National Electronics Holdings Limited - Proxy Solicitation & Information Statement 2015

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about 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.

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)

MAJOR AND CONNECTED TRANSACTION

DISPOSAL OF A SUBSIDIARY AND NOTICE OF SPECIAL GENERAL MEETING

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

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 25 of this circular. A letter from the Independent Board Committee is set out on pages IBC-1 to IBC-2 of this circular. A letter from Gram Capital containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages IFA-1 to IFA-16 of this circular.

A notice convening the SGM to be held at Falcon Room, Basement, Gloucester Luk Kwok Hong Kong, 72 Gloucester Road, Wanchai, Hong Kong on Friday, 23 January 2015 at 10:00 a.m. is set out on pages SGM-1 to SGM-2 of this circular. If you are not able to attend the meeting in person, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and deposit it with the Company’s branch registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17M 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 appointed 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.

7 January 2015

TABLE OF CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board
A.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
B.	The Disposal Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
C.	Financing under the Disposal Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
D.	The Condition Precedent of the Disposal Agreement . . . . . . . . . . . . . . . . . . . . . . .	15
E.	Completion of the Disposal Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
F.	Effect of the Disposal Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
G.	Competing Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
H.	Reasons for and Benefits of the Disposal Transaction . . . . . . . . . . . . . . . . . . . . . .	19
I.	Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
J.	Information of the Group and the Vendor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
K.	Information of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
L.	Information of the Assets to be Disposed of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
M.	Listing Rules Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
N.	The Independent Financial Adviser and the Independent Board Committee . . . . . .	23
O.	SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
P.	Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Q.	General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
R.	Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Letter from	the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IBC-1
Letter from	Gram Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IFA-1
Appendix I	– Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II	– Property Valuation Report on the Properties. . . . . . . . . . . . . . . . . . . . .	II-1
Appendix III – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		III-1
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		SGM-1

– i –

DEFINITIONS

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

“Advance One Special Dividend”

one or more special cash interim dividend(s) proposed to be declared and paid by the Company to the Shareholders in anticipation that completion of the Disposal Agreement would take place (the amount of each such dividend per Share to be determined by the Board) (other than: (i) the One Special Dividend; (ii) the Silvercord Special Dividend (as defined in the Previous Announcement) to the extent of the Silvercord Special Dividend (as defined in the Previous Announcement) being applied or required to be applied to settle or set-off the provisional consideration or the consideration payable under the Silvercord First SP Agreement in accordance with its terms; and (iii) any other special cash interim dividend(s) to be declared by the Company after the date of the Announcement), the record date and payment date for which shall fall before the Completion Date

“Announcement”
the announcement of the Company dated 12 December 2014 for the Disposal Transaction
“Asian East”
Asian East Limited (carrying on business in Hong Kong as Asian East Capital Limited), a limited liability company incorporated in BVI and an indirect wholly-owned subsidiary of the Company
“associate(s)”
has the meaning ascribed to it in the Listing Rules
“Assumed Debt”

all sums due and owing to any of the Target Companies by any member of the Group (excluding the Target Companies) as at the Completion Date

“Bank Loan”

the outstanding bank loans, interest and all other sums owed by CE One pursuant to the loan agreement in relation to a term loan facility in the sum of HK$3,450,000,000 dated 13 September 2013 between CE One as borrower, certain banks and other financial institutions named therein as lenders and Bank of China (Hong Kong) Limited as the facility agent and security agent and one of the mandated coordinating arrangers, or if such bank loan is repaid but its repayment is refinanced by a new bank loan obtained by the Target Companies prior to or upon completion of the Disposal Agreement, the outstanding bank loan, interest and all other sums owed by such Target Companies pursuant to such new bank loan

– 1 –

DEFINITIONS

“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

“CE Guarantee” any guarantee, surety, security or indemnity given by any member of the Group (excluding the Target Companies) in respect of the obligations or liabilities of any of the Target Companies
“CE One” Chinese Estates (The One) Limited (formerly known as “Chinese Estates (Tung Ying Building) Limited” and “East Step Limited”), a limited liability company incorporated in Hong Kong and a direct wholly-owned subsidiary of Asian East
“close associate(s)”

has the meaning ascribed to it in the Listing Rules

“Company” Chinese Estates Holdings Limited (Stock Code: 127), a limited liability company incorporated in Bermuda, the Shares of which are listed on the main board of the Stock Exchange
“Completion Accounts” the unaudited consolidated statement of comprehensive income of the Target Companies for the period from 1 January 2015 and ending on the Completion Date and the unaudited consolidated statement of financial position of the Target Companies as at the Completion Date, each prepared in accordance with HKFRSs
“Completion Date” any Business Day falling between 1 January 2015 and 31 December 2015 (both days inclusive) as shall be agreed between Rich Lucky and Market Victory for the purpose of completion of the Disposal Agreement, or failing agreement, 31 December 2015
“Condition Precedent” the condition precedent to the completion of the Disposal Agreement as set out under section D headed “The Condition Precedent of the Disposal Agreement” under the letter from the Board of this circular

– 2 –

DEFINITIONS

“connected person(s)”	has the meaning ascribed to it in the Listing Rules
“Consideration”	the aggregate consideration for the purchase of the Sale Share and
	the Sale Loan pursuant to the Disposal Agreement
“Deposits”	the aggregate amounts equivalent to: (i) the One Dividend
	receivable by Global King and JLLHIL, or their nominees or
	custodians, as Shareholders; and (ii) any additional deposits of
	any amount on top of the aforesaid One Dividend which Market
	Victory shall be entitled to pay to Rich Lucky prior to completion
	of the Disposal Agreement pursuant to the Disposal Agreement
“Director(s)”	director(s) of the Company
“Disposal Agreement”	the sale and purchase agreement dated 12 December 2014 entered
	into among Rich Lucky, the Company, Market Victory and Mr.
	Lau relating to the entire issued share capital of Asian East
“Disposal Transaction”	the transactions contemplated under the Disposal Agreement
“Dividend Entitlements”	the entitlements to the One Dividend by certain Shareholders who
	have executed and delivered to Rich Lucky and the Company the
	Letter of Payment Direction
“Global King”	Global King (PTC) Ltd., a limited liability company incorporated
	in BVI and a Shareholder and an associate of Mr. Lau, which is
	wholly-owned by the trustee of a discretionary trust of which Mr.
	Lau is the founder and a beneficiary
“Gram Capital” or	Gram Capital Limited, a licensed corporation to carry out Type 6
“Independent Financial	(advising on corporate finance) regulated activity under the SFO,
Adviser”	being the independent financial adviser to the Independent Board
	Committee and the Independent Shareholders in respect of the
	Disposal Agreement and the Disposal Transaction
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“HKFRSs”	Hong Kong Financial Reporting Standards issued by the Hong
	Kong Institute of Certified Public Accountants from time to time

– 3 –

DEFINITIONS

“Hong Kong”

the Hong Kong Special Administrative Region of the PRC

“Independent Board Committee”

the Board committee comprising all independent non-executive Directors, namely Mr. Chan, Kwok-wai, Ms. Phillis Loh, Laiping and Mr. Ma, Tsz-chun, which has been established by the Board for the purpose of advising the Independent Shareholders in relation to the Disposal Agreement and the Disposal Transaction

“Independent Property Valuer”
B.I. Appraisals Limited
“Independent Shareholders”

Shareholders other than Shareholders who have a material interest in the Disposal Transaction (including Mr. Lau and his associate(s))

“Independent Shareholders’ Approval”
approval by the Independent Shareholders at the SGM in respect of the Disposal Agreement and the Disposal Transaction
“JLLHIL”

Joseph Lau Luen Hung Investments Limited, a limited liability company incorporated in BVI and a Shareholder and an associate of Mr. Lau, which is wholly-owned by the trustee of a discretionary trust of which Mr. Lau is the founder and a beneficiary

“Latest Practicable Date”
2 January 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
“Letter of Payment Direction”
a letter of payment direction regarding the Dividend Entitlements to the One Dividend by certain Shareholders
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange
“Long Stop Date” 30 June 2015 or such other date as may be agreed between Rich Lucky and Market Victory
“Lucky Winds” Lucky Winds Investments Limited, a limited liability company incorporated in BVI and a direct wholly-owned subsidiary of Asian East
“Macau”

the Macau Special Administrative Region of the PRC

– 4 –

DEFINITIONS

“Market Victory” Market Victory Limited, a limited liability company incorporated in BVI and wholly-owned by Mr. Lau indirectly

“Moon Ocean SP Agreement” the sale and purchase agreement dated 1 September 2014 entered into among Data Dynasty Limited, the Company, One Midland Limited and Mr. Lau relating to the entire issued share capital of Value Eight Limited
“Mr. Lau”
Mr. Joseph Lau, Luen-hung, a substantial Shareholder and a controlling Shareholder
“MTR” MTR Corporation Limited
“MTR Documents” collectively, the MTR Project Agreement and such documents, letters and agreements subsequently entered into in connection therewith by some or all of the parties to the MTR Project Agreement
“MTR Guarantee” the guarantee and indemnity dated 26 February 2007 executed by the Company in favour of MTR pursuant to which the Company agreed to guarantee the performance of obligations by CE One under the MTR Project Agreement and indemnify MTR against all loss and costs arising out of any default by CE One under the MTR Project Agreement upon and subject to the terms thereof
“MTR Project Agreement” the agreement dated 26 February 2007 entered into between, among others, CE One and MTR in relation to, among others, the construction of a pedestrian subway connecting the northern platform of the Tsim Sha Tsui mass transit railway station to the basement of the Properties
“MTR Substitution Guarantee” has the meaning ascribed to it under section B headed “The Disposal Agreement – Undertakings and Indemnity” under the letter from the Board of this circular
“Normal Dividend” any ordinary interim or final cash dividend(s) proposed to be declared and/or recommended by the Board upon approving the interim results or final results of the Company, and payable to the Shareholders (excluding the Silvercord Special Dividend (as defined in the Previous Announcement), the Advance One Special Dividend, the One Special Dividend and any other special dividend(s) (if any) to be declared after the date of the Announcement), the record date and payment date for which shall fall on or before the Completion Date

– 5 –

DEFINITIONS

“One Dividend”
“One Special Dividend”
“Potential Lease”
“Potential Tenant”
“PRC”
“Previous Announcement”
“Properties”

means all and any of the Advance One Special Dividend, the One Special Dividend and the Normal Dividend

the special cash interim dividend proposed to be declared and paid by the Company to the Shareholders from the net sale proceeds of the Disposal Transaction (the amount of such dividend per Share to be determined by the Board by reference to the estimated net sale proceeds of the Disposal Transaction) (other than: (i) the Advance One Special Dividend; (ii) the Silvercord Special Dividend (as defined in the Previous Announcement) to the extent of the Silvercord Special Dividend (as defined in the Previous Announcement) being applied or required to be applied to settle or set-off the provisional consideration or the consideration payable under the Silvercord First SP Agreement in accordance with its terms; and (iii) any other special cash interim dividend(s) to be declared by the Company after the date of the Announcement), the record date for which shall fall before the Completion Date and the payment date for which shall fall on or after the Completion Date
a potential lease, tenancy or license of the Properties or any part thereof

any potential or prospective tenant or licensee of the Properties

the People’s Republic of China, which for the purpose of this circular excludes Hong Kong, Macau and Taiwan
the announcement of the Company dated 2 September 2014 in relation to, among others, the major and connected transactions in relation to the disposal of certain subsidiaries of the Company under the SP Agreements
the properties held directly by CE One as set out under section L headed “Information of the Assets to be Disposed of – Information of the Properties” under the letter from the Board of this circular

– 6 –

DEFINITIONS

“Provisional Consideration”
a sum of approximately HK$7,781.4 million (if the Bank Loan has been fully repaid prior to or upon completion of the Disposal Agreement and such repayment is fully or partially financed by additional Sale Loan provided after the date of the Disposal Agreement) or approximately HK$4,657.3 million (if the Bank Loan is still outstanding upon completion of the Disposal Agreement) as the provisional consideration payable by Market Victory to Rich Lucky upon completion of the Disposal Agreement
“Related Party”
for the purpose of the Stock Exchange Undertaking, a director, substantial shareholder, a subsidiary or an 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) 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
“Relevant Owner(s)”
Mr. Lau and/or his close associate(s) (including without limitation Market Victory) who is/are the owner(s) of the Properties
“Rich Lucky”
Rich Lucky Limited, a limited liability company incorporated in BVI and an indirect wholly-owned subsidiary of the Company
“Sale Loan”
all sums due or owing by the Target Companies to members of the Group (other than the Target Companies) as at the Completion Date
“Sale Share” the one share beneficially owned by and registered in the name of Rich Lucky, representing the entire issued share capital of Asian East (which ultimately owns the Properties)
“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 for the purpose of the Independent Shareholders considering and, if thought fit, approving the Disposal Agreement and the Disposal Transaction
“Share(s)” ordinary share(s) of HK$0.10 each in the share capital of the Company

– 7 –

DEFINITIONS

“Shareholder(s)”
“Silvercord First SP Agreement”
“Silvercord SP Agreements”
“SP Agreements”
“SP Transactions”

“Specified Transaction(s)”

the holder(s) of the Share(s)

the sale and purchase agreement dated 1 September 2014 entered into among Super Series Limited, the Company, Fly High Target Limited and Mr. Lau relating to the entire issued share capital of Brass Ring Limited

collectively, (i) the Silvercord First SP Agreement; (ii) the sale and purchase agreement dated 1 September 2014 entered into among Super Series Limited, the Company, Fly High Target Limited and Mr. Lau relating to the entire issued share capital of Union Leader Limited; and (iii) the sale and purchase agreement dated 1 September 2014 entered into among Chinese Estates, Limited, the Company, Coast Field Ltd. and Mr. Lau relating to the entire issued share capital of Chinese Estates and Finance, Limited

collectively, the Moon Ocean SP Agreement and the Silvercord SP Agreements

the transactions contemplated under the SP Agreements

for the purpose of the Stock Exchange Undertaking, transaction(s) 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 12 months, exceeds HK$200 million

– 8 –

DEFINITIONS

“Stock Exchange” The Stock Exchange of Hong Kong Limited “Stock Exchange Undertaking” 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) “Target Companies” collectively, Asian East, CE One and Lucky Winds, and “Target Company” means each or any one of them “%” per cent.

