STAR SHINE HOLDINGS GROUP LIMITED - Proxy Solicitation & Information Statement 2003

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 licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in EC-Founder (Holdings) Company Limited , you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or 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 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.

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(Incorporated in Bermuda with limited liability)

DISCLOSEABLE AND CONNECTED TRANSACTIONS

Financial adviser to EC-Founder (Holdings) Company Limited

Ernst & Young Corporate Finance Limited

Independent financial adviser to the Independent Board Committee (as defined herein) of EC-Founder (Holdings) Company Limited

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A letter from the board of directors of EC-Founder (Holdings) Company Limited is set out on pages 4 to 11 of this circular. A letter from the Independent Board Committee (as defined herein) containing its advice to the Independent Shareholders (as defined herein) in relation to the Disposal Agreement (as defined herein) and the Termination Agreement (as defined herein) is set out on page 12 of this circular. A letter from Tai Fook Capital Limited containing its advice to the Independent Board Committee (as defined herein) in relation to the Disposal Agreement and the Termination Agreement is set out on pages 13 to 23 of this circular.

A notice convening the SGM (as defined herein) to be held on Thursday, 11 September, 2003 at 11:30 a.m. at Unit 1408, 14th Floor, Cable TV Tower, 9 Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong is set out on pages 42 to 43 of this circular. Whether or not you are able to attend the SGM, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible to the principal place of business of EC-Founder (Holdings) Company Limited at Unit 1408, 14th Floor, Cable TV Tower, 9 Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong and in any event not less than 48 hours before the time of the SGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM should you so wish.

25 August 2003

* For identification purpose only

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Letter from Tai Fook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Appendix I – Business valuation of the MIT Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Appendix II – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
Notice of Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42

DEFINITIONS

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

“Announcement”	the joint announcement of Founder and EC-Founder dated 1
	August 2003 in respect of the Disposal Agreement and the
	Termination Agreement
“associate(s)”	has the meaning as ascribed to it under the Listing Rules
“Board”	the board of Directors
“Completion”	completion of the Disposal Agreement in accordance with its
	terms and conditions
“connected person(s)”	has the meaning as ascribed to it under the Listing Rules
“Director(s)”	director(s) of EC-Founder
“Disposal”	the disposal of the entire equity interests of the EC-Founder
	Group in the MIT Group
“Disposal Agreement”	the conditional agreement made between EC-Founder, HGL
	and Mr. Yung Jr. dated 1 August 2003 in connection with,
	among other things, the Disposal
“EC-Founder”	EC-Founder (Holdings) Company Limited, a company
	incorporated in Bermuda with limited liability, the shares of
	which are listed on the main board of the Stock Exchange
“EC-Founder Group”	EC-Founder and its subsidiaries
“EC-Founder Share(s)”	ordinary share(s) of HK$0.10 each in the capital of EC-Founder
“Effective Date”	the date when the Termination Agreement becomes effective
“Existing Guarantees”	the guarantees provided by EC-Founder in favour of certain
	bankers of the MIT Group in relation to certain banking
	facilities granted to the MIT Group
“Facility A”	existing banking facilities to the maximum extent of HK$5
	million made available by a bank to MITC
“Founder”	Founder Holdings Limited, a company incorporated in Bermuda
	with limited liability, the shares of which are listed on the
	main board of the Stock Exchange

DEFINITIONS

“Guarantee A”	the existing guarantee provided by EC-Founder in respect of
	Facility A
“HGL”	Honour Glory Limited, a company incorporated in Hong Kong
	with limited liability, which is owned as to 90% by Mr. Yung
	Jr.
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Independent Board Committee”	the independent board committee, comprising Mr. Yang Lin,
	Richard and Mr. Lee Ying Biu, Andrew (both are independent
	non-executive Directors), which has been established for the
	purpose of advising the Independent Shareholders in respect
	of the Disposal Agreement, the Termination Agreement and
	the transactions contemplated thereunder (including the possible
	continuing provision of Guarantee A)
“Independent Shareholders”	the Shareholders other than Mr. Yung, Mr. Yung Jr. and their
	respective associates
“Latest Practicable Date”	21 August 2003, 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
“Management Agreement”	the management agreement entered into between EC-Founder
	and Ricwinco dated 17 May 2000 relating to, among other
	matters, the appointment of Ricwinco to manage the business
	of the MIT Group
“MIT”	MIT Holdings Limited, a company incorporated in the British
	Virgin Islands with limited liability
“MIT Group”	MIT and its subsidiaries
“MITC”	Management Investment & Technology Company Limited, a
	company incorporated in Hong Kong, the entire issued ordinary
	share capital of which is owned by MIT
“Mr. Yung”	Mr. Yung Chih Shin, Richard, a Director and the beneficial
	owner of Ricwinco

DEFINITIONS

“Mr. Yung Jr.” Mr. Yung Richard, Jr., a Director, who owns a 90% interest in HGL “Ricwinco” Ricwinco Investment Limited, a company incorporated in Hong Kong with limited liability and wholly and beneficially owned by Mr. Yung “SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong (as amended from time to time)) “SGM” the special general meeting of EC-Founder, to be held on Thursday, 11 September 2003 at 11:30 a.m. at Unit 1408, 14th Floor, Cable TV Tower, 9 Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong, for the approval of the Disposal Agreement, the Termination Agreement and the transactions contemplated thereunder (including the possible continuing provision of Guarantee A)

“Shareholder(s)” the shareholder(s) of EC-Founder “Stock Exchange” The Stock Exchange of Hong Kong Limited “Tai Fook” Tai Fook Capital Limited, a licensed corporation under the transitional arrangement to carry on Type 6 (advising on corporate finance) regulated activity for the purposes of the SFO, who has been appointed as the independent financial adviser to advise the Independent Board Committee with respect to the Disposal Agreement, the Termination Agreement and the transactions contemplated thereunder (including the possible continuing provision of Guarantee A)

“Termination Agreement” the deed made between EC-Founder and Ricwinco dated 1 August 2003 in connection with the termination of the Management Agreement which will become effective upon Completion “US$” United States dollars, the lawful currency of the United States of America

Unless otherwise specified in this circular, US$1.00 = HK$7.8. No representation is made that any amounts in US$ or HK$ could have been or could be converted at such a rate or at any other rates or at all.

LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability)

Executive Directors:

Mr. Zhang Zhao Dong (Chairman) Mr. Cheung Shuen Lung Professor Wei Xin Professor Zou Wei Mr. Yung Richard, Jr.

Registered Office: Cedar House 41 Cedar Avenue Hamilton HM12 Bermuda

Principal place of

Non-executive Director: business in Hong Kong: Mr. Yung Chih Shin, Richard (Honorary Chairman) Unit 1408, 14th Floor Cable TV Tower Independent non-executive Directors: 9 Hoi Shing Road Mr. Yang Lin, Richard Tsuen Wan Mr. Lee Ying Biu, Andrew New Territories Hong Kong

25 August 2003

To Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTIONS

INTRODUCTION

As set out in the Announcement, EC-Founder entered into the Disposal Agreement with HGL and Mr. Yung Jr. on 1 August 2003. Pursuant to the Disposal Agreement, EC-Founder has conditionally agreed to sell and HGL has conditionally agreed to purchase the entire issued share capital of MIT for a total consideration of HK$45.5 million. As part of the Disposal, EC-Founder also entered into the Termination Agreement with Ricwinco on 1 August 2003. Pursuant to the Termination Agreement, the Management Agreement will be terminated upon Completion.

Mr. Yung Jr. is a Director, and thus a connected person of EC-Founder. HGL is owned as to 90% by Mr. Yung Jr. and therefore an associate of Mr. Yung Jr.. Accordingly, the transactions contemplated under the Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) constitute connected transactions for EC-Founder under the Listing Rules. Approval from the Independent Shareholders is required.

* For identification purpose only

LETTER FROM THE BOARD

Ricwinco is wholly-owned by Mr. Yung, a Director and a connected person of EC-Founder, and therefore an associate of Mr. Yung. Accordingly, the Termination Agreement constitutes a connected transaction for EC-Founder and approval from the Independent Shareholders is required.

The purpose of this circular is to provide you with information on the Disposal Agreement, the Termination Agreement and the transactions contemplated thereunder (including the possible continuing provision of Guarantee A) and seek your approval of the resolution set out in the notice of the SGM on pages 42 to 43 of this circular. The recommendation of the Independent Board Committee to the Independent Shareholders in respect of the Disposal Agreement, the Termination Agreement and the transactions contemplated thereunder (including the possible continuing provision of Guarantee A) is set out on page 12 of this circular. A copy of the letter from Tai Fook to the Independent Board Committee containing its advice in relation to the Disposal Agreement, the Termination Agreement and the transactions contemplated thereunder (including the possible continuing provision of Guarantee A) is set out on pages 13 to 23 of this circular.

THE DISPOSAL AGREEMENT

Date

1 August 2003

Parties

Vendor: EC-Founder Purchaser: HGL, a company owned as to 90% by Mr. Yung Jr., a Director Guarantor: Mr. Yung Jr.

Mr. Yung Jr. as a director of Ricwinco is responsible for the management of the MIT Group and is a director of MITC, the principal operating company of the MIT Group. He has agreed to, among other things, (i) unconditionally and irrevocably guarantee to EC-Founder the due and punctual performance by HGL of all its obligations, commitments, undertakings, warranties and covenants under the Disposal Agreement and (ii) indemnify EC-Founder against all losses which EC-Founder may suffer through or arising from any breach by HGL of such obligations, commitments, undertakings, warranties or covenants.

Assets to be sold

HGL has conditionally agreed to purchase and EC-Founder has conditionally agreed to sell the entire issued share capital of MIT, being the holding company of the MIT Group.

LETTER FROM THE BOARD

The MIT Group is principally engaged in the design, manufacture and sale of electronic products, principally electronic weighing scales. The table below sets out the audited turnover, profit/(loss) before and after tax and minority interests of each of the EC-Founder Group and the MIT Group for each of the two years ended 31 December 2001 and 2002:

Turnover Profit/(loss) before taxand minority interests Profit/(loss) after taxand minority interests	2002 The The EC-Founder MIT Group Group HK$’000 HK$’000 311,933 192,825 (84,271) 4,076 (85,430) 4,076	2001
		The The EC-Founder MIT Group Group HK$’000 HK$’000 331,455 169,762 (69,279) 4,064 # (69,041) 4,064 #

# before deducting a management fee of approximately HK$4.1 million paid by the MIT Group to ECFounder (no management fee was charged by EC-Founder to the MIT Group for the year ended 31 December 2002)

Consideration of the Disposal

The total consideration of the Disposal is HK$45.5 million which shall be payable by HGL to ECFounder (or as it may direct) in full upon Completion of which (i) an amount equal to the balance of the current account between EC-Founder and MITC, under which EC-Founder is indebted to the latter, (amounting to approximately HK$2 million as at the Latest Practicable Date) outstanding at the date of Completion will be paid to MITC in cash to settle such current account in full and (ii) the remaining balance of the consideration (of approximately HK$43.5 million assuming no change to the current balance of the current account) shall be paid to EC-Founder (or as it may direct) in cash.

