Baoye Group Company Limited — Proxy Solicitation & Information Statement 2003

Oct 21, 2003

IMPORTANT

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

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

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.

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GENERAL MANDATES TO REPURCHASE SHARES

AND TO ISSUE SHARES

Resolutions will be proposed at the AGM of Plus Holdings Limited to be held at Salisbury Room, Level 7, Conrad Hotel, Pacific Place, 88 Queensway, Hong Kong on 14th November, 2003 at 10:00 a.m. to approve the matters referred to in this circular. The notice convening the AGM is set out in the 2003 Annual Report. Whether or not you are able to attend the AGM in person, you are requested to complete and return the form of proxy enclosed with this circular in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting. Completion and delivery of the form of proxy will not preclude you from attending and voting at the meeting if you so wish.

20th October, 2003

* for identification purpose only

CONTENTS

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Chairman
General Mandate to Repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
General Mandate to Issue Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Extend General Mandate to Issue Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Explanatory Statement of the Share Repurchase Mandate . . . . . . . . . . . . . . . . . . . . . . . . . .	4

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DEFINITIONS

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

“2003 Annual Report”	the Audited Consolidated Financial Statements and the
	Reports of the Directors and Auditors of the Company for
	the year ended 31st March, 2003;
“AGM”	the annual general meeting of the Company to be held at
	Salisbury Room, Level 7, Conrad Hotel, Pacific Place, 88
	Queensway, Hong Kong, on Friday, 14th November, 2003
	at 10:00 a.m. at which the 2003 Annual Report will be
	adopted;
“Company”	Plus Holdings Limited;
“Directors”	directors of the Company;
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange;
“New Issue Mandate”	the general unconditional mandate to allot, issue and deal
	with Shares not exceeding 20% of the issued share capital
	of the Company as at the date of passing of the resolution
	approving the New Issue Mandate;
“Latest Practicable Date”	13th October, 2003, being the latest practicable date prior
	to the printing of this circular;
“Share Repurchase Mandate”	the general unconditional mandate to exercise the power of
	the Company to repurchase Shares up to a maximum of
	10% of the issued share capital of the Company as at the
	date of the resolution approving the Share Repurchase
	Mandate;
“Shareholders”	holders of issued Shares in the Company;
“Share(s)”	ordinary shares of HK$0.10 each in the share capital of the
	Company;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited; and
“Takeovers Code”	the Codes on Takeovers and Mergers and Share Repurchases
	approved by the Securities and Futures Commission as
	amended from time to time.

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LETTER FROM THE CHAIRMAN

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Directors:

Mr. Zou Yishang (Chairman)

Mr. Ma Hongyao (Deputy Chairman)

• Ms. Magdalene Halasz (Chief Executive Officer)

Mr. Zhang Keqiang

Registered Office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Ms. Chow King Lin, Theresa

Mr. Weng Xianding[#]

Mr. Cheng Zhenming[#]

Mr. Zhao Renwei[##]

Mr. Leung Wai Man, Roger[##]

Principal Place of Business

in Hong Kong:

Unit 4211, 42nd Floor COSCO Tower

183 Queen’s Road Central Hong Kong

• # Non-executive Directors

• ## Independent Non-executive Directors

20th October, 2003

To the Shareholders

Dear Sir or Madam,

GENERAL MANDATES TO REPURCHASE SHARES AND TO ISSUE SHARES

INTRODUCTION

It is proposed that at the AGM of the Company for the year ended 31st March, 2003, ordinary resolutions will be proposed to grant to the Directors general unconditional mandates to repurchase and issue Shares, and extend a general mandate to issue Shares of the Company. This circular contains the explanatory statement in compliance with the Listing Rules and gives all the information reasonably necessary to enable Shareholders to make an informed decision on whether to vote for or against the resolutions to approve the Company to repurchase and issue its own Shares.

