Kantone Holdings Limited — Proxy Solicitation & Information Statement 2008

Aug 19, 2008

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 licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares or warrants in Kantone Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer 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.

This circular is for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities.

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KANTONE HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1059)

DISCLOSEABLE TRANSACTION – ACQUISITION OF ENTIRE ISSUED SHARE CAPITAL OF GOOD HOLDINGS LIMITED AND ISSUE OF SHARES

Financial Adviser to Kantone Holdings Limited

20 August 2008

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12

DEFINITIONS

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

“Agreement”	the conditional agreement dated 28 July 2008 (as
	amended by a supplemental agreement dated 12
	August 2008) entered into between Kantone and the
	Vendors in respect of the Transaction
“Board”	board of the Directors
“Champion”	Champion Technology Holdings Limited, a company
	continued in Bermuda with limited liability and whose
	shares are listed on the Stock Exchange
“Champion Acquisition”	the acquisition of 299,290,629 Kantone Shares by
	Champion pursuant to an agreement dated 12 August
	2008 between Champion and Lawnside
“Champion Share(s)”	ordinary share(s) of HK$0.10 each in the share capital
	of Champion
“Completion”	completion of the Transaction
“connected person”	has the meaning ascribed to it under the Listing Rules
	and the word “connected” shall be construed
	accordingly
“Consideration”	the consideration payable by Kantone for the
	Transaction
“Consideration Share(s)”	Kantone Share(s) to be allotted and issued to the
	Vendors as consideration for the Transaction
“CS Network”	中體網絡有限公司(China Sports Network Limited), a
	company incorporated in Samoa with limited liability
	and a wholly-owned subsidiary of GHL
“Director(s)”	director(s) of Kantone
“General Mandate”	a general mandate granted to the Directors at the
	annual general meeting of Kantone dated 23 November
	2007 to allot, issue and deal with Kantone Shares not
	exceeding 20% of the issued share capital of Kantone
	as at the date of such approval
“GHL”	Good Holdings Limited, a company incorporated in
	the Republic of Seychelles with limited liability

– 1 –

DEFINITIONS

“GHL Group”	GHL, CS Network,中體科技有限公司(China Sports
	Technology Inc.),中體科技投資有限公司(China Sports
	Technology Investment Ltd.),中體（北京）數碼科技有
	限公司(China Sports (Beijing) Digital Technology
	Company Limited) and中體（北京）彩印有限公司
	(China Sports (Beijing) Printing Company Limited)
“Good Talent”	Good Talent Technology Ltd., a shareholder of GHL
	and one of the Vendors
“Guan Feng”	Guan Feng Technology Ltd., a shareholder of GHL and
	one of the Vendors
“HK$”	Hong Kong dollar(s), the lawful currency in Hong
	Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC
“Hudson Sky”	Hudson Sky Limited, a shareholder of GHL and one
	of the Vendors
“Kantone”	Kantone Holdings Limited, a company incorporated
	in the Cayman Islands with limited liability and whose
	shares are listed on the Stock Exchange
“Kantone Group”	Kantone and its subsidiaries
“Kantone Share(s)”	ordinary share(s) of HK$0.1 each in the share capital
	of Kantone
“Latest Practicable Date”	18 August 2008, being the latest practicable date for
	the purpose of ascertaining certain information
	contained in this circular
“Lawnside”	Lawnside International Limited, a company
	incorporated in the British Virgin Islands and
	beneficially wholly owned by Mr. Kan
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange
“Mr. Kan”	Mr. Paul Kan Man Lok, the chairman and an executive
	director of both Champion and Kantone
“PRC”	the People’s Republic of China

– 2 –

DEFINITIONS

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “Shareholders” holders of the Kantone Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Transaction” the acquisition of the entire issued share capital of GHL by Kantone pursuant to the Agreement “US$” United States dollar(s), the lawful currency in the United States of America, and the exchange rate for US$ into HK$ for the purpose of this circular is US$1.00 = HK$7.80 “Vendors” Hudson Sky, Guan Feng, Westcity and Good Talent “Westcity” Westcity International Ltd., a shareholder of GHL and one of the Vendors “%” per cent

