Smart Fish Wealthlink Holdings Limited — Proxy Solicitation & Information Statement 2006

Mar 31, 2006

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 takes no responsibility for the contents of this circular, 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 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)

CONTINUING CONNECTED TRANSACTIONS

Independent financial adviser to

the Independent Board Committee and the Independent Shareholders of the Company

ALTUS CAPITAL LIMITED

A notice convening a special general meeting of the Company to be held at Room 908, 9th Floor, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong on Friday, 21 April 2006 at 3:00 p.m. is set out on pages 21 to 22 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 26th Floor, Tesbury Centre, 28 Queen’s Road East, 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 is set out on page 9 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 is set out on pages 10 to 14 of this circular.

31 March 2006

* For identification purpose only

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Plastic Supply Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Proposed Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Reasons for Entering into the Plastic Supply Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Listing Rules Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Letter from Altus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Notice of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21

• i -

DEFINITIONS

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

“Altus”

Altus Capital Limited, a licensed corporation to carry out type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the approval of the Continuing Connected Transactions and the proposed caps

• “associates”

has the meaning ascribed to this term under the Listing Rules

• “Baili”

• 深圳市桑達百利電器有限公司 (Shenzhen Sang Da Baili Electronics Co. Ltd.), an indirect non wholly-owned subsidiary of CEC and the supplier under the Plastic Supply Agreement

• “Board”

the board of Directors

• “CEC” 中國電子信息產業集團公司 (China Electronics Corporation), a stateowned enterprise established under the laws of the PRC, the ultimate controlling Shareholder holding 74.98% interest in the Company

• “Company”

China Electronics Corporation Holdings Company Limited

• “connected person” has the meaning ascribed to this term under the Listing Rules

• “Continuing Connected the transactions contemplated under the Plastic Supply Agreement Transactions”

• “Directors” the directors of the Company

• “Group” the Company and its subsidiaries

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong” the Hong Kong Special Administrative Region of the PRC

• “Independent Board the committee of the Board, consisting of Messrs. Chan Kay Cheung, Committee” Wong Po Yan and Yin Yongli, independent non-executive Directors, formed to advise the Independent Shareholders in respect of the approval of the Continuing Connected Transactions and the proposed caps

• “Independent Shareholders” Shareholders other than CEC and its associates

• 1 -

DEFINITIONS

“Latest Practicable Date”	29 March 2006, being the latest practicable date prior to the printing of
	this circular for the purpose of ascertaining certain information contained
	in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on The Stock Exchange of
	Hong Kong Limited
“Options”	option(s) which have been granted under the Company’s share option
	scheme approved and adopted by the Shareholders on 20 June 2002
“Plastic Supply Agreement”	the Plastic Supply Agreement dated 3 March 2006 entered into between
	Sang Fei and Baili
“Philips Group”	Koninklijke Philips Electronics N.V., a company listed on the New York
	and the Amsterdam stock exchanges, together with its affiliated companies
“PRC”	the People’s Republic of China
“RMB”	Renminbi, the lawful currency of the PRC
“Sang Fei”	深圳桑菲消費通信有限公司(Shenzhen Sang Fei Consumer
	Communications Company Limited), a sino-foreign equity joint venture
	company established in the PRC and owned as to 65% by the Company
“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 21
	April 2006 to consider and, if thought fit, to approve the Continuing
	Connected Transactions and the proposed caps, notice of which is set
	out on pages 21 to 22 of this circular
“Share(s)”	share(s) of HK$0.01 each in the share capital of the Company
“Shareholder(s)”	shareholder(s) of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited

For the purpose of this circular, unless otherwise specified, conversions of Renminbi into Hong Kong dollars are based on the exchange rate of RMB1.04 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.

