Persistence Gold Group Ltd — M&A Activity 2003

Sep 24, 2003

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this document or as to the action to be taken, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or otherwise transferred all your shares in Shanghai Merchants Holdings Limited, you should at once hand this document and the accompanying form of acceptance and transfer to the purchaser(s) or transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

The Stock Exchange of Hong Kong Limited and/or the Securities and Futures Commission takes no responsibility for the contents of this document, 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 document.

MANDATORY UNCONDITIONAL CASH OFFERS BY

on behalf of

Profit Harbour Investments Limited

(incorporated in the British Virgin Islands with limited liability)

To acquire all the issued shares of HK$0.10 each and all outstanding options to subscribe for shares in Shanghai Merchants Holdings Limited other than those already acquired by Profit Harbour Investments Limited and parties acting in concert with it

Financial adviser to Profit Harbour Investments Limited

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A letter from Sun Hung Kai International Limited containing, among other things, the details of the terms of the Offers is set out on pages 4 to 14 of this document.

The procedures for acceptance and settlement of the Offers is set out on pages 12 to 13 and in Appendix I to this document and in the accompanying form of acceptance and transfer and form of acceptance and cancellation. Acceptances of the Offers should be received by Secretaries Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong by no later than 4:00 p.m. on Tuesday, 21st October, 2003 or such later date as Profit Harbour Investments Limited may determine and announce.

23rd September, 2003

CONTENTS

	Page
Expected timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from Sun Hung Kai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Appendix I – Further terms of the Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Appendix II – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20

– i –

EXPECTED TIMETABLE

Offers commence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 23rd September, 2003

Latest date for posting of the offeree document . . . . . . . . . . . . . . . Tuesday, 7th October, 2003

Latest time and date for receiving acceptance . . . . . . . 4:00 p.m. Tuesday, 21st October, 2003

Closing date of the Offers (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . .Tuesday, 21st October, 2003

Latest date for posting of remittances for the amounts

• due under the Offers in respect of valid acceptances received on or before the closing date of the

Offers (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 31st October, 2003

Notes:

1. The Offers will be closed at 4:00 p.m. on Tuesday, 21st October, 2003 unless the Offeror revises or extends the Offers in accordance with the Code. Following the close of the Offers, an announcement on the result of the Offers will be made on the closing date.

2. The consideration payable for the Shares tendered under the Share Offer will be paid as soon as possible but in any event within 10 days after the receipt by the Registrar, from a Shareholder accepting the Share Offer, of the requisite documents; same for the Options tendered under the Option Offer. Please refer to the paragraph headed “Acceptance and Settlement” in the letter from Sun Hung Kai on pages 4 to 14 of this document.

3. Although the Offeror does not intend to extend the Offers, it reserves the right to do so.

4. Acceptances of the Offers shall be irrevocable and not capable of being withdrawn, except as permitted under the Code.

– ii –

DEFINITIONS

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

• “Announcement” an announcement dated 3rd September, 2003 made by the Offeror regarding the terms and conditions of the Offers

• “CCASS” the Central Clearing and Settlement System, established and operated by the Hong Kong Securities Clearing Company Limited

• “Code”

  • the Hong Kong Code on Takeovers and Mergers

• “Company” or

• “Shanghai Merchants”

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

• “Completion”

• completion of the sale and purchase of 260,986,000 Shares pursuant to the Sale and Purchase Agreement

• “Executive”

• Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director

• “Group”

• the Company and its subsidiaries

• “HKSCC”

• Hong Kong Securities Clearing Company Limited

• “Hong Kong”

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

• “Latest Practicable Date”

• 19th September, 2003 being the latest practicable date prior to the printing of this document for ascertaining certain information referred to in this document

• “Listing Rules”

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

• “Mr. Yue”

• 岳家霖先生 (Mr. Yue Jialin), the sole shareholder and director of the Offeror

• “Offeree Document”

• the response document in respect of the Offers to be issued by the Company to the Shareholders and holders of the Options in accordance with the provisions of the Code

– 1 –

DEFINITIONS

• “Offeror”

• Profit Harbour Investments Limited, a company incorporated in the British Virgin Islands with limited liability and beneficially owned as to 100% by Mr. Yue

• “Offers”

the Share Offer and the Option Offer

• “Option(s)”

• the outstanding option(s) granted by the Company to directors and employees of the Company to subscribe for the Shares, pursuant to the share option scheme of the Company adopted on 7th June, 2002

• “Option Offer”

• the mandatory unconditional cash offer made by Sun Hung Kai, on behalf of the Offeror, in accordance with the Code to all the Optionholders to surrender their Options for cancellation at HK$0.0001 for each outstanding Option

• “Optionholder(s)” holder(s) of the Option(s)

• “PRC”

• The People’s Republic of China, which for the purpose of this document exclude Hong Kong, Taiwan and Macau

