SPT Energy Group Inc. — Proxy Solicitation & Information Statement 2002

Dec 18, 2002

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 stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Wing Shan International Limited , you should at once hand this circular, together with the accompanying form of proxy, to the purchaser or to the transferee or to the bank, stockbroker or other agent through whom the sale 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.

WING SHAN INTERNATIONAL LIMITED 榮山國際有限公司

(Incorporated in Hong Kong with limited liability)

CONNECTED TRANSACTIONS NEW FUEL SUPPLY AGREEMENT

Independent financial adviser to the Independent Board Committee

SOMERLEY LIMITED

A letter from the Board is set out on pages 3 to 7 of this circular and a letter from the Independent Board Committee is set out on page 8 of this circular. A letter from Somerley Limited containing its advice to the Independent Board Committee is set out on pages 9 to 13 of this circular.

A notice convening an extraordinary general meeting of Wing Shan International Limited to be held at Rooms 2801-5, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong at 10:00 a.m. on 31 December, 2002 is set out on page 18 of this circular.

Whether or not you propose to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to Wing Shan International Limited at its registered office in Hong Kong at Rooms 2801-5, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for the holding of the meeting. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting or any adjourned meeting should you so wish.

14 December, 2002

CONTENTS

	Pages
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Letter from Somerley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Appendix – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Notice of the Extraordinary General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18

– i –

DEFINITIONS

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

“Board”	the board of Directors
“Company”	Wing Shan International Limited, a company incorporated in Hong Kong, the shares of
	which are listed on the main board of the Stock Exchange
“Directors”	directors of the Company
“EGM”	the extraordinary general meeting of the Company to be held at Rooms 2801-5, China
	Insurance Group Building, 141 Des Voeux Road Central, Hong Kong at 10:00 a.m. on 31
	December 2002
EGM Notice	the notice convening the EGM as set out on page 18 of this circular
“Fuel Company”	Foshan City District Electricity Fuel Supply Company（佛山市區電力燃料公司）, a
	state-owned enterprise incorporated in the PRC, wholly-owned by, and under the
	supervision of, Power Group Corporation
“Group”	the Company and its subsidiaries
“Hensil”	Hensil Worldwide Inc., a company incorporated in the British Virgin Islands and a direct
	wholly-owned subsidiary of the Company
“Hong Kong”	Hong Kong Special Administrative Region of the People’s Republic of China
“Independent Board Committee”	an independent committee of the Board comprising Mr. CHAN Ting Chuen, David and Mr.
	NG Pui Cheung, Joseph, both being independent non-executive Directors, appointed to
	consider and make recommendations to the shareholders of the Company in relation to the
	New Fuel Supply Agreement, the Transactions and the Waiver Application
“Latest Practicable Date”	12 December 2002, being the latest practicable date prior to the printing of this circular for
	ascertaining certain information contained herein
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
“New Fuel Supply Agreement”	the new fuel supply agreement entered into between Shakou JV as purchaser and the Fuel
	Company as supplier dated 30 November 2002
“Power Construction	Foshan City District Electric Power Construction Corporation（佛山市區電力建設總公
Corporation”	司）, a state-owned enterprise established in the PRC and under the direct supervision of,
	and wholly-owned by, Power Group Corporation
“Power Group Corporation”	Foshan Electric Power Construction Group Corporation（佛山電建集團公司）, a state-
	owned enterprise established in the PRC, principally engaged in the investment of power
	plants and installation of power generators in Guangdong Province, the PRC

– 1 –

DEFINITIONS

• “PRC” the People’s Republic of China “SDI Ordinance” Securities (Disclosure of Interests) Ordinance (Chapter 396 of the Laws of Hong Kong) “Shakou JV” Foshan Shakou Power Plant Company Limited（佛山市沙口發電廠有限公司）, a Sinoforeign equity joint venture established in the PRC and a 80% indirectly-owned subsidiary of the Company, which owns and operates a power plant at Shakou, Foshan, the PRC with a total installed capacity of 300,000kW

• “Somerley” Somerley Limited, the independent financial adviser to the Independent Board Committee in respect of the New Fuel Supply Agreement and the Waiver Application and an investment adviser and exempt dealer under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

• “Stock Exchange” The Stock Exchange of Hong Kong Limited “subsidiaries” as defined under section 2 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

• “Transactions” the transactions as contemplated under the New Fuel Supply Agreement “Waiver Application” the application to the Stock Exchange for waiver from strict compliance of the relevant requirements of the Listing Rules in respect of the ongoing connected Transactions for the period from 1 January 2003 to 31 December 2005, as described in the section of the Letter from the Board headed “Waiver from Compliance with the Listing Rules”

• “1997 Fuel Supply Agreement” the fuel supply agreement entered into between Shakou JV as purchaser and Fuel Company as supplier dated 29 December 1997 which is due to expire on 31 December 2002

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LETTER FROM THE BOARD

WING SHAN INTERNATIONAL LIMITED 榮山國際有限公司

(Incorporated in Hong Kong with limited liability)