– 9 –

LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability)

(Stock Code: 127)

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

7 January 2015

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION

DISPOSAL OF A SUBSIDIARY

A. INTRODUCTION

Reference is made to the Announcement. On 12 December 2014, Rich Lucky as vendor, the Company as vendor guarantor, Market Victory as purchaser and Mr. Lau as purchaser guarantor entered into the Disposal Agreement relating to, among others, the sale and purchase of the entire issued share capital of Asian East.

– 10 –

LETTER FROM THE BOARD

As the Disposal Agreement was entered into within 12 months after the signing of the SP Agreements, and the Disposal Agreement and the SP Agreements were entered into by the Company with the same connected person and his associates, the Disposal Transaction and the SP Transactions will be aggregated pursuant to Rule 14A.81 of the Listing Rules. As one or more of the applicable percentage ratios under Chapter 14 of the Listing Rules for the Disposal Transaction as aggregated with the SP Transactions exceed 25% but are less than 75%, the Disposal Transaction (as aggregated with the SP Transactions) constitutes a major transaction for the Company and the Disposal Transaction is subject to the reporting, announcement, circular and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

As Mr. Lau, being a substantial Shareholder and a controlling Shareholder, who was interested in 1,430,700,768 Shares, representing approximately 74.99% of the total issue Shares as at the Latest Practicable Date, is the sole director and the sole beneficial owner of Market Victory, Mr. Lau and Market Victory are connected persons of the Company. Accordingly, the Disposal Transaction constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules, and is subject to the reporting, announcement and Independent Shareholders’ Approval requirements pursuant to Chapter 14A of the Listing Rules.

The purpose of this circular is to give you further information regarding, among others: (i) details of the Disposal Agreement and the Disposal Transaction; (ii) the opinion and advice of Gram Capital, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Disposal Agreement and the Disposal Transaction; (iii) the recommendation from the Independent Board Committee to the Independent Shareholders in connection therewith; (iv) certain financial information as required under the Listing Rules; (v) further information of the Group; and (vi) the valuation report on the Properties, and to give you notice of the SGM.

B. THE DISPOSAL AGREEMENT

Date

12 December 2014

Parties

(a) Rich Lucky, as vendor;
(b) the Company, as vendor guarantor;
(c) Market Victory, as purchaser; and
(d) Mr. Lau, as purchaser guarantor.

– 11 –

LETTER FROM THE BOARD

In consideration of Market Victory and Mr. Lau entering into the Disposal Agreement, the Company has agreed to guarantee the performance by Rich Lucky of its obligations under the Disposal Agreement. In consideration of Rich Lucky and the Company entering into the Disposal Agreement, Mr. Lau has agreed to guarantee the performance by Market Victory of its obligations under the Disposal Agreement.

Assets to be disposed of

The assets to be disposed of under the Disposal Transaction are the Sale Share and the Sale Loan. As at 30 September 2014, the Sale Loan amounted to approximately HK$2,062.2 million. In consideration for the sale or procurement of the sale of the Sale Share and the assignment or procurement of the assignment of the Sale Loan by Rich Lucky to Market Victory or its nominee(s), Market Victory further agreed to assume or procure (through its nominee(s)) to assume the obligation of repayment of the Assumed Debt (if any) upon completion of the Disposal Agreement. As at 30 September 2014, the Assumed Debt amounted to approximately HK$0.4 million.

The Sale Share to be acquired by Market Victory shall be free from all encumbrances (if any) at completion of the Disposal Agreement and with all dividends, benefits and other rights becoming attached or accruing thereto as from the Completion Date.

Consideration

The Consideration shall be equal to the aggregate of (but subject to a cap amount of HK$9,000 million):–

(a) the consolidated net asset value or liability of the Target Companies (for the purpose of ascertaining such net asset value or liability, Market Victory acknowledges and accepts that the Properties shall have a value of HK$7,880 million (being the market value of the Properties as at 30 November 2014 valued by the Independent Property Valuer) in the Completion Accounts); and
(b) the aggregate face amount of the Sale Loan, less the aggregate face amount of the Assumed Debt.

At completion of the Disposal Agreement, Market Victory shall pay to Rich Lucky the Provisional Consideration. The difference between the Provisional Consideration and the Consideration will be settled in cash or cheque within 7 Business Days after the Completion Accounts have become available.

– 12 –

LETTER FROM THE BOARD

The Provisional Consideration (if the Bank Loan has been fully repaid prior to or upon completion of the Disposal Agreement and such repayment is fully or partially financed by additional Sale Loan provided after the date of the Disposal Agreement) of approximately HK$7,781.4 million or (if the Bank Loan is still outstanding upon completion of the Disposal Agreement) of approximately HK$4,657.3 million equals to the aggregate of the unaudited consolidated net asset value of the Target Companies as at 30 September 2014 taking into account the market value of the Properties of HK$7,880 million as at 30 November 2014 as valued by the Independent Property Valuer and the unaudited figures of the amounts of the Sale Loan less the Assumed Debt as at 30 September 2014.

The Company will publish further announcement(s) once the actual amount of the Consideration is confirmed.

Deposits

Pursuant to the Disposal Agreement, Market Victory shall pay to Rich Lucky the Deposits, which will be applied towards settlement of the Provisional Consideration at completion of the Disposal Agreement.

If the Condition Precedent shall not have been satisfied on or before the Long Stop Date, or completion of the Disposal Agreement does not proceed and such non-completion does not arise as a result of the default of Market Victory or Mr. Lau under the Disposal Agreement, Rich Lucky shall return the Deposits (if any) without interest to Market Victory within 7 Business Days after receiving a written demand from Market Victory for the return.

If the Condition Precedent shall have been satisfied but completion of the Disposal Agreement does not proceed and such non-completion arises as a result of the default of Market Victory or Mr. Lau under the Disposal Agreement, such part of the Deposits equivalent to 10% of the Provisional Consideration shall be forfeited to Rich Lucky and, whereupon, the balance of the Deposits (if any) then received by Rich Lucky will be retained by Rich Lucky as security for the payment of compensation for any additional losses and/or damages (if any) suffered by Rich Lucky arising from such default of Market Victory or Mr. Lau until such losses and damages suffered by Rich Lucky have been assessed in accordance with the Disposal Agreement. Rich Lucky will, after deducting from the retained sum such losses and damages so assessed to the extent exceeding the amount of the Deposits so forfeited, return the remaining balance of the retained sum to Market Victory. In the event that the aggregate amount of the Deposits received by Rich Lucky at the time of forfeiture shall be less than 10% of the Provisional Consideration, Rich Lucky shall be entitled to forfeit the entire Deposits and claim against Market Victory to recover any further loss or damage (if any) suffered by Rich Lucky, which shall be equal to the amount of the losses and damages suffered by Rich Lucky as assessed in accordance with the Disposal Agreement less the total amount of the Deposits so forfeited, arising from such default.

– 13 –

LETTER FROM THE BOARD

Market Victory may elect to settle the Provisional Consideration (or any part thereof) by procuring certain Shareholders to apply their Dividend Entitlements, subject to completion of the Disposal Agreement, towards the payment of the Provisional Consideration and the Company will be authorised and instructed to pay such Dividend Entitlements to Rich Lucky, in lieu of such Shareholders, to settle the Provisional Consideration to the extent of the aggregate amount of such Dividend Entitlements.

Undertakings and Indemnity

Prior to completion of the Disposal Agreement, each of Market Victory and Mr. Lau has agreed to give and/or procure the provision of such guarantee, indemnity or security as may be reasonably required by the relevant banks or lenders or beneficiaries of the CE Guarantee following or upon completion of the Disposal Agreement to replace the CE Guarantee.

The Company has given the MTR Guarantee in favour of MTR in connection with the MTR Project Agreement. Prior to completion of the Disposal Agreement, the Company will use its reasonable endeavours, and Rich Lucky will procure CE One to use its reasonable endeavours, to seek the termination of the MTR Guarantee or MTR’s consent to the substitution of the MTR Guarantee by a guarantee and indemnity executed by Mr. Lau or such other person acceptable to MTR in favour of MTR, so as to fully release the Company from all its obligations and liabilities under the MTR Guarantee upon completion of the Disposal Agreement. Each of Market Victory and Mr. Lau has agreed to give and/or procure the provision of such a guarantee and indemnity on substantially the same terms of the MTR Guarantee or on such terms as may be reasonably required by MTR to substitute the MTR Guarantee (the “ MTR Substitution Guarantee ”).

In the event that upon completion of the Disposal Agreement, the MTR Guarantee shall not have been terminated or substituted as aforesaid, pursuant to the Disposal Agreement, Mr. Lau shall, among others, counter indemnify the Company for, among others, all losses and liabilities suffered, incurred or payable by the Company in relation to or in connection with or arising out of any breach under any of the MTR Documents as a result of the default of CE One after completion of the Disposal Agreement until termination or full release of the MTR Guarantee or the MTR Substitution Guarantee (if executed) becoming effective. In the event that there is any claim made by MTR against CE One or any other Target Companies after completion of the Disposal Agreement arising from any breach of any of the MTR Documents by CE One or any other member of the Group occurring before completion of the Disposal Agreement, Rich Lucky shall indemnify Market Victory and the Target Companies against, among others, all losses and liabilities suffered or properly and reasonably incurred or payable by Market Victory and/or the Target Companies arising from or otherwise in connection therewith.

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LETTER FROM THE BOARD

C. FINANCING UNDER THE DISPOSAL AGREEMENT

Rich Lucky has agreed that, if Market Victory needs to raise loans or other borrowings from banks or third parties for its payment of the Provisional Consideration or the Consideration or any part thereof, on the basis of the Target Companies providing guarantees or securities (including securities on the Properties) to such banks or third parties, and if so requested by Market Victory and subject to compliance with all applicable laws and regulations, Rich Lucky will procure the Target Companies to give reasonable assistance to Market Victory prior to or at completion of the Disposal Agreement to facilitate the provision of such securities by the Target Companies and the obtaining of such financing by Market Victory upon completion of the Disposal Agreement. Given the above guarantee(s) or security(ies) if provided by the Target Companies will only be provided if completion of the Disposal Agreement occurs, and that upon completion thereof, such Target Companies will cease to be subsidiaries of the Company but become wholly-owned subsidiaries of Market Victory, such financial assistance will therefore be provided by the subsidiaries of Market Victory to Market Victory. Hence, the assistance if provided by Rich Lucky will be administrative assistance in facilitating Market Victory to obtain financing to complete the Disposal Agreement. Such administrative assistance is not unusual in sale and purchase transactions of this kind.

D. THE CONDITION PRECEDENT OF THE DISPOSAL AGREEMENT

Completion of the Disposal Agreement is conditional upon obtaining of the Independent Shareholders’ Approval.

If the Condition Precedent shall not have been fulfilled on or before the Long Stop Date, the Disposal Agreement shall thereupon terminate whereupon none of the parties thereto shall have any claim against the other for costs, damages, compensation or otherwise (save in respect of any prior breach of the Disposal Agreement).

E. COMPLETION OF THE DISPOSAL AGREEMENT

Subject to the Condition Precedent having been satisfied, completion of the Disposal Agreement shall take place on the Completion Date upon and subject to its terms. The parties to the Disposal Agreement undertake with each other to use their respective reasonable endeavours and in good faith to proceed with completion of the Disposal Agreement as soon as practicable after the fulfilment of the Condition Precedent.

F. EFFECT OF THE DISPOSAL TRANSACTION

After completion of the Disposal Agreement, the Target Companies will cease to be subsidiaries of the Company, and their financial results, assets and liabilities will cease to be consolidated with the consolidated financial statements of the Group.

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LETTER FROM THE BOARD

Principal assets of the Target Companies are the Properties which are recorded as investment properties in the consolidated financial statements of the Group. Pursuant to the accounting policies of the Group, the Properties (being investment properties) are measured at fair values in the consolidated financial statements of the Group. Gains and losses arising from changes in the fair values of the Properties are included in profit or loss for the period in which they arise. Accordingly, the Properties will be measured at their fair values on the Completion Date. Any changes in the fair values of the Properties on the Completion Date to that stated in the consolidated financial statements of the Group will be included in profit or loss as fair value gains or losses. It is expected that these fair value gains or losses as a result of the fair value changes will be entirely eroded by the gain or loss on the Disposal Transaction (being the difference between the Consideration and the value of the Target Companies recorded in the consolidated financial statements of the Group on the Completion Date). Furthermore, the transaction costs related to the Disposal Transaction of approximately HK$7.0 million will be included in the gain or loss on disposal. On this basis together with assuming that the Consideration will not exceed the cap of HK$9,000 million, it is estimated that the Group will not record net material gain or loss on the Disposal Transaction. Moreover, this estimate is made based on the Provisional Consideration, less the aggregate of: (i) the net asset value of the Target Companies as at 30 September 2014 after adjusting the carrying amount of the Properties to their market values as at 30 November 2014; and (ii) the Sale Loan less the Assumed Debt as at 30 September 2014. The actual net gain or loss on completion of the Disposal Agreement might be different given that the above estimate is based on: (i) the net asset value of the Target Companies (taking into account the market values of the Properties as at 30 November 2014), and (ii) the Sale Loan and the Assumed Debt as at 30 September 2014, which might be different from those on the Completion Date.

