Silkwave Inc — Share Issue/Capital Change 2002

Feb 8, 2002

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.

	SOUTH CHINA HOLDINGS LIMITED (Incorporated in the Cayman Islands with limited liability)

ANNOUNCEMENT
DISTRIBUTION IN SPECIE OF SHARES IN
CAPITAL PUBLICATIONS LIMITED
BY SOUTH CHINA HOLDINGS LIMITED

On 8th February, 2002, the Board passed a resolution to distribute Capital Publications Shares to the Shareholders by way of a special dividend in specie. The Distribution will be made to the Shareholders whose names appear on the register of members of the Company on the Record Date in the proportion of one Capital Publications Share for every four Shares then held.

THE DISTRIBUTION

The Board has declared a special dividend on 8th February, 2002 to distribute Capital Publications Shares to the Shareholders, including those Shareholders whose addresses as shown in the Hong Kong branch register of members of the Company at the close of business on the Record Date are outside of Hong Kong, by way of special dividend in the amount of HK$0.0006 per Share (based on the pro forma unaudited net asset value of Capital Publications Group as at 31st December, 2001 per Share as at 8th February, 2002) to be paid not in cash but in specie on the basis of one Capital Publications Share for every four Shares held on the Record Date (assuming no further issue of Shares prior to the Record Date). The entire issued Capital Publications Shares will be distributed under the Distribution. No distribution of Capital Publications Share will be made to the Shareholders in respect of fractional entitlements.

REASONS FOR THE DISTRIBUTION

The Directors believe that the Distribution will give rise to the following principal benefits:

Benefits to both the Group (excluding the Capital Publications Group) and the Capital Publications Group

1. Given the different operating characteristics of the businesses of the Group (excluding the Capital Publications Group) and the Capital Publications Group, the Distribution will enhance the transparency of the performance of their respective business operations.

2. The Group (excluding the Capital Publications Group) and the Capital Publications Group will be able to implement financing and business development plans such as mergers and acquisitions and joint ventures according to their specific needs.

Benefits to the Shareholders

The Distribution will enable the Shareholders to hold a direct investment in the Capital Publications Group, thereby allowing them to participate directly in the future development and fund raising of the Capital Publications Group.

FUTURE TRANSACTIONS BETWEEN THE GROUP (EXCLUDING THE CAPITAL PUBLICATIONS GROUP) AND THE CAPITAL PUBLICATIONS GROUP FOLLOWING THE DISTRIBUTION

It is expected that certain on-going transactions between the Group (excluding the Capital Publications Group) and the Capital Publications Group will continue after completion of the Distribution. The Group (excluding the Capital Publications Group) will provide to or share with the Capital Publications Group the following services:

˙ Provision of photofinishing and processing services

˙ Sharing of marketing services and expenses

˙ Sharing of certain support services and expenses, including administrative, accounting, information technology and human resources

In addition, the Group (excluding the Capital Publications Group) may place advertisements in the magazine published by the Capital Publications Group and place a “hyperlink” on the website of the Capital Publications Group and vice versa. A subsidiary within the Group has entered into a leasing agreement with the Capital Publications Group.

Following the Distribution, agreements related to such transactions will be entered into in the ordinary and usual course of business of the companies concerned and will continue to be conducted on terms which are fair and reasonable to companies concerned. Such transactions will constitute connected transactions after completion of the Distribution. The Company shall, where appropriate, comply with or seek a waiver from the Stock Exchange for the relevant disclosure and approval requirements under the Listing Rules in respect of such transactions. Further announcement will be made as and where appropriate.

PRINCIPAL ACTIVITIES OF THE GROUP

The Company is an investment holding company. Its subsidiaries and associates are principally engaged in trading and manufacturing, securities and commodities brokerage and trading, margin financing, money lending, provision of corporate advisory services, information and technology related businesses, real estate investment and development, implementation and marketing of software applications, publishing and printing businesses, marketing and promotional services, sale of air tickets and provision of other related travel services.

