China High Precision Automation Group Limited — Proxy Solicitation & Information Statement 2002

Jul 29, 2002

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, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Alco 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, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

A copy of this circular has been delivered to and registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies Ordinance of the Laws of Hong Kong. The Registrar of Companies in Hong Kong and the Securities and Futures Commission in Hong Kong take no responsibility as to the contents of this circular.

ALCO HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

PROPOSED BONUS ISSUE OF WARRANTS

AND

GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES

Financial Advisor to Alco Holdings Limited

A notice convening a special general meeting of Alco Holdings Limited to be held at Salon 3, JW Marriott Hotel, Pacific Place, 88 Queensway, Hong Kong on Thursday, 22 August 2002 at 11:30 a.m. or such later time immediately following the close of the annual general meeting of the Company on the same date, is set out on pages 27 to 28 of this circular. A form of proxy for use at the special general meeting is also enclosed.

Whether or not you are able to attend the meeting, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the Company’s share registrar in Hong Kong, Abacus Share Registrars Limited, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the meeting. Completion and return of the form of proxy will not prevent Shareholders from attending and voting at the meeting if they so wish.

Subject to the granting of listing of and permission to deal in the Warrants and the new Shares which may fall to be issued upon the exercise of the subscription rights attaching to the Warrants on the Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the Warrants and the new Shares which may fall to be issued upon the exercise of the subscription rights attaching to the Warrants will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Warrants on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

29 July 2002

CONTENTS

		Page
Responsibility statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		ii
Expected	timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		2
Letter from the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
2.	Bonus Warrant Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
3.	Overseas Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
4.	Conditions of the Bonus Warrant Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
5.	Reasons for the Bonus Warrant Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
6.	Closure of Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
7.	Listing and dealings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
8.	Certificates for the Warrants and board lot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
9.	General Mandates to issue and repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . .	9
10.	SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
11.	Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
12.	Relationship among the Company,
	Mr. Lau Wang Yip, Derrick and GC Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
13.	Documents available for inspection and general information . . . . . . . . . . . . . . .	11
Appendix I – Particulars of the Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		12
Appendix II – Explanatory statement for Repurchase Mandate . . . . . . . . . . . . . . . . . .		23
Notice of	the SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27

– i –

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable 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.

– ii –

EXPECTED TIMETABLE

Year 2002

Last day of dealings in Shares cum entitlements to the Bonus Warrant Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 14 August First day of dealings in Shares ex entitlements to the Bonus Warrant Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 15 August Latest time for registration of Share transfers to qualify for entitlements to the Bonus Warrant Issue. . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday, 16 August Closure of the Register (both days inclusive) . . . . . . . . . . . . . . . . . . . From Monday, 19 August to Thursday, 22 August Latest time for forms of proxy for the SGM to be returned . . . . . . . . . . . . . . . . . . . . . . . . . . 11:30 a.m. on Tuesday, 20 August Record date for determining the entitlements to the Bonus Warrant Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 22 August SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11:30 a.m. on Thursday, 22 August Reopening of Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 23 August Despatch of the Warrant certificates on or before . . . . . . . . . . . . . . . . . . . . . . . Friday, 30 August Commencement of dealings in the Warrants . . . . . . . . . . . . . . . . . . . . . . . . Monday, 2 September

– 1 –

DEFINITIONS

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

“AGM”	the annual general meeting of the Company to be held at the
	same place as the SGM on Thursday, 22 August 2002 at 11:00
	a.m.
“Board”	the board of Directors of the Company
“Bonus Warrant Issue”	the proposed bonus issue of Warrants by the Company on the
	basis of one Warrant for every ten Shares held by Shareholders
	on the Record Date upon and subject to the terms and
	conditions referred to in this circular
“CCASS”	The Central Clearing and Settlement System established and
	operated by HKSCC
“Company”	Alco Holdings Limited, a company incorporated in Bermuda
	with limited liability, the Shares of which are listed on the
	Stock Exchange
“Director(s)”	director(s) of the Company
“GC Capital”	GC Capital (Asia) Limited, financial advisor to the Company
“General Mandates”	the Repurchase Mandate and the Share Issue Mandate (as
	defined in the Letter from the Board), approvals of which are to
	be sought at the AGM
“Group”	the Company and its subsidiaries
“HKSCC”	Hong Kong Securities Clearing Company Limited
“Hong Kong”	The Hong Kong Special Administrative Region of the People’s
	Republic of China
“Instrument”	the deed poll to be executed by the Company creating the
	Warrants
“Latest Practicable Date”	23 July 2002, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information in
	this circular

– 2 –

DEFINITIONS

“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Overseas Shareholder(s)”	the Shareholder(s) whose address(es), as shown on the Register
	at the close of business on the Record Date, is/are outside
	Hong Kong
“Record Date”	22 August 2002, being the date for determination of entitlements
	to the Bonus Warrant Issue
“Register”	the register of members of the Company
“Securities”	issued Shares and Warrants
“Share(s)”	share(s) of HK$0.10 each in the capital of the Company
“Share Buy Back Rules”	the relevant rules set out in the Listing Rules to regulate the
	repurchase by companies with primary listing of their own
	securities on the Stock Exchange
“Shareholder(s)”	holder(s) of Share(s)
“SGM”	a special general meeting of the Company to be held at Salon 3,
	JW Marriott Hotel, Pacific Place, 88 Queensway, Hong Kong
	on Thursday, 22 August 2002 at 11:30 a.m. or such later time
	immediately following the close of the AGM, the notice of the
	meeting is set out on pages 27 to 28 of this circular
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription Period”	the period from the date when dealings of the Warrants on the
	Stock Exchange commence (which is expected to be 2 September
	2002) to 1 September 2005 (both days inclusive)
“Takeover Code”	the Hong Kong Code on Takeovers and Mergers
“Warrant(s)”	warrant(s) to be constituted by the Instrument and to be granted
	by way of bonus issue by the Company as described herein in
	the aggregate amounts of not less than HK$50,115,421 (subject
	to adjustment in the subscription price), each with subscription
	right entitling the holder(s) thereof to subscribe in cash at any
	time during the Subscription Period for new Shares at an initial

