BAIOO Family Interactive Limited — Proxy Solicitation & Information Statement 2005

Sep 22, 2005

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 a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant, or other professional advisers.

If you have sold or transferred all your shares in Datronix Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee, or to the bank, stockbroker or other agent through whom the sale 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.

DATRONIX HOLDINGS LIMITED �� ! " # $ % & '[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 889)

INDEPENDENT SHAREHOLDERS’ APPROVAL FOR CONTINUING CONNECTED TRANSACTIONS

Independent Financial Adviser to the Independent Board Committee

TIS Securities (HK) Limited

A letter from the Board is set out on pages 1 to 7 of this circular. A letter from the Independent Board Committee is set out on page 8 of this circular. A letter from TIS Securities (HK) Limited dated 20 September 2005 containing its advice to the Independent Board Committee and Independent Shareholders is incorporated and set out on pages 9 to 15 of this circular.

A notice convening the Special General Meeting to be held at 19th Floor, North Point Industrial Building, 499 King’s Road, North Point, Hong Kong on Friday, 7 October 2005 at 11:00 a.m. is set out on page 21 of this circular. Whether or not you are able to attend the Special General Meeting, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return it to Hong Kong Registrars Limited at Rooms 1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding such meeting. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting should you so wish.

• For identification purposes only

20 September 2005

CONTENTS

	Page
CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	i
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
2. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
3. THE CONTINUING CONNECTED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . .	2
4. REASON FOR THE CONTINUING CONNECTED TRANSACTIONS . . . . . . . . . . .	4
5. INDEPENDENT SHAREHOLDERS’ APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
6. RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
7. SPECIAL GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . .	8
LETTER FROM TIS SECURITIES (HK) LIMITED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
NOTICE OF SPECIAL GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21

– i –

DEFINITIONS

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

• “2nd Master Supply Agreement”

the agreement entered into by Datatronic and Datatronics Romoland on 7 April 2004

• “3rd Master Supply Agreement”

the agreement entered into by Datatronic and Datatronics Romoland on 1 August 2005

• “Board”

the board of directors of the Company

• “Cap Amount”

the annual limit of the aggregate consideration of the continuing connected transactions for each financial year of the Company

• “Company”

Datronix Holdings Limited, an exempted company incorporated in Bermuda with limited liability and the shares of which are listed on the Stock Exchange

• “Continuing Connected Transactions” the transactions under the 3rd Master Supply Agreement

• “Datatronic”

• Datatronic Limited, a company incorporated in Hong Kong with limited liability and a subsidiary of the Company

• “Datatronics Romoland”

• Datatronics Romoland, Inc., a company incorporated in the US with limited liability and is a company owned as to approximately 96.5% by Mr. Siu

• “Group”

the Company and its subsidiaries

• “HK$”

Hong Kong dollar(s)

• “Identified Shareholders”

Fortune Treasure Worldwide Ltd., Chu Shu Chen, Su Chun Yu, Feng To His, Lee Pei Jin, Linkcom Enterprises Ltd., Tong Ho Hang, Li Yuk Chun and Cheng Mei Yau

• “Independent Board Committee”

an independent board committee of the Company comprising Mr. Chung Pui Lam, Mr. Lam Tak Shing and Mr. Chan Fai Yue, Leo

• “Independent Shareholders”

shareholders other than Mr. Siu, the Identified Shareholders and their respective associates as defined in the Listing Rules

• “Latest Practicable Date”

• 16 September 2005, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

– ii –

DEFINITIONS

“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Master Supply Agreement”	the agreement entered into by Datatronic and Datatronics
	Romoland on 6 June 2001
“Mr. Siu”	Mr. Paul Y. Siu, the chairman and the controlling shareholder of
	the Company who together with his spouse hold 75% of the issued
	shares of the Company through Onboard Technology Limited
“SFO”	Securities and Futures Ordinance of Hong Kong, Chapter 571 of
	the laws of Hong Kong
“Shareholder(s)”	holder(s) for the time being of the share(s) of the Company
“Special General Meeting”	the special general meeting of the Company to be convened on
	Friday, 7 October 2005 for the purpose of considering and
	approving the Continuing Connected Transactions and the Cap
	Amount
“Stock Exchange”	the Stock Exchange of Hong Kong Limited
“subsidiary”	shall have the meaning as defined in the Companies Ordinance of
	Hong Kong, Chapter 32 of the laws of Hong Kong
“US”	the United States of America
“US$”	US dollars

– iii –

LETTER FROM THE BOARD

DATRONIX HOLDINGS LIMITED �� ! " # $ % & '[*]

(Incorporated in Bermuda with limited liability)

Executive Directors: SIU Paul Y.

alias Siu Paul Yin Tong (Chairman) SHUI Wai Mei (Vice Chairman) SHEUNG Shing Fai SIU Nina Margaret

Independent non-executive Directors: CHUNG Pui Lam LAM Tak Shing CHAN Fai Yue, Leo

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal place of business in Hong Kong: 19th Floor North Point Industrial Building 499 King’s Road North Point Hong Kong

20 September 2005

To the Shareholders

Dear Sir or Madam,

INDEPENDENT SHAREHOLDERS’ APPROVAL FOR CONTINUING CONNECTED TRANSACTIONS

1. INTRODUCTION

The Company made disclosure by announcement dated 6 May 2004 of the continuing connected transactions to be taken place under the 2nd Master Supply Agreement in the three years ending 31 December 2004, 2005 and 2006 for the Cap Amounts of HK$39 million, HK$49 million and HK$57 million respectively. It is expected that the considerations of the said continuing connected transactions will exceed the said Cap Amounts in the years ending 31 December 2005 and 2006 and that such continuing connected transaction will continue in the year ending 31 December 2007. The Continuing Connected Transactions is subject to Independent Shareholders’ approval.

