National Electronics Holdings Limited — Proxy Solicitation & Information Statement 2004

Sep 28, 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)

DISPOSAL OF PROPERTIES AND ASSETS DISCLOSEABLE AND CONNECTED TRANSACTION

Independent financial adviser to the Independent Board Committee and the Independent Shareholders of

Chinese Estates Holdings Limited

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A notice dated 27th September 2004 convening the SGM to be held at Salon 6 (Level 3), JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong, on Monday, 18th October 2004 at 10:00 a.m. is set out on pages 53 to 54 of this circular. Whether or not you intend to attend and vote at the SGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the principal place of business of the Company in Hong Kong at 26th Floor, MassMutual Tower, 38 Gloucester Road, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding of the SGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM should you so wish.

A letter from the Board is set out on pages 1 to 13 of this circular. A letter from the Independent Board Committee is set out on page 14 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 15 to 23 of this circular.

27th September 2004

CONTENTS

	Page
DEFINITIONS ........................................................................................................................................................... ii
LETTER FROM THE BOARD................................................................................................................................ 1
LETTER FROM THE INDEPENDENT BOARD COMMITTEE..................................................................... 14
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER..................................................................... 15
APPENDIX I :	PROPERTY VALUATION REPORT ON THE FIRST PROPERTIES......................... 24
APPENDIX II :	PROPERTY VALUATION REPORT ON THE PROPERTIES
	(OTHER THAN THE FIRST PROPERTIES)............................................................... 28
APPENDIX III :	ASSETS AUCTION ESTIMATE......................................................................................... 37
APPENDIX IV :	GENERAL INFORMATION............................................................................................... 44
NOTICE OF SGM	................................................................................................................................................... 53

i

DEFINITIONS

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

‘‘Assets’’

certain works of art held by Jade Wall which include Chinese ceramics, furniture and paintings

‘‘associate’’

has the meaning ascribed to it in the Listing Rules

‘‘Board’’

the board of Directors

‘‘Business Day’’ a day (excluding a Saturday) on which banks are generally open for business in Hong Kong

‘‘Chase Master’’

Chase Master Company Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of the Company

‘‘Company’’ Chinese Estates Holdings Limited, a company incorporated in Bermuda with limited liability, the ordinary shares of which are listed on the Main Board of the Stock Exchange

‘‘connected person’’ ‘‘Director(s)’’

has the meaning ascribed to it in the Listing Rules

the director(s) of the Company

• ‘‘Disposal’’

the Disposal of the Properties and the Disposal of the Assets

‘‘Disposal of the Assets’’ the disposal of the Second Sale Share and the Second Sale Debt ‘‘Disposal of the Properties’’ the disposal of the First Sale Shares and the First Sale Debts

‘‘First BVI Company’’ Project King Ltd., a company incorporated in the British Virgin Islands with limited liability and wholly owned by the First Vendor

• ‘‘First Group’’

• the First BVI Company and the First Property Company

• ‘‘First Properties’’ the properties as particularised in the paragraph headed ‘‘The First Group’’ in this circular

• ‘‘First Property Company’’ Barker Road Investments Limited, a company incorporated in Hong Kong with limited liability and wholly owned by the First BVI Company

‘‘First Purchaser’’

Colour Jade Ltd., a company incorporated in the British Virgin Islands with limited liability and wholly owned by a discretionary trust set up by Mr. Lau, a Director and a substantial shareholder of the Company, for the benefit of certain of his family members

‘‘First Sale and Purchase Agreement’’ the sale and purchase agreement dated 27th August 2004 entered into between the First Vendor and the First Purchaser in relation to the Disposal of the Properties

ii

DEFINITIONS

‘‘First Sale Debts’’

• ‘‘First Sale Shares’’

• ‘‘First Vendor’’

‘‘Fourth BVI Company’’

• ‘‘Fourth Group’’

• ‘‘Fourth Properties’’

• ‘‘Fourth Property Companies’’

the outstanding interest-free loans due from members of the Outgoing Group to the First Vendor and such loans amounted to HK$395,504,488.12 as at 30th June 2004

• the entire issued share capital of each of the First BVI Company, the Second BVI Company, the Third BVI Company and the Fourth BVI Company

• Paul Y. Holdings Company Limited, a company incorporated in the Cayman Islands with limited liability and a wholly-owned subsidiary of the Company

Glory Ocean Limited, a company incorporated in the British Virgin Islands with limited liability and wholly owned by the First Vendor

the Fourth BVI Company and the Fourth Property Companies

the properties as particularised in the paragraph headed ‘‘The Fourth Group’’ in this circular

• (1) Host Fortune Limited, a company incorporated in Hong Kong with limited liability and wholly owned by the Fourth BVI Company

• (2) Crown Wealthy Limited, a company incorporated in Hong Kong with limited liability and wholly owned by the Fourth BVI Company

• (3) Hero Alliance Limited, a company incorporated in Hong Kong with limited liability and wholly owned by the Fourth BVI Company

• ‘‘Group’’

• ‘‘Hong Kong’’

• ‘‘Independent Board Committee’’

• ‘‘Independent Financial Adviser’’

• ‘‘Independent Shareholders’’

• ‘‘Jade Wall’’

• the Company and its subsidiaries

the Hong Kong Special Administrative Region of the PRC

the independent committee of the Board, comprising Mr. Koon, Wing-yee and Mr. Cheng, Kwee, independent non-executive Directors

Access Capital Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders and a corporation deemed licensed under the SFO to perform types 1, 4, 6 and 9 of the regulated activities (as defined in the SFO)

Shareholders other than the First Purchaser, the Second Purchaser, Mr. Lau, Mr. Thomas Lau, Luen-hung and their respective associates

• Jade Wall Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company

iii

DEFINITIONS

• ‘‘Latest Practicable Date’’

• 23rd September 2004, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular

• ‘‘Listing Rules’’

• Rules Governing the Listing of Securities on the Stock Exchange

• ‘‘Mr. Lau’’

• Mr. Joseph Lau, Luen-hung, a Director and a substantial shareholder deemed to have a 63.09% interest in the Company as at the Latest Practicable Date

• ‘‘Outgoing Group’’

• the First BVI Company, the Second BVI Company, the Third BVI Company, the Fourth BVI Company and their respective subsidiaries

• ‘‘PRC’’ the People’s Republic of China

• ‘‘Properties’’

• the First Properties, the Second Properties, the Third Property and the Fourth Properties

• ‘‘Second BVI Company’’

Sino Harbour Limited, a company incorporated in the British Virgin Islands with limited liability and wholly owned by the First Vendor

• ‘‘Second Group’’

the Second BVI Company and the Second Property Companies

• ‘‘Second Properties’’

the properties as particularised in the paragraph headed ‘‘The Second Group’’ in this circular

• ‘‘Second Property Companies’’

• (1) Best Sun Limited, a company incorporated in Hong Kong with limited liability and wholly owned by the Second BVI Company

• (2) Luck Forever Limited, a company incorporated in Hong Kong with limited liability and wholly owned by the Second BVI Company

• (3) Mutual Sky Limited, a company incorporated in Hong Kong with limited liability and wholly owned by the Second BVI Company

‘‘Second Purchaser’’

London Queen Limited, a company incorporated in the British Virgin Islands with limited liability and wholly owned by a discretionary trust set up by Mr. Lau, a Director and a substantial shareholder of the Company, for the benefit of certain of his family members

• ‘‘Second Sale and Purchase Agreement’’

the sale and purchase agreement dated 27th August 2004 entered into between the Second Vendor and the Second Purchaser in relation to the Disposal of the Assets

iv

DEFINITIONS

‘‘Second Sale Debt’’ the outstanding interest-free loan due from Jade Wall to Chase Master and such loan amounted to HK$11,300,000.00 as at 17th August 2004 ‘‘Second Sale Share’’ the entire issued share capital of Jade Wall

‘‘Second Vendor’’ the Company ‘‘SFO’’ Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

‘‘SGM’’ the special general meeting of the Company to be held on Monday, 18th October 2004 at 10:00 a.m. to consider and, if thought fit, approve, amongst other things, the First Sale and Purchase Agreement, the Second Sale and Purchase Agreement and the transactions contemplated thereunder or any adjournment thereof

‘‘Share(s)’’ ordinary share(s) of HK$0.10 each in the 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 ‘‘Third BVI Company’’ Great Kings Investments Ltd., a company incorporated in the British Virgin Islands with limited liability and wholly owned by the First Vendor ‘‘Third Group’’ the Third BVI Company and the Third Property Company ‘‘Third Property’’ the property as particularised in the paragraph headed ‘‘The Third Group’’ in this circular

• ‘‘Third Property Company’’ Jade Art Development Limited, a company incorporated in Hong Kong with limited liability and wholly owned by the Third BVI Company

• ‘‘HK$’’ Hong Kong dollar, the lawful currency of Hong Kong ‘‘US$’’ United States dollar, the lawful currency of the United States of America

• ‘‘%’’ per cent.

v

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

Independent non-executive Directors:

Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Constance Choy, Hok-man Koon, Wing-yee Cheng, Kwee

Principal Office in Hong Kong:

26th Floor MassMutual Tower 38 Gloucester Road Wanchai Hong Kong 27th September 2004

To the Shareholders

Dear Sir or Madam,

DISPOSAL OF PROPERTIES AND ASSETS DISCLOSEABLE AND CONNECTED TRANSACTION

INTRODUCTION

The Directors announced that on 27th August 2004, the First Vendor, a wholly-owned subsidiary of the Company, entered into the First Sale and Purchase Agreement with the First Purchaser, pursuant to which the First Vendor conditionally agreed to sell the First Sale Shares and procure the sale of the First Sale Debts as at completion of the Disposal of the Properties and the First Purchaser conditionally agreed to purchase the First Sale Shares for a consideration of HK$153,302,069.36 (subject to adjustment) and the First Sale Debts as at completion of the Disposal of the Properties at their face value. The First Sale Debts amounted to HK$395,504,488.12 as at 30th June 2004, being the date to which the latest unaudited management accounts of the Outgoing Group were made up.

The Directors further announced that on the same day, the Second Vendor, entered into the Second Sale and Purchase Agreement with the Second Purchaser, pursuant to which the Second Vendor conditionally agreed to sell the Second Sale Share and procure the sale of the Second Sale Debt as at completion of the Disposal of the

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LETTER FROM THE BOARD

Assets and the Second Purchaser conditionally agreed to purchase the Second Sale Share for a consideration of HK$81,964,550.00 and the Second Sale Debt as at completion of the Disposal of the Assets at its face value. The Second Sale Debt amounted to HK$11,300,000.00 as at 17th August 2004, being the date to which the latest unaudited management account of Jade Wall was made up.

The Disposal constitutes a discloseable transaction for the Company under the Listing Rules.

The First Purchaser and the Second Purchaser are wholly owned by two respective discretionary trusts which have been set up by Mr. Lau, a Director and a substantial shareholder of the Company, for the benefit of certain of his family members. The Disposal therefore also constitutes a connected transaction for the Company under the Listing Rules. As the consideration for the Disposal is more than HK$10,000,000.00, the Disposal is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 of the Listing Rules and the approval of the Independent Shareholders by way of poll in accordance with Rule 14A.48 of the Listing Rules.

The purpose of this circular is to provide you with, inter alia, (i) further information regarding the details of the Disposal; (ii) the advice of the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Disposal; (iii) the recommendation of the Independent Board Committee to the Independent Shareholders in relation to the Disposal; (iv) the valuation report on the Properties; (v) the auction price estimates for the Assets; and (vi) a notice convening the SGM.

THE FIRST SALE AND PURCHASE AGREEMENT DATED 27TH AUGUST 2004

Parties

First Purchaser: Colour Jade Ltd., a company incorporated in the British Virgin Islands with limited liability and wholly owned by a discretionary trust set up by Mr. Lau, a Director and a substantial shareholder of the Company, for the benefit of certain of his family members. The First Purchaser is principally engaged in investment holding.

First Vendor: Paul Y. Holdings Company Limited, a company incorporated in the Cayman Islands with limited liability and a wholly-owned subsidiary of the Company. The First Vendor is principally engaged in investment holding.

Items to be disposed

First Sale Shares: the entire issued share capital of each of the First BVI Company, the Second BVI Company, the Third BVI Company and the Fourth BVI Company.

First Sale Debts: the outstanding loans due from members of the Outgoing Group to the First Vendor as at completion of the Disposal of the Properties, and such loans amounted to HK$395,504,488.12 as at 30th June 2004, being the date to which the latest unaudited management accounts of the Outgoing Group were made up.

2

LETTER FROM THE BOARD

The shareholding structure of the Outgoing Group prior to completion of the Disposal of the Properties is as follows:

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Consideration

The initial consideration for the First Sale Shares is HK$153,302,069.36. It is subject to adjustment and has been determined as follows:

A - B - C

• where A = HK$566,250,000.00, being the open market value of the Properties as at 16th August 2004

• B = HK$17,443,442.52, being the net liabilities due to third parties from members of the Outgoing Group as at 30th June 2004

• C = HK$395,504,488.12, being the face value of the First Sale Debts as at 30th June 2004

The initial consideration of the First Sale Shares will be adjusted as follows:

• (1) It will be adjusted upward by the excess amount as calculated below if: (B + C) (B1 + C1)

• (2) It will be adjusted downward by the excess amount as calculated below if: (B1 + C1) (B + C)

• where B1 = the net liabilities due to third parties from members of the Outgoing Group as at completion of the Disposal of the Properties

• C1 = the face value of the First Sale Debts as at completion of the Disposal of the Properties

The consideration for the First Sale Debts will be the face value of all outstanding loans due from members of the Outgoing Group to the First Vendor as at completion of the Disposal of the Properties. The First Sale Debts amounted to HK$395,504,488.12 as at 30th June 2004.

3

LETTER FROM THE BOARD

The total consideration receivable by the Company under the First Sale and Purchase Agreement is HK$548,806,557.48 (subject to adjustment).