• “Registrar”

• Secretaries Limited, Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, an agent appointed by the Offeror responsible for registration relating to the Offers

• “Relevant Period”

• the period between 3rd March, 2003 (being the date falling six months prior to 3rd September, 2003, which was the date of the Announcement) and the Latest Practicable Date

• “Sale and Purchase Agreement”

• the sale and purchase agreement dated 26th August, 2003 made between the Vendor and the Offeror relating to the sale and purchase of 260,986,000 Shares

• “SFC”

The Securities and Futures Commission

• “Share(s)”

• Share(s) of HK$0.10 each in the issued share capital of the Company

– 2 –

DEFINITIONS

• “Share Offer”

• “Shareholder(s)”

• “Stock Exchange”

• “Sun Hung Kai”

• “Vendor”

• “HK$”

the mandatory unconditional cash offer to be made by Sun Hung Kai on behalf of the Offeror to acquire all the Shares other than those already acquired by the Offeror and parties acting in concert with it

shareholder(s) of the Company

The Stock Exchange of Hong Kong Limited

Sun Hung Kai International Limited, an investment adviser and a licensed corporation under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

Angel Field Limited, a company incorporated in the British Virgin Islands with limited liability and is beneficially wholly-owned by Mr. Chau Ching Ngai. It had a shareholding interest of approximately 63.19 per cent. in and was a substantial shareholder of the Company prior to Completion

Hong Kong dollar(s), the lawful currency of Hong Kong

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LETTER FROM SUN HUNG KAI

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23rd September, 2003

To the Shareholders and the Optionholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFERS BY SUN HUNG KAI INTERNATIONAL LIMITED ON BEHALF OF PROFIT HARBOUR INVESTMENTS LIMITED TO ACQUIRE ALL THE ISSUED SHARES OF HK$0.10 EACH AND ALL OUTSTANDING OPTIONS TO SUBSCRIBE FOR SHARES IN SHANGHAI MERCHANTS HOLDINGS LIMITED OTHER THAN THOSE ALREADY ACQUIRED BY PROFIT HARBOUR INVESTMENTS LIMITED

AND PARTIES ACTING IN CONCERT WITH IT

INTRODUCTION

On 26th August, 2003, the Offeror entered into the Sale and Purchase Agreement with the Vendor to acquire from the Vendor 260,986,000 Shares, representing approximately 63.19 per cent. of the issued share capital of the Company and of the voting rights which may be exercised at the general meeting of the Company at a total consideration of HK$11,500,000, or approximately HK$0.0441 per Share. The Sale and Purchase Agreement was completed on the date of the Sale and Purchase Agreement. The 260,986,000 Shares represent the entire shareholding held by the Vendor in the Company immediately before Completion.

Under Rule 26 of the Code, the Offeror is required to make a mandatory unconditional cash offer for all the issued Shares other than those already owned by the Offeror or parties acting in concert with it at HK$0.0441 per Share. In compliance with the Code, Sun Hung Kai is making the Offers on behalf of the Offeror.

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LETTER FROM SUN HUNG KAI

This letter sets out details of the Sale and Purchase Agreement and information on the Offers and the Offeror. The Offers are subject to the terms set out in Appendix I to this document and in the accompanying form of acceptance and transfer and form of acceptance and cancellation. Under the Code, the Offeree Document which will contain, inter alia, a letter from the independent board committee formed to advise the Shareholders and the Optionholders on the Offers and a letter of advice from the independent financial advisers appointed to advise the independent board committee in respect of the Offers, will be sent to the Shareholders and the Optionholders as soon as practicable, and in any event, no later than 14 days from the date of this document. Shareholders are strongly advised to read the Offeree Document before deciding whether or not to accept the Offers.

THE SALE AND PURCHASE AGREEMENT

Date of the Sale and Purchase Agreement: 26th August, 2003

Parties:

Vendor: Angel Field Limited

(Angel Field Limited had a shareholding interest of approximately 63.19 per cent. in and was a substantial shareholder of the Company prior to Completion and is beneficially wholly-owned by Mr. Chau Ching Ngai)

Purchaser: The Offeror

(The Offeror is beneficially wholly-owned by Mr. Yue)

Shares Acquired

The Offeror acquired 260,986,000 Shares, representing approximately 63.19 per cent. of the issued share capital of the Company and of the voting rights which may be exercised at a general meeting of the Company. The Vendor was the legal and beneficial owner of the 260,986,000 Shares and had the right to sell the 260,986,000 Shares to the Offeror free from all claims, liens, charges and encumbrances, without the consent of any third party (save and except the share mortgage executed by the Vendor in favour of Sun Hung Kai Investment Services Limited dated 17th April, 2003 as disclosed by the Vendor to the Offeror which consent had been obtained by the Vendor from Sun Hung Kai Investment Services Limited regarding the sale of 260,986,000 Shares).

