National Electronics Holdings Limited - Proxy Solicitation & Information Statement 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 advisers.

If you have sold or transferred your shares in Chinese Estates Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the 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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(incorporated in Bermuda with limited liability)

(Stock code: 127)

CONNECTED TRANSACTION

PROVISION OF FINANCIAL ASSISTANCE TO POWER JADE LIMITED IN RELATION TO PROPOSED PRIVATISATION OF THE KWONG SANG HONG INTERNATIONAL LIMITED

BY POWER JADE 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

Independent Financial Adviser to the Independent Board Committee

and the independent Shareholders of

Chinese Estates Holdings Limited

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A letter from the Board is set out on pages 1 to 9 of this circular. A letter from the Independent Board Committee is set out on page 10 of this circular. A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the independent Shareholders is set out on pages 11 to 16 of this circular.

1st December, 2004

Page DEFINITIONS ........................................................................................................................................................... ii LETTER FROM THE BOARD ................................................................................................................................ 1 LETTER FROM THE INDEPENDENT BOARD COMMITTEE ..................................................................... 10 LETTER FROM THE INDEPENDENT FINANCIAL ADVISER ..................................................................... 11 APPENDIX : GENERAL INFORMATION ........................................................................................................ 17

DEFINITIONS

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

‘‘acting in concert’’	has the meaning ascribed to it in the Takeovers Code
‘‘associate’’	has the meaning ascribed to it in 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 was indirectly interested in 50% of the
	issued share capital of Power Jade as at the Latest Practicable Date. Mr.
	Joseph Lau and Associates are deemed to be interested in approximately
	62.81% of the issued share capital of the Company as at the Latest
	Practicable Date
‘‘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
‘‘connected person’’	has the meaning ascribed to it in the Listing Rules
‘‘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 was interested in approximately 7.60% of the issued KSH
	Shares as at the Latest Practicable Date
‘‘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
‘‘Independent Financial Adviser’’	Access Capital Limited, the independent financial adviser to the
	Independent Board Committee and the independent Shareholders and a
	corporation licensed under the SFO to perform types 1, 4, 6 and 9 of the
	regulated activities (as defined in the SFO)

DEFINITIONS

‘‘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 issued share capital of KSH ‘‘KSH Shareholder(s)’’ holder(s) of the KSH Shares ‘‘Latest Practicable Date’’ 26th November, 2004, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular

‘‘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’’ Rules Governing the Listing of Securities on the Stock Exchange ‘‘Loan’’ an interest-free loan in the amount of up to approximately 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 Latest Practicable Date, held 1,275,143,456 Shares, representing approximately 62.81% 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 Latest Practicable Date ‘‘Power Jade’’ Power Jade Limited (trading as Power Jade Capital 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 was interested in approximately 53.52% of the issued KSH Shares as at the Latest Practicable Date

iii

DEFINITIONS

‘‘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
‘‘Share Subscription’’ the subscription of an equal number of new shares in Power Jade on the same terms by each of Solar Chain and Gold Castle Ltd. (trading as Gold Castle Capital 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

‘‘SFO’’ Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
‘‘Share(s)’’ share(s) of HK$0.10 each in the issued share capital of the Company ‘‘Shareholder(s)’’ holder(s) of Share(s) ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited ‘‘substantial shareholder’’ has the meaning ascribed to it in the Listing Rules ‘‘Takeovers Code’’ Hong Kong Code on Takeovers and Mergers ‘‘Undertaking’’ an undertaking given by the Company in favour of the Stock Exchange dated 20th September, 1990 (as amended and supplemented)
‘‘HK$’’ Hong Kong dollar, the lawful currency of Hong Kong ‘‘%’’ per cent.

LETTER FROM THE BOARD

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(incorporated in Bermuda with limited liability)

(Stock code: 127)

Executive Directors:

Registered Office:

Thomas Lau, Luen-hung (Chairman) Joseph Lau, Luen-hung

Non-executive Director:

Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Amy Lau, Yuk-wai

Principal Office in Hong Kong:

Independent non-executive Directors:

Koon, Wing-yee Cheng, Kwee Chan, Kwok-wai

26th Floor MassMutual Tower 38 Gloucester Road Wanchai Hong Kong

1st December, 2004

To the Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION PROVISION OF FINANCIAL ASSISTANCE TO POWER JADE LIMITED IN RELATION TO PROPOSED PRIVATISATION OF THE KWONG SANG HONG INTERNATIONAL LIMITED BY POWER JADE 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

INTRODUCTION

Reference is made to the announcements of the Company dated 27th October, 2004 and 9th November, 2004 respectively and the joint announcement of Power Jade and KSH dated 4th November, 2004.

The Directors announce that 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, upon completion 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.

LETTER FROM THE BOARD

As at the Latest Practicable Date, KSH was an associated company of the Company. Further information on KSH is set out in the paragraph headed ‘‘Information on KSH’’ of this circular.

The purpose of this circular is to provide you with, among other things, (i) further information regarding the details of the Connected Transaction; (ii) the advice of the Independent Financial Adviser to the Independent Board Committee and the independent Shareholders in relation to the Connected Transaction; and (iii) the recommendation of the Independent Board Committee to the independent Shareholders in relation to the Connected Transaction.

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;
(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; and
(f) a premium of approximately 3.31% over the closing price of approximately HK$1.21 per KSH Share as quoted on the Stock Exchange as at the Latest Practicable Date.

As at the Latest Practicable Date, 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 prices 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.

LETTER FROM THE BOARD

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.

LETTER FROM THE BOARD

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 by Power Jade 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 and unsecured loan which is repayable on demand in the amount of up to approximately 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.

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. Such funds will be applied towards the working capital of the Group.

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.

LETTER FROM THE BOARD

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

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 financial assistance under 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.

As at the Latest Practicable Date, Mr. Joseph Lau and Associates were deemed to be interested in approximately 1,275,143,456 Shares, representing approximately 62.81% of the issued share capital of the Company. 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 associate is a Shareholder, and none of the Shareholders has a material interest in the Connected Transaction. In the circumstances, 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.