The considerations for the First Sale Shares and the First Sale Debts have been determined based on arm’s length negotiations between the First Vendor and the First Purchaser with reference to the open market value of the Properties as at 16th August 2004 and will be settled by the First Purchaser in cash upon completion of the Disposal of the Properties.

The open market value of (a) House A, House B, House C and House D comprised in the First Properties of HK$120 million, HK$95 million, HK$85 million and HK$100 million respectively; (b) the Second Properties of HK$80.1 million; (c) the Third Property of HK$26.85 million; and (d) the Fourth Properties of HK$59.3 million as at 16th August 2004 has been determined by CB Richard Ellis Limited, an independent qualified valuer. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, each of CB Richard Ellis Limited and its ultimate beneficial owners and their respective associates are not connected persons of the Company and are not connected to the directors, chief executive and substantial shareholders of the Company and its subsidiaries and their respective associates.

The following table sets out the open market value of the Properties and the unaudited net assets (liabilities) due to third parties from each of the First Group, the Second Group, the Third Group and the Fourth Group and illustrates the calculation of the total consideration for the First Sale Shares and the First Sale Debts assuming that the net liabilities due to third parties from members of the Outgoing Group and the First Sale Debts remain the same as at 30th June 2004 and completion of the Disposal of the Properties:

	First Group	Second Group	Third Group	Fourth Group	Total
	(HK$)	(HK$)	(HK$)	(HK$)	(HK$)
Open market value of
the Properties as at
16th August 2004 (a)	400,000,000.00	80,100,000.00	26,850,000.00	59,300,000.00	566,250,000.00
Unaudited net assets
(liabilities) due to third
parties from members of
the Outgoing Group (b)	(17,201,636.52)	28,359.00	49,255.00	(319,420.00)	(17,443,442.52)
Face value of the
First Sale Debts (c)	240,187,759.26	79,418,360.72	26,849,619.28	49,048,748.86	395,504,488.12
Consideration for the
First Sale Shares
(d) = (a) + (b) – (c)	142,610,604.22	709,998.28	49,635.72	9,931,831.14	153,302,069.36
Consideration for the
First Sale Debts (c)	240,187,759.26	79,418,360.72	26,849,619.28	49,048,748.86	395,504,488.12
Total consideration
(e) = (d) + (c) or (a) + (b)	382,798,363.48	80,128,359.00	26,899,255.00	58,980,580.00	548,806,557.48

4

LETTER FROM THE BOARD

The following table sets out the calculation of the estimated gain on Disposal of the Properties:

Total consideration (e) Unaudited net asset (liability) value of the Outgoing Group as at 30th June 2004 (adjusted to reflect the position of the Group) (x) Face value of the First Sale Debts (y) Total value (z) = (x) + (y) Estimated gain (e) – (z)	First Group (HK$) 382,798,363.48 Second Group (HK$) 80,128,359.00 Third Group (HK$) 26,899,255.00 Fourth Group (HK$) 58,980,580.00 Total (HK$) 548,806,557.48
	(89,905,626.01) (Note 1) 240,187,759.26 (77,261.72) (Note 2) 79,418,360.72 (4,675,267.55) (Note 3) 26,849,619.28 951,147.71 (Note 4) 49,048,748.86 (93,707,007.57) 395,504,488.12
	150,282,133.25 232,516,230.23 79,341,099.00 787,260.00 22,174,351.73 4,724,903.27 49,999,896.57 8,980,683.43 301,797,480.55 247,009,076.93

Notes:

1. The amount of HK$89,905,626.01 represents the net liabilities of the First Group as at 30th June 2004 in the amount of HK$206,705,626.01 after exclusion of bank loan in the amount of HK$116,800,000.00.

2. The amount of HK$77,261.72 represents the net liabilities of the Second Group as at 30th June 2004 in the amount of HK$94,001.72 after exclusion of the net liabilities of HK$16,740.00 of the subsidiaries of the Second BVI Company (other than the Second Property Companies) which have been disposed of by the Second BVI Company pursuant to an intra-group transfer subsequent to 30th June 2004.

3. The amount of HK$4,675,267.55 represents the net liabilities of the Third Group as at 30th June 2004 in the amount of HK$6,538,020.55 after exclusion of a net deficit on valuation of investment properties in the amount of HK$1,862,753.00 which have been held in revaluation reserve of the Group and will be released upon disposal of the Third Properties.

4. The amount of HK$951,147.71 represents the net liabilities of the Fourth Group as at 30th June 2004 in the amount of HK$11,551,186.13 after exclusion of (a) bank loan in the amount of HK$5,425,000.00; (b) net deficit on valuation of investment properties in the amount of HK$2,831,710.00 which have been held in revaluation reserve of the Group and will be released upon disposal of the Fourth Properties; and (c) the net liabilities of HK$4,245,623.84 of subsidiaries of the Fourth BVI Company (other than the Fourth Property Companies) which have been disposed of by the Fourth BVI Company pursuant to an intra-group transfer subsequent to 30th June 2004.

There will be no effect on the total consideration under the Disposal of the Properties as a result of the difference in the amount of the First Sale Debts as at 30th June 2004 and at completion of the Disposal of the Properties. Adjustments to the total consideration will be made in the event that the net liabilities due to third parties from the Outgoing Group as at 30th June 2004 will be different from those as at completion of the Disposal of the Properties.

5

LETTER FROM THE BOARD

The Board expects that there will be no material change to the financial position of the Outgoing Group since 30th June 2004. In the event that the percentage ratios with respect to the adjusted consideration exceeds the discloseable transaction thresholds, the Company will ensure compliance with the Listing Rules.

Conditions

The Disposal of the Properties is conditional upon:

• (a) the First Vendor having provided evidence to the satisfaction of the First Purchaser that the First Vendor is in a position to fully discharge all the existing mortgages in connection with any of the First Properties on or before completion of the sale and purchase of the entire issued share capital of the First BVI Company;

• (b) the First Vendor having provided evidence to the satisfaction of the First Purchaser that the First Vendor is in a position to fully discharge all the existing mortgages in connection with any of the Second Properties, the Third Property and/or the Fourth Properties on or before completion of the sale and purchase of the entire issued share capital of each of the Second BVI Company, the Third BVI Company and the Fourth BVI Company;

• (c) the passing by the Independent Shareholders of the resolution in the SGM approving the First Sale and Purchase Agreement and the transactions contemplated thereunder in accordance with the Listing Rules;

• (d) the First Purchaser having notified the First Vendor that a due diligence on the First Group has been conducted to the reasonable satisfaction of the First Purchaser; and

• (e) the First Purchaser having notified the First Vendor that a due diligence on the Second Group, the Third Group and the Fourth Group has been conducted to the reasonable satisfaction of the First Purchaser.

As at the Latest Practicable Date, the outstanding loans as secured under the existing mortgages of the Properties amounted to approximately HK$200 million, of which approximately HK$122.2 million was attributable to the bank loans taken out by members of the Outgoing Group with the remaining by other members of the Group. The First Vendor will discharge all existing mortgages in relation to the Properties prior to completion of the Disposal of the Properties.

The First Purchaser will have the absolute discretion to waive any one or both of the conditions (d) and (e). If condition (c) is not fulfilled by 31st March 2005 (or such other time and/or date as mutually agreed between the First Vendor and the First Purchaser), the First Sale and Purchase Agreement will cease to be of any effect save for any antecedent breach. As at the Latest Practicable Date, none of the above conditions have been fulfilled.

Completion

Completion of the disposal in respect of the entire issued share capital in the First BVI Company will take place on the 20th Business Day after the satisfaction of conditions (a), (c) and (d) or such other time and/or date as mutually agreed between the First Vendor and the First Purchaser.

Completion of the disposal in respect of the entire issued share capital in the Second BVI Company, the Third BVI Company and the Fourth BVI Company will take place on or before 31st March 2005 or such other time and/or date as mutually agreed between the First Vendor and the First Purchaser subject to the satisfaction of conditions (b), (c) and (e).

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LETTER FROM THE BOARD

Upon completion of the Disposal of the Properties, each of the First BVI Company, the Second BVI Company, the Third BVI Company and the Fourth BVI Company will cease to be a subsidiary of the Company.

Profit-sharing arrangement

The First Purchaser has undertaken that subject to completion of the disposal in respect of the entire issued share capital in the First BVI Company and within 24 months from such completion, in the event that the First Purchaser will dispose of any of the First Properties directly or indirectly through the disposal of its interest in the First BVI Company or the First Property Company and the consideration for such disposal exceeds the acquisition cost of such property, the First Vendor will be entitled to share 80% of the excess.

Information on the Outgoing Group

The First Group

The First BVI Company is principally engaged in investment holding. The First BVI Company is interested in the entire issued share capital of the First Property Company, which in turn holds the First Properties. The First Properties are the sole asset of the First Property Company. The unaudited consolidated net loss before and after taxation of the First BVI Company for the year ended 31st December 2002 were both HK$152,317,179.42, which mainly comprised impairment loss in the amount of HK$152.3 million recognised in respect of property under development. The unaudited consolidated net loss before and after taxation of the First BVI Company for the year ended 31st December 2003 were both HK$298,933.73. Based on the unaudited consolidated management account of the First BVI Company as at 30th June 2004, the unaudited consolidated net liabilities of the First BVI Company amounted to HK$206,705,626.01 which resulted from the total impairment loss on property under development for an amount of approximately HK$205.8 million from 1998 to 2002 and the unaudited consolidated total assets of the First BVI Company amounted to HK$168,943,237.25. The unaudited consolidated net liabilities of the First BVI Company as at 30th June 2004 in the amount of HK$206,705,626.01 as referred to above included bank loan in the amount of HK$116,800,000.00.

The First Properties comprise four detached houses, namely House A, House B, House C and House D at No. 31 Barker Road, Hong Kong. The First Properties were acquired by the Group in 1997 and have a total book value of HK$167,483,769.77. They were valued at HK$120 million, HK$95 million, HK$85 million and HK$100 million respectively as at 16th August 2004 by CB Richard Ellis Limited. The First Properties have remained vacant since completion of the development in September 2003.

The Second Group

The Second BVI Company is principally engaged in investment holding. The Second BVI Company is interested in the entire issued share capital of each of the Second Property Companies, which in turn hold the Second Properties. The Second Properties are the sole asset of the Second Property Companies. The Second BVI Company was incorporated in 2004. Based on the unaudited consolidated management account of the Second BVI Company as at 30th June 2004, the unaudited consolidated net liabilities of the Second BVI Company amounted to HK$94,001.72 and the unaudited consolidated total assets of the Second BVI Company amounted to HK$79,341,099.00.

The Second Properties consist of three residential units at Dynasty Court, No. 23 Old Peak Road, Hong Kong, namely (1) Flat B, 24/F., Tower 1 and carparking space No. 36 on Level LG2, (2) Flat B, 37/F., Tower 1 and

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LETTER FROM THE BOARD

carparking space No. 35 on Level LG2; and (3) Flat B, 43/F., Tower 5 and carparking space No. 48 on Level LG3. The Second Properties were acquired by the Group in May 2004 and have a total book value of HK$79,312,740.00, being the original cost of acquisition by the Group from an independent third party who is not a connected person of the Company under the Listing Rules. They were valued at HK$80.1 million as at 16th August 2004 by CB Richard Ellis Limited. The Second Properties have remained vacant since they were acquired by the Group in May 2004.

The Third Group

The Third BVI Company is principally engaged in investment holding. The Third BVI Company is interested in the entire issued share capital of the Third Property Company, which in turn holds the Third Property. The Third Property is the sole asset of the Third Property Company. The unaudited consolidated net loss before and after taxation of the Third BVI Company for the year ended 31st December 2002 were both HK$6,115,347.91, which mainly comprised deficit on valuation of investment properties. The unaudited consolidated net profit before and after taxation of the Third BVI Company for the year ended 31st December 2003 was HK$3,303,519.16 and HK$3,061,395.16 respectively. Based on the unaudited consolidated management account of the Third BVI Company as at 30th June 2004, the unaudited consolidated net liabilities of the Third BVI Company amounted to HK$6,538,020.55 which resulted from net deficit on valuation of investment properties for an amount of approximately HK$6.1 million recognised in 2002 and 2003 and the unaudited consolidated total assets of the Third BVI Company amounted to HK$20,311,598.73.

The Third Property is a residential unit at Flat B, 35/F., Tower 5, Leighton Hill, 2B Broadwood Road, Hong Kong together with carparking space No. C76 on 2/F. The Third Property was acquired by the Group in September 2002 and has a book value of HK$19,700,000.00. It was valued at HK$26.85 million as at 16th August 2004 by CB Richard Ellis Limited. The Third Property has remained vacant since it was acquired by the Group in September 2002.

The Fourth Group

The Fourth BVI Company is principally engaged in investment holding. The Fourth BVI Company is interested in the entire issued share capital of each of the Fourth Property Companies which in turn hold the Fourth Properties. The Fourth Properties are the sole asset of the Fourth Property Companies. The unaudited consolidated net loss before and after taxation of the Fourth BVI Company for the year ended 31st December 2002 were HK$32,336,628.85 and HK$32,343,583.85 respectively, which mainly comprised deficit on valuation of investment properties for an amount of approximately HK$31.7 million. The unaudited consolidated net profit before and after taxation of the Fourth BVI Company for the year ended 31st December 2003 were HK$20,049,188.00 and HK$18,868,131.00 respectively, which resulted from surplus on valuation of investment properties of approximately HK$18.2 million. Based on the unaudited consolidated management account of the Fourth BVI Company as at 30th June 2004, the unaudited consolidated net liabilities of the Fourth BVI Company amounted to HK$11,551,186.13 which resulted from net deficit on valuation of investment properties for an amount of approximately HK$11.8 million from 1998 to 2003 and the unaudited consolidated total assets of the Fourth BVI Company amounted to HK$51,962,975.57. The unaudited consolidated net liabilities of the Fourth BVI Company as at 30th June 2004 in the amount of HK$11,551,186.13 as referred to above included bank loan in the amount of HK$5,425,000.00 and net liabilities of HK$4,245,623.84 of subsidiaries of the Fourth BVI Company (other than the Fourth Property Companies) which have been disposed of by the Fourth BVI Company pursuant to an intra-group transfer subsequent to 30th June 2004.