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LETTER FROM SUN HUNG KAI

Purchase Price

The consideration of HK$11,500,000 for the 260,986,000 Shares was determined after arm’s length negotiations and represents a price of approximately HK$0.0441 per Share. The price of approximately HK$0.0441 per Share represents a discount of approximately 83 per cent. to the closing price of the Shares on the Stock Exchange of HK$0.26 on 30th May, 2003, the last trading date immediately prior to the suspension of the trading in the Shares on the Stock Exchange and a discount of approximately 84 per cent. to the average closing price of Shares on the Stock Exchange of approximately HK$0.27 per share for the 10 trading days immediately prior to the suspension in trading in the Shares on the Stock Exchange.

Payment Terms

The full amount of the consideration was paid in cash upon Completion.

Completion

The Sale and Purchase Agreement was completed on 26th August, 2003.

MANDATORY UNCONDITIONAL CASH OFFER

The Offeror and parties acting in concert with it are interested in 260,986,000 Shares representing approximately 63.19 per cent. of the issued share capital of the Company and of the voting rights which may be exercised at a general meeting of the Company. Under Rule 26 of the Code, the Offeror is required to make a mandatory unconditional cash offer for all the issued Shares not already beneficially owned by the Offeror and parties acting in concert with it. Sun Hung Kai, on behalf of the Offeror, makes the Share Offer on the following basis:

For each Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.0441 in cash

The offer price represents:

• (a) a discount of approximately 83 per cent. to the closing price of the Shares on the Stock Exchange of HK$0.26 on 30th May, 2003, the last trading date immediately prior to the suspension of the trading in the Shares on the Stock Exchange;

• (b) a discount of approximately 84 per cent. to the average closing price of Shares on the Stock Exchange of approximately HK$0.27 per share for the 10 trading days immediately prior to the suspension in trading in the Shares on the Stock Exchange; and

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LETTER FROM SUN HUNG KAI

• (c) a discount of approximately 83 per cent. to the Group’s pro forma adjusted consolidated net asset value of approximately HK$0.26 per Share after subscription pursuant to the subscription agreement dated 6th March, 2003 (based on the Group’s audited net asset value of approximately HK$56,695,000 as at 31st December, 2002 which is adjusted by the net proceeds of HK$49.9 million from the said subscription as stated in the Company’s circular dated 18th March, 2003 and 413,000,000 Shares outstanding after the said subscription).

Save as disclosed below, the Company has no outstanding equity securities (including equity related convertible securities, warrants, options or subscription rights in respect of any equity share capital other than options under the Company’s share option scheme) in issue as at the Latest Practicable Date.

Based on the 2002 annual report of the Company dated 7th April, 2003, a total of 9,840,000 Options granted to the directors and employees of the Company for subscription of the Company’s shares at a subscription price of HK$0.556 each were outstanding. Sun Hung Kai, on behalf of the Offeror, will make the Option Offer to all the Optionholders for the surrender of their Options for cancellation at the offer price of HK$0.0001 for each of the outstanding Option.

Based on the total number of 413,000,000 Shares in issue as at the Latest Practicable Date, the Share Offer would value the total issued shares of the Company at approximately HK$18,213,300.

On the basis of the offer price of HK$0.0001 for each of the outstanding Option, the Option Offer would value the outstanding Options at approximately HK$984.

Pursuant to the letter dated 23rd August, 2003 from Standard Chartered Bank, the Offeror has standby facilities with the bank of not less than HK$8 million for the purpose of the Offers. Sun Hung Kai is satisfied that sufficient financial resources are available to the Offeror to meet full acceptance of the Offers.

The Offeror will not exercise the power of compulsory acquisition.

Sellers’ ad valorem stamp duty at the rate of HK$1.00 for every HK$1,000 or part thereof of the consideration arising in connection with acceptance of the Share Offer will be payable by those shareholders of the Company who accept the Share Offer and will be deducted from the consideration due to such person on acceptance of the Share Offer.

Acceptance of the Offers by any person(s) will be deemed to constitute a warranty by such person(s) that any Shares and Options acquired pursuant to the Offers are sold by such person(s) free from all liens, charges, options, claims, equities, adverse interests, third-party rights or encumbrances whatsoever and together with all rights accruing or attaching thereto, including (without limitation) the right to receive dividends and distributions declared, made or paid, if any, on or after the date of the Announcement.

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LETTER FROM SUN HUNG KAI

Neither the Offeror nor any other parties acting in concert with it owns any Shares or any other securities, including equity related convertible securities, warrants, options or subscription rights in respect of any equity share capital of the Company prior to Completion. Except for the acquisition of 260,986,000 Shares pursuant to the Sale and Purchase Agreement, neither the Offeror nor any parties acting in concert with it has dealt in any Shares or any securities, including equity related convertible securities, warrants, options or subscription rights in respect of any equity share capital of the Company during the Relevant Period.