Directors:

Mr. HE Haochang, Chairman & Managing Director

Mr. CHAN Che Kan, Edward, Deputy Managing Director Mr. SITU Min Mr. TANG Jian Mr. LAM Siu Hung Mr. CHAN Ting Chuen, David Mr. NG Pui Cheung, Joseph

Registered Office:

Rooms 2801-5 China Insurance Group Building 141 Des Voeux Road Central Hong Kong

(* Independent Non-Executive Director)

14 December 2002

(** Non-Executive Director)

To the shareholders of the Company

Dear Sir or Madam,

CONNECTED TRANSACTIONS New Fuel Supply Agreement

1. INTRODUCTION

On 30 November 2002, the Directors announced that Shakou JV, a 80% indirectly owned subsidiary of the Company, entered into the New Fuel Supply Agreement with the Fuel Company on 30 November 2002 whereby the Fuel Company agreed to sell and deliver to Shakou JV the quantity of fuel requested by Shakou JV according to an annual schedule agreed between the parties for a term of three years commencing from 1 January 2003.

The purpose of this circular is to provide you with further information relating to the New Fuel Supply Agreement, the Transactions and the Waiver Application and to convene the EGM to consider and, if thought fit, to approve the New Fuel Supply Agreement and the Waiver Application.

2. THE NEW FUEL SUPPLY AGREEMENT

On 30 November 2002, Shakou JV (as purchaser) and the Fuel Company (as supplier) entered into the New Fuel Supply Agreement.

The contract term of the New Fuel Supply Agreement is three years commencing from 1 January 2003 and ending on 31 December 2005. On 29 December 1997, Shakou JV and the Fuel Company entered into the 1997 Fuel Supply Agreement. Pursuant to the 1997 Fuel Supply Agreement, the Fuel Company agreed to sell and deliver to Shakou JV the quantity of fuel requested by Shakou JV according to an annual schedule agreed between Shakou JV and the Fuel Company for a term of five years. As the 1997 Fuel Supply Agreement is expiring on 31 December 2002, Shakou JV and the Fuel Company have agreed to enter into the New Fuel Supply Agreement and the terms and conditions of which are similar to that of the 1997 Fuel Supply Agreement.

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LETTER FROM THE BOARD

3. DETAILS OF THE NEW FUEL SUPPLY AGREEMENT

Under the New Fuel Supply Agreement, the Fuel Company agrees to sell and deliver to Shakou JV the quantity of fuel requested by Shakou JV according to an annual schedule agreed between Shakou JV and the Fuel Company. The Fuel Company may sell and deliver fuel to other parties provided that that does not affect the Fuel Company’s ability to deliver the agreed quantity of fuel to Shakou JV plus any additional amount of fuel as may be required by Shakou JV from time to time pursuant to the New Fuel Supply Agreement.

According to the New Fuel Supply Agreement, the quantity of fuel agreed between the Fuel Company and Shakou JV for the year ending 31 December 2003 is 300,000 tonnes. The scheduled quantity of fuel for each subsequent year will be agreed between Shakou JV and the Fuel Company before the end of the immediately preceding year. In each year during the term of the New Fuel Supply Agreement, the Fuel Company will use its best endeavours to supply fuel requested by Shakou JV in excess of the scheduled quantity. In the event that the usage of fuel does not reach the agreed quantity in any given year, Shakou JV has no obligation to purchase the shortfall between the agreed quantity of fuel and the actual usage. Therefore, Shakou JV does not need to purchase any unnecessary fuel. The price payable by Shakou JV for the fuel delivered will be determined by Shakou JV and the Fuel Company from time to time, but in any event will not be higher than: (i) the then prevailing market price for sales of fuel by the Fuel Company to independent third parties; or (ii) the then quotation of price of the fuel that Shakou JV could obtain from other independent supplier(s), whichever is the lower. Currently, Shakou JV is the single largest customer of the Fuel Company in respect of that particular kind of fuel to be supplied under the New Fuel Supply Agreement and the Fuel Company is Shakou JV’s single largest supplier of such kind of fuel.

4. INFORMATION ON THE FUEL COMPANY

The Fuel Company is a state-owned enterprise incorporated in the PRC and is wholly-owned by, and under the supervision of, Power Group Corporation. The principal activity of the Fuel Company is the provision of fuel supply to the power plants in Guangdong Province, the PRC.

5. INFORMATION ON SHAKOU JV

Shakou JV is a Sino-foreign equity joint venture established in the PRC which is owned as to 80% by Hensil and 20% by Power Construction Corporation. Shakou JV owns and operates a power plant at Shakou, Foshan, the PRC with a total installed capacity of 300,000kW. Hensil is a direct wholly-owned subsidiary of the Company.

