Wai Kee Holdings Limited — Proxy Solicitation & Information Statement 2004

Mar 3, 2004

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Wai Kee Holdings Limited, you should at once hand this circular to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or the transfer was effected for transmission to the purchaser or the transferee.

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

==> picture [65 x 66] intentionally omitted <==

WAI KEE HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

DISCLOSEABLE TRANSACTION

3rd March, 2004

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
APPENDIX — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9

� i �

DEFINITIONS

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

“Agreement”	the agreement dated 3rd February, 2004 between Main Success,	the agreement dated 3rd February, 2004 between Main Success,	the agreement dated 3rd February, 2004 between Main Success,
	the Company, the Purchaser and Sun Hung Kai	Properties
	Limited;
“Asian Reward”	Asian Reward Development Limited, a company incorporated in
	the British Virgin Islands;
“Bank”	The Hongkong and Shanghai Banking Corporation Limited, being
	the bank to which the Property is currently mortgaged	to secure
	banking facilities for First Star;
“Board”	the board of directors of the Company;
“Company”	Wai Kee Holdings Limited, a company incorporated in	Bermuda,
	the shares of which are listed on the Main Board of		the
	Stock Exchange;
“Completion”	completion of the Disposal in accordance with the terms of		the
	Agreement (which has taken place on 26th February, 2004);
“Conditions”	the conditions of the Agreement;
“Consideration”	an aggregate consideration of HK$593.2 million, subject		to
	adjustments, for the Disposal;
“Directors”	the directors of the Company;
“Disposal”	the disposal of the Sale Share and the Loan pursuant to		the
	Agreement;
“First Star”	First Star Development Limited, a company incorporated in Hong
	Kong and 50% of the issued share capital of which is beneficially
	owned by Asian Reward;
“Independent Third Party”	a person independent of and not connected with	the chief
	executive, directors and substantial shareholders	of	the
	Company or its subsidiaries or their respective	associates
	(as defined in the Listing Rules);
“Latest Practicable Date”	1st March, 2004;
“Listing Rules”	The Rules Governing the Listing of Securities	on	the
	Stock Exchange;

� 1 �

DEFINITIONS

“Litigation”	High Court Action of First Instance Action No. 2761 of 2003
	between First Star (as plaintiff), the Hong Kong Housing
	Authority (as 1st defendant) and the Secretary of Justice (on
	behalf of the Government) (as 2nd defendant) in relation to the
	development of the Property;
“Loan”	the loan advanced by Main Success to Asian Reward and
	outstanding as at Completion;
“Main Success”	Main Success Investments Limited, a company incorporated in the
	British Virgin Islands and wholly owned by the Company;
“Modification”	the modification of the Government Grant to convert the Property
	from a home ownership scheme property to a private development
	property;
“NWS”	NWS Holdings Limited, a company incorporated in Bermuda, the
	shares of which are listed on the Main Board of the
	Stock Exchange;
“Property”	the property situated at Hung Hom Bay Reclamation Area,
	Kowloon, Hong Kong and registered in the Land Registry as
	Inland Lot No. 11076;
“Purchaser”	Newcourt Developments Limited, a company incorporated in the
	British Virgin Islands and a wholly owned subsidiary of Sun Hung
	Kai Properties Limited;
“Sale Share”	one share of US$1.00 in Asian Reward representing all the issued
	and paid up share capital of Asian Reward;
“SHK”	Sun Hung Kai Properties Limited, a company incorporated in
	Hong Kong whose shares are listed on the Main Board of the
	Stock Exchange;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Wai Kee Group”	the Company and its subsidiaries;
“Warrantors”	Main Success and the Company;
“Wealth March”	Wealth March Property Limited, a company incorporated in the
	British Virgin Islands and a subsidiary of NWS.

� 2 �

LETTER FROM THE BOARD

==> picture [65 x 66] intentionally omitted <==

WAI KEE HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

Directors:

William Zen Wei Pao (Chairman) Derek Zen Wei Peu (Vice Chairman) Keter Fong Shiu Leung Patrick Lam Wai Hon Leslie Cheng Chi Pang Steve Wong Che Ming Samuel Wan Siu Kau

Registered Office: Clarendon House Church Street Hamilton HM11 Bermuda

Principal place of business: Unit 702B, 7th Floor East Ocean Centre 98 Granville Road Tsimshatsui Kowloon Hong Kong

• Non-Executive Director

• ** Independent Non-Executive Director

3rd March, 2004

To the Shareholders

Dear Sir and Madam,

DISCLOSEABLE TRANSACTION

INTRODUCTION

The board of Directors announced on 3rd February, 2004 that Main Success, a wholly owned subsidiary of the Company, agreed to sell and the Purchaser agreed to purchase the entire issued share capital of Asian Reward through which the Company holds a 50% interest in the Property, and the Loan (being in the principal amount of approximately HK$108.7 million as at 3rd February, 2004), for an aggregate consideration of HK$593.2 million, subject to adjustment. Completion of the Agreement has taken place on 26th February, 2004.