– 3 –

DEFINITIONS

subscription price of HK$0.98 per new Share (subject to adjustment) and otherwise on the terms set out in the Instrument, a summary of the principal terms of which is set out in Appendix I to this circular

“HK$” Hong Kong dollars “US$” United States dollars

– 4 –

LETTER FROM THE BOARD

ALCO HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

Executive Directors:

Mr. LEUNG Kai Ching, Kimen (Chairman) Mr. LEUNG Wai Sing, Wilson Mr. KUOK Kun Man, Andrew

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

Independent Non-executive Directors: Mr. WONG Po Yan, G.B.M., J.P. The Hon LI Wah Ming, Fred, J.P. Mr. LAU Wang Yip, Derrick

Principal Place of Business: 11th Floor Zung Fu Industrial Building 1067 King’s Road Quarry Bay Hong Kong

29 July 2002

To the Shareholders

Dear Sir or Madam,

PROPOSED BONUS ISSUE OF WARRANTS AND

GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES

1. INTRODUCTION

It was announced on 11 July 2002 in conjunction with the announcement of the Group’s audited results for the year ended 31 March 2002 that the Bonus Warrant Issue would be proposed to the Shareholders.

The purpose of this circular is to provide you with information regarding (i) the proposed General Mandates to issue and repurchase Shares at the AGM and (ii) the ordinary resolution to be proposed at the SGM relating to the Bonus Warrant Issue.

– 5 –

LETTER FROM THE BOARD

2. BONUS WARRANT ISSUE

Subject to the conditions mentioned below, the Warrants will be granted by way of a bonus issue to Shareholders whose names appear on the Register on the Record Date (other than the Overseas Shareholders) on the basis of one Warrant for every ten Shares held on the Record Date. The Warrants will entitle the holders thereof to subscribe for new Shares at the initial subscription price of HK$0.98 per Share (subject to adjustment) at any time during the Subscription Period.

On the basis of 511,381,854 Shares in issue as at the Latest Practicable Date and assuming no further Shares are issued and no Shares are repurchased after the Latest Practicable Date and up to the Record Date, 51,138,185 units of Warrants carrying rights to subscribe in aggregate of HK$50,115,421 (subject to adjustment in the subscription price) in cash for Shares will be issued pursuant to the Bonus Warrant Issue. On the basis of the initial subscription price of HK$0.98 per Share (subject to adjustment) during the Subscription Period, full exercise of the subscription rights attaching to the Warrants would result in the issue of 51,138,185 new Shares representing 10% of the then existing issued share capital of the Company, and the receipt of approximately HK$50,115,421, before expenses, by the Company. The shareholding of those Shareholders holding Warrants who do not exercise the subscription rights attaching to their Warrants may be diluted when other holders of the Warrants exercise their Warrants.

The Warrants will be created by the Instrument and are proposed to be granted in registered form and will form one class of Securities subject to the terms and conditions set out in the Instrument. A summary of the terms and conditions of the Warrants, including the circumstances in which the subscription price may be adjusted, is set out in Appendix I to this circular.

Status of Shares to be issued upon exercise of Warrants

Shares falling to be issued on the exercise of the subscription rights attaching to the Warrants will rank pari passu in respect of any dividends and other distributions on the relevant record date for which is on or after the relevant subscription date and in all other respects with the then existing issued Shares on the relevant subscription date.

Subscription price of Warrants

The initial subscription price per Share of HK$0.98 represents a premium of approximately 19.5% to the closing price of HK$0.82 per Share as quoted on the Stock Exchange on 11 July 2002, the date on which the Company announced the Bonus Warrant Issue (“Announcement Date”), represents a premium of approximately 21.0% to the approximate average closing price per Share of HK$0.81 as quoted on the Stock Exchange for the past 10 trading days up to, and

– 6 –

LETTER FROM THE BOARD

including the Announcement Date, a premium of approximately 11.4% to the closing price of HK$0.88 per Share as quoted on the Stock Exchange on the Latest Practicable Date and represents a premium of approximately 11.4% to the approximate average closing price per Share of HK$0.88 as quoted on the Stock Exchange for the past 10 trading days up to, and including the Latest Practicable Date.

The proceeds, before expenses, of the issue of Shares upon full exercise of the subscription rights attaching to the Warrants are estimated to be HK$50,115,421 (on the basis of 511,381,854 Shares in issue as at the Latest Practicable Date and assuming no further Shares are issued and no Shares are repurchased after the Latest Practicable Date and up to the Record Date). The proceeds from the said issue of Shares are intended to be applied as general working capital of the Company.

Subscription Period

The Warrants may be exercised at any time from the date when dealings in the Warrants on the Stock Exchange commence (which is expected to be 2 September 2002) to 1 September 2005 (both days inclusive).

Fractional entitlements

Fractional entitlements to the Warrants will not be granted to the Shareholders but will be aggregated and sold for the benefit of the Company.

3. OVERSEAS SHAREHOLDERS

Documents relating to the Bonus Warrant Issue will not be registered or filed under any securities or equivalent legislation of any jurisdiction other than Hong Kong and Bermuda and therefore the Warrants will not be issued to any Overseas Shareholder. Having reviewed the Register, the Directors are of the view that the granting of the Warrants to the Overseas Shareholders would, or might, in the absence of compliance with registration or other formalities, be unlawful or impractical. However, arrangements will be made for the Warrants which would otherwise have been issued to Overseas Shareholders to be sold in the market as soon as practicable, if a premium, net of expenses, can be obtained. Any net proceeds of such sale, after deduction of expenses, will be distributed in Hong Kong dollars to the relevant Shareholders pro rata to their respective shareholdings and remittances therefor will be posted to them, at their own risk, unless the amount falling to be distributed to any such person is less than HK$100 in which case it will be retained for the benefit of the Company.