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LETTER FROM THE BOARD

The Fourth Properties consist of three residential units, namely (1) Penthouse A, 26/F. and 27/F. including the Flat Roof(s), Celeste Court, Nos. 10, 11 and 12 Fung Fai Terrace, Hong Kong and carparking space No. 9 on Carpark Level 3; (2) Flat B, 59/F., Tower 6, The Belcher’s, No. 89 Pok Fu Lam Road, Pok Fu Lam, Hong Kong; and (3) Flat A, 39/F., The Mayfair, No. 1 May Road, Hong Kong. The Fourth Properties were acquired by the Group between June and August 2002 and have a total book value of HK$47,150,000.00. They were valued at HK$59.3 million as at 16th August 2004 by CB Richard Ellis Limited. Out of the Fourth Properties, two of them are currently subject to lease agreements. As at the Latest Practicable Date, the aggregate net income generated from the said leases amounted to approximately HK$3.7 million.

THE SECOND SALE AND PURCHASE AGREEMENT DATED 27TH AUGUST 2004

Parties

Second Purchaser: London Queen Limited, a company incorporated in the British Virgin Islands with limited liability, which is wholly owned by a discretionary trust set up by Mr. Lau, a Director and a substantial shareholder of the Company, for the benefit of certain of his family members. The Second Purchaser is principally engaged in investment holding.

Second Vendor: the Company

Items to be disposed

Second Sale Share: the entire issued share capital of Jade Wall

Second Sale Debt: the outstanding loan due from Jade Wall to Chase Master as at completion of the Disposal of the Assets, and such loan amounted to HK$11,300,000.00 as at 17th August 2004.

Consideration

The consideration for the Second Sale Share is HK$81,964,550.00 and has been determined with reference to the high auction estimate (being the estimated hammer price at the high end at an auction) of the Assets of HK$93,264,550.00 as at 17th August 2004 as determined by Christie’s Hong Kong Limited, an independent valuer. The low auction estimate (being the estimated hammer price at the low end at an auction) of the Assets as at 17th August 2004 was HK$75,737,800.00 as determined by Christie’s Hong Kong Limited. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, each of Christie’s Hong Kong Limited and its ultimate beneficial owners and their respective associates are not connected persons of the Company and are not connected to the directors, chief executive and substantial shareholders of the Company and its subsidiaries and their respective associates.

The consideration for the Second Sale Debt will be the face value of the outstanding loan due from Jade Wall to Chase Master as at completion of the Disposal of the Assets. The Second Sale Debt amounted to HK$11,300,000.00 as at 17th August 2004.

The considerations for the Second Sale Share and the Second Sale Debt have been determined based on arm’s length negotiations between the Second Vendor and the Second Purchaser and will be settled by the Second Purchaser in cash upon completion of the Disposal of the Assets.

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LETTER FROM THE BOARD

The following table sets out the calculation of the estimated gain on the Disposal of the Assets:

(HK$)

Consideration for Second Sale Share	81,964,550.00
Consideration for Second Sale Debt	11,300,000.00
Total Consideration (a)	93,264,550.00
Cost of investment in Jade Wall
as at 17th August 2004 (b)(Note)	8,227,722.52
Estimated Gain (a) - (b)	85,036,827.48

Note: Cost of investment in Jade Wall of HK$8,227,722.52 represents the net assets value of Jade Wall as at 17th August 2004 of HK$921,274.82 after consolidation adjustment of an additional depreciation of the Assets of HK$3,993,552.30 and an elimination of inter-company loan of HK$11,300,000.00.

Condition

The Disposal of the Assets is conditional upon the passing by the Independent Shareholders of the resolution in the SGM approving the Second Sale and Purchase Agreement and the transactions contemplated thereunder in accordance with the Listing Rules.

If the above condition is not fulfilled by 31st March 2005 (or such other time and/or date as mutually agreed between the Second Vendor and the Second Purchaser), the Second Sale and Purchase Agreement will cease to be of any effect save for any antecedent breach.

Completion

Completion of the Disposal of the Assets will take place on or before 31st March 2005 (or such other time and/or date as mutually agreed between the Second Vendor and the Second Purchaser).

Upon completion of the Disposal of the Assets, Jade Wall will cease to be a subsidiary of the Company.

Information on Jade Wall

Jade Wall is principally engaged in investment holding. The unaudited net loss before and after taxation of Jade Wall for the year ended 31st December 2002 were HK$230,004.84 and HK$223,188.84 respectively. The unaudited net profit before and after taxation of Jade Wall for the year ended 31st December 2003 were HK$8,672,222.60 and HK$8,667,353.60 respectively, which mainly resulted from a gain on disposal of the assets of Jade Wall. Based on the unaudited management accounts of Jade Wall as at 17th August 2004, the unaudited net assets of Jade Wall amounted to HK$921,274.82 and the unaudited total assets of Jade Wall amounted to HK$12,408,863.82, comprising the Assets.

REASONS FOR THE DISPOSAL

The principal activity of the Company is investment holding. The Group is principally engaged in property investment and development, brokerage, securities investment and money lending.

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LETTER FROM THE BOARD

As a result of the Disposal, the Group is expected to record an unaudited gain of approximately HK$332 million before taxation, as to approximately HK$247 million in relation to the Disposal of the Properties, and as to approximately HK$85 million in relation to the Disposal of the Assets. The Disposal of the Properties and the Disposal of the Assets are not inter-conditional.

The recent months have revealed a slowdown in the transactions at the high-end of the residential properties market. The disposal of the First Properties coupled with the profit-sharing arrangement would enable the Group to lock-in a reasonable investment return and avail the Company of further upside. The disposal of the Second Properties, the Third Property and the Fourth Properties which are residential apartments for investment purposes in dispersed locations and which are not subject to any co-terminating tenancy would allow the Group to focus and redeploy its resources on property developments and projects that will yield economies of scale. The Disposal of the Assets would allow the Group to realise these valuable non-core assets (which are normally sold through auctions or private sales) at their independently appraised value.

USE OF PROCEEDS

The net proceeds of the Disposal are estimated to be approximately HK$642 million. The Directors intend to use approximately HK$200 million of the net proceeds for repayment of bank loans taken out by members of the Group (including the mortgages on the Properties) and with the balance of approximately HK$442 million for general working capital of the Group (other than the Outgoing Group and Jade Wall).

GENERAL

The Disposal constitutes a discloseable transaction for the Company under the Listing Rules. The First Purchaser and the Second Purchaser are wholly owned by two respective discretionary trusts set up by Mr. Lau, a Director and a substantial shareholder of the Company, for the benefit of certain of his family members. Accordingly, each of the First Purchaser and the Second Purchaser is a connected person of the Company within the meaning of the Listing Rules and the Disposal also constitutes a connected transaction for the Company under the Listing Rules. As the consideration for the Disposal is more than HK$10,000,000.00, the Disposal is subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 of the Listing Rules and the approval of the Independent Shareholders by way of poll in accordance with Rule 14A.48 of the Listing Rules.

As at the Latest Practicable Date, (a) Mr. Lau is deemed to be interested in 1,283,143,456 Shares, representing approximately 63.09% of the issued share capital of the Company; (b) Mr. Thomas Lau, Luen-hung is deemed to be interested in 199,207,187 Shares, representing approximately 9.80% of the issued share capital of the Company; (c) the First Purchaser and the Second Purchaser are wholly owned by two respective discretionary trusts set up by Mr. Lau for the benefit of certain of his family members. As Mr. Lau and Mr. Thomas Lau, Luen-hung, being all the executive Directors, have a material interest in the Disposal by virtue of the fact that the First Purchaser and the Second Purchaser are wholly owned by two discretionary trusts which have been set up by Mr. Lau for the benefit of certain of his family members, Mr. Lau, Mr. Thomas Lau, Luen-hung and their respective associates, who together are deemed to be interested in approximately 72.89% interest of the issued share capital of the Company, will abstain from voting on the resolutions proposed at the SGM in relation to the Disposal.

As at the Latest Practicable Date, (a) there is no voting trust or other agreement or arrangement or understanding which has been entered into by or binding upon any of Mr. Lau, Mr. Thomas Lau, Luen-hung or their respective associates; (b) no obligation or entitlement of any of Mr. Lau, Mr. Thomas Lau, Luen-hung or their respective associates exists whereby any of them has or may have temporarily or permanently passed control over the exercise of the voting right in respect of their Shares to a third party, either generally or on a case-by-case basis;

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LETTER FROM THE BOARD

and (c) no discrepancy exists between the interests of Mr. Lau, Mr. Thomas Lau, Luen-hung and their respective associates as disclosed in this circular and the number of Shares in respect of which any of them control or will be entitled to exercise control over the voting right at the SGM.

INDEPENDENT BOARD COMMITTEE

An Independent Board Committee comprising Mr. Koon, Wing-yee and Mr. Cheng, Kwee, independent non-executive Directors, was formed to give advice to the Independent Shareholders on how they should vote in relation to each of the First Sale and Purchase Agreement and the Second Sale and Purchase Agreement and the transactions contemplated thereunder. As Ms Constance Choy, Hok-man, an independent non-executive Director, is also a partner of Sidley Austin Brown & Wood which is advising the Company in respect of the Disposal, Ms Constance Choy, Hok-man is not considered independent to act as member of the Independent Board Committee and to advise the Independent Shareholders in respect of the Disposal.

Shareholders should note that based on the advice of the Independent Financial Adviser, the Independent Board Committee considers that the First Sale and Purchase Agreement, the Second Sale and Purchase Agreement and the transactions contemplated thereunder are on normal commercial terms and are fair and reasonable as far as the Independent Shareholders are concerned and the Disposal is in the interests of the Company and the Shareholders as a whole.

INDEPENDENT FINANCIAL ADVISER

Access Capital Limited has been appointed the independent financial adviser to give advice to the Independent Board Committee and the Independent Shareholders in respect of the First Sale and Purchase Agreement, the Second Sale and Purchase Agreement and the transactions contemplated thereunder.

SGM

A notice convening the SGM to be held at Salon 6 (Level 3), JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong on Monday, 18th October 2004 at 10:00 a.m. is set out on pages 53 to 54 of this circular for the purpose of considering and, if thought fit, passing, amongst others, the resolutions in respect of the Disposal.

A form of proxy for use by the Shareholders at the SGM is enclosed. Whether or not you are able to attend the meeting in person, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon to the principal place of business of the Company in Hong Kong, at 26th Floor, MassMutual Tower, 38 Gloucester Road, Wanchai, Hong Kong, as soon as possible and in any event, not later than 48 hours before the time appointed for holding such meeting or any adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting thereof (as the case may be) should you so wish.

Pursuant to Bye-law 75 of the bye-laws of the Company, a poll may be demanded by the Chairman or by:

• (a) 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

• (b) 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

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LETTER FROM THE BOARD

• (c) 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.

As the Disposal constitutes a connected transaction for the Company under the Listing Rules, the votes of the Shareholders to be taken at the SGM will be on a poll where Mr. Lau, Mr. Thomas Lau, Luen-hung and their respective associates will abstain from voting on the resolutions relating to the Disposal.

RECOMMENDATIONS

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 First Sale and Purchase Agreement, the Second Sale and Purchase Agreement and the transactions contemplated thereunder 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 appendices to this circular and the notice of the SGM.

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

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [250 x 84] intentionally omitted <==

(incorporated in Bermuda with limited liability)

(Stock code: 127)

27th September 2004

To the Independent Shareholders

Dear Sir or Madam,

DISPOSAL OF PROPERTIES AND ASSETS DISCLOSEABLE AND CONNECTED TRANSACTION

CONNECTED TRANSACTION

We refer to the circular issued by the Company to the Shareholders dated 27th September 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 Shareholders on whether the terms of the First Sale and Purchase Agreement, the Second Sale and Purchase Agreement and the transactions contemplated thereunder 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 13 and the letter from the Independent Financial Adviser as set out on pages 15 to 23 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 First Sale and Purchase Agreement, the Second Sale and Purchase Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned and the First Sale and Purchase Agreement, the Second Sale and Purchase Agreement and the transactions contemplated thereunder are 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 First Sale and Purchase Agreement, the Second Sale and Purchase Agreement and the transactions contemplated thereunder.

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

Koon, Wing-yee

Cheng, Kwee

Independent non-executive directors

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from Access Capital Limited for inclusion in the Company’s circular, which sets out its advice to the Independent Board Committee and the Independent Shareholders in relation to the Disposal, a discloseable and connected transaction involving the disposal of Properties and Assets by the Company.

==> picture [64 x 90] intentionally omitted <==

Suite 606 6th Floor Bank of America Tower 12 Harcourt Road, Central Hong Kong

27th September 2004

To the Independent Board Committee of

Chinese Estates Holdings Limited and the Independent Shareholders

Dear Sirs,

DISPOSAL OF PROPERTIES AND ASSETS DISCLOSEABLE AND CONNECTED TRANSACTION

I. INTRODUCTION

We refer to our appointment to advise the independent board committee (‘‘Independent Board Committee’’) and the Independent Shareholders of the Chinese Estates Holdings Limited (the ‘‘Company’’) regarding the above captioned discloseable and connected transaction involving the disposal of certain Hong Kong luxury residential property holdings (the ‘‘Properties’’), as well as various works of art (the ‘‘Assets’’) by the Company, to two companies wholly-owned by two respective discretionary trusts, set up by Mr. Joseph Lau, Luen-hung (‘‘Mr. Lau’’), a Director and a substantial shareholder of the Company, for the benefit of certain family members (together the ‘‘Disposal’’).

Details of the Disposal are contained in the ‘‘Letter from the Board’’ set out in the circular to the Shareholders dated 27th September 2004 (the ‘‘Circular’’), of which this letter forms part. Terms used in this letter shall have the same meaning as those defined in the Circular unless the context otherwise requires.

