THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR · PDF filewholly-owned by Shanwei City Hong Hai...

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

If you have sold or transferred all your shares in Chun Wo Development Holdings Limited, you shouldat once hand this circular and the accompanying form of proxy to the purchaser or the transferee or thebank, registered institution in securities or other agent through whom the sale or transfer was effected fortransmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take noresponsibility for the contents of this circular, make no representation as to its accuracy or completenessand expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance uponthe whole or any part of the contents of this circular.

(incorporated in Bermuda with limited liability)

(Stock Code: 711)

DISCLOSEABLE AND CONNECTED TRANSACTIONINVOLVING ISSUE OF CONSIDERATION SHARES

ACQUISITION OF THE REMAINING 62% EQUITY INTERESTS INMANDARIN GROUP LIMITED

Financial adviser to the Company

Independent Financial Adviser to the Independent Board Committeeand the Independent Shareholders

A letter from the Independent Board Committee containing its recommendation to the IndependentShareholders is set out on page 12 of this circular. A letter from Ample Capital, containing its advice to theIndependent Board Committee and the Independent Shareholders, is set out on pages 13 to 23 of thiscircular.

A notice convening the SGM to be held at Tang Room, 3rd Floor, Sheraton Hong Kong Hotel & Towers, 20Nathan Road, Kowloon, Hong Kong on 16 March 2010, Tuesday at 11:30 a.m. is set out on pages SGM-1 toSGM-2 of this circular. A form of proxy for use at the SGM is enclosed. Whether or not you are able toattend the SGM in person, you are requested to complete and sign the enclosed form of proxy, inaccordance with the instructions printed thereon, and return it to the principal place of business of theCompany in Hong Kong at C2, 5th Floor, Hong Kong Spinners Industrial Building, 601-603 Tai Nan WestStreet, Cheung Sha Wan, Kowloon, Hong Kong, as soon as possible but in any event no later than 48 hoursbefore the time appointed for holding of the SGM (or any adjournment thereof). Completion and return ofthe form of proxy will not preclude you from attending and voting in person at the SGM (or anyadjournment thereof) if you so wish.

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

25 February 2010

Page

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . 12

Letter from Ample Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Appendix I – Valuation Report on the Project Site . . . . . . . . . . . . . . . . . . I-1

Appendix II – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1

Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SGM-1

CONTENTS

– i –

In this circular, the following expressions shall have the meanings set out below unless the

context requires otherwise:

“Acquisition” the acquisition of the Sale Shares and the Sale Loanpursuant to the Sale and Purchase Agreement

“Ample Capital” Ample Capital Limited, the independent financialadviser to the Independent Board Committee and theIndependent Shareholders in relation to the terms ofthe Sale and Purchase Agreement and the transactionscontemplated thereunder (including but not limitedto the allotment and issue of the ConsiderationShares)

“Announcement” the announcement of the Company dated 5 February2010 in relation to the Acquisition

“associate(s)” has the meaning ascribed to it under the Listing Rules

“Board” the board of Directors

“Company” Chun Wo Development Holdings Limited, a companyincorporated in Bermuda with limited liability, theshares of which are listed on the Main Board of theStock Exchange

“Completion” the completion of the Acquisition pursuant to the Saleand Purchase Agreement (including but not limited tothe allotment and issue of the Consideration Shares)

“connected person(s)” has the meaning ascribed to it under the Listing Rules

“Consideration” the consideration of HK$36.1 million payable by thePurchaser to the Vendor for the purchase of the SaleShares and Sale Loan under the Sale and PurchaseAgreement

“Consideration Shares” 56,406,250 new Shares to be allotted and issued by theCompany to the Vendor or its nominees uponCompletion pursuant to the Sale and PurchaseAgreement

“Director(s)” director(s) of the Company

“Group” the Company and its subsidiaries

DEFINITIONS

– 1 –

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

“Hong Kong” the Hong Kong Special Administrative Region of thePRC

“Independent BoardCommittee”

the independent board committee of the Companycomprising all the independent non-executiveDirectors established for the purpose ofrecommending the Independent Shareholders inrelation to the terms of the Sale and PurchaseAgreement and the transactions contemplatedthereunder (including but not limited to the allotmentand issue of the Consideration Shares)

“Independent Shareholders” the Shareholders (other than the Vendor, Mr. Pang andtheir respective associates) who are not connected tothe Vendor or its associates and are entitled to vote atthe SGM

“Latest Practicable Date” 22 February 2010, being the latest practicable dateprior to the printing of this circular for ascertainingcertain information for inclusion in this circular

“Listing Rules” the Rules Governing the Listing of Securities on theStock Exchange

“Mr. Pang” Mr. Pang Kam Chun, an executive Director andcontrolling Shareholder

“PRC” the People’s Republic of China which, for the purposeof this circular, excludes Hong Kong, the MacauSpecial Administrative Region of the PRC and Taiwan

“Project Site” the property development site which is located atShanwei, Guangdong Province, the PRC and iswholly-owned by Shanwei City Hong Hai

“Purchaser” Chun Wo China Construction Limited, a companyincorporated in the British Virgin Islands with limitedliability and a wholly-owned subsidiary of theCompany

“RMB” Renminbi, the lawful currency of the PRC

DEFINITIONS

– 2 –

“Sale and Purchase Agreement” the sale and purchase agreement dated 5 February2010 entered into between the Vendor and thePurchaser in relation to the Acquisition

“Sale Loan” the entire shareholder ’s loan due and owing by theTarget Company to the Vendor as at Completion

“Sale Shares” 16,120,000 shares of the Target Company, representing62% of the total issued share capital of the TargetCompany

“SGM” the special general meeting of the Company to beconvened and held to consider, and if thought fit, toapprove the Sale and Purchase Agreement and thetransactions contemplated thereunder (including butnot limited to the allotment and issue of theConsideration Shares)

“Shanwei City Hong Hai” 汕尾市紅海大酒店有限公司 (Shanwei City Hong HaiHotel Co. Ltd.*) , a sino-foreign co-operativeenterprise (中外合作企業) established in the PRC

“Shareholder(s)” holder(s) of the Shares

“Shares” ordinary shares of HK$0.10 each in the share capital ofthe Company

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Target Company” Mandarin Group Limited, a company incorporated inthe British Virgin Islands with limited liability and is38% owned by the Group and 62% owned by theVendor as at the Latest Practicable Date

“Target Group” the Target Company and Shanwei City Hong Hai

“Valuation Report” the valuation report issued by CB Richard EllisLimited on the Project Site and set out in Appendix Ito this circular

“Vendor” Pacific Group Limited, a company incorporated in theBritish Virgin Islands with limited liability and iswholly-owned by Mr. Pang

“%” per cent.

For the purpose of this circular and for illustration purpose only, amounts denominated inRMB have been translated into HK$ at an exchange rate of RMB1.0 = HK$1.13.

* For identification purpose only

DEFINITIONS

– 3 –


(Stock Code: 711)

Executive Directors:Mr. Pang Kam Chun (Chairman)Mr. Kwok Yuk Chiu, Clement (Managing Director)Madam Li Wai Hang, Christina

Independent Non-executive Directors:Mr. Au Son YiuMr. Chan Chiu YingMr. Hui Chiu Chung JP

Mr. Lee Shing See GBS, OBE, JP

Registered office:Clarendon House2 Church StreetHamilton, HM11Bermuda

Head office and principal place ofbusiness in Hong Kong:

C2, 5th FloorHong Kong Spinners Industrial

Building601-603 Tai Nan West StreetCheung Sha WanKowloonHong Kong

25 February 2010

To the Shareholders

Dear Sirs,



INTRODUCTION

On 5 February 2010, the Purchaser, a wholly-owned subsidiary of the Company,entered into the Sale and Purchase Agreement with the Vendor, pursuant to which thePurchaser has conditionally agreed to acquire and the Vendor has conditionally agreed tosell (i) the Sale Shares, representing 62% of the issued share capital of the Target Company;and (ii) the Sale Loan, representing the entire shareholder ’s loan due and owing by theTarget Company to the Vendor as at Completion at the Consideration of HK$36.1 million,which shall be satisfied by procuring the Company to allot and issue 56,406,250Consideration Shares to the Vendor at an issue price of HK$0.64 per Consideration Shareupon Completion.

LETTER FROM THE BOARD

– 4 –

The purpose of this circular is to provide you with, among other things, (i) furtherdetails of the Acquisition; (ii) a letter from the Independent Board Committee containingits recommendation to the Independent Shareholders in respect of the terms of the Saleand Purchase Agreement (including but not limited to the allotment and issue of theConsideration Shares); (iii) a letter from Ample Capital to the Independent BoardCommittee and the Independent Shareholders containing its advice to the IndependentBoard Committee and the Independent Shareholders in respect of the terms of the Sale andPurchase Agreement (including but not limited to the allotment and issue of theConsideration Shares); (iv) the Valuation Report; and (v) the notice of the SGM.