– 3 –

LETTER FROM THE BOARD

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KANTONE HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1059)

Executive Directors: Paul Kan Man Lok (Chairman) Lai Yat Kwong (Acting Chief Executive Officer)

Non-executive Directors: Leo Kan Kin Leung Shirley Ha Suk Ling Paul Michael James Kirby

Independent non-executive Directors: Liang Xiong Jian Ye Pei Da Frank Bleackley Julia Tsuei Jo Miranda Ho Mo Han

Registered office: Cricket Square Hutchins Drive PO Box 2681 Grand Cayman KY1-1111 Cayman Islands

Principal and head office: 5th Floor Kantone Centre 1 Ning Foo Street Chaiwan Hong Kong

20 August 2008

To the Shareholders and for information only, holders of warrants of Kantone

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION – ACQUISITION OF ENTIRE ISSUED SHARE CAPITAL OF GOOD HOLDINGS LIMITED AND ISSUE OF SHARES

INTRODUCTION

It was announced that on 28 July 2008 and 12 August 2008, Kantone and the Vendors entered into the Agreement, pursuant to which Kantone conditionally agreed to purchase and the Vendors conditionally agreed to sell the entire issued share capital of GHL for a total Consideration of HK$390.6 million. The Consideration will be satisfied entirely by the allotment and issue of 620 million Consideration Shares at HK$0.63 each under the General Mandate.

– 4 –

LETTER FROM THE BOARD

The Transaction constitutes a discloseable transaction of Kantone pursuant to Chapter 14 of the Listing Rules.

The purpose of this circular is to provide you with, among other things, details of the Transaction.

THE AGREEMENT

Date

28 July 2008 (as amended on 12 August 2008)

Parties

Purchaser: Kantone Vendors: Hudson Sky, Guan Feng, Westcity and Good Talent

All of the Vendors are investment holding companies. To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, each of the Vendors and their respective ultimate beneficial owners are third parties independent of and not connected with Kantone or its connected persons.

Assets to be acquired

Kantone conditionally agreed to acquire and each of the Vendors conditionally agreed to sell 25% equity interest in GHL, representing the entire issued share capital of GHL in aggregate.

The Consideration

The Consideration of HK$390.6 million will be satisfied entirely by the allotment and issue of 620 million Consideration Shares at HK$0.63 each under the General Mandate upon Completion. The 620 million Consideration Shares have an aggregate nominal value of HK$62 million.

The Consideration was arrived at after arm’s length negotiations between Kantone and the Vendors. The Consideration represents (i) approximately 13.7% discount to the development costs of websites and various contents owned by CS Network, a subsidiary of GHL, in the amount of US$58 million (equivalent to approximately HK$452.4 million) as at 26 July 2008 based on cost approach and opined by Equipnet Asia Pacific Pte. Ltd., a qualified independent valuer, as fair and reasonable; and (ii) approximately 2.4% discount to the adjusted unaudited consolidated net asset value of GHL (excluding shareholders’ loans owed to the Vendors) in the amount of approximately US$51.33 million (equivalent to approximately HK$400.39 million) as at 30 June 2008, details of which are set out in the section headed “Information on the GHL Group” below.

– 5 –

LETTER FROM THE BOARD

The issue price of HK$0.63 per Consideration Share represents (i) a premium of about 3.3% over the closing price of HK$0.61 per Kantone Share as quoted on the Stock Exchange on 28 July 2008, being the last trading day of Kantone Shares prior to the signing of the Agreement, (ii) a discount of about 4.5% to the average closing price of about HK$0.66 per Kantone Share as quoted on the Stock Exchange for the last five trading days up to and including 28 July 2008, and (iii) a premium of about 16.7% over the closing price of HK$0.54 per Kantone Share as quoted on the Stock Exchange on the Latest Practicable Date.

The Consideration Shares represent (i) approximately 18.2% of the existing issued share capital of Kantone, (ii) approximately 15.4% of the issued share capital of Kantone as enlarged by the Consideration Shares on the basis no outstanding warrants of Kantone were exercised, and (iii) approximately 13.4% of the issued share capital of Kantone as enlarged by the Consideration Shares and full exercise of the outstanding warrants of Kantone. The Consideration Shares will rank pari passu in all respects with the Kantone Shares in issue as at the date of allotment. Application has been made to the Stock Exchange for the listing of and permission to deal in the Consideration Shares. There is no restriction on subsequent disposal of the Consideration Shares by the Vendors under the Agreement.