6. SHAREHOLDING STRUCTURE

Details of the shareholding structure of Shakou JV as at the Latest Practicable Date is set out below:

==> picture [299 x 170] intentionally omitted <==

----- Start of picture text -----

Company Power Group Corporation
100% 100% 100%
Hensil Power Construction
Fuel Company
Corporation
80%
20%
Shakou JV
----- End of picture text -----

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LETTER FROM THE BOARD

7. REASONS FOR ENTERING INTO THE NEW FUEL SUPPLY AGREEMENT

The principal activities of the Group are the generation and sale of electricity in Foshan City, Guangdong Province, the PRC. As the 1997 Fuel Supply Agreement is expiring on 31 December 2002, the Directors consider that the entering into of the New Fuel Supply Agreement between Shakou JV and the Fuel Company will ensure stable, high quality and economical supply of fuel to Shakou JV. The Directors are also of the view that the terms of the Transactions are fair and reasonable so far as the shareholders of the Company are concerned.

8. CONNECTED TRANSACTIONS

Since Power Construction Corporation holds 20% of the equity interests in Shakou JV, it is regarded as a substantial shareholder (as defined in the Listing Rules) of Shakou JV and is thus a connected person (within the meaning of the Listing Rules) of the Company. As the Fuel Company and Power Construction Corporation are wholly-owned by Power Group Corporation, the Fuel Company is an associate of Power Construction Corporation by virtue of their being fellow subsidiaries of the same holding company. The entering into of the New Fuel Supply Agreement and the Transactions between Shakou JV and the Fuel Company constitutes connected transactions under the Listing Rules.

9. WAIVER FROM COMPLIANCE WITH THE LISTING RULES

The Transactions would normally require full disclosure under Rule 14.25 of the Listing Rules and prior independent shareholders’ approval under Rule 14.26 of the Listing Rules. However, the Directors are of the opinion that such Transactions will continue to be carried out in the ordinary and usual course of business of the Group and on terms that are fair and reasonable so far as the shareholders of the Company are concerned. The Directors consider that it would not be practicable to make disclosure or, if necessary, obtain shareholders’ approval for each of the Transactions as it arises. Accordingly, the Directors have applied to the Stock Exchange for granting of a waiver on the following conditions:

1. The aggregate amount of the Transactions for each financial year of the Company will not exceed the cap amount of 80% of the cost of sales of the Group in that financial year.

2. The independent non-executive Directors will review the Transactions annually and confirm in the Company’s relevant annual report that such Transactions are:

3. (a) in the ordinary and usual course of business of the Company;

4. (b) the Transactions have been entered into on an arm’s length basis and on normal commercial terms (which expression will be applied by reference to transactions of a similar nature and to be made by similar entities within the PRC) or on terms no less favourable than terms available to or from independent third parties or (where there is no available comparison) on terms that are fair and reasonable so far as the shareholders of the Company are concerned;

5. (c) entered into in accordance with the terms and conditions of the New Fuel Supply Agreement; and

6. (d) the aggregate amount of the Transactions for each financial year of the Company has not exceeded the cap amount of 80% of the cost of sales of the Group in that financial year.

7. The auditors of the Company will review the Transactions annually and confirm in a letter to the Directors (with a copy to the Stock Exchange) stating that such Transactions:

8. (a) have received the approval of the Board;

9. (b) have been entered into in accordance with the pricing policy as stated in the Company’s annual report;

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LETTER FROM THE BOARD

• (c) have been entered into in accordance with the terms of the New Fuel Supply Agreement; and

• (d) the aggregate amount of the Transactions for each financial year of the Company has not exceeded the cap amount of 80% of the cost of sales of the Group in that financial year.

Where, for whatever reason, the auditors decline to accept the engagement or are unable to provide such confirmation, the Directors will inform the Stock Exchange immediately.

1. Details of such Transactions in each financial year will be disclosed in the annual report of the Company in that financial year in accordance with Rule 14.25(1)(A) to (D) of the Listing Rules together with a statement of opinion of the independent non-executive Directors and the auditors of the Company referred to in sub-paragraphs 2 and 3 above.

2. The Company undertakes to the Stock Exchange that, for so long as the shares of the Company are listed on the Stock Exchange, it will provide the auditors of the Company with full access to its relevant records for the purpose of the auditors’ review of the Transactions. The Fuel Company has undertaken to Shakou JV that, during the term of the New Fuel Supply Agreement, it will provide Shakou JV with full access to its relevant records in connection with the Transactions.

3. If the cap amount referred to in sub-paragraph 1 above has exceeded or if there are any changes to the terms of the New Fuel Supply Agreement, the Company must comply with the provisions of the Listing Rules governing connected transactions.

The cap amount of 80% of the cost of sale of the Group under the Waiver Application is based on the waiver granted in respect of the 1997 Fuel Supply Agreement and past records of the operation of Shakou JV.

The Stock Exchange has indicated that if the Group enters into any new agreement with any connected persons (within the meaning of the Listing Rules and subject to the requirements as set out in the Listing Rules) in future, the Company must comply with the provisions of the Listing Rules governing connected transactions unless the Company applies for and obtains a separate waiver from the Stock Exchange.

