THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

==> picture [325 x 53] intentionally omitted <==

(Incorporated in Bermuda with limited liability)

(Stock Code: 149)

DISCLOSEABLE TRANSACTION

DISPOSAL OF PRC JOINT VENTURE RIGHTS

18 October 2004

* for identification purposes only

CONTENTS

– i –

DEFINITIONS

In this circular, the following terms have the following meanings:—

– 1 –

DEFINITIONS

• “Huizhou Best Glory” Huizhou Best Glory Property Ltd., a sino-foreign co-operative joint venture incorporated under the laws of PRC, whose incorporation was approved by the Commission of Foreign Trade and Economic Cooperation of Huizhou on 25 December 1993 and whose registration was approved by the Administration for Industry and Commerce of Huizhou on 14 January 1994

• “Huizhou Da Ya Wan” Huizhou Da Ya Wan Development Company, a PRC state-owned enterprise, the Chinese partner in the PRC Joint Ventures and an Independent Third Party. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, it and its ultimate beneficial owner are third parties independent of the Purchaser, its ultimate beneficial owner and its associates

• “Huizhou Gladly” Huizhou Gladly Property Ltd., a sino-foreign co-operative joint venture incorporated under the laws of PRC, whose incorporation was approved by the Commission of Foreign Trade and Economic Cooperation of Huizhou on 25 December 1993 and whose registration was approved by the Administration for Industry and Commerce of Huizhou on 14 January 1994

• “Huizhou World Express” Huizhou World Express Property Ltd., a sino-foreign co-operative joint venture incorporated under the laws of PRC, whose incorporation was approved by the Commission of Foreign Trade and Economic Cooperation of Huizhou on 25 December 1993 and whose registration was approved by the Administration for Industry and Commerce of Huizhou on 14 January 1994

• “Independent Third Party” any person who and whose ultimate beneficial owner are independent of and not connected to the Company or any director, chief executive or substantial shareholder of the Company or any of its subsidiaries or any of their respective associates (as defined in the Listing Rules) and is not a connected person of the Company (as defined in the Listing Rules).

• “Joint Venture Interest” (1) the joint venture right of World Express in Huizhou World Express, including 100% of the equity interest in Huizhou World Express, 90% of the net profit (after tax) distribution right (Huizhou Da Ya Wan is entitled to the remaining 10% of the net profit distribution right) and the shareholder’s loan owing to World Express by Huizhou World Express in the amount of HK$278,479,784; (2) the joint venture right of Best Glory in Huizhou Best Glory, including 100% of the equity interest in Huizhou Best Glory, 90% of the net profit (after tax) distribution right (Huizhou Da Ya Wan is entitled to the remaining 10% of the net profit distribution right) and the shareholder’s loan owing to Best Glory by Huizhou Best Glory in the amount of

– 2 –

DEFINITIONS

– 3 –

DEFINITIONS

– 4 –

LETTER FROM THE CHAIRMAN

==> picture [325 x 53] intentionally omitted <==

(Incorporated in Bermuda with limited liability)

(Stock Code: 149)

Directors: Chan Yeung Nam (Chairman) Fu Jie Pin (Chief Executive Officer) Tang Cheung Fai[#] Lam Ping Cheung[#] Wengue Jee[#]

Independent non-executive Director

Registered office: Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda

Principal place of business in Hong Kong: Room 1416, 14th Floor China Merchants Tower Shun Tak Centre Sheung Wan Hong Kong

18 October 2004

To the Shareholders of the Company

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION

DISPOSAL OF PRC JOINT VENTURE RIGHTS

INTRODUCTION

By an announcement dated 24 September 2004, the Directors announced that on 10 August 2004 and 9 September 2004, the binding Framework Agreement and the Supplemental Agreement were respectively entered into between, inter alia, the respective Vendors (non-wholly owned subsidiaries of the Company), the Purchaser, the Company, the Subsidiaries (non-wholly owned subsidiaries of the Company and the respective sole shareholder of the respective Vendors) and the Purchaser Guarantor which sets out the main terms in respect of the proposed disposal of the Joint Venture Interest in the PRC Joint Ventures in consideration of RMB50,000,000. The Subsidiaries will, at completion of the Framework Agreement, grant to the Purchaser an option for the Purchaser to acquire within 2 years all their shareholding in the Vendors and the shareholder’s loans owing by the Vendors to the Subsidiaries for a nominal consideration. As contemplated in the Framework Agreement, the Vendors entered into the Transfer Agreements with the Purchaser on the same day setting out certain terms of the proposed transfer of the Joint Venture Interest to the Purchaser under the Disposal.

