Beijing Enterprises Water Group Limited — Proxy Solicitation & Information Statement 2005

Oct 26, 2005

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Shang Hua Holdings Limited, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

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SHANG HUA HOLDINGS
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SHANG HUA HOLDINGS LIMITED �� ! " # $ %[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 371)

RE-ELECTION OF DIRECTORS, GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES, REFRESHMENT OF SCHEME MANDATE LIMIT, AMENDMENTS TO BYE-LAWS AND NOTICE OF ANNUAL GENERAL MEETING

A letter from the board of directors of Shang Hua Holdings Limited is set out on pages 3 to 8 of this circular.

A notice convening an annual general meeting of Shang Hua Holdings Limited to be held at Unit 1601, 16/F, Cosco Tower, No.183 Queen’s Road Central, Sheung Wan, Hong Kong on Friday, 25 November 2005 at 3:00 p.m. is set out on pages 12 to 17 of this circular. If you do not intend to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Tengis Limited, of G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and, in any event, not later than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof. 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

26 October 2005

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
RE-ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES . . . . . . . . . . . . . . . . . .	5
REFRESHMENT OF THE SCHEME MANDATE LIMIT . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
AMENDMENTS TO THE BYE-LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
AGM AND PROCEDURE FOR DEMANDING A POLL . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
DOCUMENT FOR INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
RECOMMENDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
APPENDIX – EXPLANATORY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
NOTICE OF ANNUAL GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12

DEFINITIONS

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

• “Adoption Date”

20 March 2002, being the date on which the Share Option Scheme was adopted by the Company

“AGM”

the annual general meeting of the Company to be held at Unit 1601, 16/F, Cosco Tower, No.183 Queen’s Road Central, Sheung Wan, Hong Kong on Friday, 25 November 2005 at 3:00 p.m.

“associate”

has the meaning ascribed thereto under the Listing Rules

• “Board”

the board of Directors

• “Bye-laws” the existing bye-laws of the Company

“Code” the Code on Corporate Governance Practices set out in Appendix 14 to the Listing Rules

• “Company” Shang Hua Holdings Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange

• “Director(s)” the director(s) of the Company

• “General Mandates” the Issue Mandate and the Repurchase Mandate

• “Group” the Company and its subsidiaries

“Issue Mandate” the mandate to allot and issue Shares as set out in the Notice of AGM

• “Latest Practicable Date” 21 October 2005, the latest practicable date prior to the printing of this circular for the purposes of ascertaining certain information contained herein

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

“Notice of AGM” the notice convening the AGM as set out on pages 12 to 17 of this circular

“Open Offer” the open offer of 27,761,816 offer Shares on the basis of one offer Share for every two existing Shares held on 3 August 2005

– 1 –

DEFINITIONS

“Option(s)” the share option(s) granted or to be granted by the Company pursuant to the Share Option Scheme and/or any other scheme(s) of the Company “Participant(s)” any director, executive or employee of any member of the Group “Repurchase Mandate” the mandate to repurchase Shares as described in the explanatory statement set out in the Appendix to this circular “Scheme Mandate Limit” the maximum number of Shares which may be issued upon exercise of all Options to be granted under the Share Option Scheme and any other scheme(s) of the Company as permitted under the Listing Rules, being 10 per cent. of the Company’s issued share capital as at the Adoption Date “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “Share(s)” ordinary share(s) of HK$0.10 each in the share capital of the Company “Share Consolidation” the consolidation of every 20 issued shares of HK$0.005 each of the Company into 1 share of HK$0.10 which took effect on 26 July 2004 “Share Option Scheme” the share option scheme of the Company adopted on the Adoption Date “Shareholder(s)” holder(s) of Share(s) “Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” the Hong Kong Code on Takeovers and Mergers

– 2 –

LETTER FROM THE BOARD

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SHANG HUA HOLDINGS
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SHANG HUA HOLDINGS LIMITED �� ! " # $ %[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 371)

