National Electronics Holdings Limited - Proxy Solicitation & Information Statement 2009

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 licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional advisers.

If you have sold or transferred all your Shares, you should at once hand this circular together with the enclosed form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

This circular is addressed to the Shareholders in connection with the SGM to be held at 10:00 a.m. on Monday, 12 October 2009.

Hong Kong Exchanges and Clearing Limited and the Stock Exchange take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

(Incorporated in Bermuda with limited liability)

(Stock Code: 127)

DISCLOSEABLE AND CONNECTED TRANSACTIONS: DISPOSAL OF SUBSIDIARIES AND ASSETS

AND

NOTICE OF SPECIAL GENERAL MEETING

Financial adviser to the Company

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

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Capitalised terms used in this cover page shall have the same meanings as those defined in the section headed “Definitions” in this circular. A letter from the Board is set out on pages 10 to 39 of this circular. A letter from the Independent Board Committee is set out on page 40 of this circular. A letter from VC Capital containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 41 to 54 of this circular.

A notice convening the SGM to be held at Concord Room II-III, 8th Floor, Renaissance Harbour View Hotel Hong Kong, No. 1 Harbour Road, Wanchai, Hong Kong on Monday, 12 October 2009 at 10:00 a.m. is set out on pages 66 to 69 of this circular. Whether or not you intend to attend the SGM in person, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company’s branch registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1806-07, 18th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof if you so wish.

23 September 2009

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
A. The Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
B. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
C. Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
D. Reasons for the Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
E. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	37
F. Listing Rules Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	37
G. SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
H. Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	39
I. Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	39
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	40
Letter from VC Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
Appendix I – Property valuation report on the Great Will Property
and the Global Young Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	55
Appendix II – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	61
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	66

* Should there is any discrepancy between English and Chinese versions, the English version shall prevail.

DEFINITIONS

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

“Action Basic”

Action Basic Limited, a company incorporated in BVI and an indirect wholly-owned subsidiary of the Company (held through China Entertainment)

“Action Basic Agreement”

the sale and purchase agreement dated 2 September 2009 and entered into between China Entertainment, Chinese Estates, the Purchaser and Mr. Lau relating to the entire issued share capital of and loans due by Action Basic

“Action Basic Interest Reference Date”
the date which is immediately after the last day up to and inclusive of which interests on the Cathay Pacific Credit Linked Note have been both accrued and paid
“Agreements”

collectively,

the Action Basic Agreement;
the Global Stage Agreement;
the Oriental Kingdom Agreement;
the Fame Winner Agreement;
the Stars Up Agreement;
the Union Nice Agreement;
the Great Will Agreement; and
the Global Young Agreement
“associate(s)”

having the meaning ascribed thereto in the Listing Rules

“Atlantic Notes”

the US$1,250,000,000 8.75% guaranteed notes due 2014 issued by Atlantic Finance Limited, in the aggregate principal amount of US$63,000,000 (equivalent to approximately HK$488,439,000) beneficially owned by Global Stage, which were purchased by Global Stage on 20 May 2009 at US$63,000,000 (equivalent to approximately HK$488,439,000). As at 1 September 2009, its value amounted to approximately US$66,307,500 (equivalent to approximately HK$513,883,125)

DEFINITIONS

“Barclays RCIs”
the GBP3,000,000,000 14% step-up callable perpetual reserve capital instruments issued by Barclays Bank PLC, in the aggregate principal amount of GBP9,500,000 (equivalent to approximately HK$118,845,000) beneficially owned by Global Stage, which were purchased by Global Stage on 3 June 2009 at GBP9,614,000 (equivalent to approximately HK$120,271,140). As at 1 September 2009, its value amounted to approximately GBP11,756,250 (equivalent to approximately HK$147,188,250)
“Board” the board of Directors
“Business Day(s)” a day (other than a Saturday or a Sunday) on which banks are generally open for business in Hong Kong
“BVI” the British Virgin Islands
“Cathay Pacific Credit Linked Note”
the one year credit linked note linked to Cathay Pacific Airways Limited with nominal amount of US$9,000,000 (equivalent to approximately HK$69,747,300) sold by Deutsche Bank AG, Singapore Branch to Action Basic
“China Entertainment” China Entertainment and Land Investment Company, Limited, a company incorporated in Hong Kong and a direct wholly-owned subsidiary of the Company
“Chinese Estates”
Chinese Estates, Limited, a company incorporated in Hong Kong and a direct wholly-owned subsidiary of the Company
“Chinese Estates (Eaton)” Chinese Estates (Eaton Square) Limited, a company incorporated in the UK and an indirect wholly-owned subsidiary of the Company (held through Union Nice)
“Company” Chinese Estates Holdings Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange

DEFINITIONS

“connected person(s)”
having the meaning ascribed thereto in the Listing Rules
“Director(s)”
the director(s) of the Company
“Everbright Pacific” Everbright Pacific Ltd., a company incorporated in BVI and an indirect wholly-owned subsidiary of the Company (held through Chinese Estates)
“Fame Winner” Fame Winner Limited, a company incorporated in Hong Kong and an indirect wholly-owned subsidiary of the Company (held through Super Series)
“Fame Winner Agreement” the sale and purchase agreement dated 2 September 2009 and entered into between Super Series, Chinese Estates, the Purchaser and Mr. Lau relating to the entire and issued share capital of and loans due by Fame Winner
“Fame Winner Interest Reference Date”
the date which is immediately after the last day up to and inclusive of which interests on the JAL Credit Linked Note have been both accrued and paid
“GBP”
Pound Sterling, the lawful currency of the UK
“Global Stage”
Global Stage Limited, a company incorporated in BVI and an indirect wholly-owned subsidiary of the Company (held through Chinese Estates)
“Global Stage Agreement”
the sale and purchase agreement dated 2 September 2009 and entered into between Global Stage, Chinese Estates, the Purchaser and Mr. Lau relating to certain notes and reserve capital instruments
“Global Young”
Global Young Holdings Ltd., a company incorporated in BVI and an indirect wholly-owned subsidiary of the Company (held through Paul Y. Holdings)
“Global Young Agreement”

the sale and purchase agreement dated 2 September 2009 and entered into between Paul Y. Holdings, Chinese Estates, the Purchaser and Mr. Lau relating to the entire issued share capital of and loan due by Global Young

DEFINITIONS

“Global Young Properties”
Apartment No. 6, 10/12 Hans Crescent, London SW1X 0LJ, UK together with an underground Car Park Bay K39, 25 Basil Street, London SW3, UK
“Great Will” Great Will Limited, a company incorporated in BVI and an indirect wholly-owned subsidiary of the Company (held through Chinese Estates)
“Great Will Agreement”
the sale and purchase agreement dated 2 September 2009 and entered into between Chinese Estates and Mr. Lau relating to the entire issued share capital of and loan due by Great Will
“Great Will Property”
the land being 82 Eaton Square, London SW1W 9AP, UK and the buildings thereon
“Group”
collectively, the Company and its subsidiaries from time to time
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”
the board committee comprising all independent nonexecutive Directors, namely Mr. Chan, Kwok-wai, Ms. Phillis Loh, Lai-ping and Mr. Ma, Tsz-chun, which has been established by the Board for the purpose of advising the Independent Shareholders in relation to the Transactions
“Independent Shareholders”

Shareholders other than Mr. Lau and his associates

“Interest Rate Swap”
(a) the 12 year Non-Call 3 Months Cancelable Yield Curve Range Accrual Swap entered into between Goldman Sachs International and Everbright Pacific; and
(b) the outright transfer agreement dated 29 August 2008 entered into by Oriental Kingdom in favour of Goldman Sachs International

DEFINITIONS

“JAL Credit Linked Note” the series 288 US$30,000,000 Fixed Rate Credit Linked Secured Notes Due 2010 linked to Japan Airlines International Co., Ltd and its successors in the principal amount of US$30,000,000 (equivalent to approximately HK$232,632,000) issued by Eirles Three Limited to Fame Winner
“Latest Practicable Date” 18 September 2009, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
“LIBOR” London-Interbank Offer Rate
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“MS Notes” the US$2,000,000,000 global medium-term notes, series F, fixed rate senior notes due 2019 issued by Morgan Stanley, in the aggregate principal amount US$53,000,000 (equivalent to approximately HK$410,750,000) beneficially owned by Global Stage, which were purchased by Global Stage on 8 May 2009 at approximately US$52,877,570 (equivalent to approximately HK$409,801,168). As at 1 September 2009, its value amounted to approximately US$58,803,500 (equivalent to approximately HK$455,727,125)
“Mr. Lau”
Mr. Joseph Lau, Luen-hung, the Chairman and an executive Director, the Chief Executive Officer of the Company and a substantial Shareholder

DEFINITIONS

“Oriental Deposit Interest Adjustment”
the amount of interests accrued on the margin deposit kept by Oriental Kingdom with Goldman Sachs International in connection with the Interest Rate Swap for the period commencing from the date (being a day prior to the signing of the Oriental Kingdom Agreement) immediately after the last day up to and inclusive of which interests on such margin deposit have been both accrued and paid by Goldman Sachs International up to the date of the Oriental Kingdom Agreement (both days inclusive) provided that such amount will not result in the Oriental Consideration exceeding HK$780,000,000 and if it does, such amount shall be reduced (based on the current information available to the Company, the Oriental Deposit Interest Adjustment amounted to approximately US$1,419 (equivalent to approximately HK$10,997))
“Oriental Kingdom”
Oriental Kingdom Limited, a company incorporated in BVI and an indirect wholly-owned subsidiary of the Company (held through Chinese Estates)
“Oriental Kingdom Agreement”
the sale and purchase agreement dated 2 September 2009 and entered into between Chinese Estates, the Purchaser and Mr. Lau relating to the entire issued share capital of and loans due by Everbright Pacific and Oriental Kingdom
“Paul Y. Holdings” Paul Y. Holdings Company Limited, a company incorporated in the Cayman Islands and a direct whollyowned subsidiary of the Company
“PRC” the People’s Republic of China
“Purchaser”
Wisdom Hero Limited, an investment holding company incorporated in BVI which is wholly-owned by Mr. Lau

DEFINITIONS

“Related Party”
for the purpose of the Stock Exchange Undertaking, a director, substantial shareholder, a subsidiary or associated company of the Company (other than a wholly-owned subsidiary of the Company) or an associate of any such person, save that any associated company of the Company which was formed with other independent third parties who is/are not connected person(s) (as defined in the Listing Rules) of the Company as a joint venture consortium to engage in real property development projects will not be regarded as a Related Party pursuant to the Stock Exchange Undertaking
“Rich Lucky” Rich Lucky Limited, a company incorporated in BVI and an indirect wholly-owned subsidiary of the Company (held through Chinese Estates)
“Selection Notice” written notification stating a Business Day selected by the Purchaser or Mr. Lau as the case may be for the purpose of completion of the agreement concerned after the satisfaction of the condition precedent to such agreement
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“SGM”
a special general meeting of the Company to be convened at Concord Room II-III, 8th Floor, Renaissance Harbour View Hotel Hong Kong, No. 1 Harbour Road, Wanchai, Hong Kong on Monday, 12 October 2009 at 10:00 a.m. or any adjournment thereof (as the case may be), for the purpose of the Independent Shareholders considering, and if thought fit, approving the Transactions, notice of which is set out on pages 66 to 69
“Share(s)” ordinary share(s) of HK$0.10 each in the share capital of the Company
“Shareholder(s)” holder(s) of Shares

DEFINITIONS

“Specified Transaction(s)”

for the purpose of the Stock Exchange Undertaking, a transaction between the Company or any of its subsidiaries and a Related Party being:

(a) any acquisition or disposal of assets by the Company or any of its subsidiaries whether in the ordinary and usual course of business of such company and/or on normal commercial terms or not;
(b) an arrangement or agreement whereby the Company or any of its subsidiaries directly or indirectly grants a loan or gives other financial assistance to a Related Party; or
(c) an arrangement or agreement whereby the Company or any of its subsidiaries provides security, whether by guarantee or otherwise, for the due discharge of any obligation of a Related Party

which, in any such case, is for a consideration or in respect of a principal amount which, when aggregated with the consideration or principal amount of any other Specified Transaction(s) between the Company or any of its subsidiaries and any Related Party carried into effect during the previous twelve months, exceeds HK$200 million

“Stars Up”
“Stars Up Agreement”
“Stock Exchange”
“Stock Exchange Undertaking”

Stars Up Limited, a company incorporated in BVI and an indirect wholly-owned subsidiary of the Company (held through Chinese Estates)

the sale and purchase agreement dated 2 September 2009 and entered into between Chinese Estates, the Purchaser and Mr. Lau relating to the entire issued share capital of and loan due by Stars Up

The Stock Exchange of Hong Kong Limited

the undertaking provided by the Company to the Stock Exchange dated 20 September 1990 (as supplemented on 8 January 1991 and amended by letter dated 24 September 1996 from the Stock Exchange)

DEFINITIONS

“Subject Companies” collectively, Action Basic, Oriental Kingdom, Everbright Pacific, Fame Winner, Stars Up, Union Nice, Chinese Estates (Eaton), Great Will and Global Young “Super Series” Super Series Limited, a company incorporated in BVI and an indirect wholly-owned subsidiary of the Company (held through Chinese Estates) “Transactions” the transactions contemplated under the Agreements “UK” the United Kingdom “Union Nice” Union Nice Limited, a company incorporated in BVI and an indirect wholly-owned subsidiary of the Company (held through Rich Lucky) “Union Nice Agreement” the sale and purchase agreement dated 2 September 2009 and entered into between Rich Lucky, Chinese Estates, the Purchaser and Mr. Lau relating to the entire and issued share capital of Union Nice and loans due by Union Nice and Chinese Estates (Eaton) “United States” or “U.S.” the United States of America

“US$” the United States dollars, the lawful currency of the United States
“VC Capital” VC Capital Limited, a corporation licensed to carry on types 1 (dealing in securities) and 6 (advising on corporate finance) regulated activities under the SFO, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Agreements and the Transactions
“%” per cent.

For the purposes of this circular, conversion of currencies had been calculated using the then current exchange rates of the relevant transactions, otherwise, conversion of currencies had been calculated using the following exchange rates:

GBP1 = HK$12.52 US$1 = HK$7.75

Such exchange rates had been used for purposes of illustration only and did not constitute a representation that any amounts have been, could have been, or may be exchanged at such or any other rates.

LETTER FROM THE BOARD

(Incorporated in Bermuda with limited liability) (Stock Code: 127)

Executive Director: Registered office: Joseph Lau, Luen-hung Canon’s Court (Chairman and Chief Executive Officer) 22 Victoria Street Hamilton HM 12 Non-executive Directors: Bermuda Lau, Ming-wai Amy Lau, Yuk-wai Principal office in Hong Kong: 26th Floor Independent Non-executive Directors: MassMutual Tower Chan, Kwok-wai 38 Gloucester Road Phillis Loh, Lai-ping Wanchai Ma, Tsz-chun Hong Kong 23 September 2009

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTIONS: DISPOSAL OF SUBSIDIARIES AND ASSETS

INTRODUCTION

On 2 September 2009, the Board announced that each of the following agreements were entered into between, among other parties, the subsidiaries of the Company and the Purchaser or Mr. Lau as the case may be:

the Action Basic Agreement;
the Global Stage Agreement;

LETTER FROM THE BOARD

the Oriental Kingdom Agreement;
the Fame Winner Agreement;
the Stars Up Agreement;
the Union Nice Agreement;
the Great Will Agreement; and
the Global Young Agreement.

