Asia Energy Logistics Group Limited — Proxy Solicitation & Information Statement 2003

Mar 27, 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular, you should consult your stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or otherwise transferred all your shares in CHEUNG TAI HONG HOLDINGS 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 and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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(Incorporated in Bermuda with limited liability)

PROPOSED CAPITAL REORGANISATION INVOLVING CAPITAL REDUCTION, SHARE SUB-DIVISION, SHARE CONSOLIDATION, CANCELLATION OF SHARE PREMIUM, AMENDMENTS TO THE BYE-LAWS OF THE COMPANY

AND

GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES

A notice convening a special general meeting of CHEUNG TAI HONG HOLDINGS LIMITED to be held at Gemini, Level 33, Best Western Rosedale on The Park, 8 Shelter Street, Causeway Bay, Hong Kong on Monday, 14th April, 2003 at 10:00 a.m. is set out on pages 15 to 19 of this circular. Whether or not you are able to attend the meeting, you are requested to complete the accompanying form of proxy for use at the special general meeting in accordance with the instructions printed thereon and return it to the principal place of business of the Company in Hong Kong at Room 2206, 22nd Floor, Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong as soon as possible and, in any event, not less than 48 hours before the time appointed for the holding of the meeting or any adjourned meeting thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjourned meeting should you so wish.

* For identification purpose only

21st March, 2003

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Capital Reorganisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Effect of the Capital Reorganisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Reasons for the Capital Reorganisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Conditions of the Capital Reorganisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Change of Board Lots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Amendments to the Bye-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Adjustment to the Exercise Price of the Share Options . . . . . . . . . . . . . . . . . . . . . . . . .	8
Listing and Dealings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
General Mandates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Directors’ Responsibility Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Appendix – Explanatory Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Notice of Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15

DEFINITIONS

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

“Bermuda Registrar”	the Registrar of Companies in Bermuda
“Board”	the board of Directors
“Bye-laws”	the bye-laws of the Company
“Capital Reduction”	the proposed reduction of the issued share capital of the
	Company as referred to in sub-paragraph (a)(i) under the
	paragraph headed “Capital Reorganisation” in the section
	headed “Letter from the Board” in this circular
“Capital Reorganisation”	the proposed capital reorganisation of the Company as
	referred to in the paragraph headed “Capital Reorganisation”
	in the section headed “Letter from the Board” in this circular
“CCASS”	the Central Clearing and Settlement System established and
	operated by HKSCC
“Companies Act”	The Companies Act 1981 of Bermuda
“Company”	Cheung Tai Hong Holdings Limited, a company incorporated
	in Bermuda with limited liability with its shares listed on
	the main board of the Stock Exchange
“Consolidated Share(s)”	new ordinary share(s) of HK$0.01 each in the share capital
	of the Company comprising the authorised share capital of
	the Company following the Capital Reorganisation
“Directors”	the directors of the Company
“Effective Date”	the date upon which the Capital Reorganisation becomes
	unconditional and effective when all the conditions to which
	it is subject as set out on page 7 of this circular are satisfied
“General Mandates”	the Issue Mandate and the Repurchase Mandate
“Hong Kong”	the Hong Kong Special Administrative Region of the
	People’s Republic of China
“HKSCC”	Hong Kong Securities Clearing Company Limited
“Issue Mandate”	a mandate proposed to be sought at the SGM to authorize
	the Directors to allot and issue shares or convertible
	securities or similar rights to subscribe for any shares or
	convertible securities of the Company in the manner set out
	in ordinary resolution numbered 4 in the SGM Notice

– 1 –

DEFINITIONS

“Latest Practicable Date”	18th March, 2003, the latest practicable date prior to the
	printing of this circular for the purposes of ascertaining the
	information contained herein
“Optionholder(s)”	holder(s) of the Share Option(s)
“Registrar”	Secretaries Limited of Ground Floor, Bank of East Asia,
	Harbour View Centre, 56 Gloucester Road, Wanchai, Hong
	Kong, being the Company’s branch share registrar in Hong
	Kong
“Repurchase Mandate”	a mandate proposed to be sought at the SGM to authorize
	the Directors to repurchase fully paid shares of the Company
	in manner set out in ordinary resolution numbered 5 in the
	SGM Notice
“SGM”	the special general meeting of the Shareholders to be held
	at Gemini, Level 33, Best Western Rosedale on The Park,
	8 Shelter Street, Causeway Bay, Hong Kong on Monday,
	14th April, 2003 at 10:00 a.m. to consider and, if thought
	fit, approve, inter alia, the Capital Reorganisation or any
	adjourned meeting thereof
“SGM Notice”	the notice convening the SGM as set out on page 15 to 19
	of this circular
“Share(s)”	existing ordinary share(s) of HK$0.10 each in the share
	capital of the Company
“Share Consolidation”	the proposed consolidation of all the issued and unissued
	shares of HK$0.0005 each in the capital of the Company as
	referred to in sub-paragraph (c) under the paragraph headed
	“Capital Reorganisation” in the section headed “Letter from
	the Board” in this circular
“Share Option(s)”	option(s) to subscribe for Shares or Consolidated Shares,
	as the case may be, granted or to be granted under the
	Share Option Schemes
“Share Option Schemes”	the share option schemes adopted by the Company on 28th
	February, 1994 (which has already been terminated by the
	Company on 26th August, 2002) and 26th August, 2002
	respectively
“Share Premium Cancellation”	the proposed cancellation of the share premium in the share
	premium account of the Company as referred to in sub-
	paragraph (d) under the paragraph headed “Capital
	Reorganisation” in the section headed “Letter from the
	Board” in this circular