– 7 –

LETTER FROM THE BOARD

4. CONDITIONS OF THE BONUS WARRANT ISSUE

The Bonus Warrant Issue will be conditional upon, inter alia:

• (i) the passing of an ordinary resolution by the Shareholders at the SGM approving the Bonus Warrant Issue and the issue of new Shares falling to be issued upon exercise of the subscription rights attaching to the Warrants;

• (ii) the Listing Committee of the Stock Exchange granting listings of, and permission to deal in, the Warrants and the new Shares falling to be issued upon exercise of the subscription rights attaching to the Warrants; and

• (iii) the Bermuda Monetary Authority consenting to the issue of the Warrants and any Shares to be issued upon exercise of the subscription rights attaching to the Warrants.

5. REASONS FOR THE BONUS WARRANT ISSUE

The Directors believe that the proposed Bonus Warrant Issue will provide Shareholders with an opportunity to obtain further equity participation in the Company and thereby enlarging the Company’s shareholder and capital base.

6. CLOSURE OF REGISTER

The Register will be closed from Monday, 19 August 2002 to Thursday, 22 August 2002, both days inclusive, in order to determine the entitlements of Shareholders (other than Overseas Shareholders) to the Bonus Warrant Issue, during which period no transfers of Shares can be registered. The last day of dealings in Shares cum entitlements to the Bonus Warrant Issue will be Wednesday, 14 August 2002.

In order to qualify for the Bonus Warrant Issue, all transfers accompanied by the relevant share certificates should be lodged with the Company’s share registrar in Hong Kong, Abacus Share Registrars Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong, for registration not later than 4:00 p.m. on Friday, 16 August 2002.

7. LISTING AND DEALINGS

Application has been made to the Listing Committee of the Stock Exchange for listings of, and permission to deal in, the Warrants and any new Shares which may fall to be issued upon exercise of the subscription rights attaching to the Warrants. Dealings in the Warrants are expected to commence on Monday, 2 September 2002.

– 8 –

LETTER FROM THE BOARD

The Warrants will not be listed or dealt in on any other stock exchange outside Hong Kong. No part of the Securities is listed or dealt in on any other stock exchange and no such listing of or permission to deal in Securities is being or proposed to be sought on any other stock exchange.

Subject to the granting of listings of and permission to deal in the Warrants and the new Shares which may fall to be issued upon the exercise of the subscription rights attaching to the Warrants on the Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the Warrants and the new Shares which may fall to be issued upon the exercise of the subscription rights attaching to the Warrants will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Warrants on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

All necessary arrangements will be made to enable the above securities of the Company to be admitted into CCASS.

Dealings in the Warrants and the new Shares which are issued upon the exercise of the subscription rights attaching to the Warrants will be subject to Hong Kong stamp duty.

8. CERTIFICATES FOR THE WARRANTS AND BOARD LOT

Subject to the conditions being satisfied, certificates for the Warrants are expected to be despatched to the Shareholders entitled thereto at their own risk by ordinary post on Friday, 30 August 2002.

The proposed board lot for trading in the Warrants carrying rights to subscribe for new Shares is 10,000 units at the initial subscription price of HK$0.98 per Share (subject to adjustment), for a total of HK$9,800. So far as possible, certificates for the Warrants will be issued in board lots of Warrants. The Warrants will be separately transferable initially in units of HK$0.98 of subscription rights.

9. GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES

At the annual general meeting of the Company held on 23 August 2001, general mandates were given to the Directors to exercise all powers of the Company to issue Shares and to repurchase Shares. These general mandates will lapse at the conclusion of the forthcoming AGM. Ordinary resolutions will therefore be proposed at the AGM to grant new General Mandates to issue Shares and to repurchase Shares.

– 9 –

LETTER FROM THE BOARD

At the AGM, ordinary resolutions will be proposed to (i) grant to the Directors a general and unconditional mandate to exercise all the powers of the Company to allot, issue and deal with new Shares up to an amount not exceeding 20% of the aggregate nominal amount of the share capital of the Company in issue and fully paid-up at the date of the passing of the relevant resolution (the “Share Issue Mandate”); (ii) to grant to the Directors a general mandate to exercise all powers of the Company to repurchase Shares up to a maximum of 10% of the aggregate nominal amount of the share capital of the Company in issue and fully paid-up at the date of the passing of the resolution (the “Repurchase Mandate”); and (iii) the Share Issue Mandate be extended by adding the nominal amount of all Shares repurchased by the Company pursuant to the Repurchase Mandate to the aggregate nominal amount of the share capital of the Company to be issued and allotted pursuant to the Share Issue Mandate.

As at the Latest Practicable Date, the issued share capital of the Company comprised 511,381,854 Shares. With reference to the proposed General Mandates, the Directors wish to state that, as at the date hereof, they have no immediate plans to issue any new Share or to repurchase any existing Share.

An explanatory statement as required under the Share Buy Back Rules, giving certain information regarding the Repurchase Mandate, is set out in the Appendix II to this circular.

A notice convening the AGM to consider the ordinary resolutions relating to the General Mandates will be sent to Shareholders together with annual report of the Company on 29 July 2002.

10. SGM

Set out on pages 27 to 28 of this circular is a notice convening the SGM to consider the ordinary resolutions relating to the matters as detailed in the above paragraphs.

A form of proxy for use at the SGM is enclosed with this circular. To be valid, the form of proxy must be completed in accordance with the instructions printed thereon and deposited, together with the power of attorney or other authority (if any) under which it is signed or a certified copy of that power of attorney or authority at the Company’s Registrar in Hong Kong, Abacus Share Registrars Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and delivery of the form of proxy will not preclude you from attending and voting at the SGM if you so wish.

11. RECOMMENDATION

The Directors consider that the passing of the ordinary resolutions as set out in the notice of the SGM will be in the interests of the Company and the Group and the Shareholders. Accordingly, the Directors recommend Shareholders to vote in favour of the said resolutions.

– 10 –

LETTER FROM THE BOARD

12. RELATIONSHIP AMONG THE COMPANY, MR. LAU WANG YIP, DERRICK AND GC CAPITAL

GC Capital is the financial advisor of the Company for the Bonus Warrant Issue (the “Transaction”). Mr. Lau Wang Yip, Derrick is the managing director of GC Capital and an independent non-executive director of the Company. He has no shareholding interests in GC Capital and the Company.