The Company has applied for a waiver from holding a Shareholders’ meeting pursuant to Rules 14A.43 and 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 on 9th November, 2004 having the right to attend and vote at the general meeting to approve the Connected Transaction from Mr. Joseph Lau and Associates, being a closely allied group of Shareholders who (together) held approximately 63.1% of the issued share capital of the Company as at 9 November 2004 having the right to attend and vote at that general meeting to approve the Connected Transaction and, following the disposal of 8,000,000 Shares by Mr. Joseph Lau and Associates thereafter, 62.81% of the issued share capital of the Company as at the Latest Practicable Date. The Stock Exchange has granted the waiver from holding a Shareholders’ meeting pursuant to Rules 14A.43 and 14A.53 of the Listing Rules.

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:

LETTER FROM THE BOARD

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

The chart below illustrates the simplified shareholding structure of KSH as at the Latest Practicable Date:

Good	System	Power Jade
7.60%

		KSH

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, 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 Latest Practicable Date:

10	The Company	The Company
	0%	50%

Go	od System		Power Jade

LETTER FROM THE BOARD

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 held any derivatives in the KSH Shares as at the Latest Practicable Date.

SHAREHOLDING STRUCTURE OF KSH BEFORE AND AFTER THE PROPOSAL

The table below sets out the shareholding structure of KSH as at the Latest Practicable Date and immediately following completion of the Proposal:

		As at the	Immediately following
	Latest Practicable Date		completion of the Proposal
	Number of		Number of
Shareholders	KSH Shares	%	KSH Shares	%
Power Jade	513,746,047	53.52	513,746,047	100
Good System	72,926,000	7.60	–	–
Public	373,227,369	38.88	–	–
Total	959,899,416	100	513,746,047	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 Latest Practicable Date, KSH did not have any outstanding options, warrants or convertible securities.

REASONS FOR AND BENEFITS OF THE CONNECTED TRANSACTION

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 Latest Practicable Date.

LETTER FROM THE BOARD

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 Latest Practicable Date. 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.

The Directors have also considered the following factors in respect of the Connected Transaction: (a) the joint ownership structure of Power Jade and contribution of half of the funding for implementation of the Proposal by Solar Chain (which is not a connected person to the Company); (b) the fact that the principal asset of Power Jade consists of its 53.52% interest in KSH and that Power Jade does not have any material asset or resources available to fund the implementation of the Proposal; (c) the Scheme will be funded (either in terms of the Loan or Share Subscription) on a pro-rata basis, such that the proportion of funding from the Company is in proportion with its interest in Power Jade; (d) neither the Company nor Solar Chain will become involved in or will provide assistance to the other to fund its proportionate contribution under the Proposal; and (e) the Directors are of the view that the Connection Transaction was negotiated on an arm’s length basis and agreed on normal commercial terms between the parties involved.

In view of above factors, the Directors believe that it is in the interest of the Company and the Shareholders as a whole to provide funding through the Connected Transaction for implementation of the Proposal which is expected to provide an excellent opportunity for the Company to maximise its participation in the results of KSH.

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 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.

INDEPENDENT BOARD COMMITTEE

An Independent Board Committee comprising Mr. Koon, Wing-yee, Mr. Cheng, Kwee, and Mr. Chan, Kwok-wai all being independent non-executive Directors, was formed to give advice to the independent Shareholders.

Shareholders should note that based on the advice of the Independent Financial Adviser, the Independent Board Committee considers that the terms of the Connected Transaction are on normal commercial terms and are fair and reasonable as far as the independent Shareholders are concerned and the Connected Transaction is in the interests of the Company and the Shareholders as a whole.

LETTER FROM THE BOARD

INDEPENDENT FINANCIAL ADVISER

Access Capital Limited has been appointed as the independent financial adviser to give advice to the Independent Board Committee and the independent Shareholders in respect of the Connected Transaction.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out in this circular. Further, your attention is also drawn to the letter from the Independent Financial Adviser set out in this circular which contains its advice to the Independent Board Committee and the independent Shareholders in relation to the Connected Transaction and the principal factors and reasons considered by the Independent Financial Adviser in arriving at its advice.

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

On behalf of the Board Thomas Lau, Luen-hung Chairman

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(incorporated in Bermuda with limited liability)

(Stock code: 127)

1st December, 2004

To the independent Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION PROVISION OF FINANCIAL ASSISTANCE TO POWER JADE LIMITED IN RELATION TO PROPOSED PRIVATISATION OF THE KWONG SANG HONG INTERNATIONAL LIMITED BY POWER JADE 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

We refer to the circular issued by the Company to the Shareholders dated 1st December, 2004 (the ’’Circular’’) of which this letter forms part. Unless the context otherwise defines terms used in this letter will have the same meanings as defined in the Circular.

We have been appointed as members of the Independent Board Committee to advise the independent Shareholders on whether the terms of the Connected Transaction are fair and reasonable so far as the independent Shareholders are concerned.

We wish to draw your attention to the letter from the Board as set out on pages 1 to 9 and the letter from the Independent Financial Adviser as set out on pages 11 to 16 of the Circular respectively.

Having considered the principal factors and reasons considered by, and the advice of the Independent Financial Adviser as set out in its letter of advice, we consider that the terms of the Connected Transaction are on normal commercial terms and are fair and reasonable so far as the independent Shareholders are concerned and the Connected Transaction is in the interests of the Company and the independent Shareholders as a whole and therefore advise the independent Shareholders to vote in favour of the resolutions in relation to the Connected Transaction.

Yours faithfully, For and on behalf of the Independent Board Committee

Koon, Wing-yee

Cheng, Kwee Independent non-executive Directors

Chan, Kwok-wai

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from Access Capital setting out its advice to the Independent Board Committee and the independent Shareholders in relation to the Connected Transaction for inclusion into the Circular.

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Suite 606

6th Floor

Bank of America Tower 12 Harcourt Road, Central Hong Kong

1st December, 2004

To: The Independent Board Committee of

Chinese Estates Holdings Limited and the independent Shareholders

Dear Sirs,

CONNECTED TRANSACTION PROVISION OF FINANCIAL ASSISTANCE TO POWER JADE LIMITED IN RELATION TO PROPOSED PRIVITISATION OF THE KWONG SANG HONG INTERNATIONAL LIMITED BY POWER JADE 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

I. INTRODUCTION

We refer to our appointment to advise the independent board committee (the ‘‘Independent Board Committee’’) of Chinese Estates Holdings Limited (the ‘‘Company’’) in reference to the connected transaction of the Company (the ‘‘Connected Transaction’’) that will arise as a result of the above captioned proposed privatisation of The Kwong Sang Hong International Limited (the ‘‘Proposal’’) by way of a scheme of arrangement (the ‘‘Scheme’’).