THE SALE AND PURCHASE AGREEMENT

The principal terms of the Sale and Purchase Agreement are set out below:

Date

5 February 2010

Parties

Vendor: Pacific Group Limited

Purchaser: Chun Wo China Construction Limited, a wholly-ownedsubsidiary of the Company

Pacific Group Limited is owned by Mr. Pang, an executive Director and controllingShareholder, and is principally engaged in investment holdings.

Asset to be acquired

Being (i) the Sale Shares, representing 62% of the issued share capital of the TargetCompany; and (ii) the Sale Loan, representing the entire shareholder ’s loan due andowing by the Target Company to the Vendor as at Completion. As at 31 December 2009, theSale Loan amounted to approximately HK$5,145,732. The Vendor has warranted that theSale Loan shall not be less than HK$5.1 million as at the date of Completion.

Consideration

The Consideration shall be HK$36.1 million and shall be satisfied by the Purchaserprocuring the Company to allot and issue 56,406,250 Consideration Shares to the Vendor(or its nominees) at an issue price of HK$0.64 per Consideration Share upon Completion.

The Consideration was determined after arm’s length negotiations between thePurchaser and the Vendor based on normal commercial terms and with reference to (a) theVendor ’s attributable interest in the unaudited adjusted net asset value of the TargetGroup as at 31 December 2009 of approximately HK$33.3 million which is derived fromthe sum of the Vendor ’s attributable interest in (i) the net asset value of the Target Groupas at 31 December 2009 of approximately HK$29.6 million; and (ii) an increase in value of


– 5 –

the Project Site of approximately HK$32.1 million, being the difference between thepreliminary appraised value of the Project Site as at 31 December 2009 and the carryingvalue of the Project Site as at 31 December 2009, net of deferred taxation; and (b) the SaleLoan of not less than HK$5.1 million as at the date of Completion.

The Consideration represents a discount of approximately 6% to the sum of (i)unaudited adjusted net asset value of the Target Group as at 31 December 2009; and (ii) theminimum value of the Sale Loan.

The Valuation Report of the Project Site prepared by CB Richard Ellis Limited, anindependent professional valuer, based on direct comparison approach is included inAppendix I to this circular.

Conditions precedent

Completion of the Sale and Purchase Agreement is conditional upon fulfillment ofthe following conditions:

(a) the Purchaser being reasonably satisfied with the results of the due diligencereview of the assets, liabilities, operations and affairs of the Target Group as itmay reasonably consider appropriate and the Vendor shall provide andprocure the Target Group and its agents to provide such assistance as thePurchaser or its agents may reasonably require in connection with suchreview;

(b) all necessary consents, licences and approvals required to be obtained on thepart of the Vendor and the Target Group in respect of the Sale and PurchaseAgreement and the transactions contemplated thereunder (including but notlimited to the allotment and issue of the Consideration Shares) having beenobtained and remain in full force and effect;

(c) the passing by the Independent Shareholders at the SGM to approve the Saleand Purchase Agreement and the transactions contemplated thereunder(including but not limited to the allotment and issue of the ConsiderationShares);

(d) the warranties given by the Vendor under the Sale and Purchase Agreementremaining true and accurate in all material respects; and

(e) the Listing Committee of the Stock Exchange granting the listing of, andpermission to deal in, the Consideration Shares on the Stock Exchange.

The Purchaser may at its absolute discretion at any time waive in writing condition(a) and (d) (to the extent it is capable of being waived). If any of the conditions have notbeen satisfied (or as the case may be, waived) on or before 4:00 p.m. on 31 March 2010, orsuch later date as the Vendor and the Purchaser may agree in writing, the Sale andPurchase Agreement shall cease and determine. As at the Latest Practicable Date, none ofthe conditions was fulfilled or waived.


– 6 –

Consideration Shares

On Completion, the Consideration Shares, having a total cash value ofapproximately HK$35.5 million based on the closing Share price of HK$0.63 as at theLatest Practicable Date, will be allotted and issued to the Vendor (or its nominees). TheConsideration Shares will be issued at the issue price of HK$0.64 per Consideration Sharewhich is determined by and equals to the average closing price of the Shares for the lastfive consecutive trading days immediately preceding the date of the Sale and PurchaseAgreement. Such issue price represents:

(i) a premium of approximately 1.59% over the closing price of the Shares ofHK$0.63 per Share as quoted on the Stock Exchange as at the LatestPracticable Date;

(ii) a premium of approximately 4.92% over the closing price of the Shares ofHK$0.61 per Share as quoted on the Stock Exchange on the date of theAnnouncement;

(iii) a premium of approximately 1.59% over the average closing price ofapproximately HK$0.63 per Share for the last ten consecutive trading days upto and including the date of the Announcement;

(iv) equals to the average closing price of approximately HK$0.64 per Share for thelast twenty consecutive trading days up to and including the date of theAnnouncement; and

(v) a discount of approximately 58.17% to the unaudited consolidated net assetvalue of the Company (attributable to the Shareholders) per Share ofapproximately HK$1.53 as at 30 September 2009.

The Consideration Shares comprising 56,406,250 Shares represent approximately6.56% of the existing issued share capital of the Company and approximately 6.16% of theissued share capital of the Company as enlarged by the allotment and issue of theConsideration Shares.

An application has been made to the Stock Exchange for the listing of andpermission to deal in the Consideration Shares. The Board will seek approval from theIndependent Shareholders at the SGM for the grant of a specific mandate for the issue ofthe Consideration Shares.


– 7 –

INFORMATION ON THE TARGET GROUP

The Target Company is principally engaged in investment holding and the principalasset of which is its interests in Shanwei City Hong Hai. Shanwei City Hong Hai is aproperty development company and the principal asset of which is the Project Site, whichis a property development site located at Shanwei, Guangdong Province, the PRC. TheProject Site is located close to northeastern section of Shanwei Middle Road, UrbanDistrict, Shanwei City, Guangdong Province, the PRC. The project has an expected totalgross floor area of approximately 73,055 square meters, comprising residential floor areaof approximately 65,641 square meters and commercial floor area of approximately 7,414square meters, and basement car park with gross floor area of approximately 7,069 squaremeters. The project is expected to comprise four residential towers, a two-storey shoppingmall and one-storey basement car park and is expected to be completed by the end of 2011.

Shanwei City Hong Hai was formed in 2003 with a total registered capital ofRMB18,000,000 (equivalent to approximately HK$20,340,000) and was paid in full by theTarget Company which in turn was financed by equity and shareholder ’s loan by theVendor. The Group acquired 38% equity interest of and shareholder ’s loan to the TargetCompany from the Vendor in May 2008.

Pursuant to the memorandum and articles of association of Shanwei City Hong Haidated 18 March 2003, 汕尾市商業企業集團公司 (Shanwei Commercial Corporate GroupLimited*), an independent third party, was responsible for facilitating Shanwei City HongHai to acquire the land use right of the Project Site, whilst the Target Company isresponsible for, amongst others, the development of the Project Site. To remunerateShanwei Commercial Corporate Group Limited’s effort in facilitating Shanwei City HongHai to acquire the land use right of the Project Site, the Target Company agreed to share10% of the profit of Shanwei City Hong Hai, if any, to Shanwei Commercial CorporateGroup Limited.

Set out below are certain audited consolidated financial information on the TargetGroup for each of the two financial years ended 31 March, prepared in accordance with theHong Kong Financial Reporting Standards:

For the yearended 31 March

2008 2009HK$ HK$

Profit/(loss) before taxation (35,182) 65,038Profit/(loss) attributable to shareholders (35,182) 65,038

Note: For each of the two financial years ended 31 March, there was no extraordinary items recorded inthe audited financial statements of the Target Group.

As per the Valuation Report set out in Appendix I to this circular, the valuation ofthe Project Site was amounted to HK$80.6 million as at 31 December 2009.



– 8 –

REASONS FOR AND BENEFIT OF THE ACQUISITION

The Company is an investment holding company. Its subsidiaries are principallyengaged in construction works, property development, property investment, and securityand property management services. The Group has expanded its investment portfolio inthe PRC for its property development and investment business by the acquisition of the38% equity interest in the Target Company in May 2008. The Directors are of the view thatsubstantial value can be further realized through the property development project andhence generating attractive returns to the Group in the medium to long term spectrum.Looking ahead, the Directors are optimistic about the development potential andprospects of the PRC property market. The Directors also consider that, subject to theactual operating performance of the Target Group in the future, the Acquisition wouldenhance the earning capabilities of the Group as enlarged by the Acquisition.

Therefore, the Directors consider that the terms of the Sale and Purchase Agreementand the transactions contemplated thereunder (including but not limited to the allotmentand issue of the Consideration Shares) and the issue price of the Consideration Shares ofHK$0.64 are fair and reasonable and in the interests of the Company and Shareholders asa whole.