The financial advisory service provided by GC Capital to the Company is in the ordinary course of business of GC Capital and is conducted on normal commercial terms. Scope of the financial advisory service in the Transaction includes scenario analysis on the terms of the Bonus Warrant Issue, the disclosure requirements and preparation of announcement and circular. Mr. Lau Wang Yip, Derrick did not involve in giving advice on the Transaction.

Mr. Wong Po Yan, G.B.M., J.P. and the Hon Li Wah Ming, Fred, J.P. , being the independent non-executive Directors of the Company, opine that the financial advisory service provided by GC Capital to the Company is conducted on normal commercial terms.

13. DOCUMENTS AVAILABLE FOR INSPECTION AND GENERAL INFORMATION

Copies of the following documents are available for inspection at the office of the Company’s principal place of business in Hong Kong at 11th Floor, Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong during normal business hours on any business day up to and including the date of the SGM:

• (i) the memorandum of association and bye-laws of the Company; and

• (ii) a draft (subject to modification (if necessary)) of the Instrument.

The Instrument will be available for inspection by holders of Warrants at the branch registrar of the Company for the time being in Hong Kong in respect of the Warrants throughout the Subscription Period.

Your attention is drawn to the additional information set out in the Appendices to this circular.

Yours faithfully,

LEUNG Kai Ching, Kimen Chairman

– 11 –

PARTICULARS OF THE WARRANTS

APPENDIX I

SUMMARY OF THE TERMS OF THE WARRANTS

The Warrants are proposed to be constituted by the Instrument by way of deed poll to be executed by the Company and will be issued in registered form and will form one class and rank pari passu in all respects with each other.

Warrantholders (as defined below) shall be entitled to the benefit of, be bound by, and be deemed to have notice of all the provisions of the Instrument. Copies of the Instrument, the principal provisions of which are summarised below, will be available at the principal place of business of the Company in Hong Kong or such other place as may be notified to the Warrantholders from time to time.

References in this summary to “Shares” are to the shares of HK$0.10 each in the authorised share capital of the Company existing on the date of issue of the Warrants and all other shares from time to time and for the time being ranking pari passu therewith and all other shares in the capital of the Company resulting from any subdivision, consolidation or reclassification of Shares.

1. Subscription

• (a) The registered holder or joint holders for the time being of a Warrant (“Warrantholder”) shall have rights (“Subscription Rights”) to subscribe in cash for fully-paid Shares but not in respect of any fraction of a Share at a price (subject to the adjustments referred to below) of HK$0.98 per Share (“Subscription Price”). The Subscription Rights attaching to the Warrants held by a Warrantholder may be exercised, in respect of all or part of the Warrants so held, at any time on or after the date when dealings in the Warrants on the Stock Exchange commence (which is expected to be 2 September 2002) up to and including 1 September 2005 or such earlier date as provided in the Instrument (“Subscription Period”). Any Subscription Rights which have not been exercised on or before 1 September 2005 will thereafter lapse and the relevant Warrants will cease to be valid for any purpose.

• (b) A Warrantholder may exercise his Subscription Rights by completing and signing the subscription form endorsed on the Warrant certificate or the separate subscription form which the Company permits to be used (both of which shall, once signed and completed, be irrevocable) and delivering the Warrant certificate, together with the separate subscription form if appropriate, to the branch share registrars of the Company for the time being (“Registrars”), together with a remittance for the subscription moneys for the Shares in respect of which the Subscription Rights are being exercised. The date on which such documents (duly completed and signed) and the relevant remittances are delivered to the Registrars shall be the date on which the relevant Subscription Rights are exercised and is hereafter referred to as a “Subscription Date”. In each case, compliance must also be made with any exchange control, fiscal or other laws or regulations for the time being applicable.

– 12 –

APPENDIX I

PARTICULARS OF THE WARRANTS

• (c) No fraction of a Share will be allotted but any balance of the subscription moneys paid on the exercise of the Subscription Rights will be refunded by the Company to the relevant Warrantholder, provided that if the Subscription Rights comprised in two or more Warrant certificates are exercised by a Warrantholder on the same Subscription Date then, for the purpose of determining whether any (and if so what) fraction of a Share arises, the Subscription Rights represented by such Warrant certificates shall be aggregated.

• (d) The Company undertakes in the Instrument that Shares falling to be issued upon the exercise of the Subscription Rights will be issued and allotted not later than twentyeight days after the relevant Subscription Date and will rank pari passu with the fully-paid Shares in issue on the relevant Subscription Date and accordingly shall entitle the holders to participate in all dividends or other distributions declared, paid or made after the relevant Subscription Date unless adjustment thereof has been made as provided in the Conditions (as defined in the Instrument) and other than any dividend or other distribution previously declared or recommended or resolved to be paid or made if the Record Date (as defined in the Instrument) therefor is on or before the relevant Subscription Date and notice of the amount and Record Date therefor has been given to the Stock Exchange prior to the relevant Subscription Date.

• (e) As soon as practicable after the relevant allotment of Shares (and not later than twenty-eight days after the relevant Subscription Date) there will be issued free of charge to the Warrantholder:

• (i) a certificate (or certificates) for the relevant Shares in the name of the Warrantholder;

• (ii) (if applicable) a balancing Warrant certificate in registered form in the name of such Warrantholder in respect of any Subscription Rights comprised within the Warrant certificate(s) delivered as described in sub-paragraph (b) above remaining unexercised;

• (iii) (if applicable) a cheque representing any fractional entitlement to Shares not allotted as mentioned in sub-paragraph (c) above; and

• (iv) (if applicable) a Deficiency Certificate (as defined in the Instrument).

The certificate(s) for Shares arising on the exercise of Subscription Rights, the balancing Warrant certificate (if any), the cheque in respect of fractional entitlement (if any) and the Deficiency Certificate (if any) will be sent by post at the risk of such Warrantholder to the address of such Warrantholder as set out in the register of

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APPENDIX I

Warrantholders (or in the case of a joint holding to that one of them whose name stands first in the register of Warrantholders). If the Company agrees, such certificates and cheques may by prior arrangement be retained by the Registrars to await collection by the relevant Warrantholder.