� 3 �

LETTER FROM THE BOARD

THE AGREEMENT

On 3rd February, 2004, the parties specified below entered into the Agreement which contains terms including those described below.

Parties to the Agreement:

1. Main Success, a wholly owned subsidiary of the Company, as vendor;

2. the Company, as guarantor of the obligations of Main Success under the Agreement;

3. the Purchaser, an Independent Third Party;

4. SHK, an Independent Third Party, as guarantor of the obligations of the Purchaser under the Agreement.

Summary: Main Success agreed, conditionally, to sell and the Purchaser agreed to purchase the Sale Share and the Loan for an aggregate consideration of HK$593.2 million, subject to adjustment. Subject matter of purchase: The Sale Share represents the entire issued share capital of Asian Reward. Asian Reward beneficially owns 50% of the issued share capital of First Star, a company jointly controlled by Asian Reward and Wealth March, a subsidiary of NWS.

The Loan is the amount of the entire shareholder’s loan owing at Completion by Asian Reward to Main Success. As at the date of the Agreement, the principal amount of that shareholder’s loan was approximately HK$108.7 million.

Consideration: The aggregate Consideration is HK$593.2 million, subject to upward adjustment if there exists net assets (to be calculated on an agreed basis) or downward adjustment if there exists net liabilities (calculated on an agreed basis) of Asian Reward and First Star as at Completion. The adjusted consideration was approximately HK$596.65 million.

On the signing of the Agreement, the Purchaser has paid a deposit to stakeholders in the amount of HK$189 million, which was released on Completion.

� 4 �

LETTER FROM THE BOARD

The Consideration was arrived at after arms’ length negotiations among the parties, and agreed by the Company having regard to:

• (a) the total outstanding principal amount of the Loan;

• (b) the possible retail value of the units in the Property as a private development less historical land premium and construction costs paid, land premium payable for the Modification, cost of improvement works which are required before units in the Property could be sold to the mass market and financing costs;

• (c) the substantial increase in Wai Kee Group’s exposure to interest rate fluctuations due to its need to seek external finance for continuing with the development of the Property and the market risks inherent in the sale of private development projects.

The Directors consider, having regard to the above factors, that the Consideration is fair and reasonable so far as the Company is concerned. They note recent press reports in connection with the transaction contemplated under the Agreement.

Shareholders should note that (i) if the Property were to be sold with more than cosmetic improvements (which Wai Kee had taken into account when negotiating the Consideration), First Star will need to secure substantial further financing (which is likely to entail further capital injections by its shareholders); (ii) the Hong Kong property market is prone to volatility such that there is no assurance that all units in the Property could be sold (if at all) at a price and at such time which could guarantee a good return to First Star; and (iii) there are substantial carrying costs for the works which are to be undertaken at the Property and for the sales and marketing of the Property prior to the sale of units in the Property. In view of these factors and the associated risks and since Wai Kee Group has no prior private property development experience, the Directors do not consider that it is in the interests of the Company to refuse the opportunity to effect the Disposal.

� 5 �

LETTER FROM THE BOARD

Conditions:

Completion was conditional upon the fulfilment (or waiver, in certain cases as stated below) of various conditions precedent, being:

• (a) Main Success and the Purchaser being satisfied that documents for the release of certain obligations of the Company, Asian Reward and First Star are in an acceptable form and will be signed by the parties thereto at or before Completion;

• (b) the Bank having consented to the Modification;

• (c) Main Success having obtained necessary consent from the Bank for effecting the sale and purchase of the Sale Share and the Loan and the agreement of the Bank to release the guarantee executed by an Independent Third Party in favour of the Bank to secure existing banking facilities granted to First Star;

• (d) a formal letter of Modification and all necessary supporting documents being duly executed by First Star and evidence of the ability and intention of First Star to pay half of the balance of land premium payable under the Modification at or before the Completion Date (being the half share to be borne by Wealth March).

