National Electronics Holdings Limited — M&A Activity 2004

Nov 9, 2004

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, 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 this announcement.

(incorporated in Bermuda with limited liability)

(Stock Code: 127)

CONNECTED TRANSACTION

PROVISION OF FINANCIAL ASSISTANCE TO POWER JADE CAPITAL LIMITED

IN RELATION TO PROPOSED PRIVATISATION OF

THE KWONG SANG HONG INTERNATIONAL LIMITED

BY POWER JADE CAPITAL LIMITED

BY WAY OF A SCHEME OF ARRANGEMENT

UNDER SECTION 99 OF THE COMPANIES ACT

AT THE CANCELLATION PRICE OF HK$1.25 PER SCHEME SHARE

THE PROPOSAL The Directors wish to announce that Power Jade, a company owned as to 50% indirectly by the Company and as to 50% directly by Solar Chain, has requested the KSH Board to put forward a proposal to the Scheme Shareholders regarding a proposed privatisation of KSH by way of a scheme of arrangement under Section 99 of the Companies Act. The Proposal, if made, will be subject to, among other things, the approval by the KSH Independent Shareholders at the Court Meeting. Power Jade, Good System and any of their respective associates and parties acting in concert with them will abstain from voting at the Court Meeting. Power Jade proposes that all Scheme Shares be cancelled in exchange for HK$1.25 in cash for each Scheme Share. As at the date of this announcement, the Scheme Shareholders were interested in 446,153,369 KSH Shares, representing approximately 46.48% of the issued share capital of KSH. The amount of cash required in order to effect the Proposal is approximately HK$557.7 million. As at the date of this announcement, KSH did not have any outstanding options, warrants or convertible securities. Following the effective date of the Proposal, the listing of the KSH Shares on the Stock Exchange will be withdrawn and KSH will become a wholly-owned subsidiary of Power Jade. The Proposal is conditional upon the fulfillment or waiver of, as applicable, the conditions described in the section titled “Conditions of the Proposal” below. All conditions will have to be fulfilled or waived, as applicable, on or before 31st March, 2005 (or such later date as Power Jade and KSH may agree or as the Supreme Court of Bermuda may direct). PROVISION OF THE LOAN OR THE SHARE SUBSCRIPTION To fund the implementation of the Scheme, each of Solar Chain and the Company will provide funding to Power Jade either by way of a loan in the amount of up to HK$280 million or by way of equity through the Share Subscription, which will be pro-rata to their respective shareholdings in Power Jade. The proposed funding will be used for the sole purpose of financing Power Jade to implement the Proposal. If the Proposal does not proceed, no funding will be made by the Company. In the event that the Proposal proceeds, Good System will accept the Cancellation Price in the aggregate amount of HK$91,157,500 as consideration for the cancellation of the Scheme Shares as held by it. Specified Transaction As Power Jade is an associated company of the Company, the provision of the Loan by the Company to Power Jade will be considered a “Specified Transaction” (as defined in the Undertaking) which will require the approval of the independent Shareholders at a general meeting of the Company. The Company has applied for a waiver from the Stock Exchange in respect of the independent Shareholders' approval requirements as provided under the Undertaking. Connected Transaction Each of Power Jade and KSH is a connected person of the Company as (a) Power Jade is the controlling shareholder of KSH; and (b) a subsidiary of KSH is a substantial shareholder of a non-wholly owned subsidiary of the Company. Under Rules 14A.63 and 14A.13(2)(a)(i) of the Listing Rules, the provision of the Loan by the Company to Power Jade or the Share Subscription constitutes a connected transaction for the Company under the Listing Rules and will be subject to the reporting, announcement and independent Shareholders' approval requirements of Chapter 14A of the Listing Rules. The Company has applied for a waiver from holding a Shareholders' meeting pursuant to Rule 14A.53 of the Listing Rules on the basis that no Shareholder is required to abstain from voting if the Company is to convene a general meeting for obtaining Shareholders' approval of the Connected Transaction and written independent Shareholders' approval has been obtained from Mr. Joseph Lau and Associates, being a closely allied group of Shareholders who (together) hold approximately 63.1% of the issued share capital of the Company having the right to attend and vote at that general meeting to approve the Connected Transaction. The Company will send to the Shareholders a document containing, among other things, further details of the Connected Transaction, the recommendation of the Independent Board Committee in respect of the Connected Transaction and a letter of advice from the independent financial adviser to the Independent Board Committee for their information as soon as practicable.