10. EXTRAORDINARY GENERAL MEETING

Set out on page 18 of this circular is the EGM Notice at which ordinary resolution will be proposed to the shareholders of the Company for the approval of the New Fuel Supply Agreement and the Waiver Application.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you propose to attend the EGM in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company’s registered office at Rooms 2801-5, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong as soon as possible and, in any event, not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

11. RECOMMENDATION

The Directors consider that the entering into the New Fuel Supply Agreement is in the best interest of the Company and accordingly, the Directors recommend that all shareholders of the Company should vote in favour of the resolution as set out in the EGM Notice.

Since no shareholders of the Company or any of their associates have any interests in the New Fuel Supply Agreement and the Transactions (other than through their interests in the Company), accordingly, no shareholders of the Company are required to abstain from voting at the EGM to approve the New Fuel Supply Agreement and the Waiver Application.

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LETTER FROM THE BOARD

12. ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendix to this circular.

Yours faithfully, By order of the Board WING SHAN INTERNATIONAL LIMITED HE Haochang

Chairman & Managing Director

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

WING SHAN INTERNATIONAL LIMITED 榮山國際有限公司

(Incorporated in Hong Kong with limited liability)

14th December 2002

To the shareholders of the Company

Dear Sir or Madam,

CONNECTED TRANSACTIONS New Fuel Supply Agreement

We refer to the circular dated 14th December 2002 (the “Circular”) issued by the Company, of which this letter forms part. Terms defined in the Circular shall have the same meanings herein unless the context otherwise requires.

We have been appointed as members of the Independent Board Committe to advise the shareholders of the Company in respect of the New Fuel Supply Agreement, the Transactions and the Waiver Application. Somerley has been appointed as an independent financial adviser to advise the Independent Board Committee in respect thereof.

We draw your attention to the letter from the Board on pages 3 to 7 of the Circular which sets out the information relating to, the New Fuel Supply Agreement, the Transactions and the Waiver Application. We also draw your attention to the letter from Somerley which contains its advice on the New Fuel Supply Agreement, the Transactions and the Waiver Application, as set out on pages 9 to 13 of the Circular.

After taking into consideration the opinion of Somerley, and in particular the principal factors and reasons set out in its letter, we concur with the opinion of Somerley and consider that the New Fuel Supply Agreement, the Transactions and the Waiver Application are fair and reasonable and the entering into of the New Fuel Supply Agreement and the Transactions arises thereon and the Waiver Application are in the interests of the Company and the shareholders of the Company as a whole. Accordingly, we recommend the shareholders of the Company to vote in favour of the ordinary resolution to be proposed at the extraordinary general meeting to approve the New Fuel Supply Agreement and the Waiver Application.

Yours faithfully, Independent Board Committee

CHAN Ting Chuen, David

Independent non-executive Director

NG Pui Cheung, Joseph

Independent non-executive Director

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LETTER FROM SOMERLEY

The following is the letter of advice from Somerley to the Independent Board Committee prepared for the purpose of inclusion in this circular.

Somerley Limited Suite 3108 One Exchange Square 8 Connaught Place Central Hong Kong 14th December, 2002

The Independent Board Committee Wing Shan International Limited Rooms 2801-5, China Insurance Group Building 141 Des Voeux Road Central Hong Kong

Dear Sirs,

CONNECTED TRANSACTIONS New Fuel Supply Agreement

We refer to our appointment to advise the Independent Board Committee as regards the transactions contemplated under the New Fuel Supply Agreement (the “Transactions”). The Transactions will be on-going connected transactions for the Company and would normally require certain public disclosures to be made and prior independent shareholders’ approval pursuant to Rules 14.25 or 14.26 of the Listing Rules on each occasion the Transaction arises. In this respect, the Directors have applied to the Stock Exchange for a waiver from strict compliance with the relevant requirements of the Listing Rules in respect of the Transactions. Details of the New Fuel Supply Agreement, the Transactions and the Waiver Application are set out in the circular of the Company dated 14th December, 2002 (the “Circular”), of which this letter forms part. Unless otherwise defined, capitalised terms used in this letter shall have the same meanings as defined in the Circular.

The New Fuel Supply Agreement is entered into between Shakou JV, an 80% indirectly owned subsidiary of the Company, and the Fuel Company. Shakou JV is 20% owned by Power Construction Corporation, which has the same holding company as the Fuel Company. The Fuel Company is therefore an associate of a substantial shareholder of the Company’s subsidiary. However, save for Power Construction Corporation’s 20% shareholding in Shakou JV, Power Construction Corporation and the Fuel Company are otherwise independent from the directors, substantial shareholders and chief executives of the Company and its subsidiaries and their respective associates. As all shareholders of the Company, including the substantial shareholders and Directors who have shareholding in the Company, have the same interests in the New Fuel Supply Agreement, none of them is required to abstain from voting at the EGM to approve the New Fuel Supply Agreement and the Waiver Application.