In order to fund the implementation of the Scheme, the Company and Solar Chain Limited (a company incorporated in the British Virgin Islands with limited liability and wholly-owned by Ms. Anita Shum, a director of Power Jade Limited (‘‘Power Jade’’)) (‘‘Solar Chain’’) will provide funding to Power Jade, the controlling shareholder of The Kwong Sang Hong International Limited (‘‘KSH’’). Each of Solar Chain and the Company will provide funding to Power Jade for the sole purpose of implementing the Scheme, either by means of an interest-free loan payable upon demand amounting to up to HK$280 million (the ‘‘Loan’’), or by way of equity via a share subscription (the ‘‘Share Subscription’’), which will be pro-rata to their respective shareholdings in Power Jade.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Details of the Scheme and the requisite proposed funding by the Company and Solar Chain are set out in the Company’s announcement dated 9th November, 2004, as well as in the ‘‘Letter from the Board,’’ of the circular to the shareholders of the Company (the ‘‘Shareholders’’) dated 1st December, 2004 (the ‘‘Circular’’), of which this letter forms part. The terms used in this letter shall have the same meaning as those defined in the Circular unless the context otherwise specifies.

As set out in the ‘‘Letter from the Board’’, Power Jade is an associate company of the Company, and the provision of the Loan by the Company to Power Jade will be considered a ‘‘Special Transaction’’ (as defined in the undertaking given by the Company in favor of the Stock Exchange dated 20th September, 1990 (the ‘‘Undertaking’’), as amended and supplemented), which will require 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 requirement as provided in the Undertaking.

Each of Power Jade and KSH are connected persons of the Company as (a) the Company indirectly holds 50% of Power Jade’s outstanding shares, and Power Jade is in turn the controlling shareholder holding approximately 53.52% of KSH’s outstanding shares, and (b) a subsidiary of KSH is a substantial shareholder of a non-wholly-owned subsidiary of the Company. As such, 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 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% (as at 9th November, 2004) of the issued share capital of the Company having the right to attend and vote at the general meeting to approve the Connected Transaction.

II. THE INDEPENDENT BOARD COMMITTEE

The Company’s board of Directors (the ‘‘Board’’) currently consists of two executive Directors, namely Mr. Thomas Lau, Luen-hung and Mr. Joseph Lau, Luen-hung; a non-executive Director, namely Ms. Amy Lau, Yuk-wai, and three independent non-executive Directors, namely Mr. Koon, Wing-yee, Mr. Cheng, Kwee, and Mr. Chan, Kwok-wai (together the ‘‘Directors’’).

The Independent Board Committee comprising Mr. Koon, Wing-yee, Mr. Cheng, Kwee, and Mr. Chan, Kwok-wai, all independent non-executive Directors, has been established to consider the terms of the Connected Transaction and to give their advice and recommendation thereon to the independent Shareholders.

We have been appointed by the Independent Board Committee to advise them as to whether the terms of the Connected Transaction (i) are on normal commercial terms, (ii) fair and reasonable so far as the independent Shareholders are concerned, and (iii) are in the interests of the Company and the Shareholders as a whole, as well as (iv) to give our recommendation to the Independent Board Committee and the independent Shareholders as to whether to vote in favor or against the requisite resolution, as if such resolution were to be put forth for voting at a general meeting of the Company.

III. BASES AND ASSUMPTIONS OF THE ADVICE

In formulating our advice, we have relied on, to a considerable extent, the statements, information, opinion and representations contained in the Circular, and the information and representations provided to us by the Company and/or the Directors and/or the senior management of the Company.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have assumed that all such statements, information, assumptions, expectations, opinions and representations contained or referred to in the Circular or otherwise provided by the Company and/or the Directors and/or the senior management of the Company and for which it is/they are solely responsible were true, complete and accurate and valid at the time they were made and given and continue to be true and valid as at the date of the Circular. We have assumed that all the assumptions, representations, and opinions made or provided by the Directors and/or the senior management of the Company contained in the Circular have been reasonably made after due and careful enquiry. We have also sought and obtained confirmation from the Company that no material facts have been omitted from the information provided and referred to in the Circular.

We have reviewed all currently available information and documents which are available under the present circumstances to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinions. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Company and/or the Directors and/or the senior management of the Company and their respective advisers or to believe that material information has been withheld or omitted from the information provided to us or referred to in the aforesaid documents. We have not, however, carried out an independent verification of the information provided, nor have we conducted an independent investigation into the business and affairs of the Company or any of its subsidiaries.

IV. PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our recommendation, we have taken into consideration the following principal factors and reasons:

1. Background to and reasons for the Connected Transaction

1.1 Background to the Connected Transaction

On 9th November, 2004, the Company announced that Power Jade (a company owned as to 50% indirectly by the Company and 50% directly by Solar Chain) had requested that the board of KSH put forward a proposal regarding the proposed privatisation of KSH (i.e. the Proposal), to KSH shareholders who are eligible to be included in the Scheme, namely the public Shareholders and Good System Investment Limited (‘‘Good System’’), a wholly-owned subsidiary of the Company, which as at 9th November, 2004, held approximately 7.6% of the issued shares of KSH.

As explained in the ‘‘Letter from the Board’’ in order for the Proposal to succeed, the Scheme will require funding, and such funding will be provided by both the Company and Solar Chain to Power Jade, either by means of the Loan or by way of equity through the Share Subscription, on a pro-rata basis vis-a-vis their respective shareholdings in Power Jade.

Each of Power Jade and KSH are connected persons of the Company as (a) the Company indirectly holds 50% of Power Jade’s outstanding shares, and Power Jade is in turn the controlling shareholder holding approximately 53.52% of KSH’s outstanding shares, and (b) a subsidiary of KSH is a substantial shareholder of a non-wholly-owned subsidiary of the Company. As such, the partial funding of the Scheme by the Company via the provision of its pro rata share of the Loan or by a pro rata share of equity through the Share Subscription to Power Jade constitutes a connected transaction for the Company under the Listing Rules.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1.2 Reasons for the Connected Transaction

As noted in the ‘‘Letter from the Board’’, the principal asset of Power Jade consists of its approximately 53.52% interest in the issued share capital of KSH. In order to fund the implementation of the Scheme, the Company and Solar Chain will need to provide funding to Power Jade.

