Persistence Gold Group Ltd — Capital/Financing Update 2003

Mar 6, 2003

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

==> picture [48 x 47] intentionally omitted <==

SHANGHAI MERCHANTS HOLDINGS LIMITED 上海商貿控股有限公司[*]

(Incorporated in Bermuda with limited liability)

CONNECTED TRANSACTION SUBSCRIPTION OF NEW SHARES BY CONTROLLING SHAREHOLDER

On 6th March, 2003, the Company entered into a subscription agreement with Angel Field pursuant to which Angel Field has agreed to subscribe for 125,000,000 new Shares at the subscription price of HK$0.4 per Share. The 125,000,000 new Shares represent 43.4% of the existing issued share capital and approximately 30.3% of the Company’s issued share capital as enlarged by the issue of the Subscription Shares.

Angel Field, the controlling shareholder of the Company, which presently holds about 63.18% of the Company’s existing issued share capital, will hold about 74.30% of the issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares. Accordingly, Angel Field is a connected person of the Company under the Listing Rules and therefore the Subscription constitutes a connected transaction of the Company. Under Rule 14.26(3) of the Listing Rules, the Subscription is subject to approval by the Independent Shareholders at a general meeting of the Company at which Angel Field and its associates shall abstain from voting.

A circular containing, among other things, the details of the Subscription Agreement, the recommendation of the independent board committee of the Company, an opinion letter from the independent financial adviser to the independent board committee of the Company and a notice convening the special general meeting will be despatched to the Shareholders as soon as practicable in compliance with the requirements of the Listing Rules.

1. SUBSCRIPTION AGREEMENT DATED 6TH MARCH, 2003

Parties:

Issuer: the Company Subscriber: Angel Field

Angel Field is the controlling shareholder of the Company and is beneficially and solely owned by Mr. Chau Ching Ngai, who is the spouse of Ms. Mo Yuk Ping, the chairman and a director of the Company. As at the date of the Subscription Agreement, Angel Field is interested in 181,986,000 Shares, representing approximately 63.18% of the Company’s existing issued share capital.

• 1 -

Mr. Chau Ching Ngai is a Hong Kong resident and has since 1997 been principally engaged in property investment in Hong Kong and the PRC. Mr. Chau has also invested in agriculture and high technology projects in the PRC, as well as engaging in trading of various industrial and consumer products including fabrics.

Number of New Shares to be subscribed:

125,000,000 new Shares, representing 43.4% of the Company’s existing issued share capital and approximately 30.3% of the Company’s issued share capital as enlarged by the issue of the Subscription Shares.

Subscription Price:

The Subscription Price of HK$0.4 per Subscription Share represents a premium of approximately 5.3% to the closing price of HK$0.38 per Share as quoted on the Stock Exchange on 6th March, 2003, being the last day of trading in the Shares on the Stock Exchange prior to the signing of the Subscription Agreement; a premium of approximately 3.2% to the average closing price of HK$0.3875 per Share as quoted on the Stock Exchange for the last 10 trading days up to and including 6th March, 2003, and a premium of approximately 8.1% to the pro forma consolidated net assets per Share as per the Company’s circular dated 19th August, 2002.

Ranking of the Subscription Shares

The Subscription Shares, when issued and fully paid, will rank pari passu in all respects with the Shares in issue on the date of allotment and issue of the Subscription Shares including the right to any dividends or distributions.

Conditions of the Subscription:

The Subscription is conditional upon the following conditions:

• (1) the passing of an ordinary resolution by the Independent Shareholders at the special general meeting of the Company to be convened to approve the Subscription Agreement and the transactions contemplated thereunder (including the issue of the Subscription Shares);

• (2) the Listing Committee granting the listing of, and permission to deal in, the Subscription Shares; and

• (3) the filing of relevant documents or obtaining the necessary waiver relating to the Subscription as required by law in Bermuda, if necessary.

In the event that the conditions set out above are not fulfilled on or before 31st May, 2003 (or such later date as may be agreed between Angel Field and the Company), the Subscription Agreement shall lapse.

Completion of the Subscription:

Completion shall take place on or before the second business day following the date on which all the abovementioned conditions are fulfilled (or such other date as may be agreed between Angel Field and the Company). The Directors expect that the Completion could be taken place shortly after the special general meeting of the Company to approve the Subscription Agreement and will receive the proceeds of the Subscription in cash from Angel Field. The Directors also expect that the Subscription will not result in less than 25% of the enlarged issued share capital of the Company in public hands.

• 2 -

2. CHANGE OF SHAREHOLDING OF SUBSTANTIAL SHAREHOLDER

	Number of		Immediately	% of the issued
	Shares held	% of the	after the	share capital as
	before the	existing issued	completion of	enlarged by the
Name	Subscription	share capital	the Subscription	Subscription
Angel Field	181,986,000	63.18	306,986,000	74.30
Public Shareholders	106,014,000	36.82	106,014,000	25.70
	288,000,000	100.00	413,000,000	100.00

So far as the Directors are aware of, no connected persons of the Company other than Angel Field and its associates were interested in the Shares.

3. REASONS FOR THE SUBSCRIPTION

The Company is principally engaged in the processing of raw fabric and trading of fabric and the development of international trading and market of consumer products. As the Directors have experienced difficulties in securing independent placing agents/underwriters in the market to raise fund required through placing and rights issue, the Directors are of the view that the Subscription will provide a relatively convenient method to raise fund under the current market condition. The Directors are also of the view that the Subscription could enlarge the capital base of the Company and will strengthen the financial position of the Group by providing a cost-effective means of raising additional capital for the Group. The Directors currently have no intention to make a further placement of Shares.