SHAREHOLDING STRUCTURE OF THE COMPANY

The issued share capital of the Company (i) as at the Latest Practicable Date; and (ii)immediately upon Completion:

As at the LatestPracticable Date

Immediately uponCompletion

Shareholders No. of Shares App. % No. of Shares App. %

Mr. Pang 291,788,340 33.96 348,194,590 38.02Madam Li Wai Hang,

Christina (Note 1) 10,148,875 1.18 10,148,875 1.11GT Winners Limited

(Note 2) 129,348,294 15.05 129,348,294 14.13

Sub-total 431,285,509 50.19 487,691,759 53.26

Other Directors (Note 3) 4,461,816 0.52 4,461,816 0.49Public Shareholders 423,564,699 49.29 423,564,699 46.25

Total 859,312,024 100.00 915,718,274 100.00

Notes:

1. Madam Li Wai Hang, Christina is the spouse of Mr. Pang and a Director.

2. GT Winners Limited is a company wholly-owned by Mr. Pang.

3. Namely Mr. Kwok Yuk Chiu, Clement holding 4,160,000 Shares and Mr. Au Son Yiu holding301,816 Shares.


– 9 –

FINANCIAL EFFECT OF THE ACQUISITION

Prior to the Completion, the Target Company was an associated company of theCompany and its financial results was accounted for using the equity method. UponCompletion, the Target Company will become an indirect wholly-owned subsidiary of theCompany and its financial results will be fully consolidated into the Group.

The Directors expect that immediately upon Completion, the Acquisition will haveno significant effect on the earnings, and value of total assets and total liabilities of theGroup.

LISTING RULES IMPLICATION

As some of the applicable percentage ratios as defined in the Listing Rules exceed5% but is less than 25%, the Acquisition constitutes a discloseable transaction of theCompany under the Listing Rules. Mr. Pang is an executive Director and controllingShareholder. The Vendor is a connected person of the Company under Chapter 14A of theListing Rules by virtue of Mr. Pang’s interest in the Vendor. The Acquisition therefore alsoconstitutes a connected transaction of the Company under the Listing Rules and is subjectto the reporting, announcement and Independent Shareholders’ approval requirementsunder the Listing Rules.

The Independent Board Committee, comprising all of the four independentnon-executive Directors, has been established to advise and give recommendation to theIndependent Shareholders on the terms of the Sale and Purchase Agreement and thetransactions contemplated thereunder (including but not limited to the allotment andissue of the Consideration Shares). Each of the independent non-executive Directors hasno material interest in the Sale and Purchase Agreement and the transactionscontemplated thereunder (including but not limited to the allotment and issue of theConsideration Shares), therefore, each of them is regarded as eligible to be a member ofthe Independent Board Committee. Ample Capital has been appointed to advise theIndependent Board Committee and the Independent Shareholders in the same regard.

SGM

Set out on pages SGM-1 to SGM-2 of this circular is a notice convening the SGMwhich will be held at Tang Room, 3rd Floor, Sheraton Hong Kong Hotel & Towers, 20Nathan Road, Kowloon, Hong Kong on 16 March 2010, Tuesday, at 11:30 a.m. At the SGM,an ordinary resolution will be proposed to approve the Sale and Purchase Agreement andthe transactions contemplated thereunder (including but not limited to the allotment andissue of the Consideration Shares). Mr. Pang, who have material interests in the Sale andPurchase Agreement, and his associates (which together held 436,021,509 Shares as at theLatest Practicable Date) will abstain from voting at the SGM. Any vote exercised by theIndependent Shareholders at the SGM shall be taken by way of poll.


– 10 –

A form of proxy of the SGM is enclosed with this circular. Whether or not you areable to attend and vote at the SGM in person, you are requested to complete and sign theenclosed form of proxy, in accordance with the instructions printed thereon, and return itto the principal place of business of the Company in Hong Kong at C2, 5th Floor, HongKong Spinners Industrial Building, 601-603 Tai Nan West Street, Cheung Sha Wan,Kowloon, Hong Kong as soon as possible and in any event no later than 48 hours beforethe time appointed for holding of the SGM (or any adjournment thereof). Completion andreturn of the form of proxy will not preclude you from attending and voting in person atthe SGM (or any adjournment thereof) if you so wish.

RECOMMENDATION

The executive Directors consider that (i) the terms of the Sale and PurchaseAgreement and the transactions contemplated thereunder (including but not limited tothe allotment and issue of the Consideration Shares) are normal commercial terms and arefair and reasonable as far as the Shareholders are concerned; and (ii) the entering into ofthe Sale and Purchase Agreement is in the interests of the Company and the Shareholdersas a whole. Accordingly, the executive Directors recommend that the IndependentShareholders vote in favour of the ordinary resolution to be proposed at the SGM toapprove the Sale and Purchase Agreement and the transactions contemplated thereunder(including but not limited to the allotment and issue of the Consideration Shares).

Your attention is drawn to the letter of advice from Ample Capital set out on pages13 to 23 of this circular which contains its advice to the Independent Board Committee andthe Independent Shareholders in connection with the Sale and Purchase Agreement andtransactions contemplated thereunder (including but not limited to the allotment andissue of the Consideration Shares) and the letter of recommendation from the IndependentBoard Committee set out on page 12 of this circular which contains its recommendation tothe Independent Shareholders in relation to the same matters.

ADDITIONAL INFORMATION

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

By Order of the BoardChun Wo Development Holdings Limited

Clement Y.C. KwokManaging Director


– 11 –

The following is the text of the letter of recommendation to the Independent Shareholdersfrom the Independent Board Committee regarding the terms of the Sale and Purchase Agreementand the transactions contemplated thereunder (including but not limited to the allotment andissue of the Consideration Shares) for the purpose of incorporation into this circular.


(Stock Code: 711)

25 February 2010

To the Independent Shareholders

Dear Sirs,



We have been appointed as members of the Independent Board Committee to advisethe Independent Shareholders in respect of terms of the Sale and Purchase Agreement andthe transactions contemplated thereunder (including but not limited to the allotment andissue of the Consideration Shares), details of which are set out in the circular dated 25February 2010 (the “Circular”) to the Shareholders of which this letter forms a part. Unlessthe context otherwise requires, terms defined in the Circular shall have the same meaningswhen used in this letter.

Your attention is drawn to the advice of Ample Capital in respect of terms of the Saleand Purchase Agreement and the transactions contemplated thereunder (including butnot limited to the allotment and issue of the Consideration Shares) as set out in the letterfrom Ample Capital in the Circular. Having taken into account the advice of AmpleCapital, we consider that the terms of the Sale and Purchase Agreement and thetransactions contemplated thereunder (including but not limited to the allotment andissue of the Consideration Shares) are fair and reasonable as far as the IndependentShareholders are concerned and that the entering into of the Sale and Purchase Agreementis in the interests of the Company and the Independent Shareholders as a whole.Accordingly, we recommend the Independent Shareholders to vote in favour of theresolution to be proposed at the SGM to approve the Sale and Purchase Agreement and thetrsanctions contemplated thereunder (including but not limited to the allotment and issueof the Consideration Shares).

Yours faithfully,For and on behalf of the

Independent Board CommitteeAu Son Yiu Chan Chiu Ying

Hui Chiu Chung JP Lee Shing See GBS, OBE, JPIndependent Non-executive Directors

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

– 12 –

The following is the letter of advice to the Independent Board Committee and theIndependent Shareholders from Ample Capital regarding the terms of the Sale and PurchaseAgreement and the transactions contemplated thereunder (including but not limited to theallotment and issue of the Consideration Shares) for the purpose of incorporation into this circular.

Ample Capital LimitedUnit A, 14th FloorTwo Chinachem Plaza135 Des Voeux Road CentralHong Kong

25 February 2010

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,



INTRODUCTION

We refer to our engagement as the independent financial adviser to the IndependentBoard Committee and the Independent Shareholders on the Acquisition, details of whichare contained in the Letter from the Board (“the Letter from the Board”) contained in thecircular (the “Circular”) of the Company to the Shareholders dated 25 February 2010, ofwhich this letter forms part. Terms used in this letter have the same meanings as definedin the Circular unless the context otherwise requires.

On 5 February 2010, the Purchaser, a wholly-owned subsidiary of the Company,entered into the Sale and Purchase Agreement with the Vendor, pursuant to which thePurchaser has conditionally agreed to acquire and the Vendor has conditionally agreed tosell the Sale Shares and the Sale Loan, at a total consideration of HK$36.1 million, whichshall be satisfied by procuring the Company to allot and issue 56,406,250 ConsiderationShares to the Vendor at an issue price of HK$0.64 per Consideration Share uponCompletion.

