Television Broadcasts Limited — Proxy Solicitation & Information Statement 2005

Feb 18, 2005

IMPORTANT: THIS CIRCULAR REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or otherwise transferred all your shares in China Conservational Power Holdings Limited you should at once hand this circular to the purchaser(s) or transferee(s), licensed securities dealer or the bank manager, or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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.

==> picture [305 x 31] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 290)

REFRESHMENT OF GENERAL MANDATE TO ALLOT AND ISSUE SHARES AND REFRESHMENT OF THE LIMIT ON GRANT OF OPTIONS UNDER THE SHARE OPTION SCHEME

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

A letter from the Independent Board Committee is set out on page 11 of this circular and a letter from Guangdong Securities Limited to the Independent Board Committee and the Independent Shareholders is set out on pages 12 to 18 of this circular.

A notice convening an Extraordinary General Meeting of China Conservational Power Holdings Limited to be held at Unit 3606, 36/F, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Sheung Wan, Hong Kong on Friday, 18 March 2005 at 11:30 a.m. is contained in this circular. Shareholders are advised to read the notice and to complete and return the form of proxy enclosed in this circular to the Company’s branch registrar and transfer office in Hong Kong, Hong Kong Registrars Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time for holding the meeting. The completion and return of the form of proxy will not prevent you from attending and voting in person at the Extraordinary General Meeting or any adjournment thereof should you so wish.

18 February 2005

CONTENTS

	Page
RESPONSIBILITY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . .	11
LETTER FROM GUANGDONG SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
NOTICE OF THE EXTRAORDINARY GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . .	19

– i –

RESPONSIBILITY STATEMENT

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

– ii –

DEFINITIONS

In this circular the following terms have the following meanings unless the context requires otherwise.

• “2001 Scheme”

• the Company’s share option scheme adopted on 3 April 2001 and later terminated pursuant to a shareholders’ resolution dated 12 February 2003;

• “AGM”

• an annual general meeting of the Company held on 27 August 2004 authorising the Directors to allot and issue Shares up to 20% of the issued share capital of the Company at the date of the passing of the respective ordinary resolution;

• “associates” has the meaning ascribed thereto in the Listing Rules;

• “Board”

• the board of Directors;

• “Company”

• China Conservational Power Holdings Limited, a company incorporated in the Cayman Islands whose securities are listed on the Stock Exchange;

• “Current General Mandate”

• the general mandate approved at the AGM to grant to the Directors to allot and issue Shares up to 20% of the issued share capital of the Company as at the date of passing the respective ordinary resolution;

• “Director(s)” the directors of the Company;

• “Extraordinary General Meeting”

• an extraordinary general meeting of the Company to be convened on Friday, 18 March 2005 at 11:30 a.m. for approving the New General Mandate and refreshment of the Scheme Limit;

• “Group”

the Company and its subsidiaries;

• “Guangdong Securities”

• Guangdong Securities Limited, a corporation licensed to conduct types 1 (dealing in securities), 4 (advising in securities), 6 (advising on corporate finance) and 9 (asset management) regulated activities under the SFO, the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders in connection with the New General Mandate;

• “Listing Rules”

• The Rules Governing the Listing of Securities on the Stock Exchange;

• “HK$”

Hong Kong dollars, the lawful currency of Hong Kong;

– 1 –

DEFINITIONS

• “Hong Kong”

• The Hong Kong Special Administrative Region of the PRC;

• “Independent Board Committee”

• an independent committee of the Board, comprising Messrs. Fork Siu Lun, Tommy, Loo Chung Keung, Steve and Tsoi Wai Kwong, all of whom are independent nonexecutive Directors appointed by the Board to advise the Independent Shareholders in respect of the New General Mandate;

• “Independent Shareholders” Shareholders other than Mr. Hon and Mr. Chen and their respective associates;

• “Latest Practicable Date”

• 14 February 2005, being the latest practicable date for ascertaining certain information in this circular prior to its bulk printing;

• “Mr. Chen”

• Mr. Chen Jun Nong, an executive Director, who is interested in approximately 0.031% of the share capital of the Company as at the Latest Practicable Date;

• “Mr. Hon”

• Mr. Hon Ming Kong, an executive Director, who is deemed to be interested in approximately 15.23% of the share capital of the Company as at the Latest Practicable Date;

• “New General Mandate” the general mandate proposed to be granted the Directors to allot and issue up to 20% of the issued share capital of the Company as at the date of the Extraordinary General Meeting;

• “Option(s)” options to subscribe for Shares granted and to be granted under the Share Option Scheme

• “Placing”

• the placing of 64,454,000 shares of the Company as announced on 5 November 2004 and completed on 30 December 2004;

• “Proposed Acquisition”

• the proposed acquisition of up to 49% of the equity interest of a pharmaceutical products distribution and investment company in the PRC as announced by the Company in the announcements made by the Company dated 22 November 2004, 6 December 2004 and 3 February 2005, respectively;

• “PRC”

• The People’s Republic of China and for the sole purpose of this circular shall exclude Hong Kong, Macau Special Administrative Region and Taiwan;