INFORMATION ON THE COMPANY

On the basis of the 2002 annual report of the Company dated 7th April, 2003, the Company is an investment holding company and the activities of its principal subsidiaries are trading of base metals and fabrics in the PRC.

According to the 2002 annual report of the Company dated 7th April, 2003, the consolidated turnover of the Company for the year ended 31st December, 2002 was approximately HK$403.75 million and the loss for the year ended 31st December, 2002 was approximately HK$49.99 million. The consolidated net assets of the Company as at 31st December, 2002 were approximately HK$56.70 million.

Set out below is the audited losses recorded by the Company for each of the two years ended 31st December, 2002:

	2002	2001
	HK$’000	HK$’000
Loss before taxation	(50,069)	(47,049)
Taxation	(24)	52
Loss after taxation	(50,093)	(46,997)
Minority interests	99	1,439
Loss for the year	(49,994)	(45,558)

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LETTER FROM SUN HUNG KAI

Based on public information and the information provided by the Vendor regarding its disposal of in aggregate 46,000,000 Shares on 25th and 26th August, 2003, the Vendor had a shareholding interest of approximately 63.19 per cent. in the Company after the said disposal and prior to Completion. The following table sets out the shareholding structure of the Company before and immediately after Completion:

Vendor Offeror (and any parties acting in concert with it) Public Total	Before Completion No. of Shares % 260,986,000 63.19 – – 152,014,000 36.81 413,000,000 100.00	After Completion No. of Shares % – – 260,986,000 63.19 152,014,000 36.81 413,000,000 100.00	After Completion No. of Shares % – – 260,986,000 63.19 152,014,000 36.81 413,000,000 100.00
			100.00

INFORMATION ON THE OFFEROR

The Offeror is a private company which was incorporated in the British Virgin Islands on 18th July, 2003 and is wholly-owned by Mr. Yue. The Offeror is a special purpose vehicle formed to hold the Shares. Mr. Yue is an independent third party who is not connected with the directors, chief executive or substantial shareholders of the Company or its subsidiaries or their respective associates (as defined in the Listing Rules) other than the Offeror who is a connected person by virtue only of its substantial shareholding in the Company after Completion. Mr. Yue is the director of the Offeror. Other than the appointment of Sun Hung Kai as financial adviser to the Offeror, Mr. Yue or any of his close relatives or related trust or companies controlled by him has no other relationship, financial or otherwise, with Sun Hung Kai & Co. Limited or any party acting in concert with Sun Hung Kai & Co. Limited.

None of the shareholders of the Company has indicated to the Offeror nor any person acting in concert with it any irrevocable commitment to accept the Offers.

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LETTER FROM SUN HUNG KAI

REASONS FOR THE OFFERS AND THE FUTURE PLANS AND PROSPECTS ON THE COMPANY

Upon Completion, the Offeror and parties acting in concert with it are required under Rule 26 of the Code to extend a mandatory unconditional cash offer for the Shares not already owned by the Offeror or parties acting in concert with it.

It is the intention of the Offeror to maintain the existing principal activities of the Company and the Offeror has no intention to inject any material assets or businesses into the Company or any of its subsidiaries immediately after the Offers. The Offeror has no intention to dispose of or re-deploy any material assets of the Company or any of its subsidiaries. The Offeror will also assist the board of the Company to review the business and operations of the Group after closing of the Offers with a view to rationalizing and increasing the business activities and performance of the Group.

Directors and Management of the Company

The Offeror intends to appoint a majority of the directors of the Company (“New Board”). The daily operation and management will be carried out by the New Board after the close of the Offers. As at the Latest Practicable Date, the Offeror intends to nominate the following persons as executive directors to the New Board upon closing of the Offers.

Mr. Yue , aged 35, graduated at 深圳市司法學院 (Shenzhen College of Laws) in 1989. Mr. Yue was a magistrate of 堔圳市羅湖區人民法院經濟審判庭 (Magistrates’ court for economic affairs of the people’s court of Luohu District, Shenzhen) from 1989 to 1993. Mr. Yue worked for the 深圳市人民政府貿易發展局 (Trade Development Council of the people’s government of Shenzhen) from January 1993 to December 1995. His major duty is to scrutinize the Shenzhen branch office of foreign investors. Since 1998, Mr. Yue has been working as the director of 深圳市海佳華諮詢有限公司 (Shenzhen Hai Jia Hua Consulting Company Limited), which is principally engaged in trading, provision of consultancy service to state-owned enterprises and investment management in the PRC. Mr. Yue will allocate approximately 80% of his time to the Company.

