Hang Seng Bank Limited — Proxy Solicitation & Information Statement 2007

Sep 25, 2007

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 or transferred all your shares in Fortune Telecom Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale 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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FORTUNE TELECOM HOLDiNGs LiMiTED 長遠電信網絡集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 110)

DisCLOsEABLE TRANsACTiON iN RELATiON TO THE COMPLETiON OF EsTABLisHMENT OF A JOiNT VENTURE COMPANY

* For identification purposes only

27th September, 2007

CONTENTS

		Page
**DEFINITIONS **		1
LETTER FROM THE BOARD
1	Introduction 3
2	The Supplemental JV Agreement 4
3	Put Option Agreement 4
4	Shareholders’ Loan Agreement 5
5	Co-operative Management Agreement	5
6	Reasons for Entering into the Supplemental Agreements	5
7	Discloseable Transaction	6
8	Additional Information 6
**APPENDIX – GENERAL INFORMATION **		7

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Definitions

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

• “JV Agreement”

the agreement dated 5 June 2007 entered into amongst the Company, TeleChoice, JV Company in respect of the establishment of a joint venture to engage in the logistics and fulfillment business for Nokia-branded mobile handsets and accessories in the PRC

• “Board”

board of Directors

• “Company”

Fortune Telecom Holdings Limited, a company incorporated in Bermuda with limited liability, whose securities are listed on the Stock Exchange

• “Completion”

completion of the JV Agreement

• “Directors”

• directors of the Company (including independent non-executive directors)

• “Economic Benefits”

• gross profit generated from the sales of Nokia mobile phone handsets and accessories minus the staffing and administration costs incurred by Fortune (Shanghai) as agreed between the JV Company and Fortune (Shanghai)

• “Fortune (Shanghai)”

Fortune (Shanghai) International Trading Company Limited, a company incorporated with limited liability under the PRC laws in Shanghai and a wholly owned subsidiary of the Company

• “Group” the Company and its subsidiaries

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong”

• The Hong Kong Special Administrative Region of the PRC

• “JV Company”

• TeleFortune (China) Investments Limited, a company incorporated with limited liability under the laws of Hong Kong

• “Latest Practicable Date”

• 24 September 2007, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

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Definitions

“Nokia Fulfillment Agreement”	an agreement dated 28 August 2006 entered into between Nokia
	(China) Investment Company Limited and Fortune (Shanghai)
“Put Option”	an option to require the Company to purchase all (but not part
	of) the 16 million shares, representing 40% equity in the JV
	Company held by TeleChoice or its nominee upon Completion
	at a price of HK$50 million during the period from 1 March
	2008 to 31 December 2008
“PDA”	Personal Data Assistant
“PRC”	The People’s Republic of China
“Shanghai TeleFortune”	Shanghai TeleFortune International Trading Company Limited,
	a limited liability corporation to be established under PRC law,
	with the JV Company as its sole shareholder
“Shareholders”	shareholders of the Company
“Shares”	shares at par value of HK$0.1 each in the issued share capital
	of the Company
“Singapore Exchange”	Singapore Exchange Securities Trading Limited upon which the
	securities listed in Singapore are traded
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Supplemental Agreements”	The Supplemental JV Agreement, the Put Option Agreement, the
	Shareholders’ Loan Agreement and the Co-operative Management
	Agreement collectively
“TeleChoice”	TeleChoice International Limited, incorporated in Singapore on
	28 April 1998, listed on Singapore Exchange

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LETTER FROM THE BOARD

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FORTUNE TELECOM HOLDINGS LIMITED 長遠電信網絡集團有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 110)

Executive Directors: Lau Siu Ying (Chairman and C.E.O.) Luo Xi Zhi

Non-Executive Directors:

Fung Oi Ip, Alfonso Lo Wing Yat

Independent Non-executive Directors: Chang Wing Seng, Victor Wong Lit Chor, Alexis Chen Yi Gang

Registered Office: Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

Principal Office in Hong Kong: Room 1505-7, Tower A, Regent Centre, 63 Wo Yi Hop Road, Kwai Chung, New Territories, Hong Kong.