* for identification purpose only

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LETTER FROM THE CHAIRMAN

GENERAL UNCONDITIONAL MANDATE TO REPURCHASE SHARES

At the AGM, an ordinary resolution will be proposed to grant the Share Repurchase Mandate to the Directors to enable them to repurchase Shares subject to the criteria set out in this circular. Shareholders should note that the maximum number of shares that may be repurchased is up to 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of passing of such resolution. The Share Repurchase Mandate to repurchase shares will remain in effect until whichever is the earliest: the date of the next annual general meeting, the date by which the next annual general meeting is required to be held by law and, the date upon which such authority is revoked or varied by an ordinary resolution of the Shareholders in a general meeting of the Company.

GENERAL UNCONDITIONAL MANDATE TO ISSUE SHARES

At the AGM, an ordinary resolution will be proposed to grant the New Issue Mandate to the Directors to allot, issue and deal with, other than by way of rights or any option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares in the Company or any shares of the Company issued as scrip dividends pursuant to the bye-laws of the Company, Shares with an aggregate nominal value not exceeding 20% of the aggregate of the total nominal value of the share capital of the Company in issue on the date of the resolution approving the New Issue Mandate. The New Issue Mandate to issue shares will remain in effect until whichever is the earliest: the date of the next annual general meeting, the date by which the next annual general meeting is required to be held by law and, the date upon which such authority is revoked or varied by an ordinary resolution of the Shareholders in a general meeting of the Company.

EXTEND GENERAL MANDATE TO ISSUE SHARES

At the AGM, an ordinary resolution will be proposed that the New Issue Mandate will be extended by the addition to the aggregate nominal value of the share capital of the Company which may be allotted, or agreed conditionally or unconditionally to be allotted, by the Directors pursuant to such general mandate of an amount representing the aggregate nominal value of the share capital of the Company repurchased by the Company pursuant to the Share Repurchase Mandate, provided that such extended amount will not exceed 10% of the aggregate of the total nominal value of the issued share capital of the Company in issue on the date of the resolution approving the New Issue Mandate.

RECOMMENDATION

The Directors consider that the Share Repurchase Mandate, the New Issue Mandate and the extension of the New Issue Mandate are in the best interests of the Company and its Shareholders, so they recommend you to vote in favour of the resolutions at the forthcoming AGM.

Yours faithfully, For and on behalf of the Board of PLUS HOLDINGS LIMITED Zou Yishang

Chairman

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EXPLANATORY STATEMENT OF THE SHARE REPURCHASE MANDATE

The following explanatory statement contains all the information required pursuant to Rule 10.06 of the Listing Rules to be given to all Shareholders relating to a resolution to be proposed at the forthcoming AGM authorising the Share Repurchase Mandate.

1. EXERCISE OF THE REPURCHASE MANDATE

As at 13th October, 2003, being the Latest Practicable Date, the Company has 1,371,162,483 ordinary Shares in issue. In the event that the Share Purchase Mandate is fully exercised by the Directors pursuant to the Share Repurchase Mandate, 137,116,248 Shares will be repurchased and cancelled as required by the provisions in the Listing Rules regulating such share repurchases.

2. REASONS FOR REPURCHASE

The Directors have no present intention to repurchase any Shares but consider that the mandate will provide the Company the flexibility to make such repurchase when appropriate and beneficial to the Company. Such repurchase may enhance the net asset value of the Company and/or earnings per Share.

3. FUNDING OF REPURCHASE

The Company is empowered by its memorandum of association and bye-laws to purchase its Shares. Bermuda law provides that the amount of capital repaid in connection with a share repurchase may only be paid out of either the capital paid up on the relevant shares, or the profit that would otherwise be available for distribution by way of dividend or the proceeds of a new issue of shares made for such purpose. The amount of premium payable on repurchase may only be paid out of the funds of the Company that would otherwise be legally available for dividend or distribution, or out of the share premium accounts of the Company. According to the laws of Bermuda, Shares so repurchased will be treated as cancelled, but the aggregate amount of authorised share capital will not be reduced so that the Shares may be subsequently re-issued.