2. Adjustment of Subscription Price

The Instrument contains detailed provisions relating to the adjustment of the Subscription Price. The following is a summary of, and is subject to, the provisions of the Instrument.

• (a) The Subscription Price shall (except as mentioned in sub-paragraphs (b) and (c) below) be adjusted as provided in the Instrument in each of the following cases:

• (i) an alteration of the nominal amount of the Shares by reason of any consolidation or subdivision;

• (ii) an issue (other than in lieu of a cash dividend) by the Company of Shares credited as fully-paid by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve fund);

• (iii) a Capital Distribution (as defined in the Instrument) being made by the Company, whether on a reduction of capital or otherwise, to holders of Shares in their capacity as such;

• (iv) a grant by the Company to the holders of Shares (in their capacity as such) of rights to acquire for cash any assets of the Company or any of its Subsidiaries (as defined in the Instrument);

• (v) an offer or grant of Shares being made by the Company to holders of Shares by way of rights or of options or warrants to subscribe for Shares at a price which is less than 90 per cent. of the market price (calculated as provided in the Instrument);

• (vi) an issue wholly for cash being made by the Company or any other company of securities convertible into or exchangeable for or carrying rights of subscription for new Shares, if in any case the total Effective Consideration (as defined in the Instrument) per Share is less than 90 per cent. of the market price (calculated as provided in the Instrument), or the terms of any such issue are altered so that the said total Effective Consideration is less than 90 per cent. of the market price;

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PARTICULARS OF THE WARRANTS

APPENDIX I

• (vii) an issue being made by the Company wholly for cash of Shares other than pursuant to a Share Option Scheme (as defined in the Instrument) at a price less than 90 per cent. of the market price (calculated as provided in the Instrument); and

• (viii)the purchase by the Company of Shares or securities convertible into Shares or any rights to acquire Shares in any other circumstances where the Directors consider that it may be appropriate to make an adjustment to the Subscription Price.

• (b) Except as mentioned in sub-paragraph (c) below, no adjustment as is referred to in sub-paragraphs (a)(ii) to (vii) above will be made in respect of:

• (i) an issue of fully-paid Shares upon the exercise of any conversion rights attached to securities convertible into Shares or upon the exercise of any rights (including the Subscription Rights) to acquire Shares;

• (ii) an issue of Shares, or other securities of the Company or any subsidiary, wholly or partly convertible into, or rights to acquire Shares pursuant to a Share Option Scheme;

• (iii) an issue by the Company of Shares or by the Company or any subsidiary of securities wholly or partly convertible into or rights to acquire Shares, in consideration in whole or in part for the acquisition of any other securities, assets or business;

• (iv) an issue of fully-paid shares by way of capitalisation of all or part of the Subscription Right Reserve (as defined in the Instrument) which has been or may be established in certain circumstances pursuant to the terms and conditions contained in the Instrument (or any similar reserve which has been or may be established pursuant to the terms of any other securities convertible into or rights to acquire Shares); or

• (v) an issue of Shares in lieu of a cash dividend where an amount not less than the nominal amount of the Shares so issued is capitalised and the market value (calculated as provided in the Instrument) of the Shares is not more than 110 per cent. of the amount of dividend which holders of Shares could elect to or would otherwise receive in cash.

• (c) Notwithstanding the provisions referred to in sub-paragraphs (a) and (b) above, in any circumstances where the Directors consider that an adjustment to the Subscription Price provided for under the said provisions should not be made or should be

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APPENDIX I

calculated on a different basis or that an adjustment to the Subscription Price should be made notwithstanding that no such adjustment is required under the said provisions or that an adjustment should take effect on a different date or with effect from a different time from that provided for under the said provisions, the Company may appoint an Approved Merchant Bank (as defined in the Instrument) to consider whether for any reason whatsoever the adjustment to be made (or the absence of adjustment) would or might not fairly and appropriately reflect the relevant interests of the persons affected thereby and, if the Approved Merchant Bank considers this to be the case, the adjustment shall be modified or nullified or an adjustment made instead of no adjustment in the manner (including, without limitation, making an adjustment calculated on a different basis and/or the adjustment shall take effect from such other date and/or time) as shall be certified by the Approved Merchant Bank to be in its opinion appropriate.

• (d) Any adjustment to the Subscription Price will be made to the nearest one cent so that any amount under half a cent shall be rounded down and any amount of half a cent or more shall be rounded up. No adjustment shall be made to the Subscription Price in any case in which the amount by which the Subscription Price would be reduced would be less than one cent and any adjustment which would otherwise then be required shall not be carried forward. No adjustment may be made (except on a consolidation of Shares) which would increase the Subscription Price.

• (e) Every adjustment to the Subscription Price shall be certified by the Company’s auditors or an Approved Merchant Bank (acting as experts whose decision, in the absence of manifest error, shall be conclusive and binding on the Company and the Warrantholders) and notice of each adjustment (giving the relevant particulars) shall be given to the Warrantholders. Any such certificates of the Company’s auditors and/ or Approved Merchant Bank shall be available for inspection at the principal place of business of the Company or such other place as may be notified to the Warrantholders from time to time where copies may be obtained.

3. Registered Warrants

The Warrants will be issued in registered form. The Company shall be entitled to treat the registered holder of any Warrant as the absolute owner thereof and accordingly shall not, except as ordered by a court of competent jurisdiction or as required by law, be bound to recognise any equitable or other claim to or interest in such Warrant on the part of any other person, whether or not the Company has express or other notice thereof.

