Persistence Gold Group Ltd — Proxy Solicitation & Information Statement 2004

Apr 6, 2004

2[nd] April, 2004

To all shareholders of Shanghai Merchants Holdings Limited

Dear Shareholders,

Re: Special General Meeting of Shanghai Merchants Holdings Limited (the “Company”) to be held on 26[th] April 2004

INTRODUCTION

We, Profit Harbour Investments Limited (“Profit Harbour”) and Hong Lui Cynthia (the “Requisitionists”), the shareholders of the Company, holding approximately 63.6% and 4.8% of the issued share capital of the Company respectively, being not less than one-tenth of the paid-up capital of the Company carrying the right to vote at any general meetings of the Company, had by written requisition dated 5[th] March, 2004 (“Requisition”), required the directors of the Company to convene forthwith a special general meeting (“SGM”) of the shareholders of the Company within twenty-one (21) days of the date of the deposit of this Requisition at the registered office of the Company in accordance with section 74 of the Companies Act 1981 of Bermuda and bye-law 58 of the bye-laws of the Company.

Notwithstanding the request as set out in the Requisition, the directors of the Company failed to convene a SGM of the shareholders of the Company accordingly. As a result, the Requisitionists proceeded to issue the Notice of Special General Meeting (the “Notice”) for the removal of the directors of the Company, the details of which are set out in the Notice. To enable the shareholders to have a better understanding of this matter, we set out hereunder the background and explanation of the present case.

BACKGROUND

The directors of the Company resolved at a meeting held on 14[th] June 2003 that an application (the “Application”), which was made on 17[th] June, 2003, be made to the High Court of the Hong Kong Special Administrative Region (“Hong Kong”) for the appointment of receivers of the Company to take all proper actions to preserve the assets of the Company, to carry on the business of the Company and to do all such ancillary and necessary for the purpose of protecting the value and assets of the Company because none of the executive directors were involved in the day to day

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running of the Company and nearly all the Company’s employees had been dismissed, the Company was no longer being properly managed and no protection was being afforded to the Company’s assets.

On 17[th] June, 2003, the Honourable Madam Justice Kwan of the Court heard the Application and granted on the same day an order that Mr. Alan Chung Wah TANG and Mrs. Alison WONG Lee Fung Ying, both of Grant Thornton, certified public accountants of 13[th] Floor, Gloucester Tower, The Landmark, Central, Hong Kong (the “Receivers”) be appointed jointly and severally as the Receivers of the Company until further notice.

On 26[th] August 2003, Profit Harbour acquired approximately 63% of the issued share capital of the Company. Profit Harbour, as the majority shareholder of the Company, has decided to resume proper control and management of the Company.

On 23[rd] September, 2003, in accordance with the Hong Kong Codes on Takeovers and Mergers, Profit Harbour made a mandatory unconditional cash offers (the “Offers”) on 23[rd] September, 2003 to the shareholders of the Company to acquire all the issued shares of HK$0.10 each and all outstanding options to subscribe for shares in the Company other than those already acquired by Profit Harbour and parties acting in concert with it. The Offers were closed on 21[st] October, 2003 and as a result thereof, Profit Harbour acquired a further approximately 0.39% of the issued share capital of the Company.

On 12[th] November, 2003, Profit Harbour made an application to the High Court of Hong Kong for the following relief, inter alias,:-

1. an order that the Receivers be directed to appoint Mr. YUE Jialin and Mr. LAU Yau Cheung Brent as directors of the Company and to convene a Special General Meeting of the Company as soon as practicable thereafter to consider and if thought fit to ratify such appointments;

2. in the alternative to the order set out in paragraph 1 above, an order that:-

3. i. that a Special General Meeting of the Company be convened by the Court for the purpose of considering and if thought fit passing a resolution to appoint Mr. Yue and Mr. Lau as directors of the Company; and

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• ii. that directors be given as to the manner in which the said meeting to be called, held and conducted and all such ancillary and consequential directions as the Court may think expedient;

• an order that upon the appointment of Mr. Yue and Mr. Lau as directors of the Company, the Receivers appointed in those proceedings be discharged; and

• an order that the Receivers serve their final report and accounts as such Receivers at such time as the Court consider appropriate.

On 27[th] February, 2004, the Honourable Mr. Justice Barma gave his judgment that it was open to Profit Harbour to requisition a Special General Meeting of the Company by making use of the procedure laid down in Article 58 of the Company’s bye-laws without the need for any court application or any action be the Receivers.

The Requisitionists had by written requisition dated 5[th] March, 2004 (“Requisition”), required the directors of the Company to convene forthwith a Special General Meeting of the shareholders of the Company. The directors of the Company failed to convene a Special General Meeting of the shareholders of the Company accordingly.

