Persistence Gold Group Ltd — Capital/Financing Update 2006

Jul 13, 2006

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.

SHANGHAI MERCHANTS HOLDINGS LIMITED *

(Incorporated in Bermuda with limited liability)

(Stock code: 1104)

RESUMPTION OF TRADING

Financial Adviser to the Company

Asian Capital

( C o r p o r a t e F i n a n c e ) L i m i t e d

RESUMPTION PROPOSAL

Trading in the Shares on the Stock Exchange was suspended from 9:30 a.m. on 2 June 2003 at the request of the Company. As the Company was under receivership during the period from June 2003 to July 2004, its business operations were suspended during that time. Profit Harbour acquired over 63% of the issued share capital of the Company in August 2003 and completed a mandatory general offer in October 2003. Upon the discharge of the Receivers, the Board took control of the Company in July 2004, and has since taken active steps to revive and restore business operations and formulated the Resumption Proposal, which involves, among other things, enhancement of the Company’s existing business operations, the recovery of the debt from Great Center, the Rights Issue and the Acquisition.

Reference is made to the Company’s announcements dated 12 April 2006, 11 May 2006 and 15 June 2006, its circulars dated 4 May 2006, 1 June 2006 and 30 June 2006 and its prospectus dated 20 June 2006 respectively in relation to, among other things, the Assignment of Debt, the Rights Issue and the Acquisition.

CHANGE IN BOARD LOT SIZE

The board lot size in the ordinary shares in the capital of the Company will change from 2,000 Shares to 20,000 Shares with effect from Friday, 14 July 2006.

RESUMPTION OF TRADING

On 24 March 2006, the Stock Exchange resolved to allow the Company to proceed with the Resumption Proposal, subject to the compliance with the following conditions: (i) Profit Harbour must acquire the full debt of approximately US$4.5 million for cash at par value, due to the Company from Great Center; (ii) the completion of the Rights Issue to

— 1 —

yield HK$80 million (net) by the Company; and (iii) the sum of US$4.5 million and HK$80 million has been received in the Company’ bank accounts in Hong Kong and is free of any lien.

As at the date of this announcement, all conditions set out above have been fulfilled and the Resumption Proposal has been duly implemented.

An application has been made to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange with effect from 9:30 a.m. on Friday, 14 July 2006.

Shareholders and potential investors should exercise caution when dealing in the Shares.

Reference is made to the Company’s announcements dated 12 April 2006, 11 May 2006 and 15 June 2006, its circulars dated 4 May 2006, 1 June 2006 and 30 June 2006 and its prospectus dated 20 June 2006 respectively in relation to, among other things, the Assignment of Debt, the Rights Issue and the Acquisition.

BACKGROUND

The Company is an investment holding company and its principal subsidiaries are engaged in the trading businesses primarily in fabric products and other merchandises as well as base metals.

Trading in the Shares on the Stock Exchange was suspended from 9:30 a.m. on 2 June 2003 at the request of the Company. As the Company was under receivership during the period from June 2003 to July 2004, its business operations were suspended during that time. Profit Harbour acquired over 63% of the issued share capital of the Company in August 2003 and completed a mandatory general offer in October 2003. Upon the discharge of the Receivers, the Board took control of the Company in July 2004, and has since taken active steps to revive and restore the business operations.

REVIVAL OF THE BUSINESS OPERATIONS

The Board conducted a business and operational review of the Group, formulated and implemented strategies to revive the Company’s operations as well as to strengthen the overall business prospect of the Group. In September and December 2004 respectively, the Group resumed its fabric products and other merchandises trading and base metals trading businesses. The Company’s operation has experienced steady growth since then.

As disclosed in the annual report 2005 of the Company, the majority of the turnover for the year ended 31 December 2005 came from trading in the base metals sector. The turnover of the Group for the year ended 31 December 2005 was approximately HK$68.4 million, which showed an increase of approximately 207% from approximately HK$22.3 million of 2004. The Group recorded a net profit after tax of approximately HK$6.5 million for 2005, as compared to a loss of approximately HK$36.3 million in 2004.

— 2 —

Trading in fabric products and other merchandise

Leveraging on the extensive business networks of the controlling shareholder, Directors and management of the Company, the Group plans to expand into other product categories and provide more value-added services including supply chain management, manufacturing sourcing and quality control, so as to increase its profit margin derived from the sale orders.

The Group’s turnover for fabric products and other merchandises trading business segment reached approximately HK$23.5 million for the year ended 31 December 2005 (2004: HK$8.8 million), representing approximately 34.3% of the total turnover in 2005 and an increase of approximately 167% over that of 2004. Segment profit attributable to the Group for the year ended 31 December 2005 amounted to approximately HK$966,000 (2004: HK$393,000), an increase of approximately 146% as compared with 2004. The Group’s management has been taking active actions to expand the operations under the constraints of available working capital.