Financial results, assets and liabilities of the Target Companies will cease to be consolidated with the consolidated financial statements of the Group following completion of the Disposal Agreement that the Target Companies will cease to be subsidiaries of the Company. The Target Companies had outstanding Bank Loan of approximately HK$3,249.2 million as at 30 September 2014. Such Bank Loan may or may not be fully repaid prior to completion of the Disposal Agreement. In any event, the level of borrowings of the Group shall be reduced after completion of the Disposal Agreement, and this will result in lower finance costs to be incurred by the Group after completion of the Disposal Agreement. Moreover, rental income of the Target Companies will not be recorded in the consolidated financial statements of the Group following completion of the Disposal Agreement, and this will lead to a drop of rental income of the Group. As explained above, it is estimated that the Group will not record net material gain or loss on the Disposal Transaction. Accordingly, it is expected that the disposal of the Target Companies itself will have no material effects on the net asset value of the Group.

Upon completion of the Disposal Agreement, the Group will continue its existing business activities other than those related to the Properties. The Disposal Transaction, as aggregated with the SP Transactions, represents only approximately 35.0%, 35.6% and 14.7% of the total assets of the Group as at 30 June 2014 as adjusted in accordance with Rule 14.16 of the Listing Rules (the “ Total Assets ”), net profits of the Group for the year ended 31 December 2013 as adjusted in accordance with Rule 14.17 of the Listing Rules (the “ Net Profits ”) and total revenue of the Group for the year ended 31 December

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LETTER FROM THE BOARD

2013 as adjusted in accordance with Rule 14.17 of the Listing Rules (the “ Total Revenue ”) respectively. The remaining businesses of the Group account for approximately 65.0%, 64.4% and 85.3% of the Total Assets, Net Profits and Total Revenue respectively. After completion of the Disposal Transaction (as aggregated with the SP Transactions), the remaining Total Assets, Net Profits and Total Revenue will amount to approximately HK$43.85 billion, HK$4.48 billion and HK$5.51 billion respectively. Accordingly, the Board considers that the remaining assets, profits and revenue of the Group are substantial and sufficient to warrant the continued listing of the Shares.

The Properties is one of the 19 principal investment properties within the Group’s investment property portfolio based on the annual report of the Company for the year ended 31 December 2013. The Group functions as a conglomerate which engages in various businesses other than property leasing. Upon completion of the Disposal Agreement, the Group will continue its existing business activities other than those related to the Properties, and its principal activities will continue to be property investment and development, brokerage, securities investment, money lending and cosmetics distribution and trading.

G. COMPETING INTERESTS

In consideration of Rich Lucky and the Company entering into the Disposal Agreement, subject to completion of the Disposal Agreement having occurred, Mr. Lau has undertaken to Rich Lucky and the Company in the Disposal Agreement that so long as he and/or his close associate(s) (including without limitation Market Victory) is/are the owner(s) of the Properties and so long as he or his close associate(s) is a director of the Company whilst the Group still owns retail properties in Tsim Sha Tsui, Hong Kong, whenever there is any Potential Tenant approaching the Relevant Owner or its agent for a Potential Lease, Mr. Lau will not and, will procure the Relevant Owner not to, accept or enter into the Potential Lease unless the following steps have been done:–

(a) the Relevant Owner has notified the Company (or any person designated by the Company from time to time to receive notification from the Relevant Owner for such purpose) the opportunity for the Potential Lease and referred the Potential Tenant to the Group for a potential lease, tenancy or license of the retail properties in Tsim Sha Tsui, Hong Kong owned by the Group, except that no such notification and referral need to be made by the Relevant Owner if the Potential Tenant disagrees with or refuses to such notification and referral (in which case the Relevant Owner shall be free to take up the Potential Lease); and
(b) following the notification and referral mentioned in paragraph (a) above, the Group has decided not to accept the Potential Tenant for the lease, tenancy or licence of its retail properties in Tsim Sha Tsui, Hong Kong and conveyed its decline decision to the Relevant Owner or the Group has not notified in writing to the Relevant Owner its decision to accept the Potential Tenant within 3 weeks of the notification and referral mentioned in paragraph (a) above.

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LETTER FROM THE BOARD

The Company proposes to adopt the following measures to monitor the compliance of the above undertakings when such undertakings are in force:–

(i) a standard clause is proposed to be inserted into all the tenancy or leasing documents in respect of the Properties to be entered into between the Relevant Owner and the tenants, or alternatively a side letter to be signed and given by the tenants, whereby the tenants will confirm that they have been recommended or referred to lease the retail properties in Tsim Sha Tsui, Hong Kong owned by the Group before entering into the tenancy or leasing documents and that despite the recommendation or referral they do not intend to lease the retail properties in Tsim Sha Tsui, Hong Kong owned by the Group or they intend to lease the retail properties in Tsim Sha Tsui, Hong Kong owned by the Group but the Group has declined to lease the same to them;
(ii) where the tenants intend to lease the retail properties in Tsim Sha Tsui, Hong Kong owned by the Group following the above recommendation or the referral but the Group has declined to lease the same to them, the reasons for the decline decisions will be properly recorded and documented by the Group and the relevant records will be passed to the independent nonexecutive Directors for information purposes annually at the same time as the submission of the tenancy or leasing documents and side letters to the independent non-executive Directors contemplated in sub-paragraph (iv) below;
(iii) written instructions will be given by the Company to each of the staff responsible for leasing of the Properties in respect of the measures mentioned in (i) and (ii) above;
(iv) copies of all such tenancy or leasing documents and side letters will be submitted to and reviewed by the independent non-executive Directors annually, for the purpose of monitoring the compliance of the above undertakings; and
(v) the independent non-executive Directors will study the documents and records as provided above and discuss their findings with the responsible officers. If there is anything unusual, the independent non-executive Directors will ask for, and evaluate the adequacy of, the explanations. If the explanations are not acceptable to them, the independent non-executive Directors will propose additional measures and internal procedures which they may consider necessary or desirable for redressing the problems or deficiencies identified or better monitoring of the compliance of the above undertakings. In addition, the independent nonexecutive Directors will disclose the result of their review in the annual report. In the course of their review, the independent non-executive Directors may seek independent legal and/or financial advice, and (if necessary) commission independent third party to carry out a full and thorough investigation into the unusual matters and make recommendations to them on ways of redressing the problems, and upon completion of the investigation, depending on the seriousness of the outcome, take appropriate remedial measures to safeguard the interests of the Company and its Shareholders as a whole.

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LETTER FROM THE BOARD

The Board (including the independent non-executive Directors, after taking into account the opinion and advice from Gram Capital) considers that the above measures are able to resolve the potential competition conflict between Mr. Lau or his close associate(s) and the Group that may follow from completion of the Disposal Transaction.

H. REASONS FOR AND BENEFITS OF THE DISPOSAL TRANSACTION

As the performance of certain retail business sectors have shown indications of reaching their peaks, it is currently anticipated that this would result in a downturn in rental income in the retail sector. Decrease in Mainland China tourists’ spending also affects retail rental income. It is also anticipated that Hong Kong interest rate will follow the possible increase in interest rate of the United States of America this year, causing bank borrowing’s interest expenses to increase, which would in turn result in reduction of the net return from holding investment properties and therefore potentially less return to the Shareholders. As set out in the Company’s interim report for the six months ended 30 June 2014, the Properties’ average occupancy rate for the first half of 2014 was approximately 99.82% and it has accordingly reached a fully mature stage. Accordingly, the Company does not obviate the opportunity of disposing the Properties in order to seize the opportunity to maximise the return derived from the Properties.

Between 2012 and early 2014, the Sales and Leasing Department of the Group (the “ S&L Group ”) had been approached by property agents (the “ Agents ”) for the purpose of acquiring the Properties on behalf of their potential customers (the “ Customers ”). Although the Group did not have definitive intention of disposing the Properties at the relevant time, the S&L Group released rental information of the Properties to the Agents and/or the Customers, for the purpose of understanding market perception on the Properties. Non-disclosure agreements were signed by the Agents and/or the Customers before the S&L Group released rental information of the Properties to the Agents and/or the Customers for their analyses. After having received the rental information of the Properties, the Agents and/or the Customers presented indicative offers to the S&L Group. The S&L Group replied the Agents and/or the Customers that only written formal offers would be considered by the Group. No written formal offer has ever been received by the Group from the Agents or the Customers by the S&L Group. As such, the Group did not consider the indicative offers presented by the Agents and/or the Customers to be genuine offers for acquiring the Properties.

In November 2014, the Company was approached by Mr. Lau, a substantial Shareholder and a controlling Shareholder, with an offer to acquire the entire Properties through the Target Companies for a cash consideration determined by reference to the prevailing market values of the Properties as valued by the Independent Property Valuer.

In view of the fact that: (i) the effort of the Group leasing the Properties out fully with a view to maximising the rental income of the Properties has been completed; and (ii) the Group could fully concentrate on formulating its future development plan after completion of the Moon Ocean SP Agreement, the executive Directors decided to negotiate detailed terms with Mr. Lau, whom they regarded as a committed and capable purchaser already familiar with the Properties. Negotiations with Mr. Lau could proceed in a timely and effective manner and in complete confidence without disturbing the market and the executive Directors considered that there was a high degree of certainty that the Disposal Transaction will proceed to completion as planned.

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LETTER FROM THE BOARD

The Consideration was determined by reference to the market values of the Properties as at 30 November 2014 as valued by the Independent Property Valuer and will be paid entirely in cash. In addition, the structure of the Disposal Transaction is similar to the transactions contemplated under the Silvercord First SP Agreement. The SP Transactions (including the contemplated declaration of the Moon Ocean Special Dividend and the Silvercord Special Dividend (both as defined in the Previous Announcement)) were approved by the then Independent Shareholders by an overwhelming majority of approximately 99% vote in favour at the Company’s special general meeting held on 10 October 2014, indicating that Independent Shareholders were agreeable to the distribution of substantial special dividends. As such, the Board considers that accepting another offer of similar nature and terms will facilitate enhancement of return to the Shareholders. The Moon Ocean SP Agreement was completed on 31 October 2014 and the Moon Ocean Special Dividend (as defined in the Previous Announcement) of HK$2.55 per Share was paid to the Shareholders on or about 31 October 2014. Completion of the Silvercord SP Agreements is yet to take place. Following this successful model, the executive Directors currently intend that a majority part of the net sale proceeds derived from the Disposal Transaction may be used to pay the One Special Dividend to the Shareholders on or after the Completion Date, and the remaining net sale proceeds for general working capital of the Group, subject to the then financial and cashflow position of the Group at the respective point in time.

Taking into consideration of the aforementioned, the Board (including the independent nonexecutive Directors, after taking into account the opinion and advice from Gram Capital) considers that the terms of the Disposal Agreement are fair and reasonable and are on normal commercial terms, in the ordinary and usual course of business and in the interests of the Company and the Shareholders as a whole.

I. USE OF PROCEEDS

Based on the assumption that the Provisional Consideration will be the same as the Consideration, it is estimated that the net sale proceeds arising from the Disposal Transaction would be approximately (i) HK$7,774.4 million (with estimated sale proceeds of approximately HK$7,781.4 million, if the Bank Loan has been fully repaid prior to or upon completion of the Disposal Agreement and such repayment is fully or partially financed by additional Sale Loan provided after the date of the Disposal Agreement), after deducting the transaction costs related to the Disposal Transaction of approximately HK$7.0 million; or (ii) HK$4,650.3 million (with estimated sale proceeds of approximately HK$4,657.3 million, if the Bank Loan is still outstanding upon completion of the Disposal Agreement), after deducting the aforesaid transaction costs related to the Disposal Transaction.

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LETTER FROM THE BOARD

approved by the Independent Shareholders at the SGM, in anticipation that completion of the Disposal Agreement would take place, the Company may, prior to the Completion Date and subject to the then financial and cashflow position of the Group, declare and pay the Advance One Special Dividend in one or more phases out of the Group’s distributable profits to the Shareholders, which will be financed by the Group’s working capital. The aggregate amount of the Advance One Special Dividend and/or the One Special Dividend to be paid to the Shareholders shall not exceed the net sale proceeds of the Disposal Transaction. A small portion of such net sale proceeds will be used for general working capital of the Group. In this regard, the Disposal Transaction would enable the Shareholders to benefit from the Advance One Special Dividend and/or the One Special Dividend. The Board will take into account the then financial and cashflow position of the Group at the respective point(s) in time and the progress of the development of the Disposal Transaction before any such Advance One Special Dividend (if any) and/or One Special Dividend (if any) is proposed and declared.

As there is currently no imminent mega property development projects contemplated or other major projects which requires substantial cash investment in the near future, the Board considers that the distribution of the Advance One Special Dividend and/or the One Special Dividend (as the case may be), if materialises, is in the interests of the Company and the Shareholders as a whole. If the Company does not proceed with the distribution of the Advance One Special Dividend and/or the One Special Dividend, the net sale proceeds from the Disposal Transaction will be used for general working capital purpose. Further announcement(s) would be made by the Company in relation to the proposed distribution of the Advance One Special Dividend and/or the One Special Dividend, if any, as and when appropriate.

J. INFORMATION OF THE GROUP AND THE VENDOR

The Group is principally engaged in property investment and development, brokerage, securities investment, money lending and cosmetics distribution and trading. Rich Lucky is an investment holding company incorporated in BVI and an indirect wholly-owned subsidiary of the Company.

K. INFORMATION OF THE PURCHASER

Market Victory is an investment holding company wholly-owned and established by Mr. Lau for the purpose of holding the assets to be acquired under the Disposal Agreement.

L. INFORMATION OF THE ASSETS TO BE DISPOSED OF

Information of the Target Companies

Asian East is an investment holding company incorporated in BVI and a direct wholly-owned subsidiary of Rich Lucky. CE One is a property investment company incorporated in Hong Kong that owns the Properties and a direct wholly-owned subsidiary of Asian East. Lucky Winds is a company incorporated in BVI and a direct wholly-owned subsidiary of Asian East. After completion of the Disposal Agreement, Market Victory will become the beneficial owner of the entire issued share capital of Asian East, and each of the Target Companies will cease to be a subsidiary of the Company. As at the Latest Practicable Date, other than the Properties and certain pledged bank deposits, the Target Companies did not have any other material assets.