INTRODUCTION

Reference is made to the announcement of the Company dated 27th October, 2004 and the joint announcement of Power Jade and KSH dated 4th November, 2004.

Power Jade, a company owned as to 50% indirectly by the Company and as to 50% directly by Solar Chain, requested the KSH Board to put forward a proposal to the Scheme Shareholders regarding a proposed privatisation of KSH by way of the Scheme involving the cancellation of all the Scheme Shares at the Cancellation Price of HK$1.25 per Scheme Share, as a result of which the listing of the KSH Shares on the Stock Exchange will be withdrawn and KSH will become a wholly-owned subsidiary of Power Jade.

As at the date of this announcement, KSH is an associated company of the Company. Further information on KSH is set out in the paragraph headed “Information on KSH” of this announcement.

TERMS OF THE PROPOSAL

The Cancellation Price under the Proposal will be payable in cash which represents:

(a) a premium of approximately 5.04% over the closing price of HK$1.19 per KSH Share as quoted on the Stock Exchange on the Last Trading Day;

(b) a premium of approximately 23.03% over the average closing price of approximately HK$1.016 per KSH Share based on the daily closing prices as quoted on the Stock Exchange over the 10 consecutive trading days up to and including the Last Trading Day;

(c) a premium of approximately 36.17% over the average closing price of approximately HK$0.918 per KSH Share based on the daily closing prices as quoted on the Stock Exchange over the 30 consecutive trading days up to and including the Last Trading Day;

(d) a premium of approximately 52.63% over the average closing price of approximately HK$0.819 per KSH Share based on the daily closing prices as quoted on the Stock Exchange over the 60 consecutive trading days up to and including the Last Trading Day; and

(e) a discount of approximately 6.72% to the unaudited consolidated net asset value (as published in the interim report of KSH for the six months ended 31st May, 2004) per KSH Share of approximately HK$1.34 as at 31st May, 2004.

As at the date of this announcement, there were 959,899,416 KSH Shares in issue and the Scheme Shareholders were interested in 446,153,369 KSH Shares, representing approximately 46.48% of the issued share capital of KSH.

The Cancellation Price was arrived at after taking into consideration, among other things, the prevailing and historical market price of the KSH Shares and the unaudited consolidated net asset value of the KSH Group as at 31st May, 2004. On the basis of the Cancellation Price, the Proposal values the entire issued share capital of KSH at approximately HK$1.20 billion. The aggregate amount of cash required in order to effect the Proposal is approximately HK$557.7 million.

The Proposal, if made, will be subject to, among other things, approval by the KSH Independent Shareholders at the Court Meeting. Given that Good System is a wholly-owned subsidiary of the Company which has an indirect interest in Power Jade, Good System is regarded as a party acting in concert with Power Jade and therefore both of them and any of their respective associates and parties acting in concert with them will abstain from voting on the Proposal at the Court Meeting. The KSH Shares held by Power Jade will not form part of the Scheme Shares but the KSH Shares held by Good System will form part of the Scheme Shares.

Power Jade and Good System have indicated that if the Proposal is approved at the Court Meeting, they will vote or will procure the voting of their beneficial interests in KSH in favour of the special resolution to be proposed at the special general meeting of KSH to be convened following the Court Meeting to approve and give effect to the Proposal (including the cancellation of the Scheme Shares and the reduction of the issued share capital of KSH).

CONDITIONS OF THE PROPOSAL

The Proposal will become effective and binding on all Scheme Shareholders subject to the fulfillment or waiver (as applicable) of the following conditions:

(a) the approval of the Scheme (by way of poll) by a majority in number of the KSH Independent Shareholders representing not less than three-fourths in value of the Scheme Shares present and voting either in person or by proxy at the Court Meeting to consider the Scheme, provided that:

(i) the Scheme is approved by at least 75% of votes attaching to the Scheme Shares held by the KSH Independent Shareholders present and voting either in person or by proxy; and

(ii) the number of votes cast against the resolution to approve the Scheme is not more than 10% of the votes attaching to the Scheme Shares held by the KSH Independent Shareholders;

(b) the passing of a special resolution at the special general meeting of KSH to be convened following the Court Meeting to approve and give effect to the Proposal (including the cancellation of the Scheme Shares and the reduction of the issued share capital of KSH) by a majority in number representing at least three-fourths of votes cast by the KSH Shareholders present and voting, in person or by proxy;