The Subscription Price was determined after arm’s length negotiations between the Company and Angel Field with reference to the closing price of the Shares as quoted on the Stock Exchange on 6th March, 2003, being the last day of trading in the Shares on the Stock Exchange prior to the signing of the Subscription Agreement. The Directors consider that the terms of the Subscription Agreement are fair and reasonable as the Subscription Price represents a premium of (i) approximately 5.3% to the closing price of HK$0.38 per Share as quoted on the Stock Exchange on 6th March, 2003; (ii) approximately 3.2% to the average closing price of HK$0.3875 per Share as quoted on the Stock Exchange for the last 10 trading days up to and including 6th March, 2003; and (iii) approximately 8.1% to the pro forma consolidated net assets per Share as per the Company’s circular dated 19th August, 2002, and believe that the Subscription is in the best interests of the Company and its Shareholders as a whole.

4. USE OF PROCEEDS FROM THE SUBSCRIPTION

The Directors intend to use the net proceeds from the Subscription of approximately HK$50.0 million as to approximately HK$20 million for the Group’s fabric trading business and the development of international trading and market of consumer products and as to the balance of approximately HK$30 million for the Group’s general working capital, including but not limited to, administrative expenses for its operations and funding for potential acquisition. However, the Directors confirm that there is currently no concrete acquisition plan or negotiation with any target company.

• 3 -

During twelve months preceding the date of this announcement, the Company has also successfully raised new funding of approximately HK$41.08 million in aggregate, being HK$19.8 million by way of placing to Angel Field in July 2002, HK$17.53 million and HK$3.75 million by way of placing to independent third parties in April 2002 and May 2002. Out of the aggregate fund raised of HK$41.08 million, HK$8.0 million was intended for trade payables, HK$5 million was intended for fabric trading business and as to the remaining balance of HK$28.08 million was intended for the Group’s general working capital, including but not limited to, administrative expenses for its operations and expenses for the relocation of its Hong Kong office. The Directors confirm that the subsequent actual usage of the funds raised above was in line with the intended use as mentioned in the respective announcements dated 17th April, 2002, 8th May, 2002 and 29th July, 2002.

5. PRINCIPAL BUSINESS OF THE COMPANY

The Company is principally engaged in the processing of raw fabric and trading of fabric and the development of international trading and market of consumer products.

6. CONNECTED TRANSACTION

Angel Field is the controlling shareholder of the Company interested in 181,986,000 Shares, representing approximately 63.18% of the Company’s existing issued share capital. Angel Field is beneficially and solely owned by Mr. Chau Ching Ngai, who is the spouse of Ms. Mo Yuk Ping, the chairman and a director of the Company. Accordingly, Angel Field is a connected person of the Company under the Listing Rules and the Subscription constitutes a connected transaction of the Company. Under Rule 14.26(3) of the Listing Rules, the Subscription is subject to approval by the Independent Shareholders at a general meeting of the Company at which Angel Field and its associates shall abstain from voting.

An independent board committee of the Company will be formed to advise the Independent Shareholders as to whether the terms of the Subscription Agreement are fair and reasonable. An independent financial adviser will be appointed to advise the independent board committee of the Company regarding the fairness and reasonableness of the terms of the Subscription Agreement.

A circular containing, amongst other things, details of the Subscription Agreement, the recommendation from the independent board committee of the Company as to whether the terms of the Subscription Agreement are fair and reasonable and the opinion from the independent financial adviser, will be despatched to the shareholders of the Company within 21 days after the date of publication of this announcement.

7. APPLICATION FOR LISTING

The Company will apply to the Listing Committee for the listing of, and permission to deal in, the Subscription Shares.

8. DEFINITIONS

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

“associates”

Has the meaning as defined in the Listing Rules

• 4 -

“Angel Field” Angel Field Limited, a company incorporated in the British Virgin Islands with limited liability, which is the controlling shareholder of the Company interested in 181,986,000 Shares, representing approximately 63.18% of the Company’s existing issued share capital as at the date of this announcement

• “Company” Shanghai Merchants Holdings Limited, a company incorporated in Bermuda with limited liability and the securities of which are listed on the Stock Exchange

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

• “Group” the Company and its subsidiaries

• “Hong Kong” the Hong Kong Special Administrative Region of the PRC

• “Independent Shareholders” Shareholders other than Angel Field and their respective associates

• “Listing Committee” the listing committee of the Stock Exchange

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

• “PRC” the People’s Republic of China but, for the purpose of this announcement, excluding Hong Kong

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

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

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Subscription” the subscription of the Subscription Shares by Angel Field at the Subscription Price

• “Subscription Agreement” the subscription agreement dated 6th March, 2003 entered into between the Company and Angel Field in respect of the Subscription

• “Subscription Price” the subscription price of HK$0.4 per Subscription Share

• “Subscription Share(s)” 125,000,000 new Shares

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong

• 5 -

“%”

per cent.

Yours faithfully, For and on behalf of the Board of Shanghai Merchants Holdings Limited Mo Yuk Ping

Chairman

Hong Kong, 6th March, 2003

• For identification purpose only

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

• 6 -