• 2 -

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: Fan Qingwu (Managing Director) Hua Longxing

Independent Non-executive Directors:

Chan Kay Cheung Wong Po Yan Yin Yongli

Registered office:

Clarendon House 2 Church Street Hamilton, HM 11 Bermuda

Principal place of business in Hong Kong: Room 908, 9th Floor Sun Hung Kai Centre 30 Harbour Road Wanchai Hong Kong

31 March 2006

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

On 9 March 2006, the Board announced that the Company’s principal operating subsidiary, Sang Fei, has on 3 March 2006 entered into the Plastic Supply Agreement with Baili, pursuant to which Sang Fei will purchase from Baili the plastic parts used for the manufacture of mobile handsets.

Baili is an indirect non wholly-owned subsidiary of CEC, the ultimate controlling Shareholder holding 74.98% interest in the Company. Accordingly, Baili is a connected person to the Company.

As the expected aggregate amount of consideration to be paid by Sang Fei under the Plastic Supply Agreement on an annual basis will exceed the 2.5% threshold under Rule 14A.34 of the Listing Rules, the Continuing Connected Transactions constitute non-exempt continuing connected transactions under Rules 14A.35 of the Listing Rules.

* For identification purpose only

• 3 -

LETTER FROM THE BOARD

An Independent Board Committee has been established to advise the Independent Shareholders in respect of the terms of the Continuing Connected Transactions and the proposed caps. In this respect, Altus has been retained as the independent financial adviser to the Independent Board Committee and the Independent Shareholders.

The purpose of this circular is to provide you with further information relating to the Continuing Connected Transactions, the letter from Altus containing its advice to the Independent Board Committee and the Independent Shareholders, the letter from the Independent Board Committee containing its recommendation to the Independent Shareholders and the notice of the SGM.

PLASTIC SUPPLY AGREEMENT

Date : 3 March 2006 Parties : (i) Sang Fei; and (ii) Baili

Major terms

1. Purchase of plastic parts

Pursuant to the Plastic Supply Agreement, Sang Fei will purchase from Baili the plastic parts used for the manufacture of mobile handsets. The Plastic Supply Agreement does not create any obligation on the part of Sang Fei to purchase plastic parts exclusively from Baili. Sang Fei may source plastic parts from any other parties.

2. Term of the agreement

Subject to the approval of the Continuing Connected Transactions and the proposed caps by the Independent Shareholders at the SGM, the Plastic Supply Agreement will be for a term of three years commencing retrospectively from 1 April 2006.

3. Pricing terms

The prices of the plastic parts to be supplied by Baili to Sang Fei under the Plastic Supply Agreement will be determined after arm’s length negotiations between the parties with reference to market rates. The pricing terms will be no less favourable than those offered to Sang Fei by other third party suppliers.

• 4 -

LETTER FROM THE BOARD

PROPOSED CAP

Subject to the approval by the Independent Shareholders, the Plastic Supply Agreement will be for a term of three years commencing retrospectively from 1 April 2006 and will expire on 31 March 2009. The Directors expect that for the nine months ending 31 December 2006, the two financial years ending 31 December 2007 and 2008 and the three months ending 31 March 2009, the aggregate amount of consideration to be paid by Sang Fei to Baili for the purchase of plastic parts under the Plastic Supply Agreement will not exceed RMB43.5 million (equivalent to approximately HK$41.8 million), RMB104.5 million (equivalent to approximately HK$100.5 million), RMB120 million (equivalent to approximately HK$115.4 million) and RMB30 million (equivalent to approximately HK$28.8 million), respectively. The caps for Continuing Connected Transactions are therefore set at the amounts set out in the following table:

	For the nine	For the financial	For the financial	For the three
	months ending	year ending	year ending	months ending
31	December 2006	31 December 2007	31 December 2008	31 March 2009
		(RMB million)
Cap for the Continuing	43.5	104.5	120	30
Connected Transactions