We understand that as the Company and Solar Chain equally own Power Jade, which in turn owns a majority interest in KSH, the Proposal could only be put forward with the support of both Solar Chain and the Company. We agree with the Board’s view that as both the Company and Solar Chain jointly control Power Jade and that as they both have equal voting rights in Power Jade, the Proposal could not be carried out if either the Company or Solar Chain were not to agree to support the decision to proceed with, and provide part of the funding for, the Proposal. According to the senior management of the Company, the Proposal was put forward by Power Jade. As far as the Company is concerned, it has not considered to implement the Proposal on its own. We do not believe the Company will be able to obtain direct control of KSH (i.e. 50% or above of the existing issued share capital of KSH) as less than 40% of the existing issued share capital of KSH are held by shareholders other than Power Jade and parties acting in concert with it unless with the co-operation of Solar Chain through Power Jade. Accordingly, we believe this is a factor that makes the Company not to proceed with the Proposal on its own.

As stated in the ‘‘Letter from the Board’’ and so far as the Company is aware, Solar Chain and its sole beneficial owner, Ms. Anita Shum, are not connected persons of the Company under the Listing Rules. In order to procure the support of the Proposal by Solar Chain, the Company has agreed to contribute funding for the implementation of the Scheme in the manner described below as well as to procure the acceptance of the Scheme in respect of the KSH shares owned by Good System.

We have discussed with the Directors the commercial rationale of the Proposal and the factors considered to provide funding support to Power Jade to implement the Proposal. We noted that the Directors have taken into account the improvement in the Hong Kong economy and the local property market in recent months and they believed the Proposal would allow the Company to (through its interest in Power Jade, which in turn will have an increased interest in KSH as a result of the Proposal) capture a greater proportion of the potential enhancement in the underlying asset value of KSH, as well as any further upside, should the current trend of improving market conditions continue. In addition, the Directors considered the implementation of the Proposal (and the Connected Transaction which would facilitate such implementation) to be in the interests of the Company and its shareholders.

Although if there were no such Proposal, we would normally expect that under the recent improved economic situation in Hong Kong, the Company could still be able to enjoy the potential upside of the enhancement in the underlying asset value of KSH (but only limited to its 50% interest in the 53.52% of KSH’s outstanding shares held by Power Jade). On the other hand, we would expect that through the Company’s participation in the Proposal via Power Jade, Power Jade will, as a result of the completion of the Proposal, become the sole shareholder of KSH and the Company will enjoy a greater proportion of the potential enhancement in the underlying asset value of KSH (i.e. 50% interest in the entire outstanding issued share capital of KSH held by Power Jade). In the event of the completion of the Proposal, the Company will be able to share a greater proportion of the underlying asset value of KSH and the net results of KSH. Nevertheless, as property value is susceptible to cyclical and often, unexpected market fluctuations, Shareholders should also recognize that completion of the Proposal would correspondingly increase the exposure of the Company to such market risk (i.e. the consequence of the Proposal). In sum, we are of the view that the Proposal and the provision of financial assistance by the Company under the Connected Transaction are justifiable and in the interests of the Company and the Shareholders as a whole.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. The terms of the Connected Transaction

2.1 Terms of the Connected Transaction

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 approximately 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 complete the Proposal. If the Proposal does not proceed, no funding is to be made by the Company. It is expected that the method of funding will determined by each of Solar Chain and the Company immediately after all the conditions to the Proposal have been satisfied.

2.2 Factors considered

In considering the terms of the Connected Transaction, we have taken into account the following factors:

the joint ownership structure of Power Jade and its majority interest in KSH and the fact that the Proposal would only be made possible with the support of the Company and Solar Chain (which is not a connected person of the Company) as described in paragraph 1.2 above;
the fact that the principal asset of Power Jade consists of its approximately 53.52% interest in KSH and that Power Jade does not have sufficient assets or resources available to fund the implementation of the Proposal as described in paragraph 1.2 above;
the Scheme will be funded (either in terms of the Loan or Share Subscription) on a pro-rata basis, such that the proportion of funding from the Company and from Solar Chain, are in proportion with their equal and respective interests in Power Jade as described in paragraph 1.2 above;
that neither the Company nor Solar Chain will become involved in or will provide assistance to each other for their respective obligations to fund their respective contribution under the Proposal; and
the Company has confirmed that it would be able to fund the abovementioned pro-rata contribution from its internal resources or bank borrowings. The net funding contribution by the Company (after taking into account the acceptance of the KSH Shares by Good System under the Scheme) is approximately HK$187.7 million. As at 30th June 2004, the Company’s total cash and cash equivalents amounted to approximately HK$2,208.8 million and its total borrowings amounted to approximately HK$8,115.4 million. In addition, the Company has disposed of some of its properties and assets (details of which are contained in the Company’s circular to Shareholders dated 27 September 2004) for which the Company expects to receive total net proceeds of HK$642 million. Accordingly, the Directors are of the view that Company has sufficient liquid and financial resources and that the funding in connection with Connected Transaction would not have a material impact on the Company’s financial position.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

If the Company decided to utilise HK$187.7 million out of its total cash and cash equivalent of HK$2,850.8 million, it only represents approximately 6.6% of the cash amount. On this basis, we are of the view that it would not exert any material adverse impact to the working capital and/or liquidity position of the Group.

If the Company decided to finance its pro-rata share of contribution by means of borrowings, the net debt position of the Group (i.e. total cash and cash equivalent less total borrowings) will increase from HK$5,264.6 million to HK$5,452.3 (representing an increase of approximately 3.6%), which we are also of the view that such increase as immaterial and would not exert any material adverse impact to the net debt position of the Group.

In addition, by comparing the total borrowings of the Group (HK$8,115.4 million as at 30 June 2004 and HK$8,303.1 million if the Company decided to finance its pro-rata share of contribution by means of borrowings) with the net asset value of the Group (HK$14,339.6 million as at 30 June 2004), we note that the ratio is 0.57 time and 0.58 time respectively which we are of the view that the additional borrowings would not exert any material adverse impact to the financial position of the Group.