Mr. Lau Yau Cheung, Brent , aged 42, graduated from the University of Toronto in Canada with a bachelor’s degree in commerce in 1984. Mr. Lau has over 18 years’ experience in securities industry in Hong Kong. Since 1999, Mr. Lau is the managing director of BH Capitalink Development Limited, a money lending company in Hong Kong. Mr. Lau will allocate approximately 80% of his time to the Company.

The aforesaid nominated persons do not have expertise in the existing business of the Group, however they have extensive experience in administration and management of corporations. The Offeror may nominate new directors, including independent non-executive directors, to the New Board in compliance with the Code.

The Offeror intends that there will not be any material changes to the employees of the Company and of its subsidiaries following completion of the Offers.

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LETTER FROM SUN HUNG KAI

Continuation of Listing of the Company

It is the intention of the Offeror that the listing of the Shares on the Stock Exchange should be maintained. Accordingly, the Offeror will take appropriate steps as soon as possible following the close of the Offers to ensure the trading of the Shares on the Stock Exchange is resumed and that such number of Shares as may be required by the Stock Exchange are held by the public.

The Stock Exchange has stated that, in the event that less than 25 per cent. of the Shares are in public hands following the closing of the Offers or if the Stock Exchange believes that a false market exists or may exist in the Shares or that there are insufficient Shares in public hands to maintain an orderly market, then it will consider exercising its discretion to suspend trading in the Shares.

The Stock Exchange has stated that, if the Company remains a public company listed on the Stock Exchange, any acquisitions or disposals of assets by the Company will be subject to the provisions of the Listing Rules. Pursuant to the Listing Rules, the Stock Exchange has the discretion to require the Company to issue an announcement and a circular to its shareholders where acquisition or disposal by the Company is proposed, irrespective of the size of such acquisition or disposal and in particular where such acquisition or disposal represents a departure from the principal activities of the Company. The Stock Exchange also has the power, pursuant to the Listing Rules, to aggregate a series of acquisitions or disposals by the Company and any such acquisitions or disposals may, in any event, result in the Company being treated as a new applicant for listing and subject to the requirements for new applicants as set out in the Listing Rules.

TAXATION

Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of accepting the Offers. It is emphasised that none of Sun Hung Kai, the Offeror or any of their respective directors or any persons involved in the Offers accepts responsibility for any tax effects on, or liabilities of, any person or persons as a result of their acceptance of the Offers.

NO RIGHT OF WITHDRAWAL

Acceptance of the Offers shall be irrevocable and shall not be capable of being withdrawn, subject to the Code.

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LETTER FROM SUN HUNG KAI

ACCEPTANCE AND SETTLEMENT

(a) Procedure for acceptance

The Share Offer

To accept the Share Offer, you should complete the accompanying form of acceptance and transfer in accordance with the instructions printed thereon, which instructions form part of the terms and conditions of the Share Offer.

The completed form(s) of acceptance and transfer should then be forwarded, together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) for not less than the number of Shares in respect of which you intend to accept the Share Offer, by post or by hand to the Registrar, Secretaries Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, marked “Shanghai Merchants Share Offer” on the envelope, as soon as practicable after receipt of the form(s) of acceptance and transfer but in any event so as to reach the Registrar by not later than 4:00 p.m. on Tuesday, 21st October, 2003 or such later date as the Offeror shall announce. No acknowledgement of receipt of any form(s) of acceptance and transfer, Share certificate(s), transfer receipt(s) or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will be given. Your attention is drawn to the further details regarding the procedure for acceptance set out in Appendix I to this document and the form(s) of acceptance and transfer.

The Option Offer

To accept the Option Offer, you should complete the accompanying form(s) of acceptance and cancellation in accordance with the instruction mentioned therein, and then deliver the form(s) of acceptance and cancellation together with the relevant Option certificate(s) for the whole of your holding of Options, or for the number of Options in respect of which you accept the Option Offer by post or by hand to the Registrar, Secretaries Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, marked “Shanghai Merchants Option Offer” on the envelope, as soon as possible after receipt of the form(s) of acceptance and cancellation but in any event not later than 4:00 p.m. on Tuesday, 21st October, 2003 or such later date as the Offeror shall announce. No acknowledgement of receipt of any form(s) of acceptance and cancellation and Option certificate(s) will be given.

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LETTER FROM SUN HUNG KAI

(b) Settlement

The Share Offer

Provided that the relevant form(s) of acceptance and transfer and Share certificates(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) are in complete and good order and have been received by the Registrar on or before the relevant time and date, a cheque for the amount due to the Shareholders less stamp duty in respect of the Shares tendered by them under the Share Offer will be despatched to the Shareholders as soon as possible but in any event within 10 days of the date on which all the relevant documents are received by the Registrar to render such acceptance complete and valid.