– 21 –

LETTER FROM THE BOARD

A summary of the unaudited consolidated results of the Target Companies for each of the two years ended 31 December 2012 and 2013 is set out below:–

	For the year ended	For the year ended
	31 December 2012	31 December 2013
	(HK$ million)	(HK$ million)
Turnover	313	352
Fair value changes on investment properties	1,187	685
Profit before taxation	1,366	897
Profit after taxation	1,366	897
Profit attributable to the equity holder	1,366	897

As at 30 September 2014, the unaudited consolidated net asset value of the Target Companies was approximately HK$1,884.5 million, the aggregate amount of the Sale Loan was approximately HK$2,062.2 million and the aggregate amount of the Assumed Debt was approximately HK$0.4 million.

Information of the Properties

CE One is the owner of the Properties, which details are set out below:–

The Properties	Usage	Attributable interests to the Group
The property known as “The ONE” situated at No. 100 Nathan Road, Kowloon, Hong Kong	Commercial	100%

M. LISTING RULES IMPLICATIONS

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LETTER FROM THE BOARD

As Mr. Lau, being a substantial Shareholder and a controlling Shareholder, who was interested in 1,430,700,768 Shares, representing approximately 74.99% of the total issued Shares as at the Latest Practicable Date, is the sole director and the sole beneficial owner of Market Victory, Mr. Lau and Market Victory are connected persons of the Company. Accordingly, the Disposal Transaction constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules, and is subject to the reporting, announcement and Independent Shareholders’ Approval requirements pursuant to Chapter 14A of the Listing Rules.

Each of Mr. Lau, Ming-wai, Ms. Chan, Sze-wan, Ms. Lui, Lai-kwan and Ms. Amy Lau, Yuk-wai is an associate of Mr. Lau, who is a substantial Shareholder and a controlling Shareholder, and the sole director and the sole beneficial owner of Market Victory. Notwithstanding that none of the Directors has a material interest in the Disposal Transaction, in view of their relationship with Mr. Lau, each of Mr. Lau, Ming-wai, Ms. Chan, Sze-wan, Ms. Lui, Lai-kwan and Ms. Amy Lau, Yuk-wai abstained from voting on the Board resolutions approving the Disposal Agreement and the Disposal Transaction. Save as disclosed above, no other Directors abstained from voting on the Board resolutions approving the Disposal Agreement and the Disposal Transaction.

N. THE INDEPENDENT FINANCIAL ADVISER AND THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising all of the 3 independent non-executive Directors, namely Mr. Chan, Kwok-wai, Ms. Phillis Loh, Lai-ping and Mr. Ma, Tsz-chun, has been formed to advise the Independent Shareholders in relation to the Disposal Agreement and the Disposal Transaction.

The Company has, with the approval of the Independent Board Committee, appointed Gram Capital as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in accordance with the requirements under the Listing Rules to advise the Independent Board Committee and the Independent Shareholders regarding the Disposal Agreement and the Disposal Transaction.

O. SGM

The Company will convene the SGM at Falcon Room, Basement, Gloucester Luk Kwok Hong Kong, 72 Gloucester Road, Wanchai, Hong Kong on Friday, 23 January 2015 at 10:00 a.m. to consider the Disposal Agreement and the Disposal Transaction. An ordinary resolution will be put to the vote by poll at the SGM pursuant to the Listing Rules. A notice of the SGM is set out on pages SGM-1 to SGM-2 of this circular.

Any Shareholder with a material interest in the Disposal Transaction and his/her/its associate(s) are required to abstain from voting on the resolution(s) approving the Disposal Agreement and the Disposal Transaction in accordance with the Listing Rules. Accordingly, Mr. Lau and his associate(s) will abstain from voting on the resolution(s) approving the Disposal Agreement and the Disposal Transaction.

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LETTER FROM THE BOARD

Further, pursuant to the Stock Exchange Undertaking, the Company has undertaken to the Stock Exchange that it will not enter into Specified Transaction(s) 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 12 months, exceed 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 substantial Shareholder and a controlling Shareholder and also the sole director and the sole beneficial owner of Market Victory, each of Mr. Lau and Market Victory is a Related Party for the purpose of the Stock Exchange Undertaking. The Disposal Transaction will therefore constitute a Specified Transaction and will be subject to approval by the Shareholders at a general meeting of the Company at which any Shareholder who is a Related Party will abstain from voting.

A form of proxy for use at the SGM is also enclosed. If you are not able to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s branch registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17M 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 appointed 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.

P. RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on pages IBC-1 to IBC-2 of this circular and the letter of advice from Gram Capital to the Independent Board Committee and the Independent Shareholders in connection with the Disposal Agreement and the Disposal Transaction as well as the principal factors and reasons considered by them in arriving at such advice set out on pages IFA-1 to IFA-16 in this circular.

The Directors (including the independent non-executive Directors whose views are set out on pages IBC-1 to IBC-2 of this circular), having taken into account the opinion and advice of Gram Capital, consider that the terms of the Disposal Agreement and the Disposal Transaction are fair and reasonable so far as the Independent Shareholders are concerned, and the Disposal Agreement and the Disposal Transaction are on normal commercial terms and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend the Independent Shareholders to vote in favour of the resolution(s) approving the Disposal Agreement and the Disposal Transaction contemplated thereunder at the SGM.

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LETTER FROM THE BOARD

Q. GENERAL

Shareholders and potential investors of the Company should note that completion of the Disposal Agreement is subject to the satisfaction of the Condition Precedent, namely, the obtaining of the Independent Shareholders’ Approval. Therefore, the Disposal Transaction may or may not proceed. Shareholders and potential investors of the Company are advised to exercise caution when dealing in securities of the Company, and are recommended to consult their professional advisers if they are in any doubt about their position and as to actions that they should take.

R. 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 Executive Director and Company Secretary

– 25 –

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:

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(Incorporated in Bermuda with limited liability)

(Stock Code: 127)

7 January 2015

To the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION IN RESPECT OF DISPOSAL OF A SUBSIDIARY

We refer to the circular issued by the Company to its Shareholders dated 7 January 2015 (the “ Circular ”) of which this letter forms part. Terms defined in the Circular have the same meanings when used in this letter unless the context otherwise requires.

As the Disposal Agreement was entered into within 12 months after the signing of the SP Agreements, and the Disposal Agreement and the SP Agreements were entered into by the Company with the same connected person and his associates, the Disposal Transaction and the SP Transactions will be aggregated pursuant to Rule 14A.81 of the Listing Rules. As one or more of the applicable percentage ratios under Chapter 14 of the Listing Rules for the Disposal Transaction as aggregated with the SP Transactions exceed 25% but are less than 75%, the Disposal Transaction (as aggregated with the SP Transactions) constitutes a major transaction for the Company. The Disposal Transaction also constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to the reporting, announcement and Independent Shareholders’ Approval requirements pursuant to Chapter 14A of the Listing Rules.

We have been appointed by the Board to consider the terms of the Disposal Agreement and the Disposal Transaction and to advise the Independent Shareholders in connection therewith and as to whether, in our opinion, the terms of the Disposal Agreement and the Disposal Transaction are fair and reasonable, and whether the Disposal Agreement and the Disposal Transaction are on normal commercial terms, in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole. Gram Capital has been appointed as the independent financial adviser to advise us in this respect.

IBC – 1

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

We wish to draw your attention to the letter from the Board and the letter from Gram Capital as set out in the Circular. Having considered the principal factors and reasons considered by, and the opinion and advice of, Gram Capital as set out in its letter of advice, we consider that the terms of the Disposal Agreement and the Disposal Transaction are fair and reasonable, and the Disposal Agreement and the Disposal Transaction are on normal commercial terms, in the ordinary and usual course of business of the Group. In view of the above, we consider that the Disposal Agreement and the Disposal Transaction are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution(s) approving the Disposal Agreement and the Disposal Transaction contemplated thereunder at the SGM.

Chan, Kwok-wai

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

Ma, Tsz-chun

IBC – 2

LETTER FROM GRAM CAPITAL

Set out below is the text of a letter received from Gram Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Disposal Agreement and the Disposal Transaction for the purpose of inclusion in this circular.

Room 1209, 12/F. Nan Fung Tower 173 Des Voeux Road Central Hong Kong

7 January 2015

To: The independent board committee and the independent shareholders of Chinese Estates Holdings Limited

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION – DISPOSAL OF A SUBSIDIARY

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Disposal Agreement and the Disposal Transaction, details of which are set out in the letter from the Board (the “ Board Letter ”) contained in the circular dated 7 January 2015 issued by the Company to the Shareholders (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 12 December 2014, Rich Lucky (being an indirect wholly-owned subsidiary of the Company) as vendor, the Company as vendor guarantor, Market Victory (a company which is indirectly wholly owned by Mr. Lau) as purchaser and Mr. Lau as purchaser guarantor entered into the Disposal Agreement relating to, among other things, the sale and purchase of the entire issued share capital of Asian East, which also holds 100% equity interests in each of CE One and Lucky Winds, at the cash Consideration of HK$9,000 million at maximum. As at the Latest Practicable Date, other than the Properties and certain pledged bank deposits, the Target Companies did not have any other material assets.

With reference to the Board Letter, the Disposal Transaction constitutes a major and connected transaction for the Company under Chapters 14 and 14A of the Listing Rules respectively. As such, the Disposal Transaction is subject to the reporting, announcement, circular and Independent Shareholders’ Approval requirements under the Listing Rules. Moreover, the Disposal Transaction constitutes a Specified Transaction and will be subject to approval by the Shareholders at a general meeting of the Company at which any Shareholder who is a Related Party will abstain from voting.

IFA – 1

LETTER FROM GRAM CAPITAL

The Independent Board Committee comprising Mr. Chan, Kwok-wai, Ms. Phillis Loh, Lai-ping and Mr. Ma, Tsz-chun (all being independent non-executive Directors) has been established to advise the Independent Shareholders on (i) whether the terms of the Disposal Agreement and the Disposal Transaction are fair and reasonable; (ii) whether the Disposal Agreement and the Disposal Transaction are on normal commercial terms; (iii) whether the Disposal Agreement and the Disposal Transaction are in the interests of the Company and the Shareholders as a whole and are conducted in the ordinary and usual course of business of the Group; and (iv) how the Independent Shareholders should vote in respect of the resolution(s) to approve the Disposal Agreement and the Disposal Transaction at the SGM. We, Gram Capital Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors. We have assumed that all information and representations that have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us. Our opinion is based on the Directors’ representation and confirmation that there are no undisclosed private agreements/arrangements or implied understanding with anyone concerning the Disposal Transaction. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules.

We have not made an independent evaluation or appraisal of the assets and liabilities of either the Group or the Target Companies and we have not been furnished with any such evaluation or appraisal, save and except for the valuation report dated 30 November 2014 prepared by the Independent Property Valuer in respect of the Properties (the “ Valuation Report ”). The Valuation Report was prepared in accordance with The HKIS Valuation Standards (2012 Edition) published by the Hong Kong Institute of Surveyors as well as the requirements as stipulated under Chapter 5 of the Listing Rules. We are not experts in the valuation of properties and therefore have relied solely upon the Valuation Report for the market value of the Properties as at 30 November 2014.

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LETTER FROM GRAM CAPITAL

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, which to the best of their knowledge and belief, that the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in the Circular or the Circular misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent indepth investigation into the business and affairs of the Company, the Target Companies, Rich Lucky, Market Victory and Mr. Lau or their respective subsidiaries or associates (if applicable), nor have we considered the taxation implication on the Group or the Shareholders as a result of the Disposal Agreement and the Disposal Transaction. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. In addition, nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, it is the responsibility of Gram Capital to ensure that such information has been correctly extracted from the relevant sources while we are not obligated to conduct any independent in-depth investigation into the accuracy and completeness of those information.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Disposal Agreement and the Disposal Transaction, we have taken into consideration the following principal factors and reasons:

1. Background of and reasons for the Disposal Transaction

Information on the Group

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

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LETTER FROM GRAM CAPITAL

Set out below are the latest key financial information of the Group as extracted from the Company’s 2013 annual report (the “ 2013 Annual Report ”) and its 2014 interim report (the “ 2014 Interim Report ”):

	For the
	year ended
	31 December
	2013
	HK$’000
Revenue from continuing operations (audited)	6,452,726
– Property rental income	1,791,257
– Sales of properties held for sale	4,651,665
– Losses on sales of investments held-for-trading	(44,399)
– Interest income from loan financing	35,648
– Brokerage and cosmetic income	18,555
Profit for the year from continuing operations (audited)	6,501,121
	As at
	30 June 2014
	HK$’000
Net asset value (unaudited)	48,521,077

Business review of the Group

Property investment

Rental income from investment properties is one of the major sources of the Group’s revenue. According to the 2014 Interim Report, the overall occupancy rate of the Group’s retail portfolio in Hong Kong was approximately 98.98% during the six months ended 30 June 2014 and the retail rents were generally raised in the first half of 2014.

As at the Latest Practicable Date, the Group’s major continuing retail properties held for rental purpose included “Causeway Place”, “Windsor House”, “The ONE” (i.e. the Properties), “Olympian City 3” (which the Group is effectively sharing 25% interest) and “Coronation Circle” (which the Group is effectively sharing 15% interest). Located in Causeway Bay, the average occupancy rates of the shops of “Causeway Place” (excluding those disposed of) and “Windsor House” were approximately 83.34% and 98.45% respectively for the six months ended 30 June 2014. The average occupancy rate of “The ONE” was approximately 99.82% for the six months ended 30 June 2014. As for “Olympian City 3” and “Coronation Circle”, being the retail mall in “The Hermitage” residences and “The Coronation” residences located in West Kowloon Reclamation Area respectively, all the shops were fully let out and the occupancy rate was approximately 63.65% as at 30 June 2014 respectively.

