THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Electronics Corporation Holdings Company Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

CHINA ELECTRONICS CORPORATION HOLDINGS COMPANY LIMITED 中國電子集團控股有限公司[*]

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock Code: 0085)

DISCLOSEABLE AND CONNECTED TRANSACTION: POSSIBLE ACQUISITION OF 48% EQUITY INTEREST IN CEC WIRELESS R&D LTD. PROPOSED CAPITAL REORGANISATION PROPOSED CHANGE OF BOARD LOT SIZE

Independent financial adviser to

the independent board committee and independent shareholders of the Company

ALTUS CAPITAL LIMITED

A notice convening a special general meeting of the Company to be held at Chater Room, 2nd Floor, Mandarin Oriental Hong Kong, 5 Connaught Road, Central, Hong Kong on Tuesday, 17 May 2005 at 10:30 a.m. (or as soon thereafter as the annual general meeting of the Company convened to be held at 9:30 a.m. at the same place and date shall have been concluded or adjourned) is set out on pages 32 to 34 of this circular. Whether or not you are able to attend the special general meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Abacus Share Registrars Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the special general meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the special general meeting or any adjournment thereof should you so wish.

A letter from the independent board committee of the Company containing its recommendation to the independent shareholders of the Company regarding the possible acquisition by the Company of a 48% equity interest in CEC Wireless R&D Ltd. is set out on page 19 of this circular. A letter from Altus Capital Limited, the independent financial adviser, containing its advice to the independent board committee and the independent shareholders of the Company regarding such acquisition is set out on pages 20 to 25 of this circular.

25 April 2005

* For identification purpose only

	Page
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
The Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Proposed Capital Reorganisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Proposed Change of Board Lot Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Letter from Altus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Notice of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32

EXPECTED TIMETABLE

2005

Latest time for lodging forms of proxy in respect of the SGM (not less than 48 hours before the time appointed for holding the SGM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:30 a.m. on Sunday, 15 May Time and date of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:30 a.m. on Tuesday, 17 May

(or as soon thereafter as the annual general meeting of the Company convened to be held at 9:30 a.m. on the same date shall have been concluded or adjourned)

The following events are conditional upon the relevant resolutions regarding the Capital Reorganisation being approved by the Shareholders at the SGM:

Effective time and date of the Capital Reorganisation . . . . . . . . . . . . . . . . . 4:00 p.m. on Tuesday, 17 May

Free exchange of existing share certificates for

new share certificates commences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 18 May Temporary counter for trading in New Shares in board lots of 1,250 New Shares (in the form of existing share certificates) opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Wednesday, 18 May Existing counter for trading in Shares in board lots of 10,000 Shares (in the form of existing share certificates) closes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Wednesday, 18 May Designated broker starts to stand in the market to provide odd lots matching services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Wednesday, 18 May Existing counter for trading in New Shares in board lots of 2,000 New Shares (in the form of new share certificates) re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Wednesday, 1 June Parallel trading in New Shares (in the forms of new and existing share certificates) commences . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Wednesday, 1 June Temporary counter for trading in New Shares in board lots of 1,250 New Shares (in the form of existing share certificates) closes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Wednesday, 22 June

EXPECTED TIMETABLE

2005

Designated broker ceases to stand in the market to provide

odd lots matching services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Wednesday, 22 June

Parallel trading in New Shares (in the forms of new and

existing share certificates) ends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Wednesday, 22 June

Free exchange of existing share certificates for

new share certificates ends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Wednesday, 29 June

DEFINITIONS

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

“Acquisition”

the proposed acquisition by the Company of a 48% equity interest in CECW from China Electronics Industry subject to and upon the terms and conditions of the Equity Transfer Agreement

“Altus”

Altus Capital Limited, a licensed corporation to carry out type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Acquisition

“associates” has the meaning ascribed to this term under the Listing Rules “Board” the board of Directors “Business Day” a day (excluding Saturdays) on which banks are generally open for business in Hong Kong and the PRC throughout their normal business hours
“Capital Reduction” the proposed reduction of the nominal value of the issued Shares from HK$0.01 each to HK$0.00125 each by the cancellation of HK$0.00875 paid up on each issued Share
“Capital Reorganisation” the Capital Reduction and the Share Consolidation
“CCASS” Central Clearing and Settlement System established and operated by HKSCC
“CEC” 中國電子信息產業集團公司 (China Electronics Corporation), a state-owned enterprise established under the laws of the PRC, the ultimate controlling shareholder of the Company and the warrantor under the Equity Transfer Agreement
“CEC Group of Companies” CEC and its subsidiaries “CECW” 中電賽龍通信研究中心有限責任公司 (CEC Wireless R&D Ltd.), a sino-foreign equity joint venture among China Electronics Industry, Cellon Hong Kong Ltd. and Cellon Incorporation
“Cellon Group” Cellon International Holding Corp. and its subsidiaries, including Cellon Hong Kong Ltd. and Cellon Incorporation
3 -

DEFINITIONS

“China Electronics Industry”	中國電子產業工程公司(China Electronics Industry Corporation),
	a state-owned enterprise established under the laws of the PRC, a
	wholly-owned subsidiary of CEC, and the vendor under the Equity
	Transfer Agreement
“Company”	China Electronics Corporation Holdings Company Limited, a
	company incorporated in the Cayman Islands and continued in
	Bermuda with limited liability and whose issued Shares are listed
	on the main board of the Stock Exchange
“Completion”	completion of the Acquisition in accordance with the terms of the
	Equity Transfer Agreement
“connected person”	has the meaning ascribed to this term under the Listing Rules
“Directors”	directors (including the independent non-executive directors) of
	the Company
“Equity Transfer Agreement”	the conditional equity transfer agreement dated 4 April 2005
	entered into among China Electronics Industry as vendor, the
	Company as purchaser and CEC as warrantor
“Group”	the Company and its subsidiaries
“GPRS”	General Packet Radio Service, a standard for wireless
	communications which runs at speeds up to 115 kilo bits per
	second, compared with current GSM systems’ 9.6 kilo bits
“GSM”	Global System for Mobile Communications, a digital cellular
	telephone system which is now available in most parts of the
	world, and uses 200 kHz wide channels that allows eight
	simultaneous calls on the same radio frequency
“HKSCC”	Hong Kong Securities Clearing Company Limited
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”	an independent board committee, comprising Messrs Chan Kay
	Cheung, Wong Po Yan and Yin Yongli, being all the independent
	non-executive Directors
“Independent Shareholders”	Shareholders other than CEC and its associates
“Latest Practicable Date”	20 April 2005, being the latest practicable date prior to the printing
	of this circular for the purpose of ascertaining certain information
	contained in this circular

DEFINITIONS

“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“New Share(s)” the new share(s) of HK$0.01 each in the share capital of the Company immediately after the Capital Reorganisation becomes effective
“PRC” the People’s Republic of China “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“SGM” the special general meeting of the Company convened to be held on Tuesday, 17 May 2005 to consider and, if thought fit, to approve the Acquisition and the Capital Reorganisation, notice of which is set out on pages 32 to 34 of this circular, or any adjournment thereof
“Share Consolidation” the proposed consolidation of eight issued shares of HK$0.00125 each in the share capital of the Company into one New Share immediately after the Capital Reduction takes effect
“Share(s)” existing ordinary share(s) of HK$0.01 each in the share capital of the Company
“Shareholder(s)” holder(s) of the Share(s) “Stock Exchange” The Stock Exchange of Hong Kong Limited “Target Equity Interest” the 48% equity interest held by China Electronics Industry in CECW
“UMTS” Universal Mobile Telecommunications System, a 3G mobile technology that will deliver broadband information speeds up to 2 Mbit s/sec
“HK$” Hong Kong dollars, the lawful currency of Hong Kong “RMB” Renminbi, the lawful currency of the PRC
5 -

DEFINITIONS

For the purpose of this circular, unless otherwise specified, conversions of Renminbi into Hong Kong dollars are based on the approximate exchange rate of RMB1.0606 to HK$1.00. The translations are not representations that the Renminbi and Hong Kong dollar amounts could actually be converted at such rate, if at all.