Executive Directors: Ms. Zhou Liping (Chairman) Ms. Guan Mei (Deputy Chairman) Mr. Huang Flynn Xuxian

Registered office: Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda

Independent non-executive Directors:

Mr. Shea Chun Lok, Quadrant Mr. Chan Yiu Kwong Mr. Ngai Chi Yung

Principal office:

Unit 1601, 16/F Cosco Tower No.183 Queen’s Road Central Sheung Wan Hong Kong

26 October 2005

To the Shareholders

Dear Sir or Madam,

RE-ELECTION OF DIRECTORS, GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES, REFRESHMENT OF SCHEME MANDATE LIMIT, AMENDMENTS TO BYE-LAWS AND NOTICE OF ANNUAL GENERAL MEETING

INTRODUCTION

The purpose of this circular is to give you details of the following proposals which, together with other ordinary business, will be proposed at the forthcoming AGM for consideration and, where appropriate, approval of the Shareholders:

• (i) re-election of Directors;

• (ii) renewal of general mandates to issue and make on-market repurchase of Shares;

• For identification purpose only

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LETTER FROM THE BOARD

• (iii) refreshment of the Scheme Mandate Limit; and

• (iv) amendments to the Bye-laws.

The Notice of AGM is set out on pages 12 to 17 of this circular.

RE-ELECTION OF DIRECTORS

At the AGM, Messrs. Huang Flynn Xuxian and Chan Yiu Kwong will retire from office by rotation in accordance with Bye-law 99(B) of the Bye-laws. Both of them, being eligible, offer themselves for reelection at the AGM. Set out below are the brief biographical and other details of Messrs. Huang Flynn Xuxian and Chan Yiu Kwong:

(a) Mr. Huang Flynn Xuxian

Mr. Huang, aged 34, was appointed as an executive director of the Company in March 2004. He graduated from the University of Washington with a Bachelor of Arts in Business Administration/ Accounting and was awarded an International Master of Business Administration (I-MBA) by the University of Chicago Graduate School of Business. He is also a member of The American Institute of Certified Public Accountants and Washington CPA Society. Mr. Huang has over 10 years’ experience in taxation, accounting and corporate finance. Save as disclosed above, Mr. Huang did not hold any position in any subsidiaries of the Company or any directorship in any listed public company in the past three years.

Mr. Huang does not have any relationship with any directors, senior management or substantial or controlling shareholder(s) of the Company. As at the Latest Practicable Date, Mr. Huang did not have any interest in the Shares within the meaning of Part XV of the SFO.

There is no service agreement between the Company and Mr. Huang, but his term of office is subject to retirement by rotation and re-election in accordance with the Bye-laws. No emolument has been received by Mr. Huang for the year ended 30 June 2005.

(b) Mr. Chan Yiu Kwong

Mr. Chan, aged 40, was appointed as an independent non-executive director of the Company in June 2004. He graduated from the University of Hong Kong with a bachelor’s degree in Social Sciences. He is currently a fellow member of Hong Kong Institute of Certified Public Accountants and is a fellow member of the Chartered Association of Certified Accountants in the United Kingdom. Mr. Chan is currently an executive director and company secretary of Hi Sun Technology (China) Group Limited, a company listed on the main board of the Stock Exchange. Prior to that, he was the financial controller and company secretary of Founder (Hong Kong) Limited now known as Founder Holdings Limited, a company listed on the main board of the Stock Exchange and was a manager of an international public accountancy firm. Mr. Chan has over 15 years’ experience in auditing, business advisory and corporate management. Save as disclosed above, Mr. Chan did not hold any position in any subsidiaries of the Company or any directorship in any listed public company in the past three years.

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LETTER FROM THE BOARD

Mr. Chan does not have any relationship with any directors, senior management or substantial or controlling shareholder(s) of the Company. As at the Latest Practicable Date, Mr. Chan did not have any interest in the Shares within the meaning of Part XV of the SFO.