– 2 –

DEFINITIONS

“SFO”	Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong);
“Scheme Limit”	the total number of Shares in respect of which options
	may be granted under the Share Option Scheme and any
	other share option schemes of the Company, not exceeding
	10% of the total issued share capital of the Company;
“Share Option Scheme”	the share option scheme of the Company which was
	adopted on 12 February 2003 and became valid and
	effective on the same day for a period of 10 years
	thereafter;
“Share(s)”	share(s) of HK$0.10 each in the capital of the Company;
“Shareholder(s)”	holder(s) of Shares;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“%”	per cent

– 3 –

LETTER FROM THE BOARD

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 290)

Executive Directors : Registered Office : Mr. Chan Tat Chee (Chairman) P.O. Box 309 Mr. Hon Ming Kong Ugland House Mr. Lee Yu Leung South Church Street Mr. Ting Pascal George Town, Grand Cayman Mr. Chen Jun Nong Cayman Islands Mr. Lin Hoi Kwong British West Indies

Non-executive Director: Mr. Li Yong, Alfa

Independent Non-executive Directors : Principal Place of Business in Mr. Fork Siu Lun, Tommy Hong Kong: Mr. Tsoi Wai Kwong Unit 3606, 36/F, Mr. Loo Chung Keung, Steve China Merchants Tower Shun Tak Centre 168-200 Connaught Road Central Sheung Wan Hong Kong 18 February 2005

• To the Shareholders and, for information only, holders of the share options of the Company

Dear Sir or Madam,

REFRESHMENT OF GENERAL MANDATE TO ALLOT AND ISSUE SHARES AND REFRESHMENT OF THE LIMIT ON GRANT OF SHARE OPTIONS UNDER THE SHARE OPTION SCHEME

INTRODUCTION

On 28 January 2005, the Company announced its intention to seek the approval of the Independent Shareholders for the New General Mandate and the approval of the Shareholders for the refreshment of the Scheme Limit.

The purpose of this circular is to provide you with information relating to: (i) the details of the New General Mandate; (ii) the recommendation from the Independent Board Committee; (iii) the recommendation from Guangdong Securities to the Independent Board Committee and the Independent Shareholders; (iv) the proposed refreshment of the Scheme Limit under the Share Option Scheme; and (v) a notice convening the Extraordinary General Meeting.

– 4 –

LETTER FROM THE BOARD

GENERAL MANDATES

At the AGM, the Shareholders approved, among other things, an ordinary resolution to grant to the Directors the Current General Mandate to issue Shares equal to an aggregate of up to 20% and to repurchase up to 10% of the issued share capital of the Company as at the date of the passing of the resolution. At the date of the AGM, there were 322,272,000 Shares, in issue and thus, the Directors were authorised to issue and allot 64,454,000 Shares under the Current General Mandate.

PLACING OF SHARES

On 5 November 2004, the Company announced the Placing at HK$0.23 per Share representing about 20% of the then existing issued share capital of the Company of 322,272,000 Shares and about 16.67% of the Company’s issued share capital of 386,726,000 Shares as enlarged by the Placing. The Placing was completed on 30 December 2004 and 64,454,000 Shares were allotted and issued under the Current General Mandate producing net proceeds of approximately HK$14.4 million. As the Group has not yet identified any appropriate investment opportunity, the entire net proceeds of the Placing in the amount of approximately HK$14.4 million have been retained for general working capital purpose.

During the period between the AGM and the Latest Practicable Date, no refreshment of the Current General Mandate had been sought.

NEW GENERAL MANDATE TO ALLOT AND ISSUE SHARES

At the Extraordinary General Meeting, ordinary resolutions will be proposed to the Independent Shareholders for approval on poll that the Directors be granted the New General Mandate to:

• (i) allot and issue not exceeding 20% of the issued share capital of the Company as at the date of passing the ordinary resolution; and

• (ii) such mandate be extended to Shares repurchased by the Company pursuant to the repurchase mandate granted to the Directors at the AGM to repurchase Shares up to 10% of the issued share capital of the Company as at the date of passing the relevant resolution.

As at the Latest Practicable Date, the Company had an aggregate of 386,726,000 Shares in issue. Subject to the passing of the ordinary resolution for the approval of the New General Mandate and on the basis that no further Shares are issued and/or repurchased by the Company between the Latest Practicable Date and the date of the Extraordinary General Meeting, the Company will be allowed under the New General Mandate to allot and issue up to 77,345,200 Shares being 20% of 386,726,000 Shares in issue as at the Latest Practicable Date.

REASONS FOR THE NEW GENERAL MANDATE

The issue of 64,454,000 Shares pursuant to the Placing resulted in the Current General Mandate being fully utilized and in an increase of the number of Shares in issue to 386,726,000 Shares as at the Latest Practicable Date, representing an increase of 20% from 322,272,000 Shares in issue at the time when the Current General Mandate was granted. The 64,454,000

– 5 –

LETTER FROM THE BOARD

Shares issued under the Current General Mandate represents approximately 16.67% of the issued share capital of the Company as at the Latest Practicable Date.