For ease of reference only, the names of PRC established companies and entities have been included in this circular in both the Chinese and English languages and the English names of these companies and entities are either English translations of their respective official Chinese names or English tradenames used by them. In the event of any inconsistency between the English names and their respective Chinese names, the Chinese names shall prevail.

LETTER FROM THE BOARD

CHINA ELECTRONICS CORPORATION HOLDINGS COMPANY LIMITED 中國電子集團控股有限公司[*]

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock Code: 0085)

Non-executive Directors:

Yang Xiaotang (Chairman) Tong Baoan (Vice Chairman)

Executive Directors:

Registered office: Clarendon House 2 Church Street Hamilton, HM 11 Bermuda

Fan Qingwu (Managing Director)

Hua Longxing

Independent Non-executive Directors:

Chan Kay Cheung Wong Po Yan Yin Yongli

Principal place of business in Hong Kong: Room 908, 9th Floor Sun Hung Kai Centre No. 30 Harbour Road Wanchai Hong Kong

25 April 2005

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION: POSSIBLE ACQUISITION OF 48% EQUITY INTEREST IN CEC WIRELESS R&D LTD. PROPOSED CAPITAL REORGANISATION PROPOSED CHANGE OF BOARD LOT SIZE

INTRODUCTION

On 4 April 2005, the Board announced that the Company had entered into the Equity Transfer Agreement, pursuant to which the Company agreed to acquire, and China Electronics Industry agreed to sell, a 48% equity interest in CECW.

CECW is a sino-foreign joint venture established in the PRC. The registered capital of CECW is held as to 50.1% by China Electronics Industry, 24.9% by Cellon Hong Kong Ltd. and 25% by Cellon Incorporation.

* For identification purpose only

LETTER FROM THE BOARD

China Electronics Industry is a wholly-owned subsidiary of CEC, the ultimate controlling shareholder of the Company which, as at the Latest Practicable Date, held approximately 74.98% of the Company’s issued share capital. Cellon Hong Kong Ltd. and Cellon Incorporation and their ultimate beneficial owners are independent third parties not connected with the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or their respective associates.

The Acquisition was negotiated and entered into on an arm’s length basis and on normal commercial terms. The consideration for the Acquisition is HK$22,000,000, which will be settled by the Company in cash upon completion of the Acquisition. The Company intends to finance such consideration by using the Group’s internal resources.

Based on CECW’s audited financial statements prepared under the accounting principles generally accepted in the PRC and subsequently adjusted in accordance with Hong Kong Financial Reporting Standards, and on the Company’s audited consolidated financial results as at and for the year ended 31 December 2004, each of the total assets ratio, profits ratio and revenue ratio in respect of the Acquisition is less than 25%. The consideration for the Acquisition also represents less than 25% of the total market capitalisation of the Company as of 4 April 2005. Accordingly, the Acquisition constitutes a discloseable transaction of the Company under Rule 14.06 of the Listing Rules.

Since CEC is the ultimate controlling shareholder of the Company and therefore a connected person of the Company, the Acquisition also constitutes a connected transaction of the Company under Rule 14A.13 of the Listing Rules and will be subject to, among other things, the approval by the Independent Shareholders at the SGM. In accordance with the Listing Rules, CEC and its associates will abstain from voting on the ordinary resolution to be proposed at the SGM regarding the Acquisition. The vote of the Independent Shareholders on such resolution will be taken by poll.

An Independent Board Committee comprising Messrs Chan Kay Cheung, Wong Po Yan and Yin Yongli, being all the independent non-executive Directors, has been formed to advise the Independent Shareholders as to the fairness and reasonableness of the Acquisition so far as the Independent Shareholders are concerned. Altus has been appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in this regard.

The Board also announced on 4 April 2005 that the Company proposed to implement the Capital Reorganisation under which the nominal value of the issued Shares will be reduced from HK$0.01 each to HK$0.00125 each by the cancellation of HK$0.00875 paid up on each Share. Immediately after the Capital Reduction becoming effective, the Company proposes to consolidate every eight issued shares with nominal value of HK$0.00125 each into one New Share.

Currently, the Shares are traded in board lots of 10,000 Shares each. Upon the Capital Reorganisation becoming effective, the New Shares will be traded in board lots of 2,000 New Shares each.

The purpose of this circular is to provide you with, among other things, details of the Acquisition, the Capital Reorganisation and the proposed change of board lot size, the letter from Altus containing its advice to the Independent Board Committee and the Independent Shareholders on the Acquisition, the letter from the Independent Board Committee to the Independent Shareholders containing its recommendation to the Independent Shareholders on the Acquisition and the notice of the SGM.

LETTER FROM THE BOARD

THE ACQUISITION

Equity Transfer Agreement

Date : 4 April 2005 Parties : (1) Vendor : China Electronics Industry Corporation (2) Purchaser : China Electronics Corporation Holdings Company Limited (3) Warrantor : China Electronics Corporation

China Electronics Industry is a state-owned enterprise established under the laws of the PRC and is a wholly-owned subsidiary of CEC. China Electronics Industry is principally engaged in the research and development, manufacturing and sales of electronic products and the provision of information technology services in the PRC.

CEC is a state-owned enterprise established under the laws of the PRC. Established in 1989 with the approval of the State Council of the PRC, CEC is a nationwide electronics and information technology conglomerate directly administered by the central government of the PRC. CEC actively focuses on communications/consumer electronics, semi-conductor and software sectors in the PRC.

CEC is the ultimate controlling shareholder of the Company and, as at the Latest Practicable Date, it held approximately 74.98% of the issued Shares. China Electronics Industry and CEC are therefore connected persons of the Company.

Pursuant to the Equity Transfer Agreement, CEC has given warranties, representations and undertakings in respect of China Electronics Industry’s title in the Target Equity Interest, the operations and assets and liabilities of CECW and the legal status of CECW.

Subject matter of the Acquisition

Pursuant to the Equity Transfer Agreement, the Company agreed to, subject to certain conditions, acquire from China Electronics Industry the Target Equity Interest. The Target Equity Interest represents a 48% equity interest in CECW.

Consideration

The consideration for the Acquisition was determined with reference to various factors, including the historical performance of CECW, the current and future earnings potential of CECW, the quality of assets of CECW, as well as the current financial positions and future investment needs of CECW.

LETTER FROM THE BOARD

The consideration for the Acquisition represents a price to earnings ratio of approximately 2.4 times and 6.6 times the audited profits after tax, as adjusted in accordance with Hong Kong Financial Reporting Standards, attributable to the Target Equity Interest for the two years ended 31 December 2003 and 2004, respectively.