INFORMATION ON THE CAPITAL PUBLICATIONS GROUP

The Capital Publications Group is engaged in the business of publication of a monthly Chinese financial and economical magazine, titled “Capital” and Capital Publications is wholly owned by the Company. Upon completion of the Distribution, Capital Publications Shares will be owned by the Shareholders. Capital Publications Shares are not listed in any stock exchange.

It is intended that following the implementation of the Distribution, the Group (excluding the Capital Publications Group) and the Capital Publications Group will operate independently. Mr. Ng Hung Sang, Robert, the chairman of the Company, is the chairman of Capital Publications. In addition to Mr. Ng Hung Sang, Robert, the board of directors of the Capital Publications comprises of executive directors namely Mr. To Fai, Mr. Au Tze Sheung, Mr. Hui Ping and Mr. Wong Po Ki.

Set out below is a summary of the pro forma unaudited results of the companies comprising the Capital Publications Group for each of the two financial years ended 31st December, 2001.

	For the year ended 31st December, 2000	For the year ended 31st December, 2001
	HK$'000	HK$'000
Turnover	11,285	9,411
Loss for the year	1,230	4,057

As at 31st December, 2000 and 31st December, 2001, the pro forma unaudited combined net asset value of the companies comprising the Capital Publications Group amounted to approximately HK$ 5,149,000 and HK$ 1,092,000 respectively.

DEALINGS IN SHARES

The Shares will continue to be listed on the Stock Exchange following the implementation of the Distribution.

CLOSURE OF REGISTER OF MEMBERS AND REGISTRATION PROCEDURES

The register of members of the Company will be closed on 25th February, 2002 for the purpose of determining the entitlements of the Shareholders to Capital Publications Shares under the Distribution. No transfer of the Shares may be registered during the book closure date.

In order to qualify for the Distribution, all transfers accompanied by the relevant Share certificates must be lodged with the Hong Kong branch registrar of the Company, Standard Registrars Limited, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong by not later than 4:00 p.m. on 22nd February, 2002.

SHARE CERTIFICATES OF CAPITAL PUBLICATIONS SHARES

Definitive certificates for Capital Publications Shares are expected to be despatched by mail to the Shareholders, at their own risks no later than 30th April, 2002. Fractional shares will not be issued.

TENTATIVE TIMETABLE

2002

Last day of dealings in Shares cum entitlement to the Capital
Publications Shares pursuant to the Distribution 20th February

Commencement of dealings in Shares on an ex-entitlement basis 21st February

Latest time for lodging transfer of the Shares in order
to qualify for the Distribution 4:00 p.m. on 22nd February

Register of members closes 25th February

Record Date 25th February

Note: The above timetable is an indication only. Further announcement will be made on major changes to the above timetable.

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

“Board”	the board of Directors (including independent non-executive Directors)
“Company”	South China Holdings Limited, an exempted company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Stock Exchange
“Director(s)”	the director(s) of the Company
“Distribution”	the distribution of one Capital Publications Share to the Shareholders for every four Shares held on the Record Date
“Group”	the Company and its subsidiaries
“Capital Publications”	Capital Publications Limited, an exempted company incorporated in the Cayman Islands with limited liability which is a wholly owned subsidiary of the Company
“Capital Publications Group”	Capital Publications together with Media Bonus Limited, Capital Publishing Limited and Capital Publishing Management Limited
“Capital Publications Share(s)”	ordinary shares of HK$0.001 each in the share capital of Capital Publications
“Listing Rules”	the Rules governing the listing of securities on the Stock Exchange
“Record Date”	25th February, 2002 or such other date as the Company may decide, being the date by reference to which entitlements of the Shareholders to the Capital Publications Shares under the Distribution are to be determined
“Share(s)”	share(s) of HK$0.025 each in the share capital of the Company
“Shareholder(s)”	the holder(s) of Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong

By Order of the Board
South China Holdings Limited
Yuen Kam Tim, FrancisCompany SecretaryHong Kong, 8th February, 2002

Copy of this announcement can be obtained from our website www.sctrade.com

Please also refer to the published version of this announcement in the South China Morning Post.