The principal activities of the Company are the operation of electrical engineering contracting business, electrical materials and component trading business and direct investments in Hong Kong and the PRC. As stated in the interim report of the Company for the six months ended 30 September 2004, the growing economy in the PRC, the introduction of Closer Economic Partnership Arrangement between the PRC and Hong Kong and the development of the Pan-Pearl Delta Region, enhanced trading and business relationship between Hong Kong and the PRC due to the increased business and investment opportunities in the PRC. The Company will continue its corporate strategy of exploring investment opportunities in the PRC in addition to developing its existing business, so as to provide Shareholders with a stable return to their investments in the Company. Save for the Proposed Acquisition, the Directors currently have not yet identified any suitable investment opportunities in the PRC although they are optimistic that suitable investment opportunities can be identified. As stated in the announcement made by Company dated 3 February 2005, the terms and conditions of the Proposed Acquisition, including the consideration have yet to be negotiated and finalised by the parties and the Proposed Acquisition may or may not be consummated.

As the Current General Mandate has been fully utilised and the proceeds from the Placing has been entirely allocated for use as working capital purposes, the Directors believe that the New General Mandate will provide the Company with flexibility in its future investments and development. The New General Mandate will enable the Company to take advantage of market conditions to raise additional funds for the Company in order to facilitate future direct investment or other investments when opportunities are identified and as the Board considers appropriate. The Company does not have any present plans to issue Shares.

REFRESHMENT OF THE LIMIT ON GRANT OF OPTIONS UNDER THE SHARE OPTION SCHEME

Pursuant to a shareholder’s resolution dated 12 February 2003, the 2001 Scheme was terminated and the Share Option Scheme was adopted. Outstanding Options granted pursuant to the 2001 Scheme continued to be subject to the provisions of the 2001 Scheme.

Under the rules of the Share Option Scheme:

• (i) the maximum number of Shares which may be issued upon the exercise of all outstanding Options granted and yet to be exercised under the Share Option Scheme and any other schemes of the Company must not exceed 30% of the Shares in issue from time to time. No Options may be granted under the Share Option Scheme or any other share option schemes of the Company if such grant would result in the above limit being exceeded;

• (ii) subject to Shareholders’ approval, the maximum number of Shares in respect of which Options may be granted under the Share Option Scheme shall not exceed 10% of the Shares in issue as at the date of the relevant approval, or the maximum number of Shares in respect of which options may be granted to any one employee may not exceed 1% of the Shares in issue from time to time in a 12 month period; and

– 6 –

LETTER FROM THE BOARD

• (iii) the Scheme Limit may be refreshed by Shareholders in general meeting provided that the total number of Shares which may be issued upon exercise of all Options to be granted under the Share Option Scheme and any other share option schemes of the Company shall not exceed 10% of the total number of Shares in issue as at the date of approval of the “refreshed” Scheme Limit. Options previously granted under the share Option Scheme and any other share option schemes of the Company (including those outstanding, cancelled or lapsed in accordance with the Share Option Scheme and any other share option schemes of the Company) will not be counted for the purpose of calculating the Scheme Limit as refreshed.

Based on 223,800,000 Shares in issue as at the date of adoption of the Share Option Scheme, the Scheme Limit is 22,380,000 Shares. During the period from the date of adoption of the Share Option Scheme to the Latest Practicable Date, the Scheme Limit has not been refreshed. As at the Latest Practicable Date, a total of 18,880,000 Options have been granted by the Company since the adoption of the 2001 Scheme. Options for a maximum of 3,500,000 Shares (representing approximately 0.9% of the issued share capital of the Company and approximately 11.05% of the Scheme Limit) may be granted under the Share Option Scheme before the refreshment of the Scheme Limit. With a total of 6,150,000 Options lapsed and no Options exercised, Options carrying the rights to subscribe for up to 12,730,000 Shares remain outstanding as at the Latest Practicable Date.

The Directors consider that the Company should refresh the Scheme Limit so that the Company will have more flexibility to provide incentives or rewards to participants for their contribution to the Group and/or to enable the Group to recruit and retain high-calibre employees and attract human resource that are valuable to the Group. If the refreshment of the Scheme Limit is approved at the Extraordinary General Meeting based on the 386,726,000 Shares in issue as at the Latest Practicable Date and up to the date of the Extraordinary General Meeting, the Directors will be able to grant options for up to a total of 38,672,600 Shares under the “refreshed” Scheme Limit, representing 10% of the total number of Shares in issue as at the date of the Extraordinary General Meeting. The total number of Shares which may be issued upon exercise of the “refreshed” Scheme Limit of 38,672,600 Shares together with all outstanding options as at the Latest Practicable Date carrying the right to subscribe 12,730,000 Shares is 51,402,600 Shares, representing about 13.3% of the total number of Shares in issue as at the date of the Extraordinary General Meeting. Assuming no further Shares are issued and no Shares are repurchased after the Latest Practicable Date and up to the date of the Extraordinary General Meeting, such percentage falls below the 30% limit as set by Rule 17.03(3) of the Listing Rules.

The Directors consider that the refreshment of the Scheme Limit will be for the benefit of the Company and the Shareholders as a whole that it enables the Company to reward and motivate participants of the Share Option Scheme to contribute to the success of the Group.

An ordinary resolution will be proposed at the Extraordinary General Meeting to approve the refreshment of the Scheme Limit. None of the Shareholders are required to abstain from voting at the Extraordinary General Meeting pursuant to Rule 17.03 of the Listing Rules.