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LETTER FROM GRAM CAPITAL

The occupancy rate of the Group’s office properties maintained a high level throughout the first half of 2014. During the said period, the average occupancy rates of “Windsor House”, “MassMutual Tower” and “Harcourt House” were approximately 92.06%, 97.35% and 99.44% respectively.

The Group also holds several properties for rental purpose in the PRC and they are located in prime cities such as Chengdu, Shenzhen, Shanghai and Beijing. Besides the aforesaid, the Group’s overseas property investment includes a freehold office building in London of the United Kingdom and it was fully let out as at 30 June 2014.

Property development

For the year ended 31 December 2013, approximately 72% of the Group’s revenue was derived from sales of properties held for sale.

With reference to the 2013 Annual Report as well as the 2014 Interim Report, the Group’s property development projects in Hong Kong had been progressing satisfactorily and the sales had been achieving pleasing results in both 2013 and the first half of 2014.

At the same time, the Group is in the course of developing several property projects which are located in Chengdu and Chongqing of the PRC. As advised by the Directors, in the transformation of the economic growth mechanism, the PRC government timely implemented several stimulative policies to ensure that the economy is operating within a reasonable range. In addition, under the decentralisation and market-oriented principal, administrative intervention measures such as restriction on property purchasing have been gradually relaxed, which will benefit the long-term healthy development of the property industry in the PRC. The Group believes that the economic growth of the PRC will be steadily maintained. Following reforms on land, fiscal and tax and as the policies for housing supply system are executed by the PRC government, a more mature and market based mechanism will firm up. In this connection, the Group is optimistic about the property market in the PRC.

Information on the Target Companies

The Target Companies comprise Asian East, CE One and Lucky Winds. As disclosed in the Board Letter, Asian East is an investment holding company incorporated in BVI and a direct wholly-owned subsidiary of Rich Lucky. CE One is a property investment company incorporated in Hong Kong which owns 100% interest of the Properties and a direct whollyowned subsidiary of Asian East. Lucky Winds is a company incorporated in BVI and a direct wholly-owned subsidiary of Asian East. As at the Latest Practicable Date, other than the Properties and certain pledged bank deposits, the Target Companies did not have any other material assets.

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LETTER FROM GRAM CAPITAL

As also disclosed in the Board Letter, the Target Companies recorded unaudited consolidated turnover and net profit of approximately HK$352 million and HK$897 million respectively for the year ended 31 December 2013. As at 30 September 2014, the unaudited consolidated net asset value of the Target Companies was approximately HK$1,884.5 million, the aggregate amount of the Sale Loan was approximately HK$2,062.2 million and the aggregate amount of the Assumed Debt was approximately HK$0.4 million.

CE One is the sole owner of the Properties, i.e. “The ONE” situated at No. 100 Nathan Road, Kowloon, Hong Kong, which is for commercial use.

Reasons for the Disposal Transaction and use of proceeds

Reasons for the Disposal Transaction

As represented by the Directors, as the performance of certain retail business sectors has shown indications of reaching their peaks, it is currently anticipated that this would result in a downturn in rental income in the retail sector. Decrease in mainland China tourists’ spending also affects retail rental income. It is also anticipated that Hong Kong interest rate will follow the possible increase in interest rate of the United States of America this year, causing bank borrowing’s interest expenses to increase, which would in turn result in reduction of the net return from holding investment properties and therefore potentially less return to the Shareholders. As set out in the 2014 Interim Report and aforementioned, the Properties’ average occupancy rate for the first half of 2014 was approximately 99.82% and has reached a fully mature stage. Accordingly, the Company does not obviate the opportunity of disposing the Properties in order to seize the opportunity to maximise the return derived from the Properties.

After having received the rental information of the Properties, the Agents and/or the Customers presented indicative offers to the S&L Group. The S&L Group replied to the Agents and/or the Customers that only written formal offers would be considered by the Group. No written formal offer has ever been received by the S&L Group. As such, the Group did not consider the indicative offers presented by the Agents and/or the Customers to be genuine offers for acquiring the Properties.

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LETTER FROM GRAM CAPITAL

In November 2014, the Company was approached by Mr. Lau, a substantial shareholder and a controlling shareholder (as defined in the Listing Rules) of the Company, with an offer to acquire the entire Properties through the Target Companies for a cash consideration determined by reference to the prevailing market values of the Properties as valued by the Independent Property Valuer. In view of the fact that (i) the effort of the Group leasing the Properties out fully with a view to maximising the rental income of the Properties has been completed; and (ii) the Group could fully concentrate on formulating its future development plan after completion of the Moon Ocean SP Agreement, the executive Directors decided to negotiate detailed terms with Mr. Lau, whom they regarded as a committed and capable purchaser already familiar with the Properties. Negotiations with Mr. Lau could proceed in a timely and effective manner and in complete confidence without disturbing the market and the executive Directors considered that there was a high degree of certainty that the Disposal Transaction will proceed to completion as planned.

The Consideration was determined by reference to the market value of the Properties as at 30 November 2014 as valued by the Independent Property Valuer and will be paid entirely in cash. Furthermore, the structure of the Disposal Transaction is similar to the transactions contemplated under the Silvercord First SP Agreement. The SP Transactions (including the contemplated declaration of the Moon Ocean Special Dividend and the Silvercord Special Dividend (both as defined in the Previous Announcement)) were approved by the then independent shareholders of the Company by an overwhelming majority of approximately 99% vote in favour at the Company’s special general meeting held on 10 October 2014, indicating that the then independent shareholders of the Company were agreeable to the distribution of substantial special dividends. As such, the Board considers that accepting another offer of similar nature and terms will facilitate enhancement of return to the Shareholders. The Moon Ocean SP Agreement was completed on 31 October 2014 and the Moon Ocean Special Dividend of HK$2.55 per Share was paid to the Shareholders on or about 31 October 2014. Completion of the Silvercord SP Agreements is yet to take place. On 16 December 2014, the Board further resolved to declare the Silvercord Special Dividend of HK$4.00 per Share, payable to the Shareholders on or about 13 January 2015.

Following the said successful model, the executive Directors currently intend that a majority part of the net sale proceeds derived from the Disposal Transaction may be used to pay the One Special Dividend to the Shareholders on or after the Completion Date, and the remaining net sale proceeds for general working capital of the Group, subject to the then financial and cashflow position of the Group at the respective point in time.

IFA – 7

LETTER FROM GRAM CAPITAL

From our independent research, we noted that it is a worldwide market perception that the Federal Reserve Board will be raising the interest rate of the United States of America in the coming future. Under the current pegged exchange rate system adopted by the Hong Kong government, the interest rate of Hong Kong would likely to follow suit. As such, the net return from holding investment properties of the Group may be reduced. In addition, we have studied the 2013 Annual Report and the 2014 Interim Report with regard to the principal businesses of the Group and their respective business performance in 2013 and the first half of 2014. As we have illustrated under the section headed “Business review of the Group” of this letter, the Properties is one of the various investment properties within the Group’s investment property portfolio and the Group also engages in businesses other than property leasing. In this regard, we have further requested the Company to provide us with the Calculations (as defined in the latter section of this letter) to demonstrate that the remaining assets, profits and revenue of the Group (i.e. excluding those related to the businesses under the Disposal Transaction as well as the SP Transactions) are substantial.

On the other hand, we noted that the SP Transactions were not only well received by the Shareholders, but also the public investors, given that the closing price of the Shares rose from around HK$20 per Share on the trading days before the date of the Previous Announcement to HK$23.7 per Share on the trading day after the date of the Previous Announcement. The Company announced the Board’s decision to declare the Moon Ocean Special Dividend on 8 October 2014, on which day the market price of the Shares closed at HK$23.1 per Share. On 10 October 2014, being the date of the Company’s special general meeting to approve the SP Transactions, the closing price of the Shares increased to HK$25.25 per Share and remained at above HK$25 per Share during the subsequent consecutive trading days.

Use of proceeds

IFA – 8

LETTER FROM GRAM CAPITAL

Subject to the then financial and cashflow position of the Group at completion of the Disposal Agreement and assuming the Disposal Transaction shall have been approved by the Independent Shareholders at the SGM, it is currently intended that the majority part of the net sale proceeds which may be generated from the Disposal Transaction may be used to pay the One Special Dividend to the Shareholders on or after completion of the Disposal Agreement (which is scheduled under the Disposal Agreement to be on or before 31 December 2015). Furthermore, if the Disposal Transaction shall have been approved by the Independent Shareholders at the SGM, in anticipation that completion of the Disposal Agreement would take place, the Company may, prior to the Completion Date and subject to the then financial and cashflow position of the Group, declare and pay the Advance One Special Dividend in one or more phases out of the Group’s distributable profits to the Shareholders, which will be financed by the Group’s working capital.

The aggregate amount of the Advance One Special Dividend and/or the One Special Dividend to be paid to the Shareholders shall not exceed the net sale proceeds of the Disposal Transaction. A small portion of such net sale proceeds will be used for general working capital of the Group. In this regard, the Disposal Transaction would enable the Shareholders to benefit from the Advance One Special Dividend and/or the One Special Dividend. The Board will take into account the then financial and cashflow position of the Group at the respective point in time and the progress of the development of the Disposal Transaction before any such Advance One Special Dividend (if any) and/or One Special Dividend (if any) is proposed and declared. If the Company does not proceed with the distribution of the Advance One Special Dividend and/or the One Special Dividend, the net sale proceeds from the Disposal Transaction will be used for general working capital purpose.

Taking into account that (i) the SP Transactions had been well received by the then independent shareholders of the Company and the public investors and the Disposal Transaction follows the successful model of the SP Transactions; (ii) the possible distribution of the Advance One Special Dividend and/or the One Special Dividend using the net sale proceeds from the Disposal Transaction would be beneficial to the Shareholders; (iii) the Properties have been leased out almost fully and hence the maximisation of rental income of the Properties by the Group has been completed; (iv) the Directors expected that the Group would be facing potential downturn in rental income in the retail sector and reduction of the net return from holding investment properties due to the anticipated increase of Hong Kong interest rate; and (v) as set forth under the section headed “Business review of the Group” of

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LETTER FROM GRAM CAPITAL

this letter and will be further elaborated under the section headed “Possible financial effects of the Disposal Transaction” of this letter, the Properties is one of the investment properties within the Group’s investment property portfolio and the Group also engages in businesses other than property leasing, we concur with the Directors that the Disposal Transaction is in the interests of the Company and the Shareholders as a whole. In addition, in light of the fact that the Group is principally engaged in, amongst others, property investment, we concur with the Directors that the Disposal Transaction is conducted in the ordinary and usual course of business of the Group.

2. Principal terms of the Disposal Agreement

On 12 December 2014, Rich Lucky as vendor, the Company as vendor guarantor, Market Victory as purchaser and Mr. Lau as purchaser guarantor have entered into the Disposal Agreement, pursuant to which Rich Lucky agreed to sell and Market Victory agreed to purchase the Sale Share, representing the entire issued share capital of Asian East which also holds 100% equity interests in each of CE One and Lucky Winds, and the Sale Loan at the Consideration.

As at 30 September 2014, the Sale Loan amounted to approximately HK$2,062.2 million. In consideration for the sale or procurement of the sale of the Sale Share and the assignment or procurement of the assignment of the Sale Loan by Rich Lucky to Market Victory or its nominee(s), Market Victory further agreed to assume or procure (through its nominee(s)) to assume the obligation of repayment of the Assumed Debt (if any) upon completion of the Disposal Agreement. As at 30 September 2014, the Assumed Debt amounted to approximately HK$0.4 million.

The Consideration

Pursuant to the Disposal Agreement, the Consideration shall be equal to the aggregate

of:

(a) the consolidated net asset value or liability of the Target Companies (for the purpose of ascertaining such net asset value or liability, Market Victory acknowledges and accepts that the Properties shall have a value of HK$7,880 million (being the market value of the Properties as at 30 November 2014 valued by the Independent Property Valuer) (the “ Valuation ”) in the Completion Accounts); and
(b) the aggregate face amount of the Sale Loan, less the aggregate face amount of the Assumed Debt.

IFA – 10

LETTER FROM GRAM CAPITAL

The Consideration is subject to a cap amount of HK$9,000 million. Moreover, based on the unaudited consolidated accounts of the Target Companies, (i) the unaudited consolidated net asset value of the Target Companies was approximately HK$2,595.5 million (having included the Valuation of HK$7,880 million) as at 30 September 2014; (ii) the aggregate face amount of the Sale Loan (if the Bank Loan has been fully repaid prior to or upon completion of the Disposal Agreement and such repayment is fully or partially financed by additional Sale Loan provided after the date of the Disposal Agreement) would be approximately HK$5,186.3 million or (if the Bank Loan is still outstanding upon completion of the Disposal Agreement) would be approximately HK$2,062.2 million as at 30 September 2014; and (iii) the aggregate face amount of the Assumed Debt was approximately HK$0.4 million as at 30 September 2014. We also understand that the Directors expected that there would be an increase in the aggregate amount of the consolidated net asset value of the Target Companies and the Sale Loan after deducting the Assumed Debt of approximately HK$384.4 million from 1 October 2014 up to the Completion Date. Thus, the Consideration (if the Bank Loan has been fully repaid prior to or upon completion of the Disposal Agreement and such repayment is fully or partially financed by additional Sale Loan provided after the date of the Disposal Agreement) would be approximately HK$8,165.8 million or (if the Bank Loan is still outstanding upon completion of the Disposal Agreement) would be approximately HK$5,041.7 million.

In light of that the Consideration was determined with reference to the market value of the Properties as evaluated by the Independent Property Valuer and the remaining assets and liabilities of the Target Companies as well as the aggregate amount of the Sale Loan (less the aggregate amount of the Assumed Debt) were set at their face value on a dollar-to-dollar basis, we are of the view that the aforesaid formula for calculating the Consideration is fair and reasonable.