All the above conditions have been fulfilled.

Completion: Other terms:

Completion has taken place on 26th February, 2004.

Under the Agreement, the Purchaser has also agreed to pay to Main Success an amount equal to 50% of any award made in respect of the Litigation (net of taxation), provided that Main Success bears 50% of all costs, expenses and liabilities in connection with the Litigation.

� 6 �

LETTER FROM THE BOARD

INFORMATION ON THE COMPANY AND ASIAN REWARD

The Company is an investment holding company. Through its subsidiaries and associates it is principally engaged in the business of civil engineering, operation of quarries, bio-technology and investment in, development, operation and management of toll highways and expressways.

Asian Reward is an investment holding company incorporated in the British Virgin Islands on 15th February, 2001. Its principal assets are its 50% interest in First Star and shareholder’s loans due from First Star. The unaudited net loss before and after taxation and extraordinary items for the period from its incorporation to 31st December, 2002 and for the year ended 31st December, 2003 were as follows:

	Incorporation to	Year ended
	31/12/2002	31/12/2003
Unaudited net loss before and after taxation and
extraordinary items	NIL	NIL

The unaudited net asset value of Asian Reward as at 31st December, 2003 was HK$8.

First Star is special purpose vehicle incorporated in Hong Kong on 21st May, 1999 and is engaged in the ownership, development and sale of the Property, originally as a home ownership scheme project. First Star has agreed the Modification with the Government, subject to fulfilment of certain conditions.

The audited net loss before and after taxation of First Star for the nine months ended 31st December, 2002 and the unaudited net loss before and after taxation of First Star for the year ended 31st December, 2003 were as follows:

	Nine months	Year ended
	ended 31/12/2002	31/12/2003
	(audited)	(unaudited)
Net loss before and after taxation and
extraordinary items	HK$51,876,000	HK$102,341,000

Its unaudited net liabilities as at 31st December, 2003 was HK$154,291,000.

� 7 �

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE TRANSACTION AND THE USE OF PROCEEDS

As disclosed above, First Star is engaged in the ownership, development and sales of the Property, which originally was to be a home ownership scheme project. With the change of Government policy in respect of home ownership scheme projects, the Property will be changed to a private sector property development, subject to the signing of the terms of the Modification and payment in full of the related land premium amounting to HK$864 million in total. Wai Kee Group is not a private property developer and has no expertise in the development, sales and marketing of private property developments. Accordingly, since the Purchaser is willing to offer a reasonable price for the Sale Share and the Loan, the Directors consider the Disposal represents a good opportunity for Wai Kee Group to realise its investment in Asian Reward, and to concentrate in its core businesses. With Completion having taken place, the Company and its subsidiaries no longer has any obligation to pay any part of the balance of the land premium payable for the Modification.

The net proceeds from the Disposal of approximately HK$490 million will be used as to approximately HK$150 million to repay the bank financing of Wai Kee Group (the principal amount outstanding amounted to approximately HK$185 million in aggregate as at 31st January, 2004 of which approximately HK$80 million is repayable after one year) and the remaining proceeds of approximately HK$340 million to be used as general working capital and for making opportunistic investments (including, possibly, for the development of its bio-technology business) if appropriate opportunities arise. No such investments have yet been identified as at the Latest Practicable Date. The Company will comply with the relevant requirements of the Listing Rules in respect of any such future investments.

The excess of the Consideration over the paid up capital on the Sale Share and the face value of the Loan (being the Company’s total investment in the Property project) and the expenses of Wai Kee Group in connection with the Disposal is approximately HK$390 million. Wai Kee Group will also be able to reverse its share of losses (of approximately HK$50 million) incurred by First Star and recognize the unrealized construction profit (of approximately HK$40 million) generated from the Property project as recorded in the Company’s financial statements for the nine months ended 31st December, 2002 and the year ended 31st December, 2003.

ADDITIONAL INFORMATION

Your attention is drawn to the General Information incorporated in the appendix to this circular.

Yours faithfully, By Order of the Board Derek Zen Wei Peu Vice Chairman

� 8 �

GENERAL INFORMATION

APPENDIX

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.

DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”)) which are required to be notified to the Company and the Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of SFO) or are required to be entered in the register maintained by the Company pursuant to section 352 of the SFO or are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange were as follows:

(I) The Company

• (a) Interests in shares

	Capacity/	**Number of **	Shares held	Percentage
Name of Director	Nature of interest	Long position	Short position	of holding
				(%)
William Zen Wei Pao	Personal	187,381,843 (note 1)	�	23.86*
	Personal	5,000,000 (note 2)	�	0.64*
Derek Zen Wei Peu	Personal	176,833,078 (note 1)	�	22.52
Patrick Lam Wai Hon	Personal	500,000 (note 2)	�	0.06
Leslie Cheng Chi Pang	Personal	500,000 (note 2)	�	0.06
Steve Wong Che Ming	Personal	1,100,000 (note 1)	�	0.14

Notes:

• 1 Long position in the shares (other than pursuant to equity derivatives such as share options, warrants to subscribe or convertible bonds).

• 2 Long position in the underlying shares of the Company pursuant to unlisted equity derivatives (including physically settled, cash settled and other equity derivatives). Share options granted to directors or chief executives are included in this category the particulars of which are set out in (I)(b) below.

• As at the Latest Practicable Date, the issued share capital of the Company is 785,449,034 shares. Accordingly, the percentage has been adjusted.

� 9 �

APPENDIX

GENERAL INFORMATION

• (b) Interests in underlying shares through equity derivatives

		Vesting		Exercise	Number of
Name of Director	Date granted	period	Exercisable period	price	share options
				HK$
William Zen Wei Pao	29th November, 2000	3 years	29th November, 2001 to	0.34	5,000,000
			28th November, 2004
Patrick Lam Wai Hon	29th November, 2000	3 years	29th November, 2001 to	0.34	500,000
			28th November, 2004
Leslie Cheng Chi Pang	29th November, 2000	3 years	29th November, 2001 to	0.34	500,000
			28th November, 2004

(II) Associated Corporation

• (a) Interests in shares

		Capacity/
		Nature of	Number of Shares held		Percentage of
Name of Director	Name of company	interest	Long position	Short position	holding
					(%)
William Zen Wei Pao	Road King Infrastructure	Personal	2,500,000 (note 2)	�	0.43
	Limited
	Wai Kee (Zens) Construction	Personal	2,000,000 (note 1)	�	10.00
	& Transportation
	Company Limited
	Wai Luen Stone Products	Personal	30,000 (note 1)	�	37.50
	Limited
Derek Zen Wei Peu	Road King Infrastructure	Personal	300,000 (note 1)	�	0.05
	Limited	Personal	1,300,000 (note 2)		0.22
	Wai Kee (Zens) Construction	Personal	2,000,000 (note 1)	�	10.00
	& Transportation
	Company Limited
	Wai Luen Stone Products	Personal	30,000 (note 1)	�	37.50
	Limited
Keter Fong Shiu Leung	Road King Infrastructure	Personal	1,000,000 (note 2)	�	0.17
	Limited

Notes:

• 1 Long position in the shares (other than pursuant to equity derivatives such as share options, warrants to subscribe or convertible bonds).

• 2 Long position in the underlying shares of the Company pursuant to unlisted equity derivatives (including physically settled, cash settled and other equity derivatives). Share options granted to directors or chief executives are included in this category the particulars of which are set out in (II)(b) below.

� 10 �

APPENDIX

GENERAL INFORMATION

• (b) Interests in underlying shares through equity derivatives

		Vesting		Exercise	Number of
Name of Director	Date granted	period	Exercisable period	price	share options
				HK$
William Zen Wei Pao	17th October, 2003	5 years	17th October, 2003 to	5.15	2,500,000
			16th October, 2008
Derek Zen Wei Peu	17th October, 2003	5 years	17th October, 2003 to	5.15	1,300,000
			16th October, 2008
Keter Fong Shiu Leung	17th October, 2003	5 years	17th October, 2003 to	5.15	1,000,000
			16th October, 2008

Save as disclosed above, none of the Directors or chief executives or their associates has any interests or short positions in any shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of the SFO) as recorded in the register to be kept under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange.