Mr. Pang is an executive Director and controlling Shareholder. The Vendor is aconnected person of the Company under Chapter 14A of the Listing Rules by virtue of Mr.Pang’s interest in the Vendor. The Acquisition therefore constitutes a connectedtransaction of the Company under the Listing Rules and will be subject to the reporting,announcement and Independent Shareholders’ approval requirements under the ListingRules. In addition, as some of the applicable percentage ratios as defined in the ListingRules exceed 5% but is less than 25%, the Acquisition also constitutes a discloseabletransaction of the Company under the Listing Rules.

LETTER FROM AMPLE CAPITAL

– 13 –

Mr. Pang, who has material interests in the Sale and Purchase Agreement, and hisassociates will abstain from voting in the SGM. As at the Latest Practicable Date, Mr. Pangand his associates beneficially held 436,021,509 Shares, representing approximately50.74% of the issued share capital of the Company.

The Independent Board Committee has been established to advise whether theterms of the Acquisition are fair and reasonable and whether the Acquisition is in theinterests of the Company and its Independent Shareholders as a whole and to advise theIndependent Shareholders on how to vote. The Independent Board Committee comprisingMr. Au Son Yiu, Mr. Chan Chiu Ying, Mr. Hui Chiu Chung JP and Mr. Lee Shing See GBS,OBE, JP, all being independent non-executive Directors, has been formed to advise theIndependent Shareholders in this respect.

BASIS OF OUR ADVICE

In arriving at our recommendation, we have relied on the information and factsprovided by the Company and have assumed that any representations made to us are true,accurate and complete. We have also relied on the statements, information, opinions andrepresentations contained in the Circular and the information and representationsprovided to us by the Directors and management of the Company. We have assumed thatall information, representations and opinions contained or referred to in the Circular andall information, representations and opinions which have been provided by the Directorsand management of the Company for which they are solely responsible, are true andaccurate at the time they were made and will continue to be accurate at the date of thedespatch of the Circular.

The Directors jointly and severally accept full responsibility for the accuracy of theinformation contained in the Circular and confirm, having made all reasonable enquiries,that to the best of their knowledge and belief, opinions expressed in the Circular havebeen arrived at after due and careful consideration and there are no other facts notcontained in the Circular the omission of which would make any such statementcontained in the Circular misleading. We consider that we have been provided withsufficient information on which to form a reasonable basis for our opinion. We have noreason to suspect that any relevant information has been withheld, nor are we aware ofany fact or circumstance which would render the information provided andrepresentations and opinions made to us untrue, inaccurate or misleading. Having madeall reasonable enquiries, the Directors have further confirmed that, to the best of theirknowledge, they believe there are no other facts or representations the omission of whichwould make any statement in the Circular, including this letter, misleading. We have not,however, carried out any independent verification of the information provided by theDirectors and management of the Company, nor have we conducted an independentinvestigation into the business and affairs of the Group.


– 14 –

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

The principal factors and reasons that we have taken into consideration in assessingthe terms of the Acquisition and arriving at our opinion are set out as follows:

1. Background and reason for the Acquisition

(i) Background of the Target Group

The Target Company is principally engaged in investment holding andthe principal asset of which is its interests in Shanwei City Hong Hai. Prior toentering into the Acquisition, the Target Company was owned as to 38% bythe Purchaser and 62% by the Vendor.

Shanwei City Hong Hai is a sino-foreign co-operative enterprise (中外合作企業) established in 2003 with a total registered capital of RMB18,000,000(equivalent to approximately HK$20,340,000) between the Target companyand 汕尾市商業企業集團公司 (Shanwei Commercial Corporate GroupLimited*) and is principally engaged in property development. The principalasset of Shanwei City Hong Hai is a property development site located inShanwei, Guangdong Province, the PRC (the “Project Site”). The Project Site islocated close to northeastern section of Shanwei Middle Road, Urban District,Shanwei City, Guangdong Province, the PRC. The project has an expectedtotal gross floor area of approximately 73,055 square meters, comprisingresidential floor area of approximately 65,641 square meters and commercialfloor area of approximately 7,414 square meters and basement car park withgross floor area of 7,069 square meters. The project is expected to becompleted by the end of 2011.

Pursuant to the memorandum and articles of association of ShanweiCity Hong Hai dated 18 March 2003, Shanwei Commercial Corporate GroupLimited, the joint venture partner of the Target Company in Shanwei CityHong Hai, and the Target Company has agreed to share the profit of ShanweiCity Hong Hai as to 10% and 90% respectively.

According to the audited financial statements of the Target Group forthe year ended 31 March 2009 prepared in accordance with Hong KongFinancial Reporting Standards, the Target Group recorded a profit ofapproximately HK$65,000 and a loss of approximately HK$35,000 for thefinancial years ended 31 March 2009 and 2008 respectively. The unaudited netasset as at 31 December 2009 was approximately HK$29.6 million. Weunderstand that the profit was recorded for the financial year ended 31 March2009 only as a result of write back of design fee overstated in prior years.



– 15 –

(ii) Property market in the PRC and Guangdong Province

The economy in PRC had grown at a steady pace for the last 10 years, atan annual growth rate of over 10% for most of the years before 2008. Despitethe global economic crisis in the second half of 2008, the PRC economycontinued to grow at an impressive pace, the annual growth rate wasapproximately 8.7% in 2009. The fast growing PRC economy was mainlycontributed by the improvement of the entrepreneurship of the PRCcompanies and also by the relatively low labour cost. As a result, the GDP percapita was approximately RMB22,640 per capita in 2008 compared withapproximately RMB12,300 per capita in 2004.

2005 2006 2007 2008 2009

GDP (RMB Billion) 18,322 21,192 25,731 30,067 33,535Annual Growth Rate 10.4% 11.6% 13.0% 9.0% 8.7%

Source: National Bureau of Statistics of China

Shanwei is located at the northeast coast of Guangdong Province.According to the data from Guangdong Government, gross domestic productfrom real estate sector was approximately RMB107 billion for the first half of2009, representing an annual growth of approximately 23.4% from that of2008. The investment in fixed assets in Guangdong was approximatelyRMB525 billion for the first six months of 2009, representing a growth rate ofapproximately 15.5% from the same period of 2008. The total gross domesticproduct in Guangdong was approximately RMB1.65 trillion in the periodbetween January and June 2009, representing an approximately 7.1% growthrate from the same period the year before.

With the benefit of the fast growing PRC economy, the PRC propertyindustry has experienced a rapid growth over the past few years. Despite thefinancial crisis happened at the second half of 2008, both the PRC economyand PRC property market recovered strongly throughout 2009 as a result ofthe approximately RMB4 trillion stimulus package by the PRC government.According to data from the National Bureau of Statistics of China, over 70million square meters of residential properties were sold in GuangdongProvince for 2009 with a total value of approximately RMB458.5 billion,representing an annual growth rate of approximately 45% and 58.8%respectively from that of 2008.


– 16 –

(iii) Reasons for the Acquisition

The Group is principally engaged in construction works, propertydevelopment, property investments and security and property managementservices. In recent years, the Group has been expanding its investmentportfolio in the PRC for its property development and investment business.The acquisition of the 38% equity interest in the Target Company in May 2008represented the first step of the Group in such diversification move. As statedin the interim report of the Company for the six months ended 30 September2009, it is the plan of the Group to focus its efforts in Guangdong Province andHong Kong as regards the Group’s property development business. Havingconsidered that the Target Group’s principal asset is a property developmentsite located in Shanwei, Guangdong Province, we consider that theAcquisition is in line with the development plan of the Group.

Taking into consideration that (i) the property market in the GuangdongProvince is promising as mentioned in the paragraph headed “Propertymarket in the PRC and Guangdong Province” above; (ii) the Acquisition is inline with the development plan of the Group; and (iii) the Acquisition ismerely an acquisition of the remaining interest in an associated company ofthe Company and helps consolidate control of the Target Company which willenable the Group to implement policies efficiently, we are of the view that theAcquisition is in the interests of the Group and the Shareholders as a whole.

2. Terms of the Acquisition

(a) Consideration

The Consideration is HK$36.1 million. The Consideration wasdetermined after arm’s length negotiations between the Purchaser and theVendor based on normal commercial terms and with reference to (a) theVendor ’s attributable interest in the unaudited adjusted net asset value of theTarget Group as at 31 December 2009 of approximately HK$33.3 million whichis derived from the sum of the Vendor ’s attributable interest in (i) the net assetvalue of the Target Group as at 31 December 2009 of approximately HK$29.6million; and (ii) an increase in value of the Project Site of approximatelyHK$32.1 million, being the difference between the preliminary appraisedvalue of the Project Site as at 31 December 2009 of HK$80.6 million and thecarrying value of the Project Site as at 31 December 2009, net of deferredtaxation; and (b) the Sale Loan of not less than HK$5.1 million as at the date ofCompletion. The Consideration represents a discount of approximately 6% tothe sum of (i) the Vendor ’s attributable interest in the unaudited adjusted netasset value of the Target Group as at 31 December 2009; and (ii) the minimumvalue of the Sale Loan.