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PARTICULARS OF THE WARRANTS

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4. Transfer, transmission and register

The Subscription Rights are transferable, in whole amounts or integral multiples of HK$0.98 of Subscription Rights, by instrument of transfer in any usual or common form or in any other form which may be approved by the Directors. Where the transferor or the transferee is HKSCC Nominees Limited or its successor thereto (or such other company as may be approved by the board of Directors for this purpose), the transfers may be executed under the hands of authorised person(s) or by machine imprinted signature(s) on its behalf or of such person(s), as the case may be. The Company shall maintain a register of Warrantholders accordingly. Transfers of Warrants must be executed by both the transferor and the transferee. The provisions of the Company’s Bye-laws relating to the registration, transfer and transmission of Shares shall apply, mutatis mutandis, to the registration, transfer and transmission of the Warrants (except where there are express provisions in the Instrument to the contrary).

Persons who hold Warrants and have not registered the Warrants in their own names and wish to exercise the Warrants should note that they may incur additional costs and expenses in connection with any expedited re-registration of the Warrants prior to the transfer or exercise of the Warrants, in particular during the period commencing 10 business days prior to and including the last day for subscription being 1 September 2005.

Since the Warrants will be admitted to the Central Clearing and Settlement System (“CCASS”), so far as applicable laws or regulations of relevant regulatory authorities, terms of the Instrument and circumstances permit, the Company may determine the last trading day of the Warrants to be a date at least three trading days before 1 September 2005.

5. Closure of register of Warrantholders

The registration of transfers may be suspended and the register of Warrantholders may be closed for such periods as the Directors may from time to time direct, provided that the same may not be closed for a period, or for periods together, of more than sixty days in any one year. Any transfer or exercise of the Subscription Rights attached to the Warrants made while the register of Warrantholders is so closed shall, as between the Company and the person claiming under the relevant transfer of Warrants or, as the case may be, as between the Company and the Warrantholder who has so exercised the Subscription Rights attached to his Warrant (but not otherwise), be considered as made immediately after the re-opening of the register of Warrantholders.

6. Purchase and cancellation

The Company or any subsidiaries may at any time purchase Warrants:

(a) in the open market or by tender (available to all Warrantholders alike) at any price; or

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PARTICULARS OF THE WARRANTS

APPENDIX I

• (b) by private treaty at a price per Warrant, exclusive of expenses, not exceeding 110 per cent. of the closing price of the Warrants on the Stock Exchange prior to the date of purchase of the Warrants on the Stock Exchange, but not otherwise. All Warrants purchased shall be cancelled forthwith and may not be re-issued or re-sold.

7. Meetings of Warrantholders and modification of rights

• (a) The Instrument contains provisions for convening meetings of Warrantholders to consider any matter affecting the interests of Warrantholders, including the modification by Special Resolution (as defined in the Instrument) of the provisions of the Instrument and/or of the Conditions. A Special Resolution duly passed at any such meeting of Warrantholders shall be binding on the Warrantholders, whether present or not.

• (b) All or any of the rights for the time being attached to the Warrants (including any of the provisions of the Instrument) may from time to time (whether or not the Company is being wound up) be altered or abrogated (including, but without prejudice to that generality, by waiving compliance with, or by waiving or authorising any past or proposed breach of any of the provisions of the Conditions and/or the Instrument) with the prior sanction of a Special Resolution and may be effected only by deed poll executed by the Company and expressed to be supplemental to the Instrument.

• (c) Where the Warrantholder is a recognised clearing house (within the meaning of the Securities and Futures (Clearing Houses) Ordinance (Chapter 420 of the Laws of Hong Kong)) or its nominee(s), it may authorise such person or persons as it thinks fit to act as its representative (or representatives) or proxy (or proxies) at any Warrantholders’ meeting provided that, if more than one person is so authorised, the authorisation or proxy form must specify the number and class of Warrants in respect of which each such person is so authorised. The person so authorised will be entitled to exercise the same power on behalf of the recognised clearing house as that clearing house or its nominee(s) could exercise as if such person were an individual Warrantholder of the company.

8. Quorum

A quorum of a meeting of Warrantholders will be two or more persons representing in aggregate the holders of not less than 5 per cent. of the Warrants for the time being outstanding, present in person or by proxy.

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PARTICULARS OF THE WARRANTS

APPENDIX I

9. Replacement of Warrant certificates

If a Warrant certificate is mutilated, defaced, lost or destroyed, it may, at the Company’s discretion, be replaced at the office of the Registrars on payment of such costs which may be incurred in connection therewith and on such terms as to evidence, indemnity and/or security which the Company may require and on payment of such fee not exceeding HK$2.50 (or such other amount as may from time to time be permitted under the rules of the Stock Exchange) as the Company may determine. Mutilated or defaced Warrant certificates must be surrendered before replacements will be issued.

In the case of lost Warrant certificates, Section 71A subsections (2), (3), (4), (6), (7) and (8) of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) shall apply as if shares referred to therein included Warrants

10. Protection of Subscription Rights

The Instrument contains certain undertakings by and restrictions on the Company designed to protect the Subscription Rights.

11. Call

If at any time the aggregate of the amount of subscription moneys attached to the outstanding Warrants is equal to or less than 20 per cent. of the amount of moneys payable on exercise of all the Warrants issued under the Instrument then the Company may, on giving not less than three months’ notice, require Warrantholders either to exercise their Subscription Rights or to allow them to lapse. On expiry of such notice, all unexercised Warrants will be automatically cancelled, without compensation to Warrantholders.

12. Further issues

The Company shall be at liberty to issue further subscription warrants in such manner and on such terms as it sees fit.