In arriving at the above estimation of the aggregate amount of consideration to be paid by Sang Fei to Baili for the purchase of plastic parts, the Directors have taken into account the anticipated consumption volume of plastic parts on the basis of the estimated sales volume of mobile handsets during the term of the Plastic Supply Agreement and the average cost of the plastic parts by reference to the market prices. The Directors have made reference to Sang Fei’s historical sales volume of mobile handsets when determining the anticipated consumption volume during the term of the Plastic Supply Agreement. For the year ended 31 December 2004 and for the six months ended 30 June 2005, Sang Fei sold an aggregate of 8.4 million and 3.6 million units of mobile handsets, respectively. In general, the sales of mobile handsets follows a cyclical pattern. Sales takes place in the second half of a year will be more than that in the first half of a year. The Directors anticipate that Sang Fei’s sales volume of mobile handsets will maintain a sustained and steady growth. Sang Fei will purchase plastic parts from Baili on a pilot run basis during 2006. Thereafter, Sang Fei plans to increase the proportion of plastic parts to be supplied by Baili so as to maximize the cost efficiency brought about by the Plastic Supply Agreement. As such, the caps for the Continuing Connected Transactions show an upward trend.

The terms of the Plastic Supply Agreement have been determined on an arm’s length basis and the transactions contemplated thereunder will be conducted in the ordinary course of business of the Group and on normal commercial terms. In view of the analysis stated above, the Directors are of the view that the terms of the Plastic Supply Agreement and the proposed caps for the aggregate amount of consideration to be paid by Sang Fei to Baili under the Plastic Supply Agreement for the nine months ending 31 December 2006, the two financial years ending 31 December 2007 and 2008 and the three months ending 31 March 2009, are fair and reasonable.

• 5 -

LETTER FROM THE BOARD

REASONS FOR ENTERING INTO THE PLASTIC SUPPLY AGREEMENT

Since completion of the acquisition of a 65% equity interest in Sang Fei in September 2004, the Group has been principally engaging in the manufacture and sales of mobile handsets in the PRC. The Group’s objective is to become a leading consumer electronics and communications products and service provider in the PRC.

In order to enhance the competitiveness of its products, Sang Fei places stringent quality control on selection of production materials. The Directors consider that sophisticated and exquisite mobile handsets are, and will continue to be, the future market trend. In addition to the use of technologically advanced accessories and components, the use of high quality and delicate plastic parts also plays an important part in producing sophisticated and exquisite mobile handsets. Baili has been principally engaged in the manufacturing of electronics and electrical devices and accessories for over six years and possesses the necessary expertise and technology know-how in producing high quality and delicate plastic parts for electronics and electrical devices and accessories. In addition, Baili is located in the same industrial complex as the premises of Sang Fei. This close vicinity enables Sang Fei to enjoy logistics benefits and convenience in the management and supervision of the manufacturing process of the plastic materials.

Under the Plastic Supply Agreement, Sang Fei will purchase plastic parts from Baili in bulk. As a result, the average fixed cost per individual plastic part will be reduced, thereby reducing the cost of each individual plastic part payable by Sang Fei. The Plastic Supply Agreement provides Sang Fei with the advantage of economies of scale which further enhances the competitiveness of its products. As such, it will be cost efficient for Sang Fei to engage Baili for producing the plastic parts used for the manufacturing of mobile handsets.

Before entering into the Plastic Supply Agreement, Sang Fei sourced the plastic parts used for the manufacture of mobile handsets from Baili in a smaller scale and also from some other third party suppliers. For the financial year ended 31 December 2004, the six months ended 30 June 2005 and the financial year ended 31 December 2005, Sang Fei purchased from Baili raw materials amounting to RMB 8.4 million, RMB 5.7 million and RMB 8.1 million, respectively.

Given that Baili can supply high quality plastic parts at market rates and that Sang Fei can enjoy logistics benefits by sourcing plastic parts from Baili, Sang Fei entered into Plastic Supply Agreement to expand the purchase volume from Baili.

The Plastic Supply Agreement will enable Sang Fei to obtain high quality and delicate plastic parts in a cost efficient manner and at market rates, which the Directors consider to be important to sustain the competitiveness of the Group’s products. In view of the above, the Directors consider that it will be in the interests of the Company and the Shareholders to enter into the Plastic Supply Agreement.

