, Hong Kong.

• 34 -

GENERAL INFORMATION

APPENDIX

• (e) The branch share registrar of the Company is Computershare Hong Kong Investor Services Limited, 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.

• (f) The principal share registrar of the Company is Butterfield Fund Services (Bermuda) Limited, Rosebank Centre, 14 Bermudiana Road, Pembroke, Bermuda. The English text of this circular shall prevail over the Chinese text in case of any inconsistency.

• (g) All references to times in this circular refer to Hong Kong times.

• (h) The English text of this circular shall prevail over the Chinese text, in case of any inconsistency.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at 38th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong from 22 August 2005 to 6 September 2005 (both days inclusive):

• (a) the Equity Transfer Agreement;

• (b) the memorandum of association and Bye-laws of the Company;

• (c) the letter from the Independent Board Committee to the Independent Shareholders dated 22 August 2005, the text of which is set out on page 9 of this circular;

• (d) the letter from Somerley Limited dated 22 August 2005, the text of which is set out on pages 10 to 27 of this circular;

• (e) a copy of each circular published since the date of the latest published audited accounts;

• (f) the written consent referred to in the section headed “Consents” in paragraph 9 of this appendix; and

• (g) the audited accounts of the Group for each of the two financial years ended 31 December 2004.

• 35 -