The Agreements are related to, among other things:

(a) the Cathay Pacific Credit Linked Note (as contemplated under the Action Basic Agreement) sold by Deutsche Bank AG, Singapore Branch, being an one year credit linked note linked to Cathay Pacific Airways Limited bearing an interest at a rate of 3-month LIBOR + 5% per annum maturing 20 June 2010;
(b) the Atlantic Notes (as contemplated under the Global Stage Agreement), being guaranteed notes issued by Atlantic Finance Limited bearing an interest at a rate of 8.75% per annum maturing on 27 May 2014;
(c) the Barclays RCIs (as contemplated under the Global Stage Agreement), being callable perpetual reserve capital instruments issued by Barclays Bank PLC bearing an interest at a rate of 14% per annum with no maturity date;
(d) the MS Notes (as contemplated under the Global Stage Agreement), being mediumterm notes issued by Morgan Stanley bearing an interest at a rate of 7.30% per annum maturing on 13 May 2019;
(e) the Interest Rate Swap (as contemplated under the Oriental Kingdom Agreement), being a 12 year non-call 3-month cancelable yield curve range accrual swap contract maturing on 13 January 2017 issued by Goldman Sachs International. The Interest Rate Swap has a maturity of 12 years and is callable quarterly after 3 months. Interest is payable quarterly and is accrued daily for each day that the (30 year US$ interest rate swap rate - 10 year US$ interest rate swap rate) spread fixes at or above 0.00%;
(f) the JAL Credit Linked Note (as contemplated under the Fame Winner Agreement), being series 288 US$30,000,000 fixed rate credit linked secured notes linked to Japan Airlines International Co., Ltd and its successors maturing on 24 February 2010;
(g) the entire issued share capital of Stars Up;

LETTER FROM THE BOARD

(h) the entire issued share capital of Union Nice;
(i) the 6-storey luxury terraced house (as contemplated under the Great Will Agreement), which is one of the six houses located in Eaton Square, London, United Kingdom and classified as a “Listed Building” Grade II* built in the early 1900’s. Such property has a total gross floor area of approximately 1,650 square meters (equivalent to approximately 17,750 square feet). Such property is currently undergoing major renovation works and is scheduled to be completed in early 2010; and
(j) an apartment unit on the first floor of a 5-storey tenement building together with an underground car park bay (as contemplated under the Global Young Agreement). Such apartment, excluding the car parking space, has a gross floor area of approximately 92.81 square meters (equivalent to approximately 999 square feet) and is currently vacant. Such apartment is located in Hans Crescent, London, United Kingdom while the underground car park bay is located in 25 Basil Street, London, United Kingdom.

The purpose of this circular is to give you further information regarding, among others, details of the Agreements and the Transactions, the advice of the independent financial adviser to the Independent Board Committee and the Independent Shareholders, the recommendation from the Independent Board Committee, certain financial information as required under the Listing Rules, further information of the Group and valuation report on the Global Young Properties and the Great Will Property and to give you notice of the SGM.

A. THE AGREEMENTS

(1) The Action Basic Agreement

Parties:

(a) China Entertainment, as vendor;
(b) the Purchaser;
(c) Chinese Estates, as the vendor’s guarantor; and
(d) Mr. Lau, as the Purchaser’s guarantor.

LETTER FROM THE BOARD

In consideration of the Purchaser entering into the Action Basic Agreement, Chinese Estates has guaranteed, unconditionally and irrevocably as primary obligor, the due observance and performance by China Entertainment of all the agreements, stipulations, terms and conditions contained in the Action Basic Agreement on the part of China Entertainment to be observed and performed, and Chinese Estates shall on demand by the Purchaser indemnify and keep indemnified fully the Purchaser against any loss or damage the Purchaser may have suffered or incurred as a result of such failure on the part of China Entertainment.

In consideration of China Entertainment entering into the Action Basic Agreement, Mr. Lau has guaranteed, unconditionally and irrevocably as primary obligor, the due observance and performance by the Purchaser of all the agreements, stipulations, terms and conditions contained in the Action Basic Agreement on the part of the Purchaser to be observed and performed, and Mr. Lau shall on demand by China Entertainment indemnify and keep indemnified fully China Entertainment against any loss or damage China Entertainment may have suffered or incurred as a result of such failure on the part of the Purchaser.

Assets to be disposed

The one share beneficially owned by China Entertainment, representing the entire issued share capital of Action Basic ( “Action Basic Share” ) and all sums due or owing by Action Basic to members of the Group (other than the Subject Companies) as at the date of the Action Basic Agreement, together with any further amount which may become due or owing by Action Basic to such members of the Group (other than the Subject Companies) after the date of the Action Basic Agreement up to its completion ( “Action Basic Loan” ). As at the Latest Practicable Date, the Action Basic Loan amounted to approximately HK$17,437,499.

As at the Latest Practicable Date, other than the Cathay Pacific Credit Linked Note, Action Basic does not have any other material assets.

Consideration

The consideration for the Action Basic Share and the Action Basic Loan, which shall be paid by the Purchaser to China Entertainment upon completion of the Action Basic Agreement, shall be HK$1.00 and HK$17,437,499 (subject to adjustment set out below) respectively, provided that the consideration for the Action Basic Share and the Action Basic Loan shall not exceed HK$80,000,000, which was based on the best estimate by the Group.

LETTER FROM THE BOARD

The consideration for the Action Basic Share is subject to the interest adjustment (i.e. the adjustment in relation to the interests which will be accrued on the Cathay Pacific Credit Linked Note for the period covering from the Action Basic Interest Reference Date up to the date of the Action Basic Agreement (both days inclusive)) which was not known as at the date of the Action Basic Agreement ( “Action Basic Interest Receivable” ). The Purchaser and China Entertainment have agreed that after the Action Basic Interest Receivable is known, the amount of the consideration for the Action Basic Share shall be increased by the amount of the Action Basic Interest Receivable (subject to adjustment set out below) ( “Action Basic Adjustment Amount” ). However, if the Action Basic Adjustment Amount cannot be ascertained before completion of the Action Basic Agreement, the Purchaser shall still be obliged to pay China Entertainment the consideration for the Action Basic Share (before such adjustment) upon completion and thereafter shall pay China Entertainment the Action Basic Adjustment Amount within five Business Days after its determination. Based on the current information available to the Company, the Action Basic Adjustment Amount is approximately US$137,588 (equivalent to approximately HK$1,066,307).

The consideration for the Action Basic Loan shall be equal to the aggregate of (i) approximately HK$17,437,499; and (ii) the aggregate amount of all additional loans (calculated in HK$) which may be advanced or made by members of the Group (other than the Subject Companies) to Action Basic after the date of the Action Basic Agreement and up to its completion for the purpose of financing Action Basic to repay the bank loan owed by Action Basic to Deutsche Bank AG, Singapore Branch or any part thereof (which is the purpose of the Action Basic Loan).

The consideration under the Action Basic Agreement shall not exceed HK$80,000,000 and if it does, either one or both of the Action Basic Adjustment Amount and the consideration for the Action Basic Loan shall be adjusted downwards to the extent necessary to make the total consideration under the Action Basic Agreement equal to HK$80,000,000.

The consideration under the Action Basic Agreement was determined after arm’s length negotiations between China Entertainment and the Purchaser with reference to the higher of the market value of the Cathay Pacific Credit Linked Note of approximately HK$68,836,275 as at 28 August 2009 quoted from the issuer and the cost of investment of US$9,000,000 (equivalent to approximately HK$69,747,300) in relation to the Cathay Pacific Credit Linked Note acquired by China Entertainment in May 2009 from the issuer. The Directors consider that such consideration is fair and reasonable.

LETTER FROM THE BOARD

Undertakings

China Entertainment has undertaken to the Purchaser to procure that prior to completion of the Action Basic Agreement no member of the Group will demand or require the repayment of the Action Basic Loan or any part thereof by Action Basic and that prior to completion no repayment of the Action Basic Loan or any part thereof shall be made by Action Basic.

The Purchaser has undertaken to China Entertainment that if so requested by China Entertainment, it will give and/or procure the provision of such guarantee or security as may be reasonably required by any person who was given any guarantee, surety, security or indemnity by a member of the Group in respect of the obligations or liabilities of Action Basic only ( “Action Basic CE Guarantees” ), to replace, and obtain a release of, all the Action Basic CE Guarantees upon completion. If there is any Action Basic CE Guarantee which can only be released upon completion by way of the discharge of the underlying obligations of Action Basic in respect of which such Action Basic CE Guarantee is given, or if the bank loan owed by Action Basic to the issuer is required to be fully paid before any joint or joint and several obligations of Action Basic with other member(s) of the Group could be severed or terminated upon completion of the Action Basic Agreement, the Purchaser has undertaken to provide upon completion such amount of shareholder’s loans to Action Basic as are necessary for Action Basic to discharge such underlying obligations or to repay the aforesaid bank loan upon completion.

Information of Action Basic

Action Basic is an investment holding company incorporated in BVI and a direct wholly-owned subsidiary of China Entertainment. It has an authorised share capital of US$50,000 divided into 50,000 shares of US$1.00 each and an issued share capital of US$1.00 of one share. Prior to completion of the Action Basic Agreement, the Action Basic Share is beneficially held by China Entertainment. The Purchaser will be the beneficial owner of the entire issued share capital of Action Basic after completion of the Action Basic Agreement and Action Basic will cease to be a subsidiary of the Company.

Based on the unaudited financial statements of Action Basic as at 30 June 2009 prepared under the Hong Kong Financial Reporting Standards, the net liabilities of Action Basic as at 30 June 2009 was approximately HK$655,641. Action Basic’s unaudited loss for the years ended 31 December 2007 and 31 December 2008 was approximately HK$9,222 and approximately HK$6,514 respectively.

LETTER FROM THE BOARD

Information of China Entertainment

China Entertainment is an investment holding company incorporated in Hong Kong and a direct wholly-owned subsidiary of the Company.

(2) The Global Stage Agreement

Parties:

(a) Global Stage, as vendor;
(b) Chinese Estates, as warrantor;
(c) the Purchaser; and
(d) Mr. Lau, as the Purchaser’s guarantor.

In consideration of the Purchaser entering into the Global Stage Agreement, Chinese Estates has guaranteed, unconditionally and irrevocably as primary obligor, the due observance and performance by Global Stage of all the agreements, stipulations, terms and conditions contained in the Global Stage Agreement on the part of Global Stage to be observed and performed, and Chinese Estates shall on demand by the Purchaser indemnify and keep indemnified fully the Purchaser against any loss or damage the Purchaser may have suffered or incurred as a result of such failure on the part of Global Stage.

In consideration of Global Stage entering into the Global Stage Agreement, Mr. Lau has guaranteed, unconditionally and irrevocably as primary obligor, the due observance and performance by the Purchaser of all the agreements, stipulations, terms and conditions contained in the Global Stage Agreement on the part of the Purchaser to be observed and performed, and Mr. Lau shall on demand by Global Stage indemnify and keep indemnified fully Global Stage against any loss or damage Global Stage may have suffered or incurred as a result of such failure on the part of the Purchaser.

Assets to be disposed

The Atlantic Notes, the Barclays RCIs and the MS Notes.

LETTER FROM THE BOARD

Consideration

Subject to the adjustment set out below, the total consideration payable by the Purchaser to Global Stage for the purchase of the Atlantic Notes shall be approximately HK$513,883,125 plus a sum equivalent to all interest which has accrued on the Atlantic Notes up to the date of the Global Stage Agreement but remains unpaid as at such date, which shall be paid by the Purchaser to Global Stage or as it may direct at completion. Based on the current information available to the Company, such interest amount is approximately US$1,454,688 (equivalent to approximately HK$11,273,832). Based on the best estimate by the Group, the total consideration for the Atlantic Notes shall not be more than HK$550,000,000.

Subject to the adjustment set out below, the total consideration payable by the Purchaser to Global Stage for the purchase of the Barclays RCIs shall be approximately HK$147,188,250 plus a sum equivalent to all interest which has accrued on the Barclays RCIs up to the date of the Global Stage Agreement but remains unpaid as at such date, which shall be paid by the Purchaser to Global Stage or as it may direct at completion. Based on the current information available to the Company, such interest amount is approximately GBP287,863 (equivalent to approximately HK$3,604,045). Based on the best estimate by the Group, the total consideration for the Barclays RCIs shall not be more than HK$155,000,000.

Subject to the adjustment set out below, the total consideration payable by the Purchaser to Global Stage for the purchase of the MS Notes shall be approximately HK$455,727,125 plus a sum equivalent to all interest which has accrued on the MS Notes up to the date of the Global Stage Agreement but remains unpaid as at such date, which shall be paid by the Purchaser to Global Stage or as it may direct at completion. Based on the current information available to the Company, such interest amount is approximately US$1,171,447 (equivalent to approximately HK$9,078,714). Based on the best estimate by the Group, the total consideration for the MS Notes shall not be more than HK$470,000,000.

The Atlantic Notes, the Barclays RCIs and the MS Notes can be disposed of in the market through the relevant broker. However, given that the Purchaser is willing to purchase the entire portfolio of corporate bonds in an aggregate form, Global Stage had decided to sell these assets to the Purchaser directly.

Pursuant to the Global Stage Agreement, Global Stage shall be entitled at any time and from time to time prior to completion of the sale and purchase of each of the Atlantic Notes, Barclays RCIs and MS Notes (as the case may be) to dispose of all or any part of them to any third party without the consent of the Purchaser and all proceeds from such sale and all profit and loss derived therefrom shall belong to and borne by Global Stage and the consideration for each of the Atlantic Notes, Barclays RCIs and MS Notes shall be adjusted on a pro-rata basis (i.e. the total initial consideration times the percentage of the unsold bonds).

LETTER FROM THE BOARD

The consideration under the Global Stage Agreement was determined after arm’s length negotiations between Global Stage and the Purchaser with reference to the higher of the market value of the Atlantic Notes, the Barclays RCIs and the MS Notes quoted on the market as at 1 September 2009 and the cost of investment in relation to the Atlantic Notes, the Barclays RCIs and the MS Notes. The Directors consider that such consideration is fair and reasonable.

Information of the subject assets

The Atlantic Notes have been admitted to listing on the official list maintained by the Financial Services Authority of the UK ( “Official List” ) and to trading on the regulated market of the London Stock Exchange plc ( “London Stock Exchange” ). The Atlantic Notes which are offered or sold outside the United States to persons that are not U.S. person in reliance on Regulation S under the United States Securities Act of 1933 (as amended) have been accepted for clearance through Euroclear Bank S.A./N.V. ( “Euroclear” ) and Clearstream Banking, societe anonyme , Luxembourg ( “Clearstream, Luxembourg” ) systems and are represented by interests in a global certificate registered in the name of a common depository for Euroclear and Clearstream, Luxembourg. The Atlantic Notes were purchased by Global Stage on 20 May 2009 at US$63,000,000 (equivalent to approximately HK$488,439,000). As at 1 September 2009, the market value of the Atlantic Notes as quoted from the independent broker was approximately US$66,307,500 (equivalent to approximately HK$513,883,125) (which is also in line with the quotation obtained from Bloomberg).

The Barclays RCIs have been admitted to listing on the Official List and to trading on the London Stock Exchange’s regulated market. The Barclays RCIs have been accepted for clearance through Euroclear and Clearstream, Luxembourg systems and are represented by interests in a global certificate registered in the name of a common depository for Euroclear and Clearstream, Luxembourg. The Barclays RCIs were purchased by Global Stage on 3 June 2009 at GBP9,614,000 (equivalent to approximately HK$120,271,140). As at 1 September 2009, the market value of the Barclays RCIs as quoted from the independent broker was approximately GBP11,756,250 (equivalent to approximately HK$147,188,250) (which is also in line with the quotation obtained from Bloomberg).

The MS Notes are unlisted. They have been accepted for clearance through The Depository Trust Company, New York, New York ( “DTC” ), Euroclear and Clearstream, Luxembourg systems and are represented by interests in one or more registered global securities registered in the name of Cede & Co., and deposited with DTC. The MS Notes were purchased by Global Stage on 8 May 2009 at approximately US$52,877,570 (equivalent to approximately HK$409,801,168). As at 1 September 2009, the market value of the MS Notes as quoted from the independent broker was approximately US$58,803,500 (equivalent to approximately HK$455,727,125) (which is also in line with the quotation obtained from Bloomberg).