• 6 -

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

Baili is an indirect non wholly-owned subsidiary of CEC and is principally engaged in the manufacture of electronics and electrical devices and accessories in the PRC. CEC is the ultimate controlling Shareholder holding 74.98% interest in the Company. Accordingly, Baili is a connected person to the Company and the transactions contemplated under the Plastic Supply Agreement are continuing connected transactions of the Company.

As the expected aggregate amount of consideration to be paid by Sang Fei under the Plastic Supply Agreement on an annual basis will exceed the 2.5% threshold under Rule 14A.34 of the Listing Rules, the Continuing Connected Transactions constitute non-exempt continuing connected transactions under Rule 14A.35 of the Listing Rules and will be subject to the reporting and announcement requirements set out in Rules 14A.45 to 14A.47 of the Listing Rules and the independent shareholders’ approval requirements under Rule 14A.48 of the Listing Rules.

SGM

A notice convening the SGM to be held at Room 908, 9th Floor, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong on Friday, 21 April 2006 at 3:00 p.m. is set out on pages 21 to 22 of this circular. At the SGM, an ordinary resolution will be proposed to approve the Continuing Connected Transactions and the proposed caps. The vote of the Independent Shareholders at the SGM shall be taken by poll.

In accordance with the Listing Rules, CEC, the ultimate controlling Shareholder holding 74.98% interest in the Company as at the Latest Practicable Date, and its associates, will abstain from voting on the ordinary resolution approving the Continuing Connected Transactions and the proposed caps 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 26th Floor, Tesbury Centre, 28 Queen’s Road East, 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.

• 7 -

LETTER FROM THE BOARD

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 Continuing Connected Transactions and the proposed caps. Altus considers that the Continuing Connected Transactions are conducted in the ordinary and usual course of business of the Group and that the terms and conditions of the Plastic Supply Agreement and the proposed caps are on normal commercial terms, fair and reasonable and in the interests of the Group and the Shareholders as a whole. Altus therefore advises the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM to approve the Continuing Connected Transactions and the proposed caps. 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 are set out on pages 10 to 14 of this circular.

The Independent Board Committee, after considering the advice from Altus, concurs with the view of Altus and considers that the terms of the Continuing Connected Transactions and the proposed caps are fair and reasonable, and that the Continuing Connected Transactions 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 Continuing Connected Transactions and the proposed caps. The text of the letter from the Independent Board Committee is set out on pages 9 of this circular.

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, the letter from the Independent Board Committee which sets outs its recommendation to the Independent Shareholders, 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

• 8 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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)

31 March 2006

To the Independent Shareholders

Dear Sir or Madam

CONTINUING CONNECTED TRANSACTIONS

We have been appointed by the Board to advise you as to whether the terms of the Continuing Connected Transactions and the proposed caps are fair and reasonable, and whether the Continuing Connected Transactions are in the interests of the Company and the Shareholders as a whole. Details of the Continuing Connected Transactions are set out in the letter from the Board on pages 3 to 8 of the circular (the “ Circular ”) of the Company dated 31 March 2006, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular, unless the context otherwise requires.

We wish to draw your attention to the letter from the Board set out on pages 3 to 8 of the Circular and the letter of advice from Altus set out on pages 10 to 14 of the Circular.

We, after taking advice from Altus, concur with the views of Altus and consider that the Continuing Connected Transactions are on normal commercial terms and are conducted in the ordinary and usual course of business of the Group. We are also of the view that the terms of the Continuing Connected Transactions and the proposed caps are fair and reasonable, and that the Continuing Connected Transactions 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 Continuing Connected Transactions and the proposed caps.