The consideration was determined after arm’s length negotiations between the parties, in particular, with reference to the historical track record of the MIT Group and an independent business valuation of the MIT Group as at 31 May 2003 of approximately HK$44 million. The business valuation of the MIT Group was carried out by LCH (Asia-Pacific) Surveyors Limited, who has previous experience in valuing electronic consumer products manufacturers and is not connected with EC-Founder, the directors, chief executive or substantial shareholders of EC-Founder, its subsidiaries or their respective associates. The consideration of the Disposal represents (i) approximately 11.2 times the net profit of the MIT Group for the year ended 31 December 2002 and (ii) a premium of approximately 3.4% over the independent business valuation of the MIT Group. The Directors consider that the terms of the Disposal Agreement, including the consideration of the Disposal, are fair and reasonable.

As at 31 December 2002, the audited net asset value of the MIT Group was approximately HK$71.8 million. The consideration of the Disposal represents a discount of approximately 36.6% to the audited net asset value of the MIT Group as at 31 December 2002.

LETTER FROM THE BOARD

Existing Guarantees

EC-Founder currently provides the Existing Guarantees in favour of certain bankers of the MIT Group in relation to the banking facilities granted by such bankers to the MIT Group. As at 31 December 2002, the amount of contingent liabilities of EC-Founder in respect of the Existing Guarantees amounted to approximately HK$35 million.

As part of the terms of the Disposal Agreement, HGL has to use its best endeavours to procure that arrangements, to the reasonable satisfaction of EC-Founder, will be made with the relevant bankers of the MIT Group with a view to discharging EC-Founder from its obligations and liabilities under the Existing Guarantees (except for Guarantee A) in full upon Completion.

As at the Latest Practicable Date, a total amount of approximately US$362,000 (equivalent to approximately HK$2.8 million) of Facility A was utilized by MITC. EC-Founder has requested HGL and HGL has agreed to use its best endeavours to procure that, with effect on or before the date of Completion, the liabilities of MITC under Facility A shall have been reduced to zero and Facility A shall have been cancelled. If HGL fails to procure the reduction of the liabilities of MITC under Facility A to zero and the cancellation of Facility A on or before Completion, HGL is required to procure that the outstanding utilized amount of Facility A shall not exceed HK$5 million as at the date of Completion and MITC should not further utilize Facility A following Completion.

HGL has agreed to indemnify and keep indemnified EC-Founder, notwithstanding Completion, from and against any losses or liabilities suffered by EC-Founder as a result of or in connection with Guarantee A and shall further use its best endeavours to procure that (i) all of the outstanding utilized amount of Facility A shall have expired, lapsed or released by not later than 6 months from the date of Completion and (ii) EC-Founder’s obligations and liabilities under Guarantee A be fully released by not later than 6 months from the date of Completion or, if later, from the date on which all of outstanding utilized amount of Facility A as at the date of Completion shall have expired, lapsed or released.

In addition, HGL has agreed to procure that at Completion, cash collateral and/or securities listed on the Stock Exchange and reasonably acceptable to EC-Founder in an aggregate amount not less than the utilized amount of Facility A outstanding as at the date of Completion shall be deposited with an escrow agent. If EC-Founder suffers any losses or liabilities as a result of or in connection with Guarantee A and HGL and Mr. Yung Jr. fail to honour their respective indemnity and guarantee under the Disposal Agreement, EC-Founder shall have the rights to request the escrow agent to pay EC-Founder any cash collateral and/or to dispose of any securities collateral held by it and pay EC-Founder such cash proceeds in an aggregate amount sufficient to make good the losses or liabilities suffered by EC-Founder under Guarantee A.

Conditions

Completion is conditional upon the following conditions being fulfilled:

approvals being obtained from the respective independent shareholders of Founder and EC-Founder for the Disposal Agreement, the Termination Agreement and the transactions contemplated thereunder (including the possible continuing provision of Guarantee A); and
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LETTER FROM THE BOARD

arrangements being effected as are necessary for the release of EC-Founder’s liabilities and obligations under each of the Existing Guarantees (except for Guarantee A) upon or before Completion to the reasonable satisfaction of EC-Founder.

Completion shall take place within 10 business days after HGL has been notified by EC-Founder the fulfillment of condition 1 above (or such later day as the parties to the Disposal Agreement may agree, provided it is not later than 30 September 2003).

THE TERMINATION AGREEMENT

Background information on the Management Agreement

The Board refers to the joint announcement of Founder and EC-Founder dated 24 May 2000. ECFounder entered into the Management Agreement on 17 May 2000 with Ricwinco, a company whollyowned by Mr. Yung, the father of Mr. Yung Jr., pursuant to which Ricwinco was appointed as manager of certain businesses of the EC-Founder Group including that of the MIT Group for a period of three years commencing on 1 October 2000. Under the Management Agreement, Ricwinco has also guaranteed and undertaken, among other things, that for the period from 1 January 2003 to the date of expiry of the Management Agreement on 30 September 2003, the net profit after tax and minority interests of the MIT Group should not be less than approximately HK$3 million.

Terms of the Termination Agreement

As part of the Disposal Agreement, EC-Founder entered into the Termination Agreement with Ricwinco on 1 August 2003.

Pursuant to the Termination Agreement, conditional upon Completion, the Management Agreement shall be terminated with effect from the date of Completion and each of EC-Founder and Ricwinco shall thereupon be deemed to have unconditionally and irrevocably waived, released and discharged each other from any continuing or outstanding obligations whatsoever in respect of the Management Agreement (including any liabilities of Ricwinco in respect of any profit guarantee provided under the Management Agreement) and to have unconditionally and irrevocably waived and released any accrued rights it may have arising out of any antecedent breach or breaches by any other party of its obligations thereunder.

Despite the termination of the Management Agreement, pursuant to the Termination Agreement, Ricwinco has agreed to undertake to indemnify EC-Founder against all losses, costs, expenses, damages and liabilities which EC-Founder and/or any company which, following the Effective Date, will be its subsidiary may incur whether before or after the Effective Date arising in connection with any event taken place prior to the Effective Date and which is directly or indirectly attributable to the business of the MIT Group, and which has arisen out of or in connection with any breach or default of Ricwinco under the terms of the Management Agreement or any gross negligence or misconduct on its part, whilst under the management of Ricwinco pursuant to the Management Agreement, provided that such indemnity of Ricwinco shall not apply to any claim made by EC-Founder when (i) such claim is made after 6 months from the Effective Date or (ii) the losses, costs, expenses, damages and liabilities incurred by EC-Founder and/or its relevant subsidiary have arisen as a result of fraud or gross negligence of EC-

LETTER FROM THE BOARD

Founder or any omission of EC-Founder under the Management Agreement or (iii) any losses, costs, expenses, damages and liabilities incurred by EC-Founder and/or its relevant subsidiaries have arisen as a result of any act, conduct and/or omission by any parties beyond the control or duties of Ricwinco under the Management Agreement.

REASONS FOR AND BENEFITS OF THE DISPOSAL

The EC-Founder Group is principally engaged in (i) the provision of software solutions and services; (ii) the distribution of information products (a business which was acquired by EC-Founder earlier this year); and (iii) the design, manufacture and sale of electronic products (which is carried out by the MIT Group).

Since 2000, the EC-Founder Group has been focusing on the development of information technology related businesses. Earlier this year, EC-Founder acquired an information product distribution business, which is complementary to the development of the business of the provision of software solutions and services of the EC-Founder Group. After such acquisition, more internal resources of the EC-Founder Group are expected to be devoted to the development of the EC-Founder’s core information technology related businesses. Whilst the MIT Group generated certain profits for each of the years ended 31 December 2001 and 2002, the development of its business is relatively capital and working capital intensive. To support the business of the MIT Group, EC-Founder has provided the Existing Guarantees, under which it was exposed to total contingent liabilities of approximately HK$35 million as at 31 December 2002.

Keen competition in the electronic product market has eroded the profitability of the MIT Group. The average net profit margin of the MIT Group decreased from approximately 2.4% for the year ended 31 December 2001 to approximately 2.1% for the year ended 31 December 2002. The management services and profit guarantee provided by Ricwinco in relation to the MIT Group under the Management Agreement will expire on 30 September 2003. After the expiry of the Management Agreement, ECFounder will have to manage the operations of the MIT Group itself or appoint another manager to manage the MIT Group and will cease to enjoy the guaranteed return provided by Ricwinco under the Management Agreement. As it is the business strategy of the EC-Founder Group to focus on the development of its information technology related businesses, the Directors believe that the management of the business of the MIT Group by themselves or appointing another manager to manage the MIT Group after expiry of the Management Agreement will inevitably divert some of the EC-Founder Group’s management and financial resources from the core business development areas to non-core areas which may not be in the interest of the EC-Founder Group.

EC-Founder intends to use the net proceeds from the Disposal (estimated to be approximately HK$42.5 million) as general working capital of the EC-Founder Group. The net proceeds from the Disposal will enhance the working capital position of the EC-Founder Group. Following Completion, the EC-Founder Group will have a clearly focused line of business relating to information technology, including the provision of software solutions and services and the distribution of information products, and therefore be able to deploy all its resources, including human and financial resources, in this field of business. For the year ended 31 December 2002, the provision of software solutions and services business

LETTER FROM THE BOARD

recorded a total turnover of approximately HK$70.8 million and the information product distribution business recorded a total turnover of approximately HK$514.6 million. As the information product distribution business was acquired by EC-Founder earlier this year, the results of such business were not reflected in the audited financial statements of the EC-Founder Group for the year ended 31 December 2002. Shareholders are advised to refer to the section headed “Financial effects of the Disposal” set out in the letter from Tai Fook for further analyses of the various financial effects of the Disposal on the ECFounder Group.

In view of the above reasons, in particular, the worsening business environment of the MIT Group, the impending expiry of the Management Agreement and the corresponding profit guarantee, the expected benefits which may be brought about by the Disposal (including more efficient allocation of resources, enhancement of working capital position of the EC-Founder Group and the release of the obligations and liabilities of EC-Founder under the Existing Guarantees), the Directors (with the abstention of Mr. Yung and Mr. Yung Jr.) believe that the Disposal (including the termination of the Management Agreement as part of the Disposal Agreement) is in the interests of the EC-Founder Group and the Shareholders as a whole.