* for identification purposes only

– 5 –

LETTER FROM THE CHAIRMAN

The Disposal together with the option for the Purchaser to acquire the Subsidiaries’ shareholding in the Vendors and the shareholder’s loans owing by the Vendors to the Subsidiaries constitutes a discloseable transaction of the Company under the Listing Rules. The purpose of this circular is to provide Shareholders with further information on the Disposal and other information in compliance with the requirements of Chapter 14 of the Listing Rules.

BACKGROUND OF THE DISPOSAL OF PRC JOINT VENTURE RIGHTS

A. Framework Agreement dated 10 August 2004 as amended by the Supplemental Agreement dated 9 September 2004

Parties:

The Company, the Subsidiaries, the Vendors, the Purchaser, the Purchaser Guarantor and the Mortgagor.

The Vendors are World Express, Best Glory and Gladly, all of which are non-wholly owned subsidiaries of the Company.

The Purchaser is State Achieve Properties Limited, a company incorporated under the laws of the British Virgin Islands and whose entire issued share capital is owned by the Mortgagor. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the Purchaser and the Mortgagor are Independent Third Parties.

The Subsidiaries are Holburn Property Limited, Goldsmith Assets Limited and Exburg Limited, the respective sole shareholder of the Vendors. The capacities and obligations of the Subsidiaries under the Framework Agreement are set out in sub-paragraph (ii) of the paragraph headed “Other Terms” below.

The Company is the guarantor of the Subsidiaries and the Vendors in respect of their obligations under the Framework Agreement.

The Purchaser Guarantor and the Mortgagor are the guarantors of the Purchaser in respect of the Purchaser’s obligations under the Framework Agreement and the Transfer Agreements.

Interest Disposed: (1) the joint venture right of World Express in Huizhou World Express, comprising 100% of the equity interest in Huizhou World Express, 90% of the net profit (after tax) distribution right (Huizhou Da Ya Wan, an Independent Third Party, is entitled to the remaining 10% of the net profit distribution right) and the shareholder’s loan owing to World Express by Huizhou World Express in the amount of HK$278,479,784; (2) the joint venture right of Best Glory in Huizhou Best Glory, comprising 100% of the equity interest in Huizhou Best Glory, 90% of the net profit (after tax) distribution right (Huizhou Da Ya Wan, an Independent Third Party, is entitled to the remaining 10% of the net profit distribution right) and

– 6 –

LETTER FROM THE CHAIRMAN

the shareholder’s loan owing to Best Glory by Huizhou Best Glory in the amount of HK$28,394,333; and (3) the joint venture right of Gladly in Huizhou Gladly, comprising 100% of the equity interest in Huizhou Gladly, 90% of the net profit (after tax) distribution right (Huizhou Da Ya Wan, an Independent Third Party, is entitled to the remaining 10% of the net profit distribution right) and the shareholder’s loan owing to Gladly by Huizhou Gladly in the amount of HK$5,406,133. The PRC Joint Ventures will cease to be the subsidiaries of the Company after the Disposal.

The disposal of the Joint Venture Interest is not subject to obtaining the consent of Huizhou Da Ya Wan.

Consideration:

The aggregate purchase price for the Joint Venture Interest is RMB50,000,000 (equivalent to approximately HK$46,816,479) which has been determined at arm’s length negotiation with reference to (i) the open market value of the Properties held by the respective PRC Joint Ventures as at 31 December 2003 in the aggregate amount of HK$111 million based on the report dated 23 April 2004 of RHL Appraisal Limited, an independent firm of professional valuers, on an open market basis and (ii) the negative net asset value of the PRC Joint Ventures of approximately HK$280,000,000 and the shareholder’s loans owing by the PRC Joint Ventures to the Vendors in the aggregate amount of HK$312,280,250, with the carrying value of the Properties in the amount of HK$111 million both as at 31 December 2003 and 30 June 2004 based on the management accounts of the PRC Joint Ventures as at those dates. RHL Appraisal Limited was appointed by the Company to provide opinion on the open market value of all the properties of the Group as at 31 December 2003 for the preparation of the 2003 annual report. RHL Appraisal Limited has given and has not withdrawn its written consent to the issue of this circular with its opinion on the open market value of the Properties included in the form and context in which it appears.