4. GENERAL

As compared with the financial position of the Company as at 31st March, 2003 (being the date of its latest published audited accounts), the Directors consider that there would be a material adverse impact on the working capital and on the gearing position of the Company in the event that the proposed purchases were to be carried out in full during the proposed purchase period. The Directors confirm that no purchase would be made in circumstances that would have a material adverse impact on the working capital or gearing position of the Company.

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EXPLANATORY STATEMENT OF THE SHARE REPURCHASE MANDATE

5. DIRECTORS, THEIR ASSOCIATES AND CONNECTED PERSONS

None of the Directors or, to the best of their knowledge having made all reasonable enquiries, any of their associates (as defined in the Listing Rules) has any present intention, in the event that the proposal is approved by Shareholders, to sell Shares to the Company.

No connected person of the Company (as defined in the Listing Rules) has notified the Company that he/she has a present intention to sell Shares to the Company nor has he/she undertaken to sell any Shares held by him/her to the Company in the event that the Company is authorised to repurchase the Shares.

6. UNDERTAKING OF THE DIRECTORS

The Directors have undertaken to the Stock Exchange to exercise the power of the Company to make repurchases pursuant to the Share Repurchase Mandate in accordance with the Listing Rules and all applicable laws of Bermuda, and in accordance with the regulations set out in the memorandum of association and bye-laws of the Company.

7. EFFECT OF TAKEOVERS CODE

If on exercise of the power to repurchase Shares pursuant to the Share 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 the Takeovers Code. As a result, a Shareholder or a group of Shareholders, acting in concert could, depending on the level of increase of Shareholders interest, obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rules 26 and 32 of the Takeovers Code. The Directors are not aware of any Shareholder, or a group of Shareholders acting in concert, who may become obliged to make a mandatory offer in accordance with Rules 26 and 32 of the Takeovers Code in the event that the Directors exercise the power to repurchase Shares pursuant to the Share Repurchase Mandate.

As at the Latest Practicable Date, to the best of their knowledge and belief of the Directors, Able Technology Limited (which is beneficially wholly-owned by Mr. Zou Yishang, the Chairman and an executive director of the Company) who held approximately 18.83% of the issued share capital of the Company, was the only substantial shareholder holding more than 10% of the issued share capital of the Company. In the event that the Directors should exercise in full the powers to repurchase Shares pursuant to the Share Repurchase Mandate, the shareholding of Able Technology Limited in the Company would be increased to approximately 20.92% of the issued share capital of the Company and such increase would not give rise to an obligation to make a mandatory offer under Rules 26 and 32 of the Takeovers Code. The Directors have no present intention to exercise the Share Repurchase Mandate to such an extent that it would trigger a takeover obligation by the

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EXPLANATORY STATEMENT OF THE SHARE REPURCHASE MANDATE

controlling shareholder. Save as aforesaid, the Directors are not aware of any consequences which would arise under the Takeovers Code as a consequence of any repurchases pursuant to the Share Repurchase Mandate. The Directors may not purchase Shares on the Stock Exchange if that purchase would result in the number of Shares which are in the hands of the public falling below 25% of the Company’s issued share capital.

8. SHARE PURCHASE MADE BY THE COMPANY

During each of six months preceding the date of this circular, no Shares have been repurchased by the Company.

9. SHARE PRICES

The highest and lowest prices at which Shares have been traded on the Stock Exchange in each of the previous twelve months from 1st October, 2002 to 30th September, 2003 were as follows:

	Highest	Lowest
	HK$	HK$
2002
October	Trading	suspended
November	Trading	suspended
December	Trading	suspended
2003
January	Trading	suspended
February	Trading	suspended
March	Trading	suspended
April	Trading	suspended
May	0.2500	0.0800
June	0.1150	0.0700
July	0.1120	0.0600
August	0.1010	0.0720
September	0.1080	0.0750

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