– 2 –

DEFINITIONS

“Share Sub-division”	the proposed sub-division of each unissued Share into 200
	unissued shares of HK$0.0005 each as referred to in sub-
	paragraph (b) under the paragraph headed “Capital
	Reorganisation” in the section headed “Letter from the
	Board” in this circular
“Shareholder(s)”	holder(s) of Share(s) or Consolidated Share(s), as the context
	may require
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.

– 3 –

EXPECTED TIMETABLE

2003

Latest time for lodging of proxies for the SGM . . . . . . . . . . . . . . . .10:00 a.m., Saturday, 12th April SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m., Monday, 14th April Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 15th April Dealings in Consolidated Shares commence . . . . . . . . . . . . . . . . . . . . 9:30 a.m., Tuesday, 15th April Temporary counter for trading in Consolidated Shares, in board lots of 1,000 Consolidated Shares in the form of existing certificate(s) for the Shares opens . . . . . . . . . . . . . . . . 9:30 a.m., Tuesday, 15th April Existing counter for trading in Shares in board lots of 20,000 closes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m., Tuesday, 15th April First day for free exchange of existing certificate(s) for Shares into new certificate(s) for Consolidated Shares . . . . . . . . . . . . . . . Tuesday, 15th April Young Champion Securities Limited to stand in the market to assist in matching odd lots of Consolidated Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 15th April to Monday, 26th May Parallel trading commences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m., Friday, 2nd May Existing counter for trading in Consolidated Shares in board lots of 5,000 Consolidated Shares in the form of new share certificate(s) for Consolidated Shares re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m., Friday, 2nd May Temporary counter for trading in Consolidated Shares in board lots of 1,000 Consolidated Shares in the form of existing share certificate(s) closes . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. Monday, 26th May Parallel trading ends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m., Monday, 26th May Last day for free exchange of existing certificate(s) for Shares into new certificate(s) for Consolidated Shares . . . . . . . . . . . . . . . Thursday, 29th May

Note: All references in this circular to times and dates are references to Hong Kong times and dates.

– 4 –

LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability)

Directors:

Mr. Tse Cho Tseung (Chairman)

Mr. Tam Cheuk Ho (Deputy Chairman)

Mr. Ding Chung Keung, Vincent (Managing Director)

Ms. Lin Fung Yi

Registered office: Clarendon House Church Street Hamilton HM 11 Bermuda

Mr. Kwok Ka Lap, Alva[#]

Mr. Ho Kin Cheong, Kelvin[#]

Principal place of business in Hong Kong:

Room 2206, 22nd Floor Paul Y. Centre 51 Hung To Road Kwun Tong, Kowloon Hong Kong

# Independent non-executive Director

21st March, 2003

To the Shareholders

and for information only, the Optionholders

Dear Sir or Madam,

PROPOSED CAPITAL REORGANISATION INVOLVING CAPITAL REDUCTION, SHARE SUB-DIVISION, SHARE CONSOLIDATION, CANCELLATION OF SHARE PREMIUM, AMENDMENTS TO THE BYE-LAWS OF THE COMPANY AND GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES

INTRODUCTION

The Directors announced on 6th March, 2003 that they proposed the Capital Reorganisation to the Shareholders involving the Capital Reduction, the Share Sub-division, the Share Consolidation and the Share Premium Cancellation. The Directors will also seek the approval of the Shareholders to grant to the Directors the General Mandates.

The purpose of this circular is to give you further information regarding the proposed Capital Reorganisation, amendments to the Bye-laws and the grant of the General Mandates and to give notice of the SGM to be convened for the purpose of approving the necessary resolutions to implement and adopt the aforesaid proposals.