The Disposal constitutes a discloseable transaction, as well as a connected transaction for the Company under the Listing Rules. The purchasing parties of the Properties and Assets, the First Purchaser and the Second Purchaser respectively, are companies wholly-owned by two respective discretionary trusts set up by Mr. Lau for the benefit of certain of his family members. Mr. Lau is a Director and a substantial shareholder of the Company. Accordingly, each of the First Purchaser and the Second Purchaser is a connected person of the Company as defined under the Listing Rules, and the Disposal therefore constitutes a connected transaction for the Company. Furthermore, as the consideration for the Disposal amounts to more than HK$10,000,000.00, the Disposal will, in accordance with the Listing Rules, require independent shareholders’ approval, to be voted on by way of poll at the SGM.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Independent Board Committee

The Board currently consists of two executive directors, namely Mr. Thomas Lau, Luen-hung and Mr. Joseph Lau, Luen-hung; and three independent non-executive directors, namely Ms. Constance Choy, Hok-man, Mr. Koon, Wing-yee and Mr. Cheng, Kwee (together the ‘‘Directors’’).

The Independent Board Committee, comprising independent non-executive Directors, Mr. Koon, Wing-yee and Mr. Cheng, Kwee, has been established to consider the Disposal and to advise the independent shareholders of the Company (the ‘‘Independent Shareholders’’) thereon. Ms. Constance Choy, Hok-man, will not serve as an Independent Board Committee member for the Disposal, as she is a partner at Sidley, Austin, Brown & Wood LLP, the legal adviser to the Company for the Disposal. It would therefore be inappropriate for Ms. Constance Choy, Hok-man, to serve as an Independent Board Committee member for the Disposal.

We have been appointed by the Independent Board Committee to advise its members as to whether the terms of the Disposal are (i) on normal commercial terms, (ii) fair and reasonable in so far as the Independent Shareholders are concerned, and (iii) in the interests of the Company and the Shareholders as a whole; as well as to give our recommendation to the Independent Board Committee and the Independent Shareholders as to whether to vote in favor or against the requisite resolutions to be put forth at the SGM. Our recommendation vis-a-vis the above is set out under section III, entitled ‘‘Recommendation’’ of this letter.

Since both Mr. Lau and Mr. Thomas Lau, Luen-hung have a material interest in the Disposal by virtue of the fact that the First Purchaser and the Second Purchaser are wholly-owned by two respective discretionary trusts which have been set up by Mr. Lau for the benefit of certain members of his family, Mr. Lau and his associates (including Mr. Thomas Lau, Luen-hung) will abstain from voting on the resolutions to be proposed at the SGM in relation to the Disposal.

Bases and assumptions of our 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, as well as the independent valuation on the Properties (‘‘Property Valuation’’) and auction price estimate on the Assets (‘‘Auction Estimate’’) prepared by the respective independent professional valuation experts, CB Richard Ellis Limited and Christie’s Hong Kong Limited, appointed by the Company.

We have assumed that all 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 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 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.

Finally, we consider that 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.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

II. PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background to and reasons for the Disposal

Strategic rationale for the Disposal

As set out in the Chairman’s statement in the 2003 annual report of the Company, the Group has actively engaged itself in various property development projects and has also made acquisitions of commercial properties, despite the economic uncertainties witnessed during 2003. The Chairman also stated that the Group expects to continue to market its high-quality development projects in 2004 and 2005, with the view of capitalising on current market opportunities and with the view of generating stronger returns. The Group reaffirmed this strategy in its interim results statement issued on 6th September 2004, in which the Group stated that it will continue to focus and allocate more resources on investment and development properties by reducing its securities portfolio. In so doing, the Group will also minimise its exposure to market fluctuations as a result of investment in securities. Consistent with this policy, the Group considers the Disposal to be an opportunity to free up a certain amount of the Group’s resources currently tied up in the Properties and the Assets, for redeployment on its property development and other projects that will yield stronger returns and enable the Group to achieve greater economies of scale.

We have discussed with the senior management of the Company the rationale of the Company for the Disposal. We have, following our discussions with the independent valuers of the Properties and the Assets, noted the recent general positive sentiment regarding (i) Hong Kong’s luxury property market and the trends over the past year pertaining to the requisite sales and rental yields, as well as (ii) the art collectors market worldwide; and we concur with the views of the Directors on their rationale that by implementing the Disposal, the Group will be able to take advantage of the current market trends and free up additional resources for redeployment in property development and other projects as described above, all of which is in line with the Group’s business strategy, and in the interests of the Company and the Shareholders as a whole.

Portfolio of the Properties and Assets and their related debts

In assessing the merits of the Disposal, the Group has taken into account the fact that the Properties concerned are mainly non-rental yielding properties, or are relatively low-rental yielding properties. In the case of the First Properties, which comprises four new luxury detached houses at the high-end of the property market, the Group holds the view that it would take a considerable amount of effort and time to market and successfully sell the houses at optimal prices acceptable to the Group, whilst still bearing the risk of any cyclical market downturns that may directly affect the luxury property sector. In this regard, the Group has noted, as stated in the announcement dated 27th August 2004 issued by the Company in relation to the Disposal (‘‘Announcement’’), that in recent months there has been a slowdown in the volume of transactions relating to high-end residential properties in the market.

The Group therefore believes that the disposal of its interest in the Properties (including the First Sale Debts) would effectively cushion the Group from these market risks, and at the same time, enable the Group to lock-in a reasonable return on its investment. In the case of the First Properties, the profit sharing arrangement would avail the Group an opportunity to participate in any further upside that may exist upon the re-sale of any of the First Properties by the First Purchaser.

In respect of the disposal of the Assets (including the Second Sale Debt), this represents a unique opportunity for the Group to realise a substantial part of its collection of works of art, which are valuable but non-income yielding, at their independently appraised value.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Impact on the Group’s profitability

As stated in the ‘‘Letter from the Board’’ contained in the Circular, the Group will record profit with respect to each of the proposed sales of interest in the First Properties, the Second Properties, the Third Properties and the Fourth Properties respectively, as well as a profit on the disposal of Assets. Collectively, the Group expects that the implementation of the Disposal will result in an unaudited gain before taxation of approximately HK$332 million, which represents approximately 27.7% of the audited pre-tax profit of the Group for the year ended 31st December 2003.

After taking into account the background of and the reasons for the Disposal as described above, the Directors conclude that the implementation of the Disposal is consistent with the Group’s growth strategy, and that the expected resultant gain as a result of the Disposal, as well as the profit-sharing arrangement in respect of the First Properties are fair and reasonable in so far as the Independent Shareholders are concerned and are in the interests of the Company and Shareholders as a whole. Also, after holding discussions with the Company’s senior management; and after taking into consideration the current improving economic situation in Hong Kong, as well as the view and information provided by the professional valuation experts regarding the positive performance of the luxury property market in Hong Kong and also the strong art collectors market worldwide, we concur with the above view of the Directors that the Disposal will help the Group free up additional resources and increase the Company’s working capital while allowing it to pursue its strategy of investing in higher yielding property development projects and other projects going forward. In this regard, we view the Disposal as justifiable and in the interests of the Company and the Shareholders as a whole.

Shareholders should note that, as with any commercial decision, it is impossible to determine or predict when would be the absolute optimum time to conduct the Disposal, as market conditions vary from time to time. In the context of this transaction, market conditions are buoyant and stable. However, with regard to the disposal of the Properties, a profit-sharing mechanism has been designed and incorporated into the disposal of the First Sale Shares and First Sale Debts, in order to allow the Company to capture any potential further future upside (in relation to the First Property, which forms the largest part of the Properties to be disposed), should such an upside materialise within the next two years. Accordingly, we view this profit-sharing feature of the disposal of the First Sale Shares and First Sale Debts to be fair and reasonable and is in the interests of the Company and the Shareholders in that it offers the Company a degree of flexibility.

2. Consideration of the Disposal

In respect of the disposal of First Sale Shares and the First Sale Debts

Basis of the consideration

As stated in the ‘‘Letter from the Board’’, the total consideration in respect of the disposal of the First Sale Shares and the First Sale Debts is based on, the relevant open market values of the Properties as at 16th August 2004, as determined by CB Richards Ellis Limited, an independent qualified valuer (‘‘Independent Property Valuer’’). The reason why the total consideration is based on the relevant open market value of the Properties is because the sole assets of the holding companies in the Outgoing Group are the Properties. In our view this basis is fair and reasonable so far as the Shareholders are concerned. A copy of the property valuation report is contained in appendices I and II to the Circular.

The abovementioned total consideration receivable by the Group in respect of the disposal of the First Sale Shares and the First Sale Debts is derived by deducting the net liabilities due to third parties from the Outgoing Group as at 30th June 2004 (approximately HK$17.44 million) from the aggregate open market

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

values of the Properties as at 16th August 2004 (approximately HK$566.25 million). Shareholders should note that in the event that the net liabilities due to third parties from the Outgoing Group as at 30th June 2004 is different from the amount outstanding as at completion of the disposal of the First Sale Shares and the First Sale Debts, the total consideration receivable by the Group in respect of the disposal of the Properties will be adjusted on a dollar-for-dollar basis.

On the basis of the amount of net liabilities due to third parties from the Outgoing Group as at 30th June 2004 (approximately HK$17.44 million) and the aggregate open market values of the Properties as at 16th August 2004 (approximately HK$566.25 million), the initial amount of consideration receivable by the Group in respect of the disposal of the First Sale Shares and the First Sale Debts amounts to approximately HK$548.81 million, of which (i) approximately HK$395.51 million is the amount of outstanding First Sale Debt as at 30th June 2004 (assuming no adjustment is required at completion of the disposal of the Properties); and (ii) approximately HK$153.30 million is the initial consideration for the First Sale Shares (assuming no adjustment is required to be made to the First Sale Debt and the amount of net liabilities due to third parties from the Outgoing Group at completion of the disposal of the Properties, through these figures are subject to adjustment as mentioned in the ‘‘Letter from the Board’’).

We have also discussed with the Independent Property Valuer, the methodology applied in the Property Valuation and understand that the relevant open market values of the Properties have been arrived at on the basis of individual sale of the relevant Properties in the open market, and that the Property Valuation does not make any allowance or does not apply any discount to what a potential purchaser for the entire portfolio of the Properties may demand. In addition, the Property Valuation has not taken account of the profit-sharing arrangement on the First Properties as further described below. Nevertheless, after reviewing the above valuation methodology, we understand that they conform to market practice, and accordingly we have no reason to doubt the applicability of such methodology and the resultant basis for the consideration mentioned above. Taking into account the aforesaid analysis and based on the valuation from the Independent Property Valuer of the open market values of the Properties, we are of the view that the terms of the disposal of the First Sale Shares and the First Sale Debts are on normal commercial terms, and are fair and reasonable so far as the Shareholders are concerned.

Recent market trend

As stated in the Announcement and in the ‘‘Letter from the Board’’, in recent months there has been a slowdown in the number of transactions of high-end residential properties in Hong Kong. This view of the Board is supported by various market commentaries, which state that there has been a slowdown, although high-end property prices have risen substantially in 2004. This segment of high-end residential properties in Hong Kong therefore is currently undergoing consolidation, which implies that, following the consolidation, there may be a short supply of luxury houses in prime locations in the near future.

We have discussed with the senior management of the Company and with the Independent Property Valuer the market developments and trends, and we have reviewed comparable market rental and sales prices for similar properties. We note that in recent months there has been a slowdown in the number of transactions of luxury residential properties in Hong Kong, although overall there has been a rise in demand for high-end properties in 2004, which, according the Independent Property Valuer may in turn eventually translate into a supply shortage in future, as described above. Accordingly, after speaking with the aforesaid Independent Property Valuer and after holding discussions with the Company’s senior management, we see no reason to doubt the view of the Directors regarding recent luxury property market trends, or their decision to conduct the Disposal at this time. Furthermore, given the fact that the Disposal will provide the Company with

19

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

additional cash for property development and other future projects, in accordance with its business strategy as explained in the section of this letter entitled ‘‘Strategic rationale for the Disposal,’’ we view the Disposal being conducted at this time to be in the interest of the Company. We refer to the section of this letter entitled ‘‘Impact on the Group’s profitability’’ in which we set out our view on fact that, as with any commercial decision, it is impossible to determine with absolute certainty the exact optimum time to conduct the Disposal, as market conditions vary from time to time.

Profit-sharing arrangement

In respect of the First Properties, the First Purchaser has undertaken that should it dispose any of the First Properties directly or indirectly through the disposal of its interest in the First BVI Company or the First Property Company, after the completion of the First Sale and Purchase Agreement, and if the consideration for such disposal exceeds the acquisition cost of such property, the First Vendor shall be entitled to share 80% of the excess.

The Directors are of the view, and we, on the basis of the recent market trend as mentioned above (i.e. the slow down in number of transactions and possible shortage of supply of luxury residential properties in Hong Kong) concur with the Directors on their view, that the terms of the disposal of the First Sale Shares and the First Sale Debts are in the interests of the Company and the Shareholders as a whole. We also concur with the Directors in their view that this profit-sharing arrangement would avail the Group an opportunity to share any further upside brought on by any potential re-sale of the relevant properties within the defined period, whilst in the meantime enable the Group to realise these properties at their fair market value. Shareholders should also take note of the fact that the consideration reflects the open market value of the Property Valuation, and that it does not take into account the profit-sharing arrangement.

Expected gain on the disposal of the First Sale Shares and the First Sale Debts

It is expected that the Group will realise a profit on the sale of each of the Group’s interests in the First Properties, the Second Properties, the Third Properties and the Fourth Properties under the First Sale and Purchase Agreement. In aggregate, it is expected that the Group will record an unaudited gain before taxation of approximately HK$247 million, as against the total unaudited net liability and the face value of the First Sale Debts of the Outgoing Group totaling approximately HK$301.80 million.

We concur with the view of the Board that such expected enhancement to the financial results of the Group is in the interests of the Company and the Shareholders as a whole.

