Heng Tai Consumables Group Limited — Proxy Solicitation & Information Statement 2004

Sep 13, 2004

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

If you have sold all your shares in Continental Mariner Investment Company 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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CONTINENTAL MARINER INVESTMENT COMPANY LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 119)

DISCLOSEABLE TRANSACTION

Financial Adviser to Continental Mariner Investment Company Limited

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Yu Ming Investment Management Limited

13th September, 2004

CONTENTS

	Pages
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
The Subscription Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Information on Oils & Grains Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Information on Port Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Reasons for the Subscription Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10

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DEFINITIONS

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

“associate(s)”	has the same meaning as ascribed to it in the Listing
	Rules
“Board”	board of Directors
“Bridging Loan”	a bridging loan in the amount of RMB50,000,000
	(equivalent to approximately HK$46.73 million) to be
	provided by the Subscriber to Oils & Grains Company
	pursuant to the Subscription Agreement
“Company”	Continental Mariner Investment Company Limited, a
	company incorporated in Hong Kong with limited
	liability and whose shares are listed on main board of the
	Stock Exchange
“Completion”	completion of the Subscription Agreement
“Corporate Undertaking”	the undertaking to be given by the PRC Partner in favour
	of the Subscriber pursuant to the Subscription Agreement
“Directors”	directors of the Company
“Existing Foreign Partner”	Legend Vantage Holdings Limited, a company
	incorporated in Hong Kong with limited liability
“Group”	the Company and its subsidiaries
“Joint Ventures”	Oils & Grains Company and Port Company
“Latest Practicable Date”	9th September, 2004, being the latest practicable date
	prior to the printing of this circular for ascertaining
	certain information contained herein
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange
“Mr. Yiu”	Mr. Yiu Fei Hong, the majority shareholder of PRC
	Partner

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DEFINITIONS

“O&G Land”	a plot of land with a gross area of 221,748.14 square
	metres in Yang Jiang City, Guangdong Province, the
	PRC, which is the site of the factory of Oils & Grains
	Company
“Oils & Grains Company”	(Yang Jiang City Fung
	Yuan Oils & Grains Industrial Company Limited), a
	sino-foreign equity joint venture incorporated in the PRC
	with limited liability
“Personal Undertaking”	the undertaking to be given by Mr. Yiu in favour of the
	Subscriber pursuant to the Subscription Agreement
“Port Company”	City Po Fung Port Company
	Limited), a sino-foreign equity joint venture incorporated
	in the PRC with limited liability
“Port Land”	a plot of land with a gross area of 199,377.03 square
	metres in Yang Jiang City, Guangdong Province, the
	PRC, which is the site of the deepwater port of Port Land
“PRC” “PRC Partner”	the People’s Republic of China (Guangdong Fung Yuan Oils
	& Grains Industrial Company Limited), a company
	incorporated in the PRC with limited liability
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong), as amended, supplemented or
	otherwise modified from time to time
“Share(s)”	share(s) of HK$0.50 each in the capital of the Company
“Shareholders”	holders of Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscriber”	Prime Harvest Investment Limited, a company
	incorporated in the British Virgin Islands with limited
	liability and a wholly-owned subsidiary of the Company

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DEFINITIONS

“Subscription Agreement”	the agreement dated 23rd August, 2004 entered into
	between the Subscriber, Oils & Grains Company, Port
	Company, the PRC Partner and the Existing Foreign
	Partner in relation to the subscription of 35 per cent. of
	the enlarged registered capital of the Joint Ventures by
	the Subscriber
“Transfer”	transfer of 49 per cent. interest in Oils & Grains
	Company and 25 per cent. interest in Port Company by
	the Existing Foreign Partner to the PRC Partner before
	Completion
“Undertakings”	the Corporate Undertaking and the Personal Undertaking
“HK$”	Hong Kong dollars, the legal currency of Hong Kong
“RMB”	Renminbi, the legal currency of the PRC
“US$”	United States dollars, the legal currency of the United
	States of America
Exchange rates of US$1 = HK$7.8 = RMB8.346 is used in this circular.