The Option Offer

Provided that the relevant form(s) of acceptance and cancellation and Option certificate(s) are complete in the manner and within the time limit set out in the preceding paragraph, a remittance for the amount that you are entitled to under the Option Offer in respect of the Options surrendered by you will be sent to you, by post or by hand, as soon as possible but in any event within 10 days of the date upon which your written notification of acceptance of the Option Offer and all the relevant documents are received by the Registrar.

To ensure equality of treatment of all Shareholders, those registered Shareholders who hold Shares as nominee for more than one beneficial owner should, as far as practicable, treat the holding of each beneficial owner separately. In order for the beneficial owners of the Shares whose investments are registered in nominee names to accept the Share Offer, it is essential that they provide instructions to their nominees of their intentions with regard to the Share Offer.

The attention of Shareholders not resident in Hong Kong is drawn to paragraph (v) of the section headed “General” in Appendix I to this document.

All document and remittances sent to Shareholders and/or Optionholders through the post will be sent to them at their own risk. Such documents and remittances will be sent to Shareholders and/or Optionholders at their respective addresses as they appear in the register of members of the Company and/or the register of Optionholder or, in the case of joint Shareholder, to the Shareholder whose name stands first in the register of members of the Company. None of the Company, the Offeror, Sun Hung Kai or any of their respective directors or any other person involved in the Offers will be responsible for any loss or delay in transmission or any other liabilities that may arise as a result thereof.

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LETTER FROM SUN HUNG KAI

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the Appendices which form part of this document.

Yours faithfully, For and on behalf of Sun Hung Kai International Limited Manus Tam Eric Shum Director Director

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FURTHER TERMS OF THE OFFERS

APPENDIX I

FURTHER PROCEDURE FOR ACCEPTANCE

• (i) If the share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title in respect of your Shares is/are in the name of a nominee company or some name other than your own, and you wish to accept the Share Offer (as the case may be), you must either:

• (a) lodge your share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title with the nominee company, or other nominee, with instructions authorising it to accept the Share Offer on your behalf and requesting it to deliver the relevant form(s) of acceptance and transfer duly completed together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title to the Registrar; or

• (b) arrange for the Shares to be registered in your name by the Company through the Registrar, and send the relevant form(s) of acceptance and transfer duly completed together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title to the Registrar; or

• (c) if your Shares have been lodged with your broker/custodian bank through CCASS, instruct your broker/custodian bank to authorise HKSCC Nominees Limited to accept the Share Offer on your behalf on or before the deadline set out by HKSCC Nominees Limited, in this case, on Monday, 20th October, 2003 which is one business day before the latest date on which acceptances of the Share Offer must be received by the Registrar. In order to meet the deadline set by HKSCC Nominees Limited, you should check with your broker/custodian bank for the timing of processing your instructions, and submit your instructions to your broker/custodian bank as required by them; or

  • if your Shares have been lodged with your Investor Participant Account with CCASS, authorise your instruction via the CCASS Phone System or CCASS Internet System not later than one business day before the latest date on which acceptances of the Share Offer must be received by the Registrar, which is Monday, 20th October, 2003 in this case.

• (ii) If the share certificate(s) and/or transfer receipt(s) and/or other document(s) of title in respect of your Shares is/are not readily available and/or is/are lost and you wish to accept the Share Offer, the relevant form(s) of acceptance and transfer should nevertheless be completed and delivered to the Registrar together with a letter stating that you have lost one or more of your Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title or that it/they is/are not readily available. If you find such document(s) or it/they become available, the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title should be forwarded to the Registrar as

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FURTHER TERMS OF THE OFFERS

APPENDIX I

soon as possible thereafter. If you have lost you Share certificate(s), you should also write to the Registrar for a letter of indemnity which, when completed in accordance with the instruction given, should be returned to the Registrar.

• (iii) If you have lodged transfer(s) of any of your Shares for registration in your name and have not yet received your certificate(s), and you wish to accept the Share Offer, you should nevertheless complete the relevant form(s) of acceptance and transfer and deliver it/them to the Registrar together with the transfer receipt(s) duly signed by yourself. Such action will be deemed to be an irrevocable authority to Sun Hung Kai and/or the Offeror or their respective agent(s) to collect from the Company or the Registrar on your behalf the relevant Share certificate(s) when issued and to deliver such certificate(s) to the Registrar and to authorise and instruct the Registrar to hold such certificate(s), subject to the terms and conditions of the Share Offer, as if it was/they were delivered to the Registrar with the relevant form(s) of acceptance and transfer.

• (iv) No acknowledgement of receipt of any form(s) of acceptance and transfer, Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will be given.

ACCEPTANCE PERIOD AND REVISIONS

Although the Offeror does not intend to extend or revise the Offers, it reserves the right to do so in accordance with the relevant provisions of the Code. Unless the Offers have previously been extended, the Offers will be closed at 4:00 p.m. on Tuesday, 21st October, 2003. Acceptance must be received by 4:00 p.m. on Tuesday, 21st October, 2003. Acceptance received thereafter will only be valid if the Offers are revised or extended before the closing date.