Application will be made to the Stock Exchange for the listing of, and permission to deal in, any Shares, representing 10% of the total number of Shares in issue as at the date of the Extraordinary General Meeting approving the “refreshed” Scheme Limit, to be issued and allotted upon exercise of the options under the “refreshed” Scheme Limit.

– 7 –

LETTER FROM THE BOARD

EXTRAORDINARY GENERAL MEETING

Pursuant to Rule 13.36(4)(a) of the Listing Rules, the New General Mandate requires the approval of the Independent Shareholders at the Extraordinary General Meeting by poll at which the controlling Shareholders and their associates shall abstain from voting.

As at the Latest Practicable Date, there were no controlling Shareholders of the Company, as such, the Directors (excluding independent non-executive director) and the chief executive of the Company and their respective associates shall abstain from voting in favour of the ordinary resolution.

As at the Latest Practicable Date the following executive Directors held or are deemed to be interested under the SFO, the following shareholding in the share capital of the Company:

		Approximate percentage of
	Number of Shares	the issued share capital as at
Name of Director	held/interested in	the Latest Practicable Date
Mr. Hon_(Note 1)_	54,900,000	14.20%
Mr. Chen	120,000	0.03%

Note 1: These Shares are owned by Highworth Venture Limited, a company incorporated in the British Virgin Islands and wholly-owned by Mr. Hon.

Accordingly, under Rule 13.36(4)(a) of the Listing Rules, Mr. Hon and Mr. Chen and their respective associates will abstain from voting on the resolution in connection with the New General Mandate.

The Independent Board Committee, comprising Messrs. Fork Siu Lun, Tommy, Loo Chung Keung, Steve and Tsoi Wai Kwong, all of whom are independent non-executive Directors, has been established to advise the Independent Shareholders in respect of the New General Mandate. Mr. Tsoi Wai Kwong, an independent non-executive Director as at the Latest Practicable Date is interested in 174,000 Shares, representing approximately 0.04% of the issued share capital of the Company as at the Latest Practicable Date. Mr. Tsoi Wai Kwong is not required under the Listing Rules to abstain from voting on the resolution for the New General Mandate at the Extraordinary General Meeting. Guangdong Securities has been appointed the independent financial adviser to the Independent Board Committee and the Independent Shareholders in this regard.

The notice of the Extraordinary General Meeting and the form of proxy are enclosed in this circular. You are requested to complete the form of proxy and return it to the Company’s branch registrar and transfer office in Hong Kong, Hong Kong Registrars Limited, in accordance with the instructions printed thereon not less than 48 hours before the time fixed for holding the meeting, whether or not you intend to be present at the meeting. The completion and return of the form of proxy will not prevent you from attending and voting in person at the Extraordinary General Meeting should you so wish.

– 8 –

LETTER FROM THE BOARD

PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS

The Company’s Articles of Association sets out the procedure by which a poll may be demanded:

At any general meeting, a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is required under the Listing Rules or duly demanded (before or after the declaration of the results of the show of hands or on the withdrawal of any other demand for a poll). A poll may be demanded by:

• (i) the Chairman of the meeting; or

• (ii) at least five members present in person or in case of a corporation, by its duly authorised corporate representative or by proxy for the time being entitled to vote at the meeting; or

• (iii) any member or members present in person or in the case of a corporation, by its duly authorised corporate representative or by proxy and representing not less than onetenth of the total voting rights of all the members having the right to attend and vote at the meeting; or

• (iv) any member or members present in person or by a duly authorised corporate representative or by proxy and holding Shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all the Shares conferring that right.

RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee set out on page 11 of this circular which contains the recommendation of the Independent Board Committee to the Independent Shareholders concerning the New General Mandate and the letter from Guangdong Securities set out on pages 12 to 18 of this circular containing its advice to the Independent Board Committee and the Independent Shareholders in this regard. The Independent Board Committee, having taken into account the advice of Guangdong Securities in relation to the New General Mandate, is of the opinion that the New General Mandate is in the best interests of the Company and is fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the relevant resolution to be proposed at the Extraordinary General Meeting.

Furthermore, the Directors are of the opinion that the proposal to “refresh” the Scheme Limit is in the best interests of the Company and recommend the Shareholders to vote in favour of the relevant resolution to be proposed at the Extraordinary General Meeting.

– 9 –

LETTER FROM THE BOARD

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the Share Option Scheme are available for inspection at the principal place of business of the Company in Hong Kong at Unit 3606, 36/F, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Sheung Wan, Hong Kong during normal business hours on any business day from 18 February 2005 up to and including 4 March 2005 and at the Extraordinary General Meeting.

By Order of the Board of China Conservational Power Holdings Limited Chan Tat Chee Chairman

– 10 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 290)

18 February 2005

To the Independent Shareholders

Dear Sir or Madam

REFRESHMENT OF GENERAL MANDATE TO ALLOT AND ISSUE SHARES

We refer to the circular by the Company dated 18 February 2005 (the “Circular”) of which this letter forms part. Unless the context requires otherwise, capitalised terms used herein shall have the same meanings as defined in the Circular.

We have been appointed by the Board to advise the Independent Shareholders as to whether the terms of the proposed grant of the New General Mandate are fair and reasonable so far as the Independent Shareholders are concerned. Guangdong Securities has been appointed as the independent financial adviser to advise us in this respect.