There is no service agreement between the Company and Mr. Chan, but his term of office is subject to retirement by rotation and re-election in accordance with the Bye-laws. The director’s fee received by Mr. Chan for the year ended 30 June 2005 was HK$68,000 which was determined with reference to his duties and responsibilities with the Company and the prevailing market conditions.

Save as disclosed above, there are no other matters relating to the re-election of Mr. Huang or Mr. Chan that need to be brought to the attention of the Shareholders.

GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES

The current general mandates granted to the Directors to issue and repurchase Shares will expire at the conclusion of the AGM. Approval will be sought from the Shareholders at the AGM to grant a general mandate in order to ensure flexibility and discretion to the Directors in the event it becomes desirable for the Company to issue Shares up to an aggregate of 20 per cent. of its issued share capital as at the date of passing the relevant resolution.

As at the Latest Practicable Date, the aggregate number of Shares in issue was 83,285,449. Subject to the passing of the relevant ordinary resolution and on the basis that no further Shares are issued or repurchased prior to the AGM, the Company will be allowed under the Issue Mandate to issue a maximum of 16,657,089 Shares. Further approval will be sought from the Shareholders to extend the Issue Mandate by adding to it the aggregate nominal amount of any Shares repurchased under the Repurchase Mandate. Shareholders should note that any issue of new Shares pursuant to the Issue Mandate will be subject to the approval of the Stock Exchange for the listing of, and permission to deal in, such new Shares.

In addition, at the AGM, an ordinary resolution will be proposed to grant to the Directors a general mandate to, inter alia, repurchase up to 10 per cent. of the Shares in issue as at the date of the passing of the relevant resolution. An explanatory statement containing the particulars as required by the Listing Rules in relation to the Repurchase Mandate is set out in the Appendix to this circular.

The Repurchase Mandate and the Issue Mandate will continue in force until the conclusion of the next annual general meeting of the Company or any earlier date as referred to in resolutions numbered 4 and 5 in the Notice of AGM set out on pages 12 to 17 of this circular.

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LETTER FROM THE BOARD

REFRESHMENT OF THE SCHEME MANDATE LIMIT

Pursuant to the listing approval granted by the Stock Exchange on 19 June 2002, Directors are authorised to grant Options to subscribe for Shares up to 10 per cent. of the total number of Shares in issue as at the Adoption Date, that is, up to 77,247,266 Shares. Such Shares represent more than 90 per cent. of the issued share capital of the Company as at the Latest Practicable Date because the capital structure of the Company has been largely reconstituted as a result of the Share Consolidation and the Open Offer. The Board, therefore, would like to take this opportunity to seek the Shareholders’ approval to have the Scheme Mandate Limit refreshed so that the total number of Shares which may be issued upon exercise of all Options to be granted under the Share Option Scheme and any other scheme(s) of the Company shall not exceed 10 per cent. of the Shares in issue as at the date of passing the relevant resolution at the AGM. Options previously granted under the Share Option Scheme and any other scheme(s) of the Company (including those outstanding, cancelled or lapsed in accordance with the relevant scheme rules or exercised Options) will not be counted for the purpose of calculating the Scheme Mandate Limit as refreshed.

If the Scheme Mandate Limit is refreshed, on the basis of 83,285,449 Shares in issue as at the Latest Practicable Date and assuming that no Shares are issued or repurchased prior to the AGM, the Board will be able to grant Options to subscribe for up to 8,328,544 Shares. The Company confirms that no Options have been granted under the Share Option Scheme and there are no outstanding Options under any other scheme(s) of the Company as at the Latest Practicable Date.

Pursuant to the Listing Rules, the maximum number of Shares which may be issued upon exercise of all outstanding Options granted and yet to be exercised under the Share Option Scheme and any other scheme(s) of the Company at any time must not in aggregate exceed 30% of the Shares in issue from time to time. No Options shall be granted under any scheme(s) of the Company if this will result in the 30% limit being exceeded.