* For identification purpose only

– 5 –

LETTER FROM THE BOARD

CAPITAL REORGANISATION

The Directors propose that the Capital Reorganisation will be effected in the following manner:–

• (a) (i) the nominal value of all issued Shares of HK$0.10 each will be reduced by HK$0.0995 each by cancelling an equivalent amount of paid-up capital per Share so that the nominal value of each such Share will be reduced from HK$0.10 to HK$0.0005. Accordingly, based upon 2,343,753,121 Shares in issue as at the Latest Practicable Date, the issued share capital of the Company of HK$234,375,312.10 will be reduced by HK$233,203,435.54 to HK$1,171,876.56;

• (ii) the credit arising from such reduction in the sum of HK$233,203,435.54 will be credited to the contributed surplus account of the Company;

• (b) every unissued Share of HK$0.10 will be sub-divided into 200 unissued shares of HK$0.0005 each;

• (c) every 20 issued and unissued shares of HK$0.0005 each in the capital of the Company will be consolidated into one Consolidated Share of HK$0.01 each. On such basis and after the Capital Reduction, there will be 117,187,656 Consolidated Shares in issue following the Share Consolidation; and

• (d) the share premium as at 31st January, 2003 in the share premium account of the Company will be cancelled and the credit arising therefrom will be credited to the contributed surplus account of the Company. Based on the unaudited management accounts of the Company as at 31st January, 2003, the share premium account of the Company amounted to approximately HK$335 million.

Part of the credit transferred to the contributed surplus account of the Company mentioned in sub-paragraphs (a)(ii) and (d) above will be used to set off against the accumulated deficit of the Company as at 31st January, 2003. According to the unaudited management accounts of the Company as at 31st January, 2003, the accumulated deficit of the Company amounted to approximately HK$535.9 million.

EFFECT OF THE CAPITAL REORGANISATION

Assuming no Shares are to be issued pursuant to the exercise of the Share Options, upon the Capital Reorganisation becoming effective, the authorised share capital of the Company will remain as HK$400,000,000 divided into 40,000,000,000 Consolidated Shares of HK$0.01 each, of which 117,187,656 Consolidated Shares of HK$0.01 each will be in issue. Other than the expenses incurred in relation to the Capital Reorganisation, the implementation thereof will not alter the underlying assets, business operations, management or financial position of the Company or the interests of the Shareholders (save and except any fractional entitlements resulting from the Share Consolidation). The Directors believe that the Capital Reorganisation will not have any material adverse effect on the financial position of the Company and its subsidiaries.

– 6 –

LETTER FROM THE BOARD

REASONS FOR THE CAPITAL REORGANISATION

The unaudited management accounts of the Company as at 31st January, 2003 showed that the Company had an accumulated deficit of approximately HK$535.9 million. The Directors believe that the Company may not be able to generate sufficient profits in the immediate future to eliminate this deficit. The Capital Reorganisation will allow the Company to reduce the accumulated deficit. As the paid-up capital of the Company is no longer represented by assets which have been lost, the Directors consider it appropriate to effect the Capital Reorganisation. Under Bermuda law, a company may not issue shares at a discount to the nominal value of such shares. The Capital Reorganisation will therefore give the Company greater flexibility in pricing any new issue of its shares. However, the Company has no present intention to issue any Consolidated Shares.

CONDITIONS OF THE CAPITAL REORGANISATION

The Capital Reorganisation is conditional on:–

• (i) the passing by the Shareholders at the SGM by way of special resolutions approving the Capital Reduction and the Share Premium Cancellation;

• (ii) the passing by the Shareholders at the SGM by way of ordinary resolutions approving the Share Sub-division and the Share Consolidation;

• (iii) the publication of a notice of the Capital Reduction and the Share Premium Cancellation in Bermuda in accordance with the Companies Act;

• (iv) the Directors confirming that on the date as from which the Capital Reduction and the Share Premium Cancellation are to have effect, there are no reasonable grounds for believing that the Company is, and after the Capital Reduction and the Share Premium Cancellation would be, unable to pay its liabilities as they fall due; and

• (v) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Consolidated Shares.

CHANGE OF BOARD LOTS

Upon the Capital Reorganisation becoming effective, the Directors also propose to change the board lot size from 20,000 Shares to 5,000 Consolidated Shares of HK$0.01 each. The change of board lot will not result in any change in the relative rights of the Shareholders and the Consolidated Shares will rank pari passu in all respects with each other. The change of board lot will become effective on the Effective Date.

Based on the respective closing price of HK$0.026 and HK$0.014 per Share as quoted on the Stock Exchange on 6th March, 2003 and the Latest Practicable Date, the trading value for each board lot of the Shares is approximately HK$520 and HK$280 respectively. The theoretical share price of the Consolidated Shares will be approximately 20 times of the existing share price after the Capital Reorganisation. Upon the completion of the Capital Reorganisation and the change in the board lot of the Consolidated Shares, the trading value of each board lot of the Consolidated Shares will be approximately HK$1,400.