Based on 3,411,059,678 Kantone Shares in issue as at the Latest Practicable Date and assuming no new Kantone Shares will be issued other than the Consideration Shares until the date of Completion, none of the Vendors will become a Shareholder holding 5% or more of the issued share capital of Kantone immediately after Completion. Kantone is advised that the Vendors are independent of each other. The issue of the Consideration Shares will not result in a change of control of Kantone.

As at the Latest Practicable Date, 649,304,407 Kantone Shares were available for issue under the General Mandate. Upon Completion, around 95.5% of the General Mandate will be utilised and 29,304,407 Kantone Shares will remain available for issue under the General Mandate.

The Board considers that the terms of the Agreement, including the terms of the Consideration Shares, are on normal commercial terms, fair and reasonable and the Transaction is in the interests of Kantone and the Shareholders as a whole.

Conditions precedent

Completion is conditional upon the following conditions precedent:

• (a) the granting by the Listing Committee of the Stock Exchange of the listing of and permission to deal in the Consideration Shares;

• (b) the passing at a special general meeting of Champion of a resolution to approve the Agreement if required by the Listing Rules; and

• (c) Kantone completing a review of the financial, trading and legal position of GHL to its absolute satisfaction.

– 6 –

LETTER FROM THE BOARD

It was disclosed in the joint announcement dated 13 August 2008 issued by Champion and Kantone that Champion entered into a conditional agreement with Lawnside whereby Champion agreed to purchase 299,290,629 Kantone Shares from Lawnside. If the Champion Acquisition is completed before the Transaction, Champion’s shareholding interest in Kantone will not be diluted to below 50% as a result of the Transaction and Kantone will remain a subsidiary of Champion. As such, the Transaction will constitute a discloseable transaction of Champion instead of a major transaction pursuant to the Listing Rules and is not subject to the approval of the shareholders of Champion. In the event that the Champion Acquisition does not proceed, the Transaction will constitute a major transaction of Champion pursuant to the Listing Rules. In view of such latest development, a general meeting of Champion to approve the Agreement pursuant to the above condition (b) may or may not be required under the Listing Rules.

Completion is expected to take place on the second business day after the above conditions precedent have been fulfilled. If the above conditions precedent have not been fulfilled by 28 November 2008 (or such other date as the parties to the Agreement may agree), the Agreement shall lapse and no party thereto shall have any claim against any of the other parties except in respect of any antecedent breach.

As at the Latest Practicable Date, none of the above conditions precedent had been fulfilled.

SHAREHOLDING STRUCTURE OF KANTONE

The following table sets out the shareholding structure of Kantone as at the Latest Practicable Date and immediately after Completion under different scenarios:

Both the Champion Acquisition and the Transaction proceed

Champion Shanghai Industrial Investment (Holdings) Company Limited Lawnside Existing public Shareholders Vendors: Hudson Sky Guan Feng Westcity Good Talent Sub-total of all public Shareholders Total	As at the Latest Practicable Date Number of Kantone Shares % 1,740,200,873 51.02% 538,470,000 15.79% 299,290,629 8.77% 833,098,176 24.42% – – – – – – – – 833,098,176 24.42% 3,411,059,678 100.00%	Immediately after completion of the Champion Acquisition (Before full exercise of the outstanding warrants of Kantone) Number of Kantone Shares % 2,039,491,502 59.79% 538,470,000 15.79% – – 833,098,176 24.42% – – – – – – – – 833,098,176 24.42% 3,411,059,678 100.00%	Immediately after completion of the Champion Acquisition and Completion (Before full exercise of the outstanding warrants of Kantone) Number of Kantone Shares % 2,039,491,502 50.59% 538,470,000 13.36% – – 833,098,176 20.65% 155,000,000 3.85% 155,000,000 3.85% 155,000,000 3.85% 155,000,000 3.85% 1,453,098,176 36.05% 4,031,059,678 100.00%	Immediately after completion of the Champion Acquisition and Completion (After full exercise of the outstanding warrants of Kantone) Number of Kantone Shares % 2,339,769,529 50.59% 612,000,013 13.23% 82,058,443 1.77% 971,465,766 21.01% 155,000,000 3.35% 155,000,000 3.35% 155,000,000 3.35% 155,000,000 3.35% 1,591,465,766 34.41% 4,625,293,751 100.00%	Immediately after completion of the Champion Acquisition and Completion (After full exercise of the outstanding warrants of Kantone) Number of Kantone Shares % 2,339,769,529 50.59% 612,000,013 13.23% 82,058,443 1.77% 971,465,766 21.01% 155,000,000 3.35% 155,000,000 3.35% 155,000,000 3.35% 155,000,000 3.35% 1,591,465,766 34.41% 4,625,293,751 100.00%
					34.41%
					100.00%