EXPLANATION

The Requisitionists are issuing the attached notice dated 2[nd] April, 2004 to convene a Special General Meeting pursuant to section 74 of the Companies Act 1981 of Bermuda and Bye-Law 58 of the Bye-Laws of the Company for the removal of the existing two directors, namely, Mo Yuk Ping and Gong Bei Ying, of the Company. The Requisitionists intend to nominate persons for election, pursuant to bye-law 86(5) of the bye-laws of the Company, as new directors to fill the vacancies resulting from the removal to run the day to day management of the Company. The Requisitionists would further request the receivers to apply to the court to discharge themselves and to make application to the Stock Exchange of Hong Kong Limited to resume trading of the shares of the Company.

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RECOMMENDATION

The Requisitionists consider that the current resolution is for the best interests of the Company and its shareholders as a whole. Accordingly, the Requisitionists recommend the shareholders of the Company to vote in favour of the resolution to remove the existing two directors, namely, Mo Yuk Ping and Gong Bei Ying, of the Company.

Yours faithfully, Profit Harbour Investments Limited

Director

Hong Lui Cynthia

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Form of proxy for use at the Special General Meeting (or any adjournment thereof) of Shanghai Merchants Holdings Limited ( ㆖海商貿控股有限公司 )* (the “Company”) to be convened at 9:00a.m. on 26[th] April 2004 at Chater Room 1, B/3, Regal Hong Kong Hotel of 88 Yee Wo Street, Causeway Bay, Hong Kong (or as soon as practicable immediately after the conclusion or adjournment of the annual general meeting of the Company)

I/We[1] ____ of ____ _____ being the registered holder(s) of[2] _ shares of HK$0.10 each in the capital of the Company, HEREBY APPOINT[3] ___ of ______ ______ or failing him, the Chairman of the Meeting as my/our proxy to act for me/us at the Special General Meeting of the Company to be held at 9:00a.m. on 26[th] April 2004 at Chater Room 1, B/3, Regal Hong Kong Hotel of 88 Yee Wo Street, Causeway Bay, Hong Kong (or as soon as practicable immediately after the conclusion or adjournment of the annual general meeting of the Company) or at any adjournment there of for the purpose of considering and, if thought fit, passing the Special Resolutions, with or without modifications, as set out in the notice convening the said Meeting and at such Meeting (or at any adjournment thereof) to vote on my/our behalf in respect of the said Special Resolutions as hereunder indicated or, if no such indication is given, as my/our proxy thinks fit.[4]

, thinks fit.4	,
	**For **	Against
Special Resolution

Special Resolution Dated this _ day of _____ Signature[5] ________

Notes:

1. Full name(s) and address(es) to be inserted in BLOCK CAPITALS

2. Please insert the number of shares registered in your name(s). If no number is inserted, this form of proxy will be deemed to relate to all the shares in the capital of the Company registered in your name(s).

3. Please insert the name and address of the proxy desired. IF NO NAME IS INSERTED, THE CHAIRMAN OF THE MEETING WILL ACT AS YOUR PROXY.

4. IMPORTANT : IF YOU WISH TO VOTE FOR THE RESLUTION, TICK “√” IN THE RELEVANT BOX MARKED “FOR”. IF YOU WISH TO VOTE AGAINST THE RESOLUTION, TICK “√” IN THE RELEVANT BOX MARKED “AGAINST”. Failure to complete the boxes will entitle your proxy to cast his vote at his discretion. Your proxy will also be entitled to vote at his discretion on any resolution properly put to the Meeting other than those referred to in the notice convening the meeting.

5. This form of proxy must be signed by you or your attorney duly authorized in writing or, in the case of a corporation, must be either under its common seal or under the hand of an officer or attorney duly authorized.

6. Where there are joint registered holders of any share, any one of such persons may vote at the Meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at the Meeting personally or by proxy, then the joint holder whose name stands first on the register of members of the Company in respect of such share shall (personally or by proxy) alone be entitled to vote in respect thereof.

7. To be valid, the form of proxy, together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such power or authority, must be deposited at Messrs. P. C. Woo & Co. of 12[th] Floor, Prince’s Building, 10 Chater Road, Central, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or adjourned meeting. Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting.

8. The proxy need not be a member of the Company but must attend the meeting in person to represent you.

9. Completion and delivery of the form of proxy will not preclude you from attending and voting at the meeting if you so wish.

10. ANY ALTERATIONS MADE IN THIS FORM OF PROXY MUST BE INITIALLED BY THE PERSON WHO SIGNS IT.

* for identification purpose only