13. Undertakings by the Company

The Company undertakes in the Instrument, inter alia, that:

• (a) upon exercise of any Subscription Rights it will within twenty-eight days after the relevant Subscription Date allot and issue the number of Shares for which subscription is made;

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PARTICULARS OF THE WARRANTS

APPENDIX I

• (b) all Shares allotted on the exercise of Subscription Rights will, taking account of any adjustment which may have been made pursuant to paragraph 2(a) of this appendix, rank pari passu in all respects with the fully-paid Shares in issue on the relevant Subscription Date and shall accordingly entitle the holders to participate in full in all dividends or other distributions, declared, paid or made on the Shares after the relevant Subscription Date unless adjustment therefor has been made as provided in the Instrument and other than any dividend or other distribution previously declared or recommended or resolved to be paid or made if the Record Date therefor shall be on or before the relevant Subscription Date and notice of the amount and Record Date for which shall have been given to the Stock Exchange prior to the relevant Subscription Date;

• (c) it will send to each Warrantholder, at the same time as the same are sent to Shareholders, its audited accounts and all other notices, reports and communications despatched by it to Shareholders generally;

• (d) it will pay (if applicable) all Cayman Islands and Hong Kong stamp and capital duties, registration fees or similar charges in respect of the execution of the Instrument, the creation and initial issue of the Warrants in registered form, the exercise of the Subscription Rights and the issue of Shares upon exercise of the Subscription Rights;

• (e) it will use its best endeavours to ensure that all Shares allotted on exercise of the Subscription Rights shall be admitted to listing on the Stock Exchange provided that no admission shall be obtained in the event that the Shares cease to be listed on the Stock Exchange as a result of an offer being made to the holders of Shares (or to holders excluding the offeror and/or its nominee(s) to acquire all or a proportion of the Shares);

• (f) it will keep available for issue sufficient Ordinary Capital (as defined in the Instrument) to satisfy in full all rights for the time being outstanding of subscription or conversion into Shares; and

• (g) it will use its best endeavours to procure that at all times during the Subscription Period, Warrants may be dealt in on the Stock Exchange (save that this obligation will lapse in the event that the listing of the Warrants on the Stock Exchange is withdrawn following an offer for all or any other Warrants), and all Shares allotted and issued upon exercise of the Subscription Rights may upon allotment and issue or as soon as reasonably practicable thereafter, be dealt on the Stock Exchange (save that this obligation will lapse in the event that the listing of the Shares on the Stock Exchange is withdrawn following an offer for all or any of the Shares where a like offer is extended to the Warrantholders).

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PARTICULARS OF THE WARRANTS

APPENDIX I

14. Winding up of the Company

• (a) In the event that a notice is given by the Company to its shareholders to convene a shareholders’ meeting for the purposes of considering and, if thought fit, approving a resolution to voluntarily wind up the Company, the Company shall forthwith give notice thereof to each Warrantholder and thereupon, every Warrantholder shall be entitled by irrevocable surrender of his Warrant certificate(s) to the Company (such surrender to occur not later than two business days prior to the proposed shareholders’ meeting referred to above) together with the duly-completed subscription form(s) and payment of the Exercise Moneys or the relevant portion thereof, to exercise the Subscription Rights represented by such Warrant and the Company shall, as soon as possible and, in any event, no later than the day immediately prior to the date of the proposed shareholders’ meeting, allot such number of Shares to the Warrantholder which fall to be issued pursuant to the exercise of the Subscription Rights represented by such Warrant. The Company shall give notice to the Warrantholders of the passing of such resolution within seven days after the passing thereof; and

• (b) If an effective resolution is passed during the Subscription Period for the voluntary winding-up of the Company, then if such winding-up is for the purpose of reconstruction or amalgamation pursuant to a scheme of arrangement to which the Warrantholders, or some person designated by them for such purpose by Special Resolution, shall be a party or in conjunction with which a proposal is made to the Warrantholders and is approved by Special Resolution, the terms of such scheme of arrangement or (as the case may be) proposal will be binding on all the Warrantholders.

Subject to the foregoing, if the Company is wound-up, all Subscription Rights which have not been exercised at the date of the passing of such resolution will lapse and each Warrant certificate will cease to be valid for any purpose.

15. Overseas Warrantholders

If a Warrantholder has a registered address in any territory other than Hong Kong where, in the opinion of the Directors, the allotment of Shares to such Warrantholder upon exercise of any Subscription Rights would or may in the absence of compliance with registration or any other special formalities in such territory be unlawful or impracticable under the laws of such territory or Hong Kong, then the Company will as soon as practicable after the exercise by such Warrantholder of any Subscription Rights either (i) allot the Shares which would otherwise have been allotted to such Warrantholder to one or more third parties selected by the Company; or (ii) allot such Shares to such Warrantholder and then, on his behalf, sell them to one or more third parties selected by the Company, in each case for the best consideration then reasonably

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PARTICULARS OF THE WARRANTS

APPENDIX I

obtainable by the Company. As soon as reasonably practicable following such allotment or allotment and sale, the Company will pay such Warrantholder an amount equal to the consideration received (less expenses and duties) by it by posting the remittance to him at his risk.

16. Notices

The Instrument contains provisions relating to notices to be given to Warrantholders.

17. Governing law

The Instrument and the Warrants are governed by and will be construed in accordance with the laws of Hong Kong.

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EXPLANATORY STATEMENT FOR REPURCHASE MANDATE

APPENDIX II

This Appendix serves as an explanatory statement, as required by the Share Buy Back Rules, to provide Shareholders with all the information reasonably necessary to enable them to make an informed decision on whether to vote for or against the granting of the Repurchase Mandate.

1. REPURCHASES OF SHARES

The Listing Rules permit companies whose primary listings are on the Stock Exchange to repurchase their securities on the Stock Exchange subject to certain restrictions, among which, all on-market share repurchases by a company with its primary listing on the Stock Exchange must be approved in advance by an ordinary resolution, either by way of a specific approval in relation to specific transactions or by a general mandate to the directors of the company to make such repurchases.

2. SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company comprised 511,381,854 fully paid-up Shares. Subject to the passing of the resolution at the AGM granting the Repurchase Mandate and on the basis that no further Shares are issued or repurchased before the AGM, the Company would be allowed to repurchase a maximum of 51,138,185 Shares representing 10% of the Shares in issue as at the date of the AGM.

The Repurchase Mandate may continue in force until the earliest of: (i) the conclusion of the next annual general meeting of the Company for the year of 2003; (ii) the expiration of the period within which the next annual general meeting of the Company is required by law to be held; and (iii) the revocation or variation of the Repurchase Mandate by ordinary resolution of the Shareholders in general meeting.