– 7 –

LETTER FROM THE BOARD

The Transaction proceeds and the Champion Acquisition does not proceed

Champion Shanghai Industrial Investment (Holdings) Company Limited Lawnside Existing public Shareholders Vendors: Hudson Sky Guan Feng Westcity Good Talent Sub-total of all public Shareholders Total	As at the Latest Practicable Date Number of Kantone Shares % 1,740,200,873 51.02% 538,470,000 15.79% 299,290,629 8.77% 833,098,176 24.42% – – – – – – – – 833,098,176 24.42% 3,411,059,678 100.00%	Immediately after Completion (Before full exercise of the outstanding warrants of Kantone) Number of Kantone Shares % 1,740,200,873 43.17% 538,470,000 13.36% 299,290,629 7.42% 833,098,176 20.65% 155,000,000 3.85% 155,000,000 3.85% 155,000,000 3.85% 155,000,000 3.85% 1,453,098,176 36.05% 4,031,059,678 100.00%	Immediately after Completion (After full exercise of the outstanding warrants of Kantone) Number of Kantone Shares % 2,040,478,900 44.12% 612,000,013 13.23% 381,349,072 8.24% 971,465,766 21.01% 155,000,000 3.35% 155,000,000 3.35% 155,000,000 3.35% 155,000,000 3.35% 1,591,465,766 34.41% 4,625,293,751 100.00%	Immediately after Completion (After full exercise of the outstanding warrants of Kantone) Number of Kantone Shares % 2,040,478,900 44.12% 612,000,013 13.23% 381,349,072 8.24% 971,465,766 21.01% 155,000,000 3.35% 155,000,000 3.35% 155,000,000 3.35% 155,000,000 3.35% 1,591,465,766 34.41% 4,625,293,751 100.00%
				34.41%
				100.00%

On Completion, the public float of Kantone Shares will increase to above 25% in compliance with the Listing Rules.

INFORMATION ON KANTONE

The Kantone Group is principally engaged in the sale of general systems products; provision of services (including software customisation and provision of e-lottery services) and software licensing; leasing of systems products; development and provision of IT solutions for e-gaming, leisure and entertainment; and holding strategic investments in advanced technology product development companies.

– 8 –

LETTER FROM THE BOARD

INFORMATION ON THE GHL GROUP

Overview

GHL is an investment holding company incorporated in the Republic of Seychelles on 3 January 2008. The group structure of the GHL Group is as follows:

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----- Start of picture text -----

GHL
40% 100%
中體科技有限公司
中體網絡有限公司
(China Sports
CS Network
Technology Inc.) [1]
100%
中體科技投資
有限公司
(China Sports
Technology Investment Ltd.)
41% 60%
中體（北京）彩印 中體（北京）數碼
有限公司 科技有限公司
(China Sports (Beijing) (China Sports (Beijing)
Printing Company Digital Technology
Limited) [2] Company Limited) [3]
----- End of picture text -----

Notes:

1. The remaining 60% equity interest of 中體科技有限公司 (China Sports Technology Inc.) is beneficially owned by 中體聯投資有限公司 (China Sports United Investment Limited), a whollyowned subsidiary of 中國體育報業總社 (China Sports Publications Corporation) which in turn is wholly-owned by 國家體育總局 (the General Administration of Sport of China). 中體聯投資有 限公司 (China Sports United Investment Limited) and its beneficial owners are third parties independent of and not connected with Champion, Kantone or their respective connected persons.