SGM

Set out on pages 42 to 43 of this circular is a notice convening the SGM to be held on 11 September 2003 at 11:30 a.m. at Unit 1408, 14th Floor, Cable TV Tower, 9 Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong for the purpose of considering, and if thought fit, approving the ordinary resolution regarding the Disposal Agreement, the Termination Agreement and the transactions contemplated thereunder (including the possible continuing provision of Guarantee A) by the Independent Shareholders.

Ricwinco owns approximately 7.97% of the issued share capital of EC-Founder and is a party to the Termination Agreement. Accordingly, Mr. Yung, Mr. Yung Jr. and their respective associates, including Ricwinco, will abstain from voting at the SGM.

RECOMMENDATION

After taken into consideration the factors stated above in this letter, the Directors consider that the terms and conditions of the Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) and the Termination Agreement are fair and reasonable so far as the Shareholders are concerned and are in the interests of the EC-Founder Group and the Shareholders taken as a whole.

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising Mr. Yang Lin, Richard and Mr. Lee Ying Biu, Andrew, who are independent non-executive Directors, have been established to advise the Independent Shareholders in respect of the Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) and the Termination Agreement. Having taken into consideration the advice from Tai Fook, the Independent Board Committee is of the view that the terms and conditions of the Disposal Agreement (including the Disposal and the possible continuing provisions of Guarantee A) and the Termination Agreement are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the EC-Founder Group and the Independent 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 for approving the Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) and the Termination Agreement.

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LETTER FROM THE BOARD

FURTHER INFORMATION

Your attention is drawn to the letter from the Independent Board Committee, the letter from Tai Fook, the notice of SGM and the additional information set out in the appendices to this circular.

Yours faithfully, For and on behalf of the Board

Zhang Zhao Dong Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Incorporated in Bermuda with limited liability)

25 August 2003

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTIONS

We refer to the circular of EC-Founder dated 25 August 2003 (the “Circular”), of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to advise you as to whether, in our opinion, the respective terms and conditions of the Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) and the Termination Agreement, details of which are contained in the text of the letter from the Board as set out in the Circular, are fair and reasonable so far as the interests of the Independent Shareholders are concerned. Tai Fook has been appointed as the independent financial adviser to advise us in this regard.

Having taken into consideration the advice from Tai Fook and in particular the principal factors and reasons set out in the letter from Tai Fook as set out on pages 13 to 23 of the Circular, we are of the view that the terms and conditions of the Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) and the Termination Agreement are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the EC-Founder Group and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution relating to the Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) and the Termination Agreement to be proposed at the SGM.

We also draw the attention of the Independent Shareholders to (i) the letter from the Board, (ii) the letter from Tai Fook, and (iii) the appendices to the Circular.

Yours faithfully,

Yang Lin, Richard Lee Ying Biu, Andrew

Independent Board Committee

* For identification purpose only

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LETTER FROM TAI FOOK

The following is the text of a letter received from Tai Fook in respect of the Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) and the Termination Agreement, prepared for the purpose of incorporation in this circular:

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25th Floor, New World Tower 16-18 Queen’s Road Central Hong Kong

25 August 2003

To the Independent Board Committee

EC-Founder (Holdings) Company Limited Unit 1408, 14th Floor Cable TV Tower 9 Hoi Shing Road Tsuen Wan New Territories Hong Kong

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTIONS

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee in relation to the Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) and the Termination Agreement, details of which are contained in the circular dated 25 August 2003 (the “Circular”) issued by EC-Founder to the Shareholders of which this letter forms part. Terms used in this letter shall have the same respective meanings as defined in the Circular unless the context otherwise requires.

The Disposal Agreement constitutes a discloseable transaction for EC-Founder under the Listing Rules. Mr. Yung Jr. is a Director, and thus a connected person of EC-Founder. HGL is owned as to 90% by Mr. Yung Jr. and therefore an associate of Mr. Yung Jr.. Accordingly, the transactions contemplated under the Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) constitute connected transactions for EC-Founder under the Listing Rules. Approval from the Independent Shareholders is required.

Ricwinco is wholly-owned by Mr. Yung, a Director and a connected person of EC-Founder and therefore an associate of Mr. Yung. Accordingly, the Termination Agreement constitutes a connected transaction for EC-Founder under the Listing Rules. Ricwinco owns approximately 7.97% of the issued share capital of EC-Founder and is a party to the Termination Agreement. Accordingly, Mr. Yung, Mr. Yung Jr. and their respective associates, including Ricwinco, will abstain from voting at the SGM in respect of the resolution for approving the Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) and the Termination Agreement.

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LETTER FROM TAI FOOK

In formulating our opinion, we have relied on the information and facts supplied to us by the management and directors of EC-Founder and have assumed that all such information and facts and any representations made to us are true, accurate and complete as at the date hereof. We have also assumed that all information, representations and opinions contained or referred to in the Circular are fair and reasonable and have relied on them. We have sought and received confirmation from the management and directors of EC-Founder that all relevant information has been supplied to us and that no material facts have been omitted and we are not aware of any facts or circumstances which would render the information provided and the representations made to us untrue, inaccurate or misleading.

We consider we have reviewed sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted an independent verification of the information nor have we conducted any form of in-depth investigation into the businesses and affairs of Founder, EC-Founder or any of its subsidiaries and associates.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the terms and conditions of the Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) and the Termination Agreement, we have considered the following principal factors and reasons:

1. The Disposal

1.1 Background of and reasons for the Disposal

The EC-Founder Group is principally engaged in (i) the provision of software solutions and services; (ii) the distribution of information products (the “IT Distribution Business”) (together, the “IT Businesses”); and (iii) the design, manufacture and sale of electronic products (the “Electronic Business”).

Business strategy of the EC-Founder Group

As set out in the letter from the Board in the Circular, since 2000, the EC-Founder Group has been focusing on the development of the IT Businesses. This business strategy was reaffirmed in the annual report of EC-Founder for the year ended 31 December 2002 which stated that the EC-Founder Group will continue to focus and utilise its resources to further develop the core IT Businesses. Moreover, the IT Businesses have become an increasingly important revenue contributor to the EC-Founder Group.

In early July 2003, EC-Founder completed the acquisition (the “Acquisition”) of the IT Distribution Business, which is complementary to the development of the provision of software solutions and services business of the EC-Founder Group. As set out in the circular of EC-Founder dated 30 April 2003, the IT Distribution Business was ranked 11th out of the top 100 enterprises in terms of total revenue of its distribution business in the PRC and the Directors are of the view that, leveraging on the synergies derived from the Acquisition and cope with the existing software solutions and services, the EC-Founder Group is well

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positioned to capture the considerable development potential in the information technology industry in the PRC.

In addition, the Directors have confirmed that more internal resources of the ECFounder Group will be devoted to the development of the core IT Businesses after the Acquisition.

Prospects of the MIT Group

The Electronic Business is carried out by the MIT Group. For each of the two years ended 31 December 2002, as set out in the letter from the Board in the Circular, the MIT Group generated net profit of approximately HK$4.1 million (before deducting a management fee of approximately HK$4.1 million paid by the MIT Group to EC-Founder) and approximately HK$4.1 million respectively.

Although the MIT Group has been making profits during the past two years, keen competition in the electronic product market has eroded the profitability of the MIT Group. During the corresponding period, the net profit margin of the MIT Group has decreased from approximately 2.4% to approximately 2.1%. To support the business of the MIT Group, EC-Founder has provided the Existing Guarantees, under which it was exposed to total contingent liabilities of approximately HK$35 million as at 31 December 2002. Given the fact that the development of the Electronic Business used to be relatively capital and working capital intensive and the electronic product market will remain competitive in the near future which exerts substantial price pressure on the Electronic Business, the Directors consider that the development potential of the MIT Group is and will continue to be limited. Therefore, the EC-Founder Group may not be justified to allocate further resources to this non-core business.

Release of Existing Guarantees

As stated above, the development of the business of the MIT Group is relatively capital and working capital intensive. As part of the Disposal Agreement, the Disposal would enable EC-Founder to be released from the Existing Guarantees (except for Guarantee A which will be released not later than six months after Completion) in full upon Completion. As advised by the Directors, with the release of the Existing Guarantees, EC-Founder can allocate the additional financial resources to support the core IT Businesses.

Expiry of the Management Agreement

The management services and profit guarantee provided by Ricwinco in relation to the MIT Group under the Management Agreement will expire imminently on 30 September 2003. Pursuant to the Management Agreement, Ricwinco has guaranteed and undertaken, among other things, that for the period from 1 January 2003 to the date of expiry of the Management Agreement on 30 September 2003, the net profit after tax and minority interests of the MIT Group should not be less than approximately HK$3 million. After the expiry of

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the Management Agreement, EC-Founder will have to manage the operations of the MIT Group itself or appoint another manager to manage the MIT Group and will cease to enjoy the guaranteed return provided by Ricwinco under the Management Agreement. As it is the business strategy of the EC-Founder Group to focus on the development of the IT Businesses, the Directors believe that the management of the business of the MIT Group by themselves or appointing another manager to manage the MIT Group after expiry of the Management Agreement will inevitably divert the management and financial resources from the core business development areas to non-core areas which may not be in the interest of the ECFounder Group. Therefore, it would be in the best interest of the EC-Founder Group to dispose of the MIT Group prior to the expiry of the Management Agreement.

Proceeds from the Disposal

As set out in the letter from the Board in the Circular, EC-Founder intends to use the net proceeds from the Disposal (estimated to be approximately HK$42.5 million) as general working capital of the EC-Founder Group. The net proceeds from the Disposal will enhance the working capital position of the EC-Founder Group. As advised by the Directors, after Completion, the EC-Founder Group will have a clearly focused line of business relating to information technology and therefore be able to deploy all its resources, including human and financial resources in the IT Businesses.

Conclusion

In view of the following: 1) it has been the strategy of the EC-Founder Group to focus on the IT Businesses; 2) the limited development potential of the MIT Group; 3) the release of the Existing Guarantees (except for Guarantee A which will be released not later than six months after Completion) in full upon Completion; 4) the impending expiry of the Management Agreement and the corresponding profit guarantee; and 5) the availability of funds from the Disposal for the development of EC-Founder’s focused line of business, the Directors and we are of the view that the Disposal represents a good opportunity for the ECFounder Group to divest of the Electronic Business and is in line with the business strategy of the EC-Founder Group.

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1.2 Basis of consideration

The total consideration (the “Consideration”) of the Disposal is HK$45.5 million. The Consideration was determined after arm’s length negotiations between HGL and EC-Founder, in particular, with reference to the historical track record of the MIT Group and an independent business valuation of the MIT Group as at 31 May 2003 of approximately HK$44.0 million. As at 31 December 2002, the audited net asset value of the MIT Group was approximately HK$71.8 million. The Consideration represents 1) a price-to-earnings ratio of approximately 11.2 times of the MIT Group for the year ended 31 December 2002; 2) a premium of approximately 3.4% over the independent business valuation of the MIT Group as at 31 May 2003; and 3) a discount of approximately 36.6% to the audited net asset value of the MIT Group as at 31 December 2002 or a price-to-book ratio of approximately 0.63 time of the MIT Group as at 31 December 2002.