Trading in base metals

The Group currently engages in base metals futures trading. The Board has formulated a business plan for reactivating the Group’s physical base metal trading business, and the details of which were disclosed in the Company’s circular and prospectus dated 1 June 2006 and 20 June 2006 respectively.

The Directors consider that the operation of this business segment will be enhanced with the funding from the Rights Issue.

Turnover for this sector for the year ended 31 December 2005 was approximately HK$44.9 million (2004: HK$13.5 million), which accounted for approximately 65.7% of the total turnover in 2005. A growth of approximately 232% was recorded as compared with last year. Following the resumption of the base metals trading business in 2004, the Group has scaled up its operation in this section in the year of 2005. The base metals trading business segment contributed approximately HK$110,000 (2004: HK$121,000) to the Group’s operating profits which represented a drop of approximately 9.1%.

THE RESUMPTION PROPOSAL

The Resumption Proposal involves, among other things, enhancement of the Company’s existing business operations, the recovery of the debt from Great Center, the Rights Issue and the Acquisition.

The Assignment of Debt

Reference is made to the announcement and circular of the Company dated 12 April 2006 and 4 May 2006 respectively regarding the Assignment of Debt.

The Company and Profit Harbour entered into a deed of assignment on 12 April 2006, pursuant to which Profit Harbour conditionally agreed (subject to Independent Shareholders’ approval being obtained) to acquire from the Company, the full debt due from Great Center of approximately US$4.5 million for cash at par value.

— 3 —

In the Company’s announcement dated 23 May 2006, it was announced that the relevant resolution in relation to the Assignment of Debt was duly passed by the Independent Shareholders at the special general meeting held on 23 May 2006. The Assignment of Debt was subsequently completed on 26 May 2006.

The net proceed of US$4.5 million, equivalent to approximately HK$35.1 million, from the Assignment of Debt is free of any lien.

So far as recovery of the amount of US$4.5 million is concerned, the outcome of the litigation against Great Center (as disclosed in the Company’s prospectus for the Rights Issue dated 20 June 2006 and the 2005 annual report of the Company) will not have any impact on the Group.

For details of the Assignment of Debt, please refer to the Company’s announcement and circular dated 12 April 2006 and 4 May 2006 respectively.

The Rights Issue

Reference is made to the Company’s announcement dated 11 May 2006, its circular and prospectus dated 1 June 2006 and 20 June 2006 respectively in relation to, among other things, the Rights Issue.

At the special general meeting held on 19 June 2006, the ordinary resolutions in relation to the Rights Issue were duly passed by the Independent Shareholders and the result of which was announced on the day after.

On 11 July 2006, it was announced by the Company that all Rights Shares had been fully subscribed and all the application monies for the successful applications for the Rights Shares of HK$82.6 million were duly received by the Company. The net proceed of approximately HK$81.0 million from the Rights Issue is free of any lien.

Share certificates for all fully-paid Rights Shares are expected to be posted on Friday, 14 July 2006 to those who have accepted and (where applicable) applied for, and paid for the Rights Shares, by ordinary post at their own risks.

The Rights Issue will be completed on 14 July 2006 and dealings in the fully-paid Rights Shares are expected to commence on Monday, 17 July 2006.

For details of the Rights Issue, please refer to the Company’s announcements dated 11 May 2006 and 11 July 2006, the Company’s circular and prospectus dated 1 June 2006 and 20 June 2006 respectively.

— 4 —

Shareholding structure of the Company

The following is a summary of the shareholding structure of the Company immediately before and after completion of the Rights Issue:

Shareholder Profit Harbour (Note) Public: Six independent subscribers procured by the sub- underwriter through its agents Other public Shareholders Total	Immediately before completion of the Rights Issue No. of Shares Percentage (approximately) 262,602,000 63.58% — — 150,398,000 36.42% 413,000,000 100%	Immediately after completion of the Rights Issue No. of Shares Percentage (approximately) 928,699,801 74.96% 75,000,000 6.05% 235,300,199 18.99% 1,239,000,000 100%	Immediately after completion of the Rights Issue No. of Shares Percentage (approximately) 928,699,801 74.96% 75,000,000 6.05% 235,300,199 18.99% 1,239,000,000 100%
			100%

Note: The entire issued share capital of Profit Harbour is owned by Mr. Yue. Accordingly, Mr. Yue is deemed to be interested in all the Shares in which Profit Harbour has interest pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

Following the completion of the Rights Issue, public Shareholders (including the independent subscribers) will be interested in approximately 25.04% of the total issued share capital of the Company, and thereby maintaining public float for Shares above 25% as required under Rule 8.08 of the Listing Rules.