Having considered the principal reasons and factors considered by, and the advice of Guangdong Securities, as set out in its letter of advice on pages 12 to 18 of the Circular, we are of the opinion that the grant of the New General Mandate is in the interests of the Company and the Shareholders as a whole and the terms of which are fair and reasonable so far as the Company and the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the Extraordinary General Meeting to approve the grant of the New General Mandate.

Yours faithfully, Yours faithfully, Yours faithfully, Fork Siu Lun, Tommy Loo Chung Keung, Steve Tsoi Wai Kwong Independent non-executive Independent non-executive Independent non-executive Director Director Director Member of the Independent Member of the Independent Member of the Independent Board Committee Board Committee Board Committee

– 11 –

LETTER FROM GUANGDONG SECURITIES

Set out below is the text of the letter of advice received from Guangdong Securities in relation to the New General Mandate for inclusion in this circular.

==> picture [53 x 32] intentionally omitted <==

18 February 2005

• To the Independent Board Committee and

• the Independent Shareholders of China Conservational Power Holdings Limited

Dear Sirs,

REFRESHMENT OF GENERAL MANDATE TO ALLOT AND ISSUE SHARES

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the refreshment of the general mandate to allot and issue shares of the Company (the “New General Mandate”), details of which are contained in the Letter from the Board in the circular issued to the Shareholders dated 18 February 2005 (the “Circular”), 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 requires otherwise.

The Board proposed to put forward an ordinary resolution for approval by the Independent Shareholders (by way of poll) at the Extraordinary General Meeting to consider and, if thought fit, to approve the following:

• (i) allot and issue not exceeding 20% of the issued share capital of the Company as at the date of passing the ordinary resolution; and

• (ii) such mandate be extended to Shares repurchased by the Company pursuant to the Current General Mandate.

Pursuant to Rule 13.36(4) of the Listing Rules, the New General Mandate requires the approval of the Independent Shareholders (by way of poll) at the Extraordinary General Meeting at which the controlling Shareholders, the Directors (excluding independent nonexecutive Directors), the chief executive of the Company and their respective associates shall abstain from voting in favour of the ordinary resolution. As at the Latest Practicable Date, there were no controlling Shareholders of the Company and Mr. Hon and Mr. Chen, being executive Directors of the Company collectively held or were deemed under the SFO to be interested in approximately 15.23% and 0.031% of the issued share capital of the Company respectively. Accordingly, Mr. Hon and Mr. Chen and their respective associates will abstain from voting on the resolution in connection with the New General Mandate.

– 12 –

LETTER FROM GUANGDONG SECURITIES

The Independent Board Committee, comprising Messrs. Fork Siu Lun, Tommy, Loo Chung Keung, Steve, and Tsoi Wai Kwong, all of whom are independent non-executive Directors, has been established to advise the Independent Shareholders as to whether the terms of the New General Mandate are fair and reasonable so far as the Independent Shareholders are concerned and whether the New General Mandate is in the interests of the Company and the Independent Shareholders as a whole.

In formulating our opinion, we have relied on the statements, information, opinions, facts and representations contained in the Circular, which have been provided by the Directors and representatives of the Company and we have assumed that all such information, statements, opinions and representations contained or referred to in the Circular or otherwise supplied to us by the Company are true, complete, accurate and relevant, and we have not independently verified the accuracy of such. We have also relied on the representations of the Directors that they have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular relating to the Company and they have made all reasonable inquiries, and that to the best of their knowledge and belief, there are no other material factors omitted from the information and representations supplied to us.

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 have assumed that all statements of belief, opinion and intention made by the Directors contained in and representations made or referred to in this Circular were true, accurate and complete at the time they were made and will continue to be so at the Latest Practicable Date and also assumed that all intentions of the Company and the Directors will be met or carried out as the case may be.

We consider that we have been provided with sufficient information to reach an informed view concerning the New General Mandate contained in the Circular in order to provide a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate and misleading. We have not, however, carried out any independent verification of the information, nor have we conducted any form of investigation into the businesses, operational aspects, financial standing and affairs of the Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendation to the Independent Board Committee and the Independent Shareholders relating to the New General Mandate, we have taken into consideration, inter alia, the following principal factors and reasons:

I. Background for the New General Mandate

The Company is principally engaged in the operation of electrical engineering contracting business, electrical materials and component trading business and direct investments in Hong Kong and the PRC.

– 13 –

LETTER FROM GUANGDONG SECURITIES

At the AGM held on 27 August 2004, the Shareholders approved, among other things, an ordinary resolution to grant to the Directors the Current General Mandate to issue Shares equal to an aggregate of up to 20% and to repurchase up to 10% of the issued share capital of the Company as at the date of passing of such resolution. At the date of the passing of that resolution, there were 322,272,000 Shares, in issue and thus, the Directors were authorized to issue and allot 64,454,000 Shares under the Current General Mandate.