The Independent Board Committee has been formed to consider the Continuing Connected Transactions and the Cap Amounts for the three years ending 31 December 2007. The letter from the Independent Board Committee to the Independent Shareholders is included in this circular. An independent financial adviser TIS Securities (HK) Limited has been appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the Continuing Connected Transactions, including the Cap Amounts for the three years ending 31 December 2007, and its letter of advice to the Independent Board Committee and Independent Shareholders is included in this circular.

• For identification purposes only

– 1 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with further information in relation to the Continuing Connected Transactions, to set out the recommendations of the Independent Board Committee and the letter of advice from TIS Securities (HK) Limited to the Independent Board Committee and the Independent Shareholders.

A resolution to approve the Continuing Connected Transactions and the Cap Amounts will be proposed at the Special General Meeting to be held on Friday, 7 October 2005. In accordance with the Listing Rules, Mr. Siu and his associates (as defined by the Listing Rules) will be required to abstain from voting on the resolution to approve the Continuing Connected Transactions and the Cap Amounts. The Identified Shareholders who hold approximately 23.16% of the issued shares of the Company have agreed to abstain from voting at the Special General Meeting

2. BACKGROUND

The Group is principally engaged in manufacturing and trading of magnetic components. Datatronics Romoland is a supplier of high reliability and military magnetics to the military and aerospace industries in the US. Datatronic and Datatronics Romoland entered into the Master Supply Agreement on 6 June 2001 (which was superseded by the 2nd Master Supply Agreement) and the 2nd Master Supply Agreement on 7 April 2004 in respect of supply of magnetic products to Datatronics Romoland. A 3rd Master Supply Agreement for a term of three years from 1 January 2005 and on effectively the same terms and conditions of the Master Supply Agreement and the 2nd Master Supply Agreement was entered into on 1 August 2005 superseding the 2nd Master Supply Agreement. As Datatronics Romoland is a company owned as to approximately 96.5% by Mr. Siu, the Continuing Connected Transactions constitute connected transactions for the Company under Chapter 14A of the Listing Rules.

The Company made disclosure by announcement dated 6 May 2004 of the continuing connected transactions to be taken place under the 2nd Master Supply Agreement in the three years ending 31 December 2004, 2005 and 2006 for the Cap Amounts of HK$39 million, HK$49 million and HK$57 million respectively.

None of the directors of the Company and their respective associates are interested in any business apart from the business of the Company, which competes or is likely to compete, either directly or indirectly, with the business of the Company.

The trading of the Company’s shares on the Stock Exchange has been suspended since 15 August 2002 at the request of the Company and will continue to be suspended until further notice.

3. THE CONTINUING CONNECTED TRANSACTIONS

3.1 Terms of the Continuing Connected Transactions

The major terms and conditions of the Master Supply Agreement have been summarized in page 50 of the Company’s prospectus dated 12 June 2001:

The Master Supply Agreement is for an initial term of three years from 1 January 2001 and shall continue thereafter until terminated by either party giving to the other party not less than three months’ written notice. Pursuant to the Master Supply Agreement, the selling prices of the magnetics under the Master Supply Agreement are to be agreed between

– 2 –

LETTER FROM THE BOARD

Datatronic and Datatronics Romoland. The Group will determine the price of the magnetics required by Datatronics Romoland according to its pricing policy of obtaining a reasonable profits margin for its sales in accordance with the prevailing market conditions, on normal commercial terms and at arm’s length basis. The Group is granted a first refusal right by Datatronics Romoland to the effect that if Datatronic declines to supply the magnetics, Datatronics Romoland may source the same from any third-party supplier, provided that the terms of purchase shall not be more favourable than those offered to Datatronic.

The terms and conditions of the 3rd Master Supply Agreement are effectively the same, except that the term is a fixed term of three years ending 31 December 2007 with no provision for automatic extension.

The Group currently offers credit sales to Datatronics Romoland with a term of payment of 90 days payable by Telegraphic Transfer, which is the same to other customers. The payment term and other terms of the Continuing Connected Transactions are no less favourable to the Group than those offered to other customers of the Group and those available from other third parties. The balances of accounts receivable from Datatronics Romoland was approximately HK$4.1 million, HK$10.1 million and HK$5.8 million as at 31 December 2002, 31 December 2003 and 31 December 2004 respectively, which are generally in line with the growth in sales to Datatronics Romoland.

3.2 The amounts of the Continuing Connected Transactions for the years 2002, 2003 and 2004

Set out below are the amounts of the Continuing Connected Transactions for the years 2002, 2003 and 2004.

	Financial year	Financial year	Financial year
	ended 31	ended 31	ended 31
	December 2002	December 2003	December 2004
	HK$’000	HK$’000	HK$’000
Aggregate consideration of the
Continuing Connected
Transactions	14,447	21,679	38,985
Total turnover of the Group	115,381	144,654	184,490
Percentage of aggregate
consideration of the
Continuing Connected
Transactions to total
turnover of the Group	approx. 12.5%	approx. 15%	approx. 21%