The Independent Board Committee comprising two independent non-executive Directors namely Messrs Chan Ting Chuen, David and Ng Pui Cheung, Joseph, has been formed to consider the terms and conditions of the New Fuel Supply Agreement, the Transactions and the Waiver Application and to make recommendation to the shareholders of the Company as to how they shall vote at the EGM. We have been appointed to advise the Independent Board Committee in this respect.

In formulating our opinion, we have relied on the information and facts supplied, and the opinions expressed, by the Company. We have sought and received confirmation from the Directors that no material factors have been omitted from the information supplied and opinions expressed to us. We have relied on such information and consider that we have been provided with sufficient information to reach an informed view and have no reason to believe that any material information has been withheld, nor to doubt the truth or accuracy of the information provided. We have not, however, conducted an independent investigation into the affairs of the Group.

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LETTER FROM SOMERLEY

PRINCIPAL FACTORS AND REASONS CONSIDERED

In considering whether or not the terms and conditions of the New Fuel Supply Agreement are fair and reasonable, we have taken into account the principal factors and reasons set out below:

(A) Background and reasons for entering into the New Fuel Supply Agreement

The principal activities of the Group are the generation and sale of electricity in Foshan City, Guangdong Province, the PRC through its 80% indirectly owned subsidiary, Shakou JV.

The Company acquired its 80% indirect interest in Shakou JV in early 1998 (the “Acquisition”). Shakou JV owns and operates a power plant which is equipped with combined cycle power generating facilities comprising two gas turbine generating units and one steam turbine generating unit with a total installed capacity of 300,000 kW. All electricity generated by Shakou JV’s power plant is sold to Guangdong Guang-Dian Power Grid Group Company Limited Foshan Branch. Shakou JV purchased fuel from the Fuel Company. Pursuant to the 1997 Fuel Supply Agreement entered into between Shakou JV and the Fuel Company on 29th December, 1997, the Fuel Company has been supplying Shakou JV the quantity of heavy oil, diesel oil or additives based on an annual schedule agreed between Shakou JV and the Fuel Company.

The 1997 Fuel Supply Agreement is due to expire on 31st December, 2002. Shakou JV and the Fuel Company have on 30th November, 2002 entered into the New Fuel Supply Agreement whereby the Fuel Company agrees to continue to supply fuel to Shakou JV on terms and conditions largely similar to that of the 1997 Fuel Supply Agreement. The New Fuel Supply Agreement is for a term of three years commencing from 1st January, 2003.

The entering into of the New Fuel Supply Agreement is essential to the operation of Shakou JV as it will ensure stable supply of fuel to Shakou JV. The Fuel Company is the operator of the largest fuel storage facilities in close proximity to Shakou JV’s power plant. The close proximity of the fuel supplier has in the past five years enabled Shakou JV to secure its fuel supply for its power plant on an efficient and uninterrupted basis. The Directors have confirmed that previous transactions with the Fuel Company pursuant to the 1997 Fuel Supply Agreement have been entered into in the ordinary and usual course of business of the Group and on terms and conditions that were fair and reasonable so far as the shareholders of the Company were concerned. The future purchase of fuel from the Fuel Company will be priced at the lower of the price of fuel sold by the Fuel Company to an independent third party or the quotation that Shakou JV is able to obtain from an independent third party. We are of the view that the entering into of the New Fuel Supply Agreement, which will enable Shakou JV to secure a stable supply of fuel at competitive price, is in the interest of the Company.

(B) Principal terms of the New Fuel Supply Agreement

(i) Supply of fuel

According to the New Fuel Supply Agreement, the Fuel Company will make available to Shakou JV 300,000 tonnes of fuel for the year ending 31st December, 2003. The scheduled quantity of fuel for each subsequent year will be agreed between Shakou JV and the Fuel Company before the end of the immediately preceding year. Shakou JV has no obligation to purchase the agreed quantity of fuel from the Fuel Company in any given year.

In each year during the term of the New Fuel Supply Agreement, the Fuel Company will use its best endeavours to supply fuel requested by Shakou JV in excess of the scheduled quantity. The Fuel Company may sell and deliver fuel to other parties provided that the Fuel Company’s ability to deliver the agreed quantity of fuel to Shakou JV plus any additional amount of fuel as may be required by Shakou JV from time to time pursuant to the New Fuel Supply Agreement will not be affected.