Ratios comparison

The MIT Group is principally engaged in the design, manufacture and distribution of electronic products, particularly electronic weighing scales. As there is no company listed on the Stock Exchange principally engaged in the production of electronic weighing scales, a direct ratios comparison with the business of the MIT Group is not possible. However, we have in turn selected six companies listed on the main board of the Stock Exchange which are principally engaged in the manufacturing of consumer electronic products and have recorded net profits in their latest audited financial statements as the comparable companies (the “Comparable Companies”). We consider the price-to-earnings ratios and price-to-book ratios of the Comparable Companies relevant for the purposes of ascertaining and indicating whether the Consideration is generally in line with the market.

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We set out below the price-to-earnings ratios and price-to-book ratios of the Comparable Companies:

			Closing
Name of		Date of latest	price as at	Price/	Price/
Comparable	Description of principal	financial	the Latest	earnings	book
Companies	business	statements	Practicable Date	ratio	ratio
			HK$
Skyworth Digital	Designs, manufactures and	31 March 2003	1.10	10.8	1.00
Holdings	sells color televisions and
Limited	audio visual products
Orient Power	Develops, manufactures and	31 December 2002	0.92	7.4	0.72
Holdings	markets audio, in-car
Limited	electronic and digital video
	disc products
Tonic Industries	Designs, manufactures and	31 March 2003	0.57	8.3	0.89
Holdings	markets consumer audio,
Limited	video products and home
	appliance products
Daiwa Associate	Designs, develops,	31 March 2003	0.57	7.3	0.33
Holdings	manufactures and distributes
Limited	electronic components and
	consumer electronics
Allan	Designs, manufactures and	31 March 2003	1.39	8.1	1.09
International	sells household electrical
Holdings	appliances and personal care
Limited	products
Sunway	Designs, develops,	30 September 2002	0.39	13.0	0.46
International	manufactures and sells
Holdings	electronic and related
Limited	components and parts and
	consumer electronic products
Average				9.1	0.75
The MIT Group				11.2	0.63
Source: Bloomberg

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We note that the products manufactured and sold by the Comparable Companies may not be exactly identical to those of the MIT Group, but all of the Comparable Companies are principally engaged in the manufacture and sale of consumer electronic products and we consider the Comparable Companies relevant and would reflect the market’s collective valuation for the similar nature of business engaged by the MIT Group.

As illustrated in the table above, the average price-to-earnings ratio and the average price-to-book ratio of the Comparable Companies are approximately 9.1 times and 0.75 time respectively. Accordingly, since 1) the price-to-earnings ratio and the price-to-book ratio (11.2 times and 0.63 time respectively) of the MIT Group are within the range of those of the Comparable Companies; 2) the price-to-earnings ratio of the MIT Group represents a premium of approximately 23.1% to the average price-to-earnings ratio of the Comparable Companies which is favourable to the EC-Founder Group; and 3) although the price-to-book ratio of the MIT Group represents a discount of approximately 16.0% to the average priceto-book ratio of the Comparable Companies, whereas five out of the six Comparable Companies are traded at prices lower than or equal to their respective book value with an average price-to-book ratio of approximately 0.68 time, which is in line with the price-tobook ratio of the MIT Group, we consider the Consideration fair and reasonable.

Independent business valuation

The independent business valuation of the MIT Group as at 31 May 2003 was carried out by LCH (Asia-Pacific) Surveyors Limited (“LCH”). We have reviewed and discussed with LCH as to the methodology and the bases and assumptions adopted in arriving at the valuation of the fair market value of the MIT Group. We noted that in the process of valuation, LCH has chosen the asset-based approach in determining the business enterprise value of the MIT Group with the market approach to evaluate whether such value was sustainable from an adversary perspective. The reasons for choosing the asset-based approach are set out in Appendix I to the Circular. We were also advised by LCH that it has taken into consideration all pertinent factors affecting the operation of the business of the MIT Group with the particular usage of its existing assets, details of which are set out in the paragraph headed “The basis of valuation” in Appendix I to the Circular. As set out in Appendix I to the Circular, the valuation was carried out on basis of fair market value in continued use and as a going-concern business through the application of the asset accumulation method.

Having considered the above, we are of the view that the above methodology used in obtaining the value of the MIT Group is appropriate and the principal bases and assumptions used in arriving at the fair market value of the MIT Group have been made with due care and objectivity. As such, we are of the view that the basis of the valuation, the approach to value and the valuation methodology adopted by LCH for determining the fair market value of the MIT Group are fair and reasonable.

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Conclusion

Taking into consideration 1) the price-to-earnings ratio of the MIT Group represents a premium of approximately 23.1% to the average price-to-earnings ratio of the Comparable Companies; 2) the Consideration represents a premium of about 3.4% over the independent business valuation of the MIT Group; and 3) the release of the Existing Guarantees (except for Guarantee A which will be released not later than six months after Completion) in full upon Completion, despite the Consideration represents a discount of approximately 16.0% to the average price-to-book ratio of the Comparable Companies, we are of the view that the Consideration is fair and reasonable so far as the Independent Shareholders as a whole are concerned.

1.3 Financial effects of the Disposal

Net asset value

According to the circular of EC-Founder dated 30 April 2003, the unaudited adjusted net tangible asset value per EC-Founder Share was approximately HK$0.180. Assuming the Disposal had been completed and the Consideration had been paid in full, based on 1,100,562,040 EC-Founder Shares in issue, the unaudited adjusted net tangible asset value per EC-Founder Share would decrease by 13.3% to approximately HK$0.156. The decline in the unaudited adjusted net tangible asset value per EC-Founder Share after Completion is due to the discount of the Consideration to the audited net asset value of the MIT Group as at 31 December 2002. As mentioned in the section headed “Background of and reasons for the Disposal” above, the Directors consider that since the prospect of the MIT Group is limited and the profit guarantee provided by Ricwinco will expire imminently on 30 September 2003, the substantial amount of the net proceeds arising from the Disposal will enable EC-Founder to devote further resources to focus on the development of the IT Businesses which are of considerable potential. As such, we are of the view that the decline in the unaudited adjusted net tangible asset value per EC-Founder Share is fair and reasonable.

Earnings

For the year ended 31 December 2002, the MIT Group recorded audited profit of approximately HK$4.1 million. Assuming the Disposal and the Acquisition had been taken place on 1 January 2002 and having not taking into account the accounting loss that may be recorded as a result of the Disposal, the adjusted net loss per EC-Founder Share would increase by approximately 3.9% from approximately HK$0.096 to approximately HK$0.100 for the year ended 31 December 2002. We consider such a slight increase in the adjusted net loss per EC-Founder Share fair and reasonable.

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Working capital

The net proceeds from the Disposal will generate net cash inflow of approximately HK$42.5 million to the EC-Founder Group as well as reduce unnecessary funding requirement of the EC-Founder Group in non-core businesses. Upon Completion, deducting the cash and cash equivalents of approximately HK$7.9 million held by the MIT Group as at 31 December 2002, the cash and cash equivalents of the EC-Founder Group will increase by approximately HK$34.6 million. As advised by the Directors, EC-Founder intends to use the net proceeds from the Disposal as general working capital of the EC-Founder Group.

Gearing and contingent liability positions

According to the circular of EC-Founder dated 30 April 2003, the adjusted gearing ratio (representing long-term debt to equity) of the EC-Founder Group was approximately 0.29%. Following Completion, the gearing ratio of the EC-Founder Group would reduce to zero as all the long-term debt of the EC-Founder Group was contributed by the MIT Group.

To support the business of the MIT Group, EC-Founder was exposed to total contingent liabilities of approximately HK$35 million as at 31 December 2002. With the release of the Existing Guarantees (except for Guarantee A which will be released not later than six months after Completion), the contingent liabilities of EC-Founder will reduce to at most HK$5 million upon Completion and further reduce to zero when Guarantee A is released within six months after Completion.

Conclusion

As set out in the circular of EC-Founder dated 30 April 2003, after the Acquisition, the IT Distribution Business will immediately broaden the income stream of the EC-Founder Group and the EC-Founder Group is well positioned in the market to capture the considerable development potential in the PRC information technology industry. According to the Directors, after the Disposal, EC-Founder will be able to utilise its entire resources, including the proceeds from the Disposal and the additional financial resources from the release of the Existing Guarantees, to develop the IT Businesses.

Taken into account the improvement in the financial position of the EC-Founder Group in terms of the enhancement in working capital, gearing and contingent liabilities upon Completion, despite the decrease in the adjusted net tangible asset value per ECFounder Share and the slight increase in the adjusted net loss per EC-Founder Share, we are of the view that the Disposal is in the interests of the EC-Founder Group and the Independent Shareholders as a whole.

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2. Possible continuing provision of Guarantee A

As at the Latest Practicable Date, a total amount of approximately US$362,000 (equivalent to approximately HK$2.8 million) of Facility A was utilised by MITC. EC-Founder has requested HGL and HGL has agreed to use its best endeavours to procure that, with effect on or before the date of Completion, the liabilities of MITC under Facility A shall have been reduced to zero and the Facility A shall have been cancelled. If HGL fails to procure the reduction of the liabilities of MITC under Facility A to zero and the cancellation of Facility A on or before Completion, HGL is required to procure that the outstanding utilised amount of Facility A shall not exceed HK$5 million as at the date of Completion and MITC should not further utilise Facility A following Completion.

HGL has agreed to provide certain undertakings and indemnities in relation to the possible continuing provision of Guarantee A which will constitute connected transaction for EC-Founder under the Listing Rules. In particular, HGL has agreed to procure that at Completion, cash collateral and/or securities listed on the Stock Exchange and reasonably acceptable to EC-Founder in an aggregate amount not less than the utilised amount of Facility A outstanding as at the date of Completion shall be deposited with an escrow agent. If EC-Founder suffers any loss or liability as a result of or in connection with Guarantee A and HGL and Mr. Yung Jr. fail to honour their respective indemnity and guarantee under the Disposal Agreement, EC-Founder shall have the rights to request the escrow agent to pay EC-Founder any cash collateral and/or to dispose of any securities collateral held by it and pay EC-Founder such cash proceeds in an aggregate amount sufficient to make good the loss or liability suffered by EC-Founder under Guarantee A.

Although Guarantee A may not be released until 6 months from the date of Completion, given the financial risk of EC-Founder will be minimal due to 1) the maximum extent of Facility A is only HK$5 million, which represents a small amount as compared to the financial resources of the EC-Founder Group; and 2) the undertakings and indemnities given by HGL, in particular the collateral to be procured by HGL, we are of the view that the terms and conditions in relation to the possible continuing provision of Guarantee A as part of the Disposal Agreement are fair and reasonable to the EC-Founder Group and the Independent Shareholders.

