09:36 SHANGHAI GROWTH<00770> - Announcement (5) December 2003. The New Cap for each of the other periods covered by the Fourth Supplemental Agreement consists only of the Management and Administration Fee expected to be payable by the Company to the Investment Manager in relation to each relevant period and does not include a component for an Incentive Fee, as the Company cannot anticipate whether there will be any Incentive Fee to be payable to the Investment Manager in any of those periods. If the total fees payable to the Investment Manager (consisting of the Management and Administration Fee and, if any, the Incentive Fee) for each of the periods covered by the Fourth Supplemental Agreement exceed the corresponding New Cap, the Company will again have to fully comply with the provisions of Chapter 14A of the Listing Rules governing connected transactions, including making further announcement and obtaining further approval from its Independent Shareholders. REASONS FOR THE FOURTH SUPPLEMENTAL AGREEMENT The Company, an investment company listed under Chapter 21 of the Listing Rules on the Stock Exchange, aims to achieve long-term capital appreciation through unlisted investments in the greater Shanghai region and listed China-related securities. Since 12 November 1993, the Company has appointed the Investment Manager to provide Investment Management Services to the Company. The minimum five years term of appointment of the Investment Manager under the Supplemental Agreement will expire on 31 December 2005 and either party may terminate the Investment Management Agreement with two months prior written notice at any time. Similarly, the Waiver is valid for the term of the Supplemental Agreement and the Company will have to fully comply with the requirements of the Listing Rules in relation to the Ongoing Connected Transactions thereafter, including, but not limited to, a requirement that such transactions be made conditional on approval by the Independent Shareholders as required by rule 14A.35 of the Listing Rules. The Board considers that the Company should take immediately steps to ensure compliance with such requirements and in particular, considers that the AGM, expected to be held in May 2005, to be an appropriate time for the Independent Shareholders to consider and, if thought fit, approve, inter alia, the Fourth Supplemental Agreement and the Ongoing Connected Transactions. The Directors are of the opinion that the Investment Manager will continue to have the necessary expertise in providing the Investment Management Services to the Company in the future, beyond 31 December 2005. The Directors (including the independent non-executive Directors) consider that the execution of the Fourth Supplemental Agreement and the Ongoing Connected Transactions to be in the best interests of the Company and the Shareholders as a whole, on normal commercial terms and in the ordinary and usual course of business of the Company. APPROVAL BY INDEPENDENT SHAREHOLDERS (1) The New Caps The New Caps were determined by reference to previous Ongoing Connected Transactions, in particular the historical values of the Ongoing Connected Transactions as compared to the net tangible asset values of the Company for each corresponding preceding year. For each of the three years ended on 31 December 2004, 2003 and 2002, the aggregate value of the Ongoing Connected Transactions amounted to approximately US$1,121,335 (approximately HK$8,746,413), US$1,043,854 (approximately HK$8,142,061) and US$1,120,953 (approximately HK$8,743,433) respectively, representing 2.08%, 1.99% and 1.84% of the Company's net tangible asset value as at 31 December 2003, 2002 and 2001 respectively. For the six months ended on 30 June 2005, the aggregate value of the Ongoing Connected Transactions were expected to be approximately US$573,735 (approximately HK$4,475,133), representing 1% of the Company's net tangible asset value as at 31 December 2004. The Board expects that during the three years of the term of the Investment Management Agreement, similar percentage level of the transaction values of the Ongoing Connected Transactions to the Company's net tangible asset value will be maintained and that the Company's net tangible asset value may be increased. The Company's latest audited Net Asset Value as at 31 December 2004 was US$57,373,522 (HK$447,513,472) and its latest unaudited Net Asset Value as at 28 February 2005 was US$57,270,150 (HK$446,707,170). (2) Approval by Independent Shareholders The listing of the Company was approved by the Stock Exchange as an investment company under Chapter 21 of the Listing Rules. Pursuant to Rule 21.13 of the Listing Rules, for so long as the Investment Manager remains the investment manager of the Company for the purposes of the Listing Rules, all of the Ongoing Connected Transactions would