The Valuation

To further assess the fairness and reasonableness of the Consideration, we have reviewed the Valuation Report and discussed with the Independent Property Valuer regarding the methodology adopted and the basis and assumptions used in arriving at the Valuation. In the course of our discussion, we noted that the Independent Property Valuer carried out a site visit to the Properties on 8 December 2014 to research for the necessary information for determining the market value of the Properties. Based on the Valuation Report, the Independent Property Valuer has adopted the investment method, which is under the market approach for the Valuation. As further confirmed by the Independent Property Valuer, the market approach is commonly adopted for valuation of properties in Hong Kong and is also consistent with normal market practice. For our due diligence purpose, we have reviewed and enquired into (i) the terms of engagement of the Independent Property Valuer with the Company; (ii) the Independent Property Valuer’s qualification and experience in relation to the preparation of the Valuation Report; and (iii) the steps and due diligence measures taken

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LETTER FROM GRAM CAPITAL

by the Independent Property Valuer for conducting the Valuation. From the mandate letter and other relevant information provided by the Independent Property Valuer and based on our interview with it, we are satisfied with the terms of engagement of the Independent Property Valuer as well as its qualification and experience for preparation of the Valuation Report. The Independent Property Valuer has also confirmed that it is independent to the Group, the Target Companies, Rich Lucky, Market Victory and Mr. Lau.

Further details of the basis and assumptions of the Valuation are included in the Valuation Report as contained in Appendix II to the Circular. During our discussion with the Independent Property Valuer, we have not identified any major factors which cause us to doubt the fairness and reasonableness of the principal basis and assumptions adopted for or the information used in the Valuation. Nevertheless, Shareholders should note that valuation of assets or properties usually involves assumptions and therefore the Valuation may or may not reflect the true market value of the Properties accurately.

In view of the above basis for calculation of the Consideration (including the Valuation), we consider that the Consideration is fair and reasonable so far as the Independent Shareholders are concerned.

The Provisional Consideration

At completion of the Disposal Agreement, Market Victory shall pay to Rich Lucky the Provisional Consideration. The difference between the Provisional Consideration and the Consideration will be settled in cash or cheque within seven Business Days after the Completion Accounts having become available.

The Provisional Consideration (if the Bank Loan has been fully repaid prior to or upon completion of the Disposal Agreement and such repayment is fully or partially financed by additional Sale Loan provided after the date of the Disposal Agreement) of approximately HK$7,781.4 million or (if the Bank Loan is still outstanding upon completion of the Disposal Agreement) of approximately HK$4,657.3 million equals to the aggregate of the unaudited consolidated net asset value of the Target Companies as at 30 September 2014 taking into account the Valuation and the unaudited figures of the amounts of the Sale Loan less the Assumed Debt as at 30 September 2014.

Since certain time is required for preparation of the Completion Accounts, we concur with the Directors that the payment terms above are acceptable.

The Deposits

IFA – 12

LETTER FROM GRAM CAPITAL

Furthermore, Market Victory may elect to settle the Provisional Consideration (or any part thereof) by procuring certain Shareholders to apply their Dividend Entitlements, subject to completion of the Disposal Agreement, towards the payment of the Provisional Consideration and the Company will be authorised and instructed to pay such Dividend Entitlements to Rich Lucky, in lieu of such Shareholders, to settle the Provisional Consideration to the extent of the aggregate amount of such Dividend Entitlements. We understand from the Directors that the certain Shareholders as aforementioned would likely to be Global King and JLLHIL.

Undertakings and indemnity

In the event that upon completion of the Disposal Agreement, the MTR Guarantee shall not have been terminated or substituted as aforesaid, pursuant to the Disposal Agreement, Mr. Lau shall, amongst others, counter indemnify the Company for, amongst others, all losses and liabilities suffered, incurred or payable by the Company in relation to or in connection with or arising out of any breach under any of the MTR Documents as a result of the default of CE One after completion of the Disposal Agreement until termination or full release of the MTR Guarantee or the MTR Substitution Guarantee (if executed) becoming effective. In the event that there is any claim made by MTR against CE One or any other Target Companies after completion of the Disposal Agreement arising from any breach of any of the MTR Documents by CE One or any other member of the Group occurring before completion of the Disposal Agreement, Rich Lucky shall indemnify Market Victory and the Target Companies against, amongst others, all losses and liabilities suffered or properly and reasonably incurred or payable by Market Victory and/or the Target Companies arising from or otherwise in connection therewith.

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LETTER FROM GRAM CAPITAL

We are of the opinion that the aforesaid undertakings and indemnity would safeguard the interest of the Company and hence are favourable to the Company.

3. Non-competition undertaking by Mr. Lau

(a) the Relevant Owner has notified the Company (or any person designated by the Company from time to time to receive notification from the Relevant Owner for such purpose) the opportunity for the Potential Lease and referred the Potential Tenant to the Group for a potential lease, tenancy or license of the retail properties in Tsim Sha Tsui, Hong Kong owned by the Group, except that no such notification and referral need to be made by the Relevant Owner if the Potential Tenant disagrees with or refuses to such notification and referral (in which case the Relevant Owner shall be free to take up the Potential Lease); and
(b) following the notification and referral mentioned in paragraph (a) above, the Group has decided not to accept the Potential Tenant for the lease, tenancy or licence of its retail properties in Tsim Sha Tsui, Hong Kong and conveyed its decline decision to the Relevant Owner or the Group has not notified in writing to the Relevant Owner its decision to accept the Potential Tenant within three weeks of the notification and referral mentioned in paragraph (a) above.

Shareholders may also refer to the section headed “Competing interests” of the Board Letter with regard to the measures which the Company proposes to adopt to monitor the compliance of the above undertakings.

We concur with the Directors that the above undertaking and measures would be able to resolve the potential competition and conflict of interest between Mr. Lau or his close associate(s) and the Group that may follow after completion of the Disposal Transaction and thus are favourable to the Company.

4. Possible financial effects of the Disposal Transaction

As advised by the Directors, after completion of the Disposal Agreement, the Target Companies will cease to be subsidiaries of the Company, and their financial results, assets and liabilities will cease to be consolidated with the consolidated financial statements of the Group.

IFA – 14

LETTER FROM GRAM CAPITAL

As disclosed in the relevant disclosure in the section headed “Effect of the Disposal Transaction” of the Board Letter, it is estimated that the Group will not record net material gain or loss on the Disposal Transaction, save for the transaction costs related to the Disposal Transaction of approximately HK$7.0 million which will be included in the gain or loss on disposal. Nonetheless, the actual net gain or loss on completion of the Disposal Agreement might be different given that the above estimate is based on (i) the net asset value of the Target Companies (taking into account the Valuation); and (ii) the Sale Loan and the Assumed Debt as at 30 September 2014, which might be different from those on the Completion Date. Overall speaking, the Directors are of the view that the Disposal Transaction would have no material effects on the net asset value of the Group.

On the other hand, the Directors expected that the level of borrowings of the Group shall be reduced after completion of the Disposal Agreement, and this will result in lower finance costs to be incurred by the Group after completion of the Disposal Agreement. Moreover, rental income of the Target Companies will not be recorded in the consolidated financial statements of the Group following completion of the Disposal Agreement, and this will lead to a drop of rental income of the Group.

Resulting from the reduction in the level of borrowings of the Group after completion of the Disposal Agreement whilst the net asset value of the Group shall remain relatively unchanged, the Directors expected that the gearing level of the Group would be reduced after completion of the Disposal Agreement.

As also confirmed by the Directors, upon completion of the Disposal Agreement, the Group will continue its existing business activities other than those related to the Properties. The Disposal Transaction, as aggregated with the SP Transactions, represents approximately 35.0%, 35.6% and 14.7% of the total assets of the Group as at 30 June 2014 as adjusted in accordance with Rule 14.16 of the Listing Rules (the “ Total Assets ”), net profits of the Group for the year ended 31 December 2013 as adjusted in accordance with Rule 14.17 of the Listing Rules (the “ Net Profits ”) and total revenue of the Group for the year ended 31 December 2013 as adjusted in accordance with Rule 14.17 of the Listing Rules (the “ Total Revenue ”) respectively. The remaining businesses of the Group account for approximately 65.0%, 64.4% and 85.3% of the Total Assets, Net Profits and Total Revenue respectively. After completion of the Disposal Transaction (as aggregated with the SP Transactions), the remaining Total Assets, Net Profits and Total Revenue will amount to approximately HK$43.85 billion, HK$4.48 billion and HK$5.51 billion respectively (all of the above, the “ Calculations ”). For this reason, the Directors consider that the remaining assets, profits and revenue of the Group are substantial and sufficient to warrant the continued listing of the Shares.

IFA – 15

LETTER FROM GRAM CAPITAL

We understand from the Directors that the Properties is one of the 19 principal investment properties within the Group’s investment property portfolio based on the 2013 Annual Report. The Group functions as a conglomerate which engages in various businesses other than property leasing. Upon completion of the Disposal Agreement, the Group will continue with its existing business activities other than those related to the Properties, and its principal activities will continue to be property investment and development, brokerage, securities investment, money lending and cosmetics distribution and trading. The Group may also further explore into property investment and development in the PRC as the Group is optimistic about the property market in the PRC.

It should be noted that the aforementioned analyses are for illustrative purpose only and do not purport to represent how the financial position of the Group will be upon completion of the Disposal Agreement.

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of the Disposal Agreement and the Disposal Transaction are fair and reasonable; (ii) the Disposal Agreement and the Disposal Transaction are on normal commercial terms, conducted in the ordinary and usual course of business of the Group and 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 resolution(s) to be proposed at the SGM to approve the Disposal Agreement and the Disposal Transaction, and we recommend the Independent Shareholders to vote in favour of the resolution(s) in this regard.

Yours faithfully, For and on behalf of

Gram Capital Limited Graham Lam Managing Director

IFA – 16

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

Details of the financial information of the Group for each of the three years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2014 are disclosed in the annual reports of the Company for the years ended 31 December 2011, 2012 and 2013 and the interim report of the Company for the six months ended 30 June 2014 respectively. These annual and interim reports are published on the website of the Stock Exchange (http://www.hkexnews.hk) and the website of the Company (http://www.chineseestates.com):

annual report of the Company for the year ended 31 December 2011 published on 24 April 2012 (pages 71 – 212);
annual report of the Company for the year ended 31 December 2012 published on 19 April 2013 (pages 83 – 232);
annual report of the Company for the year ended 31 December 2013 published on 14 April 2014 (pages 79 – 241); and
interim report of the Company for the six months ended 30 June 2014 published on 24 September 2014 (pages 2 – 36).

2. INDEBTEDNESS

Borrowings

As at the close of business on 30 November 2014, being the latest practicable date for the purpose of this indebtedness prior to the printing of this circular, the Group had outstanding borrowings as follow:

Secured bank loans Other secured loans Amounts due to associates Amounts due to investee companies Amounts due to non-controlling shareholders	30 November 2014 HK$’000 16,566,993 1,828,726 58,419 27,085 478,256
	18,959,479

The bank loans and the other loans were secured by the Group’s investment properties, other fixed assets, investments held-for-trading, bonds and pledged deposits.

I – 1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Guarantees

As at 30 November 2014, the Group continued to provide (i) financial guarantees on banking facilities granted to the Company’s subsidiaries and associates; (ii) repurchase guarantee given to banks for mortgage facilities given to certain property purchasers; and (iii) rental guarantee of certain disposed properties to certain purchasers. Details of the guarantees are as follow:

Guarantees given to banks in respect of banking facilities utilised by associates Guarantees given to a bank in respect of banking facilities in lieu of the cash public utility deposit jointly utilised by subsidiaries Repurchase guarantee given to banks in respect of mortgages facilities given to property purchasers by subsidiaries Rental guarantee given to certain property purchasers of a subsidiary	30 November 2014 HK$’000 829,592 15,000 17,904 31,136
	893,632

Guarantees given to banks in respect of banking facilities
utilised by associates
Guarantees given to a bank in respect of banking facilities
in lieu of the cash public utility deposit jointly utilised
by subsidiaries
Repurchase guarantee given to banks in respect of mortgages
facilities given to property purchasers by subsidiaries
Rental guarantee given to certain property purchasers
of a subsidiary

30 November 2014
HK$’000
829,592
15,000
17,904
31,136

893,632

Save as aforesaid and apart from intra-group liabilities and normal trade payables in the ordinary course of the business of the Group, as at the close of business on 30 November 2014, the Group did not have other outstanding mortgages, charges, debentures or other loan capital, bank overdrafts or loans, other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptance or acceptance credits, guarantees or other material contingent liabilities.

3. MATERIAL ADVERSE CHANGE

The Directors confirm that they were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2013, being the date to which the latest published audited accounts of the Group were made up to, up to and including the Latest Practicable Date, save as disclosed in:–

(i) the profit warning announcement of the Company and the latest interim report of the Company published on 8 August 2014 and 24 September 2014 respectively, the Group recorded a decline in revenue and decrease in profit for the six months ended 30 June 2014 as compared with the six months ended 30 June 2013. It was primarily due to absence of completion of development projects and decrease in the fair value gain on investment properties;

I – 2

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) the major and connected transactions announcement of the Company published on 2 September 2014 in respect of the disposal of subsidiaries of the Company. Following anticipated completion of the Silvercord SP Agreements, rental income from Silvercord properties will no longer be included in the consolidated statement of comprehensive income of the Group upon completion of the Silvercord SP Agreements, it is expected that it will lead to a drop of rental income and net profits of the Group;
(iii) the declaration of special dividend announcement of the Company published on 10 October 2014 in respect of the Moon Ocean Special Dividend (as defined in the Previous Announcement) and payment of the Moon Ocean Special Dividend (as defined in the Previous Announcement) on or about 31 October 2014, the Group has recorded a decrease in working capital, total assets and net assets since 10 October 2014;
(iv) the declaration of special dividend announcement of the Company published on 16 December 2014 in respect of the Silvercord Special Dividend (as defined in the Previous Announcement), which is expected to be paid on or about 13 January 2015, the Group has recorded a decrease in working capital, total assets and net assets since 16 December 2014; and
(v) the voluntary announcement of the Company published on 2 January 2015 in respect of the recognition of the realised loss on securities investments in the profit or loss of the Group for the year ended 31 December 2014, as a result of the disposal of certain listed securities investments by the Group during the year 2014.