– 7 –

LETTER FROM THE BOARD

AMENDMENTS TO THE BYE-LAWS

Upon the Capital Reorganisation becoming effective, the par value of the shares of the Company will be reduced from HK$0.10 to HK$0.01. In order to reflect the new par value of the shares of the Company, the Directors propose that the existing Bye-law 3(1) of the Bye-laws be deleted in its entirety and replaced by the following new provision:

“3(1) Subject to any resolution of Members to the contrary, the share capital of the Company shall be divided into shares of a par value of $0.01 each.”

ADJUSTMENT TO THE EXERCISE PRICE OF THE SHARE OPTIONS

As at the Latest Practicable Date, there were 11,889,000 outstanding Share Options which confer the Optionholders to subscribe for up to a maximum of 11,889,000 Shares at the exercise prices ranging from HK$0.10 to HK$1.092 each.

Pursuant to the rules of the Share Option Schemes and Chapter 17 of the Listing Rules, the auditors of the Company certified on the Latest Practicable Date that the implementation of the Capital Reorganisation will result in an adjustment to the exercise prices of the outstanding Share Options by a factor of 20 and an adjustment to the number of shares issuable on the exercise of the outstanding Share Option by a factor of 0.05. The exercise prices of the Share Options and number of shares issuable will be adjusted as follows:–

				Number of
		Number of		Consolidated
		Shares issuable		Shares issuable
		on the exercise		on the exercise
		of the		of the
		outstanding		outstanding
	Exercise	Share Options	Exercise	Share Options
	price prior	prior to	price after	after
	to the Capital	the Capital	the Capital	the Capital
Option period	Reorganisation	Reorganisation	Reorganisation	Reorganisation
	HK$		HK$
30th April, 1997 to 29th April, 2007	0.792	1,080,000	15.84	54,000
2nd May, 1997 to 1st May, 2007	0.825	480,000	16.50	24,000
19th June, 1997 to 18th June, 2007	1.092	168,000	21.84	8,400
2nd February, 1998 to 1st February, 2008	0.100	111,000	2.00	5,550
25th November, 1998 to 24th November, 2008	0.105	440,000	2.10	22,000
17th November, 1999 to 16th November, 2009	0.117	210,000	2.34	10,500
20th December, 1999 to 19th December, 2009	0.128	1,500,000	2.56	75,000
14th March, 2000 to 13th March, 2010	0.330	7,900,000	6.60	395,000

LISTING AND DEALINGS

Application will be made to the Listing Committee for the listing of, and permission to deal in, the Consolidated Shares to be in issue following the implementation of the Capital Reorganisation and any Consolidated Shares to be issued upon exercise of the Share Options granted under the Share Option Schemes. No part of the share capital of the Company is listed or dealt in on any other stock exchange and no such listing or permission to deal is being or proposed to be sought.

– 8 –

LETTER FROM THE BOARD

Subject to the granting of listing of, and permission to deal in, the Consolidated Shares on the Stock Exchange, the Consolidated Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the Consolidated Shares on the Stock Exchange or on such other date as HKSCC so determines. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

The Consolidated Shares will be traded in board lots of 5,000 Consolidated Shares. Subject to the Capital Reorganisation becoming unconditional and effective, dealings in the Consolidated Shares are expected to commence on Tuesday, 15th April, 2003 and it is proposed that arrangements for dealings in the Consolidated Shares will be as follows:–

• (i) From Tuesday, 15th April, 2003, the existing counter for trading in Shares in board lots of 20,000 Shares will be closed. A temporary counter for trading in Consolidated Shares in board lots of 1,000 Consolidated Shares represented by 20,000 Shares in form of the existing certificate(s) for the Shares will be established and every 20 Shares will be deemed to represent one Consolidated Share. Existing certificate(s) for Shares (in pink colour) can only be traded at the temporary counter.

• (ii) With effect from Friday, 2nd May, 2003, the existing counter will be re-opened for trading in Consolidated Shares in board lots of 5,000 Consolidated Shares. Only certificates for Consolidated Shares (in the form of new certificates in green colour) can be traded at this counter.

• (iii) During the period from Friday, 2nd May, 2003 to Monday, 26th May, 2003 (both dates inclusive), parallel trading will be permitted at the above two counters.