V. RECOMMENDATION

After considering (i) the information provided to us, (ii) the background to and the reasons for the Connected Transaction in the context of the Proposal, (iii) the evaluation of the terms of the Connected Transaction as set out in this letter, (iv) the fact that any benefits that could accrue to Power Jade under the Proposal would also be beneficial to the Company and its Shareholders as a whole, (v) that the Connected Transaction (irrespective of how the Company finance its pro-rata share of contribution, by means of internal resources or borrowings) would not have a material adverse impact on the Group’s financial position, and (vi) the commercial rationale that underlines the Company’s decision to proceed with the Proposal and the Connected Transaction as well as the accompanying market risk, we consider the Connected Transaction to be on normal commercial terms, fair and reasonable so far as the independent Shareholders are concerned; and in the interests of the Company and the Shareholders as a whole. We have advised the Independent Board Committee accordingly and would recommend to the independent Shareholders, were a general meeting of the Company held in order to approve the Connected Transaction, to vote in favour of the relevant resolution to approve the Connected Transaction.

Yours faithfully, For and on behalf of ACCESS CAPITAL LIMITED Jeanny Leung Managing Director

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 jointly and severally accept full responsibility for the accuracy of the information contained in this circular (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 circular (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 circular (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 circular (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 circular (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 circular (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 circular (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 circular (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 circular (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 circular (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 circular (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 circular (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 circular (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 circular (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 circular (other than those relating to the KSH Group and the Group), the omission of which would make any statements in this circular (other than those relating to the KSH Group and the Group) misleading.

2. Disclosure of Interests

(a) As at the Latest Practicable Date, the interests and short positions of the Directors in the Shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which are required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO or as recorded in the register kept by the Company pursuant to section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by the Directors of Listed Companies of the Listing Rules were as follows: –

GENERAL INFORMATION

APPENDIX

(I) The Company

Number Percentage of Shares of Issued Name of Director (ordinary share) Note Capacity Share Capital Mr. Joseph Lau, Luen-hung 275,143,456 (1) Other Interests (‘‘Mr. Lau’’) 1,000,000,000 (2) Other Interests 1,275,143,456 62.81% Mr. Thomas Lau, Luen-hung 199,207,187 (3) Other Interests 9.81%

Notes: –

(1) These Shares were indirectly owned by a discretionary trust, of which Mr. Lau was the founder and certain family members of Mr. Lau were eligible beneficiaries.
(2) These Shares were held by a unit trust and Mr. Lau was one of the unit holders. The said Shares were indirectly owned by a discretionary trust, of which Mr. Lau was the founder and certain family members of Mr. Lau were eligible beneficiaries.
(3) These Shares were indirectly owned by a discretionary trust, of which Mr. Thomas Lau, Luen-hung and certain of his family members were eligible beneficiaries.

(II) Associated Corporations of the Company

(A) Chi Cheung Investment Company, Limited (‘‘Chi Cheung’’)

	Number			Percentage
	of Shares			of Issued
Name of Director	(ordinary share)	Note	Capacity	Share Capital
Mr. Lau	209,811,186	(1)	Interest in	74.32%
			Controlled
			Corporation

(B) The Kwong Sang Hong International Limited

Number Percentage of Shares of Issued Name of Director (ordinary share) Note Capacity Share Capital Mr. Lau 586,672,047 (2) Interest in 61.12% Controlled Corporation

GENERAL INFORMATION

APPENDIX

(C) G-Prop (Holdings) Limited (‘‘G-Prop’’)

	Number			Percentage
	of Shares			of Issued
Name of Director	(ordinary share)	Note	Capacity	Share Capital
Mr. Lau	397,858,761	(3)	Interest in	57.56%
			Controlled
			Corporation

Notes: –

(1) Mr. Lau, by virtue of his 62.81% interest in the issued share capital of the Company as disclosed in paragraph 2(a)(I) above, was deemed to be interested in 209,811,186 shares in Chi Cheung held directly by Billion Up Limited, a wholly-owned subsidiary of Lucky Years Ltd. which in turn was a wholly-owned subsidiary of the Company.
(2) Mr. Lau, by virtue of his 62.81% interest in the issued share capital of the Company as disclosed in paragraph 2(a)(I) above, was deemed to be interested in the 586,672,047 shares in KSH held indirectly by the Company. The Company was interested in 586,672,047 shares of KSH, of which 72,926,000 shares were held by Good System, a wholly-owned subsidiary of the Company. The other 513,746,047 shares were held by Power Jade which was 50% owned by Gold Castle Capital Ltd., a wholly-owned subsidiary of the Company.
(3) Mr. Lau, by virtue of his 62.81% interest in the issued share capital of the Company as disclosed in paragraph 2(a)(I) above, was deemed to be interested in 397,858,761 shares of G-Prop. The Company was interested in 397,858,761 shares of G-Prop, of which 170,000,000 shares, 113,818,911 shares, 37,162,165 shares and 76,877,685 shares were held by Million Point Limited (‘‘Million Point’’), Paul Y. Holdings Company Limited (‘‘Paul Y.’’), Great Empire International Ltd. (‘‘Great Empire’’) and Luckpoint Investment Limited (‘‘Luckpoint’’) respectively.

The Company was deemed to be interested in the 170,000,000 shares of G-Prop as the Company owned the entire issued share capital of Chinese Estates, Limited, which owned the entire issued share capital of Cosmos Success Limited which in turn owned the entire issued share capital of Million Point.

The Company was also deemed to be interested in the 113,818,911 shares of G-Prop as the Company owned the entire issued share capital of Paul Y..

The Company was also deemed to be interested in the 37,162,165 shares of G-Prop as the Company owned the entire issued share capital of the Paul Y., which owned the entire issued share capital of Goldstance Group Limited, which in turn owned the entire issued share capital of Great Empire.

The Company was also deemed to be interested in the 76,877,685 shares of G-Prop as the Company owned the entire issued share capital of China Entertainment and Land Investment Company, Limited, which in turn owned the entire issued share capital of Luckpoint.

Save as disclosed above and so far as the Company is aware, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the Shares, underlying shares or debentures of the Company or its associated corporations (as defined in Part XV of the SFO) for which (a) notification will be given to the Company or the Stock Exchange pursuant to the provisions of Divisions 7 and 8 of Part XV of the SFO (including those interests and short positions which the Directors and chief executives are supposed or deemed to be holding or owning pursuant to the provisions of the SFO); or (b) registration will be made in the register in accordance with Section 352 of the SFO; or (c) notification will be made to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies of the Listing Rules.