27th September, 2007

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION IN RELATION TO THE COMPLETION OF ESTABLISHMENT OF A JOINT VENTURE COMPANY

1. INTRODUCTION

Reference is made to the announcement dated 5 June 2007 and the circular dated 22 June 2007 regarding the JV Agreement entered into by the Company and TeleChoice and the JV Company. The business of the JV Company and the information on TeleChoice have been disclosed with details in such circular.

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LETTER FROM THE BOARD

It was announced on 6 September 2007 that Completion has occurred on 4 September 2007 as all the conditions have been fulfilled. The JV Company is owned as to 60% by the Company and 40% by TeleChoice. Upon Completion, related parties have entered into a number of agreements to supplement the establishment and operation of the JV Company.

The purpose of this circular is to provide you with further information regarding the details of the Supplemental Agreements which constitute a discloseable transaction for the Company under the Listing Rules.

2. SUPPLEMENTAL JV AGREEMENT

On 4 September 2007, the Company, TeleChoice and the JV Company have entered into the Supplemental JV Agreement pursuant to which certain terms of the JV Agreement were amended or supplemented as summarized below:–

• (a) TeleChoice surrenders or waives its rights to subscribe new Shares up to 10% of the enlarged share capital of the Company upon Completion;

• (b) The Company procure to pay a sum of HK$ 1 million in cash upon Completion and the balance of HK$24 million by instalments in cash and/or via transfer of stocks and assets including Nokia mobile phone handsets and accessories, business and office equipments based on fair value of such stocks and assets on or before 1 March 2008, instead of paying HK$ 45 million by way of transfer of assets including Nokia mobile phone handsets and accessories, business and office equipments and goodwill arising from performing the Nokia Fulfillment Agreement by Fortune (Shanghai) other than cash, into the JV Company, for the issue of 24 million shares, representing 60% equity in the JV Company.

3. PUT OPTION AGREEMENT

On 4 September 2007, the Company and TeleChoice have entered into a Put Option Agreement pursuant to which the salient terms are as follows:

• (a) The Company grants to TeleChoice an option to require the Company to purchase all the 16 million shares as a whole (not part of), representing 40% equity in the JV Company to be held by TeleChoice or its nominee upon Completion at a price of HK$50 million. The exercise period shall be from 1 March 2008 to 31 December 2008. Upon exercise, TeleChoice shall be required to pay a sum of HK$ 1 million to the Company, being the exercise fee.

• (b) The Put Option shall not be exercised unless during the exercise period, (i) the Nokia Fulfillment Agreement cannot be novated from Fortune (Shanghai) to Shanghai TeleFortune; And (ii) Shanghai TeleFortune and Nokia (China) Investment Company Limited or its associated company cannot enter into an agreement containing similar terms or arrangements under the Nokia Fulfillment Agreement in favour of Shanghai TeleFortune.

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LETTER FROM THE BOARD

Other than the contractual relationship between Fortune (Shanghai) and Nokia (China) Investment Company Limited arising from the entering of the Nokia Fulfillment Agreement, there is no relation between Nokia (China) Investment Company Limited and the Company, TeleChoice and the JV Company.

4. SHAREHOLDERS’ LOAN AGREEMENT

On 4 September 2007, the Company, TeleChoice and the JV Company have entered into the Shareholders’ Loan Agreement, pursuant to which the Company agrees to grant an interest-free, shareholders’ loan of up to HK$30 million upon request by the JV Company. Such loan will be made available on condition that the net cash position of the JV Company is less than HK$20 million.

5. CO-OPERATIVE MANAGEMENT AGREEMENT

On 4 September 2007, the Company, TeleChoice and the JV Company have entered into the Co-operative Management Agreement pursuant to which the JV Company will provide their expertise, resources and other assistance to enable and facilitate Fortune (Shanghai) in its performance of the Nokia Fulfillment Agreement, pending the novation of such agreement to Shanghai TeleFortune. In consideration of provision of such services, Fortune (Shanghai) will pay the JV Company the Economic Benefits in connection with the Nokia Fulfillment Agreement.