Yours faithfully Independent Board Committee

Chan Kay Cheung

Wong Po Yan

Yin Yongli

• For identification purpose only

• 9 -

LETTER FROM ALTUS

The following is the text of a letter received from Altus in respect of the Continuing Connected Transactions prepared for the purpose of incorporation in this circular:

ALTUS CAPITAL LIMITED

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

The Independent Board Committee and independent Shareholders of

China Electronics Corporation Holdings Company Limited

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

31 March 2006

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to the circular to the Shareholders dated 31 March 2006 (the “ Circular ”) issued by the Company of which this letter forms part and to our appointment as independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Continuing Connected Transactions. Details of the Continuing Connected Transactions are set out in the letter from the Board (“ Board’s Letter ”) contained in the Circular. Capitalised terms used in this letter shall have the same meanings ascribed to them in the Circular unless the context otherwise requires.

It was announced that on 3 March 2006, Sang Fei and Baili entered into the Plastic Supply Agreement where Sang Fei will purchase from Baili plastic parts used for its manufacture of mobile handsets.

Baili is an indirect non wholly-owned subsidiary of CEC, which is the ultimate controlling Shareholder holding 74.98% interest in the Company. Accordingly, Baili is a connected person to the Company and the transactions contemplated under the Plastic Supply Agreement are continuing connected transactions of the Company. The Independent Board Committee has been formed to advise the Independent Shareholders in relation to the Continuing Connected Transactions and the proposed caps and the SGM will be convened for the purpose of approving the relevant resolution. In accordance with the Listing Rules, CEC and its associates will abstain from voting on the relevant resolution at the SGM and the vote of the Independent Shareholders on such resolution will be taken by poll.

• 10 -

LETTER FROM ALTUS

BASIS OF OUR OPINION

In formulating our opinion, we have relied on the information, facts and representations contained or referred to in the Circular and the information, facts and representations provided by, and the opinions expressed by the Directors, the Company and its management. We have assumed that all statements, information, facts, opinions and representations made or referred to in the Circular were true, accurate and complete at the time they were made and continued to be true, accurate and complete as at the date of the Circular. We have no reason to doubt the truth, accuracy and completeness of the statements, information, facts, opinions and representations provided to us by the Directors, the Company and its management. The Directors have confirmed to us that no material facts have been omitted from the information supplied and opinions expressed; thus we have no reason to doubt that any relevant material facts have been withheld or omitted from the information provided and referred to in the Circular, or the reasonableness of the opinions and representations provided to us by the Group.

All the Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that, to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and that there are no other facts not contained in the Circular the omission of which would make any statement in the Circular misleading. We have relied on such information and opinions and have not however, conducted any independent investigation into the business, financial conditions and affairs or the future prospects of the Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our advice in respect of the terms of the Continuing Connected Transactions, we have taken into account the following principal factors and reasons:

1. Background

The Group has been principally engaged in the manufacturing and sales of mobile handsets in the PRC since the acquisition of a 65% equity interest in Sang Fei in September 2004. Its objective is to become a leading consumer electronic and communications products and service provider in the PRC.

Baili is principally engaged in the manufacturing of electronics and electrical devices and their accessories. It has the expertise and technology know-how to produce quality and delicate plastic parts for these devices and accessories. The manufacturing facilities of Baili are located in the same industrial complex as Sang Fei.

2. Reasons for the Continuing Connected Transactions

Sang Fei has been manufacturing mobile handsets on OEM and ODM basis since 1997. The Directors believe sophisticated and exquisite mobile handsets are, and will continue to be, the future market trend and increasingly, high quality and delicate plastic parts will be used in the production of these mobile handsets.

• 11 -

LETTER FROM ALTUS

To remain competitive, Sang Fei places strong emphasis on the quality of its products and in turn, adopts stringent quality control on the selection of materials used in its production process. Timely delivery to customers is also important and hence Sang Fei requires reliable supply of materials which otherwise would disrupt its production schedule, resulting in delays in delivery.