The purpose of the Share Option Scheme is to provide incentives or rewards to the Participants for their contribution to the Group and to enable the Group to recruit and retain high-calibre employees and attract human resources that are valuable to the Group. The Directors consider that it will be for the benefit of the Company and the Shareholders as a whole that the Participants are granted rights to obtain equity holdings in the Company through the grant of Options under the Share Option Scheme. This will motivate the Participants to contribute further to the success of the Group. For these reasons, the Directors propose the passing of an ordinary resolution at the AGM for “refreshing” the Scheme Mandate Limit.

The refreshment of the Scheme Mandate Limit is conditional upon:

• (a) the passing of an ordinary resolution to approve the refreshment of the Scheme Mandate Limit by the Shareholders at the AGM; and

• (b) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Shares (representing a maximum of 10 per cent. of the Shares in issue as at the date of the AGM approving the refreshment of the Scheme Mandate Limit) which may fall to be issued pursuant to the exercise of Options granted under the Share Option Scheme and any other scheme(s) of the Company.

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LETTER FROM THE BOARD

Application will be made to the Listing Committee of the Stock Exchange for the granting of the listing of, and permission to deal in, the Shares to be issued pursuant to the exercise of Options to be granted under the Share Option Scheme and any other scheme(s) of the Company.

AMENDMENTS TO THE BYE-LAWS

The Board would also take the opportunity at the AGM to seek the approval of the Shareholders to amend the current Bye-laws. The purpose of the amendments is to comply with implementation of the Code which became effective on 1 January 2005. The proposed amendments will, if passed, require that all Directors, including the Chairman of the Directors and/or the Managing Director, be subject to the 3- year rotation requirements provided in paragraph A.4.2 of the Code. In addition, any Director appointed by the Board as additional Director or to fill a casual vacancy should be subject to election by Shareholders at the first general meeting of the Company after such Director’s appointment. Further, paragraph E.2.1 of the Code requires that the Chairman must demand a poll in general meetings of the Company whenever voting by way of a poll is required under the Listing Rules. It is therefore proposed to amend Bye-law 69 at the AGM to comply with such requirement.

The full text of the proposed amendments is set out in resolution numbered 8 in the Notice of AGM set out on pages 12 to 17 of this circular.

The proposed amendments are subject to the approval of the Shareholders by way of special resolution at the AGM.

AGM AND PROCEDURE FOR DEMANDING A POLL

The notice for convening the AGM is set out on pages 12 to 17 of this circular. A form of proxy for use at the AGM is also enclosed with this circular. If you do not intend to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Tengis Limited, of G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and, in any event, not later than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof. 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.

Pursuant to Bye-law 69 of the Bye-laws, all resolutions put to the vote of the Shareholders at the AGM shall be decided on a show of hands, unless a poll is (before or on the declaration of the result of the show of hands) demanded by:

• (i) the chairman;

• (ii) at least 3 Shareholders present in person or by proxy or representative for the time being entitled to vote at the meeting;

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LETTER FROM THE BOARD

• (iii) any Shareholder(s) present in person or by proxy or representative and holding between them not less than one-tenth of the total voting rights of all the Shareholders having the right to attend and vote at the meeting; or

• (iv) any Shareholder(s) present in person or by proxy or representative and holding Shares conferring a right to attend and 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 the Shares conferring that right.

In addition, under the Listing Rules, if the chairman of the meeting and/or the Directors individually or collectively hold(s) proxies in respect of Shares holding five per cent. or more of the total voting rights of the Company at the AGM, and if the votes cast at the AGM on a show of hands are in the opposite manner to that instructed in those proxies, then the chairman shall demand a poll. However, if it is apparent from the total proxies held that a vote taken on a poll will not reverse the vote taken on a show of hands, then the chairman shall not be required to demand a poll.

DOCUMENT FOR INSPECTION

A copy of the Bye-laws is available for inspection during normal business hours at the principal office of the Company in Hong Kong at Unit 1601, 16/F, Cosco Tower, No.183 Queen’s Road Central, Sheung Wan, Hong Kong from the date of this circular up to and including the date of the AGM and at the AGM.