6. REASONS FOR ENTERING INTO THE SUPPLEMENTAL AGREEMENTS

The Group is a distributor, retailer and value added services provider of mobile phones, PDAs, and wireless broadband communication solutions in the PRC and Hong Kong. Notwithstanding the Group’s diversified business scope within the industry of wireless communications, as well as areas such as natural resources and property development in the PRC, the Group is always looking for opportunities to work with business partners to explore and strengthen mobile phone and wireless network business in the PRC.

The terms of the Supplemental Agreements have been concluded based on arm’s length negotiation between the parties thereto in light of further negotiation in relation to the surrender of the option to subscribe new Shares up to 10% of the enlarged share capital of the Company by TeleChoice to bargain for the Option Agreement. The Directors consider that the terms of the Supplemental Agreements, particularly the reduction to $25 million by instalments for the issue of the 24 million shares of the JV Company to the Company under the Supplement JV Agreement, are favourable to the Group. Under such circumstances, the Directors believe that the terms of such agreements are fair and reasonable and in the interests of the Shareholders as a whole.

Upon Completion, the consolidated assets of the Company would increase while there is no substantial change on the consolidated liabilities of the Company. The Directors however believe that there is no immediate effect on the earnings of the Company upon Completion.

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LETTER FROM THE BOARD

7. DISCLOSEABLE TRANSACTION

The Directors, having made all reasonable enquiries, confirm, to the best of their awareness, that other than the JV Agreement and the Supplemental Agreements, the Company does not have any prior transactions or relationship with each of TeleChoice and its ultimate beneficial owners. The Directors confirm, to the best of their awareness, that TeleChoice and its ultimate beneficial owners are third parties independent of the Group and the connected persons (as defined in the Listing Rules) of the Group.

As at 4 September 2007 and the date of this circular, to the best knowledge of the Board, TeleChoice and its associates do not hold any existing shares of the Company.

As the applicable percentage ratios calculated under Chapter 14 of the Listing Rules in respect of the JV Agreement together with the Supplemental Agreements exceed 5% but less than 25%, the Supplemental Agreements therefore constitute a discloseable transaction of the Company under Chapter 14 of the Listing Rules.

8. ADDITIONAL INFORMATION

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

Yours faithfully, By Order of the Board of

FORTUNE TELECOM HOLDINGS LIMITED

Lau Siu Ying

Chairman and Chief Executive Officer

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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 collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquires, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF DIRECTORS’ INTERESTS

As at the Latest Practicable Date, the interests and short positions held by the Directors and chief executive of the Company in Shares, underlying Shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to Section 352 of the SFO, to be entered in the register maintained by the Company referred to therein (the “Register”); or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange, were as follows:

Interest in the Shares

			Approximate
			% of total
		Number of	issued Shares
Name of Director	Nature of Interest	Shares Held	of the Company
Mr. Lau Siu Ying	Family Interest_(Note 1)_	188,300,013	51.62%
Mr. Lau Siu Ying	Beneficial Owner	280,000	0.08%

Remarks: Mr. Lau Siu Ying and his spouse were granted options to subscribe 2,000,000 Shares and 1,000,000 Shares Respectively.

Note:

1. 188,300,013 Shares are held by Future 2000 Limited, which is wholly-owned by Mr. Lee Wai, Timothy as trustee of The Lau’s Family Trust (being a discretionary trust) of which Mr. Lau Siu Ying, his spouse and their children are the current eligible beneficiaries but who do not have a fixed interests in the assets of the Lau’s Family Trust. Mr. Lau Siu Ying is interested in through being one of the eligible beneficiaries of The Lau’s Family Trust. Pursuant to the SFO, he is also deemed to be interested in the interest of his wife and children who are also the eligible beneficiaries under The Lau’s Family Trust.