Conditions

Completion is conditional upon the fulfilment (or waiver, in certain cases as stated below) of certain conditions on or before 30 June 2005 or such later date as China Electronics Industry and the Company may agree. These conditions include:

(i) the passing of the necessary resolution by the Independent Shareholders at the SGM to approve the Acquisition and the transactions contemplated thereunder;
(ii) China Electronics Industry having conducted a state-owned assets valuation in respect of the Target Equity Interest, and the administration authority for state-owned assets or its authorised institutions having confirmed the results of the valuation and agreed to the transfer;
(iii) CECW having obtained an amended certificate of approval for establishment of enterprises with foreign investment and having completed the registration for change in connection with the transfer of the Target Equity Interest;
(iv) the Company being satisfied with the results of the due diligence review of the legal and financial affairs of CECW;
(v) the warranties and representations given by China Electronics Industry and CEC under the Equity Transfer Agreement remaining true and accurate in all material respects and China Electronics Industry and CEC having observed all the pre-Completion undertakings and covenants under the Equity Transfer Agreement;
(vi) Cellon Hong Kong Ltd. and Cellon Incorporation having consented to the Acquisition and waived all the pre-emptive rights that they are entitled under the joint venture contract and the articles of association of CECW; and
(vii) the board of directors of CECW having unanimously approved the Acquisition.

The Company may waive conditions described in paragraphs (iv) and (v) above. As at the Latest Practicable Date, the conditions described in paragraphs (vi) and (vii) above have been fulfilled. The Company did not intend to waive the conditions described in paragraphs (iv) and (v) above.

As to the condition described in paragraph (ii) above, China Electronics Industry has conducted a state-owned assets valuation in respect of the Target Equity Interest, and the State-owned Assets Supervision and Administration Commission of the State Council has filed and confirmed the results of such valuation.

10 -

LETTER FROM THE BOARD

As at the Latest Practicable Date, the transfer under the Equity Transfer Agreement was still pending the agreement from the relevant authority or institution. Should the relevant authority or institution not agree to the transfer under the Equity Transfer Agreement, the condition described in paragraph (ii) above will not be fulfilled.

If any of the above conditions have not been fulfilled or (in the case of conditions described in paragraphs (iv) and (v) above) waived by 30 June 2005 or such later date as China Electronics Industry and the Company may agree, the Equity Transfer Agreement shall cease and determine and none of the parties thereto shall have any obligations and liabilities under the Equity Transfer Agreement save for antecedent breaches of the provisions thereof. Further announcement will be made by the Company if the conditions have not been fulfilled or waived by the Company, as the case may be.

Completion

Completion shall take place on the seventh Business Day following the fulfilment (or waiver) of the above conditions precedent. Completion is expected to take place in mid to late May 2005.

Information on CECW

CECW was established as a subsidiary of CEC in December 1999. Subsequently on 26 August 2002, CECW became a sino-foreign equity joint venture among the CEC Group of Companies and the Cellon Group. CECW has a tenure of 15 years ending on 25 August 2017. Headquartered in Beijing, CECW is principally engaged in the research and development of mobile phones, communications equipment and systems engineering technology. CECW specialises in GSM/GPRS/UMTS platforms and terminal design. CECW’s customers include mobile phone manufacturers and distributors.

The registered capital of CECW is RMB40,000,000 (equivalent to approximately HK$37,715,000), which was held as to 50.1% (being RMB20,040,000, equivalent to approximately HK$18,895,000) by China Electronics Industry, 24.9% (being RMB9,960,000, equivalent to approximately HK$9,391,000) by Cellon Hong Kong Ltd. and 25% (being RMB10,000,000, equivalent to approximately HK$9,429,000) by Cellon Incorporation. The registered capital of CECW has been fully contributed.

Cellon Hong Kong Ltd. and Cellon Incorporation are both subsidiaries of Cellon International Holding Corp. Cellon Hong Kong Ltd., Cellon Incorporation and Cellon International Holding Corp. and their ultimate beneficial owners are independent third parties not connected with the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or their respective associates.

According to the provisions of the joint venture contract and the articles of association of CECW, the board of directors of CECW consists of seven directors, three of whom are appointed by China Electronics Industry, two of whom are appointed by Cellon Hong Kong Ltd. and the remaining two directors are appointed by Cellon Incorporation. None of China Electronics Industry, Cellon Hong Kong Ltd. nor Cellon Incorporation is able to control the composition of the board of directors of CECW.

11 -

LETTER FROM THE BOARD

Based on CECW’s audited financial statements prepared under the accounting principles generally accepted in the PRC for the two years ended 31 December 2003 and 2004, the audited profits before taxation and profits after taxation of CECW and attributable to the Target Equity Interest, as adjusted in accordance with Hong Kong Financial Reporting Standards, were as follows:

	Year ended	Year ended
	31 December 2003	31 December 2004
	Approximately	Approximately
	(RMB’000)	(RMB’000)
Profits before tax	21,021	7,892
Profits before tax attributable
to the Target Equity Interest	10,090	3,788
Profits after tax	20,297	7,315
Profits after tax attributable
to the Target Equity Interest	9,743	3,511

The audited net asset value of CECW as at 31 December 2004, as adjusted in accordance with Hong Kong Financial Reporting Standards, was approximately RMB65,995,000, of which an amount of approximately RMB31,678,000 was attributable to the Target Equity Interest.

Immediately after Completion, the registered capital of CECW will be held as to 48% (being RMB19,200,000, equivalent to approximately HK$18,103,000) by the Company, 2.1% (being RMB840,000, equivalent to approximately HK$792,000) by China Electronics Industry, 24.9% (being RMB9,960,000, equivalent to approximately HK$9,391,000) by Cellon Hong Kong Ltd. and 25% (being RMB10,000,000, equivalent to approximately HK$9,429,000) by Cellon Incorporation. After Completion, the board of directors of CECW will still comprise seven directors, among whom the Company will be entitled to appoint three directors. Accordingly, the Company will not be able to control the composition of the board of directors of CECW. After Completion, CECW will not be regarded as a subsidiary of the Company and CECW will not be accounted for and consolidated in the consolidated accounts of the Company as a subsidiary. CECW will be treated as a jointly controlled entity in the consolidated accounts of the Company.

Reasons for the Acquisition

Since completion of the acquisition of a 65% equity interest in Shenzhen Sang Fei Consumer Communications Company Limited from CEC in September 2004, the Group has been principally engaging in the manufacturing and sales of mobile phones in the PRC.

12 -

LETTER FROM THE BOARD

The Directors consider that the Acquisition offers the Group a valuable business opportunity to further invest in mobile phone related business which is complementary to the Group’s existing business and in line with the Group’s objective of becoming a leading consumer electronic and communications products and service provider in the PRC. CECW’s expertise in mobile phones, communications equipment and systems equipment technology will enhance the Group’s technological capability in the consumer electronic and communications products market.

The Directors noted the decrease in net profits of CECW in 2004. Such decrease is primarily due to the significant increase in CECW’s total cost of sales in 2004, which, based on the audited results of CECW as adjusted in accordance with Hong Kong Financial Reporting Standards, increased by approximately 120% over 2003. Research and development expenses contributed to a very significant portion of the total cost of sales. The Directors noted that CECW had intentionally strengthened its research and development capability in 2004 so as to increase its market competitiveness. Therefore, despite the decrease in net profits of CECW in 2004, the Directors are of the view that with CECW’s research and development capability, the Group is able to pioneer new and comprehensive products and services swiftly to meet the ever changing and expanding needs of the consumer electronic and communications products market, thereby enabling the Group to capitalise on the rapid growth of the PRC’s consumer electronic and communications products market.

Taking into account the future earnings potential of CECW as a result of its strengthened research and development capability, the synergy effect that CECW can bring to the Group and the overall terms of the Acquisition, the Directors (including the independent non-executive Directors) take the view that the terms of the Acquisition are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

Given the track record, earnings ability and prospects of CECW, the Directors consider that the Acquisition will broaden the Group’s income base and enhance the Group’s asset value.

Listing Rules Implication

Since CEC is the ultimate controlling shareholder of the Company and therefore a connected person of the Company, the Acquisition also constitutes a connected transaction of the Company under Rule 14A.13 of the Listing Rules and will be subject to, among other things, the approval by the Independent Shareholders at the SGM. In accordance with the Listing Rules, CEC and its associates will abstain from voting on the ordinary resolution approving the Acquisition to be proposed at the SGM. The vote of the Independent Shareholders on such resolution will be taken by poll.