LETTER FROM THE BOARD

Information of Global Stage

Global Stage is an investment holding company incorporated in BVI and an indirect wholly-owned subsidiary of the Company (held through Chinese Estates).

(3) The Oriental Kingdom Agreement

Parties:

(a) Chinese Estates, as vendor;
(b) the Purchaser; and
(c) Mr. Lau, as the Purchaser’s guarantor.

In consideration of Chinese Estates entering into the Oriental Kingdom Agreement, Mr. Lau has guaranteed, unconditionally and irrevocably as primary obligor, the due observance and performance by the Purchaser of all the agreements, stipulations, terms and conditions contained in the Oriental Kingdom Agreement on the part of the Purchaser to be observed and performed, and Mr. Lau shall on demand by Chinese Estates indemnify and keep indemnified fully Chinese Estates against any loss or damage Chinese Estates may have suffered or incurred as a result of such failure on the part of the Purchaser.

Assets to be disposed

(a) The one share beneficially owned by Chinese Estates, representing the entire issued share capital of Everbright Pacific ( “Everbright Share” ) and all sums due or owing by Everbright Pacific to members of the Group (other than the Subject Companies) as at the date of completion of the Oriental Kingdom Agreement ( “Everbright Loan” As at the Latest Practicable Date, Everbright Pacific did not owe any sum to the Group; and
(b) The one share beneficially owned by Chinese Estates, representing the entire issued share capital of Oriental Kingdom ( “Oriental Share” ) and all sums due or owing by Oriental Kingdom to members of the Group (other than the Subject Companies) as at the date of the Oriental Kingdom Agreement, together with any further amount which may become due or owing by Oriental Kingdom to such members of the Group (other than the Subject Companies) after the date of the Oriental Kingdom Agreement up to its completion ( “Oriental Loan” ). As at the Latest Practicable Date, the Oriental Loan amounted to approximately HK$134,659,911.

LETTER FROM THE BOARD

Everbright Pacific is the beneficial owner of the Interest Rate Swap while Oriental Kingdom holds the Interest Rate Swap on account of Everbright Pacific. It is the intention of the Group to have Oriental Kingdom holding such swap on account of Everbright Pacific and keeping the cash margin deposit with Goldman Sachs International. As at the Latest Practicable Date, the amount of the cash margin deposit was approximately US$20,801,782 (equivalent to approximately HK$161,213,811). Given that Oriental Kingdom holds the Interest Rate Swap on account of Everbright Pacific, it will receive the relevant net interest payment from Goldman Sachs International.

As at the Latest Practicable Date, other than the Interest Rate Swap, Everbright Pacific did not have any other material assets. As at the Latest Practicable Date, other than cash margin deposits placed with Goldman Sachs International in accordance with the terms of the Interest Rate Swap, Oriental Kingdom did not have any other material assets.

Consideration

The consideration for the Everbright Share and the Oriental Share shall be approximately HK$26,553,902 and HK$1.00 plus the Oriental Deposit Interest Adjustment respectively (subject to adjustment set out below).

The consideration for the Oriental Loan and the Everbright Loan shall be the aggregate of (i) approximately HK$134,659,911; and (ii) the aggregate amount of all additional Oriental Loan and Everbright Loan (calculated in HK$) which may be advanced or made by members of the Group (other than the Subject Companies) to Oriental Kingdom and Everbright Pacific after the date of the Oriental Kingdom Agreement and up to its completion for the purpose of financing Oriental Kingdom and Everbright Pacific to make any cash payments to, or top up the cash margin deposits placed with, Goldman Sachs International in accordance with the terms of the Interest Rate Swap (which is the purpose of the Oriental Loan and the Everbright Loan), provided that the amount of the consideration under the Oriental Kingdom Agreement shall be subject to the adjustment set out below.

The total consideration under the Oriental Kingdom Agreement ( “Oriental Consideration” ) shall not exceed HK$780,000,000 (which was based on the best estimate by the Group) and if it does, any one or more of the Oriental Deposit Interest Adjustment, the Oriental Adjustment Amount (as defined below), the consideration for the Everbright Loan and the Oriental Loan shall be adjusted downwards to the extent necessary to make the Oriental Consideration equal to HK$780,000,000.

LETTER FROM THE BOARD

The Oriental Consideration shall be paid by the Purchaser to Chinese Estates upon completion of the Oriental Kingdom Agreement, provided that if the amount of the Oriental Deposit Interest Adjustment still cannot be ascertained at the completion of the Oriental Kingdom Agreement, the payment of the Oriental Deposit Interest Adjustment as part of the consideration for the Oriental Share shall be deferred after the completion of the Oriental Kingdom Agreement and be made within five Business Days after its amount has been determined.

Chinese Estates and the Purchaser agree that since it is not known as of the date of the Oriental Kingdom Agreement whether, in relation to the period covering from 1 August 2009 to the date of the Oriental Kingdom Agreement (both days inclusive) ( “Relevant Period” ), Everbright Pacific and Oriental Kingdom will be entitled to a net interest payment from Goldman Sachs International for the Relevant Period ( “Oriental Interest Receivable” ) under the Interest Rate Swap ( “1st Scenario” ) or whether Everbright Pacific and Oriental Kingdom will be required to pay a net interest payment to Goldman Sachs International for the Relevant Period ( “Oriental Interest Payable” ) under the Interest Rate Swap ( “2nd Scenario” ), there should be certain adjustments to the Oriental Consideration depending on which of the 1st Scenario or the 2nd Scenario will happen after the date of the Oriental Kingdom Agreement.

If the triggering events under the Interest Rate Swap result in the 1st Scenario, the aggregate consideration for the Everbright Share and Oriental Share shall be increased by the amount of the Oriental Interest Receivable (subject to adjustment set out above) ( “Oriental Adjustment Amount” ), and if such result can only be known after completion, the Purchaser shall pay Chinese Estates the Oriental Adjustment Amount within five Business Days after the occurrence of the 1st Scenario. The Oriental Adjustment Amount will be arrived at by ascertaining the amount of the Oriental Interest Receivable and whether such amount is required to be adjusted so that the total consideration under the Oriental Kingdom Agreement does not exceed HK$780,000,000.

If the triggering events under the Interest Rate Swap result in the 2nd Scenario, the aggregate consideration for the Everbright Loan and Oriental Loan shall be reduced by the amount of the Oriental Interest Payable, and if such result can only be known after completion, the Purchaser shall pay aggregate consideration for the Everbright Loan and Oriental Loan (before such adjustment) upon completion but Chinese Estates shall refund the amount of the Oriental Interest Payable to the Purchaser within five Business Days after the occurrence of the 2nd Scenario.

Based on the best estimate by the Group, the Oriental Adjustment Amount or the Oriental Interest Payable will be known in mid of October 2009.

LETTER FROM THE BOARD

The consideration under the Oriental Kingdom Agreement was determined after arm’s length negotiations between Chinese Estates and the Purchaser with reference to the market value of the Interest Rate Swap quoted from the issuer of a loss of approximately US$3,426,923 (equivalent to approximately HK$26,558,653) as at the date of the Oriental Kingdom Agreement, the cost of investment of HK$1 in relation to the Interest Rate Swap and the Oriental Loan amounted to approximately HK$134,659,911 as at 2 September 2009. The Directors consider that such consideration and the relevant cap are fair and reasonable.

Undertakings

Chinese Estates has undertaken to the Purchaser to procure that prior to completion of the Oriental Kingdom Agreement no member of the Group will demand or require the repayment of the Everbright Loan or the Oriental Loan or any part thereof and that prior to completion no repayment of the Everbright Loan or the Oriental Loan or any part thereof shall be made by Everbright Pacific or Oriental Kingdom, and Everbright Pacific and Oriental Kingdom will not apply any cash payment which they receive from Goldman Sachs International under the Interest Rate Swap for repaying the Everbright Loan or the Oriental Loan or any part thereof.

The Purchaser has undertaken to Chinese Estates that if so requested by Chinese Estates, it will give and/or procure the provision of such guarantee or security as may be reasonably required by any person who was given any guarantee, surety, security or indemnity by a member of the Group in respect of the obligations or liabilities of Everbright Pacific and Oriental Kingdom only ( “EPOK CE Guarantees” ), to replace, and obtain a release of, all the EPOK CE Guarantees upon completion. If there is any EPOK CE Guarantee which can only be released upon completion by way of the discharge of the underlying obligations of Everbright Pacific and Oriental Kingdom in respect of which such EPOK CE Guarantee is given, the Purchaser has undertaken to provide upon completion such amount of shareholder’s loans to Everbright Pacific and Oriental Kingdom as are necessary for Everbright Pacific and Oriental Kingdom to discharge such underlying obligations upon completion.

Information of Everbright Pacific

Everbright Pacific is an investment holding company incorporated in BVI and a direct wholly-owned subsidiary of Chinese Estates. It has an authorised share capital of US$50,000 divided into 50,000 shares of US$1.00 each and an issued share capital of US$1.00 of one share. Prior to completion of the Oriental Kingdom Agreement, Everbright Share is beneficially held by Chinese Estates. The Purchaser will be the beneficial owner of the entire issued share capital of Everbright Pacific after completion of the Oriental Kingdom Agreement and Everbright Pacific will cease to be a subsidiary of the Company.

LETTER FROM THE BOARD

Based on the unaudited financial statements of Everbright Pacific as at 31 July 2009 prepared under the Hong Kong Financial Reporting Standards, the net asset value of Everbright Pacific as at 31 July 2009 was approximately HK$8. Everbright Pacific’s unaudited profit before tax and profit after tax for the year ended 31 December 2007 were both HK$188,464,675, and its unaudited profit before tax and profit after tax for the year ended 31 December 2008 were both HK$54,520,099.

Information of Oriental Kingdom

Oriental Kingdom is an investment holding company incorporated in BVI and a direct wholly-owned subsidiary of Chinese Estates. It has an authorised share capital of US$50,000 divided into 50,000 shares of US$1.00 each and an issued share capital of US$1.00 of one share. Prior to completion of the Oriental Kingdom Agreement, the Oriental Share is beneficially held by Chinese Estates. The Purchaser will be the beneficial owner of the entire issued share capital of Oriental Kingdom after completion of the Oriental Kingdom Agreement and Oriental Kingdom will cease to be a subsidiary of the Company.

Based on the unaudited financial statements of Oriental Kingdom as at 31 July 2009 prepared under the Hong Kong Financial Reporting Standards, the net asset value of Oriental Kingdom as at 31 July 2009 was approximately HK$8. Oriental Kingdom’s unaudited profit before tax and profit after tax for the year ended 31 December 2007 were both approximately HK$18,724,041, and its unaudited profit before tax and profit after tax for the year ended 31 December 2008 were both approximately HK$4,544,155.

Information of Chinese Estates

Chinese Estates is an investment holding company incorporated in Hong Kong and a direct wholly-owned subsidiary of the Company.

(4) The Fame Winner Agreement

Parties:

(a) Super Series, as vendor;
(b) the Purchaser;
(c) Chinese Estates, as vendor’s guarantor; and
(d) Mr. Lau, as the Purchaser’s guarantor.

LETTER FROM THE BOARD

In consideration of the Purchaser entering into the Fame Winner Agreement, Chinese Estates has guaranteed, unconditionally and irrevocably as primary obligor, the due observance and performance by Super Series of all the agreements, stipulations, terms and conditions contained in the Fame Winner Agreement on the part of Super Series to be observed and performed, and Chinese Estates shall on demand by the Purchaser indemnify and keep indemnified fully the Purchaser against any loss or damage the Purchaser may have suffered or incurred as a result of such failure on the part of Super Series.

In consideration of Super Series entering into the Fame Winner Agreement, Mr. Lau has guaranteed, unconditionally and irrevocably as primary obligor, the due observance and performance by the Purchaser of all the agreements, stipulations, terms and conditions contained in the Fame Winner Agreement on the part of the Purchaser to be observed and performed, and Mr. Lau shall on demand by Super Series indemnify and keep indemnified fully Super Series against any loss or damage Super Series may have suffered or incurred as a result of such failure on the part of the Purchaser.

Assets to be disposed

The two shares beneficially owned by Super Series, representing the entire issued share capital of Fame Winner ( “Fame Winner Shares” ) and all sums due or owing by Fame Winner to members of the Group (other than the Subject Companies) as at the date of the Fame Winner Agreement, together with any further amount which may become due or owing by Fame Winner to such members of the Group (other than the Subject Companies) after the date of the Fame Winner Agreement up to its completion ( “Fame Winner Loan” ). As at the Latest Practicable Date, the outstanding Fame Winner Loan for the purpose of financing the JAL Credit Linked Note, amounted to approximately HK$285,230,999.

As at the Latest Practicable Date, other than the JAL Credit Linked Note, Fame Winner did not have any other material assets.

Consideration

The consideration for the Fame Winner Shares and the Fame Winner Loan, which shall be paid by the Purchaser to Super Series upon completion of the Fame Winner Agreement, shall be HK$1.00 and HK$285,230,999 (subject to adjustment set out below) respectively, provided that the consideration for the Fame Winner Shares and the Fame Winner Loan shall not exceed HK$300,000,000, which was based on the best estimate by the Group.

LETTER FROM THE BOARD

The consideration for the Fame Winner Shares is subject to the interest adjustment (i.e. the adjustment in relation to the interests which will be accrued on the JAL Credit Linked Note for the period covering from the Fame Winner Interest Reference Date up to the date of the Fame Winner Agreement (both days inclusive)) which was not known as at the date of the Fame Winner Agreement ( “Fame Winner Interest Receivable” ). The Purchaser and Super Series have agreed that after the Fame Winner Interest Receivable is known, the amount of the consideration for the Fame Winner Shares shall be increased by the amount of the Fame Winner Interest Receivable (subject to adjustment set out below) ( “Fame Winner Adjustment Amount” ). However, if the Fame Winner Adjustment Amount cannot be ascertained before completion of the Fame Winner Agreement, the Purchaser shall still be obliged to pay Super Series the consideration for the Fame Winner Shares (before such adjustment) upon completion and thereafter shall pay Super Series the Fame Winner Adjustment Amount within five Business Days after its determination. Based on the current information available to the Company, the Fame Winner Adjustment Amount is approximately US$ 50,000 (equivalent to approximately HK$387,500).

The consideration for the Fame Winner Loan shall be equal to the aggregate of (i) approximately HK$285,230,999; and (ii) the aggregate amount of all additional loans (calculated in HK$) which may be advanced or made by members of the Group (other than the Subject Companies) to Fame Winner after the date of the Fame Winner Agreement and up to its completion.

The consideration under the Fame Winner Agreement shall not exceed HK$300,000,000 and if it does, either one or both of the Fame Winner Adjustment Amount and the consideration for the Fame Winner Loan shall be adjusted downwards to the extent necessary to make the total consideration under the Fame Winner Agreement equal to HK$300,000,000.

The consideration under the Fame Winner Agreement was determined after arm’s length negotiations between Super Series and the Purchaser with reference to the higher of the market value of the JAL Credit Linked Note quoted from the issuer of approximately US$36,804,000 (equivalent to approximately HK$285,231,000) as at 31 August 2009 and the cost of investment of US$30,000,000 (equivalent to approximately HK$232,632,000) in relation to the JAL Credit Linked Note. The Directors consider that such consideration is fair and reasonable.

Undertakings

Super Series has undertaken to the Purchaser to procure that prior to completion of the Fame Winner Agreement no member of the Group will demand or require the repayment of the Fame Winner Loan or any part thereof by Fame Winner and that prior to completion no repayment of the Fame Winner Loan or any part thereof shall be made by Fame Winner save and except that Fame Winner shall be entitled to transfer out the utility deposit of HK$189,500 in the name of Fame Winner and use the proceeds of such transfer for repaying part of the Fame Winner Loan representing the amount of such proceeds.