2. The remaining equity interest of 中體（北京）彩印有限公司 (China Sports (Beijing) Printing Company Limited) is owned as to 49% by 中體聯投資有限公司 (China Sports United Investment Limited) and 10% by 北京匯中通產投資有限公司 (Beijing Huizhong Tong Chan Investment Company Ltd.), both being third parties independent of and not connected with Champion, Kantone or their respective connected persons.

3. The remaining equity interest of 中體（北京）數碼科技有限公司 (China Sports (Beijing) Digital Technology Company Limited) is owned as to 30% by 中體聯投資有限公司 (China Sports United Investment Limited) and 10% by 北京匯中通產投資有限公司 (Beijing Huizhong Tong Chan Investment Company Ltd.).

– 9 –

LETTER FROM THE BOARD

CS Network is a company incorporated in Samoa and is principally engaged in the development of gaming software, sports contents, sports websites and sports network systems. CS Network has developed a multiple entertainment platform which hosts various games. The development costs of websites and various contents owned by CS Network amounted to US$58 million (equivalent to approximately HK$452.4 million) as at 26 July 2008 based on cost approach and opined by Equipnet Asia Pacific Pte. Ltd., a qualified independent valuer, as fair and reasonable.

中體（北京）彩印有限公司 (China Sports (Beijing) Printing Company Limited) is a sports media company established in the PRC. It is principally engaged in colour printing and currently publishes 5 newspapers and 27 magazines for 中國體育報業總社 (China Sports Publications Corporation). It also provides other printing services to other companies and organisations.

中體（北京）數碼科技有限公司 (China Sports (Beijing) Digital Technology Company Limited) is established in the PRC and is intended to engage in the development of webbased e-commerce and provision of value-added-services for mobile applications in the PRC.

Both 中體科技有限公司 (China Sports Technology Inc.) and 中體科技投資有限公司 (China Sports Technology Investment Ltd.) are investment holding companies and are being accounted for by GHL as associates using equity method. 中體（北京）數碼科技有限 公司 (China Sports (Beijing) Digital Technology Company Limited) and 中體（北京）彩印 有限公司 (China Sports (Beijing) Printing Company Limited) are accounted for by GHL as investments.

Financial information

Pursuant to the Agreement, the Vendors agreed to waive and to procure the waiver of all amounts due from any member of the GHL Group to the Vendors and/or their respective associates (as defined in the Listing Rules) on the date of Completion so that GHL shall have a net asset value of not less than HK$400.39 million as at the date of Completion.

Based on the management accounts of GHL (prepared in accordance with International Financial Reporting Standards), amounts due from the GHL Group to the Vendors were approximately US$51.28 million (equivalent to approximately HK$400.0 million) in aggregate as at 30 June 2008. Excluding the aforesaid shareholders’ loans, the adjusted unaudited consolidated net asset value of GHL was approximately US$51.33 million (equivalent to approximately HK$400.39 million) as at 30 June 2008.

GHL has not prepared any profit and loss accounts since the internet businesses of the GHL Group are under development stage and revenue has yet to be generated. As advised by the Vendors, loss incurred by GHL since the date of its incorporation is insignificant.

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LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE TRANSACTION

In recent years, advances in communications technology and the widespread application of fixed phones, mobile phones, credit cards, and various other emerging electronic devices globally have enriched the media coverage for sports and revitalised lottery operating systems worldwide. The increase in new media such as the internet and mobile channels covering sports activities as well as increase in lottery sales provide evidence of the increasing popularity of sports and the media that provide coverage.

Kantone has been developing horse racing information channels and contents for sports, online telephone call data handling systems and call centre software applications, and has also been developing integrated platforms with secure e-commerce solutions for global gaming and entertainment activities. Building on its expertise in integrated IT solutions and telephone data management, Kantone continues to expand its portfolio of investments in gaming software and sports and entertainment websites.