Completion risks

As with all sales transactions in properties, the vendor has to face the risk of default and the risk of non-completion. Shareholders should note that in the case of the First Sale and Purchase Agreement, where the Group has only to deal with a single counterparty within a pre-agreed completion timetable, rather than with a number of prospective buyers, we are of the view that this risk would effectively be reduced significantly, as there are less counterparties with whom to negotiate and transact.

In accepting this view, we have assumed that both the First Purchaser and the First Vendor will, subject to the approval of the Independent Shareholders, use their best and reasonable effort to complete the transactions contemplated under the First Sale and Purchase Agreement as soon as practicable. As at today’s date, we have no reason to doubt that the First Purchaser and First Vendor will not proceed to complete the Disposal of Properties, though there still remains a theoretical and potential completion risk between now and the completion date due to force majeure. As such, we believe that this completion risk (irrespective of how remote) needs to be disclosed for completeness so as to enable the Independent Board Committee and the Independent Shareholders to evaluate the Disposal while taking into account all possibilities.

20

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In respect of the disposal of the Second Sale Share and Second Sale Debt

Basis of the consideration

As stated in the ‘‘Letter from the Board’’, the total consideration in respect of the disposal of the Second Sale Share and Second Sale Debt is based on the high-end of the Auction Estimate of the Assets (which contains a collection of Chinese ceramics, furniture, paintings and other collectibles) of HK$93,264,550.00 as determined by Christie’s Hong Kong Limited, (‘‘Christie’s’’, an independent party and one of the world’s leading auctioneers and valuers of property of the type represented by the Assets). The reason why the consideration for the Second Sale Share and the Second Sale Debt is based on the Auction Estimate of the Assets is because the Assets are the sole assets of the holding company Jade Wall. In our view this basis is fair and reasonable so far as the Shareholders are concerned. A copy of the Auction Estimate is contained in appendix III to the Circular.

On the basis of the high-end of the Auction Estimate of the Assets (approximately HK$93.26 million), the amount of consideration receivable by the Group in respect of the disposal of the Second Sale Share and Second Sale Debt shall be approximately HK$93.26 million, of which (i) approximately HK$11.30 million is the amount of outstanding Second Sale Debt as at 17th August 2004 (assuming no adjustment is required at completion of the disposal of the Second Sale Share and Second Sale Debt); and (ii) approximately HK$81.96 million is the consideration for the Second Sale Shares.

We have discussed with Christie’s the methodology applied in arriving at the Auction Estimate and understand that the relevant estimates represent the range of ‘‘hammer-prices’’ which the items concerned could be expected to fetch at auction, were they to have been auctioned on 17th August 2004 (the potential aggregate hammer-price value for the artworks, which have been valued for auction on an individual item basis, is estimated to range between HK$75.74 million to HK$93.26 million). We further understand that Christie’s estimate does not make any allowance for or does not apply any discount to what a potential purchaser for the entire portfolio of the Assets may require. In addition, Shareholders should note that no marketing or selling commission, which is a customary expense for auction sales, has been deducted from the abovementioned estimates. Following our discussion with Christie’s on the normal and customary international auction industry practices and methodologies, which in this case are being applied to the disposal of Second Sale Share and Second Sale Debt, we have no reason to doubt the applicability of such market practices and methodologies, or the resultant basis for the consideration mentioned above. Taking into account the aforesaid analysis, we are of the view that the terms of the disposal of the Second Sale Share and Second Sale Debt are on normal commercial terms, fair and reasonable, and in the interests of the Company and the Shareholders as a whole.

Liquidity of the items included in the Assets

The Group has confirmed to us that the items included in the Assets were purchased over time through private sales and public auctions. As such, these items are not normally transacted on a regular basis, and the market for the items concerned can potentially be illiquid. The Directors consider that the Second Sale and Purchase Agreement would afford the Group a unique opportunity for the wholesale disposal of the Assets, which are non-core assets unrelated to the principal businesses of the Group, at their respective independently appraised value, assuming the sale of the relevant items takes place under an orderly auction sale environment. We concur with the Directors on their view that this is a unique opportunity to dispose of the Assets in one lot at the estimated auction hammer-prices described above, and that in so doing, this will free up additional cash for the Company; and we accordingly find the disposal of Assets (which are non-core assets unrelated to the principal businesses of the Group) to be in the interest of the Company. Finally, the Directors

21

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

have confirmed that after the completion of the disposal of the Assets, the Group’s remaining holdings in such kind of assets would be immaterial (based on the net book value of such remaining assets, these represent less than approximately 0.0003% of the total assets of the Group as at 31st December 2003, and less than approximately 0.0003% of the total assets of the Group as at 30th June 2004).

Expected gain on the disposal of the Second Sale Share and Second Sale Debt

Based on the unaudited management accounts of Jade Wall (the holding company of the Assets) as at 17th August 2004, the disposal of the Second Sale Share and Second Sale Debt is expected to result in an unaudited gain of approximately HK$85.00 million before taxation, as against the cost of investment in Jade Wall (the holding company of the Assets) as at 17th August 2004 of approximately 8.2 million.

We concur with the view of the Board that such expected enhancement to the financial results of the Group is in the interests of the Company and the Shareholders as a whole.

3. Use of proceeds and expected financial effects

Use of proceeds

The net proceeds of the Disposal are estimated to be approximately HK$642 million. The Directors intend to apply as to approximately HK$200 million out of the net proceeds for repayment of bank loans (including the mortgages in connection with the Properties) and as for the balance of HK$442 million for general working capital of the Group.

Expected resulted gain

It is expected that the completion of the Disposal will generate an unaudited gain of approximately HK$332.0 million before taxation, representing approximately 27.7% of the audited consolidated pre-tax profit of the Group of approximately HK$1,198.8 million for the year ended 31st December 2003, and approximately 52.6% of the unaudited consolidated pre-tax profit of the Group of approximately HK$631.3 million for the six months ended 30th June 2004, respectively.

The abovementioned expected gain will be reflected in the Group’s financial results as and when the constituent parts of the Disposal are completed. We concur with the view of the Directors that such expected enhancement to the results of the Group is in the interests of the Company and the Shareholders as a whole.

Estimated resultant liquidity position of the Group

The Disposal is estimated to result in the Group increasing its cash and cash equivalents by HK$442 million (the balance of the net proceeds from the Disposal after repayment of bank loans, as set out in the section entitled ‘‘Use of proceeds’’ in ‘‘Letter from the Board’’) after Completion of the Disposal. Similarly the Group’s total borrowing will be reduced by HK$200 million. In turn, the shareholders equity for the Group will increase by HK$332 million (i.e. the resultant unaudited gain as set out in the section entitled ‘‘Reasons for the Disposal’’ in the ‘‘Letter from the Board’’).

With respect to the expected significant improvement to the liquidity position (include working capital) of the Group as outlined above, we are of the view that the Disposal, if completed, will indeed help to realise the Company’s goal of freeing up resources for property development and other projects as previously described, as well as reduce the Group’s overall gearing position. As a result, the resultant estimated effects on the Company’s liquidity position are in the interests of the Company and the Shareholders as a whole.

22

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

III. RECOMMENDATION

We have considered the above principal factors and reasons and, in particular, have taken into account the following points when arriving at our opinion:

• (i) the strategic rationale for the Disposal;

• (ii) the consideration for the disposal of the First Sale Shares and First Sale Debts, which is based on the open market value of the Properties of the Property Valuation;

• (iii) the consideration of the disposal of the Second Sale Share and Second Sale Debt, which is based on the high-end of the Auction Estimate before deduction of any marketing or selling commission;

• (iv) the profit-sharing arrangement in respect of the First Properties, which would potentially allow the Group to share any further upside on a re-sale of any of the First Properties by the First Purchaser;

• (v) the expected gain which the Group would record as a result of the completion of the Disposal, and the expected significant improvement to the liquidity position and the gearing position of the Group; and

• (vi) the substantial amount of cash to be generated from the Disposal of (a) the low yielding properties (in terms of the Properties as a whole) and (b) non-income generating assets (in terms of the Assets) for redeployment in the core business of the Group.

Having considered the above, we are of the view that the terms of the Disposal are on normal commercial terms, and are fair and reasonable so far as the Independent Shareholders are concerned, and that they are in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend that the Independent Shareholders vote in favour of the respective resolutions to be proposed at the SGM to approval the Disposal.

Yours faithfully, For and on behalf of Access Capital Limited Ambrose W. H. Lam Chairman

23

APPENDIX I PROPERTY VALUATION REPORT ON THE FIRST PROPERTIES

The following is the text of a letter, summary of values and valuation certificates prepared for the purpose of incorporation in this circular received from CB Richard Ellis Limited, an independent valuer, in connection with its valuation as at 16th August 2004 of the Properties: –

==> picture [90 x 10] intentionally omitted <==

==> picture [130 x 177] intentionally omitted <==

27th September 2004

Chinese Estates Holdings Limited 26/F., Mass Mutual Tower 38 Gloucester Road Wanchai Hong Kong

Dear Sirs,

Re: Houses A, B, C & D at No. 31 Barker Road, Hong Kong. (collectively, the ‘‘Properties’’)

We refer to your instruction for us to carry out a valuation of the Properties held by the Chinese Estates Holdings Limited ( the ‘‘Company’’) and its subsidiaries for public circulation purposes. We confirm that we have conducted searches at the Land Registry, made enquiries and obtained and analysed such further information as we consider necessary for the purpose of providing our opinion of the Open Market Value of the Properties interest as at 16th August 2004 (‘‘the date of valuation’’).

Unless otherwise stated, our valuation is prepared in accordance with the ‘‘Hong Kong Guidance Notes on the Valuation of Property Assets’’ published by The Hong Kong Institute of Surveyors (‘‘HKIS’’). If the Guidance Notes are silent on subjects requiring guidance, we refer to the ‘‘Appraisal and Valuation Manual’’ published by The Royal Institution of Chartered Surveyors (‘‘RICS’’) subject to variation to meet local established law, custom, practice and market conditions.

Our valuation is our opinion of the open market value of the property which is defined to mean ‘‘the best price at which the sale of an interest in property would have been completed unconditionally for cash consideration on the date of valuation assuming:

a) a willing seller;

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APPENDIX I PROPERTY VALUATION REPORT ON THE FIRST PROPERTIES

• b) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of price and terms and for the completion of the sale;

• c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;

• d) that no account is taken of any additional bid by a prospective purchaser with a special interest; and

• e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion.’’

Our valuation has been made on the assumption that the owner sold the property on the open market without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to increase the value of the property.

We have caused searches to be made at the Land Registry, however, we have not inspected the original documents to verify ownership or to ascertain the existence of any amendments which might not appear on the copies handed to us. We have relied to a considerable extent on information given by you, in particular to matters such as planning approvals or statutory notices, easements, tenure, tenancy details and building plans. No on-site measurements have been taken. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are only approximations.

No structural survey has been made and we are unable to report whether the building was or was not free from rot, termite, pest infestation or any structural defects. No tests have been carried out on any of the building services.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property nor for any expenses or taxation which might be incurred in effecting a sale. It is assumed that the property was free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

Our valuation is prepared for the purpose stated above and may not be used for any other purposes. The valuation certificate or part thereof shall be read in conjunction with this letter. Possession of this certificate or any copy thereof does not carry with the right of copying. Neither the whole or any part of the valuation certificate or any reference to our name, our valuation and the valuation certificate may be included in any document, circular or statement nor published without our prior written consent to the form and context in which they may appear.

The liability of CB Richard Ellis Limited and its directors and employees is limited to the addressee of this letter. No accountability, obligation or liability to any other third parties is accepted.

A summary of valuation and our valuation certificates are attached hereto.

Yours faithfully For and on behalf of

CB Richard Ellis Limited

Gary C Ip MHKIS MRICS RPS (GP)

Director

Valuation & Advisory Services

Encl.

Note: Mr Gary C Ip is a Registered Professional Surveyor (General Practice) – RPS (GP), a member of royal institution of Chartered Surveyors – MRICS and a member of the Hong Kong Institute of Surveyors – MHKIS. He is a Director of the Valuation & Advisory Services Department of CB Richard Ellis and has over 23 years valuation experience in Hong Kong.

25

APPENDIX I PROPERTY VALUATION REPORT ON THE FIRST PROPERTIES

VALUATION CERTIFICATE

Property interests held by the ‘‘Company’’ for investment

Property

Houses A, B, C & D at No. 31 Barker Road, Hong Kong.

The property is registered as Rural Building Lot No. 91 and The Extension Thereto

Description and tenure

The property comprises four detached houses erected on a regular shaped site with a registered area of 2,495 sq.m. (26,856 sq.ft.). The property is completed in 2003.

The floor areas of the houses are as below:

House A:	sq.m.	sq.ft.
Covered
House Area:	413.2	4,450
Roof:	112.13	1,207
Ground Floor
Open Area:	330.18	3,554
Basement:	167.69	1,805
House B:	sq.m.	sq.ft.
Covered
House Area:	331.94	3,573
Roof:	94.11	1,013
Ground Floor
Open Area:	244.61	2,633
Basement:	Nil	Nil
House C:	sq.m.	sq.ft.
Covered
House Area:	308.16	3,317
Roof:	94.11	1,013
Ground Floor
Open Area:	202.62	2,181
Basement:	Nil	Nil
House D:	sq.m.	sq.ft.
Covered
House Area:	322.65	3,473
Roof:	96.15	1,035
Ground Floor
Open Area:	295.15	3,177
Basement:	Nil	Nil

Details of occupancy All houses are currently vacant.

Capital value in existing state as at 16th August 2004

House A HK$120,000,000

House B HK$95,000,000 House C HK$85,000,000 House D HK$100,000,000

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APPENDIX I PROPERTY VALUATION REPORT ON THE FIRST PROPERTIES

Property

Description and tenure

Details of occupancy

Capital value in existing state as at 16th August 2004

All houses are provided with carport, and open area on ground floor. Houses A and D are provided with private swimming pools. The swimming in House A is of a standard size whilst the one in House D is of a smaller size.