• (iv) The temporary counter for trading in share certificates in board lots of 1,000 Consolidated Shares will be withdrawn after the close of trading on Monday, 26th May, 2003 and thereafter trading will only be done in Consolidated Shares in board lots of 5,000 Consolidated Shares (in the form of new certificates in green colour). Existing certificates for Shares (in pink colour) will only be valid for delivery and settlement in respect of dealings for the period up to and including Monday, 26th May, 2003 and thereafter will not be acceptable for delivery and settlement purposes. However, valid certificates for Shares (in pink colour) will continue to be good evidence of legal title to the Consolidated Shares on the basis of 20 Shares for one Consolidated Share and may be exchanged for new share certificate(s) for Consolidated Shares (in green colour) at the Registrar at any time.

Subject to the conditions of the Capital Reorganisation being fulfilled, Shareholders may submit their certificates for Shares (in pink colour) to the Registrar in exchange for certificates for Consolidated Shares (in green colour) on the basis of one Consolidated Share for every 20 existing Shares, free of charge at the Registrar’s office during business hours from Tuesday, 15th April, 2003 to Thursday, 29th May, 2003. Thereafter, existing certificates for Shares will be accepted for exchange only on payment of a fee of HK$2.5 (or such higher amount as may from time to time be allowed by the Stock Exchange) for each new certificate issued for Consolidated Shares. The fee is calculated according to either (a) the number of new certificate(s) to be issued for the Consolidated Shares or (b) the number of certificate(s) for the Shares in exchange for the new certificates

– 9 –

LETTER FROM THE BOARD

(whichever is the higher amount). Unless otherwise instructed, new share certificates will be issued on board lots of 5,000 Consolidated Shares. It is expected that new certificates for Consolidated Shares will be available for collection within 10 business days from the date of submission of existing certificates for Shares to the Registrar for exchange.

In order to alleviate the difficulties arising from the existence of odd lots of the Consolidated Shares, the Company has agreed to procure an agent to arrange a “matching service” for the Shareholders who wish to buy and sell their holding of odd lots. Shareholders should note that the aforesaid “matching service” is on a best effort basis and there is no guarantee of a successful execution of such transaction. Holders of odd lots of Consolidated Shares who wish to take advantage of this facility should contact Mr. Lo Tai Wah of Young Champion Securities Limited at Room 904-5, 9th Floor, West Tower, Shun Tak Centre, 200 Connaught Road Central, Hong Kong (telephone no. 25228828) from Tuesday, 15th April, 2003 to Monday, 26th May, 2003. The fractional entitlements, if any, of the Consolidated Shares that arise from the Share Consolidation will be aggregated and sold, the proceeds of sale will be retained for the benefit of the Company.

GENERAL MANDATES

Ordinary resolutions will also be proposed to the Shareholders at the SGM to grant new General Mandates to the Directors to exercise all powers of the Company:

• (i) to allot, issue and deal with Consolidated Shares or convertible securities of the Company or similar rights to subscribe for any Consolidated Shares or convertible securities of the Company up to an amount not exceeding 20% of the aggregate nominal amount of the share capital of the Company in issue as at the Effective Date;

• (ii) to repurchase on the Stock Exchange fully paid up Consolidated Shares up to a maximum of 10% of the aggregate nominal amount of the issued share capital of the Company as at Effective Date; and

• (iii) to extend the Issue Mandate by an amount representing the aggregate nominal amount of the Consolidated Shares repurchased by the Company pursuant to and in accordance with the Repurchase Mandate.

The General Mandates will continue in force until the conclusion of the next annual general meeting of the Company or until the expiration of the period within which the next annual general meeting of the Company is required by the Bye-laws or any applicable laws to be held or until revoked or varied by ordinary resolutions of the Shareholders in a special general meeting held prior to the next annual general meeting of the Company.

Shareholders should refer to the explanatory statement contained in the Appendix to this circular which sets out further information in relation to the Repurchase Mandate.

SGM

The SGM Notice at which special and ordinary resolutions will be proposed to the Shareholders to approve the Capital Reorganisation, the amendments to the Bye-laws and the grant of the General Mandates is set out on page 15 to 19 of this circular.

– 10 –

LETTER FROM THE BOARD

A form of proxy for use at the SGM is enclosed. Whether or not you are able to attend the SGM in person, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjourned meeting thereof to the Company’s principal place of business in Hong Kong at Room 2206, 22nd Floor, Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting thereof should you so wish.

RECOMMENDATION

The Directors are of the opinion that the terms of the Capital Reorganisation, the amendments to the Bye-laws and the grant of the General Mandates are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of all the resolutions set out in the SGM Notice.

DIRECTORS’ RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquires, that to the best of their knowledge and belief, there are no other facts not contained in this circular the omission of which would make any statements herein misleading.