– 17 –

In assessing the fairness and reasonableness of the Consideration, wehave reviewed the valuation report (the “Valuation Report”) prepared by CBRichard Ellis Limited (“CBRE”), a qualified valuer which is an IndependentThird Party, in relation to the valuation (the “Valuation”) of the Project Site asat 31 December 2009, which is set out in Appendix I to the Circular, and havediscussed with CBRE on the methodology adopted and assumptions used inarriving at the Valuation. We understand that CBRE has adopted the directcomparison approach by making reference to comparable sales evidence asavailable in the market and has taken into account the costs incurred to theProject Site. As confirmed by CBRE, direct comparison approach is acommonly adopted approach for valuation of properties and it is alsoconsistent with normal market practice. Further details of the basis andassumptions of the Valuation are included in Appendix I to the Circular.During our discussion with CBRE, we have not identified any major factorswhich cause us to doubt the fairness and reasonableness of the principal basisand assumptions used by CBRE in arriving at the Valuation.

Given that the principal asset of the Target Group is the Project Site andthe Valuation prepared by CBRE is fair and reasonable, we consider that usingthe adjusted net asset value of the Target Group, which has taken intoconsideration the difference between the Valuation and the carrying value ofthe Project Site, as a basis to determine the Consideration is a fair andreasonable means.

We understand that pursuant to the memorandum and articles ofassociation of Shanwei City Hong Hai dated 18 March 2003, ShanweiCommercial Corporate Group Limited and the Target Company have agreedto share the profit of Shanwei City Hong Hai as to 10% and 90% respectively.

In view that the Consideration represents a discount of 6% to the sum of(i) the Vendor ’s attributable interest in the unaudited adjusted net asset valueof the Target Group as at 31 December 2009; and (ii) the minimum value of theSale Loan being HK$5.1 million and such 6% discount is commensurate withthe fact that (i) the target of the Acquisition is the 62% interest in the issuedshare capital of the Target Company and (ii) the Target Group needs to share10% profit of Shanwei City Hong Hai with Shanwei Commercial CorporateGroup Limited, we consider that the Consideration is fair and reasonable sofar as the Group and the Independent Shareholders are concerned.

(b) Consideration Shares

The Consideration shall be satisfied by the allotment and issue of56,406,250 Consideration Shares by the Company to the Vendor at the issueprice (the “Issue Price”) of HK$0.64 per Consideration Share uponCompletion.


– 18 –

The Issue Price is determined by and equals to the average closing priceof the Shares for the last five consecutive trading days immediately precedingthe date of the Sale and Purchase Agreement. The Issue Price represents:

(i) a premium of approximately 4.92% over the closing price of theShares of HK$0.61 per Share as quoted on the Stock Exchange onthe date of the Announcement;

(ii) a premium of approximately 1.59% over the average closing priceof approximately HK$0.63 per Share for the last ten consecutivetrading days up to and including the date of the Announcement;

(iii) equals to the average closing price of approximately HK$0.64 perShare for the last twenty consecutive trading days up to andincluding the date of the Announcement; and

(iv) a discount of approximately 58.17% to the unaudited consolidatednet asset value of the Company (attributable to the Shareholders)per Share of approximately HK$1.53 as at 30 September 2009.

The chart below shows the daily closing prices of the Shares as quotedon the Stock Exchange from 2 January 2009 to 5 February 2010, the date of theAnnouncement (the “Review Period”):

(HK$)

Source: hkex.com.hk

During the Review Period, the Shares have been traded generally withan upward trend between January 2009 and May 2009, with the highestclosing price of HK$0.710 recorded on 1 June 2009 and the lowest closing priceof HK$0.315 first recorded on 21 January 2009. After that, the Shares have beentraded generally within the range of HK$0.5 and HK$0.7. We noticed that theIssue Price falls in the upper side of the above trading price range.


– 19 –

The table below illustrates the liquidity of the Shares during the ReviewPeriod:

Average dailytrading volume for

the month/period

Percentage ofthe average daily

trading volume tothe number of

the issued Sharesas at the Latest

Practicable Date(Shares)

2009January 708,023 0.08%February 959,100 0.11%March 629,688 0.07%April 2,970,232 0.35%May 4,679,158 0.54%June 2,526,109 0.29%July 1,988,705 0.23%August 1,501,290 0.17%September 661,070 0.08%October 1,537,320 0.18%November 1,463,984 0.17%December 1,088,696 0.13%

2010January 4,554,632 0.53%February (up to the

date of the Announcement) 1,109,240 0.13%

Source: hkex.com.hk

From the above table, we note that the liquidity of the Shares wasgenerally thin during the Review Period. The daily trading volume of theShares on the Stock Exchange has been relatively thin averagingapproximately 1,881,841 Shares a day, representing approximately 0.22% ofthe Company’s entire issued Shares as at the Latest Practicable Date.

Even though the Issue Price represents a discount to the auditedconsolidated net asset value per Share as at 30 September 2009, we considerthat the Issue Price is fair and reasonable so far as the Company and theIndependent Shareholders are concerned when taking into account the thindaily trading volume and the Issue Price falling in the upper side of the recenttrading price range and representing a premium to the closing price on thedate of the Announcement and equaling to the average closing price of the lastfive consecutive trading days immediately preceding the date of the Sale andPurchase Agreement.


– 20 –

3. Dilution of the shareholding interests in the Company

The table below demonstrates the shareholding structure of the Companyimmediately before and after the issue and allotment of the Consideration Sharesassuming that there is no change in the shareholding structure of the Company fromthe Latest Practicable Date:

As at theLatest Practicable Date

Immediately uponCompletion

Shareholders No. of SharesShareholding

percentage No. of SharesShareholding

percentage

Mr. Pang 291,788,340 33.96 348,194,590 38.02Madam Li Wai Hang,

Christina (Note 1) 10,148,875 1.18 10,148,875 1.11GT Winners Limited (Note 2) 129,348,294 15.05 129,348,294 14.13

Sub-total 431,285,509 50.19 487,691,759 53.26

Other Directors (Note 3) 4,461,816 0.52 4,461,816 0.49Public Shareholders 423,564,699 49.29 423,564,699 46.25

Total 859,312,024 100.00 915,718,274 100.00

Notes:

(1) Madam Li Wai Hang, Christina is the spouse of Mr. Pang and a Director.

(2) GT Winners Limited is a company wholly-owned by Mr. Pang.

(3) Namely Mr. Kwok Yuk Chiu, Clement holding 4,160,000 Shares and Mr. Au Son Yiuholding 301,816 Shares.

As shown in the above table, the shareholding interests of the existing publicShareholders will be decreased from approximately 49.29% to 46.25% immediatelyafter the issue and allotment of the Consideration Shares, representing a dilution ofapproximately 6.17%. After taking into account that (i) the terms of the Sale andPurchase Agreement were fairly and reasonably set; (ii) the reasons and benefits ofthe Acquisition; and (iii) the shareholding interests of the existing publicShareholders will be diluted in proportion to their respective shareholdings in theCompany, we are of the view that the dilution effect to the public Shareholders isacceptable.

4. Financial effect of the Acquisition on the Group

Upon Completion, the accounts of the Target Company will be consolidatedinto the financial statements of the Company and the Target Company will beaccounted for as an indirect wholly owned subsidiary of the Group.


– 21 –

Earnings

The annual report of the Company for the year ended 31 March 2009 (the“2009 Annual Report”) stated that the Group recorded loss attributable toShareholders of approximately HK$119,877,000 during the year ended 31March 2009. On the other hand, according to the interim report for the sixmonths ended 30 September 2009, the Group recorded profit attributable toShareholders of approximately HK$30,771,000 during these six months. Sincethe Project Site is still in the course of development, the Acquisition will notbring immediate positive contribution to the earnings of the Group. However,it is expected that the Acquisition would enhance earning capabilities of theGroup in view of the promising future of the property market in GuangdongProvince, subject to the actual operating performance of the Target Group inthe future.

Net asset value

According to the 2009 Annual Report, the net asset value of the Groupwas approximately HK$1,286,905,000 as at 31 March 2009. With reference tothe unaudited consolidated financial statement of the Target Group providedby the Company, the Target Group had net assets of approximatelyHK$29,600,000 as at 31 December 2009. Since the Consideration will besatisfied by the allotment and issue of the Consideration Shares, the net assetvalue of the Group is expected to be increased upon Completion.

Gearing and cash position

According to the 2009 Annual Report, the Group had net interestbearing debts of approximately HK$913,426,000 (comprised of (i) convertiblebonds of approximately HK$259,270,000; plus (ii) borrowings ofapproximately HK$1,112,492,000; and less (iii) bank balances and cash ofapproximately HK$458,336,000) and shareholders’ equity of approximatelyHK$1,286,555,000 as at 31 March 2009. Accordingly, the gearing ratio (netinterest bearing debts/shareholders’ equity x 100%) of the Group as at 31March 2009 was approximately 71%. Based on the unaudited consolidatedfinancial statement of the Target Group provided by the Company, the TargetGroup had no bank borrowing as at 31 December 2009. Accordingly, thegearing ratio should be reduced upon Completion in view that theshareholders’ equity will be increased as a result of the issue of theConsideration Shares.