– 3 –

LETTER FROM THE BOARD

4. REASON FOR THE CONTINUING CONNECTED TRANSACTIONS

There has been a progressive growth in the purchase orders of magnetics placed by Datatronics Romoland with the Group relative to the other customers of the Group as a whole. During the year ended 31 December 2002, the Group received purchase orders of magnetics from Datatronics Romoland in the total amount of approximately HK$14.4 million, representing about 12.5% of the total turnover of the Group. The business of the Group recovered steadily in the year 2003 as with the global economy in general. For the year ended 31 December 2003, Datatronics Romoland placed purchase orders in the total amount of approximately HK$21.68 million for the Group’s magnetics. During the year ended 31 December 2004, the Group received purchase orders of magnetics from Datatronics Romoland in the total amount of approximately HK$38.99 million, representing about 21% of the total turnover of the Group. For the period from 1 January 2005 up to the Latest Practicable Date, Datatronics Romoland placed purchase orders in the total amount of approximately HK$46.4 million for the Group’s magnetics. Based on the current financial projections and the information on the value of purchase orders on hands provided by Datatronics Romoland, the Board expects that additional purchase orders of magnetics will be placed by Datatronics Romoland during the remainder of the year ending 31 December 2005 and onward. Accordingly, it is expected that the total amount of purchase orders from Datatronics Romoland for the whole year ending 31 December 2005 will amount to about HK$86 million.

As far as the Board is aware, Datatronics Romoland is one of the few suppliers of high reliability and military magnetics to the US military and aerospace industries and the Group is the sole supplier of high reliability and military magnetic components to Datatronics Romoland. The continuation of regional military conflicts and instabilities will result in the US government purchasing more high-technology weapons like missiles and fighters, the manufacturing and maintenance of which requires high reliability magnetic components. Moreover, under the 3rd Master Supply Agreement, the Group is granted a first refusal right by Datatronics Romoland to the effect that only if the Group declines to supply the magnetics, Datatronics Romoland may source the same from any third-party supplier, provided that the terms of purchase shall not be more favourable than those offered to the Group. In view of the above and the upward trend of the US defense budget, the Board believes that Datatronics Romoland will continue to purchase from the Group and the volume will continue to grow.

Besides Datatronics Romoland, the Group’s customers are mainly in the telecommunication and networking industries. Due to the slowing down in demand for the Group’s products in these industries, the sales to customers in these industries by the Group grows relatively slowly as compare to the growth in the sales to Datatronics Romoland. Therefore, there is an increase in the proportion of sales to Datatronics Romoland relative to the total turnover of the Group experienced in the past years.

– 4 –

LETTER FROM THE BOARD

Based on the above and on the projection provided by Datatronics Romoland, the Board expects that the sales to be made to Datatronics Romoland will continue to grow for the three years ending 31 December 2005, 2006 and 2007 respectively. The Group shall seek to continue to expand its market with other customers and shall keep the proportion of sales to Datatronics Romoland at an optimal level in that the Board will ensure that not too much reliance shall be placed upon one particular customer. The projected amounts of the Continuing Connected Transactions for those three years are as follows:

Projection for the year Projection for the year Projection for the year ending 31/12/2005 ending 31/12/2006 ending 31/12/2007 HK$’000 HK$’000 HK$’000 86,000 125,000 133,000

The Board is of the view that the 3rd Master Supply Agreement has been entered into on normal commercial terms, in the ordinary course of business of the Group with terms no less favourable than those offered to other customers of the Group and is fair and reasonable to the Shareholders taken as a whole and it is in the interest of the Company to continue the Continuing Connected Transactions upon the terms and conditions set out in the 3rd Master Supply Agreement. Based on the above projection, the Board proposes that the Cap Amounts of the Continuing Connected Transactions for the three years ending 31 December 2005, 2006 and 2007 be HK$86 million, HK$125 million and HK$133 million respectively.

Up to the Latest Practicable Date, the utilization rate of the Group’s existing production capacity is approximately 53%. The Group plans to invest in equipment, machinery, production set-ups and others for high automation in production to improve efficiency and increase productivity. In the premises, the Board is of the view that the Group’s existing production capacity is able to cope with the expected increase of the purchase orders for the three years ending 31 December 2007.

5. INDEPENDENT SHAREHOLDERS’ APPROVAL

As Datatronics Romoland is a company owned as to approximately 96.5% by Mr. Siu, the Continuing Connected Transactions constitute connected transactions for the Company under Chapter 14A of the Listing Rules and would require approval of the Independent Shareholders of the Company pursuant to rule 14A.48 of the Listing Rules.

The Company will ensure that the Continuing Connected Transactions are in compliance with the provisions of Chapter 14A of the Listing Rules and in particulars rules 14A.35 to 14A.41 and 14A.46 governing continuing connected transactions.

The Company would seek approval of the Independent Shareholders of the Continuing Connected Transactions and the Cap Amounts for the three years ending 31 December 2005, 2006 and 2007 pursuant to rules 14A.35 and 14A.48 of the Listing Rules.

– 5 –

LETTER FROM THE BOARD

Mr. Siu owns 96.5% of Datatronics Romoland whereas he and his spouse through Onboard Technology Limited control 75% of the voting right in respect of their shares in the Company. As the independence of the Identified Shareholders has not been established beyond doubt and while the inquiry on the public float issue by the Stock Exchange is still on-going, the Identified Shareholders who hold approximately 23.16% of the issued shares of the Company have agreed to abstain from voting at the Special General Meeting. In the circumstances, Mr. Siu, the Identified Shareholders and their respective associates will abstain from voting at the Special General Meeting.

Mr. Siu, the Identified Shareholders and their respective associates are entitled to exercise control over the voting rights in their respective shares in the Company.

6. RECOMMENDATIONS

The Board has appointed the Independent Board Committee to consider and advise the Independent Shareholders on the terms of the Continuing Connected Transactions and the Cap Amounts for the three years ending 31 December 2007.

The Independent Board Committee, having taken into account the advice of TIS Securities (HK) Limited, considers that the terms of the Continuing Connected Transactions and the Cap Amounts are fair and reasonable insofar as the Independent Shareholders are concerned. Accordingly, it recommends that the Independent Shareholders vote in favour of the resolution to approve the Continuing Connected Transactions and the Cap Amounts.