By order of the Board Cheung Tai Hong Holdings Limited Tse Cho Tseung Chairman

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EXPLANATORY STATEMENT

APPENDIX

The following information is provided to enable the Shareholders to make an informed decision on whether to vote for or against the resolution to approve the grant of the Repurchase Mandate to the Directors to exercise the power of the Company to purchase is own securities:–

1. SHARE CAPITAL

As at the Latest Practicable Date, there were 2,343,753,121 Shares in issue. Assuming that (i) no further Shares in the Company are issued or repurchased between the Latest Practicable Date and the date of the SGM; and (ii) special resolution numbered 1 in relation to the Capital Reduction and ordinary resolutions numbered 1 and 2 in relation to the Share Sub-division and the Share Consolidation set out in the SGM Notice becoming unconditional and effective, there will be in issue 117,187,656 Consolidated Shares in the Company and, assuming the adjustments described in the paragraph headed “Adjustment to the exercise price of the Share Options” in this circular becoming effective, exercise in full of the Repurchase Mandate will result in up to a maximum of 11,718,765 Consolidated Shares (representing 10% of the then issued share capital of the Company), being repurchased by the Company during the Relevant Period as referred to in ordinary resolution numbered 5 (in relation to the Repurchase Mandate) of the SGM Notice.

2. REASONS FOR REPURCHASE

The Directors believe that the Repurchase Mandate affords the Company the flexibility and ability in pursuing the best interests of the Company and its Shareholders. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset and/or earnings per Consolidated Share and will only be made when the Directors believe that such repurchases will benefit the Company and its Shareholders.

3. FUNDING OF REPURCHASES

Repurchase would be funded entirely from the Company’s available cash flow or working capital facilities which will be funds legally available for the purpose and in accordance with the Memorandum of Association and the Bye-laws and the laws of Bermuda.

The Directors propose that such repurchase of Consolidated Shares would be appropriately funded by the Company’s internal resources and/or available banking facilities. As compared with the position disclosed in the audited accounts contained in the annual report for the year ended 31st March, 2002, the Directors consider that there might be material adverse impact on the working capital requirements or gearing position of the Company in the event that the Repurchase Mandate were exercised in full at any time during the proposed repurchase period. However, the Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

4. UNDERTAKING

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules and the Companies Act.

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EXPLANATORY STATEMENT

APPENDIX

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, their associates (as defined in the Listing Rules), have any present intention to sell any Consolidated Shares to the Company or its subsidiaries under the Repurchase Mandate if such is approved by the Shareholders.

As at the Latest Practicable Date, no connected person (as defined in the Listing Rules) had notified the Company that it has a present intention to sell any of the Shares or the Consolidated Shares to the Company, or has undertaken not to do so, in the event that the Repurchase Mandate is approved by the Shareholders.

5. SHARE PRICES

The highest and lowest prices at which the Shares have been traded on the Stock Exchange in each of the twelve calendar months preceding the Latest Practicable Date were as follows:–

	Highest	Lowest
	Traded Price	Traded Price
	HK$	HK$
2002
March	0.086	0.065
April	0.080	0.064
May	0.104	0.075
June	0.091	0.068
July	0.069	0.061
August	0.061	0.030
September	0.048	0.031
October	0.043	0.027
November	0.044	0.020
December	0.035	0.021
2003
January	0.045	0.030
February	0.045	0.020

6. TAKEOVERS CODE

If, on the exercise of the power to repurchase Consolidated Shares pursuant to the Repurchase Mandate, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purposes of Rule 32 of the Takeovers Code. As a result, a Shareholder or a group of Shareholders acting in concert (within the meaning under the Takeovers Code), depending on the level of increase in the Shareholder’s interest, could obtain or consolidate control of the Company and become(s) obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code.

As at the Latest Practicable Date, by virtue of the Securities (Disclosure of Interests) Ordinance (Chapter 396 of the Laws of Hong Kong), Lunghin Enterprise Inc., which is a substantial Shareholder, was beneficially interested in 552,063,921 Shares, representing 23.55% of the issued

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EXPLANATORY STATEMENT

APPENDIX

share capital of the Company. In the event that the Directors exercise in full the power to repurchase Consolidated Shares in accordance with the terms of the ordinary resolution numbered 5 to be proposed at the SGM, then (if the present shareholdings otherwise remain the same) the shareholding of Lunghin Enterprise Inc. in the Company would be increased to approximately 26.17% of the issued share capital of the Company. At present, the Directors are not aware of any circumstances which will give rise to an obligation to make a mandatory offer under Rules 26 and 32 of the Takeovers Code in the event that the Directors exercise the power to repurchase Consolidated Shares pursuant to the Repurchase Mandate.

7. SHARE REPURCHASES MADE BY THE COMPANY

The Company had not repurchased any Shares (whether on the Stock Exchange or otherwise) in the six months preceding the Latest Practicable Date.