The above term of the New Fuel Supply Agreement enables Shakou JV to secure a stable source of supply of fuel while at the same time allows Shakou JV to maintain a flexible cost structure. Based on comparison between the

– 10 –

LETTER FROM SOMERLEY

scheduled demand and the actual demand in the period under the 1997 Fuel Supply Agreement, it is expected that the scheduled quantity of fuel for any given year would be sufficient to support the operation of Shakou JV in that year. If the actual consumption of fuel exceeds the agreed quantity from the Fuel Company in any given year, the Fuel Company will use its best endeavours to meet the additional demand from Shakou JV and will only supply to third parties if such supply would not affect the ability of the Fuel Company to meet the purchase orders from Shakou JV. On the other hand, Shakou JV has no obligation to purchase the fuel up to the agreed quantity from the Fuel Company in any given year. The Fuel Company is in close proximity to Shakou JV and it delivers the heavy oil and diesel oil to Shakou JV through pipelines. Shakou JV will only purchase fuel from the Fuel Company as and when required. Therefore the storage cost for the fuel supplied by the Fuel Company can be kept to the minimum. This term of supply of fuel, which is essential to the operation of Shakou JV, is particularly beneficial to Shakou JV since it enables Shakou JV to secure a stable supply of fuel without exposure to risk of compensation to the Fuel Company for any warranties on minimum purchase.

(ii) Pricing structure of fuel

Pursuant to the New Fuel Supply Agreement, the price payable by Shakou JV for the fuel delivered will be determined by Shakou JV and the Fuel Company from time to time, but in any event will not be higher than : (i) the then prevailing market price for sales of fuel by the Fuel Company to independent third parties; or (ii) the then quotation of price of the fuel that Shakou JV could obtain from other independent supplier(s), whichever is the lower. This term of the New Fuel Supply Agreement is in the interest of the Company as it allows Shakou JV to purchase the fuel from a reliable supplier at competitive price.

(C) Basis of the Cap

As it is not practical in terms of timing for the Company to fully comply with the Listing Rules requirements applicable to connected transactions (the “Relevant Listing Rules Requirements”) before each purchase by Shakou JV from the Fuel Company, the Company has applied for a waiver from strict compliance with the Relevant Listing Rules Requirements in respect of the Transactions.

The Waiver Application is subject to the terms and conditions as more particularly discussed in paragraph (D) below. One of the conditions is that the Waiver Application will cover future ongoing connected Transactions to the extent that the total value of such future ongoing connected Transactions in any one financial year shall be less than an amount equal to 80% of the Group’s cost of sales in that financial year. The cap amount being sought under the Waiver Application is the same as that for the waiver granted in respect of the 1997 Fuel Supply Agreement.

The value of the fuel purchased by Shakou JV from the Fuel Company as compared to the costs of sales of the Group for the year ended 31st December, 1999, 2000 and 2001 were approximately 69.57%, 69.81% and 69.95% respectively. The cap amount is determined with reference to the historical operation of Shakou JV. The price for the fuel purchase would continue to be affected by the international oil price fluctuation. The cap amount being sought would, in our view, provide a reasonable buffer to Shakou JV to cater for any international oil price fluctuation and possible fluctuations in other cost elements. We consider the provision of the cap amount to be in the interests of the Company.

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LETTER FROM SOMERLEY

(D) Conditions of the Waiver

As stated in the letter from the Board, in addition to the cap amount, the Waiver Application is subject to other conditions as follows:

• (i) The independent non-executive Directors will review the ongoing connected Transactions annually and confirm in the Company’s relevant annual report that such ongoing connected Transactions are:

• (a) in the ordinary and usual course of business of the Company;

• (b) the ongoing connected Transactions have been entered into on an arm’s length basis and on normal commercial terms (which expression will be applied by reference to transactions of a similar nature and to be made by similar entities within the PRC) or on terms no less favourable than terms available to or from independent third parties or (where there is no available comparison) on terms that are fair and reasonable so far as the shareholders of the Company are concerned;

• (c) entered into in accordance with the terms and conditions of the New Fuel Supply Agreement; and

• (d) the aggregate amount of the ongoing connected Transactions for each financial year of the Company has not exceeded the cap amount of 80% of the cost of sales of the Group in that financial year.

• (ii) The auditors of the Company will review the ongoing connected Transactions annually and confirm in a letter to the Directors (with a copy to the Stock Exchange) stating that such ongoing connected Transactions:

• (a) have received the approval of the Board;

• (b) have been entered into in accordance with the pricing policy as stated in the Company’s annual report;

• (c) have been entered into in accordance with the terms of the New Fuel Supply Agreement; and

• (d) the aggregate amount of the ongoing connected Transactions for each financial year of the Company has not exceeded the cap amount of 80% of the cost of sales of the Group in that financial year.

Where, for whatever reason, the auditors decline to accept the engagement or are unable to provide such confirmation, the Directors will contact the Stock Exchange immediately.

• (iii) Details of such ongoing connected Transactions in each financial year will be disclosed in the annual report of the Company in that financial year in accordance with Rule 14.25(1)(A) to (D) of the Listing Rules together with a statement of the opinion of the independent non-executive Directors and the auditors of the Company referred to in sub-paragraphs (i) and (ii) above.

• (iv) The Company has agreed to undertake to the Stock Exchange that, for so long as the shares of the Company are listed on the Stock Exchange, it will provide the auditors of the Company with full access to its relevant records for the purpose of the auditors’ review of the ongoing connected Transactions. The Fuel Company has undertaken to Shakou JV that, during the term of the New Fuel Supply Agreement, it will provide Shakou JV with full access to its relevant records in connection with the ongoing connected Transactions.