On 5 November 2004, the Company entered into an agreement with Kingston Securities Limited for the placement of 64,454,000 new Shares (the “Placing”) on best effort basis. Details of the Placing were set out in the announcement of the Company dated 5 November 2004. All the new Shares were placed to independent third parties at the placing price of HK$0.23 each Share. As a result of the Placing, the Company has fully exercised the Current General Mandate granted at the AGM and the number of the Shares in issue was increased to 386,726,000 Shares as at the Latest Practicable Date. The 64,454,000 Shares issued under the Current General Mandate represent approximately 16.67% of the issued share capital of the Company as at the Latest Practicable Date. During the period between the AGM and the Latest Practicable Date, no refreshment of the Current General Mandate has been sought.

II. Terms of the New General Mandate

The Company will be required to seek the prior consent from the Shareholders for the allotment, issue or grant of Shares or securities convertible into Shares or rights to subscribe for Shares or such convertible securities, unless such allotment, issue or grant falls under the circumstances provided under Rule 13.36(2) of the Listing Rules. An ordinary resolution will be proposed at the Extraordinary General Meeting to obtain approval from the Independent Shareholders to refresh the Current General Mandate so that the Directors will be entitled to exercise the powers to allot and issue Shares not exceeding 20% of the aggregate nominal amount of the issued share capital of the Company as at the date of the Extraordinary General Meeting. The approval of the New General Mandate by the Shareholders is unconditional.

III. Reasons for the New Issue Mandate

In order to increase the financing flexibility for raising additional capital in case of any business opportunities that may arise in the future, the Board would like to seek for the approval of the Independent Shareholders at the Extraordinary General Meeting to refresh the general mandate to allot, issue and deal with Shares not exceeding 20% of the aggregate nominal amount of the issued share capital of the Company as at the date of passing the relevant resolution at the Extraordinary General Meeting.

– 14 –

LETTER FROM GUANGDONG SECURITIES

In arriving at our opinion in respect of the fairness and reasonableness of the New General Mandate, we have considered the following factors:

1. Diversification of the Group’s business

According to the latest interim report of the Group for the six months ended 30 September 2004, the Group has been taking diversification strategy to broaden its revenue base and balance its exposure to risks in different markets. The Group has diversified into waste combustion electric power business and logistic business and has been actively considering acquiring new business and identifying long-term investments that generate stable revenue and this has been evidenced from the Proposed Acquisition of up to 49% of equity interest in a pharmaceutical products distribution and investment company in the PRC. As stated in the announcement made by Company dated 3 February 2005, the terms and conditions of the Proposed Acquisition, including the consideration have yet to be negotiated and finalised by the parties and the Proposed Acquisition may or may not be consummated.

As stated in the latest interim report of the Group for the six months ended 30 September 2004, in view of the swift growth economy in the PRC, the introduction of Closer Economic Partnership Arrangement between the PRC and Hong Kong, and the development of the Pan-Pearl Delta Region to enhance the trading business relationship between Hong Kong and the PRC, the Group may continue to explore investment opportunities in the PRC in addition to developing its existing business which provide Shareholders with a stable returns to their investments in the Company. Based on the interim report for the six months ended 30 September 2004, the cash and bank balances of the Group were approximately HK$21.53 million which are sufficient to finance its daily operation. However, there is no certainty that such cash and bank balances will be adequate for future investments identified by the Group. In the event that the Group identified a suitable investment opportunity and does not have sufficient cash resources on hand, and it fails to obtain loans on terms which the Directors consider acceptable to the Group, or it cannot find other alternatives to finance the acquisition of such investment opportunity in a timely manner, the Group may lose its bid in an otherwise favorable investment. Therefore, the Directors consider allotment and issuance of new Shares will provide a means for the Group to obtain working capital so as to acquire potential profitable businesses in the PRC.

Based on the above facts and representations, we concur with the Directors’ view that the New General Mandate will enable the Company to take advantage of market conditions to raise additional funds for the Group to facilitate future direct investment or other investments when opportunities are identified or as the Directors think appropriate.

2. Financial flexibility

As discussed in the paragraph headed “Diversification of the Group’s business” above, the Group may continue to explore investment opportunities in the PRC to diversify its business with an objective to increase Shareholders’ returns, we consider that the granting of the New General Mandate could strengthen the capital base of the Company and enhance the financing flexibility of the Company to raise capital, if and

– 15 –

LETTER FROM GUANGDONG SECURITIES

when required, through placing of Shares for further development of the Group. While the Directors consider that investment decisions may have to be made should suitable investment opportunities arise, the New General Mandate would then provide the Company with the maximum flexibility allowed under the Listing Rules to take advantage of market conditions to raise additional capital, through placing of new Shares as consideration, for funding such investments in the future when opportunities are identified and as Directors think appropriate. As such, we consider that the increased amount of capital which may be raised under the New General Mandate will provide an additional financing alternative to the Group and will enable the Group to grasp future investments and development in a timely manner. As at the Latest Practicable Date, the Board has indicated that the Company has no current plan to issue securities.