(c) the sanction of the Proposal (with or without modification) by the Supreme Court of Bermuda and the delivery to the Registrar of Companies in Bermuda of a copy of the order of the Supreme Court of Bermuda for registration;

(d) the necessary compliance with the requirements of Section 46 of the Companies Act in relation to the reduction of the issued share capital of KSH as regards the Scheme Shares;

(e) all Authorisations in connection with the Proposal having been obtained from, with or by (as the case may be) the Relevant Authorities in Bermuda and/or Hong Kong and/or any other relevant jurisdictions;

(f) all Authorisations remaining in full force and effect without variation, and all necessary statutory or regulatory obligations in all relevant jurisdictions having been complied with and no requirement having been imposed by any Relevant Authorities which is not expressly provided for, or is in addition to requirements expressly provided for, in relevant laws, rules, regulations or codes in connection with the Proposal or any matters, documents (including circulars) or things relating thereto, in each aforesaid case up to and at the time when the Proposal becomes effective;

(g) all other necessary consents which may be required under any existing contractual obligations of KSH being obtained; and

(h) if required, the obtaining by the Company of such other necessary consent, approval, authorisation, permission, waiver or exemption which may be required from any Relevant Authorities or other third parties which are necessary or desirable for the performance of the Scheme under the applicable laws and regulations, including but without limitation to the relevant regulatory approval(s) by the Stock Exchange or as required under the Listing Rules.

Power Jade reserves the right to waive condition (g), either in whole or in respect of any particular matter. In the event that condition (e) or (f) is not fulfilled by reason of an Authorisation not having been obtained, Power Jade reserves the right to assess the materiality of such non-fulfillment and to waive the fulfillment of such condition(s) to such extent where it considers appropriate. Conditions (a) to (d) and (h) cannot be waived in any event. All of the above conditions will have to be fulfilled or waived, as applicable, on or before 31st March, 2005 (or such other date as Power Jade and KSH may agree or as the Supreme Court of Bermuda may direct), otherwise the Proposal will lapse. Further announcement will be made by the Company if the Proposal lapses or when the Proposal becomes unconditional.

PROVISION OF THE LOAN OR THE SHARE SUBSCRIPTION

On the basis of HK$1.25 per Scheme Share, the aggregate amount of cash required in order to effect the Proposal is approximately HK$557.7 million.

To fund the implementation of the Scheme, each of Solar Chain and the Company will provide funding to Power Jade either by way of an interest-free loan which is repayable on demand in the amount of up to HK$280 million or by way of equity through the Share Subscription, which will be pro-rata to their respective shareholdings in Power Jade, subject to each of the conditions of the Proposal being fulfilled or waived (as the case may be). The Company will fulfill the funding needs by its internal resources or bank borrowings. It is expected that in the event that the parties proceed with the Share Subscription, each of Solar Chain and the Company will hold 50% interest in Power Jade immediately upon completion of the Share Subscription. The proposed funding will be used for the sole purpose of financing Power Jade to implement the Proposal. If the Proposal does not proceed, no funding will be made by the Company. It is expected that the method of funding will be determined by each of Solar Chain and the Company immediately after all the conditions to the Proposal have been satisfied. Further announcement will be made by the Company if the Company has determined the method of funding by each of Solar Chain and the Company. In the event that the Proposal proceeds, Good System will accept the Cancellation Price in the aggregate amount of HK$91,157,500 as consideration for the cancellation of the Scheme Shares as held by it.

Specified Transaction

Pursuant to the Undertaking, the Company has undertaken to the Stock Exchange that it will not carry into effect a Specified Transaction (as defined in the Undertaking) which includes, amongst others, any arrangement whereby the Company directly or indirectly grants a loan or gives other financial assistance for a principal amount which exceeds HK$200 million to its associated company (as defined in the Takeovers Code), unless such transaction has obtained the approval of the independent Shareholders at a general meeting of the Company.

As Power Jade is an associated company of the Company, the provision of the Loan by the Company to Power Jade will be considered a “Specified Transaction” (as defined in the Undertaking) which will require the approval of the independent Shareholders at a general meeting of the Company.

The Undertaking imposes additional compliance requirements on the Company over the Listing Rules. The Company has, since 19th September, 1996, made various applications for the release of the Undertaking on the basis, amongst other things, that the amendments of Listing Rules since 1990 have strengthened disclosure and approval requirements and the voting requirement under the Undertaking has led to unnecessary delay in the conduct of business of the Company.