All houses enjoy panoramic view over Victoria Harbour.

The property is held under Government Lease commencing from 28th December 1898 for a term of 75 years renewable for further 75 years. The annual Government Rent is $1,710 (New Rent) for the lot.

Notes:

1. The owner of the property is Barker Road Investments Limited registered vide Memorial No. 7394680 dated 19th December 1997.

2. The property was subject to Legal Charge and Debenture in favour of Standard Chartered Bank registered vide Memorial No. 8788153 dated 27th September 2002.

3. The property is zoned for Residential (Group C) 3 under the Outline Zoning Plan No. S/H14/7 dated December 2003. The current use of the property is in compliance with the current town planning zoning.

27

APPENDIX II

PROPERTY VALUATION REPORT ON THE PROPERTIES (OTHER THAN THE FIRST PROPERTIES)

The following is the text of a letter, summary of values and valuation certificates prepared for the purpose of incorporation in this circular received from CB Richard Ellis Limited, an independent valuer, in connection with its valuation as at 16th August 2004 of the Properties (other than the First Properties): –

==> picture [90 x 10] intentionally omitted <==

==> picture [130 x 178] intentionally omitted <==

27th September 2004

Chinese Estates Holdings Limited 26/F., Mass Mutual Tower 38 Gloucester Road Wanchai Hong Kong

Dear Sirs,

• Re: 1. Flat A on 39th Floor, The Mayfair, 1 May Road, Hong Kong.

2. Penthouse A on 26th & 27th Floors including the Flat Roof Thereof and Car Park No 9 on Car Park Level 3, Celeste Court, 10-12 Fung Fai Terrace, Happy Valley, Hong Kong.

3. Flat B on 59th Floor, Tower 6, The Belcher’s, No. 89 Pok Fu Lam Road, Hong Kong.

4. Flat B on 35th Floor including Air Conditioning Platform Thereof of Tower 5 and Car Parking Space no. C76 on 2nd Floor, The Leighton Hill, No. 2B Broadwood Road, Hong Kong.

5. Flat B on 24th Floor of Tower 1 and Car Parking Space No. 36 on Level LG2, Dynasty Court, No. 23 Old Peak Road, Hong Kong.

6. Flat B on 37th Floor of Tower 1 and Car Parking Space No. 35 on Level LG2, Dynasty Court, No. 23 Old Peak Road, Hong Kong.

7. Flat B on 43rd Floor of Tower 5 and Car Parking Space No. 48 on Level LG3, Dynasty Court, No. 23 Old Peak Road, Hong Kong.

(collectively, the ‘‘Properties’’)

We refer to your instruction for us to carry out a valuation of the Properties held by Chinese Estates Holdings Limited (the ‘‘Company’’) and its subsidiaries for public circulation purposes. We confirm that we have conducted searches at the Land Registry, made enquiries and obtained and analysed such further information as we consider necessary for the purpose of providing our opinion of the Open Market Value of the Properties interest as at 16th August 2004 (‘‘the date of valuation’’).

Unless otherwise stated, our valuation is prepared in accordance with the ‘‘Hong Kong Guidance Notes on the Valuation of Property Assets’’ published by The Hong Kong Institute of Surveyors (‘‘HKIS’’). If the Guidance Notes are silent on subjects requiring guidance, we refer to the ‘‘Appraisal and Valuation Manual’’ published by The Royal Institution of Chartered Surveyors (‘‘RICS’’) subject to variation to meet local established law, custom, practice and market conditions.

28

APPENDIX II PROPERTY VALUATION REPORT ON THE PROPERTIES (OTHER THAN THE FIRST PROPERTIES)

Our valuation is our opinion of the open market value of the property which is defined to mean ‘‘the best price at which the sale of an interest in property would have been completed unconditionally for cash consideration on the date of valuation assuming:

• a) a willing seller;

• b) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of price and terms and for the completion of the sale;

• c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;

• d) that no account is taken of any additional bid by a prospective purchaser with a special interest; and

• e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion.’’

Our valuation has been made on the assumption that the owner sold the property on the open market without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to increase the value of the property.

We have caused searches to be made at the Land Registry, however, we have not inspected the original documents to verify ownership or to ascertain the existence of any amendments which might not appear on the copies handed to us. We have relied to a considerable extent on information given by you, in particular to matters such as planning approvals or statutory notices, easements, tenure, tenancy details and building plans. No on-site measurements have been taken. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are only approximations.

No structural survey has been made and we are unable to report whether the building was or was not free from rot, termite, pest infestation or any structural defects. No tests have been carried out on any of the building services.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property nor for any expenses or taxation which might be incurred in effecting a sale. It is assumed that the property was free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

Our valuation is prepared for the purpose stated above and may not be used for any other purposes. The valuation certificate or part thereof shall be read in conjunction with this letter. Possession of this certificate or any copy thereof does not carry with the right of copying. Neither the whole or any part of the valuation certificate or any reference to our name, our valuation and the valuation certificate may be included in any document, circular or statement nor published without our prior written consent to the form and context in which they may appear.

The liability of CB Richard Ellis Limited and its directors and employees is limited to the addressee of this letter. No accountability, obligation or liability to any other third parties is accepted.

A summary of valuations and our valuation certificates are attached hereto.

Yours faithfully For and on behalf of

CB Richard Ellis Limited

Gary C Ip MHKIS MRICS RPS (GP)

Director

Valuation & Advisory Services

Encl.

Note: Mr Gary C Ip is a Registered Professional Surveyor (General Practice) – RPS (GP), a member of royal institution of Chartered Surveyors – MRICS and a member of the Hong Kong Institute of Surveyors – MHKIS. He is a Director of the Valuation & Advisory Services Department of CB Richard Ellis and has over 23 years valuation experience in Hong Kong.

29

APPENDIX II

PROPERTY VALUATION REPORT ON THE PROPERTIES (OTHER THAN THE FIRST PROPERTIES)

VALUATION CERTIFICATE

Property interests held by the ‘‘Company’’ for investment

Property

Description and tenure

Capital value in Details of existing state as occupancy at 16th August 2004

1. Flat A on 39th Floor, The property comprises a luxury The Mayfair, apartment on the 39th floor of a 1 May Road, 30-storey residential block erected on Hong Kong. a 7-storey complex. The complex comprises club house facilities,

The property comprises swimming pool, tennis court and car 256/17334 shares of parking spaces. The building is and in Inland Lot completed in 1997. No. 8410

The property was leased HK$40,000,000 for a term of three years from 18th December 2002 until 17th December 2005 at a monthly rent of HK$100,000, inclusive of rates and management fees.

The gross and saleable areas of the property are 271.09 sq.m. (2,918 sq.ft.) and 208.30 sq.m. (2,242 sq.ft.) respectively.

The property is held under Conditions of Exchange No. 12280 commencing from 17th November 1993 until 30th June 2047. The annual Government Rent is 3% of the rateable value of the lot.

Notes:

1. The owner of the property is Hero Alliance Limited registered vide Memorial No. 8772424 dated 28th August 2002.

2. The property was subject to Deed of Mutual Covenant registered vide Memorial No. 7453060 dated 12th March 1998.

3. The property was subject to Mortgage in favour of Liu Chong Hing Bank Limited registered vide Memorial No. 9016212 dated 10th September 2003.

4. The property is zoned for Residential (Group B) under the Outline Zoning Plan No. S/H11/13 dated July 2002. The current use of the property is in compliance with the current town planning zoning.

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APPENDIX II

PROPERTY VALUATION REPORT ON THE PROPERTIES (OTHER THAN THE FIRST PROPERTIES)

Property

Description and tenure

Capital value in Details of existing state as occupancy at 16th August 2004

1. Penthouse A on The property comprises a penthouse 26th & 27th Floors unit on the 26th & 27th floors of a including the Flat Roof 26-storey residential block erected on Thereof and Car Park a 9-storey complex. The complex No 9 on Car Park comprises club house facilities, Level 3, Celeste Court, swimming pool, podium garden and 10-12 Fung Fai Terrace, car parking spaces. The building is Happy Valley, completed in 1992. Hong Kong.

The property was leased HK$12,500,000 for a term of two years from 29th March 2003 until 28th March 2005 at a monthly rent of HK$43,000, exclusive of rates and management fees.

The saleable area of the property is The property comprises 125.30 sq.m. (1,348 sq.ft.). 21/2684 shares of and in Subsections 1, The property is held under 2 & the Remaining Government Lease for a term of 75 Portion of Section A years renewable for 75 years and the Remaining commencing from 23rd November Portion of Inland 1923. The annual Government Rent is Lot No. 2456 and $152 (Determined). the Extension Thereto

Notes:

1. The owner of the property is Host Fortune Limited registered vide Memorial No. 8754250 dated 29th July 2002.

2. The property was subject to Deed of Mutual Covenant registered vide Memorial No. 5501750 dated 11th November 1992.

3. The property was subject to Legal Charge/Mortgage in favour of Standard Chartered Bank Limited registered vide Memorial No. 8754251 dated 29th July 2002.

4. The property is zoned for Residential (Group B) under the Outline Zoning Plan No. S/H7/11 dated May 2003. The current use of the property is in compliance with the current town planning zoning.

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APPENDIX II

PROPERTY VALUATION REPORT ON THE PROPERTIES (OTHER THAN THE FIRST PROPERTIES)

Property Description and tenure

1. Flat B on 59th Floor, The property comprises a 59th floor Tower 6, unit in Tower 6 of The Belcher’s. The The Belcher’s, development consists of a total of six No. 89 Pok Fu blocks erected on a communal Lam Road, complex. The complex provides club Hong Kong. house facilities, shopping arcades, swimming pool, podium garden and The property comprises car parking spaces. The building is 144/705271 shares of completed in 2001. and in Inland Lot No. 8880 The gross and saleable areas of the property are 91.04 sq.m. (980 sq.ft.) and 72.10 sq.m. (776 sq.ft.) respectively.

Capital value in Details of existing state as occupancy at 16th August 2004 The property was vacant HK$6,800,000

The property is held under Conditions of Exchange No. 12437 for a term commencing from 18th January 1997 until 5th September 2030.

The annual Government Rent payable is equivalent to 3% of the rateable value of the property.

Notes:

1. The owner of the property is Crown Wealthy Limited registered vide Memorial No. 8727521 dated 24th June 2002.

2. The property was subject to Deed of Mutual Covenant registered vide Memorial No. 8383100 dated 23rd April 2001.

3. The property is zoned for Residential (Group A) 1 under the Outline Zoning Plan No. S/H1/13 dated December 2003. The current use of the property is in compliance with the current town planning zoning.

32

APPENDIX II

PROPERTY VALUATION REPORT ON THE PROPERTIES (OTHER THAN THE FIRST PROPERTIES)

Property

Description and tenure

Capital value in Details of existing state as occupancy at 16th August 2004

1. Flat B on 35th Floor The property comprises a 35th floor including A/C Platform apartment in Tower 5 of The Thereof of Tower 5 Leighton Hill. The development and Car Parking Space consists of 8 30 to 31 storeys no. C76 on 2nd Floor, residential block erected on a The Leighton Hill, communal complex. The complex No. 2B Broadwood Road, provides club house facilities, Hong Kong. swimming pool, tennis court and car parking spaces. The building is The property comprises completed in 2002. 349/279977 shares of and in the Remaining The gross and saleable areas of the Portion of Inland property are 207.92 sq.m. (2,238 Lot No. 8882 sq.ft.) and 160.20 sq.m. (1,724 sq.ft.) respectively.

The property was vacant HK$26,850,000

The property is held under Conditions of Sale No. 12519 for a term of 50 years commencing from 14th May 1998.

The annual Government Rent payable is equivalent to 3% of the rateable value of the property.

Notes:

1. The owner of the property is Jade Art Development Limited registered vide Memorial No. 8796136 dated 20th September 2002.

2. The property was subject to Deed of Mutual Covenant registered vide Memorial No. 8789714 dated 19th September 2002.

3. The property was subject to Mortgage in favour of Liu Chong Hing Bank Limited registered vide Memorial No. 9016212 dated 10th September 2003.

4. The property is zoned for Residential (Group B) under the Outline Zoning Plan No. S/H7/11 dated May 2003. The current use of the property is in compliance with the current town planning zoning.

33

APPENDIX II

PROPERTY VALUATION REPORT ON THE PROPERTIES (OTHER THAN THE FIRST PROPERTIES)

• Property Description and tenure 5. Flat B on 24th Floor The property comprises a 24th floor of Tower 1 and Car apartment in Tower 1 of Dynasty Parking Space No. 36 Court. The development consists of 5 on Level LG2, 38 to 46 storeys residential block Dynasty Court, erected on a communal complex. The No. 23 Old Peak Road, complex provides club house Hong Kong. facilities, swimming pool, tennis court and car parking spaces. The building

• The property comprises is completed in 1991. 26/10650 shares of and in the Remaining The gross and saleable areas of the Portion of Section A property are 209.59 sq.m. (2,256 and the Remaining sq.ft.) and 166.70 sq.m. (1,794 sq.ft.) Portion of Inland respectively. Lot No. 1093 and Inland Lot No. 1218 and The property is held under the Extension Thereto Government Leases for a same term of 999 years commencing from 3rd October 1887. The annual Government Rent is $432 (Determined)

Capital value in Details of existing state as occupancy at 16th August 2004

The property was vacant. HK$27,000,000

Notes:

1. The owner of the property is Best Sun Limited registered vide Memorial No. 9226054 dated 7th May 2004.

2. The property was subject to Deed of Mutual Covenant registered vide Memorial No. 5137626 dated 13th December 1991.

3. The property was subject to Mortgage in favour of Liu Chong Hing Bank Limited registered vide Memorial No. 9233528 dated 7th May 2004.

4. The property is zoned for Residential (Group B) under the Outline Zoning Plan No. S/H11/13 dated July 2002. The current use of the property is in compliance with the current town planning zoning.