3. Financial position of the Group

According to the interim report of the Group for the six months ended 30 September 2004, there was a net loss attributable to Shareholders of approximately HK$24.7 million, increased significantly by approximately 221% as compared with the net loss of approximately HK$7.7 million for the corresponding period in 2003. The bank borrowing of the Group as at 30 September 2004 was approximately HK$4,705,000, increased by approximately 5.4% as compared with that of approximately HK$4,466,000 as at 31 March 2004. The finance costs of the Group for the six months ended 30 September 2004 was approximately HK$185,000 and increased by approximately 26.7% as compared with that of approximately HK$146,000 for the corresponding period in 2003. In addition, the pledged bank deposits of the Group in order to secure banking facilities increased from approximately HK$4 million as at 31 March 2004 to approximately HK$8 million as at 30 September 2004. Based on such latest published accounts of the Group, the Directors consider that the Group may not obtain debt or bank financing at favorable terms should it require additional funding to capture business opportunities. Accordingly, the Directors consider that equity financing such as issuance of new Shares for cash or equity swaps will be more appropriate to fund potential investments/acquisitions despite the dilution effect of the exercise of the New General Mandate on the shareholding interests of the existing public Shareholders in the Company.

Based on the above facts, we concur with the Directors’ view that issuance of new Shares for cash or equity swaps can be more appropriate to fund potential investments/ acquisitions comparing to bank financing and debt issuance which will require fixed interest payments commitments and the New General Mandate will enhance the financing flexibility of the Company.

4. Other financing alternatives

Other than raising fund by way of issuing equity capital, the Board indicates that the Company may consider other financing methods such as bank financing, debt financing and funding through internal resources in order to meet its financing requirements arising from future development of the Group, depending on the then financial position, capital structure and cost of funding of the Group as well as the then market condition. The New General Mandate will serve as one of the alternatives for the Company to finance the Group’s businesses. We consider that it is sensible to make reference to the then financial position, capital structure and cost of funding of the Group as well as the then market condition in order to decide a suitable financing method for the future development or investment of the Group.

– 16 –

LETTER FROM GUANGDONG SECURITIES

5. Potential dilution to the shareholding of the Independent Shareholders

The table below sets out the shareholding structure of the Company as at the Latest Practicable Date and the respective shareholding structures of the Company upon full exercise of the New General Mandate (assuming no exercise of the options granted under the 2001 Scheme and the Share Option Scheme):

			Issued Shares with full	Issued Shares with full
	Issued	Shares as at the	exercise of the New
	Latest	Practicable Date	General Mandate
	No. of Shares	%	No. of Shares	%
		(Approximate)		(Approximate)
YSH Investments Limited
(Note 1)	39,572,000	10.23	39,572,000	8.52
Mr. Hon_(Note 2)_	54,900,000	14.20	54,900,000	11.83
AWH Fund Limited	27,366,000	7.08	27,366,000	5.89
Mr. Tsoi Wai Kwong
(independent non-executive
Director)	174,000	0.04	174,000	0.04
Mr. Chen (executive
Director)	120,000	0.03	120,000	0.03
Shares to be issued under
the New General Mandate	–	–	77,345,200	16.67
Public Shareholders	264,594,000	68.42	264,594,000	57.02
Total	386,726,000	100.00	464,071,200	100.00

Notes:

1. YSH Investments Limited is beneficially owned as to 90.40% by Mr. Lai Sai Sang, the former Chairman of the Company and currently director of certain subsidiaries of the Group.

2. These Shares are owned by Highworth Venture Limited, a company incorporated in the British Virgin Islands and wholly-owned by Mr. Hon.

Shareholders should note that the New General Mandate will and continue to be in force until the earlier of (i) the conclusion of the Company’s next annual general meeting, and (ii) the revocation or variation of the authority given under the relevant resolution to be proposed as ordinary resolution of the Shareholders in general meeting. Such duration is in compliance with Rule 13.36(3) of the Listing Rules.

As shown in the table above, upon full exercise of the New General Mandate, 77,345,200 Shares will be issued, representing approximately 20% of the existing issued share capital as at the Latest Practicable Date and approximately 16.67% of the enlarged issued share capital respectively.

– 17 –

LETTER FROM GUANGDONG SECURITIES

The aggregate shareholding of public Shareholders (excluding YSH Investments Limited, AWH Fund Limited, Mr. Hon, Mr. Chen, Mr. Tsoi Wai Kwong and their respective associates) will decrease from approximately 68.42% to approximately 57.02% upon full exercise of the New General Mandate, representing a potential maximum dilution of approximately 11.40%.

Taking into account that (i) the New General Mandate will provide an alternative of financing to the Group for future development of its business and potential investment as and when such opportunities arise; (ii) the New General Mandate will allow the increase in capital which may be raised by way of new equity issue under the New General Mandate, and (iii) the fact that the shareholding of all the Shareholders will be diluted proportionally to their respective shareholdings upon any utilization of the New General Mandate, we consider that such maximum potential dilution to the shareholdings of the Independent Shareholders is justifiable.

RECOMMENDATIONS

Having considered the factors and reasons stated above, we are of the opinion that the New General Mandate is fair and reasonable, so far as the Independent Shareholders are concerned and the New General Mandate is in the interests of the Company and the Independent Shareholders as a whole. Therefore, we advise the Independent Board Committee to recommend to the Independent Shareholders to vote in favor of the New General Mandate at the Extraordinary General Meeting.