3. The Termination Agreement

As part of the Disposal Agreement, EC-Founder entered into the Termination Agreement with Ricwinco. Pursuant to the Termination Agreement, conditional upon Completion, the Management Agreement shall be terminated with effect from the date of Completion and each of EC-Founder and Ricwinco shall therefore be deemed to have unconditionally and irrevocably waived, released and discharged each other from any continuing or outstanding obligations whatsoever in respect of the Management Agreement (including any liabilities of Ricwinco in respect of any profit guarantee provided under the Management Agreement). Details of the Termination Agreement are set out in the letter from the Board in the Circular.

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LETTER FROM TAI FOOK

The Termination Agreement was entered into on 1 August 2003, approximately 60 days from the expiry of the Management Agreement. Since the expiry of the Management Agreement is imminent, as advised by the Directors, the principle purpose of entering into the Termination Agreement was to facilitate the Disposal. As stated in the section headed “Background of and reasons for the Disposal” above, the Directors believe that it would be in the best interest of the EC-Founder Group to dispose of the MIT Group prior to the expiry of the Management Agreement.

In light of 1) the Management Agreement and the profit guarantee relating thereto will expire very soon; and 2) the reasons for the Disposal as mentioned in the section headed “Background of and reasons for the Disposal” above, we are of the view that the terms and conditions of the Termination Agreement, as part of the Disposal, are fair and reasonable.

RECOMMENDATION

Having taken the above principal factors and reasons into account, we consider the terms and conditions of the Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) and the Termination Agreement are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the EC-Founder Group and the Independent Shareholders as a whole. Accordingly, we advise 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 Disposal Agreement (including the Disposal and the possible continuing provision of Guarantee A) and the Termination Agreement.

Yours faithfully, For and on behalf of

Tai Fook Capital Limited Derek C. O. Chan Deputy Managing Director

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BUSINESS VALUATION OF THE MIT GROUP

APPENDIX I

The following is the text of a valuation letter prepared for the purpose of inclusion in this circular, received from LCH (Asia-Pacific) Surveyors Limited, an independent valuer, in connection with the valuation of the equity value of the MIT Group as at 31 May 2003:

==> picture [216 x 50] intentionally omitted <==

27th Floor, Li Dong Building 9 Li Yuen Street East Central Hong Kong 25 August 2003

The Directors EC-Founder (Holdings) Company Limited Unit 1408, 14th Floor Cable TV Tower 9 Hoi Shing Road Tsuen Wan, New Territories Hong Kong Dear Sirs,

In accordance with the recent instructions given by the management of EC-Founder (Holdings) Company Limited (hereinafter referred to as “EC-Founder”) to LCH (Asia-Pacific) Surveyors Limited (hereinafter referred to as “LCH” or “we”), we have investigated and analysed the business enterprise value of MIT Holdings Limited (hereinafter referred to as “MIT” or the “subject business enterprise”) as at 31 May 2003 (hereinafter referred to as the “effective date of the appraisal”) for possible merger and acquisition purposes.

At the request of the management of EC-Founder, we prepared this letter to summarise our findings and conclusion for the purpose of inclusion in a public document at today’s date. This letter forms part of our detailed appraisal report dated 23 July 2003, and the assumptions, caveats and limiting conditions adopted by our appraisal report are also applied to this letter. Terms used in this letter should have the same meanings as defined in the circular of EC-Founder dated 25 August 2003 unless otherwise defines.

INTRODUCTION

Business enterprise value is defined as the total value of a business. It comprises of monetary assets (net working capital), tangible assets and intangible assets, thereby encompassing all assets of a business enterprise ( see Note ). In other words, the business enterprise value is also equal to the value of its invested capital – common equity, preferred stocks and long-term debts. However, there is no universal definition of the term; rather, it is a usual practice for a professional appraiser, based on his professional knowledge and experience, to identify the definition intended in its use.

Note: A business enterprise is defined as a commercial, industrial, service, or investment entity, or a combination thereof, pursuing an economic activity.

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BUSINESS VALUATION OF THE MIT GROUP

APPENDIX I

In this appraisal, we were instructed to analyse the value of the subject business enterprise and to express an independent opinion of the fair market value of the entire equity interest of the subject business enterprise as at the effective date of the appraisal. Based on our instructions, we define the term business enterprise value in our appraisal as the fair market value of the entire equity interest.

The term “Fair Market Value” as used herein is defined as the price, expressed in terms of cash equivalents, at which asset would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s-length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts. This definition has been made on the assumption that both the buyer and the seller contemplate the retention of the subject business enterprise at its present location for the continuation of the current operations, and both seeking their maximum economic self-interest in arriving at an arm’s-length transaction.

DESCRIPTION OF THE SUBJECT BUSINESS ENTERPRISE

We understand that MIT is an investment holding company incorporated in the British Virgin Islands on 14 June 2000 and is wholly owned by EC-Founder. MIT directly and indirectly wholly owns Management Investment & Technology Company Limited, Meditech Holdings Limited and Meditech Limited (hereinafter together with MIT referred to as “MIT Group”).

Management Investment & Technology Company Limited (hereinafter referred to as “MITC”) was incorporated in Hong Kong on 9 September 1975 and the entire issued ordinary share capital is owned by MIT. The primary business of MITC is to manufacture and distribute its self-designed electronic weighing scales to the consumer market, both locally and overseas. We were given to understand that the business of the MIT Group is mainly being carried out by MITC.

The principal economic asset of MITC is its operation of an electronic consumer products factory (hereinafter referred to as the “factory” or “MITC’s factory”) and its self-designed electronic weighing scales and other OEM (Original Equipment Manufacturer) electronic products such as lightings, stepdown power supplies, high voltage electronic power supplies and electronic medical products. MITC has obtained an ISO9001 certificate. The factory is located at Xiao Bian Industrial Estate, Changan, Dongguan of Guangdong Province, the People’s Republic of China (hereinafter referred to as the “PRC” or “China”). It at present has a workforce of approximately 1,400. Apart from the factory, MITC also owns an office and a warehouse in Tin Fung Industrial Mansion, Aberdeen of Hong Kong.

Meditech Holdings Limited is an investment holding company incorporated in the British Virgin Islands on 2 June 1999 and is wholly owned by MITC. The principal economic asset of Meditech Holdings Limited is its ownership of the entire equity interest of Meditech Limited , a company established in Hong Kong on 9 June 1999. We were given to understand that Meditech Limited is a dormant company and has not conducted any business since its incorporation.

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BUSINESS VALUATION OF THE MIT GROUP

APPENDIX I

VALUATION PROCEDURES ADOPTED

In performing the appraisal of the subject business enterprise, we have adopted the following procedures which were agreed with the management of EC-Founder before the engagement. They are:

to prepare and submit a list(s) of required documents and information regarding the operation of each business enterprise of the MIT Group, in particular MITC during the course of valuation;
to read the supplied materials and based on the content of the materials such as product information, market condition, financial information and the scale of each business enterprise of the MIT Group to arrive at our opinion;
to conduct a limited scope on-site inspection and to gather relevant information regarding the type of business, its operation and the assets of each business enterprise of the MIT Group;
to hold discussions with relevant business enterprise’s personnel and to review various accounting and financial documents in order to understand the scope of their assets;
to obtain the latest available asset schedule and management account of each business enterprise of the MIT Group on which to start the valuation;
to identify off-balance sheet assets that should be recognised and valued;
to conduct appropriate research in order to obtain necessary industry and market information to support our opinion of value. The extent of research is at the discretion of LCH;
to value all identified tangible and intangible assets (if any) to be included in the adjusted balance sheet using the respective standards of value that are most appropriate;
to construct a valuation based balance sheet to include the current assets (as provided by the management of MIT) that reflects the appropriate standards of value; and
to document our findings and conclusion in our appraisal report.

THE BASIS OF VALUATION

The subject business enterprise is valued on the basis of “Fair Market Value” in continued use and as a going-concern business. The continued use premises assumes that the subject business enterprise will be used for the purpose for which the subject business enterprise was conceived or is currently used. Implicit in this definition is the fact that a hypothetical willing and able buyer would not pay more to acquire the subject business enterprise than he could reasonably expect to earn in the future from an investment in the subject business enterprise.

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BUSINESS VALUATION OF THE MIT GROUP

APPENDIX I

The valuation of the subject business enterprise has taken account of all pertinent factors affecting the operation of its business with the particular usage of its existing production assets i.e. the factory and its ability to generate future investment returns. The factors considered in the appraisal included, but were not limited to, the following:

the nature and the business of each business enterprise of the MIT Group, in particular MITC;
the present worth of the assets of each business enterprise of the MIT Group;
the past and projected future economic benefits of each business enterprise of the MIT Group based on the assumptions made by the management of MIT;
the economic and industry data affecting the operation of each business enterprise of the MIT Group;
the market-derived investment returns of similar businesses; and
the risks facing each business enterprise of the MIT Group.

APPROACHES TO VALUE

In the process of valuation, we have considered the three generally accepted business enterprise appraisal approaches to value, namely the Market Approach, the Income Approach and the Asset-based Approach.

The Market Approach

The Market Approach is basically a comparison method to value a business enterprise by comparison to the prices at which other similar business nature companies or interests changed hands in arm’s-length transactions. By using this approach, the appraiser will first look for valuation indication from the prices of other similar companies or equity interests in companies that have sold. The right transactions used in analysing for valuation indication need to be sales on an arm’s-length basis, assuming that the buyers and sellers are well informed and have no special motivations or compulsions to buy or to sell. Then, based on those transactions to derive multiples (financial ratios) to apply to the fundamental financial variables of the appraised business enterprise and to arrive at an indicative value of the appraised business enterprise. The most commonly used multiples are price-to-earnings, price-to-revenues and price-to-book multiple.

To the best of our knowledge, apart from EC-Founder, we are not aware of any publicly traded company in the Stock Exchange which has similar line of business of MITC. We aware that there are numerous closely-held companies such as Hong Kong Weighing Equipment Co., Ltd., Sam Hing Scales Factory Limited and Johnson Measures and Weights Ltd. have similar line of business. However, we have difficulties in using these companies as guideline companies as no sufficient financial data and earnings of these companies are made available to the public to form a “guideline” of the industry. The use of these comparables will cause inadequate comparative analysis.

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BUSINESS VALUATION OF THE MIT GROUP

APPENDIX I

We noticed that there are numerous closely-held companies (including Sino-foreign equity joint ventures and foreign wholly owned enterprises) with similar business operations in China in various geographical locations i.e. market. However, we have reservation to use these companies as guideline companies for the same reason as stated in the above paragraph.