4. WORKING CAPITAL

The Directors are of the opinion that, after taking into account of the Group’s internal resources, cash flow from operations, the present facilities available and also the effect of the Disposal Transaction, the Group will have sufficient working capital to satisfy its present requirements, that is, for at least the next 12 months from the date of this circular in the absence of unforeseen circumstances.

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Given the dissipation of the negative factors, the economic environment of the United States of America and the European countries are improving. The Group believes that any change to the global monetary policies in future is likely to be gradual and at a controlled pace. In this respect, the global economy is looking less fluctuating and is expected to continue recover in the times ahead. It is anticipated that the interest rate of the United States of America will probably increase this year and the interest rate of Hong Kong will follow under the current pegged exchange rate system adopted by the Hong Kong government.

I – 3

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group sees promising future in its core businesses. The Group’s retail investment properties consistently recorded satisfactory rental growth, however, rental rates for certain retail business sectors have showed the sign of reaching the peak. In light of changing consumption patterns, the Group is keen to conduct periodic reviews of the tenant mix of its prime shopping malls so as to introduce more popular restaurants, trendy fashion and attractive brands to further boost customer flow and spending. It is expected that the Group will continue to enjoy stable rental growth.

So far, the Group’s office properties continued to record high occupancy rate except the office properties in Chengdu which offer for lease in late 2014. With the solid demand for quality commercial premises in prime locations, it is expected that the Group’s office properties will continue to lease well.

Government policies will remain a major factor in determining the direction of the local property market. Nevertheless, the demand for local residential properties remains strong. The Group expects its property development business in Hong Kong will be optimistic.

In the transformation of the economic growth mechanism, the Central Government timely implemented several stimulative policies to ensure that the economy is operating within a reasonable range. In addition, under the decentralisation and market-oriented principal, administrative intervention measures such as restriction on property purchasing have been gradually relaxed, which will benefit for the long-term healthy development of the property industry in the PRC. The Group believes that the economic growth of the PRC will be steadily maintained. Following the reforms on land, fiscal and tax and as the policies for housing supply system are executed by the Central Government, a more mature and market based mechanism will firm up. In this connection, the Group is optimistic about the property market in the PRC.

The Group will continue observing the property markets of Hong Kong, the PRC and overseas and will replenish its land bank and expand its investment property portfolio if opportunities arise.

I – 4

PROPERTY VALUATION REPORT ON THE PROPERTIES

APPENDIX II

The following is the text of a letter and valuation certificate prepared for the purpose of incorporation in this circular received from B.I. Appraisals Limited, an independent property valuer, in connection with its opinion of market value of the Properties as at 30 November 2014.

==> picture [65 x 47] intentionally omitted <==

www.bigroupchina.com

7 January 2015

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

Dear Sirs,

Re: The whole building of The ONE, No. 100 Nathan Road, Kowloon, Hong Kong

In accordance with the instructions from Chinese Estates Holdings Limited (hereinafter referred to as the “ Company ”) for us to carry out a valuation of the property interest in the property known as “ The ONE ” (hereinafter referred to as the “ Property ”), which is held by the Company and/or its subsidiaries (hereinafter together referred to as the “ Group ”), we confirm that we have carried out inspection, conducted land searches at the Land Registry, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of value of the property interest as at 30 November 2014 (hereinafter referred to as the “ Date of Valuation ”).

It is our understanding that this valuation document is to be used by the Company for disclosure purpose.

This letter, forming part of our valuation report, identifies the property interest being valued, explains the basis and methodology of our valuation and lists out the assumptions and title investigation which we have made in the course of our valuation, as well as the limiting conditions.

II – 1

PROPERTY VALUATION REPORT ON THE PROPERTIES

APPENDIX II

BASIS OF VALUATION

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

Our valuation has been carried out in accordance with The HKIS Valuation Standards 2012 Edition published by The Hong Kong Institute of Surveyors and under generally accepted valuation procedures and practices, which are in compliance with the requirements set out in Chapter 5 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

VALUATION METHODOLOGY

In valuing property interest, which is held for investment by the Group, we have adopted the Investment Method by taking into account the current rents passing and the reversionary income potential of the tenancies.

VALUATION ASSUMPTIONS

Our valuation has been made on the assumption that such property interest is sold in the open market without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement that would serve to affect its value. In addition, no account has been taken of any option or right of pre-emption concerning or effecting a sale and no forced sale situation in any manner is assumed in our valuation.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property interest or for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interest is free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

Apart from the above, we have made further assumptions as follows:

a) The Property has been constructed, occupied and used in full compliance with, and without contravention of all ordinances, except only where otherwise stated.
b) The Property is finished and maintained in reasonable condition commensurate with its age and use and is in its original layout without any unauthorized alteration.
c) All consents, approvals, required licences, permits, certificates and authorizations have been obtained, except only where otherwise stated, for the use of the Property upon which our valuation is based.

II – 2

PROPERTY VALUATION REPORT ON THE PROPERTIES

APPENDIX II

TITLE INVESTIGATION

We have carried out title searches at the Land Registry for the property interest. However, we have not examined the original documents to verify the ownership and to ascertain the existence of any amendments that may not appear on the copies handed to us. All documents have been used for reference only. We assume no responsibility for matters legal in nature nor do we render any opinion as to the title to the property interest that is assumed to be good and marketable.

LIMITING CONDITIONS

The Property was inspected on 8 December 2014 by Mr. Ken W. C. Tsang, an assistant manager of our firm who is a technical staff having more than 13 years of experience in the inspection and valuation of properties in Hong Kong and the People’s Republic of China. We have inspected the exterior and, where possible, the interior of the Property. In the course of our inspections, we did not note any serious defects. However, no structural survey has been made and we are therefore unable to report whether the Property is free from rot, infestation or any other structural defects. No tests were carried out on any of the services.

We have not conducted any on-site measurements to verify the correctness of the site and floor areas of the Property but have assumed that the areas shown on the documents furnished to us are correct. Dimensions, measurements and areas included in the valuation certificate attached are based on information contained in the documents provided to us by the Group and are, therefore, only approximations.

We have relied to a considerable extent on the information and advice given or made available to us by the Group and the relevant government authorities on such matters as planning approvals, statutory notices, easements, tenures, particulars of occupancy, tenancy agreements and all other relevant matters. We have not seen original planning consents and have assumed that the Property is erected, occupied and used in accordance with such consents.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We were 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.

CURRENCY

Unless otherwise stated, all monetary amounts stated in this report are in Hong Kong Dollars (HK$).

II – 3

PROPERTY VALUATION REPORT ON THE PROPERTIES

APPENDIX II

REMARKS

We hereby confirm that we have neither present nor prospective interests in the Group, the property interest or the value reported herein.

Our Valuation Certificate is enclosed herewith.

Yours faithfully, For and on behalf of B.I. APPRAISALS LIMITED William C. K. Sham Registered Professional Surveyor (G.P.) China Real Estate Appraiser MRICS, MHKIS, MCIREA Executive Director

Notes:

(1) Mr. William C. K. Sham is a qualified valuer on the approved List of Property Valuers for Undertaking Valuation for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection with Takeovers and Mergers published by the Hong Kong Institute of Surveyors. Mr. Sham has over 30 years’ experience in the valuation of properties in Hong Kong and has over 15 years’ experience in the valuation of properties in the People’s Republic of China and the Asia Pacific regions.
(2) Inspection of the Property was carried out on 8 December 2014 by Mr. Ken Tsang, Assistant Manager. Mr. Tsang obtained the Degree of Associate of Science in Facilities Management from City University of Hong Kong in 2007 and has more than 13 years’ experience in the inspection and valuation of properties in Hong Kong and the People’s Republic of China.

II – 4

PROPERTY VALUATION REPORT ON THE PROPERTIES

APPENDIX II

VALUATION CERTIFICATE

			Capital value in
		Particulars of	existing state as at
Property	Description and tenure	occupancy	30 November 2014
The whole building of	The ONE is a 29-storey commercial	As at the Date of	$7,880,000,000
The ONE, No. 100 Nathan Road,	building completed in about 2010 and	Valuation, the Property,	(100% interest
Kowloon, Hong Kong	is built over a site with a site area of	except for the basement	attributable to
	approximately 3,125.60 sq.m.	car park, is subject to	the Group:
The Remaining Portion of	(33,644 sq.ft.). It is located on the	various tenancies and	$7,880,000,000)
Kowloon Inland Lot	eastern side of Nathan Road at its	licences, yielding a total
No. 6022 (the “Lot”)	junction with Granville Road and	monthly rent (excluding
	bounded by Carnarvon Road on the	the turnover rent, if any)
	east within the commercial hub of	and licence fee of about
	Tsim Sha Tsui.	$28.82 million exclusive
		of rates and services
	The Property comprises all retail	charges.
	shops of various nature and
	restaurants on Lower Ground	The basement car park
	1 and 2 Floors, Ground Floor, Upper	is licensed at a monthly
	Ground 1 and 2 Floors, Level 1 to	licence fee of $700,000,
	Level 21 Floors together with	inclusive of rates, service
	a 4-level basement car park, which	charges and electricity
	accommodates 44 private car parking	charges.
	spaces, 3 taxi stands, 3 heavy goods
	vehicle loading/unloading bays,	In addition, the total
	27 light goods vehicle parking spaces	income received on
	and 20 motorcycle parking spaces.	turnover rent in the
		12-month period of
	The total gross floor area of the	2013 amounted to
	Property (excluding car parking areas)	approximately
	is approximately 37,496.55 sq.m.	HK$22.72 million
	(403,613 sq.ft.).	and that in the
		first ten months of
	The Lot is held under Conditions of	2014 amounted to
	Re-grant No. UB4371 for a term of	approximately
	150 years commencing from 24 June	HK$18.76 million.
	1889.
	The Government Rent payable for the
	Lot is HK$772 per annum.

Notes:

1) The registered owner of the Property is Chinese Estates (The One) Limited vide Memorial No. 09052101900012 dated 15 April 2009.

II – 5

PROPERTY VALUATION REPORT ON THE PROPERTIES

APPENDIX II

2) The Property is subject to the following encumbrances registered in the Land Registry:
(a) Tenancy Agreement for 3 years from 28 May 2010 to 27 May 2013 with an option to renew for a further term of 3 years in favour of International Harvest Industrial Limited vide Memorial No. 11080301040021 dated 11 August 2010, the rent is $1,100,000.00 per month;
(b) Tenancy Agreement for 6 years from 2 August 2010 to 1 August 2016 at monthly rental of HK$1,000,000.00 from 2 August 2010 to 1 August 2013 and HK$1,200,000.00 from 2 August 2013 to 1 August 2016 with an option to renew for a further term of 3 years (re: shops GB01, GB02, GB03, GB04 and GB05 on Ground Floor (also referred to as G/F), shops UG109, UG110, UG111, UG112, UG113, UG114, UG115 and UG116 on Upper Ground 1 (also referred to as UG1), shops UG204, UG205, UG206, UG207, UG208, UG209, UG210, UG211, UG212, UG213 and UG214 on Upper Ground 2 (also referred to as UG2), shops L104, L105, L106, L107, L108, L109, L110, L111, L112, L113 and L114 on Level 1 (also referred to as L1) of The ONE) in favour of Kenchart Investments Limited vide Memorial No. 12071902220011 dated 10 November 2011;
(c) Tenancy Agreement for 6 years commencing from 2 August 2010 to 1 August 2016 with an option to renew for a further term of 3 years (re: shop L102 on Level 1 (also referred to as L1) and shops L201, L202, L205, L208, L209, L210, L215, L216, L217, L218, L219, L220 and L221 on Level 2 (also referred to as L2) of The ONE) in favour of Kenchart Investments Limited vide Memorial No. 12072301280045 dated 25 October 2011;
(d) Lease for 6 years from 2 August 2010 to 1 August 2016 with an option to renew for a further term of 3 years (re: (A) shops GB01 to GB05 on Ground Floor, shops UG109 to UG116 on Upper Ground 1, shops UG204 to UG214 on Upper Ground 2, shops L104 to L114 on Level 1 of The ONE; (B) shop L102 on Level 1 and shops L201, L202, L205, L208, L209, L210, L215 to L221 on Level 2 on The ONE) in favour of Kenchart Investments Limited vide Memorial No. 13010201810030 dated 4 December 2012; and
(e) Legal Charge and Debenture in favour of Bank of China (Hong Kong) Limited vide Memorial No. 13100802320112 dated 4 October 2013.
3) The Lot lies within an area currently zoned as “Commercial (6)” on the Approved Tsim Sha Tsui Outline Zoning Plan No. S/K1/28 gazetted on 13 December 2013.

II – 6

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Interests of Directors and chief executive of the Company

As at the Latest Practicable Date, the interests and short positions of each Director and chief executive of the Company 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/she 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 as set out in Appendix 10 of the Listing Rules (the “ Model Code ”), to be notified to the Company and the Stock Exchange were as follows:

Long Positions

The Company

				Percentage of
	Number of			Issued
Name of Directors	Shares Held	Note	Capacity	Share Capital
Lau, Ming-wai	1,430,700,768	*	Beneficiary of trust	74.99%
Lui, Lai-kwan	1,430,700,768	*	Interest of children under 18	74.99%

Note:

These shares were indirectly owned by a discretionary trust of which Mr. Lau, Ming-wai and the children of Ms. Lui, Lai-kwan were eligible beneficiaries of that trust.

Save as disclosed above, 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.