On this basis, we are of the view that the interests of the shareholders of the Company will be properly safeguarded.

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LETTER FROM SOMERLEY

OPINION

Having taken into account the above factors and reasons, we consider that the New Fuel Supply Agreement and the Waiver Application are fair and reasonable and the entering into of the ongoing connected Transactions in accordance with the terms and conditions of the New Fuel Supply Agreement and the Waiver Application is in the interests of the Company and the shareholders of the Company as a whole. Accordingly, we advise the Independent Board Committee to recommend the shareholders of the Company to vote in favour of the ordinary resolution to be proposed at the EGM to approve the New Fuel Supply Agreement and the Waiver Application.

Yours faithfully, For and on behalf of SOMERLEY LIMITED Mei H. Leung Managing Director

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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 INTEREST

As at the Latest Practicable Date, the interests of the Directors in the shares of the Company and its associated corporations (within the meaning of the SDI Ordinance) required to be disclosed pursuant to Section 28 of the SDI Ordinance (including interests which they are taken or deemed to have under Section 31 or Part I of the Schedule to the SDI Ordinance) or which are required to be entered in the register pursuant to Section 29 of the SDI Ordinance or which are required pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules (the “Model Code”) to be notified to the Company and the Stock Exchange were as follows:

• (a) Interests in the Company’s shares

	Number of ordinary shares held	Number of ordinary shares held
Name of Directors	Personal interests	Corporate interests
HE Haochang_(Note)_	–	6,117,079
CHAN Che Kan, Edward	205,034	–

Note: Held by Main Fortune International Limited which is 50% owned by Mr. HE Haochang.

(b) Interests in share options

Under the share option scheme of the Company, options may be granted to Directors and employees of the Company to subscribe for shares of the Company. The following Directors have personal interests in the share options to subscribe for shares in the Company:–

			Exercise	Number of share
Name of Directors	Date Granted	Exercisable Period	Price	options granted
			HK$
HE Haochang	30 July 2002	30 January 2003 to	0.35	4,200,000
		29 January 2008
CHAN Che Kan, Edward	30 July 2002	30 January 2003 to	0.35	3,900,000
		29 January 2008
SITU Min	30 July 2002	30 January 2003 to	0.35	3,800,000
		29 January 2008
TANG Jian	30 July 2002	30 January 2003 to	0.35	3,800,000
		29 January 2008
LAM Siu Hung**	19 August 2002	19 February 2003 to	0.35	828,000
		18 February 2008
CHAN Ting Chuen, David*	29 July 2002	29 January 2003 to	0.35	828,000
		28 January 2008
NG Pui Cheung, Joseph*	25 July 2002	25 January 2003 to	0.35	828,000
		24 January 2008

• Independent non-executive Director

• ** Non-executive Director

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GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, none of the Directors had any interests in the shares of the Company and its associated corporations (within the meaning of the SDI Ordinance) which are required to be disclosed pursuant to Section 28 of the SDI Ordinance (including interests which they are taken or deemed to have under Section 31 or Part I of the Schedule to the SDI Ordinance) or which are required to be entered in the register pursuant to Section 29 of the SDI Ordinance or which are required pursuant to the Model Code to be notified to the Company and the Stock Exchange.

3. EXPERT

The following are the qualifications of the expert who has given an opinion or advice contained in this circular:

Name Qualifications Somerley Limited registered investment adviser and exempt dealer under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

Somerley has given and has not withdrawn its written consent to the issue of this circular with inclusion of the texts of its letter and references to its name in the form and context in which they appear.

4. ADDITIONAL DISCLOSURE OF INTERESTS

• (a) As at the Latest Practicable Date, none of the Directors were materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which is significant to the business of the Group.

• (b) As at the Latest Practicable Date, none of the Directors had entered, or proposed to enter, into a service contract with any member of the Group which is not determinable by the relevant member of the Group within one year without payment of compensation, other than statutory compensation.

• (c) As at the Latest Practicable Date, Somerley had no shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

• (d) As at the Latest Practicable Date, none of the Directors or Somerley had any direct or indirect interest in any asset which had been acquired or disposed of by, or leased to, any member of the Group, or was proposed to be acquired or disposed of by, or leased to, any member of the Group, since 31 December 2001, the date to which the latest published audited financial statements of the Group were made up.