In view of the above, the Directors therefore propose the entering into the Plastic Supply Agreement. Prior to this, Sang Fei purchased material parts from Baili in a smaller scale which amounted to RMB8.4 million for the financial year ended 31 December 2004, RMB5.7 million for the six months ended 30 June 2005 and RMB8.1 million for financial year ended 31 December 2005. Under the Plastic Supply Agreement, Sang Fei’s purchases from Baili will increase as further discussed under the section headed “ The proposed caps ” below. Such bulk purchases of plastic parts from Baili allow Sang Fei to benefit from lower average fixed cost per individual plastic part as transportation and administration costs will be shared by larger order quantities. Based on our discussion with Sang Fei’s management, in addition to being able to meet with Sang Fei’s purchasing demand, the quality of Baili’s products has been satisfactory. In terms of delivery, as Baili is located in the same industrial complex where Sang Fei is located, there are cost saving benefits in terms of logistic and convenience. The proximity also allows flexibility and effectiveness in production planning and supervision of manufacturing process.

The transactions contemplated under the Plastic Supply Agreement will be conducted in the ordinary course of business of the Group and on normal commercial terms and the Plastic Supply Agreement does not create any obligation on the part of Sang Fei to source plastic parts exclusively from Baili, maintaining its flexibility to continue to source from other suppliers. The Group intends to eventually purchase approximately 30% of its plastic parts requirement from Baili as further discussed below and the Group will continue to purchase its remaining requirements from other suppliers. Based on the above, we are of the view that the Group will not be overly reliant on Baili for the supply of plastic parts. Having considered the rationale above, we are of the view that it is fair and reasonable for the Group to enter into the Plastic Supply Agreement.

3. Basis of determining the price

The prices of the plastic parts to be supplied by Baili to Sang Fei under the Plastic Supply Agreement will be determined after arm’s length negotiations between the parties with reference to market rates. The pricing terms will be no less favourable than those offered to Sang Fei by other suppliers who are independent third parties as defined in the Listing Rules (“ Independent Suppliers ”).

We have reviewed sample copies of invoices for Sang Fei’s purchases of comparable plastic parts from Baili and the Independent Suppliers. We have also reviewed the historical record of cost of plastic parts for the manufacturing of mobile handsets that are sourced from Baili and the Independent Suppliers between April 2005 and January 2006 and note that the prices charged by Baili are comparable to those charged by the Independent Suppliers.

Based on the above, we are of the view that the basis for price determination under the Plastic Supply Agreement is fair and reasonable.

• 12 -

LETTER FROM ALTUS

4. The proposed caps

The Plastic Supply Agreement will take retrospective effect from 1 April 2006 should it be approved by the Independent Shareholders at the SGM. Sang Fei’s purchases from Baili, which will thereof commence from 1 April 2006 and expire on 31 March 2009, will be subject to the following caps for the Continuing Connected Transactions (the “ Caps ”):

		For the	For the
	For the nine	financial	financial	For the three
	months ending	year ending	year ending	months ending
	31 December	31 December	31 December	31 March
	2006	2007	2008	2009
		(RMB’	million)
The Caps	43.5	104.5	120.0	30.0
	(equivalent to	(equivalent to	(equivalent to	(equivalent to
	HK$41.8	HK$100.5	HK$115.4	HK$28.8
	million)	million)	million)	million)
% of change compared
to prior year on an
annualised basis	–	80.2%	14.8%	–

The Caps are determined having taken into account: (i) the estimated average market prices of plastic parts which are expected to be stable and are in line with the historical price trend; (ii) Sang Fei’s anticipated consumption of plastic parts with reference to the Group’s estimated mobile handsets sales; and (iii) the proportion of Sang Fei’s plastic parts requirement which will be purchased from Baili.

