Silkwave Inc — Share Issue/Capital Change 2002

Jan 7, 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		SOUTH CHINA BROKERAGE COMPANY LIMITED
	(incorporated in the Cayman Islands with limited liability)		(incorporated in the Hong Kong Special Administrative Region of the People’s Republic of China with limited liability)

JOINT ANNOUNCEMENT

UNDERWRITING AGREEMENT

CONNECTED TRANSACTION

The board of directors of South China Holdings Limited and South China Brokerage Company Limited announce that on 31 December 2001, South China Securities Limited, an indirect subsidiary of South China Holdings Limited and a wholly owned subsidiary of South China Brokerage Company Limited entered into a conditional underwriting and placing agreement with Jessica Publications Limited relating to the placing of 50,647,988 shares of Jessica Publications Limited. South China Holdings Limited holds approximately 74.58% of the issued share capital of South China Brokerage Company Limited.

Jessica Publications Limited is offering 50,647,988 new shares of HK$0.001 each and has applied to the Stock Exchange for a listing of and permission to deal in the shares in issue and to be issued on the Growth Enterprise Market of the Stock Exchange. Mr. Ng Hung Sang, Robert has beneficial interests in and is the Chairman of South China Holdings Limited, South China Brokerage Company Limited and Jessica Publications Limited. Mr. Richard Howard Gorges has personal interest in and is a director of South China Brokerage Company Limited and is also a director of South China Holdings Limited. Ms. Cheung Choi Ngor is a director of both South China Holdings Limited and South China Brokerage Company Limited. Mr. Ng Hung Sang, Robert, Mr. Richard Howard Gorges and Ms. Cheung Choi Ngor are the initial management shareholders of Jessica Publications Limited.

The transaction constitutes a connected transaction for South China Holdings Limited and South China Brokerage Company Limited in accordance with 14.25(1) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and subject to disclosure requirement by way of announcement and the inclusion of the transaction in next published annual report and accounts according to 14.25(1) A - D of the Listing Rules.

‍Underwriting and Placing Agreement (the “Underwriting Agreement”) made on 31 December 2001

Parties

The Underwriting Agreement entered into between, among others, Jessica Publications Limited (“Jessica Publications”) and South China Securities Limited (“SCS”).

Jessica Publications is an exempted company incorporated in the Cayman Islands with limited liability. The principal business activity of Jessica Publications and its subsidiaries is the publication of monthly Chinese language magazines for female readers, namely “Jessica” magazine and “Lisa” magazine.

SCS is incorporated in the Hong Kong Special Administrative Region of the People’s Republic of China and is a wholly-owned subsidiary of South China Brokerage Company Limited (“SCB”), which is a subsidiary of South China Holdings Limited (“SCH”). SCS is a registered dealer in securities with the Securities and Futures Commission of Hong Kong. Its principal activity is stock broking.

Underwriting arrangement

According to the Underwriting Agreement, Jessica Publications is offering 50,647,988 new shares of HK$0.001 each (the “Placing Shares”) for subscription at the price of HK$0.25 each.

Subject to, among others, the listing sub-committee of the board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) with responsibility for the Growth Enterprise Market operated by the Stock Exchange granting the listing and permission to deal in, the shares of HK$0.001 each of Jessica Publications on or before 30 January 2002, SCS has agreed to subscribe or procure subscribers for the Placing Shares, on the terms and conditions as set out in the Underwriting Agreement. All the Placing Shares have been placed to third parties not connected with the directors, chief executives or substantial shareholders of SCH and SCB.

Commission to be received

SCS will receive an underwriting commission of 2.5% on the issue of all the Placing Shares. The total commissions received are estimated to be approximately HK$320,000.00 which will be deducted from the proceeds of the placement of the Placing Shares.

Completion

Completion of the placement of the Placing Shares took place on the close of business on 3 January 2002.

Terms

The terms of the Underwriting Agreement were arrived at after arm’s length negotiations between the relevant parties.

The boards of directors of SCH and SCB (collectively the “Directors”), including the independent non-executive Directors of SCH and SCB, consider the terms of the transaction to be normal commercial terms and are fair and reasonable and in the interests of all shareholders of SCH and SCB.

‍Reasons for the transaction

The entering into the Underwriting Agreement allows SCB to receive an underwriting commission which will be used for general working capital purpose. Both SCH and SCB do not currently have any specific plans for the use of the proceeds.

‍Information on SCH

SCH and its subsidiaries (“SCH Group”) 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. SCH holds approximately 74.58% of the issued share capital of SCB.

‍Information on SCB

SCB and its subsidiaries (the “SCB Group”) are principally engaged in securities, bullion and commodities broking and trading, margin financing, money lending, provision of corporate advisory and underwriting services, property investment and investment holding.

‍Listing Rules implications

Mr. Ng Hung Sang, Robert has beneficial interests in and is the Chairman of SCH, SCB and Jessica Publications. Mr. Richard Howard Gorges has personal interest in and is a director of SCB and is also a director of SCH. Ms. Cheung Choi Ngor is a director of both SCH and SCB. Mr. Ng Hung Sang, Robert, Mr. Richard Howard Gorges and Ms. Cheung Choi Ngor are the initial management shareholders of Jessica Publications. The transaction therefore constitutes a connected transaction for SCH and SCB according to 14.25(1) of the Rules Governing the Listing of Securities (the “Listing Rules”) on the Stock Exchange. However, as the value of the transaction represents less than the higher of HK$10,000,000 or 3% but above 0.03% of the consolidated net tangible assets value of SCH Group and SCB Group (as shown in SCH and SCB’s annual reports for the year ended 31 December 2000 and as adjusted by the consolidated net tangible assets value in their respective interim reports for the period ended 30 June 2001), the transaction requires disclosure but is not subject to the approval by the SCH and SCB’s independent shareholders.

Details of the transaction will be included in the next annual report of SCH and SCB pursuant to the Listing Rules.

By order of the Board
South China Holdings Limited
Yuen Kam Tim, FrancisCompany Secretary

By order of the Board
South China Brokerage Company Limited
Yuen Kam Tim, FrancisCompany Secretary4 January 2002

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

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.