We are not aware of any merger and acquisition activities of similar business ventures in China and Hong Kong. We take the view that there might have been a number of merger and acquisition activities of similar business ventures in China and Hong Kong around the effective date of the appraisal, however, due to the imperfect nature of the market, details of the transactional data and the basis were not made available to the public to “guidelines” of the industry.

This study is fully cognisant of the fact that there are some publicly traded companies in various stock exchanges of the United States of America (“U.S.”) that have approximately similar lines of business as MITC and have their own factories in China. Examples are Bonso Electronics International, Inc. and Mettler-Toledo International, Inc. However, we have reservation to rely solely on these companies for: i) the different market segment of these companies compared to MITC; ii) the size difference between these companies and the subject business enterprise which may involve subjective adjustment on the size premium; and iii) these companies are classified as multi-national companies with cross-border operations and enjoy various tax benefits and, subject to different accounting standards due to various rules set by the respective authorities, this may affect their financial ratios compared to a closely-held company that operated in Hong Kong, China. We, however, used these companies indirectly in our crosschecking exercise to evaluate whether the value we reached was sustainable from an adversary perspective.

The Income Approach

The Income Approach focuses on the economic benefits generated by the income-producing capability of a business enterprise. The underlying theory of this approach is that the value of a business enterprise can be measured by the present worth of the economic benefits to be received over the useful life of the business enterprise. Based on this valuation principle, the Income Approach estimates the future economic benefits and discounts these benefits to its present value using a discount rate suitable for the risks associated with realising those benefits. Alternatively, this can be calculated by capitalising the economic benefits to be received in the next period at an appropriate capitalisation rate. This is subject to the assumption that the business enterprise has been maintaining stable economic benefits and growth rate.

However, we have reservation to use this approach in this study for the subject business enterprise which is an asset rich business enterprise with a total net tangible book value of approximately HK$40 million as at the effective date of the appraisal. We take the view that the valuation arrived at by using this approach could only reflect the present value of the future economic benefits being generated by the income-producing capability of the subject business enterprise and it does not reflect the value of its manufacturing assets as a whole. In other words, this approach may understate the value of the subject business enterprise.

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Asset-based Approach

To value an asset rich business enterprise, both in tangible and intangible assets, is a complex exercise. The respective classical approaches to value (namely Market and Income Approaches) are considered inappropriate to value the business enterprise value of MIT (as an investment holding) due mainly to their respective inadequacies as described in the previous sections of this letter. In other words, the business enterprise value of MIT cannot be appraised by using one single approach to value. Having considered the general and inherent characteristics of the subject business enterprise, we consider the appropriate way to value the business enterprise value of MIT is to use the Asset-based Approach (also known as balance sheet restatement approach) since the earning power of the subject business enterprise is derived primarily from its existing assets via members of the MIT Group as at the effective date of the appraisal.

The assumption of this approach is that when each of the elements of working capital, tangible and intangible assets is individually valued, their sum represents the value of a business enterprise and equals to the value of its invested capital (equity and long-term debt). In other words, the value of the business enterprise is represented by the money that has been collected to purchase the business assets needed. This money comes from investors who buy the stocks of the business enterprise (equity) and investors who lend money to the business enterprise (debt). After collecting the total amount of money from equity and debt, and converted into various types of assets of the business enterprise for its operations, their sum equals the value of the business enterprise.

From a valuation perspective, the appraiser will restate the value of all types of assets of a business enterprise from book value i.e. historical cost minus depreciation to appropriate standards of value. After the restatement, the appraiser can identify the indicated value of the business enterprise, or, by applying the accounting principle “assets minus liabilities” to arrive at the value of the equity interests of the business enterprise.

VALUATION METHODOLOGY AND ASSETS VALUED

In choosing the Asset-based Approach as the most appropriate approach to value, we have considered both the Asset Accumulation Method and the Capitalised Excess Earnings Method. We had to discard the Capitalised Excess Earnings Method for no significant excess earnings are expected in the electronic consumer products manufacturing industry. By employing the Asset Accumulation Method, each asset of the business enterprises of the MIT Group is analysed, adjusted and appraised individually. Under this method and subject to the definition of this appraisal, the summation of the values of the individual appraised assets (both tangible and intangible) after deducting the total liabilities represents the business enterprise value of the subject business enterprise.

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The scope of our valuations included the following:

Financial Assets

Relevant categories under Financial Assets comprise Cash, Notes Receivable, Advance Payments, Stocks and Other Receivables.

We were provided with copies of the unaudited balance sheet of MITC as at the effective date of the appraisal. Based on our agreed procedures, unless otherwise stated, we have adopted their book costs in our valuations.

Tangible Assets

Real estate related

1. Dongguan of China

MITC has rented the factory at Xiao Bian Industrial Estate, Changan, Dongguan of Guangdong Province of the PRC. The factory occupies a site with an area of approximately 8,000 square metres with a total of 4 various low rise buildings and structures having a total gross floor area of approximately 22,213 square metres. The major buildings and structures of the factory include two workshop blocks, one generator room and one composite block. As the factory is a leasehold interest, from a valuation perspective, it does not possess any commercial value for the purpose of our valuation.

2. Aberdeen of Hong Kong

The properties comprise Factory Unit A on the 5th Floor and Factory Units A and B on the 7th Floor of Tin Fung Industrial Mansion, 63 Wong Chuk Hang Road, Aberdeen, Hong Kong. The building is a 1967 completed 15-storeyed industrial building with carparking and loading/unloading facilities provided on the 4th Floor of the building. The properties have a total saleable area of approximately 2,315 square metres. Factory Unit A on the 5th Floor is used as a warehouse and Factory Units A and B on the 7th Floor are used for office purpose.

In the course of valuing these properties, we have employed the direct comparison approach on the instruction that the property to be sold with vacant possession by referring to comparable market transactions in the locality and close to the effective date of the appraisal.

3. Vancouver of Canada

The property comprises a 1998 completed strata titled sub-penthouse, three bedroom apartment unit of a high-rise residential complex situated at Strata Lot 487, District Lot 185, Land District 36, Plan #LMS 3094, in the City of Vancouver, BC of Canada.

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The property has a gross floor area of approximately 105.17 square metres. The property is used as a director quarters.

In the course of valuing this property, we have employed the direct comparison approach on the instruction that the property to be sold with vacant possession by referring to comparable market transactions in the locality and close to the effective date of the appraisal.

Non-real estate related

Non-real estate assets comprise machinery and equipment, furniture and fixtures, moulds and tools, motor vehicles, leasehold improvement and construction in progress.

Due to the large number of line items included in the valuation, we conducted our inspection of the non-real estate assets on sampling basis. During our on-site inspection, we viewed and observed the operation in the factory and held discussions with relevant MITC’s personnel to understand the scope and character of the subject assets. We then considered all three valuation approaches and found the Cost and Market Approaches as the most appropriate to value the nonreal estate assets.

In conducting our valuation, we have taken into consideration the following:

The extent, character and utility of the subject assets;
Current replacement cost of the subject assets;
Specifications of currently available assets;
Used and new equipment dealer’s prices; and
Generally accepted useful or economic lives.

However, we have not taken into consideration any restrictions relating to the disposal of the subject assets in China as we cannot properly ascertain the existence of such restrictions from the documents provided to us nor we received any advice from the management of MITC. In our valuation, we have assumed that the subject assets can be freely sold and transferred in China. Should this not be the case, this will affect our valuation substantially.

Intangible Assets

Intangible assets are assets without physical existence which, although not always reported on a company’s balance sheet, may make a significant contribution to the value of an enterprise. Examples of intangible assets include, but are not limited to, trademarks, tradenames, assembled work force, easements and rights, patents, proprietary computer software, customer-related intangibles and technical know-hows.

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Trademark of “Accutech”

We are given to understand that MITC registered the Trademark in the U.S. in 1998 and has also registered the Trademark in Hong Kong and in China. We consider it is not appropriate to assign a “positive” value to the Trademark as of the effective date of the appraisal not until there are solid sales with regard to the Trademark products made available for analysis. From a valuation perspective, we have assigned a nominal figure of HK$100,000 to reflect the relevant cost to produce the Trademark.

Patent of “Parallel Beam”

The Patent was invented by various individuals and registered in the U.S. in 1987. The Patent was finally assigned to MITC in 1990 for the benefits (including assignment of the Patent) within the residual patent term and renewal term (if any). We are given to understand that the Patent is critical to MITC’s self-designed and manufactured electronic scales and weighing instruments.

According to the rules and regulation in the U.S., the protection of patent term is usually 17 years for technical inventions and innovations and 14 years for design patents. We are given to understand that the Patent is a technical invention and granted to the inventors in 1984 (first filed) and 1987 (as a continuous grant and part of the first filed). Based on our discussion with the management of MITC, the protected term of the Patent is closed to expiry in 2004. Under such circumstance, we have assigned no particular value to this patented technology from a view of financial conservatism.

In valuing the equity interest of the subject business enterprise, we have considered the illiquidity of the equity interest from a perspective of closely held in nature. By definition, ownership interests in closely-held companies are typically not readily marketable, and, by definition not as liquid and as easily converted to cash compared to similar interests in public companies. Thus, we have applied an illiquidity (lack of marketability) discount to the subject business enterprise to reflect the restriction.

VALUATION COMMENTS AND CAVEATS

We understand that the management of EC-Founder will use our work product as part of its business diligence and we have not been engaged to make specific purchase or sale recommendations. We further understand that the management of EC-Founder will not rely solely on our work, and that the use of our work product will not supplant other due diligence which the management of EC-Founder should conduct in reaching its business decision. Our work is designed solely to provide information that will allow the management of EC-Founder to make an informed decision.

Title and the licence rights to the MIT Group are assumed to be good and marketable. In the course of appraisal, we have assumed that the equity interest of the subject business enterprise being valued in our appraisal is freely disposable and transferable in the market to both local and overseas purchasers without payment of any premium to the government.

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No investigation has been made to the legal title, licence rights or any liabilities attached to each business enterprise of the MIT Group (including the leasehold interest). All legal documents disclosed (if any) are for reference only and no responsibility is assumed for any legal matters concerning the legal title to each business enterprise of the MIT Group and the licence rights (included the leasehold interest). We have not verified the original documents (if any) presented to us. Any responsibility for our misinterpretation of the documents, therefore, cannot be accepted. We are not attorney in nature, therefore, we are not in the position to advise and comment on the title and encumbrances to each business enterprise of the MIT Group and the licence rights (including the leasehold interest).

For the purpose of this appraisal, we were furnished with audited reports, unaudited financial statements and other documents germane to the appraisal by the management of MIT. We have utilised the data provided without further verification and make allowance for any change of industry, market, business model or the management of each business enterprise of the MIT Group. We have had no reason to doubt the truth and accuracy of the information that we have been furnished. No responsibility is assumed for the accuracy of such information.