13 -

LETTER FROM THE BOARD

PROPOSED CAPITAL REORGANISATION

As at the Latest Practicable Date, the Company had an authorised share capital of HK$300,000,000 divided into 30,000,000,000 Shares, of which 8,668,480,000 Shares were allotted and issued.

The Company proposes to reduce the nominal value of the issued Shares from HK$0.01 each to HK$0.00125 each by the cancellation of HK$0.00875 paid up on each Share.

Immediately after the Capital Reduction having become effective, the Company proposes to effect the Share Consolidation by consolidating every eight issued shares with nominal value of HK$0.00125 each into one New Share. Based on the number of 8,668,480,000 issued Shares as at the Latest Practicable Date, upon the Capital Reorganisation becoming effective, the issued share capital of the Company will comprise 1,083,560,000 New Shares.

Reasons for the Capital Reorganisation

As at 31 December 2004, the Company had accumulated losses of approximately HK$154,440,000 and contributed surplus of approximately HK$140,263,000. The Board has on 18 March 2005 resolved to apply the entire contributed surplus of the Company as at 31 December 2004 to set off an equivalent amount against the accumulated losses of the Company as at the same date (the “ Set-off ”). The Set-off became effective on 18 March 2005.

With the implementation of the Capital Reorganisation, based on the number of 8,668,480,000 issued Shares as at the Latest Practicable Date, an amount of HK$75,849,200 standing to the credit of the share capital account of the Company will be cancelled and credited to the contributed surplus account of the Company. An equivalent amount in the then contributed surplus account of the Company will be applied to set off against the entire remaining balance of the accumulated losses of the Company after the Set-off.

Effect of the Capital Reorganisation

The implementation of the Capital Reorganisation will not materially alter the underlying assets, business operations, management or financial position of the Group nor the interest of the Shareholders as a whole. The Directors also consider that the Capital Reorganisation will have no material adverse effect on the financial position of the Group.

The Company was solvent as at the Latest Practicable Date and expects to remain solvent up to and immediately upon the Capital Reduction becoming effective.

14 -

LETTER FROM THE BOARD

Conditions of the Capital Reorganisation

The Capital Reorganisation is conditional upon, among other things, the fulfilment of the following conditions:

(i) the passing of the necessary resolutions by the Shareholders at the SGM to approve the Capital Reorganisation;
(ii) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the New Shares; and
(iii) the compliance by the Company with the relevant legal procedures and requirements under the applicable laws of Bermuda.

Application for listing

The Company has applied to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the New Shares. All necessary arrangements will be made for the New Shares to be admitted into CCASS established and operated by HKSCC.

Subject to the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the New Shares on the Stock Exchange, the New Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the New Shares on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Fractional entitlement to New Shares

Any fractional entitlement to New Shares will be aggregated and sold, and the proceeds of such sales will be retained for the benefit of the Company.

PROPOSED CHANGE OF BOARD LOT SIZE

Currently, the Shares are traded in board lots of 10,000 Shares each. Upon the Capital Reorganisation becoming effective, the New Shares will be traded in board lots of 2,000 New Shares each.

15 -

LETTER FROM THE BOARD

Odd lots arrangements

In order to alleviate the difficulties arising from the existence of odd lots of New Shares as a result of the Capital Reorganisation and the change of board lot size, the Company has appointed HSBC Securities (Asia) Limited to stand in the market to provide matching service for odd lots of New Shares on best effort basis during the period from 18 May 2005 to 22 June 2005 (both dates inclusive). Shareholders who wish to make use of this matching facility either to dispose of their odd lots of New Shares or to top up their odd lots to board lots of 2,000 New Shares may, directly or through their brokers, contact Mr Thomas Ngai of HSBC Securities (Asia) Limited at Level 16, HSBC Main Building, 1 Queen’s Road Central, Hong Kong, and at telephone number (852) 2996 6992, during such period.

Shareholders should note that the matching service is on a best effort basis and successful matching of the sale and purchase of odd lots of New Shares is not guaranteed. Shareholders are recommended to consult their professional advisers if they are in any doubt about the matching facility described above.

Free exchange of new share certificates

Subject to the Capital Reorganisation becoming effective, which is expected to be on or around 17 May 2005, new share certificates will be issued in board lots of 2,000 New Shares. Shareholders may submit certificates for the Shares to the Company’s branch share registrar in Hong Kong, Abacus Share Registrars Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, for exchange, at the expenses of the Company, for certificates for the New Shares, at any time between 9:00 a.m. and 4:00 p.m. from 18 May 2005 to 29 June 2005 (both dates inclusive). Thereafter, certificates for the Shares will be accepted for exchange only on payment of a fee of HK$2.50 (or such other amount as may from time to time be allowed by the Stock Exchange) for each new certificate issued for the New Shares. Nevertheless, certificates for the Shares will continue to be good evidence of legal title, on the basis of eight Shares for one New Share, and may be exchanged for certificates for the New Shares at any time.

The new share certificates for New Shares will be grey in colour in order to distinguish them from the existing share certificates which are green in colour.

Parallel trading arrangements

Subject to the Capital Reorganisation becoming effective, the existing counter for trading of the Shares in board lots of 10,000 Shares (in the form of existing share certificates) will be temporarily closed from 9:30 a.m. on 18 May 2005. With effect from 9:30 a.m. on 18 May 2005, a temporary counter will be established for trading of the New Shares in board lots of 1,250 New Shares (in the form of existing share certificates). Only certificates for the Shares can be traded in this temporary counter. Existing share certificates will be valid for settlement and delivery for trading transacted at this temporary counter on the basis of eight Shares for one New Share for the period up to and including 22 June 2005.

With effect from 9:30 a.m. on 1 June 2005, the existing counter will be re-opened for trading of the New Shares in board lots of 2,000 New Shares (in the form of new share certificates). Only certificates for the New Shares can be traded in this counter.

16 -

LETTER FROM THE BOARD

During the period from 1 June 2005 to 22 June 2005 (both dates inclusive), there will be parallel trading at the above two counters.

The temporary counter for trading of the New Shares in board lots of 1,250 New Shares (in the form of existing share certificates) will be closed after 4:00 p.m. on 22 June 2005. Thereafter, trading will only be in the form of certificates for the New Shares and the certificates for the Shares will cease to be marketable and will not be acceptable for trading and settlement purposes but will remain effective as documents of title on the basis of eight Shares for one New Share.

Further details in relation to the parallel trading arrangements for the Shares and the New Shares are set out in the section headed “Expected Timetable” in this circular.

SGM

A notice convening the SGM to be held at Chater Room, 2nd Floor, Mandarin Oriental Hong Kong, 5 Connaught Road, Central, Hong Kong on Tuesday, 17 May 2005 at 10:30 a.m. (or as soon thereafter as the annual general meeting of the Company convened to be held at 9:30 a.m. at the same place and date shall have been concluded or adjourned) is set out on pages 32 to 34 of this circular. At the SGM, a special resolution will be proposed to approve the Capital Reduction and ordinary resolutions will be proposed to approve the Acquisition and the Share Consolidation. The vote of the Independent Shareholders on the resolution approving the Acquisition shall be taken by poll.