RECOMMENDATION

The Directors consider that the proposals described in this circular are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends all Shareholders to vote in favour of the resolutions to be proposed at the AGM.

Yours faithfully, For and on behalf of the Board Zhou Liping

Chairman

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EXPLANATORY STATEMENT

APPENDIX

1. REASONS FOR REPURCHASE MANDATE

The Directors believe that the Repurchase Mandate is in the interests of the Company and the Shareholders. Such repurchase may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net value of the Shares and the assets and/or earnings per Share and will only be made when the Directors believe that such repurchases will benefit the Company and the Shareholders.

2. FUNDING OF REPURCHASES AND IMPACT ON WORKING CAPITAL AND GEARING POSITION

Repurchases must be funded out of funds legally available for such purpose in accordance with the memorandum of association and bye-laws of the Company, and the applicable laws of Bermuda. It is envisaged that the Company would derive the funds from its distributable profits.

There might be a material adverse impact on the working capital or gearing position of the Company (as compared with position disclosed in the audited accounts of the Company for year ended 30 June 2005) in the event that the Repurchase Mandate is 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.

3. 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 applicable laws of Bermuda.

4. DIRECTORS AND CONNECTED PERSONS

None of the Directors or, to the best of their knowledge, having made all reasonable enquiries, any of their associates have any present intention, if the Repurchase Mandate is approved by the Shareholders at the AGM, to sell any Shares to the Company or its subsidiaries.

No connected person of the Company or their associates have notified the Company that they have a present intention to sell Shares to the Company, or have undertaken not to do so in the event that the Company is authorised to make repurchase of Shares.

5. SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company comprised 83,285,449 shares of HK$0.10 each. Subject to the passing of the relevant ordinary resolution and on the basis that no further Shares are issued or repurchased prior to the AGM, the Company will be allowed under the Repurchase Mandate to repurchase a maximum of 8,328,544 Shares.

– 9 –

EXPLANATORY STATEMENT

APPENDIX

6. TAKEOVERS CODE

If as a result of the exercise of the power to repurchase 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 the Takeovers Code. As a result, a Shareholder, or group of Shareholders acting in concert, depending on the level of increase of the Shareholder’s interest, could 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.

As at the Latest Practicable Date, Pioneer Wealth Ltd., being the single largest Shareholder, held 20,297,875 Shares representing approximately 24.37% of the issued share capital of the Company. In the event that the Directors should exercise in full the Repurchase Mandate, the attributable shareholding of Pioneer Wealth Ltd. will be increased to approximately 27.08% of the issued share capital of the Company and such an increase would not give rise to an obligation to make a mandatory offer under Rules 26 and 32 of the Takeovers Code.

On the basis of 83,285,449 Shares in issue as at the Latest Practicable Date and assuming that no Shares are issued or repurchased prior to the AGM, the exercise of the Repurchase Mandate whether in whole or in part will not result in less than 25% of the issued share capital of the Company being held by the public as required by Rule 8.08 of the Listing Rules.

7. SHARE PRICES

The highest and lowest prices at which the Shares were traded on the Stock Exchange during each of the previous twelve months were as follows:

previous twelve months were as follows:
	Highest	Lowest
	Traded Price	Traded Price
	HK$	HK$
2004
October	0.233*	0.167*
November	0.327*	0.167*
December	0.307*	0.297*
2005
January	0.433*	0.327*
February	0.433*	0.407*
March	0.700*	0.487*
April	0.700*	0.533*
May	0.533*	0.520*
June	0.493*	0.433*
July	0.700*	0.400*
August	0.450	0.200
September	0.340	0.238
October (up to the Latest Practicable Date)	0.240	0.220

* Adjusted to take into account the effect of the open offer which became unconditional on 22 August 2005.