SUBSTANTIAL SHAREHOLDERS

(I) The Company

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons (other than a director or chief executive of the Company), who have interests or short positions in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO:

the SFO:
		Capacity/
		Nature of	**Number of **	shares held		Percentage of
Name of shareholder	Name of company	interest	Long position	**Short **	position	holding
						(%)*
Chow Tai Fook Enterprises Limited	Wai Kee Holdings	Corporate	213,868,000 (note 1)		�	27.23
(note A)	Limited
New World Development	Wai Kee Holdings	Corporate	213,868,000 (note 1)		�	27.23
Company Limited	Limited
(note B)
NWS Holdings Limited	Wai Kee Holdings	Corporate	213,868,000 (note 1)		�	27.23
(note C)	Limited
NWS Service Management Limited	Wai Kee Holdings	Corporate	213,868,000 (note 1)		�	27.23
(note D)	Limited
NWS Service Management Limited	Wai Kee Holdings	Corporate	213,868,000 (note 1)		�	27.23
(note E)	Limited
Vast Earn Group Limited	Wai Kee Holdings	Personal/	213,868,000 (note 1)		�	27.23
(note F)	Limited	Beneficiary

� 11 �

GENERAL INFORMATION

APPENDIX

Notes:

• 1 Long position in the shares (other than pursuant to equity derivatives such as share options, warrants to subscribe or convertible bonds).

• A Chow Tai Fook Enterprises Limited is deemed to be interested in the shares through its interests in more than one-third of the issued share capital of New World Development Company Limited.

• B New World Development Company Limited is deemed to be interested in the shares through its interests in more than one-third of the issued share capital of NWS Holdings Limited.

• C NWS Holdings Limited is deemed to be interested in the shares through its interests in its wholly owned subsidiaries, namely NWS Service Management Limited (incorporated in the Cayman Islands), NWS Service Management Limited (incorporated in the British Virgin Islands) and Vast Earn Group Limited.

• D NWS Service Management Limited (incorporated in the Cayman Islands) is deemed to be interested in the shares through its interests in its wholly owned subsidiary, namely NWS Service Management Limited (incorporated in the British Virgin Islands).

• E NWS Service Management Limited (incorporated in the British Virgin Islands) is deemed to be interested in the shares through its interests in its wholly owned subsidiary, namely Vast Earn Group Limited.

• F Vast Earn Group Limited is a wholly owned subsidiary of NWS Service Management Limited (incorporated in the British Virgin Islands).

• As at the Latest Practicable Date, the issued share capital of the Company is 785,449,034 shares. Accordingly, the percentage has been adjusted.

� 12 �

GENERAL INFORMATION

APPENDIX

(II) Other members of Wai Kee Group

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company and save as otherwise disclosed in this Circular, the persons (other than a Director or chief executive of the Company or a member of Wai Kee Group) who were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of Wai Kee Group were as follows:

		Approximate
		percentage of
Name of subsidiary	Name of shareholder	interest held
		(%)
Cheuk Wah Construction	Goldky Industries Limited	40
Engineering Limited
Eastar Construction	Fulight Engineering Limited	20
Engineering Limited
Grandeur Building Material	Proficiency Building Materials	20
(Shanghai) Limited	and Equipment Limited
	Tse Pang	20
Huge Host Engineering Limited	Downer Mining (Asia) Limited	30
Wuhan Nature’s Favour	Wuhan Green Century	18
Bioengineering Company Limited	Biotechnical Company
	Limited

Save as disclosed above, no other person (other than a director or chief executive of the Company) has an interest or a short position in the shares and underlying shares of the Company as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO and no other persons (other than a Director or chief executive of the Company or a member of Wai Kee Group) were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of Wai Kee Group or had any options in respect of any such share capital of any other member of Wai Kee Group.

� 13 �

GENERAL INFORMATION

APPENDIX

SERVICE CONTRACTS

Save as disclosed below, as at the Latest Practicable Date, none of the Directors has entered into or proposes to enter into any service contract with any member of Wai Kee Group (excluding contracts expiring or determinable by the relevant member of Wai Kee Group within one year without payment of compensation (other than statutory compensation)).

Each of Mr. William Zen Wei Pao, Mr. Derek Zen Wei Peu and Mr. Keter Fong Shiu Leung has entered into service contracts with Wai Kee Group for a term of three years commencing from 1st August, 2003.

LITIGATION

Neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

OTHER INFORMATION

• (i) The secretary of the Company is Mr. Keter Fong Shiu Leung, a certified practising accountant in Australia and also a fellow member of The Hong Kong Society of Accountants.

• (ii) The branch share registrar of the Company in Hong Kong is Secretaries Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (iii) In the event of inconsistency, the English text of this circular shall prevail over the Chinese text.

� 14 