In accordance with the Listing Rules, CEC, the ultimate controlling shareholder of the Company which was interested in approximately 74.98% of the issued share capital of the Company as at the Latest Practicable Date, and its associates, will abstain from voting on the resolution approving the Acquisition at the SGM.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Abacus Share Registrars Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

RECOMMENDATION

Altus has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders with regard to the terms of the Acquisition. Altus considers that the Acquisition and the terms and conditions of the Equity Transfer Agreement are fair and reasonable as far as the Independent Shareholders are concerned and the Equity Transfer Agreement is in the interests of the Company and the Shareholders as a whole. Accordingly, Altus advises the Independent Shareholders, as well as the Independent Board Committee to recommend the Independent Shareholders, to vote in favour of the relevant resolution to be proposed at the SGM. The text of the letter from Altus containing its advice and the principal factors and reasons it has taken into consideration in arriving at its advice is set out on pages 20 to 25 of this circular.

17 -

LETTER FROM THE BOARD

The Board takes the view that the terms of the Acquisition are fair and reasonable and in the interests of the Company and the Shareholders as a whole. The Independent Board Committee, having taken into account the advice of Altus, considers that the terms of the Acquisition are fair and reasonable so far as the Independent Shareholders are concerned, and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Acquisition. The text of the letter from the Independent Board Committee is set out on page 19 of this circular.

The Board considers that the Capital Reorganisation is in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the special resolution to be proposed at the SGM to approve the Capital Reduction and the ordinary resolution to be proposed at the SGM to approve the Share Consolidation.

FURTHER INFORMATION

Your attention is also drawn to the letter from Altus which contains its advice to the Independent Board Committee and the Independent Shareholders in connection with the Acquisition, the letter from the Independent Board Committee which sets out its recommendation to the Independent Shareholders in relation to the Acquisition, and the additional information set out in the Appendix to this circular.

Yours faithfully For and on behalf of the Board China Electronics Corporation Holdings Company Limited Yang Xiaotang Chairman

18 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter from the Independent Board Committee setting out its recommendation to the Independent Shareholders in relation to the Acquisition:

CHINA ELECTRONICS CORPORATION HOLDINGS COMPANY LIMITED 中國電子集團控股有限公司[*]

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock Code: 0085)

25 April 2005

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION: POSSIBLE ACQUISITION OF 48% EQUITY INTEREST IN CEC WIRELESS R&D LTD.

We have been appointed to advise you as to whether the Acquisition is fair and reasonable so far as the Independent Shareholders are concerned. Details of the Acquisition are set out in the letter from the Board on pages 7 to 18 of the circular (the “ Circular ”) of the Company 25 April 2005, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless specified otherwise.

We wish to draw your attention to the letter from the Board set out on pages 7 to 18 of the Circular and the letter of advice from Altus set out on pages 20 to 25 of the Circular.

Having taken into account the advice from Altus, we consider that the terms of the Acquisition are fair and reasonable so far as the Independent Shareholders are concerned, and are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Acquisition.

Yours faithfully

Independent Board Committee

Chan Kay Cheung Wong Po Yan Yin Yongli

* For identification purpose only

19 -

LETTER FROM ALTUS

The following is the text of the letter of advice from Altus to the Independent Board Committee and the Independent Shareholders in relation to the Acquisition for incorporation in this circular.

ALTUS CAPITAL LIMITED

8/F Hong Kong Diamond Exchange Building 8 Duddell Street, Central Hong Kong

25 April 2005

The Independent Board Committee and

the Independent Shareholders

China Electronics Corporation Holdings Company Limited

Room 908, 9th Floor, Sun Hung Kai Centre, No. 30 Harbour Road, Wanchai, Hong Kong

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION POSSIBLE ACQUISITION OF 48% EQUITY INTEREST IN CEC WIRELESS R&D LTD.

INTRODUCTION

We refer to the Equity Transfer Agreement relating to the acquisition by the Company of the Target Equity Interest, details of which are set out in the circular of the Company dated 25 April 2005, (the “Circular”) to the Shareholders of which this letter forms part. Capitalised terms used in this letter shall have the meanings ascribed to them in the Circular unless the context otherwise requires.

The Company announced on 4 April 2005 that it entered into the Equity Transfer Agreement on the same day to acquire, subject to certain conditions, from China Electronics Industry, the Target Equity Interest. The Acquisition constitutes a discloseable transaction of the Company under Rule 14.06 of the Listing Rules. As China Electronics Industry is a connected person of the Company, the Acquisition also constitutes a connected transaction of the Company under Rule 14A.13 of the Listing Rules.

An Independent Board Committee comprising Messrs Chan Kay Cheung, Wong Po Yan and Yin Yongli, being all the independent Directors, has been formed to advise the Independent Shareholders in relation to the Acquisition. Votes of the Independent Shareholders at the SGM shall be taken by poll and CEC and its associates (as defined in the Listing Rules) shall abstain from voting in the SGM with respect to the ordinary resolution to approve the Acquisition.

20 -

LETTER FROM ALTUS

BASIS OF OUR OPINION

In formulating our opinion, we have relied to a considerable extent on the information, statements, opinion and representations contained or referred to in the Circular and the information and representations contained or referred to in the Circular and all information and representations which have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so at the date hereof. We have also assumed that all statements of belief, opinion and intention of the Directors as set out in the Letter from the Board were reasonably made after due and careful inquiry. We have also sought and obtained confirmation from the Company that no material facts have been omitted from the information provided and referred to in the Circular.

The Directors confirmed that they have provided us with all currently available information and documents which are available under present circumstances to enable us to reach an informed view and we have relied on the accuracy of the information contained in the Circular so as to provide a reasonable basis of our opinion. We have no reason to suspect that any material facts or information (which is known to the Company) have been omitted or withheld from the information supplied or opinions expressed in the Circular nor to doubt the truth and accuracy of the information and facts, or the reasonableness of the opinions expressed by the Company and the Directors which have been provided to us. We have not, however, carried out any independent verification on the information provided to us by the Directors, nor have we conducted any form of independent in-depth investigation into the business and affairs or the prospects of the Group.

THE ACQUISITION

In arriving at our opinion for the Acquisition, we have considered the following principal factors and reasons:

Background and reasons

The Group has been principally engaging in the manufacturing and sales of mobile phones in the PRC since completion of the acquisition of a 65% equity interest in Shenzhen Sang Fei Consumer Communications Company Limited (“Sang Fei”) from CEC in September 2004.

CECW is a Sino-foreign joint venture established in the PRC. The registered capital of CECW is held as to 50.1% by China Electronics Industry, 24.9% by Cellon Hong Kong Ltd. and 25.0% by Cellon Incorporation. CECW is principally engaged in the research and development of mobile phones, communications equipment and systems engineering technology and specialises in GSM/GPRS/UMTS platforms and terminal design. Customers of CECW are mainly mobile phone manufacturers and distributors.

In each of the two financial years ended 31 December 2003 and 2004, the adjusted audited profits after tax of CECW was approximately RMB20.3 million and RMB7.3 million respectively (equivalent to approximately HK$19.1 million and HK$6.9 million) according to the audited financial statements prepared under the accounting principles generally accepted in the PRC as adjusted in accordance with Hong Kong Financial Reporting Standards (“Adjusted Financial Statements”). Based on discussions with the Directors,

21 -

LETTER FROM ALTUS

the decrease in net profits of CECW was primarily due to significant increase in its cost of sales, which increased by approximately 120% from 2003 to 2004. A significant portion of the cost of sales relates to research and development expenses and according to the Directors, CECW has put in substantial resources to this area to strengthen its capability so as to increase its market competitiveness.