The Company has applied for a waiver from the Stock Exchange in respect of the independent Shareholders' approval requirements as required under the Undertaking.

Financial Assistance

Each of Power Jade and KSH is a connected person of the Company as (a) Power Jade is the controlling shareholder of KSH; and (b) a subsidiary of KSH is a substantial shareholder of a non-wholly owned subsidiary of the Company.

Under Rules 14A.63 and 14A.13(2)(a)(i) of the Listing Rules, the provision of the Loan by the Company to Power Jade or the Share Subscription constitutes a connected transaction for the Company under the Listing Rules and will be subject to the reporting, announcement and independent Shareholders' approval requirements of Chapter 14A of the Listing Rules.

The Directors consider that the Connected Transaction was negotiated on an arm's length basis and agreed on normal commercial terms between the parties involved. The Directors further consider that the terms of the Connected Transaction are fair and reasonable so far as the Shareholders are concerned and the Connected Transaction is in the interest of the Company and the Shareholders as a whole.

So far as the Company is aware, none of Power Jade, KSH, Ms. Anita Shum and their respective associates are Shareholders, and none of the Shareholders has a material interest in the Proposal.

The Company has applied for a waiver from holding a Shareholders' meeting pursuant to Rule 14A.53 of the Listing Rules on the basis that no Shareholder is required to abstain from voting if the Company is to convene a general meeting for obtaining Shareholders' approval of the Connected Transaction and written independent Shareholders' approval has been obtained from Mr. Joseph Lau and Associates, being a closely allied group of Shareholders who (together) hold approximately 63.1% of the issued share capital of the Company having the right to attend and vote at that general meeting to approve the Connected Transaction.

The Company will send to the Shareholders a document containing, among other things, further details of the Connected Transaction, the recommendation of the Independent Board Committee in respect of the Connected Transaction and a letter of advice from the independent financial adviser to the Independent Board Committee for their information as soon as practicable.

INFORMATION ON KSH

The principal activities of the KSH Group include property development, sales of properties, property leasing, manufacturing and trading in cosmetic products.

A summary of the audited consolidated results of the KSH Group for each of the two years ended 30th November, 2002 and 30th November, 2003 and the unaudited consolidated results of the KSH Group for the six months ended 31st May, 2004 (as published in the interim report of KSH for the six months ended 31st May, 2004) is set out below:

	For the year ended 30th November		For the six months ended 31st May
	2002 HK$'000 (Audited)	2003 HK$'000 (Audited)	2004 HK$'000 (Unaudited)
Turnover (Loss)/profit before taxation Taxation (Loss)/profit after taxation Minority interests (Loss)/profit attributable to shareholders	49,044 (300,731) 7,478 ————— (293,253) 36,946 ————— (256,307)	144,618 (57,419) (18,703) ————— (76,122) 2,510 ————— (73,612)	20,367 8,949 (2,738) ————— 6,211 219 ————— 6,430

As at 31st May, 2004, the unaudited consolidated net assets of the KSH Group (as published in the interim report of KSH for the six months ended 31st May, 2004) was approximately HK$1,289.9 million, representing approximately HK$1.34 per KSH Share (based on 959,899,416 KSH Shares in issue as at the date of this announcement).

The chart below illustrates the simplified shareholding structure of KSH as at the date of this announcement:

INFORMATION ON POWER JADE

Power Jade is an investment holding company incorporated in the British Virgin Islands with limited liability on 2nd January, 1998. Power Jade has not conducted any business other than the investment holding of its interests in the KSH Shares. Power Jade is owned as to 50% indirectly by the Company and as to 50% directly by Solar Chain. The directors of Power Jade are Mr. Joseph Lau, Luen-hung, Mr. Thomas Lau, Luen-hung, Ms. Anita Shum and Solar Chain. The sole director of Solar Chain and its representative on the board of directors of Power Jade is Ms. Anita Shum. The chairman of the board of directors of Power Jade does not have a casting vote at the board meeting of Power Jade.

The chart below illustrates the simplified shareholding structure of Power Jade and Good System as at the date of this announcement:

Apart from its interests in KSH through Power Jade, the Company also holds approximately 7.60% interests in KSH through Good System, which is an investment holding company incorporated in Hong Kong with limited liability and is a wholly-owned subsidiary of the Company.