The Directors consider that the terms of the transaction are fair and reasonable and in the interests of the Company and the shareholders as a whole on the basis that there is a premium on the net asset value of the PRC Joint Ventures in the amount of approximately HK$14.8 million. The purchase price shall be paid in cash by the Purchaser to the Company or any of the subsidiaries of the Company in 5 instalments in the following manner:-

• (a) upon signing of the agreement, the sum of RMB 3,000,000 (equivalent to HK$2,808,989) has been paid;

– 7 –

LETTER FROM THE CHAIRMAN

• (b) within 2 months from the date of signing of the agreement, the sum of RMB7,000,000 (equivalent to HK$6,554,307) has been paid;

• (c) before 31 December 2004, the sum of RMB15,000,000 (equivalent to HK$14,044,943) shall be paid;

• (d) before 30 April 2005, the sum of RMB10,000,000 (equivalent to HK$9,363,296) shall be paid; and

• (e) before 30 June 2005, the balance of RMB15,000,000 (equivalent to HK$14,044,943) shall be paid.

The above payment by the Purchaser shall be non-refundable except in the case of a breach of the terms of the Agreements by the Vendors.

If, after the completion of the transfer of the Joint Venture Interest, (i) the Purchaser sells its interest in the PRC Joint Ventures or their land use rights of the Properties; or (ii) the Purchaser is granted loan from any bank by mortgaging the land use right of the Properties of the PRC Joint Ventures; or (iii) the PRC Joint Ventures obtain compensation for auction of the land use right of the Properties from the Huizhou Municipal Government, the Purchaser shall apply the money received from the above events towards payment of the Consideration.

Security for payment of Consideration:

The payment of the Consideration is guaranteed by the following:

• (i) the Purchaser Guarantor has agreed to guarantee the payments to be made by the Purchaser under the Framework Agreement and the Transfer Agreements.

• (ii) the Mortgagor has agreed to execute a mortgage of the entire issued share capital of the Purchaser in favour of World Express as security for the performance by the Purchaser of any and all of the obligations of the Purchaser which are or may become payable to the Vendors under or pursuant to the Transfer Agreements and/or the Framework Agreement. The details of the Share Mortgage are summarized below:

• (1) Event of Default: (i) failure on the part of the Purchaser to perform any and all of its Secured Obligations; (ii) if the Purchaser tries to dispose of the assets and/or shares it holds; (iii) breach by the Mortgagor of any of the representations and warranties set out in the Share Mortgage; and (iv) occurrence of any Bankruptcy Event (as defined in the Share Mortgage) in respect of the Mortgagor and the Purchaser;

– 8 –

LETTER FROM THE CHAIRMAN

• (2) the security created by the Share Mortgage shall become enforceable immediately upon the occurrence of an Event of Default, including failure on the part of the Purchaser to perform any of its obligations owed to any of the Vendors, including those other than World Express. World Express shall be entitled, without prior notice and whether or not it shall have appointed a receiver, to exercise the power to sell or otherwise dispose of the whole or any part of the Collateral;

• (3) World Express shall, at the cost of the Mortgagor, release and transfer to the Mortgagor, the Collateral upon the full performance and discharge of the Secured Obligations

Other Terms:

Additional terms include in summary the following:

• (i) the Vendors shall nominate 3 out of a total of 5 directors to the respective board of each of the PRC Joint Ventures prior to payment of the Consideration having been made by the Purchaser in full;

• (ii) the Subsidiaries will, at completion of the Framework Agreement, grant to the Purchaser the option, within 2 years from the date of the Option Deed, to purchase from the Subsidiaries all their shareholding, including those held by their nominees, in the Vendors and the shareholder’s loans owing by the Vendors to the Subsidiaries for a nominal consideration of US$3.00. There is no restriction in the Framework Agreement in relation to the distribution of dividends or assets by the Vendors to the Subsidiaries during the period between the date of the Framework Agreement and the expiry date of the 2-year period mentioned above or up to the release of the Share Mortgage;

• (iii) The Company has agreed to guarantee the performance by (a) the Vendors; and (b) the Subsidiaries of the Agreements. The Company shall only be responsible to pay 70% of any damages awarded by the court in relation to each claim under the guarantee, and the maximum liability of all claims shall be limited to 70% of the Consideration (i.e. RMB35,000,000) received by the Vendors in accordance with the terms of the Framework Agreement, which is in proportion to the Company’s percentage of attributable equity interest in the Vendors. No party will be responsible for the remaining 30% of any damages awarded.