It was stated in the annual report of the Company for the financial year ended 31 December 2004 that the acquisition of the interest in Sang Fei has provided the Group with an enlarged operating base and steady cash flow. In terms of future plans, it was stated that the Group plans to devote its resources to research and development, production and sales and distribution functions, and plans to establish a complete production chain for mobile communications products. The Group will also actively implement a vertical integration of the consumer electronics and communications product chain, including the design and manufacture of proprietary chipsets, development of system platform and provision of network application and services. The Acquisition offers the Group a valuable business opportunity to further invest in mobile phone related business which is complementary to the Group’s existing business. Leveraging on the research and development capability of CECW, the Group will be able to provide new and wider range of products and services to meet the fast changing and expanding needs of the market and to capitalise on its growth. The Acquisition is therefore beneficial to the Group and is in line with its objective of becoming a leading consumer electronic products and service provider in the PRC.

Based on the fact that (i) the Acquisition was negotiated and entered into on an arm’s length basis and on normal commercial terms; (ii) CECW has proven track record and capabilities; (iii) the Acquisition offers an opportunity for the Group to further invest in mobile phone related business which is complementary to the Group’s existing business and in line with the Group’s objective of becoming a leading consumer electronic and communications products and service provider in the PRC; and (iv) the Acquisition offers an opportunity for the Group to enhance its earnings base, we are of the view that the Acquisition are in the interest of the Group and the Independent Shareholders as a whole.

The Consideration

The consideration for the Acquisition (the “Consideration”) is HK$22,000,000 and will be settled by the Company in cash upon completion of the Acquisition. The Company intends to finance the Consideration using the Group’s internal resources.

According to the Directors, the Consideration was determined, inter alia, with reference to the historical performance of CECW, the current and future earnings potential of CECW, the quality of the assets of CECW, its current financial positions and future investment needs of CECW.

To assess the fairness and reasonableness of the valuation of CECW based on the Consideration, we have considered the following analysis based on the Adjusted Financial Statements.

(a) Price-earnings ratio (“PER”)

The PER analysis is one of the most commonly used references for valuing a company which reflects the earnings potential of the underlying business as a going concern. The PER valuation analysis is applicable in this instance as CECW has a profitable track record.

22 -

LETTER FROM ALTUS

The Consideration represents PER of approximately 2.4 times and 6.6 times the adjusted audited profits after tax attributable to the Target Equity Interest of approximately RMB9.7 million and RMB3.5 million for each of the two financial years ended 31 December 2003 and 2004 respectively.

(b) Net asset value (“NAV”)

The NAV analysis is more appropriate when valuing, for instance, asset-based businesses such as property investment companies or businesses under liquidation. For comparison purposes, we have also applied this valuation method to assess the Consideration.

The adjusted audited net asset value of CECW as at 31 December 2004 attributable to the Target Equity Interest was about HK$29.9 million and the Consideration represents a discount of about 26.3% to the aforesaid net asset value.

The market for research and development of mobile phones in the PRC is fragmented with many players including independent research and development companies such as CECW, albeit many are of smaller size, as well as established mobile device manufacturers which design mobile phones in-house. We are not aware of any company listed on the Stock Exchange or any other major exchanges which principal businesses are the research and development of mobile phones, communications equipment and systems engineering technology. Direct comparison of the valuation of such companies with CECW is therefore not available.

In the absence of the above, we have identified those companies listed on the Stock Exchange which as far as we are aware, are engaged in the design, manufacture and sale of telecommunication products. We wish to note that businesses and products of the companies identified are not directly comparable with that of CECW. Nevertheless, for comparison purposes, we have conducted an analysis on the PER of these companies as summarised below.

			PER based
	Closing		on audited
	price as at	Financial	full-year results
	21 April 2005	year-end	(times)
CECW	–	31 December 2004	6.6
CCT Tech International Limited	0.022	31 December 2003	10.0_(Note)_
Vtech Holdings Limited	10.750	31 March 2004	6.8
TCL Communication Technology
Holdings Limited	0.490	31 December 2004	N/A
Suncorp Technologies Limited	2.825	31 December 2004	9.6

Sources: website of the Stock Exchange

Note: Based on diluted earnings per share.

23 -

LETTER FROM ALTUS

Save for TCL Communication Technology Holdings Limited which is loss making and therefore no PER is available, the PER of the companies above ranged between 6.8 times and 10.0 times. The aforesaid PER of CECW of 6.6 times is lower than the current PERs of the companies above.

For comparison with the general market, we have also made reference to the weighted average PER of the Hang Seng Index and the weighted average PER of the Hang Seng Composite Index – Information Technology. As at the end of March 2005, the PERs of the Hang Seng Index and the Hang Seng Composite Index – Information Technology were approximately 26.6 times and 15.1 times respectively. The aforesaid PER of 6.6 times is therefore considerably lower than the two reference indices. Based on the foregoing, we are of the view that valuation of CECW is fairly determined on the basis of PER.

In addition, given that the valuation of CECW based on the Consideration represents a discount to the adjusted audited NAV of CECW as at December 2004 attributable to the Target Equity Interest, we are of the view that the valuation of CECW is fairly determined in terms of the NAV analysis. On the whole, we are therefore of the view that the bases for determination of the Consideration are fair and reasonable and are in the interest of the Independent Shareholders.

As discussed, the Company intends to finance the Consideration using the Group’s internal resources. Based on its audited balance sheet, the Company had bank balances and cash of approximately HK$137.3 million as at 31 December 2004 and has minimal liabilities. Based on the foregoing, we are of the view that the Company has the necessary financial resources to pay for the Consideration and its financial position will not be adversely affected by the Acquisition.

POSSIBLE FINANCIAL EFFECTS

The following analysis is based on the audited consolidated financial statements of the Company for the financial year ended 31 December 2004. As discussed in the Letter from the Board, CECW will be treated as a jointly controlled entity of the Group upon Completion and the results of CECW will not be consolidated as a subsidiary into the consolidated financial results of the Group.

Earnings

CECW has had profitable track record in the two financial years ended 31 December 2003 and 2004. If CECW continues to operate profitably, the Acquisition would have positive contribution to the earnings of the Group.

24 -

LETTER FROM ALTUS

Working capital

The Company intends to finance the Acquisition by the internal resources of the Group. As previously discussed, the Company had bank balances and cash of approximately HK$137.3 million and minimal liabilities as at 31 December 2004. Given that the Consideration of HK$22 million represents only about 16% of such cash and bank balances available, we are of the view that the Acquisition will not have any adverse impact on the working capital position and hence, the normal operations of the Group.

Net asset value

As at 31 December 2004, the Group had consolidated NAV of approximately HK$369.2 million. Based on the Adjusted Financial Statement, the adjusted audited NAV of CECW as at 31 December 2004 was approximately RMB66.0 million (equivalent to approximately HK$62.2 million) of which approximately RMB31.7 million (equivalent to approximately HK$29.9 million) was attributable to the Target Equity Interest.

The Acquisition will be financed by cash and CECW will be regarded as a jointly controlled entity of the Group upon Completion. The Acquisition will therefore not have any material impact on the net asset value of the Group immediately after the Completion.

RECOMMENDATION

Having considered the above factors, we are of the view that the Acquisition and the terms and conditions of the Equity Transfer Agreement are fair and reasonable as far as the Independent Shareholders are concerned and the Equity Transfer Agreement is in the interests of the Company and the Shareholders as a whole. We would therefore advise the Independent Shareholders, as well as the Independent Board Committee to recommend to the Independent Shareholders, to vote in favour of the relevant resolution to be proposed at the SGM

Yours faithfully, For and on behalf of Altus Capital Limited

Arnold Ip Sean Pey, Chang Executive Director Executive Director

25 -

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests and short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules.