LETTER FROM THE BOARD

Information of Fame Winner

Fame Winner is an investment holding company incorporated in Hong Kong and a direct wholly-owned subsidiary of Super Series. It has an authorised share capital of HK$10,000 divided into 10,000 shares of HK$1.00 each and an issued share capital of HK$2.00 of two shares. Prior to completion of the Fame Winner Agreement, the Fame Winner Shares are beneficially held by Super Series. The Purchaser will be the beneficial owner of the entire issued share capital of Fame Winner after completion of the Fame Winner Agreement and Fame Winner will cease to be a subsidiary of the Company.

Based on the unaudited financial statements of Fame Winner as at 30 June 2009 prepared under the Hong Kong Financial Reporting Standards, the net liabilities of Fame Winner as at 30 June 2009 was approximately HK$173,196,452. Fame Winner’s unaudited loss for the years ended 31 December 2007 and 31 December 2008 was approximately HK$90,755 and approximately HK$99,657 respectively.

Information of Super Series

Super Series is an investment holding company incorporated in BVI and is an indirect wholly-owned subsidiary of the Company (held through Chinese Estates).

(5) The Stars Up Agreement

Parties:

(a) Chinese Estates, as vendor;
(b) the Purchaser; and
(c) Mr. Lau, as the Purchaser’s guarantor.

In consideration of Chinese Estates entering into the Stars Up Agreement, Mr. Lau has guaranteed, unconditionally and irrevocably as primary obligor, the due observance and performance by the Purchaser of all the agreements, stipulations, terms and conditions contained in the Stars Up Agreement on the part of the Purchaser to be observed and performed, and Mr. Lau shall on demand by Chinese Estates indemnify and keep indemnified fully Chinese Estates against any loss or damage Chinese Estates may have suffered or incurred as a result of such failure on the part of the Purchaser.

LETTER FROM THE BOARD

Assets to be disposed

The one share beneficially owned by Chinese Estates, representing the entire issued share capital of Stars Up ( “Stars Up Share” ) and all sums due or owing by Stars Up ( “Stars Up Loan” ) to members of the Group (other than the Subject Companies) as at the date of the Stars Up Agreement, together with any further amount which may become due or owing by Stars Up to such members of the Group (other than the Subject Companies) after the date of the Stars Up Agreement up to its completion. As at the Latest Practicable Date, the Stars Up Loan amounted to approximately HK$14,439,279.

Consideration

The consideration for the purchase of the Stars Up Share shall be HK$1.00.

The consideration for the purchase of the Stars Up Loan shall be (a) approximately HK$14,439,278 plus; (b) the aggregate amount of all additional loans (calculated in HK$) which may be advanced or made by members of the Group (other than the Subject Companies) to Stars Up after the date of the Stars Up Agreement and up to its completion for the purpose of financing payments under the contractor agreements in respect of the Great Will Property (which is the purpose of the Stars Up Loan) provided that the aggregate amount of all such additional Stars Up Loan shall not exceed the cap of HK$15,560,721.48 which was determined based on the best estimate by the Group in respect of the possible payments under the contractor agreement. Those contractor agreements, which are financed by Stars Up, are mainly related to the renovation works of the Great Will Property.

The consideration pursuant to the Stars Up Agreement shall be paid by the Purchaser to Chinese Estates upon completion of the Stars Up Agreement.

The consideration under the Stars Up Agreement was determined after arm’s length negotiations between Chinese Estates and the Purchaser with reference to the amount of the Stars Up Loan. The Directors consider that such consideration and the relevant cap are fair and reasonable.

Undertakings

Chinese Estates has undertaken to the Purchaser to procure that prior to completion of the Stars Up Agreement no member of the Group will demand or require the repayment of the Stars Up Loan or any part thereof by Stars Up and that prior to completion no repayment of the Stars Up Loan or any part thereof shall be made by Stars Up.

LETTER FROM THE BOARD

Information of Stars Up

Stars Up is an investment holding company incorporated in BVI and a direct whollyowned subsidiary of Chinese Estates. It has an authorised share capital of US$50,000 divided into 50,000 shares of US$1.00 each and an issued share capital of US$1.00 of one share. Prior to completion of the Stars Up Agreement, the Stars Up Share is beneficially held by Chinese Estates. The Purchaser will be the beneficial owner of the entire issued share capital of Stars Up after completion of the Stars Up Agreement and Stars Up will cease to be a subsidiary of the Company. As at the Latest Practicable Date, other than the loan made to Great Will, Stars Up did not have any major assets.

Based on the unaudited financial statements of Stars Up as at 31 July 2009 prepared under the Hong Kong Financial Reporting Standards, the net liabilities of Stars Up as at 31 July 2009 was approximately HK$41,444. Stars Up’s unaudited loss for the years ended 31 December 2007 and 31 December 2008 was approximately HK$6,749 and approximately HK$2,043 respectively.

(6) The Union Nice Agreement

Parties:

(a) Rich Lucky, as vendor;
(b) Chinese Estates, as vendor’s guarantor;
(c) the Purchaser; and
(d) Mr. Lau, as the Purchaser’s guarantor

In consideration of the Purchaser entering into the Union Nice Agreement, Chinese Estates has guaranteed, unconditionally and irrevocably as primary obligor, the due observance and performance by Rich Lucky of all the agreements, stipulations, terms and conditions contained in the Union Nice Agreement on the part of Rich Lucky to be observed and performed, and Chinese Estates shall on demand by the Purchaser indemnify and keep indemnified fully the Purchaser against any loss or damage the Purchaser may have suffered or incurred as a result of such failure on the part of Rich Lucky.

In consideration of Rich Lucky entering into the Union Nice Agreement, Mr. Lau has guaranteed, unconditionally and irrevocably as primary obligor, the due observance and performance by the Purchaser of all the agreements, stipulations, terms and conditions contained in the Union Nice Agreement on the part of the Purchaser to be observed and performed, and Mr. Lau shall on demand by Rich Lucky indemnify and keep indemnified fully Rich Lucky against any loss or damage Rich Lucky may have suffered or incurred as a result of such failure on the part of the Purchaser.

LETTER FROM THE BOARD

Assets to be disposed

The one share beneficially owned by Rich Lucky, representing the entire issued share capital of Union Nice ( “Union Nice Share” ) and all sums due or owing by each of Union Nice ( “UN Loan” ) and Chinese Estates (Eaton) ( “ES Loan” ) to members of the Group (other than the Subject Companies) as at the completion date of the Union Nice Agreement. As at the Latest Practicable Date, the UN Loan and the ES Loan amounted to approximately HK$30,738 and approximately HK$83,331 respectively.

Consideration

The consideration for the purchase of the Union Nice Share shall be HK$1.00.

The consideration for the purchase of the UN Loan shall be approximately HK$30,737.

The consideration for the purchase of the ES Loan shall be approximately HK$83,331.

The consideration for the purchase of the UN Loan and the ES Loan shall be the aggregate of (a) the consideration for the UN Loan; (b) the consideration for the ES Loan; and (c) the aggregate amount of all additional loans (calculated in HK$) which may be advanced or made by members of the Group (other than the Subject Companies) to Union Nice and Chinese Estates (Eaton) after the date of the Union Nice Agreement and up to its completion for the purpose of financing Union Nice and Chinese Estates (Eaton) to make any cash payments exclusively for utility deposits, utilities charges, management fees and other expenses in relation to the Great Will Property (which is the purpose of the UN Loan and the ES Loan) provided that the aggregate amount of all such additional loans shall not exceed the cap of HK$385,931.31 which was determined based on the best estimate by the Group given the historical track record of the cash payments made to the expenses.

The consideration pursuant to the Union Nice Agreement shall be paid by the Purchaser to Rich Lucky upon completion of the Union Nice Agreement.

The consideration under the Union Nice Agreement was determined after arm’s length negotiations between Rich Lucky and the Purchaser with reference to the amount of the UN Loan and the ES Loan. The Directors consider that such consideration and the relevant cap are fair and reasonable.

LETTER FROM THE BOARD

Undertakings

Rich Lucky has undertaken to the Purchaser to procure that prior to completion of the Union Nice Agreement no member of the Group will demand or require the repayment of the UN Loan or the ES Loan or any part thereof by Union Nice or Chinese Estates (Eaton) and that prior to completion no repayment of the UN Loan or the ES Loan or any part thereof shall be made by Union Nice or Chinese Estates (Eaton).

Information of Union Nice

Union Nice is an investment holding company incorporated in BVI and a direct wholly-owned subsidiary of Rich Lucky. It has an authorised share capital of US$50,000 divided into 50,000 shares of US$1.00 each and an issued share capital of US$1.00 of one share. Prior to completion of the Union Nice Agreement, the Union Nice Share is beneficially held by Rich Lucky. The Purchaser will be the beneficial owner of the entire issued share capital of Union Nice after completion of the Union Nice Agreement and Union Nice will cease to be a subsidiary of the Company. As at the Latest Practicable Date, other than having investment interest in Chinese Estates (Eaton), Union Nice did not have any major assets.

Based on the unaudited financial statements of Union Nice as at 30 June 2009 prepared under the Hong Kong Financial Reporting Standards, the net liabilities of Union Nice as at 30 June 2009 was approximately HK$28,222. Union Nice’s unaudited loss for the years ended 31 December 2007 and 31 December 2008 was approximately HK$5,985 and approximately HK$1,500 respectively.

Information of Chinese Estates (Eaton)

Chinese Estates (Eaton) is an investment holding company incorporated in the UK and a direct wholly-owned subsidiary of Union Nice. It has an authorised share capital of GBP1,000 divided into 1,000 shares of GBP1.00 each and an issued share capital of GBP1.00 of one share. The Purchaser will be the beneficial owner of the entire issued share capital of Union Nice after completion of the Union Nice Agreement and Chinese Estates (Eaton), being a wholly-owned subsidiary of Union Nice, will cease to be a subsidiary of the Company. As at the Latest Practicable Date, other than having a utility deposit in relation to the Great Will Property, Chinese Estates (Eaton) did not have any major assets.

Based on the unaudited financial statements of Chinese Estates (Eaton) as at 30 June 2009 prepared under the Hong Kong Financial Reporting Standards, the net liabilities of Chinese Estates (Eaton) as at 30 June 2009 was approximately HK$22,683. Chinese Estates (Eaton)’s unaudited loss for the period from 28 April 2008 (being its incorporation date) to 31 December 2008 was HK$15,186.

Information of Rich Lucky

Rich Lucky is an investment holding company incorporated in BVI and an indirect wholly-owned subsidiary of the Company (held through Chinese Estates).

LETTER FROM THE BOARD

(7) The Great Will Agreement

Parties:

(a) Chinese Estates, as vendor; and
(b) Mr. Lau, as purchaser.

Assets to be disposed

The one share beneficially owned by Chinese Estates, representing the entire issued share capital of Great Will ( “Great Will Share” ) and all sums due or owing by Great Will to members of the Group (other than the Subject Companies) as at the date of the Great Will Agreement, together with any further amount which may become due or owing by Great Will to such members of the Group (other than the Subject Companies) after the date of the Great Will Agreement up to its completion ( “Great Will Loan” ). As at the Latest Practicable Date, the Great Will Loan amounted to approximately HK$409,981,533.

Pursuant to the Agreement for Lease entered into between Eaton Square Properties Limited ( “Landlord” ) and Great Will on 24 November 2003, the Landlord agreed to lease the Great Will Property to Great Will for a term of 75 years commencing from 25 December 2003 and expiring on 24 December 2078. As at the Latest Practicable Date, Great Will held the Great Will Property. The arrangements to have Stars Up to finance payments under the contractor agreements and Union Nice or Chinese Estates (Eaton) to make cash payments for utilities and management charges for the Great Will Property are for the ease of the Group’s management of their administrative costs and expenses.

Consideration

The aggregate consideration for the purchase of the Great Will Share and the Great Will Loan ( “Great Will Consideration” ) shall be the aggregate of (i) approximately HK$409,981,534; and (ii) the aggregate amount of all additional Great Will Loan (calculated in HK$) which may be advanced or made by members of the Group (other than the Subject Companies) to Great Will after the date of the Great Will Agreement and up to its completion for the purpose of financing Great Will to make any payments under the underlease and the relevant freehold agreement of the Great Will Property and to settle the utilities expenses and all other outgoings of the Great Will Property incurred by Great Will as shown in its completion accounts (which is the purpose of the Great Will Loan), provided that the aggregate amount of all such additional Great Will Loan shall not exceed the cap of HK$115,018,466.05 which was determined based on the best estimate by the Group given the historical track record of the cash payments made to the expenses.

LETTER FROM THE BOARD

The Great Will Consideration shall be payable by Mr. Lau to Chinese Estates upon completion of the Great Will Agreement.

The consideration under the Great Will Agreement was determined after arm’s length negotiations between Chinese Estates and Mr. Lau with reference to higher of the market value of the Great Will Property which was valued by an independent property valuer at approximately HK$345,000,000 as at 31 August 2009 and the cost of investment of the Great Will Property of approximately HK$409,981,534. The Directors consider that such consideration and the relevant cap are fair and reasonable.

Undertakings

Chinese Estates has undertaken to Mr. Lau to procure that prior to completion of the Great Will Agreement no member of the Group nor Stars Up will demand or require the repayment of the Great Will Loan, the Stars Up Loan or any part thereof by Great Will and that prior to completion no repayment of the Great Will Loan, the Stars Up Loan or any part thereof shall be made by Great Will.

Information of Great Will

Great Will is an investment holding company incorporated in BVI and a direct wholly-owned subsidiary of Chinese Estates. It has an authorised share capital of US$50,000 divided into 50,000 shares of US$1.00 each and an issued share capital of US$1.00 of one share. Prior to completion of the Great Will Agreement, the Great Will Share is beneficially held by Chinese Estates. Mr. Lau will be the beneficial owner of the entire issued share capital of Great Will after completion of the Great Will Agreement and Great Will will cease to be a subsidiary of the Company. As at the Latest Practicable Date, other than the Great Will Property, Great Will did not have any other material assets.

Based on the unaudited financial statements of Great Will as at 31 July 2009 prepared under the Hong Kong Financial Reporting Standards, the net liabilities of Great Will as at 31 July 2009 was approximately HK$46,718,294. Great Will’s unaudited profit before tax and profit after tax for the year ended 31 December 2007 were HK$57,891,156 and HK$57,875,195 respectively, and its unaudited loss before tax and loss after tax for the year ended 31 December 2008 were approximately HK$221,518,442 and approximately HK$221,524,793 respectively.

LETTER FROM THE BOARD

(8) The Global Young Agreement

Parties:

(a) Paul Y. Holdings, as vendor;
(b) Chinese Estates, as vendor’s guarantor;
(c) the Purchaser; and
(d) Mr. Lau, as the Purchaser’s guarantor.

In consideration of the Purchaser entering into the Global Young Agreement, Chinese Estates has guaranteed, unconditionally and irrevocably as primary obligor, the due observance and performance by Paul Y. Holdings of all the agreements, stipulations, terms and conditions contained in the Global Young Agreement on the part of Paul Y. Holdings to be observed and performed, and Chinese Estates shall on demand by the Purchaser indemnify and keep indemnified fully the Purchaser against any loss or damage the Purchaser may have suffered or incurred as a result of such failure on the part of Paul Y. Holdings.

In consideration of Paul Y. Holdings entering into the Global Young Agreement, Mr. Lau has guaranteed, unconditionally and irrevocably as primary obligor, the due observance and performance by the Purchaser of all the agreements, stipulations, terms and conditions contained in the Global Young Agreement on the part of the Purchaser to be observed and performed, and Mr. Lau shall on demand by Paul Y. Holdings indemnify and keep indemnified fully Paul Y. Holdings against any loss or damage Paul Y. Holdings may have suffered or incurred as a result of such failure on the part of the Purchaser.

Assets to be disposed

The one share beneficially owned by Paul Y. Holdings, representing the entire issued share capital of Global Young ( “Global Young Share” ) and all sums due or owing by Global Young to members of the Group (other than the Subject Companies) as at the date of the Global Young Agreement, together with any further amount which may become due or owing by Global Young to such members of the Group (other than the Subject Companies) after the date of the Global Young Agreement up to its completion ( “Global Young Loan” ). As at the Latest Practicable Date, the Global Young Loan amounted to approximately HK$19,243,635.