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LETTER FROM THE BOARD

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CONTINENTAL MARINER INVESTMENT COMPANY LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 119)

Executive Directors: WANG Jun (Chairman) HE Ping (Vice-Chairman) LI Shi Liang (Managing Director) CHEN Hong Sheng CHAN Tak Chi, William

Registered office: Room 2503 Admiralty Centre, Tower 1 18 Harcourt Road Hong Kong

Non-Executive Director: IP Chun Chung, Robert

Independent Non-Executive Directors:

YAO Kang LAM Tak Shing CHOY Shu Kwan

13th September, 2004

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION

INTRODUCTION

The Board announced on 24th August, 2004 that the Subscriber, a wholly-owned subsidiary of the Company, entered into the Subscription Agreement with, inter alia, Oils & Grains Company and Port Company, pursuant to which, the Subscriber agreed to subscribe for 35 per cent. of the enlarged registered capital of each of Oils & Grains Company and Port Company for an aggregate consideration of US$14,490,000 (equivalent to approximately HK$113,022,000).

The entering into of the Subscription Agreement constitutes a discloseable transaction for the Company and is subject to reporting and announcement requirements under the Listing Rules.

The purpose of this circular is to provide you with further information relating to the Subscription Agreement.

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LETTER FROM THE BOARD

THE SUBSCRIPTION AGREEMENT

Date : 23rd August, 2004

• Parties : (a) the Subscriber, a wholly-owned subsidiary of the Company, as the subscriber, the principal business of which is investment holding;

• (b) Oils & Grains Company, the principal business of which is extraction of soybean oil, and production and sale of soybean meals, soybean oil and related by-products;

• (c) Port Company, the principal business of which is operation of a deepwater port in Yang Jiang City, Guangdong Province, the PRC;

• (d) the PRC Partner, as the PRC partner in the Joint Ventures, the principal business of which is investment holding; and

• (e) the Existing Foreign Partner, as the foreign partner in the Joint Ventures before the Transfer, the principal business of which is investment holding

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, Oils & Grains Company, Port Company, the PRC Partner and the Existing Foreign Partner and their respective ultimate beneficial owners are independent third parties and are not connected persons (as defined under the Listing Rules) of the Company and are not connected with any member of the Group or the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or their respective associates.

Pursuant to the Subscription Agreement, the Subscriber agreed to subscribe for 35 per cent. of the enlarged registered capital of each of Oils & Grains Company and Port Company for US$4,550,000 (equivalent to approximately HK$35,490,000) and US$9,940,000 (equivalent to approximately HK$77,532,000) respectively. The Subscriber further agreed to provide a bridging loan of RMB50,000,000 (equivalent to approximately HK$46.73 million) to Oils & Grains Company as working capital within 7 days of signing the Subscription Agreement. The Bridging Loan bears an interest rate of 10 per cent. per annum and is unsecured and repayable within 10 days of Completion or 1 month of termination of the Subscription Agreement. Since the Subscriber is only obliged to contribute all capital within 1 year from Completion, the Bridging Loan would be fully repaid before the deadline for capital contribution. The Subscriber would not make capital contribution so as to make its financial commitment to the Joint Ventures under the Subscription Agreement exceeding US$14,490,000 (equivalent to approximately HK$113,022,000).

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LETTER FROM THE BOARD

Completion is conditional upon satisfaction of the following on or before 31st December, 2004 (unless agreed by the Subscriber):

• (a) the Subscriber being satisfied with the legal, financial and operational position of the Joint Ventures;

• (b) all relevant approvals for the transactions contemplated under the Subscription Agreement being obtained, and the Joint Ventures having obtained new business licences reflecting, inter alia, the Transfer and increase in registered capital;

• (c) the PRC Partner having made all its capital contribution to the Joint Ventures;

• (d) the Subscriber having obtained the Undertakings and, if necessary, the Corporate Undertaking being registered with the relevant PRC authorities; and

• (e) the Company having satisfied all requirements under the Listing Rules.

The Subscriber advanced RMB30,000,000 (equivalent to approximately HK$28.04 million) of the Bridging Loan to Oils & Grains Company on 23rd August, 2004 pursuant to the Subscription Agreement and will advance the balance of the Bridging Loan upon drawdown by Oils & Grains Company , and up to the Latest Practicable Date, none of the above conditions has been satisfied, and the Subscriber has not made any capital contribution to the Joint Ventures.