Solar Chain is a single purpose investment holding company and its entire issued share capital is beneficially owned by Ms. Anita Shum. Ms. Anita Shum is the daughter-in-law of Mr. Cheng Yue-Pui, a younger brother of Dato' Dr. Cheng Yu-Tung. Dato' Dr. Cheng Yu-Tung is the chairman of New World Development Company Limited, the shares of which (stock code: 17) are listed on the Stock Exchange. Mr. Cheng Yue-Pui is a non-executive director of New World Development Company Limited. So far as the Company is aware, Solar Chain and its beneficial owner, Ms. Anita Shum, are not connected persons of the Company under the Listing Rules.

None of Power Jade, Good System, the Company, Ms. Anita Shum and parties acting in concert with any of them holds any derivatives in the KSH Shares as at the date of this announcement.

SHAREHOLDING STRUCTURE OF KSH BEFORE AND AFTER THE PROPOSAL

The table below sets out the shareholding structure of KSH as at the date of this announcement and immediately following implementation of the Proposal:

Shareholders	As at the date of this announcement		Immediately following completion of the Proposal
	Number of KSH Shares	%	Number of KSH Shares	%
Power Jade Good System Public Total	513,746,047 72,926,000 373,227,369 ————— 959,899,416	53.52 7.60 38.88 ———— 100	513,746,047 - - ————— 513,746,047	100 - - ———— 100

Upon the completion of the Proposal, the issued share capital of KSH will be reduced by cancelling and extinguishing the Scheme Shares.

In addition, KSH will become a wholly-owned subsidiary of Power Jade and the listing of the KSH Shares on the Stock Exchange will be withdrawn. As at the date of this announcement, KSH did not have any outstanding options, warrants or convertible securities.

REASONS FOR AND BENEFITS OF THE PROPOSAL

The KSH Shares have been trading at a discount to its underlying net asset value per KSH Share and the trading volume of the KSH Shares has been thin. For the period from 31st October, 2003 up to and including the Last Trading Day, the KSH Shares have been traded within the range from HK$0.39 to HK$1.21 per KSH Share with an average closing price of approximately HK$0.65 per KSH Share. Such average closing price represents a discount of approximately 51.49% to the unaudited consolidated net asset value (as published in the interim report of KSH for the six months ended 31st May, 2004) per KSH Share of approximately HK$1.34 as at 31st May, 2004. The average daily trading volume of the KSH Shares for the period from 31st October, 2003 up to and including the Last Trading Day was approximately 906,620 KSH Shares. Such daily trading volume represents about 0.09% of the issued share capital of KSH as at the date of this announcement.

The Cancellation Price represents a premium of approximately 23.03%, 36.17% and 52.63% over the average daily closing price of KSH Shares over the 10-trading days, 30-trading days and 60-trading days respectively up to and including the Last Trading Day. The average daily trading volume for the period from 31st October, 2003 up to and including the Last Trading Day represents about 0.09% of the KSH Shares in issue as at the date of this announcement. In addition, the Cancellation Price represents a discount of about 6.72% to the unaudited consolidated net asset value (as published in the interim report of KSH for the six months ended 31st May, 2004) per KSH Share of approximately HK$1.34 as at 31st May, 2004.

Upon implementation of the Proposal, the Scheme Shares held by the Scheme Shareholders will be cancelled pursuant to the terms of the Scheme and upon which the shares of KSH will be wholly-owned by Power Jade, which is in turn owned as to 50% indirectly by the Company and as to 50% directly by Solar Chain. In other words, the Company's effective shareholding in KSH will be increased following implementation of the Proposal.

As the KSH Shares will be withdrawn from listing on the Stock Exchange following the Proposal becoming effective, the existing business of KSH could be operated with more flexibility, and the listing fees and administrative costs in relation to the continual compliance with the Listing Rules can be saved in the long run.

In view of above factors, the Directors believe that the Proposal will provide an excellent opportunity for the Company to maximise its participation in the results of KSH.

WITHDRAWAL OF LISTING OF THE KSH SHARES ON THE STOCK EXCHANGE

Upon the Proposal becoming effective, all the Scheme Shares will be cancelled. Share certificates for the KSH Shares held by the Scheme Shareholders will thereafter cease to have effect as documents or evidence of title. KSH will apply to the Stock Exchange for the withdrawal of the listing of the KSH Shares on the Stock Exchange. The Scheme Shareholders will be notified by way of a press announcement of KSH of the exact dates on which the Proposal and the withdrawal of the listing of the KSH Shares on the Stock Exchange will become effective. The Proposal will lapse if it does not become effective on or before 31st March, 2005 or such later date as Power Jade and KSH may agree or as the Supreme Court of Bermuda may direct, and the Scheme Shareholders will be notified by way of a press announcement of KSH accordingly. The listing of the KSH Shares will not be withdrawn if the Proposal is not approved or lapses.