As at the Latest Practicable Date, Global Young held the Global Young Properties. The Global Young Properties were acquired on 21 January 2003 at GBP1,370,000 (equivalent to approximately HK$17,467,500). The apartment unit is held under long lease for a term of 999 years commencing from 29 September 2002 whilst the underground car parking space is held under a lease for a term of 99 years commencing from 21 January 2003.

LETTER FROM THE BOARD

Consideration

The aggregate consideration for the purchase of the Global Young Share and the Global Young Loan ( “Global Young Consideration” ) shall be the aggregate of (i) approximately HK$19,243,636; and (ii) the aggregate amount of all additional Global Young Loan (calculated in HK$) which may be advanced or made by members of the Group (other than the Subject Companies) to Global Young after the date of the Global Young Agreement and up to its completion for the purpose of financing Global Young to settle the building management and utilities expenses and all other outgoings of the Global Young Properties and other administrative expenses incurred by Global Young as shown in its completion accounts (which is the purpose of the Global Young Loan), provided that the aggregate amount of all such additional Global Young Loan shall not exceed the cap of approximately HK$756,363.55 which was determined based on the best estimate by the Group given the historical track record of the cash payments made to the expenses.

The Global Young Consideration shall be payable by the Purchaser to Paul Y. Holdings upon completion of the Global Young Agreement.

The consideration under the Global Young Agreement was determined after arm’s length negotiations between Paul Y. Holdings and the Purchaser with reference to the higher of the market value of the Global Young Properties which was valued by an independent property valuer at approximately HK$18,580,000 as at 31 August 2009 and the cost of investment of the Global Young Properties of approximately HK$19,243,636. The Directors consider that such consideration and the relevant cap are fair and reasonable.

Undertakings

Paul Y. Holdings has undertaken to the Purchaser to procure that prior to completion of the Global Young Agreement, no member of the Group will demand or require the repayment of the Global Young Loan or any part thereof by Global Young and that prior to completion, no repayment of the Global Young Loan or any part thereof shall be made by Global Young.

Information of Global Young

Global Young is an investment holding company incorporated in BVI and a direct wholly-owned subsidiary of Paul Y. Holdings. It has an authorised share capital of US$50,000 divided into 50,000 shares of US$1.00 each and an issued share capital of US$1.00 of one share. Prior to completion of the Global Young Agreement, the Global Young Share is beneficially held by Paul Y. Holdings. The Purchaser will be the beneficial owner of the entire issued share capital of Global Young after completion of the Global Young Agreement and Global Young will cease to be a subsidiary of the Company. As at the Latest Practicable Date, other than the Global Young Properties, Global Young did not have any other material assets.

LETTER FROM THE BOARD

Based on the unaudited financial statements of Global Young as at 30 June 2009 prepared under the Hong Kong Financial Reporting Standards, the net liabilities of Global Young as at 30 June 2009 was approximately HK$492,749. Global Young’s unaudited profit before tax and profit after tax for the year ended 31 December 2007 were both approximately HK$5,601,742 and its unaudited loss for the year ended 31 December 2008 was approximately HK$15,010,967.

Information of Paul Y. Holdings

Paul Y. Holdings is an investment holding company incorporated in the Cayman Islands and is a direct wholly-owned subsidiary of the Company.

B. CONDITIONS

Completion of each of the Agreements is conditional upon the satisfaction of the condition precedent that all necessary approvals by the Independent Shareholders in general meeting of the Company in respect of the Transactions in a manner as required by the Stock Exchange or under the Listing Rules, the bye-laws of the Company and the applicable legislation have been obtained.

If the above condition precedent is not fulfilled on or before 30 November 2009 (or such later date as may be agreed between the respective vendor of each of the Agreements and the Purchaser or Mr. Lau as the case may be), such agreement shall thereupon terminate whereupon none of the parties shall have any claim against the other for costs, damages, compensation or otherwise (save in respect of any prior breach).

C. COMPLETION

Subject to the above condition precedent having been satisfied, completion of each of the Agreements shall take place on a Business Day to be selected and notified in writing by the Purchaser or Mr. Lau as the case may be to the respective vendor of each of the Agreements for the purpose of completion after the satisfaction of the above condition precedent, provided that:

(a) such Business Day shall not be earlier than the third Business Day after the date of the Selection Notice;
(b) such Business Day shall fall within the period of 60 days after the date on which the above condition precedent having been satisfied; and
(c) if no Selection Notice is given by the Purchaser or Mr. Lau as the case may be, the completion date shall be the last Business Day during the aforesaid 60-day period;

LETTER FROM THE BOARD

or at such other time and/or place as the respective vendor of each of the Agreements and the Purchaser (or Mr. Lau as the case may be) may agree. Completion of the Agreements is not required to take place on the same day. The consideration under each of the Agreements will be settled by cash and adjustments to consideration of all the Agreements are made on a dollar-to-dollar basis.

D. REASONS FOR THE TRANSACTIONS

The Group is principally engaged in property investment and development, brokerage, securities investment, money lending and cosmetics distribution and trading.

The Group had pursued various opportunities within the realm of its principal activities during the times of the financial crisis, in which case, the Company had invested in certain corporate bond contracts, credit link notes contracts and an interest rate swap contract as contemplated under the investment portfolio. During the times of the financial crisis, the risk and volatility level associated with the aforesaid contracts were relatively attractive than the equity investment opportunities. Nevertheless, in light of the change in circumstances of the market and taking into account the marketability of the securities, the Group had reassessed its investment portfolio and considers that the disposals of the aforesaid contracts provide a good opportunity for the Group to dispose of such investments and provide additional funding for the Group to pursue other investment opportunities when available. Upon completion of the Transactions, the gain or the loss to be realised under the investment portfolio will not be taken up by the vendor concerned or by the Group.

On the other hand, the Group’s property investments are mainly located in Hong Kong, the Macau Special Administrative Region of the PRC and the PRC. As such, given that the residential properties to be disposed contemplated under the Global Young Agreement and the Great Will Agreement are located in the UK, such disposals provide the Group with an opportunity to dispose of these non-core property assets.

According to the currently available information, the net liabilities of all the Subject Companies was approximately HK$221.2 million. Based on the cost of investment of the Group in relation to the subject matters under the Agreements and the best estimate of the total consideration for the Transactions as at 1 September 2009, it is expected that a gain of approximately HK$271.4 million will be resulted.

The Directors consider that the terms of each of the Agreements are fair and reasonable and are on normal commercial terms and in the interest of the Group and the Shareholders as a whole.

LETTER FROM THE BOARD

E. USE OF PROCEEDS

It is intended that part of the net proceeds generated from the Transactions will be used as general working capital of the Group while the remaining net proceeds will be distributed to the Shareholders as special dividend. On 7 September 2009, the Board announced that sales proceeds of approximately HK$2,024 million would be received and it was intended that part of the net proceeds generated from the Transactions would be distributed to the Shareholders as special dividend. Further, the Board declared a special dividend of HK63 cents per Share amounted to approximately HK$1,235 million (based on the number of the issued Shares as at the Latest Practicable Date) on the condition that all conditions precedent of the Transactions are fulfilled included the approval by the Independent Shareholders at the SGM. However, no special dividend would be distributed to the Shareholders if the Company has not obtained the Independent Shareholders’ approval on the Transactions and any of the other conditions precedent cannot be fulfilled. Further announcement would be made by the Company in relation to the closure of register of members and despatch date of special dividend warrants in relation thereto, as appropriate, at a later stage.

F. LISTING RULES IMPLICATIONS

Mr. Lau, who held 1,429,643,768 Shares, representing approximately 72.94% of the total issued Shares as at the Latest Practicable Date, being a director and the sole beneficial owner of the Purchaser and as the purchaser of Great Will Agreement is a connected person of the Company and hence the Transactions constitute connected transactions for the Company under Rule 14A.13(1)(a) of the Listing Rules. The Transactions will therefore be subject to the reporting, announcement and Independent Shareholders’ approval requirements pursuant to Chapter 14A of the Listing Rules. As the applicable percentage ratios under Chapter 14 of the Listing Rules for the Transactions exceed 5% but are less than 25%, the Transactions also constitute discloseable transactions for the Company.

VC Capital has been appointed to advise the Independent Board Committee and the Independent Shareholders regarding the Agreements and Transactions. The Independent Board Committee has been appointed to advise the Independent Shareholders on whether or not the Agreements and Transactions are in the interest of the Company and are fair and reasonable so far as the Independent Shareholders are concerned.

LETTER FROM THE BOARD

Pursuant to the Stock Exchange Undertaking, the Company has undertaken to the Stock Exchange that it will not enter into a Specified Transaction with a Related Party which is for a consideration or in respect of a principal amount which, when aggregated with the consideration or principal amount of any other Specified Transaction(s) between the Company or any of its subsidiaries and any Related Party carried into effect during the previous twelve months, exceeds HK$200 million, unless the approval of the Shareholders at a general meeting of the Company at which the Related Party will abstain from voting is obtained. As Mr. Lau is a director and beneficial owner of the Purchaser, and Mr. Lau is also the purchaser in the Great Will Agreement, each of the Purchaser and Mr. Lau is a Related Party for the purpose of the Stock Exchange Undertaking, the Transactions will therefore constitute Specified Transactions and will be subject to the approval by the Shareholders at a general meeting of the Company at which any Shareholder who is a Related Party will abstain from voting.

G. SGM

The Company will convene the SGM at Concord Room II-III, 8th Floor, Renaissance Harbour View Hotel Hong Kong, No. 1 Harbour Road, Wanchai, Hong Kong on Monday, 12 October 2009 at 10:00 a.m. to consider, among other things, the Transactions. The resolution will be put to vote by poll at the SGM pursuant to the Listing Rules. The notice of the SGM is set out on pages 66 to 69 of this circular. So far as the Directors are aware and based on the current information available, Mr. Lau and his associates, who together held 1,683,181,780 Shares representing approximately 85.88% of the issued share capital of the Company as at the Latest Practicable Date, will abstain from voting on the resolution approving the Transactions in accordance with Rule 14A.54 of the Listing Rules if they hold any Shares as at the date of the SGM.

A form of proxy for use at the SGM is also enclosed. Whether or not you intend to attend the SGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company’s branch registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1806-07, 18th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not later than 48 hours before the time for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof if you so wish.

LETTER FROM THE BOARD

H. RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on page 40 of this circular and the letter from VC Capital to the Independent Board Committee and the Independent Shareholders in connection with the Agreements and the Transactions as well as the principal factors and reasons considered by them in arriving at such advice set out on pages 41 to 54 in this circular.

The Independent Board Committee, having taken into account the advice of VC Capital, considers that the Transactions are in the ordinary and usual course of business of the Company, the terms of each of the Agreements and the Transactions are on normal commercial terms and the Agreement and the Transactions are in the interest of the Company and the Shareholders as a whole and are fair and reasonable so far as the Independent Shareholders are concerned and recommends the Independent Shareholders to vote in favour of the ordinary resolution approving the Agreements and the Transactions at the SGM.

I. ADDITIONAL INFORMATION

Your attention is drawn to the information set out in the appendices to this circular.

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

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is a full text of the letter from the Independent Board Committee prepared for the purpose of inclusion in this circular:

(Incorporated in Bermuda with limited liability)

(Stock Code: 127)

23 September 2009

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTIONS: DISPOSAL OF SUBSIDIARIES AND ASSETS

We refer to the circular issued by the Company to its Shareholders dated 23 September 2009 (the “Circular” ) of which this letter forms part. Terms defined in the Circular shall have the same meanings when used in this letter unless the context otherwise defines.

The Transactions constitute connected transactions for the Company under Rule 14A.13(1) (a) of the Listing Rules and are subject to reporting, announcement and the Independent Shareholders’ approval requirements pursuant to Chapter 14A of the Listing Rules. Apart from this, as the applicable percentage ratios under Chapter 14 of the Listing Rules for the Transactions exceed 5% but are less than 25%, the Transactions also constitute discloseable transactions for the Company.

We have been appointed by the Board to consider the terms of the Agreements and the Transactions and to advise the Independent Shareholders in connection therewith and as to whether, in our opinion, the Agreements and the Transactions are in the interest of the Company and are fair and reasonable so far as the Independent Shareholders are concerned. VC Capital has been appointed as the independent financial adviser to advise us in this respect.

We wish to draw your attention to the letter from the Board and the letter from VC Capital as set out in the Circular. Having considered the principal factors and reasons considered by, and the advice of, VC Capital as set out in its letter of advice, we consider that the Transactions are in the ordinary and usual course of business of the Company, the terms of each of the Agreements and the Transactions are on normal commercial terms. We also consider that the Agreements and the Transactions are in the interest of the Company and the Shareholders as a whole and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution approving the Agreements and the Transactions at the SGM.

Yours faithfully, For and on behalf of Independent Board Committee Chan, Kwok-wai Phillis Loh, Lai-ping Independent Non-executive Directors

Ma, Tsz-chun

LETTER FROM VC CAPITAL

The following is the full text of a letter of advice prepared by VC Capital to the Independent Board Committee and the Independent Shareholders for the purpose of inclusion in this circular:

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23 September 2009

To the Independent Board Committee and the Independent Shareholders of Chinese Estates Holdings Limited

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTIONS: DISPOSAL OF SUBSIDIARIES AND ASSETS

INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Agreements and the Transactions contemplated thereunder, details of which are set out in the letter from the Board as contained in the circular of the Company dated 23 September 2009 (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

Mr. Lau, who held 1,429,643,768 Shares, representing approximately 72.94% of the total issued Shares as at the Latest Practicable Date, is a director and the sole beneficial owner of the Purchaser and is the purchaser under the Great Will Agreement. As such, he is a connected person of the Company and the Transactions constitute connected transactions for the Company under Rule 14A.13(1)(a) of the Listing Rules, which will be subject to approval by the Independent Shareholders by way of poll at the SGM at which Mr. Lau and his associates shall abstain from voting. As the applicable percentage ratios under Chapter 14 of the Listing Rules for the Transactions exceed 5% but are less than 25%, the Transactions also constitute discloseable transactions for the Company.

The Independent Board Committee, comprising Mr. Chan, Kwok-wai, Ms. Phillis Loh, Lai-ping and Mr. Ma, Tsz-chun, being all the independent non-executive Directors who have no interest in the Agreements and the Transactions contemplated thereunder, has been established to advise on whether the Transactions are on normal commercial terms, whether the terms of the Agreements and the Transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned and whether they are in the interests of the Company and the Shareholders as a whole.

LETTER FROM VC CAPITAL

In our capacity as the independent financial adviser to the Independent Board Committee and the Independent Shareholders, our role is to give an independent opinion as to (i) whether the Transactions are on normal commercial terms; (ii) whether the Transactions are conducted in the ordinary and usual course of business of the Group; (iii) whether the terms of the Agreements and the Transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned; (iv) whether the terms of the Agreements and the Transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole; and (v) how the Independent Shareholders should vote in respect of the proposed resolution to approve the Agreements and the Transactions contemplated thereunder at the SGM.

VC Capital is not associated with the Company and its substantial Shareholders or any party acting, or presumed to be acting, in concert with any of them and, accordingly, is considered eligible to give independent advice in respect of the Agreements and the Transactions contemplated thereunder. Apart from normal professional fees payable to us in connection with this engagement, no arrangement exists whereby VC Capital will receive any fees or benefits from the Company or its substantial Shareholders or any party acting, or presumed to be acting, in concert with any of them.

In formulating our opinion, we have relied on the information and facts supplied and the opinions expressed by the executive Directors and senior management of the Group. We have also assumed that the information and representations contained or referred to in the Circular were true and accurate at the time they were prepared or made and will continue to be so up to the date of the SGM. We have no reason to doubt the truth, accuracy and completeness of the information and representations made to us by the executive Directors and senior management of the Group. We have also been advised by the executive Directors that no material facts have been omitted from the Circular and the information provided to us.