– 9 –

LETTER FROM THE CHAIRMAN

• (iv) The Framework Agreement is binding and unconditional.

The Directors consider that the terms in the Framework Agreement as summarised in sub-paragraphs (ii) and (iii) above are fair and reasonable and in the interests of the Company and the shareholders as a whole on the basis that:

• (i) as the only asset held by the Vendors have been disposed of as part of the Disposal, the Directors did not see any reason to object to the Purchaser’s request for the option to acquire the Vendors;

• (ii) The Purchaser has asked for a guarantee from the Company given that the Vendors did not have any substantial assets other than those disposed of as part of the Disposal, and given that the guarantee was in proportion to the Company’s interest in the PRC Joint Ventures, the Directors felt the terms were reasonable.

B. Transfer Agreements dated 10 August 2004

The Transfer Agreements are entered to give effect to the transfer of the Joint Venture Interest pursuant to the Framework Agreement. The Transfer Agreements have been approved by the Commission of Foreign Trade and Economic Cooperation of Huizhou in September 2004.

Parties:

Vendors: World Express, Best Glory and Gladly, all of which are non-wholly owned subsidiaries of the Company

Purchaser: State Achieve Properties Limited, a company incorporated under the laws of the British Virgin Islands and whose entire issued share capital is owned by the Mortgagor. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the Purchaser and the Mortgagor are Independent Third Parties.

Effective Date: The Transfer Agreements will be effective upon the approval by the Commission of Foreign Trade and Economic Cooperation of Huizhou Interest Transferred: The Joint Venture Interest Consideration: As disclosed in the Framework Agreement

Termination Event: The non-breaching party has the right to terminate the Transfer Agreements and demand damages from the breaching party if the breaching party breaches any of the representations and warranties set out in the Transfer Agreements under the terms of that agreement.

– 10 –

LETTER FROM THE CHAIRMAN

THE COMPANY, THE SUBSIDIARIES, THE VENDORS AND THE PRC JOINT VENTURES STRUCTURE

==> picture [454 x 417] intentionally omitted <==

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

Chips Plus
The Company
Development
Incorporated
70% indirect (Independent
beneficial interest Third Party)
30%
Dionysus
100% 100% 100%
beneficial beneficial beneficial
interest interest interest
Subsidiaries Holburn Goldsmith Exburg
100% 100% 100%
beneficial beneficial beneficial
interest interest interest
World Huizhou Huizhou Huizhou
Vendors Best Glory Gladly
Express Da Ya Wan Da Ya Wan Da Ya Wan
100% 100% 100%
Joint equity equity equity
Venture interest interest interest
Interest 90% 10% 90% 10% 90% 10%
Profit Profit Profit Profit Profit Profit
PRC Joint Huizhou
Ventures World Huizhou Huizhou
Best Glory Gladly
Express
----- End of picture text -----

– 11 –

LETTER FROM THE CHAIRMAN

INFORMATION ABOUT THE PRC JOINT VENTURES AND THE PROPERTIES

The PRC Joint Ventures, namely, Huizhou World Express, Huizhou Best Glory and Huizhou Gladly, were sino-foreign co-operative joint ventures incorporated under the laws of the PRC. Their incorporation was approved by the Commission of Foreign Trade and Economic Cooperation of Huizhou on 25 December 1993 and their registration approved by the Administration for Industry and Commerce of Huizhou on 14 January 1994. The Chinese partner of all of the PRC Joint Ventures is Huizhou Da Ya Wan Development Company, an Independent Third Party.