GENERAL INFORMATION

APPENDIX

(b) As at the Latest Practicable Date, so far as are known to the Directors and the chief executive of the Company, interests or short positions held by any individual or company, other than the Directors or chief executive of the Company, for which disclosure will be made to the Company pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, or any beneficial interests representing 5% or more of the issued share capital of the Company directly or indirectly which were recorded in the register kept by the Company under section 336 of the SFO, were as follows:-

			Percentage
	Number of		of Issued
Name	Shares Held	Capacity	Share Capital
Credit Suisse Trust Limited	1,000,000,000	Trustee and	49.26%
	(Note 1)	Beneficiary of a Trust
Global King Ltd.	1,000,000,000	Trustee	49.26%
	(Note 1)
GZ Trust Corporation	275,143,456	Trustee and Interest	13.55%
	(Note 2)	in Controlled Corporation
Joseph Lau Luen Hung	275,143,456	Beneficial Owner	13.55%
Investments Limited	(Note 2)
Ms. Ip, Sok-wun	199,207,187	Founder of	9.81%
	(Note 3)	Discretionary Trust
J.P. Morgan Trust Company	199,207,187	Trustee and Interest	9.81%
(Bahamas) Limited	(Note 4)	in Controlled Corporation
Sunny Trend Limited	199,207,187	Beneficial Owner	9.81%
	(Note 4)
Mr. Li Ka-shing	174,660,000	Founder of	8.60%
	(Notes 5 & 6)	Discretionary Trusts
		and Interest of
		Controlled Corporations
Li Ka-Shing Unity	174,660,000	Trustee and	8.60%
Trustcorp Limited	(Notes 5 & 6)	Beneficiary of a Trust
Li Ka-Shing Unity Trustee	174,660,000	Trustee and	8.60%
Corporation Limited	(Notes 5 & 6)	Beneficiary of a Trust
Li Ka-Shing Unity Trustee	174,660,000	Trustee	8.60%
Company Limited	(Notes 5 & 6)
Cheung Kong (Holdings) Limited	174,660,000	Interest of	8.60%
	(Notes 5 & 6)	Controlled Corporations

GENERAL INFORMATION

APPENDIX

			Percentage
	Number of		of Issued
Name	Shares Held	Capacity	Share Capital
Hutchison Whampoa Limited	174,660,000	Interest of	8.60%
	(Note 5)	Controlled Corporations
Hutchison International Limited	174,660,000	Interest of a	8.60%
	(Note 5)	Controlled Corporation
Primetek Holdings Limited	174,660,000	Beneficial Owner	8.60%
	(Note 5)

Notes: –

1. Credit Suisse Trust Limited as trustee of a discretionary trust held units in a unit trust of which Global King Ltd. was the trustee and therefore was regarded as interested in the same parcel of shares held by Global King Ltd. These Shares were the same parcel of 1,000,000,000 Shares referred to in ‘‘Other Interests’’ of Mr. Lau as disclosed in paragraph 2(a)(I) above. As at the Latest Practicable Date, Mr. Lau was a director of Global King Ltd.

2. GZ Trust Corporation as trustee of a discretionary trust held the entire issued share capital of Joseph Lau Luen Hung Investments Limited and therefore was regarded as interested in the same parcel of shares held by Joseph Lau Luen Hung Investments Limited. These Shares were the same parcel of 275,143,456 Shares referred to in ‘‘Other Interests’’ of Mr. Lau as disclosed in paragraph 2(a)(I) above. As at the Latest Practicable Date, Mr. Lau was a director of Joseph Lau Luen Hung Investments Limited.

3. These Shares were indirectly owned by a discretionary trust of which Ms. Ip, Sok-wun was the founder. These Shares were the same parcel of the Shares referred to in ‘‘Other Interests’’ of Mr. Thomas Lau, Luen-hung as disclosed in paragraph 2(a)(I) above.

4. J P. Morgan Trust Company (Bahamas) Limited as trustee of a discretionary trust owned the entire issued share capital of Sunny Trend Limited. By virtue of the SFO, J P. Morgan Trust Company (Bahamas) Limited was deemed to have interest in the 199,207,187 Shares held by Sunny Trend Limited. These Shares were the same parcel of shares referred to in ‘‘Other Interests’’ of Mr. Thomas Lau, Luen-hung as disclosed in paragraph 2(a)(I) above and Note 3 above. As at the Latest Practicable Date, Mr. Thomas Lau, Luen-hung was a director of Sunny Trend Limited.

5. Primetek Holdings Limited (‘‘Primetek’’) is a wholly-owned subsidiary of Hutchison International Limited (‘‘HIL’’), which in turn is a wholly-owned subsidiary of Hutchison Whampoa Limited (‘‘HWL’’). By virtue of the SFO, HWL and HIL are deemed to be interested in the 174,660,000 Shares held by Primetek.

6. Li Ka-Shing Unity Holdings Limited, of which each of Mr. Li Ka-shing, Mr. Li Tzar Kuoi, Victor and Mr. Li Tzar Kai, Richard is interested in one-third of the entire issued share capital, owns the entire issued share capital of Li Ka-Shing Unity Trustee Company Limited (‘‘TUT1’’). TUT1 as trustee of The Li Ka-Shing Unity Trust (‘‘UT1’’), together with certain companies which TUT1 as trustee of UT1 is entitled to exercise or control the exercise of more than one-third of the voting power at their general meetings, hold more than one-third of the issued share capital of Cheung Kong (Holdings) Limited (‘‘CKH’’). Subsidiaries of CKH are entitled to exercise or control the exercise of more than one-third of the voting power at the general meetings of HWL.

In addition, Li Ka-Shing Unity Holdings Limited also owns the entire issued share capital of Li Ka-Shing Unity Trustee Corporation Limited (‘‘TDT1’’) as trustee of The Li Ka-Shing Unity Discretionary Trust (‘‘DT1’’) and Li Ka-Shing Unity Trustcorp Limited (‘‘TDT2’’) as trustee of another discretionary trust (‘‘DT2’’). Each of TDT1 and TDT2 holds units in the UT1.