GENERAL

The Company is an investment holding company incorporated in Bermuda with limited liability, the shares of which (stock code: 127) are listed on the Stock Exchange. The Group is principally engaged in property investment and development, brokerage, securities investment and money lending.

The Company will send to the Shareholders a document containing, among other things, further details of the Connected Transaction, the recommendation of the Independent Board Committee in respect of the Connected Transaction and a letter of advice from the independent financial adviser to the Independent Board Committee for their information as soon as practicable.

The information relating to the KSH Group, Power Jade, Solar Chain and Ms. Anita Shum has been extracted from the joint announcement of KSH and Power Jade dated 4th November, 2004.

In this announcement, the following expressions have the meanings set out below unless the context requires otherwise.

“acting in concert” has the meaning ascribed to it under the Takeovers Code

“associate(s)” has the meaning ascribed to it under the Listing Rules

“Authorisation(s)” all necessary authorisations, registrations, filing, rulings, consents, permissions and approvals in connection with the Proposal

“Board” board of Directors

“Cancellation Price” HK$1.25 in cash per Scheme Share

“Company” Chinese Estates Holdings Limited, an exempted company incorporated in Bermuda with limited liability, the shares of which (stock code: 127) are listed on the Stock Exchange, and is indirectly interested in 50% of the issued share capital of Power Jade as at the date of this announcement. Mr. Joseph Lau, Luen-hung is the substantial shareholder deemed to be interested in approximately 63.1% of the issued share capital of the Company as at the date of this announcement

“Companies Act” the Companies Act 1981 of Bermuda (as amended)

“Connected Transaction” the provision of the Loan or the Share Subscription by the Company

“Court Meeting” a meeting of the KSH Independent Shareholders to be convened at the direction of the Supreme Court of Bermuda to consider the Proposal

“Director(s)” director(s) of the Company

“Good System” Good System Investment Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company, and is interested in approximately 7.60% of the issued KSH Shares as at the date of this announcement

“Group” the Company and its subsidiaries

“Hong Kong” the Hong Kong Special Administrative Region of the People's Republic of China

“Independent Board

Committee” an independent committee of the Board comprising all independent non-executive Directors to be established for the purpose of advising the independent Shareholders in connection with the Connected Transaction

“KSH” The Kwong Sang Hong International Limited, an exempted company incorporated in Bermuda with limited liability, the shares of which (stock code: 189) are listed on the Stock Exchange

“KSH Board” board of KSH Directors

“KSH Director(s)” director(s) of KSH

“KSH Group” KSH and its subsidiaries

“KSH Independent

Shareholders” KSH Shareholders other than Power Jade, Good System and any of their respective associates and parties acting in concert with any of them

“KSH Share(s)” share(s) of HK$0.40 each in the ordinary share capital of KSH

“KSH Shareholder(s)” holder(s) of the KSH Shares

“Last Trading Day” 1st November, 2004, being the last trading day prior to the suspension of trading in the KSH Shares on the Stock Exchange pending the release of joint announcement of KSH and Power Jade dated 4th November, 2004

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

“Loan” a loan in the amount of up to HK$280 million to be provided by each of Solar Chain and the Company to Power Jade

“Mr. Joseph Lau

and Associates” Mr. Joseph Lau, Luen-hung and his associates (namely Global King Ltd. and Joseph Lau Luen Hung Investments Limited), being a closely allied group of Shareholders who (together), as at the date of this announcement, hold 1,283,143,456 Shares, representing approximately 63.1% of the issued share capital of the Company having the right to attend and vote at general meetings. Global King Ltd. is the trustee of a unit trust of which the units are held respectively by Mr. Joseph Lau, Luen-hung and a discretionary trust of which Mr. Joseph Lau, Luen-hung is the founder and certain of his family members are eligible beneficiaries. The entire issued share capital of Joseph Lau Luen Hung Investments Limited is held by a trustee of another discretionary trust of which Mr. Joseph Lau, Luen-hung is the founder and certain of his family members are eligible beneficiaries