We consider we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our opinion. We have not, however, conducted any independent investigation into the business and affairs or the future prospects of the Group, nor have we carried out any independent verification of the information supplied.

All the executive Directors have confirmed, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and that there are no other facts not contained in the Circular, the omission of which would make any statement in the Circular misleading.

LETTER FROM VC CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

In considering whether the Transactions are on normal commercial terms, whether the Transactions are conducted in the ordinary and usual course of business of the Group, whether the terms of the Agreements and the Transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned and whether they are in the interests of the Company and the Shareholders as a whole, we have taken into account the following principal factors and reasons:

1. Background information and reasons for and benefits of the Transactions

The Agreements were entered into between, among other parties, certain subsidiaries of the Company and the Purchaser or Mr. Lau (as the case may be) on 2 September 2009 in relation to the Transactions. Details of the Agreements are set out in the letter from the Board in the Circular and are summarised below.

The Group is principally engaged in property investment and development, brokerage, securities investment, money lending and cosmetics distribution and trading.

As disclosed in the letter from the Board, the Group had pursued various opportunities during the times of the financial crisis. In view of the attractiveness over other equity investment opportunities in terms of associated risks and volatility level, the Company had invested in certain corporate bond contracts, credit linked notes contracts and an interest rate swap contract. With the change in circumstances of the market and taking into account the marketability of the securities, the Group had reassessed its investment portfolio and considers that the Transactions provide a good opportunity for the Group to dispose of such securities and provide additional funding for the Group to pursue other investment opportunities when available.

In addition, given that the Group’s property investments are mainly located in Hong Kong, the Macau Special Administrative Region of the PRC and the PRC, the Company has entered into the Great Will Agreement and the Global Young Agreement to dispose of the residential properties located in the UK, which are considered to be non-core property assets of the Group. As such, the entering into of the Great Will Agreement and the Global Young Agreement represents an opportunity for the Group to dispose of its non-core property assets and reorganise its investment property portfolio.

LETTER FROM VC CAPITAL

Based on the cost of investment of the Group in relation to the assets to be disposed of under the Agreements and the best estimate of the total consideration for the Transactions, it is estimated that the sales proceeds from the Transactions will amount to approximately HK$2,024.0 million and a gain of approximately HK$271.4 million would arise from the Transactions. As stated in the announcement dated 7 September 2009 of the interim results of the Company for the six months ended 30 June 2009, a special dividend of HK63 cents per Share has been declared which will be paid to the Shareholders on condition that all the conditions precedent of the Transactions, including the approval of the Transactions by the Independent Shareholders at the SGM, have been fulfilled. It is intended that part of the net proceeds generated from the Transactions of approximately HK$1,235 million (based on 1,959,860,079 Shares in issue as at the Latest Practicable Date) will be distributed to the Shareholders as a special dividend upon completion of the Agreements, while the remaining will serve as general working capital of the Group.

Having considered that: (i) the Group is principally engaged in, amongst others, property and securities investment; (ii) the Transactions provide an opportunity for the Group to dispose of certain corporate bond contracts, credit linked notes contracts and an interest rate swap contract in return for funds to pursue other investment opportunities when available; (iii) the Transactions also provide an opportunity for the Group to dispose of its non-core property assets in the UK; (iv) an estimated gain of approximately HK$271.4 million would arise from the Transactions; and (v) part of the net proceeds generated from the Transactions of approximately HK$1,235 million (based on 1,959,860,079 Shares in issue as at the Latest Practicable Date) is intended to be distributed to the Shareholders as a special dividend upon completion of the Agreements, we are of the view that the Transactions are conducted in the ordinary and usual course of business of the Group, and that they are in the interests of the Company and the Shareholders as a whole.

2. Principal terms of the Agreements

For the purpose of our evaluation, we have separated the Agreements into four groups, namely, transaction(s) that involve(s): (i) disposal of interest in subsidiaries of the Company, together with the loans due from and the securities held by those subsidiaries, i.e. the Action Basic Agreement, the Oriental Kingdom Agreement and the Fame Winner Agreement; (ii) disposal of securities held by a subsidiary of the Company, i.e. the Global Stage Agreement; (iii) disposal of interest in subsidiaries of the Company and the loans due from those subsidiaries, i.e. the Stars Up Agreement and the Union Nice Agreement; and (iv) disposal of interest in subsidiaries of the Company, together with the loans due from and the properties held by those subsidiaries, i.e. the Great Will Agreement and the Global Young Agreement.

LETTER FROM VC CAPITAL

(a) The Action Basic Agreement, the Oriental Kingdom Agreement and the Fame Winner Agreement

Pursuant to the Action Basic Agreement, the Oriental Kingdom Agreement and the Fame Winner Agreement, the entire issued share capital of each of Action Basic, Everbright Pacific, Oriental Kingdom and Fame Winner, all sums due or owing by each of them to members of the Group (other than the Subject Companies) and their respective principal assets, namely, the Cathay Pacific Credit Linked Note, the Interest Rate Swap and the JAL Credit Linked Note (collectively the “ Instruments ”) will be disposed of to the Purchaser. The principal terms of each of the Action Basic Agreement, the Oriental Kingdom Agreement and the Fame Winner Agreement are summarised as follows:

Name of
Agreement
Vendor
(Guarantor/
Warrantor,
if any)
Purchaser
(Guarantor/
Warrantor,
if any)
Consideration
Assets to be
disposed of
Action Basic
Agreement
China
Entertainment
(Chinese
Estates)
Purchaser
(Mr. Lau)
The Action
Basic Share, the
Action Basic
Loan and the
Cathay Pacific
Credit Linked
Note
(i) HK$69,750,000
(being HK$17,437,500
and the loan from
Deutsche Bank AG,
Singapore Branch to
Action Basic in the
sum of US$6,750,000
(approximately
HK$52,312,500));
(ii) adjustment for
interest accrued up to
the date of the Action
Basic Agreement
(approximately
US$137,588 (equivalent
to approximately
HK$1,066,307)); and
(iii) additional loan
Oriental
Kingdom
Agreement
Chinese Estates
Purchaser
(Mr. Lau)
The Everbright
Share, the
Everbright
Loan, the
Oriental Share,
the Oriental
Loan, the
Interest Rate
Swap and the
Cash Margin
Deposit
(i) HK$161,213,814
(being the Everbright
Share, the Oriental
Share and the Oriental
Loan); (ii) adjustments
for interest accrued
or payable up to the
date of the Oriental
Kingdom Agreement;
and (iii) additional
loans

Cap amount
Basis for consideration
Market price
Cost of
investment
HK$
HK$
HK$

68,836,275
as at
28 August
2009
69,747,300
80,000,000
(26,558,653)
as at
2 September
2009
161,213,811,
being the
cash margin
deposit
placed with
Goldman
Sachs
International
in relation to
the Interest
Rate Swap
(the“Cash
Margin
Deposit”)
780,000,000

LETTER FROM VC CAPITAL

Cap amount
Basis for consideration
Market price
Cost of
investment
HK$
HK$
HK$

285,231,000
as at
31 August
2009
232,632,000
300,000,000

Given that the consideration for each of the Action Basic Agreement, the Oriental Kingdom Agreement and the Fame Winner Agreement was determined with reference to the higher of (i) the latest market prices of the Instruments as quoted from their respective issuers; and (ii) the costs of investment of the Instruments, we consider that the consideration for each of the Action Basic Agreement, the Oriental Kingdom Agreement and the Fame Winner Agreement 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.

We have reviewed each of the Action Basic Agreement, the Oriental Kingdom Agreement and the Fame Winner Agreement and understood that any interest accrued on the respective Instruments up to the date of each of the above-mentioned agreements shall be paid to the respective vendors, while pursuant to the Oriental Kingdom Agreement, any interest accrued or incurred on the relevant Instrument up to the date of the Oriental Kingdom Agreement to be paid to or paid by Chinese Estates is subject to the interest adjustment for the Oriental Interest Receivable or the Oriental Interest Payable respectively. Given that the Instruments are interest-bearing with fixed or floating interest rates and are sold to the Purchaser prior to their respective maturities, the respective vendors should be entitled to any interest already accrued and/or any interest payable incurred (as the case may be) on the respective Instruments under the relevant period covering from the respective interest reference date (for the Action Basic Agreement and the Fame Winner Agreement) or from 1 August 2009 (for the Oriental Kingdom Agreement) up to the dates of such agreements (both days inclusive). As such, we are of the view that the interest adjustment mechanism under each of the Action Basic Agreement, the Oriental Kingdom Agreement and the Fame Winner Agreement and the Oriental Deposit Interest Adjustment is fair and reasonable so far as the Independent Shareholders are concerned and that it is in the interests of the Company and the Shareholders as a whole.

LETTER FROM VC CAPITAL

According to the Directors, the cap amount for each of the Action Basic Agreement, the Oriental Kingdom Agreement and the Fame Winner Agreement was best estimated by them. We have reviewed the basis and assumptions for determining those cap amounts and understood that the cap amounts were determined based on any possible additional loans to be incurred by the respective vendors in the Action Basic Agreement and the Fame Winner Agreement, the interest that is expected to be received under the Fame Winner Agreement and the maximum exposure of the Interest Rate Swap by the vendor under the Oriental Kingdom Agreement. Also, pursuant to the Action Basic Agreement, the Oriental Kingdom Agreement and the Fame Winner Agreement, the consideration under each of them shall not exceed their respective cap amounts such that if it does, either or both of the interest adjustment or the adjustment of the additional loans shall be adjusted downwards so that the consideration under each of such agreements will not exceed the respective cap amounts. As such, we concur with the Directors that the cap amount for each of the Action Basic Agreement, the Oriental Kingdom Agreement and the Fame Winner Agreement is justifiable and that the basis and assumptions for determining the cap amount for each of the Action Basic Agreement, the Oriental Kingdom Agreement and the Fame Winner Agreement are fair and reasonable.

LETTER FROM VC CAPITAL

(b) The Global Stage Agreement

As set out in the letter from the Board, the principal assets to be disposed of pursuant to the Global Stage Agreement are the Atlantic Notes, the Barclays RCIs and the MS Notes (collectively the “ Bonds ”). The principal terms of the Global Stage Agreement are summarised as follows:

Name of
Agreement
Vendor
(Guarantor/
Warrantor,
if any)
Purchaser
(Guarantor/
Warrantor,
if any)
Assets to be
disposed of
Consideration
Global Stage
Agreement
Global Stage
(Chinese
Estates)
Purchaser
(Mr. Lau)
The Atlantic
Notes, the
Barclays RCIs
and the MS
Notes
(i) HK$1,116,798,500;
and (ii) adjustment on
interest accrued up to
the date of the Global
Stage Agreement
(approximately
HK$23,956,591 in
aggregate)

Cap amount
Basis for consideration
Market price
Cost of
investment
HK$
HK$
HK$
1,116,798,500
as at
1 September
2009
1,018,511,308
1,175,000,000

Similarly, given that the consideration under the Global Stage Agreement was determined with reference to the higher of (i) the market prices of the Bonds as quoted from the independent broker (which is also in line with the quotation obtained from Bloomberg) as at 1 September 2009; and (ii) the costs of investment of the Bonds, we regard the consideration under the Global Stage Agreement as fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole.

We have reviewed each of the considerations for the Bonds and understood that the considerations are subject to an interest adjustment mechanism where any interest accrued on the Bonds up to the date of the Global Stage Agreement shall be paid to Global Stage. As the Bonds are interest-bearing and are sold to the Purchaser prior to their respective maturities (if any), Global Stage should be entitled to any interests already accrued on the Bonds. Accordingly, we are of the view that such adjustment mechanism for the considerations for the Bonds pursuant to the Global Stage Agreement is fair and reasonable so far as the Independent Shareholders are concerned and that it is in the interests of the Company and the Shareholders as a whole.

According to the Directors, the cap amount for each of the Bonds was best estimated by them. We have also reviewed the basis and assumptions for determining those cap amounts and understood that the cap amounts were determined based on the interest accrued on the Bonds from the date on which the Bonds were purchased up to and including the date of the Global Stage Agreement. As such, we concur with the Directors that the cap amount for each of the Bonds is justifiable and that the basis and assumptions for determining the cap amount for each of the Bonds are fair and reasonable.

LETTER FROM VC CAPITAL

We also note from the letter from the Board that all or any part of the Bonds can be disposed of in the market at any time and from time to time prior to completion of the sale and purchase of each of the Bonds to any third party without the consent of the Purchaser. In that case, all proceeds from such sale and all profit and loss derived therefrom shall belong to and be borne by Global Stage and the consideration for each of the Bonds shall be adjusted on a pro-rata basis. We consider that such measure provides Global Stage with flexibility to respond to and make the most appropriate decision in the interests of the Company and the Shareholders according to the then prevailing market situation. As confirmed by the Directors, since the Purchaser is willing to purchase the entire portfolio of the Bonds, the Company intends to sell the entire portfolio of the Bonds to the Purchaser, but at the same time, the Company will continually monitor the market situation to decide whether or not to dispose of all or any part of the Bonds prior to completion of the sale and purchase of each of the Bonds in the interests of the Company and the Shareholders as a whole. As such, we are of the view that such flexibility pursuant to the Global Stage Agreement is favourable to the Company and that it is in the interests of the Company and the Shareholders as a whole.

(c) The Stars Up Agreement and the Union Nice Agreement

Pursuant to the Stars Up Agreement and the Union Nice Agreement, the entire issued share capital of each of Stars Up and Union Nice and all sums due or owing by each of them to members of the Group (other than the Subject Companies) will be disposed of by the respective vendors. As mentioned in the letter from the Board, the consideration for each of the Stars Up Agreement and the Union Nice Agreement was determined with reference to all sums due or owing by each of them to members of the Group (other than the Subject Companies), subject to the cap amounts for any additional loans as best estimated by the Directors. The principal terms of each of the Stars Up Agreement and the Union Nice Agreement are summarised as follows:

	Vendor	Purchaser
	(Guarantor/	(Guarantor/				Cap amount
Name of	Warrantor,	Warrantor,	Assets to be		Basis for	for additional
Agreement	if any)	if any)	disposed of	Consideration	consideration	loans
						HK$
Stars Up	Chinese Estates	Purchaser	The Stars Up Share and	(i) HK$14,439,279;	Amount of Stars	15,560,721.48
Agreement		(Mr. Lau)	the Stars Up Loan	and (ii) additional	Up Loan of
				loan	HK$14,439,279
Union Nice	Rich Lucky	Purchaser	The Union Nice Share,	(i) HK$114,069;	Aggregate amount	385,931.31
Agreement	(Chinese Estates)	(Mr. Lau)	the UN Loan and	and (ii) additional	of UN Loan and
			the ES Loan	loans	ES Loan of
					HK$114,069

LETTER FROM VC CAPITAL

According to the Directors, the cap amounts for the Stars Up Agreement and the Union Nice Agreement were determined with reference to the possible payments under the contractor agreement or the historical track record of the cash payments made to the expenses respectively. We have discussed the commitment of Stars Up and Union Nice as estimated by the management of the Group up to the long stop date of the relevant agreements and consider that the cap amounts are justifiable and reasonable to cover any possible additional sums to be incurred for the period from 2 September 2009, being the date of the Stars Up Agreement and the Union Nice Agreement, up to and including the long stop date of the relevant agreements based on the Directors’ estimates. As confirmed by the Directors, the Company will only finance any additional loan(s) to be incurred by each of Stars Up and Union Nice up to the respective cap amounts under each of the Stars Up Agreement and the Union Nice Agreement. As a result, we consider that both the consideration and the cap amount for each of the Stars Up Agreement and the Union Nice Agreement 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. We also consider that the basis and assumptions for determining the cap amount for each of the Stars Up Agreement and the Union Nice Agreement are fair and reasonable.