7. SPECIAL GENERAL MEETING

A Special General Meeting of the Company will be convened to approve the Continuing Connected Transactions and the Cap Amounts for the three years ending 31 December 2005, 2006 and 2007 by the way of poll.

An independent financial adviser TIS Securities (HK) Limited has been appointed to advise the Independent Board Committee and the Independent Shareholders.

Pursuant to Bye-law 66 of the Company, a poll may be demanded by the chairman of the meeting or by at least 3 members present in person (or in case of a member being a corporation by its duly authorized representative) or by proxy for the time being entitled to vote at the meeting or by a member or members present in person (or in case of a member being a corporation by its duly authorized representative) or by proxy and representing not less than one-tenth of the total voting rights of all members having the right to vote at the meeting or by a member or members present in person (or in case of a member being a corporation by its duly authorized representative) or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring that right. The vote will be taken by poll.

– 6 –

LETTER FROM THE BOARD

A notice convening the Special General Meeting to be held at 19th Floor, North Point Industrial Building, 499 King’s Road, North Point, Hong Kong on Friday, 7 October 2005 at 11:00 a.m. is set out on page 21 of this circular. Whether or not you are able to attend the Special General Meeting, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return it to Hong Kong Registrars Limited at Rooms 1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding such meeting. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting should you so wish.

Yours faithfully, By order of the Board Sheung Shing Fai Executive Director

– 7 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

DATRONIX HOLDINGS LIMITED �� ! " # $ % & '[*]

(Incorporated in Bermuda with limited liability)

20 September 2005

To the Independent Shareholders

Dear Sir or Madam,

APPROVAL FOR CONTINUING CONNECTED TRANSACTIONS

We refer to the circular of the Company to the Shareholders dated 20 September 2005 (the “Circular”), of which this letter forms part. Terms defined therein shall have the same meaning when used in this letter unless the context otherwise requires.

We have been appointed by the Board as the Independent Board Committee to advise the Independent Shareholders as to whether the terms of the Continuing Connected Transactions and the Cap Amounts for the three years ending 31 December 2007 are fair and reasonable so far as the Independent Shareholders are concerned. Details of the Continuing Connected Transactions and the Cap Amounts are set out in the letter from the Board contained in the Circular on pages 1 to 7. TIS Securities (HK) Limited has been appointed as the independent financial adviser to advise us in respect of the Continuing Connected Transactions. We wish to draw your attention to the letter of advice from TIS Securities (HK) Limited dated 20 September 2005, which is incorporated and set out on pages 9 to 15 of the Circular.

Having considered the terms of the Continuing Connected Transactions and the Cap Amounts, and having taken into account the advice and recommendations of TIS Securities (HK) Limited contained in its letter, we are of the opinion that the Continuing Connected Transactions are in the usual and ordinary course of business of the Company and the terms and conditions of the Continuing Connected Transactions, including the Cap Amount for the three years ending 31 December 2007, are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned and are in the interest of the Company and the Independent Shareholders as a whole. We therefore advise and recommend that the Independent Shareholders should vote in favour of the resolution to approve the Continuing Connected Transactions and the Cap Amounts to be proposed at the Special General Meeting.

Yours faithfully,

For and on behalf of

the Independent Board Committee

Chung Pui Lam Lam Tak Shing Chan Fai Yue, Leo

Independent non-executive Directors

• For identification purposes only

– 8 –

LETTER FROM TIS SECURITIES (HK) LIMITED

Set out below is the text of the letter from TIS Securities (HK) Limited to the Independent Board Committee prepared for inclusion in this circular:

TIS Securities (HK) Limited Units 1401-02, 14th Floor Grand Millennium Plaza No. 181 Queen’s Road Central Hong Kong

20 September 2005

To the Independent Board Committee and Independent Shareholders

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Continuing Connected Transactions, particulars of which are set out in the “Letter from the Board” (the “Letter”) contained in the circular to the Shareholders dated 20 September 2005 (the “Circular”) and in which this letter is reproduced. Unless the context requires otherwise, terms used in this letter shall have the same meanings as those defined in the Circular.

Datatronic and Datatronics Romoland entered into the Master Supply Agreement and 2nd Master Supply Agreement on 6 June 2001 and 7 April 2004 respectively in respect of supply of magnetics to Datatronics Romoland. A 3rd Master Supply Agreement for a term of three years from 1 January 2005 and on effectively the same terms and conditions of the Master Supply Agreement and the 2nd Master Supply Agreement was entered into on 1 August 2005 superseding the 2nd Master Supply Agreement. As Datatronics Romoland is a company owned as to approximately 96.5% by Mr. Siu, the Continuing Connected Transactions constitute connected transactions for the Company under Chapter 14A of the Listing Rules.

BASIS OF OUR OPINION

In formulating our opinion, we have relied to a considerable extent on the information, statements, opinion and representations supplied to us by the Company and the directors of the Company and we have assumed that all such information, statements, opinions and representations contained or referred to in the circular were true and accurate and complete at the time they were made and continue to be true at the date of the circular, and we have relied on the same. We have also assumed that all statements of belief, opinion and intention of the directors of the Company as set out in the Letter were reasonably

– 9 –

LETTER FROM TIS SECURITIES (HK) LIMITED

made after due and careful inquiry. We have also sought and obtained confirmation from the Company that no material facts have been omitted from the information provided and referred to in the circular. We have also discussed with the management of the Company their plans for the Group and the prospects of the businesses of the Group.