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FURTHER TERMS OF THE OFFERS

APPENDIX I

ANNOUNCEMENTS

• (a) By 6:00 p.m. (or such later time as the Executive in exceptional circumstances permit), on the closing date, the Offeror shall inform the Executive and the Stock Exchange of its decision in relation to the revision or the extension or expiry or unconditionality of the Offers. The Offeror shall publish an announcement on the website of the Stock Exchange by 7:00 p.m. on the closing date of the Offers stating whether the Offers has been revised or extended, has expired or has become or been declared unconditional. The Offeror shall republish such announcement (in accordance with paragraph (c) below) on the next business day after the closing date of the Offers stating whether the Offers has been revised or extended, has expired or has become or been declared unconditional. The announcement shall state the total number of the Shares:

• for which acceptances of the Offers has been received;

• held, controlled or directed by the Offeror or persons acting in concert with it before the offer period; and

• acquired or agreed to be acquired during the offer period by the Offeror or any persons acting in concert with it.

The announcement shall include the details of voting rights, rights over shares, derivatives and arrangements as required by Rule 3.5(c), (d) and (f) of the Code. The announcement shall also specify the percentages of the relevant classes of share capital, and the percentages of voting rights, represented by these numbers.

If the Offeror is unable to comply with any of the requirements of Rule 19 of the Code, the Executive may require that acceptors be granted a right of withdrawal, on terms acceptable to the Executive, until the requirements of Rule 19 can be met.

• (b) In computing the number of the Shares represented by acceptances, there will be included, for announcement purposes, acceptances which are not in all respects in order or are subject to verification. The number of these acceptances will be separately stated.

• (c) As required under the Code, all announcements in relation to the Offers, in respect of which the Executive has confirmed that it has no further comments, must be published as a paid announcement in at least one leading English language newspaper and one leading Chinese language newspaper, being in each case a newspaper which is published daily and circulating generally in Hong Kong.

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FURTHER TERMS OF THE OFFERS

APPENDIX I

GENERAL

• (i) Acceptance of the Offers by any person or persons holding Share(s) and Option(s) will be deemed to constitute a warranty by such person or persons to the Offeror that the Share(s) and Option(s) acquired under the Offers is/are sold by any such person or persons free from all liens, charges, encumbrances, equities and third party rights and together with all rights attaching thereto including the right to receive all dividends and distributions declared, made or paid on or after the date of the Announcement.

• (ii) All communications, notices, forms of acceptance and transfer, Share certificates, transfer receipts, other documents of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and remittances to be delivered by or sent to or from the Shareholders will be delivered by or sent to or from them, or their designated agents, through the post at their own risk, and neither the Offeror nor any of its agents accepts any liability for any loss in postage or any other liabilities that may arise as a result thereof.

• (iii) The provisions set out in the accompanying form of acceptance and transfer and form of acceptance and cancellation form part of the terms of the Offers.

• (iv) The accidental omission to despatch this document and/or the form of acceptance and transfer or the form of acceptance and cancellation or any of them to any person to whom the Offers are made will not invalidate the Offers in any way.

• (v) The making of the Offers to certain persons resident in jurisdictions outside Hong Kong may be prohibited or affected by the laws of the relevant jurisdictions. Shareholders who are citizens or residents or nationals in jurisdictions outside Hong Kong should obtain appropriate legal advice on, inform themselves about and observe any applicable legal requirements. It is the responsibility of any such person outside Hong Kong wishing to accept the Offers to satisfy himself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental or other consent which may be required or the compliance with other necessary formalities. Any such overseas holder will be responsible for any such transfer or other taxes by whomsoever payable and the Offeror, Sun Hung Kai and any person acting on their behalf shall be entitled to be fully indemnified and held harmless by such overseas Shareholders for any such transfer or other taxes as such person may be required to pay. Acceptances of the Offers by any such person will constitute a warranty by such person that such person is permitted under all applicable laws to receive and accept the Offers, and any revision thereof, and such acceptance shall be valid and binding in accordance with all applicable laws.

• (vi) The Offers and all acceptances will be governed by and construed in accordance with the laws of Hong Kong.

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FURTHER TERMS OF THE OFFERS

APPENDIX I

• (vii) Due execution of a form of acceptance and transfer or a form of acceptance and cancellation will constitute an authority to any director of the Offeror or Sun Hung Kai or such person or persons as the Offeror may direct, to complete and execute any document on behalf of the person or persons accepting the Offers and to do any other act that may be necessary or expedient for the purposes of vesting in the Offeror, or such person or persons as they may direct, the Shares and the Options in respect of which such person or persons has/have accepted the Offers.