By virtue of the SFO, each of Mr. Li Ka-shing being the settlor and which may be regarded as a founder of DT1 and DT2 for the purpose of the SFO, TDT1, TDT2, TUT1 and CKH were deemed to be interested in the 174,660,000 Shares held by Primetek.

GENERAL INFORMATION

APPENDIX

Saved as disclosed above, as far as the Directors and the chief executive of the Company are aware, as at the Latest Practicable Date, there was no other person, other than the Directors and chief executive of the Company, who was required under the provisions of Divisions 2 and 3 of Part XV of the SFO to make disclosure to the Company for any interests or short positions in shares, relevant shares and debentures, or who owns any beneficial interests representing 5% or more of any class of shares or warrants or attached with a right to vote at any of the shareholders’ general meeting of the Company.

(c) As at the Latest Practicable Date, so far as are known to the Directors, the following persons were, directly or indirectly interested in 10% or more of the equity interest of the members of the Group: –

		Percentage of
Name of subsidiary	Name of substantial shareholder	shareholdings
Dollar Union Limited	Steamroller Limited_(Note 1)_	25%
Modern City Investment Limited	Rothschild Investments Limited	25%
Conduit Road Development Limited	Rush Will Limited	30%
Konshing Enterprises Limited	Earlway International & Development Ltd.	49%
G-Prop	Koga Limited_(Note 2)_	5.49%
	Hutchison International Limited_(Note 2)_	9.10%

Notes: –

1. KSH is the 100% holding company of Steamroller Limited.

2. Koga Limited (‘‘Koga’’) was the beneficial owner of 37,987,988 shares in G-Prop, representing approximately 5.49% of the issued capital of G-Prop. Koga was a wholly-owned subsidiary of Cheung Kong Infrastructure (BVI) Limited (‘‘CKIBVI’’), which in turn was a wholly-owned subsidiary of Cheung Kong Infrastructure Holdings Limited (‘‘CKI’’). CKI was a subsidiary of Hutchison Infrastructure Holdings Limited (‘‘HIH’’), which in turn was a wholly-owned subsidiary of HIL. HIL was a wholly-owned subsidiary of HWL. By virtue of the SFO, each of CKIBVI, CKI, HIH, HIL and HWL was taken to have an interest in the same parcels of shares which Koga was interested in.

HIL was the beneficial owner of 62,899,924 shares in G-Prop, representing approximately 9.10% of the issued capital of G-Prop. As disclosed above, HWL was taken to have an interest in the same parcel of such 62,899,924 shares in G-Prop which HIL was interested in.

Li Ka-Shing Unity Holdings Limited, of which each of Mr. Li Ka-shing, Mr. Li Tzar-Kuoi, Victor and Mr. Li Tzar-Kai, Richard was interested in one-third of the entire issued share capital, owned the entire issued share capital of TUT1. TUT1 as trustee of UT1, together with certain companies which TUTI as trustee of UT1 is entitled to exercise or control the exercise of more than one-third of the voting power at their general meetings, held more than one-third of the issued share capital of CKH. Certain subsidiaries of CKH were entitled to exercise or control the exercise of more than one-third of the voting power at the general meetings of HWL. In addition, Li Ka-Shing Unity Holdings Limited also owned the entire issued share capital of TDT1 as trustee of DT1 and TDT2 as trustee of DT2. Each of TDT1 and TDT2 holds units in UT1, Mr. Li Ka-shing was the settlor of each of DT1 and DT2 and may be regarded as a founder of each of DT1 and DT2 for the purpose of the SFO. By virtue of the SFO, each of Mr. Li Ka-shing, TDT1, TDT2, TUT1 and CKH was deemed to be interested in the 100,887,912 shares in G-Prop which HWL was interested.

Save as disclosed above, so far as the Directors and the chief executive of the Company are aware, as at the Latest Practicable Date, there was no other person who is directly or indirectly, interested in 10% or more of the equity interest carrying rights to vote in all circumstances at general meetings of any other member of the Group.

GENERAL INFORMATION

APPENDIX

3. Expert and consent

The following is the qualification of the expert who has been named in this circular or has given opinion, letters or advice contained in this circular: –

Name Qualification Access Capital Limited a corporation licensed to carry out types 1, 4, 6 and 9 regulated activities under the SFO.

The Independent Financial Adviser does not hold any shares in any member of the Group nor does it has any right to subscribe for or to nominate any other person to subscribe for the securities of any member of the Group.

The Independent Financial Adviser has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its opinion and letter, and the references to its name, in the form and context in which they respectively appear.

4. Service Contracts

Each of Mr. Lau and Mr. Thomas Lau, Luen-hung had on 8th December, 2003 entered into a service contract with Chinese Estates, Limited, a wholly-owned subsidiary of the Company with effect from 1st January, 2004 for a term of one year renewable automatically for one year unless notice of non-renewal is served by either each of Mr. Lau and Mr. Thomas Lau, Luen-hung or Chinese Estates, Limited at least six months prior to the end of the relevant term. The initial annual salaries for Mr. Lau and Mr. Thomas Lau, Luen-hung are HK$3,600,000 and HK$600,000 respectively, subject to adjustment at the discretion of the board of directors of Chinese Estates, Limited based on the prevailing market environment. They may receive discretionary bonus for serving as a director for any other members of the Group as such company may determine based on the prevailing market environment.

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

5. Material Contracts

The following material contracts (not being contracts in the ordinary course of business) have been entered into by members of the Group within the two years preceding the date of this circular: –

(a) An agreement dated 11th February, 2003 between the Company, Chi Cheung and Jumbo Legend Limited (a wholly-owned subsidiary of Chi Cheung) pursuant to which the Company agreed to exchange certain properties with Chi Cheung and Jumbo Legend Limited which involved initial aggregate consideration amounts of approximately HK$103.9 million payable by the Company to Chi Cheung (subject to adjustment and set-off) and of approximately HK$637.2 million payable by Chi Cheung to the Company (subject to adjustment and set-off) as part of the restructuring of the Group’s property business.
(b) An agreement dated 27th August, 2004 entered into between Paul Y. (a wholly-owned subsidiary of the Company) and Colour Jade Limited in relation to the disposal of the entire issued share capital of each of Project King Ltd., Sino Harbour Limited, Great Kings Investments Ltd. and Glory Ocean Limited and all sums due by the said four companies and their respective subsidiaries for an aggregate consideration of approximately HK$549 million (subject to adjustment).