The Acquisition and enhancement of the business operations

Since the Board took control of the Company in July 2004, the Board has been searching for viable business opportunities through the Directors’ extensive business networks in the PRC and Hong Kong with a view to expanding its business operations and enhancing the financial performance of the Group.

Reference is made to the announcement and circular of the Company dated 15 June 2006 and 30 June 2006 respectively regarding the Acquisition. It was announced by the Company that Rise Cheer Limited, a wholly owned subsidiary of the Company, entered into a conditional agreement dated 14 June 2006 to acquire from an independent third party of approximately 60% equity interest in Chinaright and its shareholder’s loan due from Chinaright of approximately HK$1 million at a consideration of HK$2 million, subject to, among other things, as conditions, the resumption of trading in and continued listing of the Shares on the Stock Exchange. The consideration for the Acquisition will be satisfied by the issuance of the Convertible Bond by the Company upon completion of the Acquisition.

As a result of the resumption of trading in Shares on 14 July 2006, the completion of the Acquisition is expected to take place on 19 July 2006.

— 5 —

Chinaright is primarily engaged in the distribution of integrated circuit chips for set-top boxes, a reception device which receives and decodes the digital signal from either cable or satellite transmission. Chinaright is one of the authorized dealers of ST Microelectronics Inc., the second largest integrated circuit chips manufacturer in France, for its integrated circuit chips for set-top boxes. Such integrated circuit chips can be used in digital consumer segment which includes DVD, DVB, DCAM, and MP3.

Upon completion of the Rights Issue, the number of the New Shares which may be issued upon full conversion of the Convertible Bond at the adjusted conversion price of HK$0.10 per New Share will be 20,000,000, representing (i) approximately 4.84% of the existing issued share capital of the Company as at the date of this announcement, (ii) approximately 1.59% of the issued share capital of the Company as enlarged by the issue of 20,000,000 New Shares upon full conversion of the Convertible Bond and the issue of 826,000,000 new Shares under the Rights Issue.

For details of the Acquisition and further information on Chinaright, please refer to the Company’s announcement dated 15 June 2006 and the Company’s circular dated 30 June 2006.

Use of proceeds from the Assignment of Debt and the Rights Issue

The total net proceeds of approximately HK$116.1 million from the Assignment of Debt and the Rights Issue will be used as to (i) approximately HK$45.1 million for working capital to finance the fabric products and other merchandise trading business of the Group; (ii) approximately HK$20 million for working capital to finance the base metals trading business; (iii) approximately HK$15 million for loan repayment; and (iv) approximately HK$36 million for general working capital of the Group.

An aggregate amount of approximately HK$65.1 million referred to in (i) & (ii) above will be mainly used for financing the trade purchases and/or placing as pledged deposits for obtaining additional credit limit of banking facilities such as letters of credit and/or trust receipt loans for trading purposes.

Material litigations and contingent liabilities

As at the date of this announcement and save for those disclosed in the prospectus of the Company for the Rights Issue dated 20 June 2006 and the 2005 annual report of the Company, no member of the Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against any members of the Group.

The Directors are of the opinion that the litigations or claims disclosed in the prospectus of the Company for the Rights Issue dated 20 June 2006 and the 2005 annual report of the Company would have no material impact on the operations of the Group.

In addition, save for disclosed in the prospectus of the Company for the Rights Issue dated 20 June 2006 and the 2005 annual report of the Company, the Group does not have any material contingent liabilities as at the date of this announcement.

— 6 —

CHANGE IN BOARD LOT SIZE

The board lot size in the ordinary shares in the capital of the Company will change from 2,000 Shares to 20,000 Shares with effect from Friday, 14 July 2006.

In order to facilitate the trading of odd lots of the Shares after the change in board lot size, the Company has appointed Sun Hung Kai Investment Services Limited (the “Agent”) to stand in the market to provide matching services for the odd lots of Shares on a best effort basis during the period from 14 July 2006 to 14 August 2006 (both days inclusive). Shareholders who wish to take advantage of this matching service either to top up or sell their holdings of Shares may directly or through their brokers, contact Miss Connie Cheung Sau Lin of the Agent at Level 12, One Pacific Place, 88 Queensway, Hong Kong at telephone number 2822-5075.

Existing share certificates will continue to be valid evidence of entitlement to the Shares and be valid for trading, delivery and settlement. There will be no new share certificate issued as a result of the change in board lot size, and therefore no arrangement for free exchange of existing share certificates in board lots of 2,000 Shares for new share certificates in boards lots of 20,000 Shares will be provided.