We consider that we have been provided with, and we have reviewed, all currently available information and documents which are available under present circumstances to enable us to reach an informed view regarding the Continuing Connected Transactions and to justify reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis of our opinion. We have no reason to suspect that any materials facts or information (which is known to the Company) have been omitted or withheld from the information supplied or opinions expressed in the Circular nor to doubt the truth and accuracy of the information and facts, or the reasonableness of the opinions expressed by the Company and the directors of the Company which have been provided to us. We have not, however, carried out any independent verification on the information provided to us by the directors of the Company, nor have we conducted an independent in-depth investigation into the business and affairs of the Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our recommendation in respect of the terms of the Continuing Connected Transactions, we have taken the following principal factors and reasons into consideration:

1. Background and reasons for the Continuing Connected Transactions

The Group is principally engaged in manufacturing and trading of magnetic components. Datatronics Romoland is a supplier of magnetic products to the military and aerospace industries in the US and the Group is the sole supplier of magnetic components to Datatronics Romoland. The Group and Datatronics Romoland from time to time conduct transactions on an order by order basis, on normal commercial terms and in the ordinary course of business of the Group. Datatronic and Datatronics Romoland entered into the Master Supply Agreement and the 2nd Master Supply Agreement on 6 June 2001 and 7 April 2004 respectively in respect of supply of magnetics to Datatronics Romoland. A 3rd Master Supply Agreement for a term of three years from 1 January 2005 and on effectively the same terms and conditions of the Master Supply Agreement and the 2nd Master Supply Agreement was entered into on 1 August 2005 superseding the 2nd Master Supply Agreement. Since Mr. Siu is the controlling shareholder of the Company and Datatronics Romoland, the Continuing Connected Transactions constitute connected transactions for the Company under the Listing Rules.

The Stock Exchange granted a waiver (the “Waiver”) to the Company from strict compliance with Chapter 14 of the Listing Rules which were in force immediately prior to 31 March 2004 in respect of the continuing connected transactions under the Master Supply Agreement for the three financial years ended on 31 December 2003 with the conditions stated in the prospectus of the Company dated 12 June 2001 (“Prospectus”) and a cap amount of not exceeding 15% of the total turnover of the Group for the relevant year. Thereafter, the Company obtained the Shareholders’ approval according to Rule 14A.48 under Chapter 14A of the Listing Rules which were in force immediately from 31 March 2004 in respect of the continuing connected transactions under the 2nd Master Supply Agreement for three financial years ending on 31 December 2006 with a cap amount of not exceeding HK$39,000,000, HK$49,000,000 and HK$57,000,000 for each of financial year until the year ending 31 December 2006.

– 10 –

LETTER FROM TIS SECURITIES (HK) LIMITED

The Waiver granted by the Stock Exchange to the Company was subject to a number of conditions, among others, the annual review by the auditors of the Company (the “Auditors”) as to whether (i) the continuing connected transactions under the Master Supply Agreement have received the approval of the Board; (ii) the continuing connected transactions under the Master Supply Agreement were conducted in accordance with the pricing policies of the Group; and (iii) the cap amount has not been exceeded. Based on the letters to the Company from the Auditors dated 30 April 2003 and 27 April 2004, we have learnt that the Auditors have duly examined the supporting invoices and other relevant documents relating to the continuing connected transactions under the Master Supply Agreement. The Auditors noted in their letters that the Board has approved the continuing connected transactions under the Master Supply Agreement conducted and confirmed to the Board that the continuing connected transactions under the Master Supply Agreement conducted were in accordance with Datatronic’s pricing policies and that the respective amount of the continuing connected transactions under the Master Supply Agreement for each of the year in the relevant period have not exceeded the cap amount under the previous waivers. In compliance with Rule 14A.38, the annual review by the Auditors has to confirm whether (i) the continuing connected transactions under the 2nd Master Supply Agreement have received the approval of the Board; (ii) the continuing connected transactions under the 2nd Master Supply Agreement were conducted in accordance with the pricing policies of the Group; (iii) the continuing connected transactions under the 2nd Master Supply Agreement were entered into in accordance with the relevant agreement governing the transactions and; (iv) the cap amount has not been exceeded. Based on the letter to the Company from the Auditors dated 12 April 2005, we have learnt that the Auditors have duly examined the supporting invoices and other relevant documents relating to the continuing connected transactions under the 2nd Master Supply Agreement. The Auditors noted in their letters that the Board has approved the continuing connected transactions under the 2nd Master Supply Agreement conducted and confirmed to the Board that the continuing connected transactions under the 2nd Master Supply Agreement conducted were in accordance with Datatronic’s pricing policies and the 2nd Master Agreement and that the respective amount of the continuing connected transactions under the 2nd Master Supply Agreement for the year ended 31 December 2004 has not exceeded the cap amount of HK$39 million.

In view of the above, the Company has a track record of endeavouring to fulfill strictly the requirements and conditions specified under the previous waivers.

2. Major terms of the Continuing Connected Transactions

The major terms and conditions of the continuing connected transactions under the Master Supply Agreement have been summarized in page 50 of the Prospectus.

The Master Supply Agreement is for an initial term of three years from 1 January 2001 and shall continue thereafter until terminated by either party giving to the other party not less than three months’ written notice. Pursuant to the Master Supply Agreement, the selling prices of the magnetics under the Master Supply Agreement are to be agreed between Datatronic and Datatronics Romoland. The Group will determine the price of the magnetics required by Datatronics Romoland according to its pricing policy of obtaining a reasonable profits margin for its sales in accordance with the prevailing market conditions, on normal commercial terms and at arm’s length basis. The Group is granted a first refusal right by Datatronics Romoland to the effect that if Datatronic

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LETTER FROM TIS SECURITIES (HK) LIMITED

declines to supply the magnetics, Datatronics Romoland may source the same from any third-party suppliers, provided that the terms of purchase shall not be more favourable than those offered to Datatronic. According to the Directors, the Master Supply Agreement was superseded by the 2nd Master Supply Agreement. The major terms and conditions of the Continuing Connected Transactions are similar to those of the continuing connected transactions under the Master Supply Agreement.