(d) The Great Will Agreement and the Global Young Agreement

Pursuant to the Great Will Agreement and the Global Young Agreement, the entire issued share capital of Great Will and Global Young, all sums due or owing by each of them to members of the Group (other than the Subject Companies) and their respective principal assets, namely, the Great Will Property and the Global Young Properties (collectively the “Properties” ) will be disposed of to the Purchaser. The principal terms of each of the Great Will Agreement and the Global Young Agreement are summarised as follows:

Name of
Agreement
Vendor
(Guarantor/
Warrantor,
if any)
Purchaser
(Guarantor/
Warrantor,
if any)
Assets to be
disposed of
Consideration
Great Will
Agreement
Chinese Estates
Mr. Lau
The Great Will Share,
the Great Will Loan
and the Great Will
Property
(i) HK$409,981,534;
and (ii) additional
loan
Global Young
Agreement
Paul Y. Holdings
(Chinese Estates)
Purchaser
(Mr. Lau)
The Global Young
Share, the Global
Young Loan and
the Global Young
Properties
(i) HK$19,243,636;
and (ii) additional
loan

Basis for consideration
Cap amount
for
additional
loans
Independent
valuation
Cost of
investment
HK$
HK$
HK$
345,000,000 as at 31
August 2009
409,981,534 115,018,466.05
18,580,000 as at 31
August 2009
19,243,636
756,363.55

LETTER FROM VC CAPITAL

The considerations for the Great Will Agreement and the Global Young Agreement were determined with reference to the higher of (i) the market price of the Properties as valued by an independent property valuer (the “ Valuer ”) as at 31 August 2009; and (ii) the cost of investment of the Properties. As noted from the valuation report of the Properties prepared by the Valuer as set out in Appendix I to the Circular (the “ Valuation ”), the Great Will Property and the Global Young Properties were valued at approximately HK$345,000,000 and approximately HK$18,580,000 respectively as at 31 August 2009, based on the direct comparison approach which involves making reference to comparable transactions as available in the relevant market. We have reviewed the basis and assumptions of the Valuation and consider that the Valuation has been made after due and careful enquiry and that the basis and assumptions made for the Valuation are fair and reasonable.

According to the Directors, the cap amounts for the additional loans under the Great Will Agreement and the Global Young Agreement were determined with reference to the historical track record of the cash payments for the expenses. We have reviewed the management accounts of each of Global Young and Great Will and consider that the cap amount for the additional loan under each of the Great Will Agreement and the Global Young Agreement is justifiable and that the basis and assumptions for determining the cap amount for the additional loan under each of the Great will Agreement and the Global Young Agreement are fair and reasonable. Furthermore, as confirmed by the Directors, the Company will only finance any additional loan(s) to be incurred by each of Great Will and Global Young up to the respective cap amount under each of the Great Will Agreement and the Global Young Agreement.

Taking into account (i) the Valuation; (ii) the Properties shall be disposed of at cost, which represents a premium of approximately 18.84% and approximately 3.57% over their respective market prices; and (iii) the Great Will Agreement and the Global Young Agreement represent a good opportunity for the Company to dispose of its noncore property assets and hence help the Group refine its business strategies to focus on its core businesses and development, we are of the view that considerations for the Great Will Agreement and the Global Young Agreement 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.

LETTER FROM VC CAPITAL

(e) Payment terms of the Agreements

We have reviewed the Agreements and understood that the consideration for each of the Agreements shall be payable in cash (together with any amount for interest adjustment (the “ Adjustment Amount ”) provided that it is known prior to their respective completion dates) by the Purchaser or Mr. Lau to the respective vendor at the respective completion date of each of the Transactions. For any Adjustment Amounts that cannot be ascertained before their respective completion dates, the Purchaser shall be obliged to pay the respective vendor the respective Adjustment Amount within five (5) Business Days after its determination. Accordingly, we consider that the payment terms pursuant to each of the Agreements are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole.

(f) Guarantees and undertakings

As disclosed in the letter from the Board, each of the Agreements (other than the Great Will Agreement) is guaranteed by Mr. Lau or in case of the Great Will Agreement, Mr. Lau is the purchaser, so as to ensure the due performance of the purchaser under each of the Agreements. Mr. Lau shall ensure the due observance and performance of the Purchaser and himself and shall indemnify and keep fully indemnified the vendor for any loss or damage in the event of non-performance of the Purchaser and himself. Since such measure can secure the vendors to the Agreements in the event of non-performance by the Purchaser and/or Mr. Lau, we are of the view that it is fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole.

3. Financial effects of the Transactions on the Group

Upon completion of the Transactions, it is expected that a gain of approximately HK$271.4 million will be resulted. As mentioned in the letter from the Board, the consideration for each of the Agreements was determined based on the higher of: (i) the market price; and (ii) the cost of investment, of the respective assets to be disposed of pursuant to each of the Agreements. As such, save for the assets which were disposed of at cost or on a dollar-for-dollar basis (i.e. the assets under the Action Basic Agreement and the loans under the Stars Up Agreement and the Union Nice Agreement), each of the Transactions is expected to generate a gain to the Company at completion.

LETTER FROM VC CAPITAL

Net asset value and working capital

Upon completion of the Transactions, the Subject Companies will cease to be subsidiaries of the Company and their accounts will not be consolidated with that of the Group. As disclosed in the letter from the Board in the Circular, based on the cost of investment of the Group in relation to the Agreements and the best estimate of the total consideration for the Transactions, it is expected that a gain of approximately HK$271.4 million would arise from the Transactions. Given that an estimated gain of approximately HK$271.4 million would arise from the Transactions, the Group’s net asset value will hence be improved.

It is estimated that the sales proceeds from the Transactions will amount to approximately HK$2,024.0 million and it is intended that part of the net proceeds generated from the Transactions of approximately HK$1,235 million (based on 1,959,860,079 Shares in issue as at the Latest Practicable Date) will be distributed to the Shareholders as special dividend upon completion of the Agreements, while the remaining will serve as general working capital of the Group. The working capital of the Group will hence be enhanced.

Gearing

According to the latest published unaudited interim results of the Company for the six months ended 30 June 2009, the gearing ratio (expressed as total borrowings of approximately HK$12,088.9 million divided by total shareholders’ equity (including minority interests) of approximately HK$35,586.5 million) was approximately 34.0%. Upon completion of the Transactions, the net asset value of the Group (including minority interests) would be increased as a result of the gain of approximately HK$271.4 million from the Transactions. Moreover, the loan from Deutsche Bank AG, Singapore Branch to Action Basic in the sum of US$6,750,000 (approximately HK$52,312,500) would cease to be a liability to the Group upon completion of the Transactions, and as such the gearing ratio of the Group is expected to improve as a result of the Transactions.

Taking into account the fact that: (i) the Company is able to dispose of the assets at market prices or at costs, whichever is the higher; (ii) the Transactions will improve the financial position of the Group and will generate a gain of approximately HK$271.4 million; (iii) part of the net proceeds from the Transactions will serve as general working capital of the Company; and (iv) the Shareholders will be able to enjoy a special dividend upon completion of the Agreements, we concur with the Directors that the Transactions are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole.

LETTER FROM VC CAPITAL

RECOMMENDATION

Having considered the above-mentioned principal factors and reasons, we consider that the Transactions are on normal commercial terms and are conducted in the ordinary and usual course of business of the Group, and that the terms of the Agreements and the Transactions contemplated thereunder 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 recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the relevant resolution to be proposed at the SGM to approve the Agreements and the Transactions contemplated thereunder.

Yours faithfully For and on behalf of VC Capital Limited

Keith Lou Executive Director

APPENDIX I PROPERTY VALUATION REPORT ON THE GREAT WILL PROPERTY AND THE GLOBAL YOUNG PROPERTIES

The following is the text of a property valuation report, prepared for the purpose of incorporation in this circular received from Norton Appraisals Limited, an independent valuer, in connection with their valuations as at 31 August 2009 of the Great Will Property and the Global Young Properties.

Unit 01, 21/F, Emperor Group Center 288 Hennessy Road Wanchai Hong Kong Tel: (852) 2810 7337 Fax: (852) 2810 6337

23 September 2009

The Directors Chinese Estates Holdings Limited 26th Floor, MassMutual Tower No. 38 Gloucester Road Wanchai Hong Kong

Dear Sirs,

In accordance with the instructions from Chinese Estates Holdings Limited (hereinafter referred to as the “Company”), its subsidiaries and associated companies (hereinafter together referred to as the “Group”) for us to value the property interests (as more particularly described in the attached Summary of Values) held by the Group in United Kingdom, we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the values of the property interests in their existing states as at 31 August 2009 (hereinafter referred to as the “date of valuation”) for public documentation purpose.

Our valuation is our opinion of market value which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

In valuing the property interests, we have assumed that the Group has valid and enforceable title to the property interests which are freely transferable, and has free and uninterrupted right to use the same, for the whole of the unexpired lease granted subject to payment of an annual ground rent (if demanded) and all requisite land premium/purchase consideration payable have been fully settled.

We have valued the properties on the basis that each of them is considered individually. We have not allowed for any discount for the properties to be sold to a single party nor taken into account any effect on the values if the properties are to be offered for sale at the same time as portfolio.

PROPERTY VALUATION REPORT ON THE GREAT WILL PROPERTY AND THE GLOBAL YOUNG PROPERTIES

APPENDIX I

In valuing the property interests, we have adopted the Direct Comparison Approach by making reference to comparable transactions as available in the relevant market.

Our valuations have been made on the assumption that the Group sells the properties on the open market without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which could serve to affect the values of the property interests and no forced sale situation in any manner in considered in our valuations. In addition, we have been advised by the Group that all properties have no option or right of pre-emption which would concern or affect the sales of the properties.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the properties nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values.

We have relied to a considerable extent on the information provided by the Group and have accepted advice on such matters as planning approvals, statutory notices, easements, tenures, completion dates of buildings, particulars of occupancy, tenancy summaries, development proposals, construction costs already expended, estimated outstanding construction costs, site and floor areas and all other relevant matter in the identification of the properties in which the Group has valid interests.

We have been provided with copies of title document of the properties. However, we have not searched the original documents to verify the ownership or to determine the existence of any lease amendments which do not appear on the copies handed to us. We have inspected the exterior, and whenever possible, the interior of the properties. In the course of our inspections, we did not note any serious defects. However, no structural survey has been made. We are not able to report whether the properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the services.

We have not carried out on-site measurements to verify the correctness of the floor areas in respect of the properties but have assumed that the floor areas shown on the documents and floor plans available to us are correct. Dimensions, measurements and areas included in the attached valuation certificates are based on information contained in the documents provided to us and are, therefore, only approximations.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We have been also advised by the Group that no material facts have been omitted from the information provided. We consider that we have been provided with sufficient information to reach an informed view, and we have no reason to suspect that any material information has been withheld.

APPENDIX I PROPERTY VALUATION REPORT ON THE GREAT WILL PROPERTY AND THE GLOBAL YOUNG PROPERTIES

Our valuations have been prepared in accordance with The HKIS Valuation Standards on Properties (1st Edition 2005) published by The Hong Kong Institute of Surveyors and all the requirements contained in the Chapter 5 to the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited.

REMARKS

Unless otherwise stated, all monetary amounts stated in our valuation certificates are in Hong Kong dollars. The exchange rate adopted in our valuation is approximately £1 = HK$12.55 which is approximately the prevailing exchange at the date of valuation.

Our Summary of Values and Valuation Certificates are enclosed herewith.

Yours faithfully, For and on behalf of Norton Appraisals Limited

Nick C. L. Kung MRICS, MHKIS, RPS (G.P.) Paul M. K. Wong MRICS, MHKIS, RPS (G.P.) Director Director

Note: Both of Mr. Nick C. L. Kung and Mr. Paul M. K. Wong are Registered Professional Surveyors whom have more than 18 years’ experience in valuation of properties in Hong Kong, the PRC and overseas.

APPENDIX I PROPERTY VALUATION REPORT ON THE GREAT WILL PROPERTY AND THE GLOBAL YOUNG PROPERTIES

Summary of Values

==> picture [428 x 268] intentionally omitted <==

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

Capital Value Capital Value
in existing state Interest attributable to
as at attributable the Group as at
Property 31st August, 2009 to the Group 31st August, 2009
HK$ HK$
1. 82 Eaton Square, $345,000,000 100% $345,000,000
London SW1W 9AP,
United Kingdom
2. Apartment No. 6, 10/12 Hans Crescent, $18,580,000 100% $18,580,000
London SW1X 0LJ
together with an underground
Car Park Bay K39,
25 Basil Street,
London SW3, United Kingdom
Total : $363,580,000 $363,580,000
----- End of picture text -----

PROPERTY VALUATION REPORT ON THE GREAT WILL PROPERTY AND THE GLOBAL YOUNG PROPERTIES

APPENDIX I

Valuation Certificate

				Capital value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31st August, 2009
1.	82 Eaton Square,	The property comprises a 6-storey	The property is	HK$345,000,000
	London SW1W 9AP,	luxury terraced house which is one	currently undergoing
	United Kingdom	of the six houses in Eaton Square	major renovation	(100% interest
		and is classified as a “Listed	works and is scheduled	attributable to
		Building” Grade II* built in the early	to be completed in	the Group:
		1900’s.	early 2010.	HK$345,000,000)
		The property has a total gross floor
		area of approximately 1,649.02 sq.m.
		(17,750 sq.ft.).
		The property is held under a lease
		for a term of 75 years from 25
		December 2003 to 24th December,
		2078_(see Note i)_at a peppercorn
		rent_(see Note ii)_.

Notes :

i) Pursuant to the Agreement for Lease entered into between Eaton Square Properties Limited (“the Landlord”) and Great Will Limited (“the Tenant”) on 24 November 2003, the Landlord agreed to lease the property to the Tenant for a term of 75 years commencing from 25 December 2003 and expiring on 24 December 2078.
ii) In legal terminology, “a peppercorn rent” is a very small payment, notional consideration which is required under United Kingdom law to create a legal contract. In practice the expression effectively means no rent is payable.
iii) Pursuant to the Agreement entered into between The Trustees of the Will Trust of the Second Duke of Westminster (“the Freeholder”), Grosvenor Estate Belgravia (“GEB”), Eaton Square Properties Limited (“the Landlord”) and Great Will Limited (“the Tenant”) dated 27 February 2004, 28 days after completion of the renovation works, the Freeholder, GEB and the Landlord sell the freehold interest of the property to the Tenant at the purchase price of £675,000.
iv) The property is classified as a “Listed Building” Grade II*. Westminster City Council granted full planning permission TP/13572 dated 1 September 2005 for the “reconstruction of extension at rear fi rst fl oor level; installation of six air conditioning units at fourth fl oor level on roof of front entrance bay to Lyall Street frontage and lift overrun, kitchen extract duct and air condenser unit on third fl oor fl at roof to side/north elevation; internal alterations; use as a single family dwelling house.”
v) As advised by the Group, the total outstanding construction costs to complete the renovation works as at 31 August 2009 was approximately £5,295,000.

PROPERTY VALUATION REPORT ON THE GREAT WILL PROPERTY AND THE GLOBAL YOUNG PROPERTIES

APPENDIX I

Valuation Certificate

				Capital value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	31st August, 2009
2.	Apartment No. 6,	The property comprises an	The property is	HK$18,580,000
	10/12 Hans Crescent,	apartment unit on the 1st Floor of a	currently vacant.
	London SW1X 0LJ	5-storey tenement building located		(100% interest
	together with an	in Hans Crescent together with		attributable to
	underground Car Park	an underground car park bay on		the Group:
	Bay K39,	Basement Level B2 of a 2-storey		HK$18,580,000)
	25 Basil Street,	underground car parking spaces
	London SW3,	in Basil Street. The building is
	United Kingdom	approximately a hundred years old
		and was substantially refurbished in
		2002.
		The property (excluding the
		underground car parking space) has
		a gross floor area of approximately
		92.81 sq.m. (999 sq.ft.).
		The apartment unit is held under a
		long lease for a term of 999 years
		commencing from 29 September
		2002 at an annual ground rent of
		£350. The underground car parking
		space is held under a lease for a term
		of 99 years commencing from 21
		January 2003 at a peppercorn rent
		(see Note ii).