According to the 2009 Annual Report, the Group had bank balances andcash of approximately HK$458,336,000. Since the Consideration will besatisfied by the allotment and issue of the Consideration Shares, the cashposition of the Group would have no material change upon Completion.

It should be noted that the above-mentioned analyses are for illustrativepurpose only and does not purport to represent how the financial position ofthe Group will be upon Completion.


– 22 –

RECOMMENDATION ON THE ACQUISITION

Having taken into account the principal factors and reasons referred to the above,we are of the opinion that the terms of the Acquisition (including the issue of theConsideration Shares) are normal commercial terms and are fair and reasonable so far asthe Independent Shareholders are concerned and the Acquisition (including the issue ofthe Consideration Shares) is entered into in the ordinary course of business of the Groupand in the interests of the Company and the Shareholders as a whole. Accordingly, weadvise the Independent Board Committee to recommend the Independent Shareholders,as well as the Independent Shareholders, to vote in favour of the ordinary resolution inrespect of approving the Acquisition.

Yours faithfully,For and on behalf of

Ample Capital LimitedH. W. Tang

President


– 23 –

The following is the text of a letter and valuation certificate from CB Richard Ellis Limited,an independent valuer, in connection with its valuation as at 31 December 2009 of the propertyinterests of the Target Group, prepared for the purpose of incorporation into this circular.

34/F Central Plaza18 Harbour Road

Wanchai, Hong KongT 852 2820 2800F 852 2810 0830

香港灣仔港灣道十八號中環廣場三十四樓

www.cbre.com.hk

地產代理(公司)牌照號碼Estate Agent’s Licence No: C-004065

電話 852 2820 2800 傳真 852 2810 0830

25 February 2010

The DirectorsChun Wo Development Holdings LimitedC2, 5/F., Hong Kong Spinners Industrial Building601-603 Tai Nan West StreetCheung Sha WanKowloon, Hong Kong

Dear Sirs,

RE: A DEVELOPMENT SITE IN SHANWEI, GUANGDONGPROVINCE, THE PEOPLE’S REPUBLIC OF CHINA

We refer to the instruction from Chun Wo Development Holdings Limited(hereinafter refer to the “Company”) for us to value the property interests held by 汕尾市紅海大酒店有限公司 (Shanwei City Hong Hai Hotel Co. Ltd.*) located in the People’sRepublic of China (the “PRC”), details of which are set out in the attached valuationcertificate. We confirm that we have made relevant investigations and enquiries andobtained such further information as we consider necessary for the purpose of providingyou with our opinion of the market value of the property interests as at 31 December 2009(the “Date of Valuation”).

In valuing the property interests, we have complied with all the requirementscontained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing ofSecurities issued by The Stock Exchange of Hong Kong Limited (the “Exchange ListingRules”) and the HKIS Valuation Standards on Properties (1st Edition) published by theHong Kong Institute of Surveyors (“HKIS”).


APPENDIX I VALUATION REPORT ON THE PROJECT SITE

– I-1 –

Our valuation is made on the basis of Market Value which is defined by the HKIS tomean “the estimated amount for which a property should exchange on the date ofvaluation between a willing buyer and a willing seller in an arm’s-length transaction afterproper marketing wherein the parties had each acted knowledgeably, prudently, andwithout compulsion.”

In forming our opinion of the value of the property interests, which are underdevelopment in the PRC, we have valued the property interests on the basis that theproperty, unless otherwise specified, will be developed and completed in accordance withthe latest development scheme provided to us. We have adopted the Direct ComparisonApproach by making reference to comparable sales evidence as available in the relevantmarkets. Comparable properties of similar size, character and location are analyzed andcarefully weighted against all the respective advantages and disadvantages of eachproperty in order to arrive at a fair capital value.

Since the property has started the construction works, we have added theconstruction cost, professional fee and other costs already incurred to the clear site valuederived by Direct Comparison Approach to arrive at the capital value of the property inexisting state.

Our valuation has been made on the assumption that the owner sells the property onthe open market without the benefit of any deferred terms contract, leaseback, jointventure, management agreement or any similar arrangement which would serve to affectthe value of the property.

No allowance has been made in our valuation for any charges, mortgages oramounts owing on the property nor for any expenses or taxation which may be incurred ineffecting sale. Unless otherwise stated, it is assumed that the property was free fromencumbrances, restrictions and outgoings of an onerous nature which could affect itsvalue.

We have relied to a considerable extent on the information given by the Companyand have accepted the advice given to us on such matters as tenure, planning approvals,statutory notices, easements, development scheme, development schedule, site and floorareas, incurred and outstanding construction costs and all other relevant matters. Noon-site measurement has been taken. Dimensions, measurements and areas included inthe valuation certificate are based on information contained in the documents provided tous and are therefore only approximations. We have had no reason to doubt the truth andaccuracy of the information provided to us, which are material to the valuation.

We have been provided with copies of the title documents relating to the property,however, due to the nature of the land registration system in the PRC, we cannot causesearches to be made on the title of the property nor have we scrutinised all the originaldocuments to verify ownership and encumbrances or to ascertain the subsequentamendments, if any, which may not appear on the copies handed to us.


– I-2 –

In forming our opinion of value to the property, we have relied on the legal opinionprovided by the Company’s PRC legal advisor, Guangdong King’s Law Firm (the “PRCLegal Opinion”). We studied the building plans provided to us. We also made enquiries tothe Company and being confirmed that there are no material factors being omitted fromthe information supplied.

We have carried out physical inspection of the property to such extent as for thepurpose of this valuation. In the course of our inspection, we did not notice any seriousdefects. Therefore, we are not able to report whether the property is free of rot, infestationor any other structural defects. We have not carried out investigations on the site todetermine the suitability of the ground conditions and the services etc. for any futuredevelopment. Our valuation is on the basis that these aspects are satisfactory.

We have not carried out site measurements to verify the correctness of the site areaof the property and have assumed that the site area shown on the documents and officialsite plans handed to us is correct.

The property interests have been valued in Renminbi (“RMB”) and such valuationhas been translated into Hong Kong Dollars (“HKD”) at HKD1.0 to RMB 0.8805 being therate of exchange prevailing at the Date of Valuation. There has been no significantfluctuation in that exchange rate between the Date of Valuation and the date of this report.

We enclose herewith our valuation certificate.

Yours faithfully,For and on behalf of

CB Richard Ellis Limited

Harry C. W. Chan MHKIS MRICS MCIREA RPS(GP)

Senior DirectorValuation & Advisory Services

Note: Mr. Harry Chan is a Registered Professional Surveyor (General Practice), a member of the Hong KongInstitute of Surveyors, a member of Royal Institution of Chartered Surveyors and a member of ChinaInstitute of Real Estate Appraisers and Agents. He has over 17 years of property valuation experience inthe PRC including Shanwei, where the subject property is located.


– I-3 –

VALUATION CERTIFICATE

The property interests held under development

Property Description and tenure Details of occupancy

Capital value inthe existing state

as at31 December 2009

A development sitelocated at thenortheastern section ofShanwei Middle Road,Shanwei City,Guangdong Province,the PRC

(中國廣東省汕尾市汕尾大道中東北段地塊)

The property comprises adevelopment site (“the Site”)having a site area of about8,576 square metres.

According to the informationprovided by the Company,the property is proposed fora mixed developmentcomprising residential,commercial, ancillarycommunity and amenityfacilities.

The gross floor area of theproposed development isabout 73,055 sq.m.(excluding undergroundareas and other ancillaryareas). The basement carparkhas a gross floor area ofabout 7,069 sq.m.

Below is floor areabreakdown by uses.

Upon our recentinspection, the propertywas under construction.As informed by theCompany, the foundationwork of the developmentwas completed as at theDate of Valuation.

HKD80,600,000(Hong Kong

Dollars EightyMillion and Six

HundredThousand)

Use

Approx.Gross

Floor Area(sq.m.)

Residential 65,641Commercial 7,414

Total: 73,055

The development isscheduled to be completed atthe end of 2011.

The property is held underState-owned Land Use RightsCertificate for a land useterm expiring in August 2075for residential use andAugust 2045 for commercialuse.


– I-4 –

Notes:

1. Pursuant to a State-owned Land Use Rights Grant Contract – No. 2005009 entered into between ShanweiMunicipal Bureau of Land Resources and 汕尾市紅海大酒店有限公司 (Shanwei City Hong Hai Hotel Co.Ltd.*) dated 8th November 2005 and two notices issued by Shanwei Municipal Bureau of Town Planningand Shanwei Municipal Bureau of Land Resources dated 8th September 2005 and 12th September 2005respectively, the development conditions of the property are set out as follows:

Gross Site Area : 13,475 sq.m.Net Site Area : 8,576 sq.m.Gross Floor Area : 68,578.37 sq.m.Building Density : Not more than 40%Greenery Ratio : Not less than 30%Usage : Residential, Commercial and HotelTerm : 70 years for residential use

40 years for commercial and hotel uses.