3. REASONS FOR REPURCHASES

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

4. FUNDING OF REPURCHASES

In repurchasing Shares, the Company may only apply funds legally available for such purpose in accordance with the memorandum of association and bye-laws of the Company and the laws of Bermuda. The laws of Bermuda provide that any repurchase of Shares by the

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EXPLANATORY STATEMENT FOR REPURCHASE MANDATE

APPENDIX II

Company may only be repurchased out of the capital paid up on the repurchased Shares or out of the profits of the Company which would otherwise be available for dividend, or distribution or out of the proceeds of a fresh issue of Shares made for the purposes of the repurchase and the premium, if any, payable on the repurchase, may only be provided for out of the funds of the Company which would otherwise be available for dividend or distribution or out of the Company’s share premium account before the Shares are repurchased.

There might be an adverse impact on the working capital or gearing position of the Company as compared with the position disclosed in the audited consolidated accounts contained in the annual report for the year ended 31 March 2002 in the event that the proposed repurchases of shares were to be carried out 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.

5. SHARE PRICES

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

	Highest	Lowest
Month	traded price	traded price
	HK$	HK$
2001
July	0.570	0.520
August	0.540	0.480
September	0.560	0.430
October	0.600	0.465
November	0.510	0.470
December	0.540	0.475
2002
January	0.580	0.480
February	0.590	0.540
March	0.720	0.590
April	0.820	0.630
May	0.870	0.750
June	0.830	0.690

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EXPLANATORY STATEMENT FOR REPURCHASE MANDATE

APPENDIX II

6. 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 and as permitted by the regulations set out in the memorandum of association and bye-laws of the Company.

7. DISCLOSURE OF INTERESTS

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

No connected person (as defined in the Listing Rules) of the Company has notified the Company that he has a present intention to sell Shares to the Company, or has undertaken not to do so, in the event that the Repurchase Mandate is approved by the Shareholders.

8. EFFECT OF TAKEOVER CODE

If, on 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 purpose of Rule 32 of the Takeover Code. As a result, a shareholder or a group of shareholders acting in concert, depending on the level of such increase, could obtain or consolidate control of the Company and may become obliged to make a mandatory offer in accordance with Rule 26 of the Takeover Code.

As at the Latest Practicable Date, the substantial Shareholder of the Company is as follows:

		Approximate	If exercised in
	Number of	percentage of	full the power
Substantial Shareholder	Shares	voting power	to repurchase
Kimen Leung UT Limited	170,018,000	33.25 %	36.94 %

In the event that the Directors shall exercise in full the power to repurchase Shares of the Company in accordance with the Repurchase Mandate and if there is no other change in the issued share capital of the Company, the interest of the above substantial shareholder would be increased by more than 2% to approximately 36.94% as shown above and, therefore, the substantial Shareholder will be required under the Takeover Code to make an offer for all the

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EXPLANATORY STATEMENT FOR REPURCHASE MANDATE

APPENDIX II

issued shares of the Company. The Directors do not have the intention to exercise the power to repurchase Shares of the Company to an extent which would make the substantial Shareholder or any Shareholder or group of Shareholders obliged to make a mandatory offer under Rule 26 of the Takeover Code in this respect.

9. SHARE REPURCHASE MADE BY THE COMPANY

In the six months preceding the date of this circular, the Company repurchased on the Stock Exchange a total of 32,000 Shares of the Company at an aggregate consideration of HK$18,240. All of the Shares were cancelled subsequent to the repurchases. Details of the Shares repurchased are set out below.

		Purchase price
Date of repurchase	Number of Shares	per Share	Consideration
		HK$	HK$
26 February 2002	32,000	0.570	18,240

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NOTICE OF THE SGM

ALCO HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting of Alco Holdings Limited (“Company”) will be held at Salon 3, JW Marriott Hotel, Pacific Place, 88 Queensway, Hong Kong on Thursday, 22 August 2002 at 11:30 a.m. or such later time immediately following the close of the annual general meeting of the Company to be held on the same day and at the same place for the purpose of considering and, if thought fit, passing, with or without modification, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT conditional upon The Stock Exchange of Hong Kong Limited (“Stock Exchange”) granting the listing of, and permission to deal in, the Warrants (as hereinafter defined) and any shares of HK$0.10 each (“Share”) in the share capital of the Company which may fall to be issued upon any exercise of subscription rights attaching to the Warrants, the directors of the Company be and are hereby authorised:

• (a) to create and issue warrants (“Warrants”) which shall be in registered form and each shall be exercisable at any time between the date when dealings in the Warrants on the Stock Exchange commence, which is expected to be 2 September 2002 and the third anniversary thereof, which is expected to be 1 September 2005, both days inclusive, to subscribe for Shares at an initial subscription price of HK$0.98 per Share, subject to adjustment, on the terms and conditions set out in the draft warrant instrument, a copy of which instrument has been submitted to the Meeting marked “A” and signed for the purpose of identification by the Chairman of the Meeting, and to issue the same by way of bonus to the persons who were registered as shareholders of the Company at the close of business on 22 August 2002 in the proportion of one (1) Warrant for every ten (10) Shares then held;

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NOTICE OF THE SGM

• (b) to allot and issue to holders of any Warrants, upon the due exercise of the subscription rights attaching thereto, the appropriate number of Shares; and

• (c) to do all such acts and things as they consider necessary or expedient to give effect to the foregoing arrangements.”

By order of the Board LEUNG Kai Ching, Kimen Chairman

Hong Kong, 29 July 2002

Principal place of business:

11th Floor Zung Fu Industrial Building 1067 King’s Road Quarry Bay Hong Kong

Notes:

1. A shareholder of the Company entitled to attend and vote at the above meeting may appoint one or more than one proxies to attend and to vote in his stead. A proxy need not be a shareholder of the Company but must be present in person to represent the shareholder.

2. Where there are joint registered holders of any Share, any one of such persons may vote at the meeting, either personally or by proxy, in respect of such Share as if he were solely entitled thereto; but if more than one of such joint holders be present at the meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such Share shall alone be entitled to vote in respect thereof.

3. In order to be valid, the form of proxy duly completed and signed in accordance with the instructions printed thereon together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof must be delivered to the office of the branch share registrars of the Company in Hong Kong, Abacus Share Registrars Limited, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

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