When we adopted the work products from other professions and the management of MIT in our valuation, the assumptions and caveats that adopted by them in arriving at their figures also applied in our valuation. The procedures we have taken do not provide all the evidence that would be required in an audit and, as we have not performed an audit, accordingly, we do not express an audit opinion.

To the best of our knowledge, all data set forth in this letter are true and accurate. Although gathered from sources we deem reliable, no guarantee is made nor liability assumed for the accuracy of any data, opinions, or estimates identified as being furnished by others which have been used in formulating this letter.

We are unable to accept any responsibility for the information that has not been supplied to us by the management of MIT. We have sought and received confirmation from the management of MIT that no material factors have been omitted from the information supplied. Our analysis and appraisal are based upon full disclosure between LCH and the management of MIT of material and latent facts that may affect the appraisal.

No allowance has been made in our valuation for any expenses or depreciation or taxation, which may be incurred in effecting a sale of the equity interest of the subject business enterprise. It is assumed that the equity interest of the subject business enterprise will be rendered free from encumbrances, restrictions and outgoings of any onerous nature, which could affect its value.

We have conducted a limited scope of physical inspection to the factory and properties included in this appraisal. The purpose of the inspection is not to produce an error free asset list or a building inspection report; rather, the purpose of the inspection is to have a better understanding on the operation of the factory and the general conditions of the properties. We need to state that we have not inspected those parts of the factory and the properties which were covered, unexposed or inaccessible and such parts have been assumed to be in reasonable condition. We cannot express an opinion about or advise upon the condition of the inspected and uninspected parts and this letter should not be taken as making any implied representation or statement about such parts. However, no structural survey,

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investigation or examination has been made. In our valuation, we have assumed that no unauthorised structure, alteration or extension was found in the factory and the properties. In fact, we are unable to report that the factory and the properties are free from rot, infestation or any other defects. No tests were carried out to any of the services or facilities.

We are not engaged to conduct land surveys of the factory and the properties. We have assumed that the site boundaries and the areas as shown on the documents (if any) available to us are correct and, the factory and the properties are situated within its legal boundaries. No responsibility is assumed for such correctness.

We have not carried out on-site measurements to verify the correctness of the areas of the factory and the properties, but have assumed that the areas shown on the documents handed to us are correct. All dimensions, measurements and areas are approximations.

We are not aware of the content of any environmental audit or other environmental investigation or soil survey which may have been carried out on the site where the factory and the properties are erected and which may draw attention to any contamination or the possibility of any such contamination. In undertaking our work, we have been instructed to assume that no contaminative or potentially contaminative uses have ever been carried out in the sites. We have not carried out any investigation into past or present uses, either of the sites or of any neighbouring land, to establish whether there is any contamination or potential for contamination to the sites from these uses or sites, and have therefore assumed that none exists. However, should it be established subsequently that contamination, seepage or pollution exists at the sites or on any neighbouring land, or that the premises have been or are being put to a contaminative use, this might reduce the value now reported.

Our opinion of the business enterprise value of MIT in this letter is valid only for the stated purpose and only for the effective date of the appraisal. No responsibility is taken for changes in market conditions and no obligation is assumed to revise this letter to reflect events or change of government policy or financial condition or other conditions, which occur subsequent to the date hereof.

This letter is provided strictly for the sole use of EC-Founder. Neither the whole nor any part of this letter or any reference hereto may be included in any published document, circular or statement, or published in any way, without our written approval of the form and context in which it may appear. Nonetheless, we consent to the publication of this letter in the EC-Founder’s circular dated 25 August 2003 to its shareholders.

Unless otherwise stated, the base currency of this letter is Hong Kong Dollars.

Our valuation is prepared in line with the ethics and guidelines as contained in the International Valuation Standards issued by the International Valuation Standards Committee and have been made in conformity with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation. The valuation has been undertaken by valuers, acting as external valuers, qualified for the purpose of the valuation.

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OPINION OF VALUE

Based on the investigation, analysis, stated assumptions, reasoning and data outlined as above, and on the appraisal method employed, it is our opinion that as of the effective date of the appraisal, the business enterprise value of MIT (before taking into consideration any transaction costs), as a goingconcern business, is reasonably stated by the amounts of HONG KONG DOLLARS FORTY FOUR MILLION ONLY (HK$44,000,000.00).

The conclusion of value is based on the generally accepted appraisal procedures and practices that rely extensively on assumptions and considerations, not all of which can be easily quantified or ascertained exactly. While we have exercised our professional judgment in arriving at the appraisal, the readers are urged to consider carefully the nature of such assumptions which are disclosed in this letter and should exercise caution in interpreting this letter.

We retain a copy of this letter in our files, together with the data from which it was prepared. We considered these records confidential, and we do not permit access to them by anyone without the management of EC-Founder’s authorisation and prior arrangement made with us.

We hereby certify that the fee for this service is not contingent upon our conclusion of values and we have neither present nor prospective interest in EC-Founder, the MIT Group and the value reported.

	Yours faithfully,
	For and on behalf of
LCH	(Asia-Pacific) Surveyors Limited
Ho	Chin Choi, Joseph BSc MRICS
	Managing Director

Mr. Joseph Ho Chin Choi has been conducting asset valuations and advisory work in Hong Kong, Macau, Taiwan, mainland China, South East Asia, Finland, Canada and the United States of America for various purposes since 1988. He obtained the Examination Certificate of the Uniform Standards of Professional Appraisal Practice issued by the American Society of Appraisers in 1996. He has extensive experience in the valuation of power plants, toll road, pharmaceutical and biotechnology, electronic consumer products manufactory, telecommunication, media and information technology related businesses for the listed companies in Hong Kong, Canada and the United States of America.

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GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to EC-Founder. 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 interests of the Directors and chief executive of EC-Founder in the securities of EC-Founder and its associated corporations (within the meaning of Part XV of the SFO) which are required to be notified to EC-Founder and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO and including interests and short positions in which he has taken or deemed to have under such provisions of the SFO or which are required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which are required to be notified to EC-Founder and the Stock Exchange pursuant to the “Model Code for Securities Transactions by Directors of Listed Companies” contained in the Listing Rules, were as follows:

(a) Interests in EC-Founder Shares

(i) Long position in EC-Founder Shares

	Number of EC-Founder Shares	Number of EC-Founder Shares
	held and nature of interest
Name of Directors	Corporate	Personal As trustee
		(Note 1)
Mr. Yung_(Note 2)_	87,680,000	– –
Mr. Cheung Shuen Lung	–	36,890,100 63,459,100
Mr. Zhang Zhao Dong	–	3,956,000 63,459,100
Professor Wei Xin	–	3,956,000 63,459,100
Professor Zou Wei	–	– 63,459,100

Note 1: These EC-Founder Shares held by each of the Directors (a total of 63,459,100 EC-Founder Shares) are held by F2 Consultant Limited as nominee on behalf of the directors of Founder Data Corporation International Limited (“FDC”), a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of EC-Founder, who are acting in their capacity as the trustees of a discretionary trust for the employees of FDC and its subsidiaries.

Note 2: Mr. Yung is interested in these shares through Ricwinco.

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(ii) Short position in EC-Founder Shares

Name of Director

Number of EC-Founder Shares

Mr. Yung (Note 3)

41,227,917

Note 3: Ricwinco has charged 41,227,917 EC-Founder Shares to FDC pursuant to a share mortgage dated 28 June 2002. Mr. Yung is deemed to have a short position over such EC-Founder Shares under the SFO by virtue of his interest in Ricwinco.

(b) Interests in a subsidiary of EC-Founder

	Subsidiary in	Number of	Nature of
Name of Director	which shares are held	shares held	interest
Mr. Yung_(Note)_	MITC	20,000,000	Corporate
		non-voting deferred
		shares

Note: Mr. Yung is interested in these shares through Ricwinco.

In addition to the above, certain Directors have non-beneficial personal equity interests in certain subsidiaries held for the benefit of EC-Founder solely for the purpose of complying with the minimum company membership requirements.

(c) Interests in share options granted under the share option scheme of EC-Founder

	Number of		Exercise
	outstanding share	Exercise	price of
Directors and	options at the Latest	period of	share
chief executive	Practicable Date	share options	options
			(HK$)
Mr. Yung Jr.	2,700,000	15.12.2001 to 14.12.2006	0.45
Mr. Cheung Shuen Lung	2,000,000	18.5.2001 to 17.5.2011	0.45
Professor Wei Xin	2,000,000	18.5.2001 to 17.5.2011	0.45
Professor Zou Wei	2,000,000	18.5.2001 to 17.5.2011	0.45
Total	8,700,000

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors or the chief executive of EC-Founder had any interest in the securities of EC-Founder or any associated corporations which were required to be notified to EC-Founder and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which they were deemed or taken to have under such provision of the SFO) or pursuant to the “Model Code for Securities Transactions by Directors of Listed Companies” contained in the Listing Rules or which are required, pursuant to section 352 of the SFO, to be entered in the register referred to therein.

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3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as is known to, or can be ascertained after reasonable enquiry by, the Directors or chief executive of EC-Founder, the following corporations (not being a Director or the chief executive of EC-Founder) who had an interest or short position in the shares and underlying shares of EC-Founder which would fall to be disclosed to EC-Founder under provisions of Divisions 2 and 3 of Part XV of the SFO, or, who were, directly or indirectly, interested in 10% or more of the EC-Founder Shares:

Name of shareholders Notes Peking University Founder Group Corporation (“Peking Founder”) 1 Founder 2 Yahoo! Inc. Ricwinco 3 F2 Consultant Limited 4 HSBC International Trustee Limited 5 Sun Hung Kai Properties Limited 5 Sunco Resources Limited 5 SUNeVision Holdings Ltd. 5 Hugh Profit Investments Ltd. 5 Well Drive Holdings Limited	Long position under the SFO Percentage of the Number of EC-Founder’s EC-Founder issued Shares share capital 668,533,477 60.74% 668,533,477 60.74% 93,240,000 8.47% 87,680,000 7.97% 63,459,100 5.77% 60,500,000 5.50% 60,500,000 5.50% 60,500,000 5.50% 60,500,000 5.50% 60,500,000 5.50% 60,500,000 5.50%	Short position under the SFO
		Percentage of the Number of EC-Founder’s EC-Founder issued Shares share capital – – – – – – 41,227,917 3.75% – – – – – – – – – – – – – –

Notes:

Peking Founder is deemed to be interested in the 668,533,477 EC-Founder Shares under the SFO by virtue of its interest in Founder.
Founder’s interests in the 668,533,477 EC-Founder Shares comprise (i) 603,690,000 EC-Founder Shares held by Founder as beneficial owner of such shares, (ii) 41,227,917 EC-Founder Shares held by FDC pursuant to a share mortgage dated 28 June 2002 made between Ricwinco, as chargee, and FDC, as chargor, (the “Share Mortgage”), and (iii) 23,615,560 EC-Founder Shares being new EC-Founder Shares which may be issued to Founder (Hong Kong) Limited (“Founder Hong Kong”), a wholly-owned subsidiary and a controlled corporation of Founders, (or as it may direct) at the option of Founder Hong Kong pursuant to an agreement dated 19 March 2003 entered into between Founder Hong Kong and EC-Founder. Founder is deemed to be interested in the interests of FDC and Founder Hong Kong in those EC-Founder Shares under the SFO.
Ricwinco is a wholly-owned subsidiary of Mr. Yung. Among the 87,680,000 EC-Founder Shares beneficially owned by Ricwinco, 41,227,917 EC-Founder Shares are charged to FDC pursuant to the Share Mortgage which are classified as a short position of Ricwinco under the SFO.
F2 Consultant Limited owns such EC-Founder Shares as nominee on behalf of the directors of FDC who are acting in their capacity as the trustees of a discretionary trust for the employees of FDC and its subsidiaries.
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APPENDIX II

Each of HSBC International Trustee Limited, Sun Hung Kai Properties Limited, Sunco Resources Limited, SUNeVision Holdings Ltd. and Hugh Profit Investments Ltd. is deemed to be interested in the 60,500,000 EC-Founder Shares under the SFO by virtue of its, direct or indirect, interests in Well Drive Holdings Limited.