In consideration of the Subscriber entering into the Subscription Agreement, the PRC Partner and Mr. Yiu, being the majority shareholder of the PRC Partner, will give the Corporate Undertaking and the Personal Undertaking in favour of the Subscriber respectively. Pursuant to the Undertakings, the PRC Partner and Mr. Yiu shall undertake that the Joint Ventures shall distribute dividends to the Subscriber of an aggregate amount representing not less than 10 per cent. of the capital contributed by the Subscriber under the Subscription Agreement for each of the five financial years after Completion. The PRC Partner shall reimburse the Subscriber for any shortfall the earlier of 3 months from end of the relevant financial year and payment of dividends by the Joint Ventures.

INFORMATION ON OILS & GRAINS COMPANY

Oils & Grains Company is a sino-foreign equity joint venture incorporated in the PRC, and owned as to 51 per cent. by the PRC Partner and as to 49 per cent. by the Existing Foreign Partner. It has a total investment amount of US$39,000,000 (equivalent to approximately HK$304,200,000), and a registered capital of US$6,800,000 (equivalent to approximately HK$53,040,000) which has been contributed by the PRC Partner and the Existing Foreign Partner in proportion to their shareholdings in Oils & Grains Company.

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LETTER FROM THE BOARD

The Existing Foreign Partner has agreed to transfer its 49 per cent. interest in Oils & Grains Company to the PRC Partner before Completion, and following Completion, Oils & Grains Company will be owned as to 65 per cent. by the PRC Partner and as to 35 per cent. by the Subscriber as the foreign partner. Pursuant to the Subscription Agreement, the registered capital of Oils & Grains Company shall be increased to US$13,000,000 (equivalent to approximately HK$101,400,000), of which US$8,450,000 (equivalent to approximately HK$65,910,000) shall be contributed by the PRC Partner and US$4,550,000 (equivalent to approximately HK$35,490,000) shall be contributed by the Subscriber in proportion to their shareholdings in Oils & Grains Company. The registered capital was determined based on the capital requirement of Oils & Grains Company. The difference of the total investment amount and the registered capital will be financed by bank borrowings. Other than the Bridging Loan and the capital contribution as set out above, the Subscriber has no financial commitment to Oils & Grains Company. Following Completion, Oils & Grains Company will be treated as an associated company of the Company.

The PRC Partner shall make all its capital contribution on or before Completion partly by cash and partly by way of injection of the O&G Land (the value of which will be determined by an independent valuation to be prepared). The Subscriber shall, through the Group’s internal resources, make its capital contribution by injection of US$4,550,000 equivalent of HK$ (approximately HK$35,490,000 or injection of US$2,340,000 (equivalent to approximately HK$18,252,000) worth of machinery and US$2,210,000 equivalent of HK$ (approximately HK$17,238,000)) within 1 year of Completion. As at the Latest Practicable Date, the Subscriber has not determined whether to contribute part of the capital by way of injection of machinery yet, and in which case an independent valuation would be prepared.

The principal business of Oils & Grains Company is extraction of soybean oil, and production and sale of soybean meals, soybean oil and related by-products. Its main asset is a factory being built on a site in Yang Jiang City, Guangdong Province, the PRC, and it has not commenced business and has not recorded any turnover or profit yet. Construction of the factory is financed by capital contribution and bank borrowings. The Company expects that construction would be completed and business operation would commence by end of 2004. Pursuant to the management accounts, as at 31st July, 2004, Oils & Grains Company had a net asset value of approximately HK$26.74 million.

Following Completion, the directors nominated by the Existing Foreign Partner will resign and the board of directors of Oils & Grains Company will comprise 5 directors, 3 nominated by the PRC Partner and 2 nominated by the Subscriber. Any dividend distribution will be made in proportion to shareholding.