Shareholders should note that successful matching of the sale and purchase of odd lots of the Shares is not guaranteed and are advised to consult their professional advisers if they are in doubt about the above procedures.

RESUMPTION OF TRADING IN SHARES

On 24 March 2006, the Stock Exchange resolved to allow the Company to proceed with the Resumption Proposal, subject to the compliance with the following conditions: (i) Profit Harbour must acquire the full debt of approximately US$4.5 million for cash at par value, due to the Company from Great Center; (ii) the completion of the Rights Issue to yield HK$80 million (net) by the Company; and (iii) the sum of US$4.5 million and HK$80 million has been received in the Company’ bank accounts in Hong Kong and is free of any lien.

As at the date of this announcement, all conditions set out above have been fulfilled and the Resumption Proposal has been duly implemented.

An application has been made to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange with effect from 9:30 a.m. on Friday, 14 July 2006.

Shareholders and potential investors should exercise caution when dealing in the Shares.

— 7 —

DEFINITIONS

• “Acquisition”

the acquisition by the Company of a controlling interest in Chinaright, details of which are disclosed in the announcement and circular of the Company dated 15 June 2006 and 30 June 2006 respectively

• “Assignment of Debt”

• the assignment of the debt of US$4.5 million in full from the Company at face value to Profit Harbour pursuant to a deed of assignment entered into between the Company and Profit Harbour dated 12 April 2006, details of which are disclosed in the announcement and circular of the Company dated 12 April 2006 and 4 May 2006 respectively

• “associates” has the meaning ascribed to it under the Listing Rules

• “Board” the board of Directors

• “Chinaright”

• Chinaright Electronics Limited, a limited liability company incorporated under the laws of Hong Kong

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

• “Convertible Bond”

• redeemable convertible bond exchangeable into the New Shares for the principal sum of HK$2.0 million at the Conversion Price

• “Conversion Price”

• conversion price of HK$0.10 per New Share (subject to adjustments), as adjusted upon the completion of the Rights Issue

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

• “Great Center”

• Great Center Limited, a company incorporated in the British Virgin Islands with limited liability

• “Group” the Company and its subsidiaries

• “Hong Kong”

• Hong Kong Special Administrative Region of the People’s Republic of China

• “Independent Shareholders other than Profit Harbour and its associates, if Shareholders” any

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

— 8 —

• “Mr. Yue”

• Mr. Yue Jialin, the executive director and the Chairman of the Company. By virtue of his interest in Profit Harbour, Mr. Yue was also deemed to be interested in 262,602,000 Shares, representing approximately 63.58% in the existing issued share capital of the Company as at the date of this announcement, and will be interested in 928,699,801 Shares, representing approximately 74.96% of the share capital of the Company following the completion of the Rights Issue

• “New Share(s)”

• new Shares to be issued by the Company upon the conversion of the Convertible Bond

• “PRC”

• the People’s Republic of China

• “Profit Harbour”

• Profit Harbour Investments Limited, an investment holding company incorporated in the British Virgin Islands with limited liability and is wholly and beneficially owned by Mr. Yue. Profit Harbour was interested in 262,602,000 Shares, representing approximately 63.58% in the existing issued share capital of the Company as at the date of this announcement and will be interested in 928,699,801 Shares, representing approximately 74.96% of the share capital of the Company following the completion of the Rights Issue

• “Receivers”

• Mr. Alan Chung Wah Tang and Ms. Alison Wong Lee Fung Ying, both from Grant Thornton, Certified Public Accounts

• “Resumption Proposal”

• the resumption proposal of the Company as detailed in the paragraph headed “The Resumption Proposal” in this announcement

• “Rights Issue”

• the issue of the new shares of the Company on the basis of two new Shares for every existing Share held on Monday, 19 June 2006 at the subscription price of HK$0.10 per new Share

• “Rights Share(s)” the 826,000,000 new Share(s) to be issued in respect of the Rights Issue

• “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

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong

— 9 —

“US$”

United States dollars, the lawful currency of the United States

“%”

per cent.

By order of the Board Shanghai Merchants Holdings Limited Yue Jialin Chairman

Hong Kong, 13 July 2006

As at the date of this announcement, the Board comprises two executive Directors, namely Mr. Yue Jialin (Chairman) and Mr. Lau Yau Cheung (Chief Executive Officer) and three independent non-executive Directors namely Mr. Wong Wing Kuen, Albert, Mr. Tsui Robert Che Kwong and Mr. Wu Guo Jian.

* For identification purpose only

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

— 10 —