Save as disclosed herein, the Directors and the chief executive of EC-Founder are not aware of any person (other than a Director or the chief executive of EC-Founder or his associates or a member of the EC-Founder Group) who had an interest or short position in the shares and underlying shares of ECFounder which would fall to be disclosed to EC-Founder under provisions 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 other members of the EC-Founder Group or had any options in respect of such capital as at the Latest Practicable Date.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with EC-Founder or any other member of the EC-Founder Group which will not expire or is not determinable by the employer within one year without payment of compensation (other than statutory compensation).

5. LITIGATION

As at the Latest Practicable Date, neither EC-Founder nor any of its subsidiaries were engaged in any litigation or arbitration of material importance and there were no litigation or claim of material importance known to the Directors to be pending or threatened by or against EC-Founder or any of its subsidiaries.

6. QUALIFICATIONS OF EXPERTS

The following are the qualifications of the experts who have given opinions or advice which are contained in this circular:

Name Qualification Tai Fook a licensed corporation under the transitional arrangement to carry on Type 6 (advisory on corporate finance) regulated activity for the proposes of the SFO LCH (Asia-Pacific) Chartered Surveyors Surveyors Limited

7. CONSENTS

Each of Tai Fook and LCH (Asia-Pacific) Surveyors Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter dated 25 August 2003 and references to its name, in the form and context in which they appear.

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8. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the EC-Founder Group since 31 December 2002 (being the date to which the latest published audited consolidated financial statements of EC-Founder were made up).

9. GENERAL

(a) The company secretary of EC-Founder is Ms. Tang Yuk Bo, Yvonne, ACIS, ACS.
(b) The Hong Kong branch registrar and transfer office of EC-Founder are Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.
(c) Save for the Management Agreement, the Disposal Agreement and the Termination Agreement as disclosed in this circular, no Director was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which was significant in relation to the business of the EC-Founder Group taken as a whole.
(d) Since 31 December 2002, the date to which the latest published audited financial statements of the EC-Founder Group have been made up, none of the Directors or Tai Fook or LCH (Asia-Pacific) Surveyors Limited has, or has had, any direct or indirect interest in any assets which have been acquired, disposed of by or leased to or which are proposed to be acquired, disposed of by or leased to, any member of the EC-Founder Group.
(e) As at the Latest Practicable Date, Tai Fook and LCH (Asia-Pacific) Surveyors Limited had no shareholding in any members of the EC-Founder Group and did not have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any securities in any members of the EC-Founder Group.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business of EC-Founder in Hong Kong at Unit 1408, 14th Floor, Cable TV Tower, 9 Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong during normal business hours on any weekday (except public holidays) from the date of this circular up to and including 11 September 2003:

(a) the Disposal Agreement;
(b) the Termination Agreement;
(c) the letter from the Independent Board Committee, the text of which is set out on page 12 of this circular;
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(d) the letter from Tai Fook to the Independent Board Committee, the text of which is set out on pages 13 to 23 of this circular;
(e) the letter from LCH (Asia-Pacific) Surveyors Limited, the text of which is set out on pages 24 to 35 of this circular; and
(f) the letters of consent from Tai Fook and LCH (Asia-Pacific) Surveyors Limited referred to in paragraph 7 above.
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NOTICE OF SPECIAL GENERAL MEETING

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(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting (the “Meeting”) of EC-Founder (Holdings) Company Limited (the “Company”) will be held on Thursday, 11 September 2003 at 11:30 a.m. for the purpose of considering and, if thought fit, passing the following resolution, which will be proposed as an ordinary resolution of the Company:

“ THAT:

(a) the disposal by the Company of the entire issued share capital of MIT Holdings Limited to Honour Glory Limited (“HGL”) in accordance with and subject to the terms of the sale and purchase agreement dated 1 August 2003 and made between the Company as vendor, HGL as purchaser and Mr. Yung Richard, Jr. as guarantor to the purchaser (the “Disposal Agreement”) (a copy of the Disposal Agreement having been produced to the Meeting marked “A” and signed by the chairman of the Meeting for the purpose of identification) as more particularly described in a circular despatched to the shareholders of the Company dated 25 August 2003 (the “Circular”) and the possible continuing provision of Guarantee A (as defined in the Circular) by the Company be and is hereby approved, confirmed and ratified AND THAT the directors of the Company acting together, individually or by committee (the “Directors”) be and are hereby authorised to do on behalf of the Company whatever they may, in their absolution discretion, consider necessary, desirable or expedient for the purposes of, or in connection with, the performance and implementation by the Company of the Disposal Agreement and the agreements and documents relating thereto or contemplated thereby (in each case as amended if applicable) and to make or agree such alterations, amendments and additions thereto as the Directors may, in their absolute discretion, consider necessary desirable or expedient; and
(b) the termination by the Company of the management agreement entered into between the Company and Ricwinco Investment Limited (“Ricwinco”) dated 17 May 2000 relating to, among other matters, the appointment of Ricwinco to manage the business of MIT Holdings Limited and its subsidiaries pursuant to the termination agreement dated 1 August 2003 and made between the Company and Ricwinco (the “Termination Agreement”) (a copy of the Termination Agreement having been produced to the Meeting marked “B” and signed by the chairman of the Meeting for the purpose of identification) as more particularly described in the Circular (as defined in (a) above) be and is hereby approved, confirmed and ratified AND THAT the Directors (as defined in (a) above) be and are hereby authorised to do on behalf of the Company whatever they may, in their absolution discretion, consider necessary,

* For identification purpose only

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NOTICE OF SPECIAL GENERAL MEETING

desirable or expedient for the purposes of, or in connection with, the performance and implementation by the Company of the Termination Agreement and the agreements and documents relating thereto or contemplated thereby (in each case as amended if applicable) and to make or agree such alterations, amendments and additions thereto as the Directors may, in their absolute discretion, consider necessary desirable or expedient.”

By order of the Board EC-Founder (Holdings) Company Limited Tang Yuk Bo, Yvonne Company Secretary

Hong Kong, 25 August 2003

Principal place of business in Hong Kong:

Unit 1408, 14th Floor

Cable TV Tower 9 Hoi Shing Road Tsuen Wan New Territories Hong Kong

Notes:

Any shareholder entitled to attend and vote at the Meeting 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 attend on the same occasion. A proxy need not be a shareholder of the Company.
Where there are joint holders of any share, any one of such joint holders may vote at the Meeting, either in person 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.
In order to be valid, the instrument appointing a proxy together with the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of that power or authority must be deposited at the principal place of business of the Company in Hong Kong at Unit 1408, 14th Floor, Cable TV Tower, 9 Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong not less than 48 hours before the time for holding the Meeting or any adjournment thereof. Delivery of an instrument appointing a proxy shall not preclude a shareholder from attending and voting in person at the Meeting or at any adjourned meeting. In such event, the instrument appointing a proxy shall be deemed to be revoked.
Mr. Yung Chih Shin, Richard, Mr Yung Richard, Jr. and their respective associates (as defined in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited), including Ricwinco, will abstain from voting at this Meeting.
43 -

AI assistant

STAR SHINE HOLDINGS GROUP LIMITED — Proxy Solicitation & Information Statement 2003

49924_rns_2003-08-25_dca7f539-f395-42d9-8d22-7ff7cd8c9811.pdf

DISCLOSEABLE AND CONNECTED TRANSACTIONS

Ernst & Young Corporate Finance Limited

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

Executive Directors:

DISCLOSEABLE AND CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM THE BOARD

THE DISPOSAL AGREEMENT

Date

Parties

Assets to be sold

LETTER FROM THE BOARD

Consideration of the Disposal

Existing Guarantees

Conditions

THE TERMINATION AGREEMENT

Background information on the Management Agreement

Terms of the Termination Agreement

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE DISPOSAL

LETTER FROM THE BOARD

SGM

RECOMMENDATION

INDEPENDENT BOARD COMMITTEE

FURTHER INFORMATION

DISCLOSEABLE AND CONNECTED TRANSACTIONS

LETTER FROM TAI FOOK

DISCLOSEABLE AND CONNECTED TRANSACTIONS

LETTER FROM TAI FOOK

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. The Disposal

Business strategy of the EC-Founder Group

Prospects of the MIT Group

Expiry of the Management Agreement

LETTER FROM TAI FOOK

Proceeds from the Disposal

Conclusion

LETTER FROM TAI FOOK

1.2 Basis of consideration

Ratios comparison

Independent business valuation

Conclusion

1.3 Financial effects of the Disposal

Net asset value

Earnings

LETTER FROM TAI FOOK

Working capital

Gearing and contingent liability positions

Conclusion

2. Possible continuing provision of Guarantee A

3. The Termination Agreement

LETTER FROM TAI FOOK

RECOMMENDATION

INTRODUCTION

DESCRIPTION OF THE SUBJECT BUSINESS ENTERPRISE

VALUATION PROCEDURES ADOPTED

THE BASIS OF VALUATION

APPROACHES TO VALUE

The Market Approach

The Income Approach

Asset-based Approach

VALUATION METHODOLOGY AND ASSETS VALUED

Financial Assets

Tangible Assets

Real estate related

1. Dongguan of China

2. Aberdeen of Hong Kong

3. Vancouver of Canada

Non-real estate related

Intangible Assets

Trademark of “Accutech”

Patent of “Parallel Beam”

VALUATION COMMENTS AND CAVEATS

OPINION OF VALUE

STAR SHINE HOLDINGS GROUP LIMITED Proxy Solicitation & Information Statement 2003