Based on the management accounts of the PRC Joint Ventures as at 30 June 2004, the total asset value of the PRC Joint Ventures is HK$111,000,000, amounts payable and other accruals amount to HK$79,000,000 and the aggregate amount of the shareholder’s loans owing to the Vendors is HK$312,280,250, leaving a negative net asset value of approximately HK$280,000,000. The PRC Joint Ventures did not record any turnover in the preceding 2 financial years because no business was conducted by the PRC Joint Ventures as the projects to develop the Properties were put on hold. The aggregate loss of the PRC Joint Ventures both before and after tax for the years ended 31 December 2002 and 31 December 2003 are HK$71,127 and HK$355,354 respectively. The shareholder’s loans owing by the PRC Joint Ventures to the Vendors are unsecured, interest free and have no fixed term of repayment.

The Properties were located at Lots 1805, 1806 and 1810 at Area 18, Jiangbei Road, Huizhou, Guangdong Province, the PRC. The Properties comprise three parcels of land with a total area of 51,811 square metres. They are designated for a large-scale composite development which was intended for sale. According to the development proposal, upon completion, the Properties will provide a total gross floor area of 693,210.84 square metres. Foundation work has been completed, but since 1995, all construction work has been suspended due to the uncertainties in an unsettled litigation in relation to the Properties. In July 2001, Huizhou World Express as the developer, initiated legal proceedings against the Huizhou Municipal Government of the Guangdong Province, the PRC, in its capacity as the guarantor of Huizhou Jia Cheng Group Co., Ltd. (“Huizhou Jia Cheng”), the main contractor in the construction of the Properties, under a guarantee letter dated 7 September 1994 executed by the Huizhou Municipal Government in favour of Huizhou World Express. Huizhou World Express claimed that Huizhou Jia Cheng stopped the construction work of the Properties before completion in breach of their agreement. The amount claimed by Huizhou World Express was RMB243.6 million (equivalent to approximately HK$228.1 million), being the pre-paid construction costs of RMB167.5 million (equivalent to approximately HK$156.8 million) paid by Huizhou World Express to Huizhou Jia Cheng together with the damages for the amount of RMB76.1 million (equivalent to approximately HK$71.3 million).

The writ was issued by Huizhou World Express on 10 September 2002, and as at the Latest Practicable Date, the proceedings are still ongoing and Huizhou World Express is waiting for the hearing of the case. The date of the hearing has not been fixed pending the submission of further evidence from both sides of the claim. At this stage, the outcome cannot be predicted with certainty. As the total construction costs the Properties has already been written off, the Directors are of the opinion that there is unlikely to be any material adverse financial impact on the Group in the event that the final judgement is not in favour of Huizhou Word Express. After the Disposal, the Group will have no share in the amount recovered from the litigation, nor will the Group have any further liability arising from the litigation.

– 12 –

LETTER FROM THE CHAIRMAN

INFORMATION ABOUT THE VENDORS

Based on the management accounts of the Vendors as at 30 June 2004, the total assets of the Vendors comprise their interests in the PRC Joint Ventures in the negative amount of HK$280 million and the shareholder’s loans owing by the PRC Joint Ventures in the aggregate amount of HK$312 million. The total asset value of the Vendors is thus HK$32 million, and the shareholder’s loans owing by the Vendors to the Subsidiaries is HK$497 million, leaving a negative net asset value of approximately HK$465 million. The Vendors did not record any turnover for the 6 months ended 30 June 2004 and in the preceding 2 financial years. The aggregate loss of the Vendors both before and after tax was approximately HK$9,000 for the 6 months ended 30 June 2004, HK$32,000 for the year ended 31 December 2003 and HK$17.9 million for the year ended 31 December 2002. The loss arose as a result of provisions made to reflect the decrease in value of the Properties and hence the Vendors’ investment value in the PRC Joint Ventures. The aggregate amount of the shareholder’s loans owing by the Vendors to the Subsidiaries is HK$497 million. The shareholder’s loans are unsecured, interest free and have no fixed term of repayment.

The Vendors intend to use the proceeds from the Disposal of RMB50,000,000 (equivalent to approximately HK$46,816,479) to repay and set off against the shareholder’s loans owing to the Subsidiaries of HK$497 million at completion of the Framework Agreement.

INFORMATION ABOUT THE PURCHASER

The Purchaser is an investment holding company which is used to acquire the Vendor’s interest in the PRC Joint Ventures and shareholder’s loans. The Purchaser has not conducted any business prior to the entering of the Disposal.

REASONS FOR AND BENEFITS OF THE DISPOSAL

The Company is principally engaged in property development in the PRC.