III – 1

GENERAL INFORMATION

APPENDIX III

(b) Interests of substantial Shareholders

So far as was known to the Directors or the chief executive of the Company, as at the Latest Practicable Date, persons other than a Director or chief executive of the Company who had interests or short positions in the shares or 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, or were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group, or held any option in respect of such capital were as follows:

Long Positions

				Percentage of
Name of	Number of			Issued
Substantial Shareholders	Shares Held	Notes	Capacity	Share Capital
Mr. Lau	1,430,700,768	^	Founder and beneficiary of	74.99%
			trust and interest of children
			under 18
Alto Trust Limited	1,430,700,768	#	Trustee and interest in	74.99%
			controlled corporation
Solar Bright Ltd.	1,430,700,768	#	Beneficiary of a trust and	74.99%
			interest in controlled
			corporation
Global King	1,199,715,948	#	Trustee	62.89%
JLLHIL	230,984,820	#	Beneficial owner	12.10%
Notes:

^ These shares were indirectly owned by a discretionary trust of which Mr. Lau was the founder. Mr. Lau and his certain other family members were eligible beneficiaries of that trust.
Alto Trust Limited as trustee of a discretionary trust held the entire issued share capital of Solar Bright Ltd. and therefore was regarded as interested in the same parcel of shares held by Solar Bright Ltd.. Solar Bright Ltd. held the entire issued share capital of Global King and all issued units in a unit trust of which Global King was the trustee and therefore was regarded as interested in the same parcel of shares held by Global King as trustee of the unit trust. Solar Bright Ltd. also held the entire issued share capital of JLLHIL and therefore was also regarded as interested in the same parcel of shares held by JLLHIL. As such, the 1,430,700,768 shares of the Company in which Solar Bright Ltd. was deemed to be interested represented the aggregate of the 1,199,715,948 shares and 230,984,820 shares of the Company held by Global King and JLLHIL respectively, which was referred to in the interests of Mr. Lau, Ming-wai and the interests of children under 18 of Ms. Lui, Lai-kwan as disclosed under “Interests of Directors and chief executive of the Company”.

III – 2

GENERAL INFORMATION

APPENDIX III

Save as disclosed above, so far as was known to the Directors or the chief executive of the Company, as at the Latest Practicable Date, no persons other than a Director or chief executive of the Company had any interests or short positions in the shares or 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, or were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group, or held any option in respect of such capital.

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. MATERIAL LITIGATION

Save as disclosed below, as at the Latest Practicable Date, so far as known to the Directors, there was no litigation, arbitration or claim of material importance in which the Group is engaged or pending or threatened against the Group.

Chenghai Royal Garden, Shantou, PRC

In relation to certain property interests located in Chenghai Royal Garden, Shantou, PRC, the Group, for the purpose of property development, entered into a contract for Pre-registration of Grant of State-owned Land Use Right (the “ Contract ”) with the district bureau of Chenghai dated 5 August 1992, had made certain down payment. However, the Group subsequently determined not to proceed with the land requisition and requested for refund.

In April 2005, the Group commenced legal proceedings at the Shantou City Intermediate People’s Court (the “ Intermediate Court ”) to terminate the Contract with the Shantou City Planning and State-owned Land Resources Bureau (the “ Chenghai Bureau ”). In view of the uncertainty in the recoverability of the amount claimed and any other entitlements under the Contract, the Group had made a full provision for an impairment loss of HK$71,118,000 during 2004.

On 28 December 2006, the Intermediate Court made a judgment in favour of the Group.

After having gone through a series of appeals to the High People’s Court of Guangdong Province (the “ High Court ”) and the Supreme People’s Court, the case was remitted to the Intermediate Court for rehearing. On 5 December 2012, the Intermediate Court delivered a judgment in favour of the Group and upheld the majority claims of the Group. Chenghai Bureau submitted an application for appeal to the High Court on 26 December 2012 against the said judgment. On 4 January 2013, the Group also submitted an application for appeal to the High Court in respect of those remaining minority claims of the Group that were not upheld by the Intermediate Court.

III – 3

GENERAL INFORMATION

APPENDIX III

On 8 May 2013, the High Court held a case hearing. On 3 December 2013, the High Court delivered the judgment which upheld the ruling of the Intermediate Court and dismissed the appeals of both parties. On 30 March 2014, the Group has submitted an application for the enforcement of judgment to the Intermediate Court and the application is accepted by the Intermediate Court on 1 April 2014.

4. 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.

5. MATERIAL CONTRACTS

During the two years immediately preceding the date of this circular, the following contracts, not being contracts entered into in the ordinary course of business, have been entered by the Company and/or members of the Group and are or may be material:–

(a) the sale and purchase agreement dated 1 September 2014 entered into between Data Dynasty Limited (an indirect wholly-owned subsidiary of the Company), the Company, One Midland Limited (wholly-owned by Mr. Lau indirectly) and Mr. Lau relating to the sale of the entire issued share capital of Value Eight Limited for a provisional consideration of HK$4,830,198,248 subject to adjustment as disclosed in the Previous Announcement. Completion of such agreement took place on 31 October 2014 and the final consideration was HK$4,876,161,695.30 as disclosed in the announcement of the Company dated 31 October 2014;
(b) the sale and purchase agreement dated 1 September 2014 entered into between Super Series Limited (an indirect wholly-owned subsidiary of the Company), the Company, Fly High Target Limited (wholly-owned by Mr. Lau indirectly) and Mr. Lau relating to the sale of the entire issued share capital of Brass Ring Limited for a provisional consideration of HK$9,255,025,626 subject to adjustment as disclosed in the Previous Announcement;
(c) the sale and purchase agreement dated 1 September 2014 entered into between Super Series Limited (an indirect wholly-owned subsidiary of the Company), the Company, Fly High Target Limited (wholly-owned by Mr. Lau indirectly) and Mr. Lau relating to the sale of the entire issued share capital of Union Leader Limited for a provisional consideration of approximately HK$5,113,483 subject to adjustment as disclosed in the Previous Announcement;

III – 4

GENERAL INFORMATION

APPENDIX III

(d) the sale and purchase agreement dated 1 September 2014 entered into between Chinese Estates, Limited (a direct wholly-owned subsidiary of the Company), the Company, Coast Field Ltd. (wholly-owned by Mr. Lau indirectly) and Mr. Lau relating to the sale of the entire issued share capital of Chinese Estates and Finance, Limited for a provisional consideration of HK$2 subject to adjustment as disclosed in the Previous Announcement; and
(e) the Disposal Agreement.

6. INTEREST IN ASSETS OR CONTRACTS

(a) As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any asset which have since 31 December 2013, 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 which are proposed to be acquired or disposed of by or leased to any member of the Group.
(b) 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, which contract or arrangement was subsisting at the Latest Practicable Date and which was significant in relation to the business of the Group.

7. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, Mr. Lam, Kwong-wai is a non-executive director of LT Commercial Real Estate Limited (“ LT ”) (a company whose shares are listed on the Stock Exchange). LT is engaged in securities investment and financing, property investment and property development business. As such, Mr. Lam, Kwong-wai was regarded as being interested in such business which competed or were likely to compete with the Group.

As at the Latest Practicable Date, each of Mr. Lau, Ming-wai and Ms. Lui, Lai-kwan had personal interests in private companies engaged in property investment businesses while Mr. Lau, Ming-wai had personal interests in private companies engaged in securities investment businesses. As such, they were regarded as being interested in such businesses which competed or might compete with the Group. However, when compared with the dominance and size of operations of the Group, such competing businesses were considered immaterial.

III – 5

GENERAL INFORMATION

APPENDIX III

8. MISCELLANEOUS

(a) The registered office of the Company is at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda and its principal place of business in Hong Kong is at 26th Floor, MassMutual Tower, 38 Gloucester Road, Wanchai, Hong Kong.
(b) The Company’s Branch Registrar and Transfer Office in Hong Kong is Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(c) The company secretary of the Company is Mr. Lam, Kwong-wai, who is a Certified Public Accountant (Practising).
(d) The English text of this circular and the form of proxy shall prevail over the Chinese text in the case of inconsistency.

9. 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.

Name Qualification

Gram Capital Limited

A licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO

B.I. Appraisals Limited

An independent professional property valuer

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 2013, 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.

III – 6

GENERAL INFORMATION

APPENDIX III

10. 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 the date of the SGM:

(a) the memorandum of association and bye-laws of the Company;
(b) the annual reports of the Company for the years ended 31 December 2011, 2012 and 2013 and the interim report of the Company for the six months ended 30 June 2014;
(c) the material contracts as referred to in the paragraph headed “Material Contracts” in this appendix;
(d) 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;
(e) the letter from Gram 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 Gram Capital” in this circular;
(f) the property valuation report from B.I. Appraisals Limited in respect of the valuation of the Properties, the text of which is set out in Appendix II to this circular;
(g) the written consent of the experts referred to in the paragraph headed “Qualification and Consent of Experts” in this appendix; and
(h) this circular.

III – 7

NOTICE OF SGM

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(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 Falcon Room, Basement, Gloucester Luk Kwok Hong Kong, 72 Gloucester Road, Wanchai, Hong Kong on Friday, 23 January 2015 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

the terms and conditions, and the entering into, of the sale and purchase agreement dated 12 December 2014 entered into among Rich Lucky Limited (an indirect wholly-owned subsidiary of the Company), the Company, Market Victory Limited and Mr. Joseph Lau, Luen-hung relating to, among others, the sale and purchase of the entire issued share capital of Asian East Limited (the “ Disposal 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 thereunder be and are hereby approved, confirmed and/or ratified (as the case may be); and that any one director or (if affixing of seal is required) any two directors of the Company be authorised for and on behalf of the Company, among other matters, to sign, execute, perfect, deliver (including under seal where applicable) and to authorise the signing, executing, perfecting and delivering (including under seal where applicable) of all such documents and deeds, and to do or authorise doing all such acts, matters and things, as he/she may in his/her absolute discretion consider necessary, expedient or desirable to give effect to and implement and/or complete all matters in connection with the transactions contemplated under the Disposal Agreement and to waive compliance from or make and agree such variations of a non-material nature to any of the terms of the Disposal Agreement, as he/she may in his/her absolute discretion consider to be desirable and in the interests of the Company and all of such acts of director(s) as aforesaid be hereby approved, ratified and confirmed.”

By order of the Board Lam, Kwong-wai Executive Director and Company Secretary

Hong Kong, 7 January 2015

SGM – 1

NOTICE OF SGM

Registered office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Principal office in Hong Kong: 26th Floor MassMutual Tower 38 Gloucester Road Wanchai Hong Kong

Notes:

Any shareholder of the Company (the “ Shareholder(s) ”) 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 Shareholder.
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 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time fixed for holding the Meeting (or at any adjournment thereof).
Delivery of an instrument appointing a proxy should not preclude a Shareholder from attending and voting in person at the Meeting or at 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 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.
Resolution as set out in this notice will be taken by poll at the Meeting.
As at the date hereof, the board of directors of the Company comprised Mr. Lau, Ming-wai, Ms. Chan, Sze-wan, Mr. Lam, Kwong-wai and Ms. Lui, Lai-kwan as Executive Directors, Ms. Amy Lau, Yuk-wai as Non-executive Director and Mr. Chan, Kwok-wai, Ms. Phillis Loh, Lai-ping and Mr. Ma, Tsz-chun as Independent Non-executive Directors.

SGM – 2

AI assistant

National Electronics Holdings Limited — Proxy Solicitation & Information Statement 2015

49038_rns_2015-01-06_49f98437-03da-4364-a0f6-7a1e88a4d0a8.pdf

MAJOR AND CONNECTED TRANSACTION

DISPOSAL OF A SUBSIDIARY AND NOTICE OF SPECIAL GENERAL MEETING

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

(Stock Code: 127)

MAJOR AND CONNECTED TRANSACTION

DISPOSAL OF A SUBSIDIARY

A. INTRODUCTION

LETTER FROM THE BOARD

B. THE DISPOSAL AGREEMENT

Date

Parties

Assets to be disposed of

Consideration

Deposits

Undertakings and Indemnity

C. FINANCING UNDER THE DISPOSAL AGREEMENT

D. THE CONDITION PRECEDENT OF THE DISPOSAL AGREEMENT

E. COMPLETION OF THE DISPOSAL AGREEMENT

F. EFFECT OF THE DISPOSAL TRANSACTION

LETTER FROM THE BOARD

G. COMPETING INTERESTS

H. REASONS FOR AND BENEFITS OF THE DISPOSAL TRANSACTION

I. USE OF PROCEEDS

LETTER FROM THE BOARD

J. INFORMATION OF THE GROUP AND THE VENDOR

K. INFORMATION OF THE PURCHASER

L. INFORMATION OF THE ASSETS TO BE DISPOSED OF

Information of the Target Companies

Information of the Properties

M. LISTING RULES IMPLICATIONS

N. THE INDEPENDENT FINANCIAL ADVISER AND THE INDEPENDENT BOARD COMMITTEE

O. SGM

P. RECOMMENDATION

Q. GENERAL

R. ADDITIONAL INFORMATION

MAJOR AND CONNECTED TRANSACTION IN RESPECT OF DISPOSAL OF A SUBSIDIARY

MAJOR AND CONNECTED TRANSACTION – DISPOSAL OF A SUBSIDIARY

INTRODUCTION

LETTER FROM GRAM CAPITAL

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

Information on the Group

Business review of the Group

Property investment

Property development

Information on the Target Companies

Reasons for the Disposal Transaction and use of proceeds

Reasons for the Disposal Transaction

Use of proceeds

2. Principal terms of the Disposal Agreement

The Consideration

The Valuation

The Provisional Consideration

The Deposits

Undertakings and indemnity

3. Non-competition undertaking by Mr. Lau

4. Possible financial effects of the Disposal Transaction

RECOMMENDATION

1. FINANCIAL INFORMATION OF THE GROUP

2. INDEBTEDNESS

Borrowings

Guarantees

3. MATERIAL ADVERSE CHANGE

4. WORKING CAPITAL

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Re: The whole building of The ONE, No. 100 Nathan Road, Kowloon, Hong Kong

BASIS OF VALUATION

VALUATION METHODOLOGY

VALUATION ASSUMPTIONS

National Electronics Holdings Limited Proxy Solicitation & Information Statement 2015