The 2nd Master Supply Agreement is also for an initial term of three years from 1 January 2004 and shall continue thereafter until terminated by either party giving to the other party not less than three months’ written notice. Except for the term of the duration, all of the terms of the 2nd Master Supply Agreement are similar to the Master Supply Agreement. According to the Directors, the 2nd Master Supply Agreement has been superseded by the 3rd Master Supply Agreement.

According to the management, the Group currently offers credit sales to Datatronics Romoland with a term of payment of 90 days, which is similar to other independent customers.

The Directors are of the view that the 3rd Master Supply Agreement, which has been entered into on normal commercial terms and in the ordinary course of business of the Group, is fair and reasonable to the Shareholders taken as a whole and is in the interest of the Company. Under Chapter 14A of the Listing Rules, the Continuing Connected Transactions normally require disclosure and/or independent Shareholders’ approval on each occasion they arise.

We have reviewed copies of the purchase orders and the bills of materials list of i) the Continuing Connected Transactions; and ii) transactions entered into between the Group and other independent third parties. The products in relation to the Continuing Connected Transactions require more advance technique, but the raw materials used are similar to other transactions. We have calculated the gross profit margin and noted that the gross profit margins from the Continuing Connected Transactions are higher than or comparable to those of the independent customers as reviewed by us. We are therefore of the opinion that the sales under the Continuing Connected Transactions are no more favourable to Datatronics Romoland than those sales to other customers of the Group.

On the basis that (i) the Continuing Connected Transactions was entered into in the ordinary and usual course of business of the Group and on normal commercial terms; and (ii) the gross profit margins of the Continuing Connected Transactions are comparable to those of the independent customers, we consider that the Continuing Connected Transactions provide the Group with additional source of income and is fair and reasonable and is in the interest of the Group and the Shareholders as a whole.

3. Cap Amount

As stated in the Letter, the Cap Amount for the Continuing Connected Transactions will not exceed HK$86 million, HK$125 million and HK$133 million for each of financial year until the year ending 31 December 2007.

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LETTER FROM TIS SECURITIES (HK) LIMITED

Furthermore, as stated in the Letter, there has been a progressive growth in the purchase orders of magnetics placed by Datatronics Romoland with the Group relative to the other customers of the Group as a whole.

		Percentage of aggregate
		consideration of the
		Continuing Connected
For the year ended	Purchases placed by	Transactions to total
31 December	Datatronics Romoland	turnover of the Group
	HK$’000	%
2002	14,447	12.5
2003	21,679	15
2004	38,985	21

As stated in the Company’s annual report for the year ended 31 December 2004 (the “2004 Annual Report”), the Group showed a significant profit increase in 2004. The Directors believe that it is reflecting the continued success of the Group’s effort to design for a new variety of customized magnetic components and its manufacturing efficiency. The audited turnover for the year 2004 was approximately HK$184 million which represented an increase of approximately 28% over the year 2003. For the year 2004, Datatronics Romoland placed purchase orders in the total amount of approximately HK$38.99 million for the Group’s magnetics which represented an increase of approximately 79.82% over the year 2003. During the period from 1 January 2005 and up to Latest Practicable Date, the actual sales to Datatronics Romoland is approximately HK$46.4 million for the Group’s magnetics. Based on the 2004 Annual Report and the sale to Datatronics Romoland by the Group for the period from 1 January 2005 to Latest Practicable Date, the average monthly sales to Datatronics Romoland for the year 2004 and for the period from 1 January 2005 to Latest Practicable Date is approximately HK$3.3 million and HK$5 million respectively and with reference to the Cap Amount, the projected average monthly sales to Datatronics Romoland by the Group for the three years ending 31 December 2007 will be approximately HK$7.2 million, HK$10.4 million and HK$11.1 million respectively.

As the terms of the Continuing Connected Transactions were entered into in the ordinary and usual course of business of the Group and on normal commercial terms; and the gross profit margins of the Continuing Connected Transactions are comparable to those of the independent customers, as illustrated in the section headed “Major terms of the Continuing Connected Transactions” above, we are of the view that the Group’s sales to Datatronics Romoland are fair and reasonable and in the interest of the Group and the Shareholders as a whole. Nevertheless, the Group will seek to continue to expand its market with other customers so that not too much reliance shall be placed upon one particular customer.

According to the Directors, the utilization rate of the Group’s existing production capacity is approximately 53%. The Group plans to invest in equipment, machinery, production set-ups and others for high automation in production to improve efficiency and increase productivity. We, based on the aforesaid utilization rate of the Group’s existing production capacity, the current financial projections prepared by the Company and the information on the value of purchase orders on hands provided by Datatronics Romoland of approximately HK$75 million, the time for

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LETTER FROM TIS SECURITIES (HK) LIMITED

the delivery of products which are before 30 June 2006, we are of the view and concur with the view of the Directors that the existing production capacity of the Group is able to cope with the expected increase in sales to Datatronics Romoland in the coming next three years ended 31 December 2007.

The Directors consider that continuation of regional military conflicts and instabilities will result in the US government purchasing more high-technology weapon like missiles and fighters, the manufacturing and maintenance of which requires high reliability magnetic components. Moreover, under the 3rd Master Supply Agreement, the Group is granted a first refusal right by Datatronics Romoland which is stated in the section headed “Major terms of the Continuing Connected Transactions” above. As a result, the Board believes that Datatronics Romoland will continue to purchase from the Group and the volume will continue to grow.