The Transaction is expected to allow Kantone to leverage its IT solutions, information software expertise, and sports and gaming endeavours for further development of the sports media market. This is expected to provide Kantone an attractive opportunity to expand its business to new horizons and capture new businesses arising from the rising popularity of sports and related activities.

Upon Completion, GHL will become a wholly-owned subsidiary of Kantone and its results will be consolidated into the financial statements of the Kantone Group. Assuming that Completion had taken place on 30 June 2008, the Transaction would have increased the total asset and net asset value of the Kantone Group by approximately HK$400.39 million. The Transaction would have no effect on the liabilities of the Kantone Group on Completion. The Transaction is expected to have a positive impact on the earnings base of the Kantone Group when revenues start to be generated from the digital content currently developed by CS Network, as well as contribution from 中體科技有限公司 (China Sports Technology Inc.).

LISTING RULES IMPLICATIONS

The Transaction constitutes a discloseable transaction of Kantone pursuant to Chapter 14 of the Listing Rules. There is no prior transaction which is required to be aggregated with the Agreement under Rule 14.22 of the Listing Rules.

ADDITIONAL INFORMATION

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

Yours faithfully, On behalf of the Board Paul Kan Man Lok

Chairman

– 11 –

APPENDIX

GENERAL INFORMATION

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Kantone Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable inquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

SHARE CAPITAL

Authorised: 12,000,000,000 Kantone Shares Issued and to be issued, fully paid or credited as fully paid: 3,411,059,678 Kantone Shares in issue on the Latest Practicable Date 620,000,000 Consideration Shares to be issued 4,031,059,678 Kantone Shares	HK$ 1,200,000,000.00
	341,105,967.80 62,000,000.00
	403,105,967.80

All the Kantone Shares rank, and the Consideration Shares on issue will rank, pari passu in all respects, including all rights as to dividend, voting and interests in the capital.

DISCLOSURE OF INTERESTS

Interests of the Directors

As at the Latest Practicable Date, the interests of the Directors in the share capital of Kantone and its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to Kantone and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests which they were 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, pursuant to the Model

– 12 –

APPENDIX

GENERAL INFORMATION

Code for Securities Transactions by Directors of Listed Companies in the Listing Rules, to be notified to Kantone and the Stock Exchange (except the changes arising as a result of the signing of the agreement relating to the Champion Acquisition, which has not been completed) were as follows:

			Approximate	Approximate
			percentage of
	Nature of	Number of	the issued		Number of
Name	interest	shares	share capital		warrants
Securities of Kantone	Corporate	Note 1		59.79	Note 1
Mr. Kan
Securities of Champion	Corporate	Note 2		26.06	Note 2
Mr. Kan
Securities of	Corporate	Note 3		79.98	Note 3
DIGITALHONGKONG.COM
(“Digital HK”)
Mr. Kan

Notes:

1. 1,740,200,873 Kantone Shares and 300,278,027 units of warrants of Kantone were held by Champion while 299,290,629 Kantone Shares and 82,058,443 units of warrants of Kantone were held by Lawnside. Lawnside is beneficially wholly owned by Mr. Kan. These warrants have not been taken into account in calculating the percentage of the issued share capital of Kantone held by them.

2. 514,491,761 Champion Shares and 100,701,319 units of warrants of Champion were held by Lawnside. These warrants have not been taken into account in calculating the percentage of the issued share capital of Champion held by Lawnside.

3. 117,300,000 shares of Digital HK were held by Champion and 2,669,171 shares of Digital HK were held by Lawnside.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or any chief executive of Kantone had an interest or short position in any shares, underlying shares or debentures of Kantone or any associated corporation (within the meaning of Part XV of the SFO) which would have to be notified to Kantone and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he was taken or deemed to have under such provisions of the SFO) or which was required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules to be notified to Kantone and the Stock Exchange.