2. Pursuant to a State-owned Land Use Rights Certificate – No. Shan Guo Yong (2006) 032 (汕國用(2006)第032號) issued by Shanwei City People’s of Government dated 24th January 2006, the land use rights of theproperty with a net site area of approximately 8,576 sq.m. were vested in 汕尾市紅海大酒店有限公司(Shanwei City Hong Hai Hotel Co. Ltd.*) for terms expiring in August 2045 for commercial use andAugust 2075 for residential use respectively.

3. Pursuant to a Construction Land Use Planning Permit – No. Shan Gui Di Zi [2005] 004 (汕規地字[2005]004號) issued by the Shanwei Municipal Bureau of Town Planning dated 19th January 2005 to汕尾市紅海大酒店有限公司 (Shanwei City Hong Hai Hotel Co. Ltd.*), a proposed hotel use on the property with a grosssite area of approximately 13,475 sq.m. (including an area of approximately 4,440 sq.m. for roadconstruction) was approved.

4. Pursuant to a Construction Project Planning Permit – No. Shan Cheng Gui Zi 2007048 (汕城規字第2007048號) issued by the Shanwei Municipal Bureau of Town Planning dated 16th October 2007, a constructionproject with gross floor area of 73,055 sq.m. and basement carpark of gross floor area of 7,069 sq.m. wasapproved.

5. Pursuant to the Business License No.441500400000901 dated 26th February 2009,汕尾市紅海大酒店有限公司 (Shanwei City Hong Hai Hotel Co. Ltd.*) is a sino-foreign cooperative enterprise (中外合作企業) withan operating period of 50 years commencing from 31st December 2003. The business scope includeslodging, restaurant, shopping mall, real estate development and property management, etc.

6. 汕尾市紅海大酒店有限公司 (Shanwei City Hong Hai Hotel Co. Ltd.*) is formed by 文華集團有限公司(Mandarin Group Co. Ltd.*) and 汕尾市商業企業集團公司 (Shanwei Commercial Corporate Group*) withprofit sharing proportion of 90% and 10% respectively.

7. 汕尾市紅海大酒店有限公司 (Shanwei City Hong Hai Hotel Co. Ltd.*) is indirectly owned by the Companyat a shareholding proportion of 38%.

8. The proposed use of the property is in compliance with the town planning use.

9. As advised by the Company, the incurred cost as at the date of valuation was approximatelyHKD27,200,000 and the estimated outstanding cost for completion was estimated to be approximatelyHKD167,300,000.

10. The capital value of the proposed development as if completed as at the Date of Valuation would beHKD348,800,000.



– I-5 –

11. The major certificates and permits of the property are summarized as follows:

(i) State-owned Land Use Rights Grant Contract Yes(ii) State-owned Land Use Rights Certificate Yes(iii) Construction Land Use Planning Permit Yes(iv) Construction Project Planning Permit Yes(v) Construction Works Commencement Permit Yes(vi) Building Ownership Certificate N/A

12. The PRC Legal Opinion states that:

(i) 汕尾市紅海大酒店有限公司 (Shanwei City Hong Hai Hotel Co. Ltd.*) has proper legal title to theproperty and has the right to use, transfer, lease and mortgage the property during the period ofresidual land use term and is protected by the PRC laws.

(ii) The land premium of the property has been fully settled.

(iii) The property is not subject to any mortgage.



– I-6 –

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for thepurpose of giving information with regard to the Group. The Directors collectively andindividually accept full responsibility for the accuracy of the information contained in thiscircular and confirm, having made all reasonable enquiries, that to the best of theirknowledge and belief, there are no other facts the omission of which would make anystatement contained herein misleading.

SHARE CAPITAL

The authorised and issued capital of the Company as at the Latest Practicable Dateand after the Completion were and will be as follows:

HK$Authorised capital:

1,500,000,000 Shares of HK$0.10 each 150,000,000

Issued and fully paid:

859,312,024 Shares of HK$0.10 each in issue 85,931,20256,406,250 Consideration Shares of HK$0.10 each 5,640,625

915,718,274 Total 91,571,827

All existing Shares rank equally in all respects, including capital, dividends andvoting rights. The Shares are listed on the Stock Exchange.

APPENDIX II GENERAL INFORMATION

– II-1 –

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN

THE SHARES, UNDERLYING SHARES AND DEBENTURES

As at the Latest Practicable Date, the interests or short positions of the Directors andchief executive of the Company in the shares, underlying shares and debentures of theCompany or any of its associated corporations (within the meaning of Part XV of theSecurities and Futures Ordinance (the “SFO”)) which were required: (i) to be notified tothe Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO(including interests and short positions which were taken or deemed to have under suchprovisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in theregister referred to therein; or (iii) to be notified to the Company and the Stock Exchangepursuant to the Model Code for Securities Transactions by Directors of Listed Companiescontained in the Listing Rules (the “Model Code”), were as follows:

(a) Interests of the Directors in the Shares (Long positions)

Name of DirectorPersonal

interestFamily

interestCorporate

interestTotal

interests

Totalinterests

as a %of the

Company’sissued

sharecapital

Mr. Pang 348,194,590(Note 1)

10,148,875(Note 2)

129,348,294(Note 3)

487,691,759 56.75%

Madam Li WaiHang, Christina

10,148,875 477,542,884(Note 2)

– 487,691,759 56.75%

Mr. Kwok Yuk Chiu,Clement

3,300,000 860,000(Note 4)

– 4,160,000 0.48%

Mr. Au Son Yiu 301,816 – – 301,816 0.04%

Notes:

1. Those 348,194,590 Shares include the Consideration Shares to be issued and 291,788,340Shares currently held by Mr. Pang.

2. Madam Li Wai Hang, Christina is the spouse of Mr. Pang and is deemed to have interest inthose Shares held by Mr. Pang. Similarly, Mr. Pang is also deemed to have interest in thoseShares held by Madam Li Wai Hang, Christina.

3. GT Winners Limited is wholly-owned by Mr. Pang who is deemed to have interest in theShares held by GT Winners Limited.

4. These Shares are beneficially owned by the spouse of Mr. Kwok Yuk Chiu, Clement.


– II-2 –

(b) Interests of the Directors in the underlying shares of the Company and theassociated corporations of the Company

Name of DirectorPersonal

interestFamily

interest Total interests

Total interestsas a % of the

Company’sissued share

capital

Mr. Pang 4,261,000(Note 1)

1,697,000(Note 2)

5,958,000 0.69%

Madam Li Wai Hang,Christina

1,697,000(Note 1)

4,261,000(Note 2)

5,958,000 0.69%

Mr. Kwok Yuk Chiu,Clement

6,026,000(Note 1)

– 6,026,000 0.70%

Mr. Au Son Yiu 300,000 – 300,000 0.03%(Note 1)

Mr. Chan Chiu Ying 300,000 – 300,000 0.03%(Note 1)

Mr. Hui Chiu Chung 300,000 – 300,000 0.03%(Note 1)

Mr. Lee Shing See 300,000 – 300,000 0.03%(Note 1)

Notes:

1. These represent interests in the share options granted by the Company.

2. Madam Li Wai Hang, Christina is deemed to have interest in the underlying shares of theCompany held by Mr. Pang. Similarly, Mr. Pang is also deemed to have interest in theunderlying shares of the Company held by Madam Li Wai Hang, Christina.

In addition, Mr. Pang and Madam Li Wai Hang, Christina hold 8,347,500 and 90,000non-voting deferred shares respectively in Chun Wo Construction and EngineeringCompany Limited, which are subject to an option granted to Chun Wo Hong KongLimited, a wholly-owned subsidiary of the Company, to purchase the said non-votingdeferred shares.

Save as disclosed above and other than certain nominee shares in the subsidiariesheld by Directors in trust for the Group, none of the Directors and chief executive of theCompany or their associates had any interest or short positions in the shares, underlyingshares or debentures of the Company or any of its associated corporations that wasrequired: (i) to be notified to the Company and the Stock Exchange pursuant to Divisions7 and 8 of Part XV of the SFO (including interests and short positions which were taken ordeemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of theSFO, to be entered in the register referred to therein; or (iii) to be notified to the Companyand the Stock Exchange pursuant to the Model Code.