The principal activities of each of the Subsidiaries is investment holding and their sole assets comprise their interests in the Vendors and the shareholder’s loans owing by the Vendors.

The principal activities of each of the Vendors is investment holding and their sole assets comprise their interests in the PRC Joint Ventures and the shareholder’s loans owing by the PRC Joint Ventures.

The PRC Joint Ventures are investment holding companies holding the Properties.

The Purchaser is an investment holding company set up to acquire the Joint Venture Interest. The Mortgagor, who is the ultimate beneficial owner of the Purchaser, is a PRC national engaged in a variety of business including garment manufacturing and property development.

– 13 –

LETTER FROM THE CHAIRMAN

The Properties were acquired by the PRC Joint Ventures in 1994. The project to develop the Properties has been put on hold since 1995 due to the uncertainties in an unsettled litigation in relation to the Properties, details of which have been disclosed in the Company’s latest interim report on 30 September 2004. As at the date of this circular, the project is still on hold. The Directors wish to take the opportunity of having located a willing buyer to dispose of the non-performing assets to reduce the Group’s liability and to improve the Group’s gearing.

The net proceeds from the Disposal are proposed to be used as general working capital of the Company.

Based on the management accounts of the PRC Joint Ventures as at 30 June 2004, the total net book value of the Properties held by the PRC Joint Ventures is HK$111,000,000. Amounts payable and other accruals attributable to the Properties amount to HK$79,000,000 and the aggregate amount of the shareholder’s loans owing to the Vendors is HK$312,280,250, leaving a negative net asset value of approximately HK$280,000,000, being the net asset value of the PRC Joint Ventures.

The profit and loss accounts of the Subsidiaries and the consolidated accounts of the Company will not be affected by the exercise of the option under the Option Deed by the Purchaser other than recording receipt of US$3 nominal consideration.

The Disposal represents a gain of approximately HK$14.8 million for the Vendors and HK$10.4 million for the Group after deducting the minority interest of 30% not held by the Group which will be recognised in the profit and loss accounts of the Company for the year ending 31 December 2004. Since the interest in the PRC Joint Ventures with total asset value of HK$111,000,000 and total liabilities of HK$79,000,000 is disposed of by the Group under the Disposal for the consideration of RMB50,000,000 (equivalent to approximately HK$46,816,479), accordingly, there will be a corresponding net reduction in the assets and liabilities of the Group after the Disposal. As the PRC Joint Ventures did not record any turnover, the Disposal will not have any impact on the future earnings of the Group.

GENERAL

The Disposal constitutes a discloseable transaction of the Company under the Listing Rules.

As at the date of this circular, the Board of the Company comprises Mr. Chan Yeung Nam and Mr. Fu Jie Pin as executive directors and Mr Tang Cheung Fai, Mr. Lam Ping Cheung and Mr. Wengue Jee as independent non-executive directors.

Yours faithfully,

Chan Yeung Nam Chairman

– 14 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

2. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, according to the register of interests in long positions and short positions kept by the Company under the provisions of Divisions 2 and 3 of Part XV of section 336 of the SFO and so far as the Directors were aware, the following persons had a long position in the shares, underlying shares or debentures 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:

Long Position in the Shares:

Ordinary share(s) of US$0.02 each of the Company

– 15 –

GENERAL INFORMATION

APPENDIX

Notes:

• (a) Mr. Chan Yeung Nam, a director of the Company, holds the entire beneficial interest in Velocity and Mr. Chan Yeung Nam is accordingly deemed to be interested in 146,943,418 shares in the Company. Mr. Chan Yeung Nam is also a director of Velocity.

• (b) Ruby directly holds the entire beneficial interest in Wealthy which in turn beneficially owns 16,079,000 shares in the Company. Accordingly, Ruby is deemed to be interested in the same 16,079,000 shares in the Company.

• (c) CWTO beneficially owns 11,000,662 shares in the Company and directly holds the entire beneficial interest in Golden and Expert. Golden and Expert beneficially own 20,742,000 and 15,000,000 shares in the Company respectively. Accordingly, CWTO is totally interest in 46,742,662 shares in the Company.