– 10 –

EXPLANATORY STATEMENT

APPENDIX

8. SHARE REPURCHASES MADE BY THE COMPANY

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

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NOTICE OF ANNUAL GENERAL MEETING

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SHANG HUA HOLDINGS

SHANG HUA HOLDINGS LIMITED �� ! " # $ %[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 371)

NOTICE IS HEREBY GIVEN that the 2005 Annual General Meeting of Shang Hua Holdings Limited (the “Company”) will be held at 3:00 p.m. on Friday, 25 November 2005 at Unit 1601, 16/F, Cosco Tower, No.183 Queen’s Road Central, Sheung Wan, Hong Kong for the following purposes:

1. To receive and consider the audited consolidated financial statements and the reports of the Directors and Auditors for the year ended 30 June 2005.

2. To re-elect the retiring Directors and to authorise the board of Directors to fix their remuneration.

3. To re-appoint Auditors and to authorise the board of Directors to fix their remuneration.

And as Special Business, to consider and if thought fit, pass the following resolutions, of which resolutions numbered 4 to 7 will be proposed as ordinary resolutions and resolution numbered 8 will be proposed as a special resolution:

ORDINARY RESOLUTIONS

1. “THAT:

2. (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 securities convertible into such shares or options, warrants or similar rights to subscribe for any shares in the Company or such convertible securities and to make or grant offers, agreements and options which would or might require the exercise of such powers, be and is hereby generally and unconditionally approved;

3. (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 which would or might require the exercise of such powers during and after the end of the Relevant Period;

* For identification purpose only

– 12 –

NOTICE OF ANNUAL GENERAL MEETING

• (c) the aggregate nominal amount of the share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors pursuant to the approval in paragraph (a) of this Resolution, otherwise than by way of (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 are convertible into shares, or (iii) an issue of shares in the Company under any option scheme or similar arrangement for the time being adopted for the grant or issue to the eligible participants prescribed thereunder of shares or rights to acquire shares of the Company, or (iv) issue of shares in lieu of the whole or part of the dividend on shares in accordance with the bye-laws of the Company, shall not exceed 20 per cent. of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this Resolution and the said approval shall be limited accordingly; and

• (d) for the purpose of this Resolution:

“Relevant Period” means the period from the passing of this Resolution until whichever is the earliest 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 law to be held; and

• (iii) the date on which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting; and

“Rights Issue” means the offer of shares in the Company or issue of options, warrants or other securities convertible into shares open for a period fixed by the Directors to holders of shares whose names appear on the register of members of the Company on a fixed record date in proportion to their then holdings of such shares (subject to such exclusion or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regards to any restriction or obligations under the laws of or the requirements of any recognised body or any stock exchange in any territory applicable to the Company).”

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NOTICE OF ANNUAL GENERAL MEETING

1. “THAT:

2. (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 securities of the Company on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) or on any other stock exchange on which the securities of the Company may be listed and recognised by the Securities and Futures Commission and the Stock Exchange for this purpose, subject to and in accordance with all applicable laws and 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, be and is hereby generally and unconditionally approved;

3. (b) the aggregate nominal amount of the shares of the Company to be repurchased by the Company pursuant to the approval in paragraph (a) of this Resolution during the Relevant Period shall not exceed 10 per cent. of the aggregate nominal amount of the share capital of the Company in issue at the date of this Resolution and the said approval shall be limited accordingly; and

4. (c) for the purpose of this Resolution:

“Relevant Period” means the period from the passing of this Resolution until whichever is the earliest 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 law to be held; and

• (iii) the date on which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting.”

• “THAT conditional upon Resolutions numbered 4 and 5 set out in the notice convening this meeting being passed, the general mandate granted to the Directors to exercise the powers of the Company to allot, issue and deal with additional shares pursuant to Resolution numbered 4 be and is hereby extended by the addition to the aggregate nominal amount of the share capital which may be allotted or agreed conditionally or unconditionally to be allotted by the Directors pursuant to such general mandate an amount representing the aggregate nominal amount of the share in the capital of the Company purchased by the Company under the authority granted pursuant to Resolution numbered 5, provided that such amount shall not exceed 10 per cent. of the aggregate nominal amount of the issued share capital of the Company at the date of passing this Resolution.”