When estimating the Group’s mobile handset sales, the Directors have made reference to Sang Fei’s historical sales volume and taking into account seasonality where higher sales are expected in the second half of a year. For reference, during the year ended 31 December 2004 and for the six months ended 30 June 2005, Sang Fei sold an aggregate of 8.4 million and 3.6 million units of mobile handsets respectively and the Directors expect Sang Fei’s mobile handset sales will maintain a sustained and steady growth, underpinned mainly by the sales to the Philips Group. As disclosed in the circular of the Company dated 11 August 2005, the Group’s sales of mobile handsets to the Philips Group is expected to increase from approximately RMB4,987 million for the financial year ended 31 December 2005 to approximately RMB6,235 million and RMB6,858 million for each of the financial year ending 31 December 2006 and 2007 respectively. Taking into account that the annual cap of the Group’s sales of mobile handsets to the Philips Group has been reasonably determined based on historical sales to the Philips Group and budgeted sales after discussions between Sang Fei and the Philips Group, we consider that the second basis as set out above for determining the Caps, which has taken into consideration (i) the intended increase in purchases from Baili; and (ii) the expected growth in sales of Group, is justifiable.

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LETTER FROM ALTUS

During the year ended 31 December 2004 and for the six months ended 30 June 2005, only a small amount of plastic parts requirement of the Group was sourced from Baili. The Group intends to progressively increase its purchases from Baili from 2006 onwards, with full scale purchases in 2007 and thereafter. This allows Baili to adapt to the Group’s requirements and ensures smooth running of operations leading to the expected economies of scale. The Group intends to purchase approximately 15% of its plastic parts requirement from Baili during the nine months ending 31 December 2006 and eventually purchases approximately 30% of its total plastic parts requirement from Baili from the financial year ended 31 December 2007 and onwards.

Based on the above, we are of the view that the bases for determining the Caps are fair and reasonable.

CONCLUSION AND RECOMMENDATION

Having considered the above principal factors and reasons, we are of the view that the Continuing Connected Transactions are conducted in the ordinary and usual course of business of the Group. The terms and conditions of the Plastic Supply Agreement, including the Caps are on normal commercial terms, fair and reasonable and are in the interest of the Group and the Shareholders as a whole. We would therefore advise the Independent Board Committee to recommend the independent Shareholders to vote in favour of the relevant resolution to approve the Continuing Connected Transactions and the Caps under the Plastic Supply Agreement.

Yours faithfully, For and on behalf of Altus Capital Limited Sean Pey, Chang Executive Director

• 14 -

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 Company. 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, the following Directors and chief executive of the Company had, or were deemed to have, interests or 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 and short positions which they were deemed or taken 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, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

			Approximate %
	Number and	No. of underlying	of the issued
	description of	Shares involved	capital of
Name of Directors	equity derivatives	in the Options	the Company
Yang Xiaotang	4,000,000 Options_(Note)_	4,000,000	0.37%
Tong Baoan	3,800,000 Options_(Note)_	3,800,000	0.35%
Fan Qingwu	3,600,000 Options_(Note)_	3,600,000	0.33%
Hua Longxing	3,600,000 Options (Note)	3,600,000	0.33%
Total		15,000,000	1.38%

Note:

The Options were all granted on 25 October 2005 under the share option scheme approved and adopted by the Shareholders on 20 June 2002. The Options represent personal interest held by the Directors as beneficial owners. Grantees of such Options are entitled to exercise the Options at a price of HK$1.488 per Share in the following periods:

• (i) in respect of 40% of the Options granted, from 1 November 2005 to 31 October 2008;

• (ii) in respect of a further 30% of the Options granted, from 1 November 2006 to 31 October 2009; and

• (iii) in respect of the remaining 30% of the Options granted, from 1 November 2007 to 31 October 2010.

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GENERAL INFORMATION

APPENDIX

Save as disclosed above, 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 or 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 and short positions which they were deemed or taken 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, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

Mr. Tong Baoan, the Vice Chairman of the Company and a non-executive Director, is a director of CEC. Messrs. Yang Xiaotang, the Chairman of the Company and a non-executive Director, 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 in 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.