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GENERAL INFORMATION

APPENDIX

3. SUBSTANTIAL SHAREHOLDERS

• (a) As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, the parties (other than Directors or chief executive of the Company) who had an interest or short position in the Shares or 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 were as follows:

Interest in the Shares

			Approximate
Name of			% of total
Substantial		Number of	issued Shares
Shareholders	Nature of Interest	Shares held	of the Company
Future 2000 Limited	discretionary trust	188,300,013	51.62%
(Notes 1 & 2)
Galaxy China	beneficial owner	72,100,000	19.76%
Opportunities
Fund
Deutsche Bank	security interest	52,810,000	14.48%
Aktiengesellschaft
(Note 3)

Notes:

1. Future 2000 Limited is wholly-owned by Mr. Lee Wai, Timothy as trustee of The Lau’s Family Trust (being a discretionary trust) of which Mr. Lau Siu Ying, his spouse and their children are the current eligible beneficiaries but who do not have a fixed interests in the assets of the Lau’s Family Trust.

2. Under the SFO, Mr. Lee Wai, Timothy is deemed to have interests in such Shares which Future 2000 Limited has interests as he is entitled to exercise more than one-third of the voting power at general meetings of Future 2000 Limited.

3. Pursuant to the disclosure of interest notices received by the Company, Deutsche Bank Aktiengesellschaft has a security interest over 52,810,000 Shares.

4. 8 -

GENERAL INFORMATION

APPENDIX

• (b) As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, the parties (other than Directors or chief executive of the Company) who was interested, directly or indirectly, 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:

Interest in the shares in members of the Group

Name of members		Approximately%
of the Group	Name	of shareholding
Synergy Technologies	Fong Kin Kiu	11%
(Asia) Limited
(“Synergy Technologies”)

• Note: Fong Kin Kiu was granted an option with entitlement to acquire 11% interest in Synergy Technologies. He does not hold any share in Synergy Technologies up to date.

Save as disclosed above, as at the Latest Practicable Date, the Directors or chief executive of the Company were not aware of any person (other than a Director or chief executive of the Company and the respective companies controlled by them whose interests have been disclosed above) 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 the Part XV of the SFO, or who was interested, directly or indirectly, 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.

4. DIRECTORS’ SERVICE CONTRACT

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which does not expire or is not determinable by the relevant member of the Group within one year without payment of compensation (other than statutory compensation).

5. LITIGATION

On 22 August 2007, Synergy Technologies has issued a Writ of Summons with general endorsement to claim for damages exceeding HK$1 million against a Taiwanese company called Gigabyte Communications Inc. for breaches of distribution agreement and after-sale service agreement. Synergy Technologies is in the course of serving the said Summons on the defendant, which is established in Taiwan, out of jurisdiction of Hong Kong.

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GENERAL INFORMATION

APPENDIX

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

6. COMPETING INTERESTS

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors or their respective associates were considered to have interest in any business which competes or may compete, either directly or indirectly, with the business of the Group pursuant to the Listing Rules.

7. GENERAL

• (a) The secretary and qualified accountant of the Company is Fok Wai Ming, Eddie.

• (b) The auditor of the Company is Messrs. Deloitte Touche Tohmatsu.

• (c) The registered office of the Company is located at Clarendon House 2 Church Street Hamilton HM 11, Bermuda.

• (d) The share registrar of the Company in Hong Kong is Tricor Abacus Limited at 26/F Tesbury Centre 28 Queen’s Road East Wanchai Hong Kong.

• (e) The English language text of this circular shall prevail over the Chinese language text in case of inconsistency.

8. DOCUMENT AVAILABLE FOR INSPECTION

Copy of the Supplemental Agreements will be available for inspection at the principal office of the Company at Room 1505-7, Tower A, Regent Centre, 63 Wo Yi Hop Road, Kwai Chung, New Territories, Hong Kong during office hours for a period of up to 14 days from the date of this circular.

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