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NOTICE OF SPECIAL GENERAL MEETING

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(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting of Cheung Tai Hong Holdings Limited (the “Company”) will be held at 10:00 a.m. on Monday, 14th April, 2003 at Gemini, Level 33, Best Western Rosedale on The Park, 8 Shelter Street, Causeway Bay, Hong Kong for the purpose of considering and, if thought fit, passing the following resolutions as special and ordinary resolutions (as the case may be) of the Company:

SPECIAL RESOLUTION NO. 1

“ THAT conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) granting the listing of, and permission to deal in, ordinary shares of HK$0.01 each in the share capital of the Company arising from the Capital Reduction (as hereinafter defined), the Share Sub-division (as defined in the ordinary resolution numbered 1 set out in the notice of the meeting (the “Notice”) of which this resolution forms part), the Share Consolidation (as defined in the ordinary resolution numbered 2 set out in the Notice) and with effect from the date following the date of the passing of this resolution (the “Effective Date”):–

• (a) the nominal value of the issued share capital of the Company be reduced by cancelling paid-up capital to the extent of HK$0.0995 on each ordinary share of HK$0.10 of the Company in issue on the date of this resolution such that the nominal amount of each issued share of the Company shall become HK$0.0005 (the “Capital Reduction”);

• (b) the amount of the paid-up share capital of the Company reduced as referred to in paragraph (a) of this resolution be transferred to the contributed surplus account of the Company; and

• (c) the directors of the Company be authorised generally to do all things appropriate to effect and implement any of the foregoing.”

SPECIAL RESOLUTION NO. 2

“ THAT with effect from the Effective Date (as defined in the special resolution numbered 1 set out in the Notice):–

• (a) the total amount of HK$335,000,460.72 standing to the credit of the share premium account of the Company as at 31st January, 2003 be cancelled;

• (b) the amount of the share premium cancelled as referred to in paragraph (a) of this resolution be transferred to the contributed surplus account of the Company (the “Share Premium Transfer”); and

• (c) the directors of the Company be authorised generally to do all things appropriate to effect and implement any of the foregoing.”

* For identification purpose only

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NOTICE OF SPECIAL GENERAL MEETING

SPECIAL RESOLUTION NO. 3

“ THAT subject to the Capital Reorganisation (as defined in the ordinary resolution numbered 1 set out in the Notice) becoming unconditional and effective, the existing Bye-law 3(1) of the Bye-laws of the Company be deleted in its entirety and replaced by the following new provision:–

“3(1) Subject to any resolution of Members to the contrary, the share capital of the Company shall be divided into shares of a par value of $0.01 each.”

ORDINARY RESOLUTION NO. 1

“ THAT conditional upon (a) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, ordinary shares of HK$0.01 each in the share capital of the Company arising from the Capital Reduction (as defined in the special resolution numbered 1 set out in the Notice), the Share Sub-division (as hereinafter defined) and the Share Consolidation (as defined in the ordinary resolution numbered 2 set out in the Notice) (collectively, the “Capital Reorganisation”) and (b) the Capital Reduction becoming unconditional and effective and with effect from the Effective Date (as defined in the special resolution numbered 1 set out in the Notice), each of the ordinary shares of HK$0.10 each in the authorised but unissued share capital of the Company following the Capital Reduction (which shall include those unissued shares arising from the Capital Reduction) be sub-divided into 200 ordinary shares of HK$0.0005 each (“Share Sub-division”).”

ORDINARY RESOLUTION NO. 2

“ THAT conditional upon the special resolution numbered 1 and ordinary resolution numbered 1 set out in the Notice becoming unconditional and effective and with effect from the Effective Date (as defined in special resolution numbered 1 set out in the Notice):

• (a) the issued and unissued ordinary shares of HK$0.0005 each in the capital of the Company resulting immediately upon the said special resolution and ordinary resolution becoming unconditional and effective (the “Post Capital Reduction Shares”) be consolidated on the basis of every 20 issued and unissued Post Capital Reduction Shares being consolidated into one share of HK$0.01 (“Consolidated Share”) (the “Share Consolidation”);

• (b) all of the Consolidated Shares resulting from the Share Consolidation shall rank pari passu in all respects with each other and have the same rights and privileges and be subject to the restrictions contained in the Company’s Bye-Laws;

• (c) any fractional entitlements to the issued Consolidated Shares shall be aggregated and sold for the benefit of the Company by an agent appointed by the board of directors of the Company for that purpose in accordance with the terms and conditions set out in the circular dispatched to the shareholders of the Company on 21st March, 2003, a copy of which is produced to the meeting marked “A” and initialled by the chairman of the meeting for the purpose of identification; and

• (d) the directors of the Company be authorised generally to do all things appropriate to effect and implement any of the foregoing.”