Since 31 December 2004, being the date to which the latest published audited consolidated financial statements of the Group were made up, up to the Latest Practicable Date, none of the Directors nor Altus had any direct or indirect material interest in any assets which had been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

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 persons had, or were deemed to have, interests or short positions in the

• 16 -

GENERAL INFORMATION

APPENDIX

Shares or the 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 percentage
		or attributable
		percentage of total
	Number or attributable	issued share capital
Name of Shareholder	number of Shares held	of the Company
CEC (BVI)	812,500,000	74.98%
CEC_(Note 1)_	812,500,000	74.98%
Devon Fortune Limited	91,421,608	8.43%
(“Devon Fortune”)
Chan Chak Shing (“Mr. Chan”)	95,546,608_(Note 2)_ 8.81%

Notes:

• (1) CEC (BVI) is a wholly-owned subsidiary of CEC. Accordingly, CEC is deemed to be interested in the 812,500,000 Shares owned by CEC (BVI).

• (2) These 95,546,608 Shares represent the aggregate of: (i) the family interest of Mr. Chan of 4,125,000 Shares and (ii) the corporate interest of 91,421,608 Shares held by Devon Fortune. As Mr. Chan holds 100% interest in Devon Fortune, the interests of Devon Fortune are deemed to be the interests of Mr. Chan.

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:

Name of subsidiary	Name of shareholder	Interest held
		(%)
Sang Fei	Members of the Philips Group	25
Sang Fei	Shenzhen SED Industry Co., Ltd.(Note 3)	10

Note:

• (3) Shenzhen SED Industry Co., Ltd. is a company established in the PRC whose A shares are listed on the Shenzhen Stock Exchange and is indirectly owned as to approximately 55.34% by CEC as at the Latest Practicable Date.

• 17 -

GENERAL INFORMATION

APPENDIX

Save as disclosed above, there is no person known to the Directors or the chief executive of the Company who, as at the Latest Practicable Date, had, or was deemed to have, an interest or short position in the Shares or the 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, or any option in respect of such capital.

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 4, 6 and 9 regulated activites under the SFO. Altus has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter of advice and references to its name in the form and context in which they appear.

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.

6. COMPETING INTEREST

Mr. Tong Baoan, the Vice Chairman of the Company and a non-executive Director, is a director of CEC, the President and legal representative of China Electronics Industry Corporation 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 Corporation.

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

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 the 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.

• 18 -

GENERAL INFORMATION

APPENDIX

7. 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.

8. PROCEDURES FOR DEMANDING A POLL AT THE SGM

In accordance with the Listing Rules, any vote taken at the SGM to approve the Continuing Connected Transactions and the proposed caps 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:

• (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.

• 19 -

GENERAL INFORMATION

APPENDIX

9. 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 18 April 2006:

• (a) the Plastic Supply Agreement;

• (b) the letter of advice from Altus to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 10 to 14 of this circular; and

• (c) the consent letter from Altus as referred to in the paragraph headed “Expert” in this Appendix.

10. MISCELLANEOUS

The English text of this circular shall prevail over the Chinese text.

• 20 -

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 Room 908, 9th Floor, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong on Friday, 21 April 2006 at 3:00 p.m. for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolution as ordinary resolution:

ORDINARY RESOLUTION

“ THAT the continuing connected transactions contemplated under the plastic supply agreement dated 3 March 2006 entered into between 深圳桑菲消費通信有限公司 (Shenzhen Sang Fei Consumer Communications Company Limited) and 深圳市桑達百利電器有限公司 (Shenzhen Sang Da Baili Electronics Co. Ltd.), a copy of which has been initialled by the chairman of this meeting and for the purpose of identification marked “A”, and the proposed caps be and are 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 Continuing Connected Transactions.”

By Order of the Board

China Electronics Corporation Holdings Company Limited Yam Pui Hung, Robert Company Secretary

Hong Kong, 31 March 2006

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 30 Harbour Road Wanchai Hong Kong

* For identification purpose only

• 21 -

NOTICE OF THE SGM

Notes:

1. 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.

2. 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 26th Floor, Tesbury Centre, 28 Queen’s Road East, 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.

3. In the case of joint holders of any 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.

4. In accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, voting on the above ordinary resolution will be taken by poll.

5. 22 -