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NOTICE OF ANNUAL GENERAL MEETING

1. “THAT subject to and 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, such number of shares of the Company which may fall to be allotted and issued pursuant to the exercise of the options which may be granted under the share option scheme of the Company adopted on 20 March 2002 (the “Share Option Scheme”) and any other scheme(s) of the Company, representing 10 per cent. of the issued share capital of the Company as at the date on which this Resolution is passed:

2. (a) approval be and is hereby granted for refreshing the 10 per cent. mandate under the Share Option Scheme (the “Refreshed Scheme Mandate”) provided that the total number of shares of the Company which may be allotted and issued upon the exercise of all options to be granted under the Share Option Scheme and any other scheme(s) of the Company under the limit as refreshed hereby shall not exceed 10 per cent. of the aggregate nominal amount of the issued share capital of the Company as at the date on which this Resolution is passed (options previously granted under the Share Option Scheme and any other scheme(s) of the Company (including options outstanding, cancelled, lapsed or exercised in accordance with the terms of the Share Option Scheme or any other scheme(s) of the Company) shall not be counted for the purpose of calculating the Refreshed Scheme Mandate); and

3. (b) the Directors be and are hereby authorised, (i) at their absolute discretion, to grant options to subscribe for shares of the Company within the Refreshed Scheme Mandate in accordance with the rules of the Share Option Scheme, and (ii) to allot, issue and deal with Shares pursuant to the exercise of options granted under the Share Option Scheme within the Refreshed Scheme Mandate.”

SPECIAL RESOLUTION

1. “THAT the bye-laws of the Company be amended in the following manner:

Bye-law 69

• (a) by inserting after the words “decided on a show of hands, unless”, the following words:

“voting by way of a poll is required by the rules of the Designated Stock Exchange or”; and

• (b) by deleting the word “or” at the end of Bye-law 69(iii);

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NOTICE OF ANNUAL GENERAL MEETING

• (c) by deleting the full-stop at the end of Bye-law 69(iv) and replacing therewith a semicolon and the word “or” immediately thereafter and by inserting the following as new Bye-law 69(v):

• “(v) if required by the rules of the Designated Stock Exchange, by any Director or Directors who, individually or collectively, hold proxies in respect of shares representing 5 per cent. or more of the total voting rights at such meeting.”;

Bye-law 91

by deleting the word “annual” after the words “hold office only until the next following” in the second sentence of the existing Bye-law 91; and

Bye-law 99(B)

• (a) by inserting after the words “the number nearest to”, the following words:

• “but not less than”; and

• (b) by deleting the words “provided that notwithstanding anything herein, the chairman of the Directors and the Managing Director of the Company shall not, whilst holding such office, be subject to retirement by rotation or be taken into account in determining the number of Directors to retire in each year” and replacing therewith “provided that every Director shall be subject to retirement at least once every three years.”

By order of the Board Zhou Liping Chairman

Hong Kong, 26 October 2005

Principal office:

Unit 1601, 16/F Cosco Tower 183 Queen’s Road Central Sheung Wan Hong Kong

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NOTICE OF ANNUAL GENERAL MEETING

Notes:

1. A member entitled to attend and vote at the meeting is entitled to appoint not more than two proxies to attend and vote instead of him. In the case of a recognised clearing house, it may authorise such person(s) as it thinks fit to act as its representative(s) at the meeting and vote in its stead. A proxy need not be a member of the Company.

2. In order to be valid, the form of proxy together with a 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 branch share registrar of the Company in Hong Kong, Tengis Limited, of G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time fixed for holding the meeting or any adjournment thereof.

3. The register of members of the Company will be closed from 21 November 2005 to 25 November 2005, both days inclusive, during which period no transfer of shares will be effected. In order to determine the identity of members who are entitled to attend and vote at the 2005 Annual General Meeting, all transfer forms accompanied by the relevant share certificates must be lodged with the branch share registrar of the Company in Hong Kong, Tengis Limited, of G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not later than 4:00 p.m. on 18 November 2005.

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