Mr Yang Xiaotang, the Chairman of the Company and a non-executive Director, is the President and legal representative of CEC, and Mr Tong Baoan, the Vice Chairman of the Company and a nonexecutive Director, is the Vice President of CEC. Messrs Yang Xiaotang, Tong Baoan and Fan Qingwu, the Managing Director and an executive Director, are the directors of China Electronics Corporation (BVI) Holdings Company Limited (“ CEC (BVI) ”). Details of the shareholding of CEC and CEC (BVI) in the Company are set out in the paragraph headed “Substantial Shareholders” in this Appendix. Save as disclosed herein, none of the Directors is a director or employee of a company which has, or is deemed to have, an interest or a short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

None of the Directors is materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which is significant in relation to the business of the Group taken as a whole.

26 -

GENERAL INFORMATION

APPENDIX

3. SUBSTANTIAL SHAREHOLDERS

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following corporations had, or were deemed to have, interests in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO:

		Approximate
	Number or attributable	percentage or attributable
Name of Shareholder	number of Shares held	percentage of shareholding
CEC (BVI)	6,500,000,000	74.98%
	(Note 1)
CEC	6,500,000,000	74.98%
	(Note 1)
Chan Chak Shing	764,372,870	8.81%
(“Mr Chan”)	(Note 2)
Bravo New Investments	500,000,000	5.77%
Limited (“Bravo”)	(Note 2)

Notes:

CEC (BVI) is a wholly-owned subsidiary of CEC. Accordingly, CEC is deemed to be interested in the 6,500,000,000 Shares owned by CEC (BVI).
These 764,372,870 Shares represented the aggregate of: (i) the 500,000,000 Shares owned by Bravo; (ii) the 231,372,870 Shares owned by Winsan International Holdings Limited (“ WIHL ”); and (iii) the family interest of Mr Chan in 33,000,000 Shares.

The entire issued share capital of each of Bravo and WIHL is owned by Mr Chan. Accordingly, Mr Chan is deemed to be interested in the shareholding interest owned by Bravo and WIHL.

27 -

GENERAL INFORMATION

APPENDIX

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following corporations were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

		Percentage of
Name of subsidiary	Name of shareholder	shareholding
Shenzhen Sang Fei	Members of the	25%
Consumer Communications	Philips Group
Company Limited	(Note 1)
Shenzhen Sang Fei	Shenzhen SED Industry	10%
Consumer Communications	Co., Ltd.(Note 2)
Company Limited

Notes:

(1) Being Koninklijke Philips Electronics N.V., a company listed on the New York Stock Exchange and the Amsterdam Stock Exchange, together with its subsidiaries.
(2) Shenzhen SED Industry Co., Ltd. is a company established in the PRC whose A shares are listed on the Shenzhen Stock Exchange and were indirectly owned as to approximately 55.34% by CEC as at the Latest Practicable Date.

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any other person who had, or was deemed to have, interests or short positions in the Shares or underlying Shares, which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into, or proposed to enter into, any service contract with the Company or any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensations (other than statutory compensation)).

5. EXPERT

Altus is a licensed corporation for types 1, 4, 6 and 9 regulated activities under the SFO. Altus has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and references to its name in the form and context in which it appears.

Altus is not beneficially interested in the share capital of any member of the Group and does not have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

28 -

GENERAL INFORMATION

APPENDIX

6. LITIGATION

As at the Latest Practicable Date, no member of the Group is engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance is known to the Directors to be pending or threatened against any member of the Group.

7. COMPETING INTEREST

Mr Yang Xiaotang, the Chairman of the Company and a non-executive Director, is the President and legal representative of CEC. Mr Tong Baoan, the Vice Chairman of the Company and a non-executive Director, is the Vice President of CEC, the President and legal representative of China Electronics Industry and the Chairman of Shenzhen SED Industry Co., Ltd. Mr Fan Qingwu, the Managing Director and an executive Director, is the Vice President of China Electronics Industry and a director of CECW.

Currently, CEC, China Electronics Industry, CECW and Shenzhen SED Industry Co., Ltd. are engaging, or having subsidiaries or associates which are engaging, in mobile phone related businesses which compete or are likely to compete, either directly or indirectly, with the business of the Group.

After Completion, the Company will be interested in 48% of the equity interest in CECW. Mr Fan Qingwu will remain as a director of CECW and will be one of the three directors whom the Company is entitled to appoint to the board of directors of CECW. Instead of being a competing business, the Directors consider CECW’s mobile phone related business to be complementary to the Group’s existing business after Completion.

The abovementioned competing businesses are operated and managed by independent management and administration. In addition, the Directors consider that the business model of, and the markets served by, the Group are different from those of the abovementioned competing businesses. The Board can exercise independent judgment and is always acting for the interests of the Company and its Shareholders as a whole. Accordingly, the Group is capable of carrying on its business independently of, and at arm’s length from, the competing businesses mentioned above.

8. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2004, being the date to which the latest published audited consolidated financial statements of the Group were made up.

9. PROCEDURES FOR DEMANDING A POLL AT THE SGM

In accordance with the Listing Rules, any vote taken at the SGM to approve the Acquisition must be taken by poll. According to bye-law 66 of the bye-laws of the Company, a resolution put to the vote of a meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded:

29 -

GENERAL INFORMATION

APPENDIX

(a) by the chairman of such meeting; or
(b) by at least three Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or
(c) any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all Shareholders having the right to vote at the meeting; or
(d) any Shareholder or Shareholders present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

A poll shall be taken in such manner (including the use of ballot or voting papers or tickets) and either forthwith or at such time (being not later than thirty (30) days after the date of the demand) and place as the chairman of the SGM directs. On a poll, votes may be given either personally or by proxy and every Shareholder present in person or by proxy (or, in the case of a Shareholder being a corporation, by its duly authorised representative) shall have one vote for every fully paid Share of which he is the holder. The result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded.

10. MISCELLANEOUS

(a) As at the Latest Practicable Date, none of Altus nor any of the Directors had any direct or indirect interest in any assets which had been acquired, disposed of by or leased to, or which were proposed to be acquired, disposed of by or leased to, any member of the Group since 31 December 2004, the date to which the latest published audited consolidated financial statements of the Group were made up.
(b) The company secretary of the Company and the qualified accountant of the Company appointed pursuant to Rule 3.24 of the Listing Rules is Mr Yam Pui Hung, Robert. Mr Yam is a Certified Public Accountant of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants.
30 -

GENERAL INFORMATION

APPENDIX

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at Linklaters, 10th Floor, Alexandra House, Chater Road, Hong Kong during normal business hours on any Business Day from the date of this circular up to and including the date of the SGM and at the SGM:

(a) the Equity Transfer Agreement;
(b) the memorandum of continuance and bye-laws of the Company;
(c) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on page 19 of this circular;
(d) the letter of advice from Altus to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 20 to 25 of this circular;
(e) the consent letter from Altus referred to in the paragraph headed “Expert” in this Appendix; and
(f) the annual reports of the Company for the two financial years ended 31 December 2003 and 2004.
31 -

NOTICE OF THE SGM

CHINA ELECTRONICS CORPORATION HOLDINGS COMPANY LIMITED 中國電子集團控股有限公司[*]

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock Code: 0085)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting of the shareholders of China Electronics Corporation Holdings Company Limited (the “ Company ”) will be held at Chater Room, 2nd Floor, Mandarin Oriental Hong Kong, 5 Connaught Road, Central, Hong Kong on Tuesday, 17 May 2005 at 10:30 a.m. (or as soon thereafter as the annual general meeting of the Company convened to be held at 9:30 a.m. at the same place and date shall have been concluded or adjourned) for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolution numbered 1 as special resolution and resolutions numbered 2 and 3 as ordinary resolutions:

SPECIAL RESOLUTION

“ THAT conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, the new shares of HK$0.01 each in the issued share capital of the Company upon the Capital Reduction and the Share Consolidation (as defined in ordinary resolution numbered 2 in this notice of special general meeting) becoming effective, with effect from 4:00 p.m. on the date on which this resolution is passed (the “ Effective Date ”):
(a) the issued share capital of the Company be reduced by cancelling paid up capital to the extent of HK$0.00875 on each of the shares of HK$0.01 each in the share capital of the Company in issue on the Effective Date (the “ Capital Reduction ”) so that each issued share in the share capital of the Company shall be treated as one fully paid share of HK$0.00125 in the share capital of the Company (the “ Reduced Share ”);
(b) subject to and forthwith upon the Capital Reduction taking effect, the credit arising from the Capital Reduction be credited to the contributed surplus account of the Company where it may be utilised in accordance with the bye-laws of the Company and the Companies Act 1981 of Bermuda (the “ Application of Credit ”); and
(c) the directors of the Company be and are hereby authorised to do all such acts and things and execute all such documents and take all such steps which in their opinion may be necessary, desirable or expedient to effect and implement the Capital Reduction and the Application of Credit.”