• (d) China Strategic directly holds the entire beneficial interest in Ruby and CWTO. Ruby and CWTO are deemed to be interested in 16,079,000 and 46,742,662 shares in the Company respectively. Accordingly, China Strategic is deemed to be interested in 62,821,662 shares in the Company.

• (e) These shares were pledged to Wing On pursuant to a loan agreement and share mortgage agreement both dated 16 December 2003.

Save as disclosed in this circular, the Directors are not aware of any other persons as at the Latest Practicable Date, who (i) had any long position or short position in the shares, underlying shares or debentures 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; or (ii) was directly or indirectly interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group or held any option in respect of such capital.

3. DISCLOSURE OF INTERESTS

Other than as disclosed in the section “Substantial shareholders” above, none of the Directors, chief executives, nor their associates, had any interests or short positions in any shares, underlying shares or debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO) as at the Latest Practicable Date which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO; or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange.

4. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or their respective associates was interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

– 16 –

GENERAL INFORMATION

APPENDIX

5. SERVICE CONTRACTS

As at the Latest Practicable Date, there were no existing or proposed service contracts between any of the Directors and any member of the Group, excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation).

6. LITIGATION

As at the Latest Practicable Date, the Group was involved in the following material litigations:

• (a) In August 1999, the architect of Paul Y. Plaza located in Guangzhou, the PRC, an Independent Third Party, initiated legal proceedings against Eventic Limited (“Eventic”), an indirect wholly owned subsidiary of the Company, in respect of claim for payment of service fees and other expenses of HK$0.6 million and HK$6.6 million respectively. Eventic engaged the architect for architectural Services in respect of Paul Y. Plaza, which is held by the Group.

Eventic has vigorously defended the claims and made a counterclaim in October 1999 for loss and damages to be assessed and suffered due to insufficient supervision services provided by the architect.

In view of the counterclaim made by Eventic, the architect amended its total claims to HK$7.7 million in November 1999. As at the Latest Practicable Date, the proceedings are still ongoing and at the stage of exchange of documents which is a process that none of the parties to the claim has commenced. The Directors therefore consider it is too early during the course of the legal proceedings to determine whether there will be any material adverse financial effect on the Group, therefore no provisions have been made in the books of the Group.

• (b) In June 2002, a sub-contractor of Paul Y. Plaza initiated legal proceedings against Eventic in respect of a claim for payment of sub-contract works of approximately RMB5.2 million (equivalent to approximately HK$4.9 million).

Eventic has vigorously defended the claim as there was no contractual relationship between Eventic and the sub-contractor. Eventic has also made a counterclaim and/or set off against the sub-contractor for the balance of unused advance payment and overpayment of approximately RMB4.2 million (equivalent to approximately HK$3.9 million) and RMB0.8 million (equivalent to approximately HK$0.7 million) respectively paid to the sub-contractor.

The matter went before a master in April 2003, and the preliminary view was that (i) even if a contractual relationship can be established, the final payment would only be due upon completion of the construction which in itself is an issue that needs to be determined; (ii) the terms of the architect’s letter dated 13 December 1995 on which the plaintiff’s claim was based was vague and uncertain; (iii) there was insufficient evidence to support a case based on estoppel by representation.

– 17 –

APPENDIX

GENERAL INFORMATION

As at the Latest Practicable Date, the proceedings have not been withdrawn, but no action has been taken in the last 18 months. After taking into consideration the above, the Directors are of the opinion that the proceedings is unlikely to have any material adverse financial impact on the Group as the amount involved in the litigation is not material to the Group when compared to its position for the year ended 31 December 2003 and in addition, the views of the master of the court have so far been in favour of the Group, therefore no provisions have been made in the books of the Group.

7. GENERAL

• (a) The registered office of the Company is situate at Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda. The principal place of business in Hong Kong of the Company is Room 1416, 14th Floor, China Merchants Tower, Shun Tak Centre, Sheung Wan, Hong Kong.

• (b) The share registrar in Hong Kong of the Company is Computershare Hong Kong Investor Services Limited, situated at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (c) The secretary and qualified accountant of the Company is Mr. Sin Ka Man, an associate member of The Hong Kong Institute of Certified Public Accountants, a fellow member of The Association of Chartered Certified Accountants, and a certified practising accountant of the CPA (Australia).

• (d) This circular has been prepared in both English and Chinese. In the case of any discrepancy, the English text shall prevail.

– 18 –