According to the fiscal 2006 defense budget released on the web site of United States Department of Defense on 7th February, 2005, we noted that the defense budget for fiscal year 2006 is approximately US$419.3 billion which represented an upward of approximately 5% when compared with that of the previous year and represented an upward of approximately 41% when compared with that of the fiscal year 2001. Based on the above information and discussion with the Directors regarding the assumption of the financial projection, we are of the view that the financial projection is reasonable.

Based on (i) since Datatronics Romoland is one of the few suppliers of high reliability and military magnetics to the US military and aerospace industries; (ii) the Group is the sole suppliers of high reliability and military magnetics components to Datatronics Romoland; (iii) the upward trend of the United States defense budget; (iv) the growth in sales to Datatronics Romoland for the three years ended 31 December 2004; and (v) the current financial projections prepared by the Company and the information on the value of purchase orders on hands provided by Datatronics Romoland, we are of the view and concur with the view of the Directors that the Cap Amount of HK$86 million (equivalent to approximately US$11 million), HK$125 million (equivalent to approximately US$16 million) and HK$133 million (equivalent to approximately US$17 million) for the coming three financial years ending 31 December 2007 is justifiable.

4. Independent Shareholders’ approval

As Datatronics Romoland is a company owned as to approximately 96.5% by Mr. Siu, the Continuing Connected Transactions constitute connected transactions for the Company under Chapter 14A of the Listing Rules. The Company would seek the approval of the Independent Shareholders for the Continuing Connected Transactions pursuant to rules 14A.35 and 14A.48 of the Listing Rules for a period of three financial years ending 31 December 2007. Furthermore, the Company will ensure that the Continuing Connected Transactions is in compliance with the provisions of Chapter 14A of the Listing Rules and in particular rules 14A.35 to 14A.41 and 14A.46 governing continuing connected transactions.

On this basis, we consider that the Company has taken appropriate measures to govern itself in carrying out the Continuing Connected Transactions, thereby safeguarding the interest of the Independent Shareholders thereunder.

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LETTER FROM TIS SECURITIES (HK) LIMITED

RECOMMENDATION

Having considered the above principal factors and reasons, we are of the view that the Continuing Connected Transactions are in the usual and ordinary course of business of the Company and the terms and conditions of the Continuing Connected Transactions, including the Cap Amount for the three years ending 31 December 2007, are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned and are in the interest of the Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders and recommend the Independent Shareholders to vote in favour of the resolution to approve the Continuing Connected Transactions and the Cap Amount for the three years ending 31 December 2007 to be proposed at the Special General Meeting.

Yours faithfully, For and on behalf of TIS Securities (HK) Limited Tai Chi Ching Director

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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. DISCLOSURE OF INTERESTS

(a) Directors’ interests in share capital

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

(i) the Company

Ordinary shares of HK$0.1 each

							Percentage
	Personal	Family	Corporate	Other		Total no.	in total
Name	interests	interests	interests	Interest		of shares	share capital
Mr. Siu	–	–	240,000,000		–	240,000,000	75%
			(note 1)

• (ii) Associated corporation – Datatronic

	Non-voting deferred shares of HK$1.00	Non-voting deferred shares of HK$1.00	Non-voting deferred shares of HK$1.00	Non-voting deferred shares of HK$1.00	each
	Personal	Family	Corporate	Other	Total no.
Name	interests	interests	interests	Interest	of shares
Mr. Siu	1	–	199,999	–	200,000
			(note 2)

Notes:

1. These shares are held by Onboard Technology Limited, a company incorporated in the British Virgin Islands, and in which Mr. Siu and Ms. Shui Wai Mei, spouse of Mr. Siu, hold 90% and 10% of its issued share capital respectively.

2. These shares are held by Data Express Limited, a company incorporated in the Republic of Liberia, whose entire issued share capital is owned by Mr. Siu.

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GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executives of the Company or their respective associates had any interests or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO) or which were required to be kept under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

(b) Substantial Shareholders

So far as the Directors are aware, as at the Latest Practicable Date, the persons other than a Director or chief executive of the Company who have interests or short positions in the shares or underlying shares of the Company which are discloseable under Divisions 2 and 3 of Part XV of the SFO are as follows (the interests in shares and short positions disclosed herein are in addition to those disclosed in respect of the Directors and the chief executive):

Long position in the shares of the Company

		Ordinary shares	of HK$0.1 each
		Total no. of	Percentage in
Name	Capacity	shares held	total share capital
Fortune Treasure
Worldwide Limited	Beneficial owner	21,784,000	6.80%
Lee Pei Jin	Beneficial owner	18,974,000	5.92%

Save as disclosed above, as at the Latest Practicable Date, the Directors are not aware of any other person who has an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any other member of the Group.

Under the Company’s share option scheme adopted in 2001, the Company may grant options to executive directors and full-time employees of the Group to subscribe for shares in the Company, subject to a maximum of 10% of the issued share capital of the Company, from time to time, excluding for this purpose shares issued on exercise of share options. The subscription price is to be determined by directors, and is not to be less then the higher of (i) the nominal value of the Company’s shares, and (ii) 80% of the average of the closing price of the Company’s shares quoted on the Stock Exchange of Hong Kong Limited on the five trading days immediately preceding the date of grant. Upon acceptance of options, the grantee shall pay HK$1 to the Company as consideration for the grant.

No options have been granted since the adoption of the share option scheme.