34

APPENDIX II

PROPERTY VALUATION REPORT ON THE PROPERTIES (OTHER THAN THE FIRST PROPERTIES)

• Property Description and tenure 6. Flat B on 37th Floor The property comprises a 37th floor of Tower 1 and Car apartment in Tower 1 of Dynasty Parking Space No. 35 Court. The development consists of 5 on Level LG2, 38 to 46 storeys residential block Dynasty Court, erected on a communal complex. The No. 23 Old Peak Road, complex provides club house Hong Kong. facilities, swimming pool, tennis court and car parking spaces. The building

• The property comprises is completed in 1991. 26/10650 shares of and in the Remaining The gross and saleable areas of the Portion of Section A property are 209.59 sq.m. (2,256 and the Remaining sq.ft.) and 166.70 sq.m. (1,794 sq.ft.) Portion of Inland respectively. Lot No. 1093 and Inland Lot No. 1218 and The property is held under the Extension Thereto Government Leases for a same term of 999 years commencing from 3rd October 1887. The annual Government Rent is $432 (Determined)

Capital value in Details of existing state as occupancy at 16th August 2004

The property was vacant. HK$28,800,000

Notes:

1. The owner of the property is Luck Forever Limited registered vide Memorial No. 9229248 dated 7th May 2004.

2. The property was subject to Deed of Mutual Covenant registered vide Memorial No. 5137626 dated 13th December 1991.

3. The property was subject to Mortgage in favour of Liu Chong Hing Bank Limited registered vide Memorial No. 9233528 dated 7th May 2004.

4. The property is zoned for Residential (Group B) under the Outline Zoning Plan No. S/H11/13 dated July 2002. The current use of the property is in compliance with the current town planning zoning.

35

APPENDIX II

PROPERTY VALUATION REPORT ON THE PROPERTIES (OTHER THAN THE FIRST PROPERTIES)

• Property Description and tenure 7. Flat B on 43rd Floor The property comprises a 43rd floor of Tower 5 and Car apartment in Tower 5 of Dynasty Parking Space No. 48 Court. The development consists of 5 on Level LG3, 38 to 46 storeys residential block Dynasty Court, erected on a communal complex. The No. 23 Old Peak Road, complex provides club house Hong Kong. facilities, swimming pool, tennis court and car parking spaces. The building

• The property comprises is completed in 1991. 23/10650 shares of and in the Remaining The gross and saleable areas of the Portion of Section A property are 184.04 sq.m. (1,981 and the Remaining sq.ft.) and 142.10 sq.m. (1,530 sq.ft.) Portion of Inland respectively. Lot No. 1093 and Inland Lot No. 1218 and The property is held under the Extension Thereto Government Leases for a same term of 999 years commencing from 3rd October 1887. The annual Government Rent is $432 (Determined)

Capital value in Details of existing state as occupancy at 16th August 2004

The property was vacant. HK$24,300,000

Notes:

1. The owner of the property is Mutual Sky Limited registered vide Memorial No. 9227806 dated 7th May 2004.

2. The property was subject to Deed of Mutual Covenant registered vide Memorial No. 5137626 dated 13th December 1991.

3. The property was subject to Mortgage in favour of Liu Chong Hing Bank Limited registered vide Memorial No. 9233528 dated 7th May 2004.

4. The property is zoned for Residential (Group B) under the Outline Zoning Plan No. S/H11/13 dated July 2002. The current use of the property is in compliance with the current town planning zoning.

36

ASSETS AUCTION ESTIMATE

APPENDIX III

The following is the text of a letter and a schedule setting out the details of the Assets and the estimated hammer price for each item of the Assets prepared for the purpose of incorporation in this circular received from Christie’s Hong Kong Limited, an independent valuer, in connection with its auction estimate as at 17th August 2004 of the Assets: –

==> picture [151 x 21] intentionally omitted <==

27th September 2004

The Board of Directors Chinese Estates Holdings Limited 26th Floor, MassMutual Tower 38 Gloucester Road Wanchai Hong Kong

Dear Sirs

Auction price estimate for a collection of works of art including Chinese ceramics, furniture and paintings (the ‘‘Property’’)

1 Instruction

• 1.1 In accordance with your instructions as our client, we have estimated the range of hammer prices which the Property could be expected to have achieved at auction, were it to have been auctioned as at 17th August 2004 (the ‘‘Estimate Date’’).

• 1.2 Our auction price estimate of the Property is given for the purpose set out in the circular to your shareholders in connection with the Disposal of the Assets (as defined in your announcement dated 27th August 2004) and not for any other purpose.

2 Basis of estimate

• 2.1 Our estimate is an auction price estimate made in accordance with our normal practice for such estimates. Such estimates are given for the purpose of soliciting auction bids.

37

ASSETS AUCTION ESTIMATE

APPENDIX III

• 2.2 Such estimates are based upon recent trends at auctions in London, New York and Hong Kong for comparable property, having regard to observable price trends, and take into account condition, rarity, quality and provenance (history of ownership), to the extent (if any) advised to us or apparent from our physical examination of the Property.

• 2.3 Although we have made a partial examination of the Property, we have not undertaken any further research with respect to the Property and, in particular, we have not (1) checked the attribution, authenticity or condition of the Property with any outside expert or authority, (2) researched the provenance of the Property or (3) obtained any outside laboratory or other scientific analysis designed to detect latent defects, enhancements or treatments. Accordingly, no representation is made, warranty given or responsibility accepted by us as to the attribution, authenticity or condition of the Property or the absence or presence of latent defects, enhancements or treatments relating to the Property.

• 2.4 We express no opinion as to legal ownership of the Property.

• 2.5 Neither you nor anyone else should rely upon our estimate as a representation or prediction of actual selling prices of the Property and we accordingly make no representation and give no warranty that the Property would realise prices within the range estimated by us upon a sale at public auction or otherwise, and selling prices actually achieved might therefore fall below or above such range depending on market conditions.

3 Estimate

• 3.1 To the best of our knowledge, all data set forth in this estimate is true and accurate. However, although gathered from sources believed by us to be reliable, no guarantee is made or liability assumed for the accuracy of any data, opinions or estimates obtained from others and used by us in making our own estimate.

• 3.2 On the basis set out in paragraphs 2 and 3.1 above and for the purpose described in paragraph 1.2 above, we estimate that the Property could have fetched an aggregate hammer price in the range of HK$75,737,800 to HK$93,264,550 were it to have been auctioned on the Estimate Date.

• 3.3 The details of the Property and our estimated hammer price for each item of the Property are attached.

4 Qualification

• 4.1 We are the Hong Kong operation of the Christie’s group of companies. Christie’s is one of the world’s leading auctioneers and valuers of property of the type represented by the Property.

• 4.2 In providing this auction price estimate, we have drawn on the experience and expertise of specialists in Christie’s group companies in Hong Kong and elsewhere.

Yours faithfully For and on behalf of

Christie’s Hong Kong Limited Anthony Lin Director

Note: In the event of any inconsistency between the English and Chinese versions of this letter and the attached schedule, including as regards the description of any of the Property, the English version shall prevail.

38

ASSETS AUCTION ESTIMATE

APPENDIX III

Summary

	As at 17th	August 2004
	Low Estimate	High Estimate
	(HK$)	(HK$)
Chinese Ceramics & Works of Art	43,400,000	48,750,000
Furniture	8,541,000	12,168,000
Paintings	20,279,000	27,077,000
Miscellaneous	3,517,800	5,269,550
	75,737,800	93,264,550

USD	7.80
GBP	14.30

39

ASSETS AUCTION ESTIMATE

APPENDIX III

Chinese Ceramics & Works of Art

	As at 17th	August 2004
Description	Low Estimate	High Estimate
	(HK$)	(HK$)
A small globular shaped jar, Ming Dynasty, Xuande Period	800,000	1,000,000
Rare Imperial Gilt Bronze-decorated white-jade Candlestick	1,000,000	1,200,000
A Rare Massive Dehua Figure of Buddha, Qing Dynasty, 19th C	800,000	1,000,000
Rare and large Imperial cloisonne enamel peach-shaped basin, Qianlong period	1,500,000	1,800,000
A magnificent early Ming blue and white dish, Yongle	1,800,000	2,000,000
A finely carved Pair of Canton ivory covered Urns, first half 19th C	300,000	350,000
Fish bowl with design of floral scrolls in doucai enamels, Qing Dynasty, Jiaqing	800,000	1,000,000
A very rare early Ming blue and white Jar, Yongle	15,000,000	16,000,000
A fine early Ming blue and white Moon flask (bianhu), Yongle	4,000,000	4,500,000
A rare blue and white lianzi Bowl, Xuande mark & period	600,000	700,000
A rare early Ming engraved white-glazed Ewer, Yongle	1,200,000	1,500,000
A fine and rare copper-red decorated double-gourd vase,	3,000,000	3,500,000
Qianlong seal mark and period
A very fine and rare pair of doucai ‘‘sanduo’’ bowls, Yongzheng marks and period	5,000,000	5,500,000
A fine and rare early Ming Blue and White saucer-dish,	800,000	1,000,000
encircled Xuande six-character mark and period
A rare white jade vessel and cover (Fang Ding) Qianlong mark and period	4,000,000	4,500,000
A large ‘‘Famille-Rose’’ Peach Dish Yongzheng mark and period	1,800,000	2,000,000
Meiping Vase with design of floral scrolls in doucai enamels,	1,000,000	1,200,000
Qing Dynasty, Yongzheng
	43,400,000	48,750,000

40

ASSETS AUCTION ESTIMATE

APPENDIX III

Furniture

	As at 17th	August 2004
Description	Low Estimate	High Estimate
	(US$)	(US$)
Reclining chair with long side railings & collapsible footrest	30,000	35,000
A Pair of Master’s chairs (‘‘Dai Shi Yi’’) with straight legs and scroll feet	60,000	80,000
A rare Huanghuali six-poster bed with carved railings, Jiazichuang, 17th C	280,000	400,000
Fine and rare Huanghuali lowback bed, luohandchuang, 17th C	200,000	300,000
Rare zitan horseshoeback armchair, quanyi, 18th C	30,000	40,000
A Huanghuali Bamboo-style daybed, TA 16th/17th C	120,000	180,000
An important Huanghuali extended leg table, Banzhuo 16th/17th C	150,000	200,000
A Huanghuali Folding Stool with Brass Fittings, Jiaowu 17th C	45,000	55,000
A Huanghuali five-legged round incense stand, Xiangji 17th C	100,000	150,000
A Huanghuali Recessed-Leg Bench, Datiaodeng 17th C	80,000	120,000
	1,095,000	1,560,000
	HK$	HK$
USD 7.80	8,541,000	12,168,000

41

ASSETS AUCTION ESTIMATE

APPENDIX III

Paintings

			As at 17th	August 2004
Artist	Description	Format	Low Estimate	High Estimate
			(HK$)	(HK$)
Zhao Zhiqian	Flowers	Hanging scroll (4)	4,000,000	5,000,000
Xie Zhiliu	Lotus	Hanging scroll	50,000	70,000
Chen Peiqiu	Orchid	Hanging scroll	60,000	80,000
Zhang Daqian	Moonlit Landscape with Pine	Scroll, mounted and framed	1,800,000	2,200,000
	and Waterfall
Lin Fengmian	Still Life with Flowers and Vase	Scroll, mounted and framed	300,000	350,000
Wu Changshuo	A Couplet in Seal Script Calligraphy	Hanging scroll (2)	300,000	400,000
Qi Baishi	Pine Tree, Plum Blossoms and Magpie	Hanging scroll	1,200,000	1,500,000
Lin Fengmian	Girl Playing the Qin	Scroll, mounted and framed	300,000	400,000
Zhao Zhiqian	Hibiscus	Hanging scroll	800,000	1,000,000
Xie Zhiliu	Lotus	Scroll, mounted and framed	120,000	150,000
Wu Qinmu	Landscapes after Yun Shouping	Album	30,000	40,000
	and Wang Hui
Qi Baishi	Prunus	Fan painting	50,000	60,000
Zhang Daqian	Lady with Fan	Hanging scroll	400,000	500,000
Zhu Menglu	Lotus and Bird	Hanging scroll	10,000	16,000
Qi Baishi	Amaranth and Insects	Hanging scroll	300,000	400,000
Zhang Daqian	Landscape	Hanging scroll	600,000	700,000
Wu Changshuo	Lizhi	Hanging scroll	120,000	150,000
Zhang Daqian	Indian Dancer	Scroll, mounted and framed	700,000	900,000
Yu Chengyao	Landscape	Hanging scroll	50,000	70,000
Lin Fengmian	Reclining Nude	Scroll, mounted and framed	200,000	300,000
Xie Zhiguang	Ten Fish	Hanging scroll	25,000	35,000
Gao Qifeng and Zhu Yun	Seven Monkeys in the Moonlight	Hanging scroll	1,000,000	1,200,000
Huang Junbi	Watching the Waterfall	Scroll, mounted and framed	40,000	50,000
Wu Xiaochang	Wild Azaleas	Oil on canvas	22,000	28,000
Wang Xin	Stillness on the Canals of Suzhou	Oil on canvas	25,000	35,000
Li Zhongliang	Courtyard Garden in Suzhou	Oil on canvas	45,000	70,000
Wu Guanzhong	Place de l’Hotel de Ville, Paris	Oil on canvas	350,000	450,000
Wu Guanzhong	Crossing the Bridge to	Oil on canvas	400,000	550,000
	the Morning Market
Wu Guanzhong	Bamboo Grove	Oil on board	350,000	500,000
Wu Guanzhong	A Street Scene in Montmartre, Paris	Oil on canvas	350,000	450,000
Jean Michel Basquiat	Everything Must go	Acrylic&oil crayon on canvas	6,240,000	9,360,000
(1960-1986)		(USD 0.8 – 1.2 M)
Chinese School,	An album of 18 studies of	(GBP 2,000 - 3,000)	28,000	43,000
mid 19th century	birds, flowers, etc
Attributed to	Wyndham Street at its junction	Pen & ink & wash	14,000	20,000
Murdoch Bruce		(GBP 1,000 – 1,500)
			20,279,000	27,077,000

note: Some of these estimates are subject to our specialists seeing the condition of these paintings.