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NOTICE OF SPECIAL GENERAL MEETING

ORDINARY RESOLUTION NO. 3

“ THAT upon the Capital Reduction (as defined in the special resolution numbered 1 set out in the Notice) and the Share Premium Transfer (as defined in the special resolution numbered 2 set out in the Notice) becoming effective, the credit arising from the Capital Reduction and the Share Premium Transfer and which has been transferred to the contributed surplus account of the Company be used firstly to set off against the accumulated deficit of the Company in the sum of HK$535,895,635.42 as at 31st January, 2003 and the remaining balance be used for any other purposes as the directors of the Company may think fit and that the directors of the Company be and are hereby authorised generally to do all things appropriate to effect and implement the foregoing.”

ORDINARY RESOLUTION NO. 4

“ THAT :

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

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

• (c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) and issued by the Directors pursuant to the approval in paragraph (a) of this Resolution, otherwise than pursuant to (i) a Rights Issue (as hereinafter defined); or (ii) the exercise of rights of subscription or conversion under the terms of any existing warrants, bonds, debentures, notes or other securities which carry rights to subscribe for or are convertible into shares of the Company; or (iii) the exercise of any option granted under any share option scheme or any similar arrangement for the time being adopted by the Company for the grant or issue to the eligible persons prescribed thereunder to subscribe for, or rights to acquire, shares in the Company; or (iv) an issue of shares of the Company by way of scrip dividend pursuant to the Bye-laws of the Company from time to time, shall not in aggregate exceed 20% of the aggregate nominal amount of the issued share capital of the Company as at the Effective Date (as defined in the special resolution numbered 1 set out in the Notice), and the said approval shall be limited accordingly; and

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NOTICE OF SPECIAL GENERAL MEETING

• (d) for the purposes of this Resolution:

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

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

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

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

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

ORDINARY RESOLUTION NO. 5

“ THAT :

• (a) subject to paragraph (b) of this Resolution, the exercise by the Directors during the Relevant Period (as hereinafter defined) of all the powers of the Company to repurchase shares of the Company on the Stock Exchange or on any other stock exchange on which the shares of the Company may be listed and recognised by the Securities and Futures Commission of Hong Kong and the Stock Exchange for this purpose, subject to and in accordance with all applicable laws, the requirements of the Rules Governing the Listing of Securities on the Stock Exchange or of any other stock exchange as amended from time to time and the Bye-laws of the Company, be and is hereby generally and unconditionally approved;

• (b) the aggregate nominal amount of shares of the Company which the Company is authorised to repurchase pursuant to the approval in paragraph (a) of this Resolution shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the Effective Date (as defined in the special resolution numbered 1 set out in the Notice) and the said approval shall be limited accordingly;

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NOTICE OF SPECIAL GENERAL MEETING

• (c) for the purpose of this Resolution, “Relevant Period” means the period from the passing of this Resolution until whichever is the earlier of:

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

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

• (iii) the revocation or variation of the authority given under this Resolution by an ordinary resolution of the shareholders of the Company in general meeting.”

ORDINARY RESOLUTION NO. 6

“ THAT subject to the passing of ordinary resolutions numbered 4 and 5 set out in the Notice, the general mandate granted to the directors of the Company to exercise all the powers of the Company to allot, issue and deal with additional securities pursuant to ordinary resolution numbered 4 set out in the Notice be and is hereby extended by the addition thereto of an amount representing the aggregate nominal amount of the share capital of the Company repurchased by the Company under the authority granted pursuant to ordinary resolution numbered 5 set out in the Notice, provided that such extended amount shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue as at the Effective Date (as defined in the special resolution numbered 1 set out in the Notice).”

By order of the Board Tse Cho Tseung Chairman

Dated: 21st March, 2003

Principal place of business in Hong Kong: Registered office: Room 2206, 22nd Floor Clarendon House Paul Y. Centre Church Street 51 Hung To Road Hamilton HM 11 Kwun Tong, Kowloon Bermuda Hong Kong

Notes:–

1. A member of the Company entitled to attend and vote at the meeting convened by the above notice is entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a member of the Company.

2. To be valid, a form of proxy, together with any power of attorney or other authority (if any) under which it is signed or a notarially certified copy of such power or authority must be deposited at the Company of Room 2206, 22nd Floor, Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong not less than 48 hours before the time fixed for holding the meeting or any adjourned meeting thereof.

3. Completion and return of the form of proxy shall not preclude a member of the Company from attending and voting in person at the meeting or on the poll concerned and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

4. Where there are joint holders of any share, any one of such holders may vote at the meeting either personally or by proxy in respect of such share as if he was solely entitled thereto; but if more than one of such joint holders be present at the meeting personally or by proxy, then the one of such holders whose name stands first on the register of members in respect of such share shall alone be entitled to vote in respect thereof.

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