“Ms. Anita Shum” Ms. Anita Shum, Yuk-ming, who is indirectly interested in 50% of the issued share capital of Power Jade through Solar Chain as at the date of this announcement

“Power Jade” Power Jade Capital Limited (corporate name: Power Jade Limited), a company incorporated in the British Virgin Islands with limited liability and is owned as to 50% indirectly by the Company and as to 50% directly by Solar Chain. Power Jade is interested in approximately 53.52% of the issued KSH Shares as at the date of this announcement

“Proposal” the proposal for the privatisation of KSH by Power Jade by way of the Scheme

“Relevant Authorities” appropriate government and/or governmental bodies, regulatory bodies, courts or institutions

“Scheme” scheme of arrangement under section 99 of the Companies Act involving the cancellation of all the Scheme Shares

“Scheme Share(s)” KSH Share(s) held by the Scheme Shareholders

“Scheme Shareholder(s)” holder(s) of the KSH Share(s) other than Power Jade

“Shareholder(s)” holder(s) of Share(s)

“Share(s)” share(s) of HK$0.10 each in the share capital of the Company

“Share Subscription” the subscription of new shares in Power Jade by each of Solar Chain and Gold Castle Capital Ltd. (corporate name: Gold Castle Ltd.), a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company

“Solar Chain” Solar Chain Limited, a company incorporated in the British Virgin Islands with limited liability and is wholly and beneficially owned by Ms. Anita Shum

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Takeovers Code” The Hong Kong Code on Takeovers and Mergers

“Undertaking” an undertaking given by the Company in favour of the Stock Exchange dated 20th September, 1990 (as amended and supplemented)

“HK$” Hong Kong dollar(s), the lawful currency of Hong Kong

“%” per cent.

By Order of the Board

Lam, Kwong-wai

Company Secretary

Hong Kong, 9th November, 2004

As at the date of this announcement, the Board comprises Mr. Thomas Lau, Luen-hung and Mr. Joseph Lau, Luen-hung as executive Directors, Ms. Amy Lau, Yuk-wai as non-executive Director, and Mr. Koon, Wing-yee, Mr. Cheng, Kwee and Mr. Chan, Kwok-wai as independent non-executive Directors.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this announcement (other than those relating to the KSH Group, Power Jade, Solar Chain and Ms. Anita Shum) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement (other than those relating to the KSH Group, Power Jade, Solar Chain and Ms. Anita Shum) have been arrived at after due and careful consideration and there are no other facts not contained in this announcement (other than those relating to the KSH Group, Power Jade, Solar Chain and Ms. Anita Shum), the omission of which would make any statements in this announcement (other than those relating to the KSH Group, Power Jade, Solar Chain and Ms. Anita Shum) misleading.

The KSH Directors jointly and severally accept full responsibility for the accuracy of the information contained in this announcement (other than those relating to Ms. Anita Shum, Solar Chain, Power Jade and the Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement (other than those relating to Ms. Anita Shum, Solar Chain, Power Jade and the Group) have been arrived at after due and careful consideration and there are no other facts not contained in this announcement (other than those relating to Ms. Anita Shum, Solar Chain, Power Jade and the Group), the omission of which would make any statements in this announcement (other than those relating to Ms. Anita Shum, Solar Chain, Power Jade and the Group) misleading.

The directors of Power Jade jointly and severally accept full responsibility for the accuracy of the information contained in this announcement (other than those relating to Ms. Anita Shum, Solar Chain, the KSH Group and the Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement (other than those relating to Ms. Anita Shum, Solar Chain, the KSH Group and the Group) have been arrived at after due and careful consideration and there are no other facts not contained in this announcement (other than those relating to Ms. Anita Shum, Solar Chain, the KSH Group and the Group), the omission of which would make any statements in this announcement (other than those relating to Ms. Anita Shum, Solar Chain, the KSH Group and the Group) misleading.

Ms. Anita Shum accepts full responsibility for the accuracy of the information contained in this announcement (other than those relating to the KSH Group and the Group) and confirms, having made all reasonable enquiries, that to the best of her knowledge, opinions expressed in this announcement (other than those relating to the KSH Group and the Group) have been arrived at after due and careful consideration and there are no other facts not contained in this announcement (other than those relating to the KSH Group and the Group), the omission of which would make any statements in this announcement (other than those relating to the KSH Group and the Group) misleading.

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Please also refer to the published version of this announcement in the Standard.