5. SUBSTANTIAL SHAREHOLDERS

• (a) As at the Latest Practicable Date, according to the register maintained by the Company pursuant to Section 16(1) of the SDI Ordinance, the Company had been notified of the following persons (other than a Director or chief executive of the Company) with interests representing 10% or more of the issued share capital of the Company:

Name	Number of shares held	Percentage
Hensil Investments Group Limited_(Note 1)_	315,000,000	38%
Foshan Development Company Limited_(Note 1)_	315,000,000	38%
YIP Siu Chun_(Note 2)_	290,196,037	35%
Oakwood Enterprise Limited_(Note 2)_	290,196,037	35%

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GENERAL INFORMATION

APPENDIX

Notes:

1. By virtue of its interests in Hensil Investments Group Limited, Foshan Development Company Limited is deemed to be interested in the 315,000,000 shares held by Hensil Investments Group Limited.

2. Oakwood Enterprise Limited has given notification in respect of its interest in 290,196,037 shares held by Madam YIP Siu Chun.

3. (b) So far as is known to the Directors, as at the latest Practicable Date, the persons (other than member of the Group) directly or indirectly interested in 10% or more of the voting power at general meetings of the member of the Group (other than the Company) were as follows:–

Name of subsidiary of the Company Name of substantial shareholder Percentage of equity interest

Shakou JV	Power Construction Corporation_(Note)_	20%
Shakou JV	Power Group Corporation_(Note)_	20%

Note: By virtue of its interest in Power Construction Corporation, Power Group Corporation is deemed to be interested in the 20% interests held by Power Construction Corporation.

Save as disclosed above, there was no other person known to the Directors who was directly or indirectly interested in 10% or more of the nominal value of the issued share capital carrying rights to vote in all circumstances at general meetings of any member of the Group as at the Latest Practicable Date.

6. MATERIAL ADVERSE CHANGE

So far as the Directors are aware, there is no material adverse change in the financial and trading position of the Company since 31 December 2001, the date to which the latest published audited financial statements of the Group were made up.

7. LITIGATION

Neither the Company nor any of its subsidiaries is engaged in any litigation or claim or arbitration of material importance and so far as the Directors are aware, no litigation or claim or arbitration of material importance is pending or threatened against the Company or any of its subsidiaries.

8. MISCELLANEOUS

• (a) The registered office and head office of the Company is situated at Rooms 2801-5, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong.

• (b) The secretary of the Company is CHEUNG Wing Yui, a practicing solicitor of Hong Kong.

• (c) The English language text of this circular shall prevail over the Chinese language text in case of inconsistency.

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GENERAL INFORMATION

APPENDIX

9. DOCUMENTS AVAILABLE FOR INSPECTION

The following documents will be available for inspection at the office of Messrs. Woo, Kwan, Kee & Lo at 27th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong during normal business hours on any weekday (public holidays excepted) from the date of this circular up to and including 31 December 2002:

• (a) memorandum and articles of association of the Company;

• (b) the New Fuel Supply Agreement;

• (c) letter from Somerley, the text of which is set out on pages 9 to 13 of this circular; and

• (d) consent letter from Somerley referred to in paragraph 3 of this appendix.

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NOTICE OF THE EXTRAORDINARY GENERAL MEETING

WING SHAN INTERNATIONAL LIMITED 榮山國際有限公司

(Incorporated in Hong Kong with limited liability)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Wing Shan International Limited (the “Company”) will be held at Rooms 2801-5, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong at 10:00 a.m. on 31December 2002 for the purpose of considering and, if thought fit, passing the following resolution which will be proposed as an ordinary resolution of the Company:–

ORDINARY RESOLUTION

“ THAT an agreement dated 30 November 2002 (the “New Fuel Supply Agreement”) made between (i) Foshan Shakou Power Plant Company Limited（佛山市沙口發電廠有限公司 ), a 80% indirectly owned subsidiary of the Company, as the purchaser and (ii) Foshan City District Electricity Fuel Supply Company (佛山市區電力燃料公司 ), as the supplier, a copy of which marked “A” has been produced to the meeting and signed by the Chairman of the meeting for the purpose of identification, and the application made by the Company to The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) for a waiver from strict compliance with disclosure and shareholders’ approval requirements as stipulated in Chapter 14 of the Rules Governing the Listing of Securities on the Stock Exchange in respect of the ongoing connected transactions contemplated thereby (the “Waiver Application”), be and are hereby confirmed, ratified and approved and THAT the directors of the Company be and are hereby authorised on behalf of the Company to sign, seal, execute, perfect, deliver and do all such documents, deeds, acts, matters and things as they may in their discretion, consider necessary or desirable or expedient for the purpose of or in connection with the New Fuel Supply Agreement and the Waiver Application.”

By order of the Board HE Haochang Chairman and Managing Director

Hong Kong, 14 December 2002

Registered Office:

Rooms 2801-5 China Insurance Group Building 141 Des Voeux Road Central Hong Kong

Notes:

• (1) Any member entitled to attend and vote at the meeting is entitled to appoint more than one proxy to attend and, on a poll, to vote instead of him. A proxy need not be a member of the Company.

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

• (3) A form of proxy for use at the meeting is enclosed.

• (4) To be valid, the form of proxy, together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such power or authority, must be deposited at the registered office of the Company, at Rooms 2801-5, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or adjourned meeting. Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting.

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