USD 7.80 GBP 14.30

42

ASSETS AUCTION ESTIMATE

APPENDIX III

Miscellaneous

	As at 17th	August 2004
Description	Low Estimate	High Estimate
	(GBP)	(GBP)
A Pair of Terrestrial and Celestial Globes, William IV, circa 1838	40,000	60,000
A very rare pair of George III oval mahogany table wine coolers, circa 1800	2,000	5,000
A fine mid 18th century large oval mahogany wine cooler, circa 1760	2,000	3,000
A Fine Mahogany Armchair, George II, circa 1755	15,000	25,000
A Fine George IV Mahogany Sideboard and Matching Cellaret, circa 1825	10,000	15,000
A Fine Victorian Mahogany Curule Stool, circa 1875	4,000	6,000
A William IV Part-Ebonized Burlwood Extension Dining Table, circa 1835	6,000	10,000
A Very Fine George III Inlaid Rosewood Breakfast Table, circa 1800	4,000	6,000
Large Export Silver Tray, marked Luenwo Shanghai and An Chang, circa 1900	1,000	1,500
A pair of George IV Silver wine Coolers, John Bridge,	40,000	50,000
for Rundell, Bridge & Rundell, London 1824
A pair of Victorian Silver Wine Coasters, Mortimer & Hunt, London 1841	5,000	7,000
An unusual Louis XV Ormolu Bracket Clock, mid-18th C	7,000	10,000
An important and rare miniature Gold Mounted Bloodstone	30,000	50,000
Three Train Musical Automation Table Clock, Markwick,
Markham, Perigal, London George III, circa 1800
Fine and rare Rock Crystal, Black Onyx, Gold and Mother-of-Pearl	80,000	120,000
and Diamond-Set Model ‘‘A’’ Mystery Clock, by Cartier,
European Watch & Clock Co., circa 1925
	246,000	368,500
	HK$	HK$
GBP 14.30	3,517,800	5,269,550

43

GENERAL INFORMATION

APPENDIX IV

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 document and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement in this document misleading.

2. Disclosure of Interests

• (a) As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company 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: –

(I) The Company

	Number			Percentage
	of Shares			of Issued
Name of Director	(ordinary share)	Note	Capacity	Share Capital
Mr. Lau	283,143,456	(1)	Other Interests
	1,000,000,000	(2)	Other Interests
	1,283,143,456			63.09%
Mr. Thomas Lau,	199,207,187	(3)	Other Interests	9.80%
Luen-hung

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.

44

GENERAL INFORMATION

APPENDIX IV

(II) Associated Corporations of the Company

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

	Number of			Percentage
	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) Kwong Sang Hong International Limited (‘‘Kwong Sang Hong’’)

	Number of			Percentage
	Shares			of Issued
Name of Director	(ordinary share)	Note	Capacity	Share Capital
Mr. Lau	586,672,047	(2)	Interest in	61.12%
			Controlled
			Corporation
G-Prop (Holdings)	Limited (‘‘G-Prop’’)
	Number of			Percentage
	Shares			of Issued
Name of Director	(ordinary share)	Note	Capacity	Share Capital
Mr. Lau	397,858,761	(3)	Interest in	57.56%
			Controlled
			Corporation

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

Notes: –

• (1) Mr. Lau, by virtue of his 63.09% interest in the share capital of the Company as disclosed in paragraph 2(a)(I) above, was deemed to be interested in 209,811,186 shares of 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 63.09% interest in the 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 Kwong Sang Hong held indirectly by the Company. The Company was interested of 586,672,047 shares of Kwong Sang Hong, of which 72,926,000 shares were held by Good System Investment Limited, a wholly-owned subsidiary of the Company. The other 513,746,047 shares were held by Power Jade Capital Limited which was 50% owned by Gold Castle Capital Ltd., a wholly-owned subsidiary of the Company.

• (3) Mr. Lau, by virtue of his 63.09% interest in the 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’’), the First Vendor, Great Empire International Ltd. (‘‘Great Empire’’) and Luckpoint Investment Limited (‘‘Luckpoint’’) respectively.

45

GENERAL INFORMATION

APPENDIX IV

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 the First Vendor.

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 First Vendor, 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.

• (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	49.17%
	(Note 1)	Beneficiary of a Trust
Global King Ltd.	1,000,000,000	Trustee	49.17%
	(Note 1)
GZ Trust Corporation	283,143,456	Trustee and Interest	13.92%
	(Note 2)	in Controlled Corporation
Joseph Lau Luen Hung	283,143,456	Beneficial Owner	13.92%
Investments Limited	(Note 2)
(formerly known as
Nation Link Limited)

46

GENERAL INFORMATION

APPENDIX IV

			Percentage
	Number of		of Issued
Name	Shares Held	Capacity	Share Capital
Ms. Ip, Sok-wun	199,207,187	Founder of	9.80%
	(Note 3)	Discretionary Trust
J.P. Morgan Trust Company	199,207,187	Trustee and Interest	9.80%
(Bahamas) Limited	(Note 4)	in Controlled Corporation
Sunny Trend Limited	199,207,187	Beneficial Owner	9.80%
	(Note 4)
Mr. Li Ka-shing	174,660,000	Founder of Discretionary	8.59%
	(Notes 5 & 6)	Trusts and Interest of
		Controlled Corporations
Li Ka-Shing Unity	174,660,000	Trustee and	8.59%
Trustcorp Limited	(Notes 5 & 6)	Beneficiary of a Trust
Li Ka-Shing Unity Trustee	174,660,000	Trustee and	8.59%
Corporation Limited	(Notes 5 & 6)	Beneficiary of a Trust
Li Ka-Shing Unity Trustee	174,660,000	Trustee	8.59%
Company Limited	(Notes 5 & 6)
Cheung Kong (Holdings) Limited	174,660,000	Interest of	8.59%
	(Notes 5 & 6)	Controlled Corporations
Hutchison Whampoa Limited	174,660,000	Interest of	8.59%
	(Note 5)	Controlled Corporations
Hutchison International Limited	174,660,000	Interest of	8.59%
	(Note 5)	a Controlled Corporation
Primetek Holdings Limited	174,660,000	Beneficial Owner	8.59%
	(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 (formerly known as Nation Link Limited) and therefore was regarded as interested in the same parcel of shares held by Joseph Lau Luen Hung Investments Limited (formerly known as Nation Link Limited). These Shares were the same parcel of 283,143,456 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 (formerly known as Nation Link Limited).

47

GENERAL INFORMATION

APPENDIX IV

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. 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 may being regarded as a founder of DT1 and DT2 for the purpose of the SFO, TDT1, TDT2, TUT1 and CKH was deemed to be interested in the 174,660,000 Shares held by Primetek.

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 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%

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Notes: –

1. Kwong Sang Hong 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 being 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.

3. Experts and consents

The following are the qualification of the experts who have been named in this circular or have given opinion, letters or advice contained in this circular: –

Name Qualifications Access Capital Limited a deemed licensed corporation to carry out types 1, 4, 6 and 9 regulated activities under the SFO. CB Richard Ellis Limited property valuer (Note)

Christie’s Hong Kong Limited the Hong Kong arm of the Christie’s group of companies. Christie’s is one of the world’s leading auctioneers and valuers of works of art such as the Assets.

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• Note: Mr. Gary C Ip is a Registered Professional Surveyor (General Practice), a member of Royal Institution of Chartered Surveyors and a member of the Hong Kong Institute of Surveyors. He is a director of the Valuation & Advisory Services Department of CB Richard Ellis Limited.

Each of Access Capital Limited, CB Richard Ellis Limited and Christie’s Hong Kong Limited 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.

Each of Access Capital Limited, CB Richard Ellis Limited and Christie’s Hong Kong Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its opinion, letter, summary of values, valuation certificates and/or schedule setting out the details of the Assets and the estimated hammer prices 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$3,600,000.00 and HK$600,000.00 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.

Save as set out above, 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) The First Sale and Purchase Agreement.

• (c) The Second Sale and Purchase Agreement.

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.

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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 Mr. Lau and Mr. Thomas Lau, Luen-hung, who are deemed to have a material interest in the Disposal, none of the Directors, Access Capital Limited, CB Richard Ellis Limited and Christie’s Hong Kong Limited 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 place of business 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 Shops 1712-1716, l7th 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.

• (e) Save for the Disposal 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.

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 12th October 2004 (being a period of not less than 14 days from the date of this circular): –

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APPENDIX IV

• (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 letter, summary of values and valuation certificate dated 27th September 2004 from CB Richard Ellis Limited, the text of which is set out in appendix I to this circular;

• (f) the letter, summary of values and valuation certificate dated 27th September 2004 from CB Richard Ellis Limited, the text of which is set out in appendix II to this circular;

• (g) the letter and a schedule setting out the details of the Assets and the estimated hammer price of each item of the Assets dated 27th September 2004 from Christie’s Hong Kong Limited, the text of which is set out in appendix III to this circular;

• (h) the written consents referred to in paragraph 3 of this appendix; and

• (i) the material contracts referred to in paragraph 5 of this appendix.

52

NOTICE OF SGM

==> picture [250 x 84] intentionally omitted <==

(incorporated in Bermuda with limited liability)

(Stock code: 127)

NOTICE IS HEREBY GIVEN that a special general meeting of Chinese Estates Holdings Limited (the ‘‘Company’’) will be held at Salon 6 (Level 3), JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong on Monday, 18th October 2004, at 10:00 a.m. for the purposes of considering and, if thought fit, passing, with or without modification, the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

1. ‘‘ THAT :

2. (a) the disposal of the entire issued share capital of Project King Ltd. and the assignment of loans due from members of the First Group (as defined in the circular of the Company dated 27th September 2004, a copy of which was produced to this meeting and marked ‘‘A’’ and initialed by the chairman of this meeting for the purpose of identification (the ‘‘Circular’’)) to Colour Jade Ltd. (collectively the ‘‘First Transactions’’) under the sale and purchase agreement dated 27th August 2004 (the ‘‘First Sale and Purchase Agreement’’) entered into between Paul Y. Holdings Company Limited and Colour Jade Ltd., a copy of which was produced to this meeting and marked ‘‘B’’ and initialed by the chairman of this meeting for the purpose of identification, be and is hereby approved, ratified and confirmed; and

3. (b) any one director of the Company, or any two directors of the Company if affixation of the common seal is necessary, be and is/are hereby authorised for and on behalf of the Company to execute all such documents, instruments and agreements and do all such acts, matters and things deemed by him/her to be incidental to, ancillary to or in connection with the matters contemplated under the First Transactions as he/she may consider, necessary, desirable or expedient.’’

4. ‘‘ THAT :

5. (a) the disposal of the entire issued share capital of each of Sino Harbour Limited, Great Kings Investments Ltd. and Glory Ocean Limited, and the assignment of loans due from members of the Outgoing Group (as defined in the circular of the Company dated 27th September 2004, a copy of which was produced to this meeting and marked ‘‘A’’ and initialed by the chairman of this meeting for the purpose of identification (the ‘‘Circular’’)) (other than the First Group (as defined in the Circular)) to Colour Jade Ltd. (collectively the ‘‘Second Transactions’’) under the First Sale and Purchase Agreement (as defined in resolution no. 1 of the notice convening this meeting of which this resolution forms part), be and is hereby approved, ratified and confirmed; and

6. (b) any one director of the Company, or any two directors of the Company if affixation of the common seal is necessary, be and is/are hereby authorised for and on behalf of the Company to execute all such documents, instruments and agreements and do all such acts, matters and things deemed by him/her to be incidental to, ancillary to or in connection with the matters contemplated under the Second Transactions as he/she may consider, necessary, desirable or expedient.’’

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NOTICE OF SGM

1. ‘‘ THAT :

2. (a) the sale and purchase agreement dated 27th August 2004 (the ‘‘Second Sale and Purchase Agreement’’) entered into between the Company and London Queen Limited, a copy of which has been produced to this meeting and marked ‘‘C’’ and initialed by the chairman of this meeting for the purpose of identification, in relation to (a) the disposal of the entire issued share capital of Jade Wall Limited (‘‘JWL’’); and (b) the assignment of loan due from JWL to Chase Master Company Limited, be and is hereby approved, ratified and confirmed; and

3. (b) any one director of the Company, or any two directors of the Company if affixation of the common seal is necessary, be and is/are hereby authorised for and on behalf of the Company to execute all such documents, instruments and agreements and do all such acts, matters and things deemed by him/her to be incidental to, ancillary to or in connection with the matters contemplated under the Second Sale and Purchase Agreement as he/she may consider, necessary, desirable or expedient.’’

By Order of the Board Lam, Kwong-wai Company Secretary

Hong Kong, 27th September 2004

Principal place of business: 26th Floor, MassMutual Tower 38 Gloucester Road Wanchai Hong Kong

Notes:

1. Any member entitled to attend and vote at the special general meeting is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him/her. A proxy need not be a member of the Company.

2. Where there are joint registered holders of any share, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she was solely entitled thereto, but if more than one of such joint holders are present at the meeting, the most senior will alone be entitled to vote, whether in person or by proxy. For this purpose, seniority will be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.

3. The instrument appointing a proxy will be in writing under the hand of the appointor or of his/her attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of any officer, attorney or other person authorised to sign the same.

4. In order to be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power of authority, must be lodged at the principal place of business of the Company in Hong Kong, 26th Floor, MassMutual Tower, 38 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the special general meeting or any adjourned meeting (as the case may be) and in default the proxy will not be treated as valid.

5. Completion and return of the form of proxy will not preclude members from attending and voting in person at the special general meeting or at any adjourned meeting (as the case may be) should they so wish, and in such event, the form of proxy will be deemed to be revoked.

6. As at the date hereof, the Board comprises Mr. Thomas Lau, Luen-hung and Mr. Joseph Lau, Luen-hung as executive Directors and Ms. Constance Choy, Hok-man, Mr. Koon, Wing-yee and Mr. Cheng, Kwee as independent non-executive Directors.

54