Yours faithfully, For and on behalf of

GUANGDONG SECURITIES LIMITED C. K. Poon

Managing Director and Head of Corporate Finance Department

– 18 –

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 290)

NOTICE IS HEREBY GIVEN (the “Notice”) that an extraordinary general meeting (the “Meeting”) of China Conversational Power Holdings Limited (the “Company”) will be held at Unit 3606, 36/F, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Sheung Wan, Hong Kong on Friday, 18 March 2005 at 11:30 a.m. for the purposes of considering and, if thought fit, passing (with or without amendments) the followings as ordinary resolutions of the Company:

• A. “ THAT the mandate to issue shares of the Company given to the directors of the Company at the annual general meeting of the Company held on 27 August 2004 be and is hereby revoked and replaced by the following mandate:

• (I) THAT:

  • (a) subject to paragraph (c) of Item (I) of this resolution, the exercise by the directors of the Company during the Relevant Period of all the powers of the Company to allot, issue and deal with additional shares in the capital of the Company and to make or grant offers, agreements and options (including warrants, bonds, debentures, notes and other securities which carry rights to subscribe for or are convertible into shares of the Company) which might require the exercise of such power be and is hereby generally and unconditionally approved;

  • (b) the approval in paragraph (a) of Item (I) of this resolution shall authorize the directors of the Company during the Relevant Period to make or grant offers, agreements and options (including warrants, bonds, debentures, notes and other securities which carry rights to subscribe for or are convertible into shares of the Company) which might require the exercise of such power after the end of the Relevant Period;

  • (c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the directors of the Company pursuant to the approval in paragraph (a) of Item (I) of this resolution, otherwise than pursuant to (i) a Rights Issue, (ii) the exercise of any rights of subscription or conversion under any existing warrants, bonds, debentures, notes and other securities issued by the Company, (iii) any option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares of the Company or (iv) any scrip dividend or similar arrangement providing for the allotment of shares in lieu of the

– 19 –

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

whole or part of a dividend on shares of the Company in accordance with the Articles of Association of the Company, shall not exceed the aggregate of:

• (i) 20% of the aggregate nominal amount of the share capital of the Company in issue at the date of passing this resolution; and

• (ii) the aggregate nominal amount of share capital of the Company repurchased by the Company after the date of passing this resolution pursuant to the general mandate to repurchase shares given by the Company to the directors from time to time (subject to a maximum number equivalent to 10% of the then existing issued share capital of the Company),

and the said approval shall be limited accordingly;

• (d) for the purposes of this resolution:

“Relevant Period” means the period from the passing of this resolution until whichever is the earlier of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Articles of Association of the Company or any applicable laws to be held; and

• (iii) the revocation or variation of the authority given under this resolution by ordinary resolution of the shareholders of the Company in general meeting; and

“Rights Issue” means an offer of shares of the Company or issue of options, warrants or other securities giving the right to subscribe for shares of the Company, open for a period fixed by the directors of the Company to holders of shares whose names appear on the register of members of the Company (and, where appropriate, to holders of other securities entitled to the offer) on a fixed record date in proportion to their then holdings of such shares of the Company (or, where appropriate, such other securities), (subject in all cases to such exclusions or other arrangements as the directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognized regulatory body or any stock exchange in, any territory applicable to the Company).

• (II) THAT the directors of the Company be and are hereby authorized to exercise the powers of the Company referred to in paragraph (a) of Item (I) of this resolution in respect of the share capital of the Company referred to in subparagraph (bb) of paragraph (c) of Item (I) of such resolution.”

– 20 –

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

• B. “ THAT subject to and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting listing of, and permission to deal in, the shares of HK$0.10 each in the share capital of the Company (representing a maximum of 10% of the shares in issue as at the date of the passing of this resolution) to be issued pursuant to the exercise of options which may be granted under the Company’s share option scheme adopted on 12 February 2003 (the “Scheme”), the refreshment of the scheme limit on grant of options under the Scheme and any other share option schemes of the Company up to 10% of the shares in issue as at the date of the passing of this resolution (the “Refreshed Scheme Mandate Limit”) be and is hereby approved and any director of the Company be and is hereby authorized to do such act and execute such document to effect the Refreshed Scheme Mandate Limit.”

By Order of the Board of China Conservational Power Holdings Limited Chan Tat Chee Chairman

Hong Kong, 18 February 2005

Principal Place of Business in Hong Kong: Registered Office: Unit 3606, 36/F, China Merchants Tower P.O. Box 309 Shun Tak Centre Ugland House 168-200 Connaught Road Central South Church Street Sheung Wan George Town, Grand Cayman Hong Kong Cayman Islands British West Indies

Notes:

1. Any member of the Company entitled to attend and vote at the Meeting may appoint one or more than one proxy to attend and to vote in his stead. A proxy need not be a member of the Company.

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

3. In order to be valid, the proxy form duly completed and signed in accordance with the instructions printed thereon together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof must be delivered to the Company’s branch registrar and transfer office in Hong Kong, Hong Kong Registrars Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.

4. Whether or not you propose to attend the Meeting in person, you are strongly urged to complete and return the proxy form in accordance with the instructions printed thereon. Completion and return of the proxy form will not preclude you from attending the Meeting and voting in person if you so wish. In the event that you attend the Meeting after having lodged the proxy form, it will be deemed to have been revoked.

5. Votes of members of the Company on ordinary resolution (A) will be taken by poll and votes of members of the Company on ordinary resolution (B) will be taken on a show of hands.

– 21 –