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LETTER FROM THE BOARD

INFORMATION ON PORT COMPANY

Port Company is a sino-foreign equity joint venture incorporated in the PRC, and owned as to 75 per cent. by the PRC Partner and as to 25 per cent. by the Existing Foreign Partner. It has a total investment amount of US$85,200,000 (equivalent to approximately HK$664,560,000), and a registered capital of US$16,000,000 (equivalent to approximately HK$124,800,000), of which approximately US$15.42 million (equivalent to approximately HK$120.31 million) has been contributed by the PRC Partner and the Existing Foreign Partner in proportion to their shareholdings in Port Company. The Existing Foreign Partner has agreed to transfer its 25 per cent. interest in Port Company to the PRC Partner before Completion, and following Completion, Port Company will be owned as to 65 per cent. by the PRC Partner and as to 35 per cent. by the Subscriber as the foreign partner. Pursuant to the Subscription Agreement, the registered capital of Port Company shall be increased to US$28,400,000 (equivalent to approximately HK$221,520,000), of which US$18,460,000 (equivalent to approximately HK$143,988,000) shall be contributed by the PRC Partner and US$9,940,000 (equivalent to approximately HK$77,532,000) shall be contributed by the Subscriber in proportion to their shareholdings in Port Company. The registered capital was determined based on the capital requirement of Port Company. The difference of the total investment amount and the registered capital will be financed by bank borrowings. Other than capital contribution, the Subscriber has no financial commitment to Port Company. Following Completion, Port Company will be treated as an associated company of the Company.

The PRC Partner shall make all its capital contribution on or before Completion partly by cash and partly by way of injection of the Port Land (the value of which will be determined by an independent valuation to be prepared). The Subscriber shall, through the Group’s internal resources, make its capital contribution by injection of US$9,940,000 equivalent of HK$ (which is approximately HK$77,532,000) within 1 year of Completion.

The principal business of Port Company is operation of a deepwater port on a site in Yang Jiang City, Guangdong Province, the PRC, having an annual handling capacity of 1,000,000 tons of good. Its main asset is the port which is being built, and Port Company has not commenced business and has not recorded any turnover or profit yet. Construction of the port is financed by capital contribution and bank borrowings. The Company expects that construction would be completed and business operation would commence by end of 2004. Pursuant to the management accounts, as at 31st July, 2004, Port Company had a net asset value of approximately HK$145.01 million.

Following Completion, the directors nominated by the Existing Foreign Partner will resign and the board of directors of Port Company will comprise 5 directors, 3 nominated by the PRC Partner and 2 nominated by the Subscriber. Any dividend distribution will be made in proportion to shareholding.

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LETTER FROM THE BOARD

REASONS FOR THE SUBSCRIPTION AGREEMENT

The Company is principally engaged in shipping, hotel operations, property investment and management, infrastructure investments, securities investment, financial services and general trading.

The Directors consider that the investment in the Joint Ventures would diversify the investment portfolio and, having considered the track record and customer base of the PRC Partner and the internal research on the soybean and port business market in the PRC, believe that the PRC Partner would be able to develop and grow the business of the Joint Ventures, resulting in broadening the sources of income of the Group in the future. The Directors expect that the Joint Ventures will contribute to the earnings of the Group after they commence business. Since the Joint Ventures will be treated as associated companies and their accounts will not be consolidated into the accounts of the Company, other than payment of cash as consideration for the subscription, the Directors do not expect that the subscription would have material impact on the assets and liabilities of the Group. The Directors, including the independent non-executive Directors, consider that the terms of the Subscription Agreement (including the Bridging Loan) are normal commercial terms and are fair and reasonable so far as the interest of the Company and the Shareholders are concerned, and the entering into of the Subscription Agreement is in the interest of the Company and the Shareholders as a whole.