– 13 –

APPENDIX

GENERAL INFORMATION

Interests of other persons in the share capital of Kantone

As at the Latest Practicable Date, so far as is known to the Directors, the following persons (other than a Director or chief executive of Kantone) had an interest in the shares and underlying shares of Kantone which would fall to be disclosed to Kantone under the provisions of Divisions 2 and 3 of Part XV of the SFO (except the changes arising as a result of the signing of the agreement relating to the Champion Acquisition, which has not been completed):

				Number of	Approximate
				underlying	percentage of
	Nature of	Number of	Description of	Kantone	issued share
Name	interest	Kantone Shares	derivatives	Shares	capital
Champion_(Note)_	Beneficial owner	1,740,200,873	–	–	51.02
	Beneficial owner		Warrants to subscribe	300,278,027	8.80
			for Kantone Shares
Shanghai Industrial Investment	Corporate interest	538,470,000	–	–	15.79
(Holdings) Company Limited	Corporate interest		Warrants to subscribe	73,530,013	2.16
			for Kantone Shares
Lawnside_(Note)_	Beneficial owner	299,290,629	–	–	8.77
	Beneficial owner		Warrants to subscribe	82,058,443	2.41
			for Kantone Shares

Note: See Note 1 to the sub-section headed “Interests of the Directors” above.

Save as disclosed above, as at the Latest Practicable Date, according to the register of interests required to be kept by Kantone under section 336 of the SFO, there was no person who had any interest or short position in the shares or underlying shares of Kantone which would fall to be disclosed to Kantone under the provisions of Divisions 2 and 3 of Part XV of the SFO.

Mr. Kan, Messrs. Leo Kan Kin Leung, Lai Yat Kwong, Shirley Ha Suk Ling, Liang Xiong Jian, Ye Pei Da and Frank Bleackley are directors of Champion.

Mr. Kan and Mr. Leo Kan Kin Leung are directors of Lawnside.

Interests in other members of the Kantone Group

As at the Latest Practicable Date, so far as is known to the Directors, the following persons (other than a Director or chief executive of Kantone) were, directly or indirectly, interested in 10% or more of the nominal value of the share capital carrying rights to vote in all circumstances at general meetings of the following subsidiaries of Kantone:

• (a) Mr. Lo Ming Chi, Charles and Mr. Wang Yu Peng were both interested in 20% of the issued share capital of Aspire Management Limited;

• (b) Mr. Wang Yu Peng and Shenzhen Helper Information Technology Co., Ltd. were interested in 23.08% and 15.38% respectively of the issued share capital of Shenzhen Helper Science Development Company Limited; and

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APPENDIX

GENERAL INFORMATION

• (c) Bharat Electronics Limited was interested in 49% of the issued share capital of Bel Multitone Limited.

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any person (other than a Director or chief executive of Kantone) who was interested, directly or indirectly, in 10% or more of the issued shares of any subsidiary of Kantone or any options in respect of such capital.

Interest of expert

The expert named in the paragraph headed “Consent” in this appendix does not have any shareholding in any company in the Kantone Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any company in the Kantone Group.

Service contracts

There is no existing or proposed service contract between any member of the Kantone Group and any Director or proposed Director (excluding contracts expiring or determinable by Kantone within one year without payment of compensation (other than statutory compensation)).

Competing business

None of the Directors or any of their respective associates has any interest in any business which competes or is likely to compete, either directly or indirectly, with the Kantone Group’s business.

LITIGATION

Neither Kantone nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened against Kantone or any of its subsidiaries.

As at the Latest Practicable Date, to the best knowledge and information of the Directors, neither GHL nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened against GHL or any of its subsidiaries.

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APPENDIX

GENERAL INFORMATION

QUALIFICATION OF EXPERT

The qualification of the expert who has given opinion in this circular is as follow:

Name Qualification

Equipnet Asia Pacific Pte. Ltd. Qualified international valuer

CONSENT

Equipnet Asia Pacific Pte. Ltd. has given and has not withdrawn its written consent to the issue of this circular with the references to its name included herein in the form and context in which they are respectively included.

GENERAL

• (a) The secretary of Kantone is Jennifer Cheung Mei Ha, solicitor practising in Hong Kong.

• (b) The qualified accountant of Kantone is Lai Yat Kwong, a fellow member of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants (Practising).

• (c) The registered office of Kantone is situated at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, the Cayman Islands.

• (d) The Hong Kong share registrar of Kantone is Tricor Secretaries Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

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

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