Notes:

(i) The property is owned by Global Young Holdings Ltd..
(ii) In legal terminology, “a peppercorn rent” is a very small payment, notional consideration which is required under United Kingdom law to create a legal contract. In practice the expression effectively means no rent is payable.
(iii) The building is subject to two conditional planning permissions TP/98/0472 and TP/98/0966 both dated 26 August 1998 from The Royal Borough of Kensington and Chelsea which granted consent for a refurbishment “to provide ten new apartments and retention of one maisonette.”

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

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

2. DIRECTORS’ INTERESTS

(a) As at the Latest Practicable Date, the interests and short positions of each Director in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which he was deemed or taken to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules (the “ Model Code ”), to be notified to the Company and the Stock Exchange were as follows:

Long Positions

(i) The Company

Name of Directors Capacity Mr. Lau Founder and beneficiary of trust Founder and beneficiary of trust Lau, Ming-wai (“Mr. MW Lau”) Beneficiary of trust Beneficiary of trust Other interests	Number and class of Shares Approximate percentage of shareholding in the same class of securities as at the Latest Practicable Date 230,984,820 ordinary (Note 1) 1,198,658,948 ordinary (Note 2) 1,429,643,768 72.94 230,984,820 ordinary (Note 1) 1,198,658,948 ordinary (Note 2) 4,000 ordinary (Note 3) 1,429,647,768 72.94	Number and class of Shares Approximate percentage of shareholding in the same class of securities as at the Latest Practicable Date 230,984,820 ordinary (Note 1) 1,198,658,948 ordinary (Note 2) 1,429,643,768 72.94 230,984,820 ordinary (Note 1) 1,198,658,948 ordinary (Note 2) 4,000 ordinary (Note 3) 1,429,647,768 72.94
		72.94


		72.94

GENERAL INFORMATION

APPENDIX II

Notes:

These Shares were indirectly owned by a discretionary trust of which Mr. Lau was the founder. Mr. Lau, Mr. MW Lau and certain other family members of Mr. Lau were eligible benefi ciaries of that trust.
These Shares were held by a unit trust of which Mr. Lau was one of the unit holders. The rest of the units in the unit trust were held by a discretionary trust of which Mr. Lau was the founder. Mr. MW Lau and certain other family members of Mr. Lau were eligible benefi ciaries of the discretionary trust.
These Shares were held under the estate of Ms. Theresa Po, Wing-kam, the late mother of Mr. MW Lau, of which Mr. MW Lau is the executor.

(ii) Associated corporations of the Company

				Approximate
				percentage of
	Name of		Number of	issued share
Name of companies	Director	Capacity	shares	capital
Chi Cheung	Mr. Lau	Founder of trust,	209,931,186	61.96%
Investment		beneficiary of trust	(Note 1)
Company, Limited		and interest in
(“Chi Cheung”)		controlled corporation
G-Prop (Holdings)	Mr. Lau	Founder of trust,	1,018,380,590	41.93%
Limited (“G-Prop”)		beneficiary of trust	(Note 2)
		and interest in
		controlled corporation
G-Prop	Mr. Lau	Interest in controlled	493,678,883	20.33%
		corporation	(Note 3)

Notes:

Mr. Lau, by virtue of his 72.94% interests in the issued share capital of the Company as disclosed in paragraph (i) above, was deemed to be interested in 209,931,186 shares of Chi Cheung held by Billion Up Limited, an indirect wholly-owned subsidiary of the Company.
The Company was interested in a total of 1,018,380,590 shares of G-Prop. Mr. Lau, by virtue of his 72.94% interests in the issued share capital of the Company as disclosed in paragraph (i) above, was deemed to be interested in 1,018,380,590 shares of G-Prop under the provisions of the SFO.
Such interests are held by a company of which Mr. Lau is the sole ultimate benefi cial owner.

GENERAL INFORMATION

APPENDIX II

(b) Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including the interests and short positions in which they were deemed or taken to have under such provisions of the SFO), or which are required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.
(c) As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any asset which have since 31 December 2008, being the date to which the latest published audited financial statements of the Group were made up, been 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.
(d) As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group, save for the Agreements, which contract or arrangement was subsisting at the Latest Practicable Date and which was significant in relation to the business of the Group.
(e) Save as disclosed above, none of the Directors was a director or an employee of a company which has an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. DIRECTORS’ SERVICE CONTRACTS

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

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2008, being the date to which the latest published audited financial statements of the Group were made up.

GENERAL INFORMATION

APPENDIX II

5. COMPETING INTEREST

As disclosed in paragraph (a) (ii) of “Directors’ Interests” in this appendix, both Mr. Lau and Mr. MW Lau have certain deemed interests in Chi Cheung and G-Prop (Mr. Lau also has certain direct interests in G-Prop). Mr. Lau is a director of certain subsidiaries of Chi Cheung and Mr. MW Lau was a director of certain subsidiaries of Chi Cheung. The businesses of both Chi Cheung and G-Prop involve property investment and/or property development. As such, they are regarded as being interested in such businesses, which competed or might compete with the Group. Such businesses are managed by separate publicly listed companies with independent management. The respective board composition of Chi Cheung and G-Prop are different and separate. As such, the Group is capable of carrying on its businesses independently of, and at arm’s length from, the businesses of Chi Cheung and G-Prop.

Besides, each of Mr. Lau and Mr. MW Lau has personal interests in private companies engaged in property development and investment in Hong Kong as well as securities investment businesses. Mr. Lau also has personal interests in private companies engaged in money lending business. As such, they are 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, such investments 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 businesses. Neither Mr. Lau nor Mr. MW Lau currently has any intention to inject such interests into the Group.

6. QUALIFICATION AND CONSENT OF EXPERTS

The following is the qualification of the experts who have given their opinions or advice which are contained in this circular.

Names Qualification

VC Capital A corporation licensed to carry on type 1 (dealings in securities) and type 6 (advising on corporate finance) regulated activities under the SFO

Norton Appraisals Limited An independent professional property valuer

GENERAL INFORMATION

APPENDIX II

As at the Latest Practicable Date, each of the above experts:

(a) did not have any shareholding, directly or indirectly, in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group;
(b) did not have any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group or were proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2008, being the date up to which the latest published audited financial statements of the Group were made; and
(c) has given and has not withdrawn its written consent to the issue of this circular with the inclusion of and references to its name, letter and/or report in the form and context in which they respectively appear.

7. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of the Company in Hong Kong at 26th Floor, MassMutual Tower, 38 Gloucester Road, Wanchai, Hong Kong during normal business hours on any weekdays (except public holidays) from the date of this circular up to and including at the date of the SGM:

(a) each of the Agreements;
(b) the letter from the Independent Board Committee containing its advice to the Independent Shareholders, the text of which is set out in the section headed “Letter from the Independent Board Committee” in this circular;
(c) the letter from VC Capital containing its advice to the Independent Board Committee and the Independent Shareholders, the text of which is set out in the section headed “Letter from VC Capital” in this circular;
(d) the property valuation report from Norton Appraisals Limited in respect of the valuation of the Great Will Property and the Global Young Properties, the text of which is set out in Appendix I to this circular; and
(e) the written consent of the experts referred to in the paragraph headed “Qualification and Consent of Experts” in this appendix.

NOTICE OF SGM

(Incorporated in Bermuda with limited liability) (Stock Code: 127)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the “ Meeting ”) of Chinese Estates Holdings Limited (the “ Company ”) will be held at Concord Room II-III, 8th Floor, Renaissance Harbour View Hotel Hong Kong, No. 1 Harbour Road, Wanchai, Hong Kong on Monday, 12 October 2009 at 10:00 a.m. for the purpose of considering and, if thought fit, with or without amendments, passing the following ordinary resolution:

ORDINARY RESOLUTION

“THAT

(a) the sale and purchase agreement dated 2 September 2009 and entered into between China Entertainment and Land Investment Company, Limited, Chinese Estates, Limited (“ Chinese Estates ”), Wisdom Hero Limited (the “ Purchaser ”) and Mr. Joseph Lau, Luen-hung (“ Mr. Lau ”) relating to the entire issued share capital of and loans due by Action Basic Limited (“ Action Basic Agreement ”) (a copy of which has been produced to the Meeting marked “A” and signed by the chairman of the Meeting for the purpose of identification) and all the transactions contemplated thereby;
(b) the sale and purchase agreement dated 2 September 2009 and entered into between Global Stage Limited, Chinese Estates, the Purchaser and Mr. Lau relating to certain notes and reserve capital instruments (“ Global Stage Agreement ”) (a copy of which has been produced to the Meeting marked “B” and signed by the chairman of the Meeting for the purpose of identification) and all the transactions contemplated thereby;
(c) the sale and purchase agreement dated 2 September 2009 and entered into between Chinese Estates, the Purchaser and Mr. Lau relating to the entire issued share capital of and loans due by Everbright Pacific Ltd. and Oriental Kingdom Limited (“ Oriental Kingdom Agreement ”) (a copy of which has been produced to the Meeting marked “C” and signed by the chairman of the Meeting for the purpose of identification) and all the transactions contemplated thereby;

NOTICE OF SGM

(d) the sale and purchase agreement dated 2 September 2009 and entered into between Super Series Limited, Chinese Estates, the Purchaser and Mr. Lau relating to the entire and issued share capital of and loans due by Fame Winner Limited (“ Fame Winner Agreement ”) (a copy of which has been produced to the Meeting marked “D” and signed by the chairman of the Meeting for the purpose of identification) and all the transactions contemplated thereby;
(e) the sale and purchase agreement dated 2 September 2009 and entered into between Chinese Estates, the Purchaser and Mr. Lau relating to the entire issued share capital of and loan due by Stars Up Limited (“ Stars Up Agreement ”) (a copy of which has been produced to the Meeting marked “E” and signed by the chairman of the Meeting for the purpose of identification) and all the transactions contemplated thereby;
(f) the sale and purchase agreement dated 2 September 2009 and entered into between Rich Lucky Limited, Chinese Estates, the Purchaser and Mr. Lau relating to the entire and issued share capital of Union Nice Limited and loans due by Union Nice Limited and Chinese Estates (Eaton Square) Limited (“ Union Nice Agreement ”) (a copy of which has been produced to the Meeting marked “F” and signed by the chairman of the Meeting for the purpose of identification) and all the transactions contemplated thereby;
(g) the sale and purchase agreement dated 2 September 2009 and entered into between Chinese Estates and Mr. Lau relating to the entire issued share capital of and loan due by Great Will Limited (“ Great Will Agreement ”) (a copy of which has been produced to the Meeting marked “G” and signed by the chairman of the Meeting for the purpose of identification) and all the transactions contemplated thereby; and
(h) the sale and purchase agreement dated 2 September 2009 and entered into between Paul Y. Holdings Company Limited, Chinese Estates, the Purchaser and Mr. Lau relating to the entire issued share capital of and loan due by Global Young Holdings Ltd. (“ Global Young Agreement ”) (a copy of which has been produced to the Meeting marked “H” and signed by the chairman of the Meeting for the purpose of identification) and all the transactions contemplated thereby;

NOTICE OF SGM

be and are hereby approved and any one director or the company secretary of the Company be authorised for and on behalf of the Company, among other matters, to sign, execute, perfect, deliver or to authorise signing, executing, perfecting and delivering each of the (a) Action Basic Agreement; (b) Global Stage Agreement; (c) Oriental Kingdom Agreement; (d) Fame Winner Agreement; (e) Stars Up Agreement; (f) Union Nice Agreement; (g) Great Will Agreement; and (h) Global Young Agreement (collectively, the “Agreements”), and all such documents and deeds, to do or authorise doing all such acts, matters and things as he/ she may in his/her discretion consider necessary, expedient or desirable to give effect to and implement and/or complete all matters in connection with the transactions contemplated in each of the Agreements and to waive compliance from or make and agree such variations of a non-material nature to any of the terms of the Agreements, as he/she may in his/her absolute discretion consider to be desirable and in the interests of the Company and all of such director’s or company secretary’s acts as aforesaid be hereby approved, ratified and confirmed.”

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

Hong Kong, 23 September 2009

Registered office: Principal office in Hong Kong: Canon’s Court 26th Floor 22 Victoria Street MassMutual Tower Hamilton HM 12 38 Gloucester Road Bermuda Wanchai Hong Kong

NOTICE OF SGM

Notes:

The register of members of the Company will be closed from 8 October 2009 to 12 October 2009 (both days inclusive). For the purpose of ascertaining the members’ entitlement to the attendance of the Meeting, all share transfer documents accompanied by relevant share certificates must be lodged with the Company’s branch registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 4:30 p.m. on 7 October 2009.
Any member entitled to attend and vote at the Meeting is entitled to appoint one or more separate proxies to attend and to vote instead of him. A proxy need not be a member of the Company.
To be valid, the form of proxy in the prescribed form together with the power of attorney or other authority (if any) under which it is signed (or a notarially certified copy thereof) must be deposited at the Company’s branch registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1806-07, 18th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time fi xed for holding the Meeting (or at any adjournment thereof).
Delivery of an instrument appointing a proxy should not preclude a member from attending and voting in person at the above meeting or any adjournment thereof and in such event, the instrument appointing a proxy shall be deemed to be revoked.
In the case of joint holders of a share, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she were solely entitled thereto; but if more than one of such joint holders are present at the above meeting, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders. For this purpose, seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
As at the date hereof, the Board comprised Mr. Joseph Lau, Luen-hung as Executive Director, Mr. Lau, Mingwai and Ms. Amy Lau, Yuk-wai as Non-executive Directors and Mr. Chan, Kwok-wai, Ms. Phillis Loh, Laiping and Mr. Ma, Tsz-chun as Independent Non-executive Directors.

AI assistant

National Electronics Holdings Limited — Proxy Solicitation & Information Statement 2009

49038_rns_2009-09-22_71e25351-1a2c-4082-a890-85f88542c77e.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

DISCLOSEABLE AND CONNECTED TRANSACTIONS: DISPOSAL OF SUBSIDIARIES AND ASSETS

AND

NOTICE OF SPECIAL GENERAL MEETING

Financial adviser to the Company

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

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

DISCLOSEABLE AND CONNECTED TRANSACTIONS: DISPOSAL OF SUBSIDIARIES AND ASSETS

INTRODUCTION

LETTER FROM THE BOARD

LETTER FROM THE BOARD

A. THE AGREEMENTS

(1) The Action Basic Agreement

Parties:

LETTER FROM THE BOARD

Assets to be disposed

Consideration

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Undertakings

Information of Action Basic

LETTER FROM THE BOARD

(2) The Global Stage Agreement

LETTER FROM THE BOARD

Consideration

LETTER FROM THE BOARD

Information of the subject assets

LETTER FROM THE BOARD

Information of Global Stage

(3) The Oriental Kingdom Agreement

LETTER FROM THE BOARD

Consideration

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Undertakings

Information of Everbright Pacific

LETTER FROM THE BOARD

Information of Oriental Kingdom

Information of Chinese Estates

(4) The Fame Winner Agreement

LETTER FROM THE BOARD

Assets to be disposed

Consideration

LETTER FROM THE BOARD

Undertakings

LETTER FROM THE BOARD

Information of Fame Winner

Information of Super Series

(5) The Stars Up Agreement

Parties:

LETTER FROM THE BOARD

Assets to be disposed

Consideration

Undertakings

LETTER FROM THE BOARD

Information of Stars Up

(6) The Union Nice Agreement

Parties:

LETTER FROM THE BOARD

Assets to be disposed

Consideration

LETTER FROM THE BOARD

Undertakings

Information of Union Nice

Information of Chinese Estates (Eaton)

Information of Rich Lucky

LETTER FROM THE BOARD

National Electronics Holdings Limited Proxy Solicitation & Information Statement 2009