• (viii) Acceptance of the Share Offer by any nominee will be deemed to constitute a warranty by such nominee to the Offeror that the number of the Shares in respect of which it is indicated in the form of acceptance and transfer are the aggregate number of the Shares held by such nominee for such beneficial owners who are accepting the Offers.

• (ix) References to the Offers in this document and in the form of acceptance and transfer and form of acceptance and cancellation shall include any extension and/or revision thereof and references to the Offers becoming unconditional shall include a reference to the Offers being declared unconditional.

• (x) The consideration payable to any Shareholder under the Share Offer, after deduction of respective seller’s ad valorem stamp duty, will be settled by posting remittances in accordance with the terms of the Share Offer and without regard to any lien, right of set-off, counterclaim, or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Shareholder.

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GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

The director of the Offeror accepts full responsibility for the accuracy of the information contained in this document and confirms, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in this document have been arrived at after due and careful consideration and there are no other facts not contained in this document, the omission of which would make any statement in this document misleading.

2. MARKET PRICES

The table below shows the closing prices of the Shares quoted on the Stock Exchange on the last trading day of each of the six calendar months immediately preceding the Announcement, on the last trading day before the Announcement and on the Latest Practicable Date.

Date	Closing price of Shares
	HK$
31st March, 2003	0.350
30th April, 2003	0.345
30th May, 2003 (Last day on which the
Shares were traded immediately before
the date of the Announcement)	0.260
30th June, 2003	Suspended
31st July, 2003	Suspended
29th August, 2003	Suspended
2nd September, 2003 (Last business day immediately	preceding
the date of the Announcement)	Suspended
Latest Practicable Date	Suspended

The highest and lowest closing prices per Share recorded on the Stock Exchange during the Relevant Period were HK$0.38 on 3rd March, 2003 and HK$0.23 on 9th May, 2003 respectively.

3. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the Offeror owned 260,986,000 Shares. Save as aforesaid, neither Mr. Yue, the Offeror nor any party acting in concert with any of them owned or controlled any Shares.

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GENERAL INFORMATION

APPENDIX II

4. DEALING IN SECURITIES OF THE COMPANY

• (a) During the Relevant Period, save for the Shares acquired under the Sale and Purchase Agreement, none of the Offeror, its directors or parties acting in concert with any one of them has dealt in the Shares.

• (b) Sun Hung Kai does not have any beneficial interest in the Shares as at the Latest Practicable Date and has not dealt in any Shares during the Relevant Period.

5. CONSENT AND QUALIFICATION

Sun Hung Kai has given and has not withdrawn its written consent to the issue of this document with the inclusion herein of its letter and/or reference to its name, in the form and context in which it appears.

6. GENERAL

• (a) As at the Latest Practicable Date, no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Code with the Offeror or with any party acting in concert with it.

• (b) As at the Latest Practicable Date, no person had irrevocably committed himself to the Offeror to accept or reject the Offers.

• (c) No payment or other benefit has been made or given to any directors of the Company or any of its subsidiary as compensation for loss of office or otherwise in connection with the Offers.

• (d) As at the Latest Practicable Date, there was no agreement or arrangement between the Offeror and any of the directors of the Company or any other person which was conditional upon the outcome of the Offers or otherwise connected with the Offers.

• (e) As at the Latest Practicable Date, there was no agreement, arrangement or understanding between the Offeror and any other persons for the transfer or the beneficial interests in Shares acquired by the Offeror under the Offers.

• (f) The correspondence address of Mr. Yue and the Offeror is Room 1225, 12th Floor, Prince’s Building, 10 Chater Road, Hong Kong. The registered office of the Offeror is at Offshore Incorporated Limited, P.O. Box 957, Offshore Incorporation Centre, Road Town, Tortola, British Virgin Islands. The Offeror has not appointed a company secretary and it does not intend to appoint one as at the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX II

• (g) The registered office of Sun Hung Kai situates at 12th Floor, One Pacific Place, 88 Queensway, Hong Kong.

• (h) The English text of this document and of the form of acceptance and transfer and the form of acceptance and cancellation shall prevail over the Chinese text.

7. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during the normal business hours at the office of P. C. Woo & Co., the legal advisers to the Offeror, at Room 1225, 12th Floor, Prince’s Building, 10 Chater Road, Hong Kong, while the Offers remain open for acceptance:

• (a) a copy of the Sale and Purchase Agreement;

• (b) the memorandum and articles of association of the Offeror;

• (c) a copy of the letter from Sun Hung Kai containing details of the Offers;

• (d) a copy of the letter of consent from Sun Hung Kai; and

• (e) consent of Sun Hung Kai Investment Services Limited in respect of the Share mortgage executed by the Vendor in favour of Sun Hung Kai Investment Services Limited dated 17th April, 2003.

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