– II-3 –

INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERSDISCLOSEABLE UNDER THE SFO

As far as is known to the Directors, as at the Latest Practicable Date, the followingparty (other than Directors or chief executive of the Company) had interests or shortpositions in the Shares or underlying Shares which would fall to be disclosed to theCompany and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV ofthe SFO, or, who were, directly or indirectly, interested in or deemed to be interested in10% or more of the issued share capital of the Company:

Interests of the substantial shareholders in the Shares and underlying Shares(Long positions)

Name ofShareholder Capacity Interests

Totalinterests as a

% of theCompany’s

issued sharecapital

GT Winners Limited Beneficial owner 129,348,294 15.05%

Note: GT Winners Limited is wholly-owned by Mr. Pang who is deemed to have interest in theShares held by GT Winners Limited.

Save as disclosed above, as at the Latest Practicable Date, as far as is known to theDirectors, there is no other party (other than Directors or chief executive of the Company)who had interests or short positions in the Shares or underlying Shares which would fallto be disclosed to the Company and the Stock exchange under the provisions of Divisions2 and 3 of Part XV of the SFO, or, who were, directly or indirectly, interested in or deemedto be interested in 10% or more of the issued share capital of the Company.

DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposedservice contract with the Company or any member of the Group (excluding contractsexpiring or determinable by the Company within one year without payment ofcompensation (other than statutory compensation)).

COMPETING INTERESTS

As at the Latest Practicable Date, to the best knowledge of the Directors, none of theDirectors and their respective associates were considered to have any interests inbusinesses which compete or might compete with the business of the Group, other thanthose businesses which the Directors were appointed as directors to represent the interestsof the Group.


– II-4 –

NO MATERIAL INTERESTS

As at the Latest Practicable Date, none of the Directors had any interest in any assetswhich have been acquired or disposed of by or leased to, or which are proposed to beacquired or disposed of by or leased to any member of the Group since 31 March 2009,(being the date to which the latest published audited consolidated accounts of theCompany were made up).

As at the Latest Practicable Date, none of the Directors was materially interest in anycontract or arrangement entered into by the Company or any of its subsidiaries, whichwas subsisting and was significant in relation to the business of the Group.

EXPERTS’ STATEMENTS

The following are the experts, and their qualifications, who have given opinioncontained in this circular:

Name Qualification

Ample Capital A corporation licensed to carry out types 4, 6 and 9(advising on securities, advising on corporate financeand asset management) regulated activities under theSFO

CB Richard Ellis Limited Professional property valuer

廣東金領律師事務所(Guangdong King’s LawFirm)

PRC legal adviser

The above experts have given and have not withdrawn their written consents to theissue of this circular with the inclusion of their letters, advice, opinion and/or reports andreferences to their names in the form and context in which they respectively appeared.

As at the Latest Practicable Date, none of the above experts had any shareholding inany member of the Group or any rights (whether legally enforceable or not) to subscribefor or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, none of the above experts had any interest in anyassets which have been, since 31 March 2009 (being the date to which the latest publishedaudited accounts of the Company were made up), acquired or disposed of by or leased toany member of the Group, or are proposed to be acquired or disposed of by or leased toany member of the Group.


– II-5 –

MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any materialadverse change in the financial or trading position of the Group since 31 March 2009,being the date to which the latest audited financial statements of the Company were madeup.

MATERIAL LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in anylitigation or arbitration or claims which would materially and adversely affect theoperations of the Company and no litigation or arbitration or claims which wouldmaterially and adversely affect the operations of the Company was known to the Directorsto be pending or threatened by or against any member of the Group.

MATERIAL CONTRACTS

The following contracts, not being entered into in the ordinary course of business ofthe Group, were entered into by members of the Group within the two years preceding theLatest Practicable Date and are, or may be, material:

(a) a provisional sale and purchase agreement dated 20 April 2009 entered intobetween Rich Score Development Limited, an indirect wholly-ownedsubsidiary of the Company as vendor and New Golden Investments Limitedas purchaser in respect of the disposal of the property which comprised of allthose (1) shops in the commercial/carpark block G/F, (2) shops in thecommercial/carpark block 1/F and (3) shops outside the commercial/carparkblock of Grandeur Terrace located at No. 88 Tin Shui Road, Yuen Long, NewTerritories, Hong Kong at a total cash consideration of HK$303,000,000;

(b) a formal sale and purchase agreement dated 27 July 2009 entered into betweenRich Score Development Limited, an indirect wholly-owned subsidiary of theCompany as vendor and New Golden Investments Limited as purchaser inrelation to the disposal of the property which comprised of all those (1) shopsin the commercial/carpark block G/F, (2) shops in the commercial/carparkblock 1/F and (3) shops outside the commercial/carpark block of GrandeurTerrace located at No. 88 Tin Shui Road, Yuen Long, New Territories, HongKong at a total cash consideration of HK$303,000,000; and

(c) the Sale and Purchase Agreement.


– II-6 –

MISCELLANEOUS

(a) The company secretary of the Company is Ms. Chan Sau Mui, Juanna, who isa member of the Hong Kong Institute of Chartered Secretaries and theInstitute of Chartered Secretaries and Administrators.

(b) The Hong Kong branch share registrar and transfer office of the Company isTricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East,Wanchai, Hong Kong.

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

(d) If there is any inconsistency between the Chinese names of PRC entities,departments, facilities or titles mentioned in this circular and their Englishtranslations, the Chinese version shall prevail.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normalbusiness hours (except Saturdays, Sundays and public holidays) at the Company’s headoffice in Hong Kong at C2, 5th Floor, Hong Kong Spinners Industrial Building, 601-603 TaiNan West Street, Cheung Sha Wan, Kowloon, Hong Kong from the date of this circular upto and including the date of the SGM:

(a) the letter from the Independent Board Committee, the text of which is set outon page 12 of this circular;

(b) the letter from Ample Capital, the text of which is set out on pages 13 to 23 ofthis circular;

(c) the letter and valuation certificate on the Project Site prepared by CB RichardEllis Limited, the text of which is set out in Appendix I of this circular;

(d) the letters of consent as referred to under the paragraph headed “Experts’Statements” in this Appendix; and

(e) copy of each of the contracts as referred to under the paragraph headed“Material Contracts” in this Appendix.


– II-7 –

(Incorporated in Bermuda with limited liability)

(Stock Code: 711)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting of Chun WoDevelopment Holdings Limited (the “Company”) will be held at Tang Room, 3rd Floor,Sheraton Hong Kong Hotel & Towers, 20 Nathan Road, Kowloon, Hong Kong on 16 March2010, Tuesday, at 11:30 a.m., for the purpose of considering and, if thought fit, passing,with or without modifications, the following resolution as an ordinary resolution of theCompany:

ORDINARY RESOLUTION

“THAT

(a) the conditional sale and purchase agreement (the “Sale and PurchaseAgreement”) dated 5 February 2010 and entered into between Chun Wo ChinaConstruction Limited, a wholly-owned subsidiary of the Company, as thepurchaser and Pacific Group Limited, as vendor (the “Vendor”) in relation tothe sale and purchase of (i) 62% of the issued share capital of Mandarin GroupLimited (the “Target Company”) and (ii) the entire shareholder ’s loan due andowing by the Target Company to the Vendor as at completion of the Sale andPurchase Agreement, at a total consideration of HK$36.1 million (a copy ofwhich has been produced to the meeting marked “A” and signed by thechairman of the meeting for the purpose of identification) and thetransactions contemplated thereunder, be and are hereby approved,confirmed and ratified;

(b) any one or more of the directors (the “Directors”) of the Company be andis/are hereby authorised to do all such acts and things and execute all suchdocuments which he/they consider(s) necessary, desirable or expedient forthe purpose of, or in connection with, the implementation of and giving effectto the Sale and Purchase Agreement and the transactions contemplatedthereunder; and

NOTICE OF SGM

– SGM-1 –

(c) the allotment and issue of an aggregate of 56,406,250 shares (the“Consideration Shares” and each a “Consideration Share”) of HK$0.10 each inthe share capital of the Company credited as fully paid at an issue price ofHK$0.64 per Consideration Share to the Vendor in accordance with the termsand conditions of the Sale and Purchase Agreement and the transactionscontemplated thereunder upon completion be and is hereby approved.”

By Order of the Board of DirectorsChun Wo Development Holdings Limited

Kwok Yuk Chiu, ClementManaging Director

Hong Kong, 25 February 2010

Notes:

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

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

3. To be valid, a form of proxy, together with the power of attorney or other authority, if any, under which itis signed or a notarially certified copy of that power of attorney or other authority must be deposited atthe principal place of business of the Company in Hong Kong at C2, 5/F., Hong Kong Spinners IndustrialBuilding, 601-603 Tai Nan West Street, Cheung Sha Wan, Kowloon, Hong Kong not less than 48 hoursbefore the time appointed for holding the meeting or any adjournment thereof.

4. Completion and return of a form of proxy will not preclude you from attending and voting in person atthe meeting or any adjourned meeting if you so wish.

5. The voting on the resolution at the meeting will be conducted by way of poll.

NOTICE OF SGM

– SGM-2 –

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR · PDF filewholly-owned by Shanwei City Hong Hai...

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