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GENERAL INFORMATION

APPENDIX

3. DIRECTORS’ INTERESTS IN CONTRACTS

• (a) Amongst the executive Directors, Mr. Siu, Ms. Shui Wai Mei and Mr. Sheung Shing Fai have each entered into a service contract with the Company for an initial fixed term of three years commencing from 22 June 2001 while Ms. Siu Nina Margaret has entered into a service contract with the Company for an initial fixed term of three years commencing from 7 July 2005. Such contracts will continue thereafter until terminated by not less than three month’s notice in writing served by either party on the other. Each of these Directors is entitled to a basic salary, which is determined on the basis of his/her qualification, experience, involvement in and contribution to the Company and by reference to the market rate, (subject to annual increment which notice shall not expire until after the fixed term of not more than 15% of the annual salary of the relevant Directors immediately prior to such increase).

In addition, the executive Directors are also entitled to a management bonus of a sum at the discretion of the Directors, provided that the aggregate amount of management bonuses payable to all the executive Directors shall not be more than 5% of the audited consolidated or combined net profit of the Group (after taxation and minority interest and the payment of such bonus but excluding extraordinary items and the payment of such bonus) in respect of each financial year of the Company. An executive Director may not vote on any resolution of the Directors regarding the amount of the management bonus payable to him. The current basic annual salaries of the executive Directors under their service contracts as follows:

Name of Director	Annual basic salary
Mr. Siu	HK$1,000,000.00
Ms. Shui Wai Mei	HK$250,000.00
Mr. Sheung Shing Fai	HK$900,000.00
Ms. Siu Nina Margaret	HK$360,000.00

Save as aforesaid, none of the Directors has any existing or proposed service contracts with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

• (b) Mr. Siu is interested in the Continuing Connected Transactions as disclosed in this circular.

• (c) Save as disclosed in 3(b) above, as at the Latest Practicable Date, none of the Directors or the independent financial adviser TIS Securities (HK) Limited has any direct or indirect interest in any assets which have been, since 31 December 2004, the date to which the latest published audited accounts of the Company were made up, acquired or disposed of by, or leased to the Company or any member of the Group, or are proposed to be acquired or disposed of by, or leased to, any member of the Group.

• (d) Save as disclosed in 3(a) and 3(b) above, as at the Latest Practicable Date, none of the Directors is materially interested in any contract or arrangement subsisting at the date of the circular and which is significant in relation to the business of the Group.

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GENERAL INFORMATION

APPENDIX

4. CONSENT AND QUALIFICATION OF EXPERT

• (a) TIS Securities (HK) Limited is a deemed licensed corporation under SFO.

• (b) As at the Latest Practicable Date, TIS Securities (HK) Limited has no shareholding interest in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities of any member of the Group.

• (c) TIS Securities (HK) Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name, in the form and context in which they respectively appear.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2004, being the date to which the latest published audited consolidated financial statements of the Company were made up.

6. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business of the Company during normal business hours from the date of this circular up to and including 7 October 2005:

• (a) the Master Supply Agreement;

• (b) the 2nd Master Supply Agreement;

• (c) the 3rd Master Supply Agreement;

• (d) the service agreements with the Directors referred to in section 3(a) of this appendix;

• (e) the letter from the Independent Board Committee as set out in this circular;

• (f) the letter from TIS Securities (HK) Limited as set out in this circular; and

• (g) the written consent of TIS Securities (HK) Limited referred to in section 4(c) of this appendix.

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GENERAL INFORMATION

APPENDIX

7. MISCELLANEOUS

• (a) The secretary of the Company is Leung Sau Fong, ACIS, LLB(Hons).

• (b) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.

• (c) The head office and principal place of business of the Company is situated at 19th Floor, North Point Industrial Building, 499 King’s Road, North Point, Hong Kong.

• (d) The branch share registrar of the Company in Hong Kong is Hong Kong Registrars Limited at Rooms 1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (e) The English text of this circular shall prevail over the Chinese text for the purpose of interpretation.

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NOTICE OF SPECIAL GENERAL MEETING

DATRONIX HOLDINGS LIMITED �� ! " # $ % & '[*]

(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting of the shareholders of Datronix Holdings Limited (the “Company”) will be held at 19th Floor, North Point Industrial Building, 499 King’s Road, North Point, Hong Kong on Friday, 7 October 2005 at 11:00 a.m. for the purpose of considering and, if thought fit, passing the following resolutions, with or without modification, as ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT :

• (a) the Continuing Connected Transactions and the Cap Amounts (as defined in a circular dated 20 September 2005 of the Company (the “Circular”)) be and are hereby approved and confirmed; and

• (b) the board of directors of the Company be and is hereby authorized to do all such further acts and things and execute such further documents and take all such steps which in its opinion may be necessary, desirable and expedient to implement and/or give effect to the Continuing Connected Transactions (as defined in the Circular).”

By order of the Board Leung Sau Fong Company Secretary

Hong Kong, 20 September 2005

Notes:

1. A member who is the holder of two or more shares in the Company may appoint one or more proxies. A proxy need not be a member of the Company but must be present to represent the member.

2. In the case of the joint holders of shares in the Company, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the vote(s) of the other joint holder(s), seniority being determined by the order in which names stand in the register of members. In order to be valid, the form of proxy must be in writing under the hand of the appointor or of his attorney duly authorised in writing, or, if the appointor is a corporation, either under seal, or under the hand of an officer or attorney or other person duly authorised, and must be deposited with the Hong Kong branch share registrar of the Company, Hong Kong Registrars Limited at Rooms 1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong (together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof) not less than 48 hours before the time fixed for holding of the special general meeting or any adjournment thereof.

3. A form of proxy for use at the special general meeting is enclosed.

4. For identification purposes only

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