* For identification purpose only

32 -

NOTICE OF THE SGM

ORDINARY RESOLUTIONS

“ THAT conditional upon special resolution numbered 1 in this notice of special general meeting being passed and subject to and forthwith upon the Capital Reduction taking effect, every eight (8) Reduced Shares (as defined in special resolution numbered 1 in this notice of special general meeting) be consolidated into one (1) share of HK$0.01 in the share capital of the Company (the “ Share Consolidation ”) and the directors of the Company be and are hereby authorised to do all such acts and things and execute all such documents and take all such steps which in their opinion may be necessary, desirable or expedient to effect and implement the Share Consolidation.”
“ THAT the conditional equity transfer agreement (the “ Equity Transfer Agreement ”) dated 4 April 2005 entered into among the Company, 中國電子產業工程公司 (China Electronics Industry Corporation) and 中國電子信息產業集團公司 (China Electronics Corporation), a copy of which has been initialled by the chairman of this meeting and for the purpose of identification marked “A”, pursuant to which China Electronics Industry Corporation has agreed to sell, and the Company has agreed to acquire, a 48% equity interest in 中電賽龍通信研究中心有限責任公司 (CEC Wireless R&D Ltd.) at a cash consideration of HK$22,000,000, be and is hereby generally and unconditionally approved and the directors of the Company be and are hereby authorised to do all such further acts and things and execute such further documents and take all such steps which in their opinion may be necessary, desirable or expedient to implement and/or give effect to the terms of the Equity Transfer Agreement.”

By Order of the Board China Electronics Corporation Holdings Company Limited Yam Pui Hung, Robert Company Secretary

Hong Kong, 25 April 2005

33 -

NOTICE OF THE SGM

Registered office: Principal place of business Clarendon House in Hong Kong: 2 Church Street Room 908, 9th Floor Hamilton, HM 11 Sun Hung Kai Centre Bermuda No. 30 Harbour Road Wanchai Hong Kong

Notes:

Any shareholder of the Company entitled to attend and vote at the meeting convened by the above notice is entitled to appoint another person as his proxy to attend and vote instead of him. A shareholder who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at the meeting. A proxy need not be a shareholder of the Company but must be present in person at the meeting to represent the shareholder. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed.
A form of proxy for use at the meeting is enclosed. In order to be valid, the form of proxy must be duly completed and signed in accordance with the instructions printed thereon and returned together with the power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority, to the Company’s branch share registrar in Hong Kong, Abacus Share Registrars Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of a form of proxy will not preclude a shareholder from attending in person and voting at the meeting or any adjournment thereof, should he so wish.
In the case of joint holders of shares, any one of such holders may vote at the meeting, either personally or by proxy, in respect of such shares as if he were solely entitled thereto, but if more than one of such joint holders are present at the meeting personally or by proxy, that one of the said persons so present whose name stands first in the register of members of the Company in respect of such shares shall alone be entitled to vote in respect thereof.
In accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, voting on the above ordinary resolution numbered 3 will be taken by poll.
34 -

AI assistant

Smart Fish Wealthlink Holdings Limited — Proxy Solicitation & Information Statement 2005

48979_rns_2005-04-26_9e24c7c3-230d-4ed3-b0bc-fe5215237058.pdf

CHINA ELECTRONICS CORPORATION HOLDINGS COMPANY LIMITED 中國電子集團控股有限公司[*]

DISCLOSEABLE AND CONNECTED TRANSACTION: POSSIBLE ACQUISITION OF 48% EQUITY INTEREST IN CEC WIRELESS R&D LTD. PROPOSED CAPITAL REORGANISATION PROPOSED CHANGE OF BOARD LOT SIZE

ALTUS CAPITAL LIMITED

CONTENTS

EXPECTED TIMETABLE

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

CHINA ELECTRONICS CORPORATION HOLDINGS COMPANY LIMITED 中國電子集團控股有限公司[*]

DISCLOSEABLE AND CONNECTED TRANSACTION: POSSIBLE ACQUISITION OF 48% EQUITY INTEREST IN CEC WIRELESS R&D LTD. PROPOSED CAPITAL REORGANISATION PROPOSED CHANGE OF BOARD LOT SIZE

INTRODUCTION

THE ACQUISITION

Equity Transfer Agreement

Subject matter of the Acquisition

Consideration

Conditions

Completion

Information on CECW

Reasons for the Acquisition

LETTER FROM THE BOARD

Listing Rules Implication

PROPOSED CAPITAL REORGANISATION

Reasons for the Capital Reorganisation

Effect of the Capital Reorganisation

Conditions of the Capital Reorganisation

Application for listing

Fractional entitlement to New Shares

PROPOSED CHANGE OF BOARD LOT SIZE

Odd lots arrangements

Free exchange of new share certificates

Parallel trading arrangements

SGM

RECOMMENDATION

FURTHER INFORMATION

CHINA ELECTRONICS CORPORATION HOLDINGS COMPANY LIMITED 中國電子集團控股有限公司[*]

DISCLOSEABLE AND CONNECTED TRANSACTION: POSSIBLE ACQUISITION OF 48% EQUITY INTEREST IN CEC WIRELESS R&D LTD.

ALTUS CAPITAL LIMITED

China Electronics Corporation Holdings Company Limited

DISCLOSEABLE AND CONNECTED TRANSACTION POSSIBLE ACQUISITION OF 48% EQUITY INTEREST IN CEC WIRELESS R&D LTD.

INTRODUCTION

BASIS OF OUR OPINION

THE ACQUISITION

Background and reasons

LETTER FROM ALTUS

The Consideration

(a) Price-earnings ratio (“PER”)

LETTER FROM ALTUS

(b) Net asset value (“NAV”)

POSSIBLE FINANCIAL EFFECTS

Earnings

Working capital

Net asset value

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

3. SUBSTANTIAL SHAREHOLDERS

4. DIRECTORS’ SERVICE CONTRACTS

5. EXPERT

6. LITIGATION

7. COMPETING INTEREST

8. MATERIAL ADVERSE CHANGE

9. PROCEDURES FOR DEMANDING A POLL AT THE SGM

10. MISCELLANEOUS

11. DOCUMENTS AVAILABLE FOR INSPECTION

CHINA ELECTRONICS CORPORATION HOLDINGS COMPANY LIMITED 中國電子集團控股有限公司[*]

NOTICE OF SPECIAL GENERAL MEETING

SPECIAL RESOLUTION

ORDINARY RESOLUTIONS

NOTICE OF THE SGM

More from Smart Fish Wealthlink Holdings Limited

Smart Fish Wealthlink Holdings Limited Proxy Solicitation & Information Statement 2005