Yours faithfully For and on behalf of the Board

CONTINENTAL MARINER INVESTMENT COMPANY LIMITED LI Shi Liang

Managing Director

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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 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 INTERESTS

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

Underlying shares in the Company:

					Percentage
					of the issued
	No. of			Aggregate	share capital of
	Shares			no. of Shares	the Company as
	under share		Exercise	under share	at the Latest
Directors	options	Date of grant	price	options	Practicable Date
	(Note)
Wang Jun	6,000,000	3rd September, 1997	HK$5.175	15,500,000	1.73%
	4,500,000	5th June, 1998	HK$1.370
	5,000,000	30th November, 2000	HK$0.740
He Ping	6,000,000	3rd September, 1997	HK$5.175	15,500,000	1.73%
	4,500,000	5th June, 1998	HK$1.370
	5,000,000	30th November, 2000	HK$0.740
Li Shi Liang	5,000,000	30th November, 2000	HK$0.740	5,000,000	0.56%

Note: All interests of the Directors were share options granted pursuant to the share option scheme of the Company adopted on 16th June, 1993. All of such options are exercisable during the period commencing on the date one year from the date of grant and expiring on the date ten years from the date of grant.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had or was deemed to have any interest or short position in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of the SFO) which were required to be notified to the Company and

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GENERAL INFORMATION

APPENDIX

the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO), or were required pursuant to section 352 of the SFO to be entered in the register referred to therein, or were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date none of the Directors had any service contracts with the Company or any of its subsidiaries which does not expire or is not determinable by the employer within one year without payment of compensation (other than statutory compensation).

4. SUBSTANTIAL SHAREHOLDERS

So far as was known to any Director or chief executive of the Company, as at the Latest Practicable Date, the following persons, other than a Director or chief executive of the Company, had an interest or short position in the Shares or underlying Shares which fell to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or were, directly or indirectly, interested in ten per cent. 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:

• (a) Interest in the issued ordinary shares of the Company

		Percentage
	Number of	of issued
Name of Shareholders	Shares held	share capital
Chee Ying Cheung	53,981,000	6.03%
Wincall Holding Limited	55,428,000	6.19%
Congratulations Company Ltd.	169,845,000	18.98%
Source Holdings Limited (Note i)	328,485,560	36.70%
Ting Shing Holdings Limited (Note ii)	498,330,560	55.67%
Ringo Trading Limited (Note iii)	539,875,030	60.31%
China Poly Group Corporation (Note iv)	539,875,030	60.31%

Notes:

• i. Source Holdings Limited had direct holding of 228,398,760 Shares and is deemed by the SFO to be interested in 100,086,800 Shares as a result of its indirect holdings of the Shares through its wholly-owned subsidiaries, including Wincall Holding Limited.

• ii. Ting Shing Holdings Limited was deemed by the SFO to be interested in 498,330,560 Shares as a result of its indirect holdings of the Shares through its wholly-owned subsidiaries, namely Source Holdings Limited and Congratulations Company Ltd.

• iii. Ringo Trading Limited had direct holding of 41,544,476 Shares and was deemed by the SFO to be interested in 498,330,560 Shares as a result of its indirect holding of the Shares through its wholly-owned subsidiary, namely Ting Shing Holdings Limited.

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GENERAL INFORMATION

APPENDIX

• iv. China Poly Group Corporation owned 100 per cent. of Ringo Trading Limited and was accordingly deemed by the SFO to be interested in the Shares directly and indirectly owned by Ringo Trading Limited.

• v. Mr. He Ping, the Vice-Chairman and an executive director of the Company, is the Vice-Chairman and President of China Poly Group Corporation.

• vi. Mr. Li Shi Liang, the managing director and an executive director of the Company, is a director of Ringo Trading Limited.

• vii. Mr. Chen Hong Sheng, an executive director of the Company, is a director and the deputy general manager of China Poly Group Corporation.

• (b) Interest in the issued ordinary shares of Poly Plaza Limited, a subsidiary of the Company

Percentage of Name of shareholders issued share capital China Poly Group Corporation 25.00%

• (c) Interest in the issued ordinary shares of Polystar Digidisc Co., Ltd., a subsidiary of the Company

Percentage of Name of shareholders issued share capital China Poly Group Corporation 34.00%

• (d) Interest in the issued ordinary shares of Taicang Xinhaikang Xiexin Thermal Power Co., Ltd., a subsidiary of the Company

Percentage of Name of shareholders issued share capital Suzhou Power Investment Company 49.00%

5. LITIGATION

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

6. MISCELLANEOUS

• (a) The secretary and qualified accountant of the Company is Mr. Ho Kwok Pang, George. He is a fellow member of the Hong Kong Society of Accountants and a fellow member of the Association of Chartered Certified Accountants.

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

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