GENERAL INFORMATION

APPENDIX

(c) An agreement dated 27th August, 2004 entered into between the Company and London Queen Limited in relation to the disposal of the entire issued share capital of Jade Wall Limited (‘‘Jade Wall’’) and the loan due by Jade Wall to Chase Master Company Limited for a consideration of approximately HK$93 million.

6. Material Changes

The Directors are not aware of any material and adverse change in the financial or trading position of the Group since 31st December, 2003, the date to which the latest published audited financial statements of the Group were made up.

7. Litigation

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

8. Miscellaneous

(a) So far as the Directors are aware, save for the agreements as set out in paragraphs (b) and (c) under the paragraph headed ‘‘5. Material Contracts’’ of this appendix where each of Mr. Lau and Mr. Thomas Lau, Luen-hung has an interest, none of the Directors and the Independent Financial Adviser has any interests, directly or indirectly, in any assets which have been, since 31st December, 2003 (being the date to which the latest published audited accounts of the Company were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.
(b) Mr. Lam, Kwong-wai, fellow member of The Association of Chartered Certified Accountants (FCCA), is the Company Secretary of the Company and the Group Financial Controller. He is a qualified accountant appointed by the Company under Rule 3.24 of the Listing Rules and holds a Master Degree in Business Administration and has over 26 years of experience in auditing, finance and accounting.
(c) The registered office of the Company is situated at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda and its principal office in Hong Kong is situated at 26th Floor, MassMutual Tower, 38 Gloucester Road, Wanchai, Hong Kong. The address of the Company’s principal share registrar, Butterfield Fund Services (Bermuda) Limited, is at Rosebank Centre, 11 Bermudiana Road, Pembroke HM 08, Bermuda. The address of the Company’s branch share registrar, Computershare Hong Kong Investor Services Limited, is at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(d) Both of the executive Directors have personal interests in private companies engaged in property development and investment in Hong Kong, securities investment and money lending. As such, they may be regarded as being interested in such businesses, which compete or may compete with the Group. Nevertheless, given the size of such investments when compared with the size of operations and the investment portfolio of the Group, investments in such ventures were considered immaterial as compared with the business interests of the Company. Given that the businesses of the Group and the private companies are independently operated by different management teams, the Directors consider that the Company is capable of carrying on its business independently of and at arm’s length from these competing business. Both of the executive Directors do not currently have any intention to inject such interests into the Group.

GENERAL INFORMATION

APPENDIX

(e) Save for the agreements as set out in paragraphs (b) and (c) under the paragraph headed ‘‘5. Material Contracts’’ of this appendix where each of Mr. Lau and Mr. Thomas Lau, Luen-hung has an interest and the Connected Transaction as disclosed in this circular, there is no contract or arrangement subsisting as at the date of this circular in which a Director is materially interested and which is significant in relation to the business of the Group.
(f) Pursuant to Bye-law 75 of the bye-laws of the Company, a poll may be demanded by the Chairman or by:
(i) at least three Shareholders present in person (or in the case of a corporation, by its duly authorised representative) or by proxy and entitled to vote at the meeting; or
(ii) any Shareholder or Shareholders present in person (or in the case of a corporation, by its duly authorised representative) or by proxy and representing in the aggregate not less than one-tenth of the total voting rights of all the Shareholders having the right to vote at the meeting; or
(iii) a Shareholder or Shareholders present in person (or in the case of a corporation, by its duly authorised representative) or by proxy and holding Shares conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

9. Documents Available for Inspection

Copies of the following documents will be available for inspection at the office of Sidley Austin Brown and Wood of 39th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong during normal business hours up to and including 17th December, 2004 (being a period of not less than 14 days from the date of this circular): –

(a) the Bye-laws of the Company;
(b) the letter from the Independent Board Committee;
(c) the letter from the Independent Financial Adviser;
(d) the service contracts of the Directors as referred to in paragraph 4 of this appendix;
(e) the written consent referred to in paragraph 3 of this appendix; and
(f) the material contracts referred to in paragraph 5 of this appendix.

AI assistant

National Electronics Holdings Limited — Proxy Solicitation & Information Statement 2004

49038_rns_2004-12-02_399dc390-0287-40c0-aba6-d0d678c7ba59.pdf

CONNECTED TRANSACTION

BY POWER JADE LIMITED BY WAY OF A SCHEME OF ARRANGEMENT

Independent Financial Adviser to the Independent Board Committee

CONTENTS

DEFINITIONS

(Stock code: 127)

INTRODUCTION

TERMS OF THE PROPOSAL

CONDITIONS OF THE PROPOSAL

PROVISION OF THE LOAN OR THE SHARE SUBSCRIPTION

Specified Transaction

Financial Assistance

INFORMATION ON KSH

INFORMATION ON POWER JADE

SHAREHOLDING STRUCTURE OF KSH BEFORE AND AFTER THE PROPOSAL

REASONS FOR AND BENEFITS OF THE CONNECTED TRANSACTION

GENERAL

INDEPENDENT BOARD COMMITTEE

INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

(Stock code: 127)

Suite 606

To: The Independent Board Committee of

I. INTRODUCTION

II. THE INDEPENDENT BOARD COMMITTEE

III. BASES AND ASSUMPTIONS OF THE ADVICE

IV. PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background to and reasons for the Connected Transaction

1.1 Background to the Connected Transaction

1.2 Reasons for the Connected Transaction

2. The terms of the Connected Transaction

2.1 Terms of the Connected Transaction

2.2 Factors considered

V. RECOMMENDATION

1. Responsibility Statement

2. Disclosure of Interests

(I) The Company

Notes: –

(II) Associated Corporations of the Company

(A) Chi Cheung Investment Company, Limited (‘‘Chi Cheung’’)

(B) The Kwong Sang Hong International Limited

(C) G-Prop (Holdings) Limited (‘‘G-Prop’’)

3. Expert and consent

4. Service Contracts

5. Material Contracts

6. Material Changes

7. Litigation

8. Miscellaneous

9. Documents Available for Inspection

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National Electronics Holdings Limited Proxy Solicitation & Information Statement 2004