China Pipe Group Limited — Proxy Solicitation & Information Statement 2003

Apr 28, 2003

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt as to any aspect of this circular or as to the action you should take, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all you shares in Prime Success International Group Limited , you should at once hand this circular, together with the enclosed proxy form, to the purchaser 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 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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永恩國際集團有限公司 PRIME SUCCESS INTERNATIONAL GROUP LIMITED (Incorporated in the Cayman Islands with limited liability)

PROPOSALS FOR

GENERAL MANDATES TO REPURCHASE AND ISSUE SHARES, ADOPTION OF NEW SHARE OPTION SCHEME AND TERMINATION OF THE EXISTING SHARE OPTION SCHEME, AMENDMENTS TO THE ARTICLES OF ASSOCIATION AND NOTICE OF EXTRAORDINARY GENERAL MEETING

A notice convening the extraordinary general meeting of PRIME SUCCESS INTERNATIONAL GROUP LIMITED to be held at Tang Room of Sheraton Hong Kong Hotel and Tower at No. 20 Nathan Road, Tsimshatsui, Kowloon, Hong Kong on Thursday, 29 May 2003 at 11:15 a.m. (or soon thereafter as the annual general meeting of the Company to be convened at the same place and on the same day shall have been concluded or adjourned), is set out on pages 19 to 22 of this circular. Whether or not you propose to attend the meeting, you are requested to complete the proxy form in accordance with the instructions printed thereon and return the same to the registrar of the Company in Hong Kong, Secretaries Limited, at 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 holding of the meeting or any adjournment thereof. Completion and return of the proxy form shall not preclude you from attending and voting at the meeting should you so wish.

23 April 2003

CONTENTS

Page(s)	Page(s)
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1-3
Letter from the Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4-8
Appendix I – Explanatory statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9-11
Appendix II – Summary of the principal terms of the rules of the New Scheme . . . . .	12-18
Appendix III – Notice of Extraordinary General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . .	19-22

DEFINITIONS

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

“AGM”	the annual general meeting of the Company to be held at
	Tang Room of Sheraton Hong Kong Hotel and Towers at
	No. 20 Nathan Road, Tsimshatsui, Kowloon, Hong Kong
	on Thursday, 29 May 2003 at 11:00 a.m., notice of which
	is set out in the annual report 2002 of the Company to
	consider, and if thought fit, to approve, amongst other
	things, the general mandates to repurchase and issue shares
“Articles”	the Articles of Association of the Company (as amended
	from time to time)
“associate”	has the meaning ascribed thereto in the Listing Rules
“Board”	the board of directors of the Company comprising all the
	Directors or a duly authorized committee thereof
“business day”	a day on which the Stock Exchange is open for business of
	dealings in securities
“chief executive”	has the meaning ascribed to it by the Listing Rules
“Company”	Prime Success International Group Limited, a company
	incorporated in the Cayman Islands, the Shares of which
	are listed on the Stock Exchange
“Companies Law”	The Companies Laws of the Caymans Islands (as amended)
“connected person”	has the meaning ascribed thereto in the Listing Rules
“Directors”	the directors of the Company including the independent
	non-executive directors of the Company
“EGM”	the extraordinary general meeting of the Company to be
	held at Tang Room of Sheraton Hong Kong Hotel and
	Towers at No. 20 Nathan Road, Tsimshatsui, Kowloon, Hong
	Kong on Thursday, 29 May 2003, at 11:15 a.m. (or so soon
	thereafter as the AGM to be convened at the same place
	and on the same day shall have been concluded or
	adjourned), notice of which is set out on pages 19 to 22 of
	this circular to consider, and if thought fit, to approve the
	adoption of the New Scheme, termination of the Existing
	Scheme and the amendments to the Articles
“Existing Scheme”	the existing share option scheme for certain employees of
	the Group adopted by the Company at its special general
	meeting on 9 October 1995

– 1 –

DEFINITIONS

“Grantee”	any Participant who accepts an offer of Options in
	accordance with the terms of the New Scheme or (where
	the context so permits) a person entitled to any such Options
	in consequence of the death of the original Grantee
“Group”	the Company and its Subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the
	People’s Republic of China
“Latest Practicable Date”	23 April 2003, being the latest practicable date prior to the
	printing of this document for ascertaining certain
	information contained herein
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“New Scheme”	the new share option scheme to be adopted by the Company
	at the EGM, the principal terms of which are summarized
	in Appendix II to this circular
“Option”	a right to subscribe for Shares pursuant to the New Scheme
“Option Period”	a period not exceeding a period of ten (10) years
	commencing on the grant date (subject to acceptance of the
	relevant Options in accordance with the Scheme)
“Participant”	any individual being an employee, officer, agent or
	consultant of the Company or any Subsidiary including any
	executive or non-executive directors thereof whether
	employed in Hong Kong or any part of the world
“Repurchase Proposal”	the proposal to give a general mandate to the Directors to
	exercise the powers of the Company to repurchase during
	the period, as set out in the Repurchase Resolution, Shares
	up to a maximum of 10% of the issued share capital of the
	Company as at the date of the Repurchase Resolution
“Repurchase Resolution”	the proposed ordinary resolution as referred to in resolution
	no. 4A of the notice of the AGM
“Share(s)”	share(s) of HK$0.10 each in the share capital of the
	Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subsidiary”	a company which is for the time being and from time to
	time a subsidiary (within the meaning of the Companies
	Ordinance of Hong Kong (as amended from time to time)
	or the Companies Law) of the Company

– 2 –

DEFINITIONS

“Substantial Shareholder” has the meaning ascribed thereto in the Listing Rules “Takeover Code” the Hong Kong Code on Takeovers and Mergers “HK$” and “cents” Hong Kong dollars and cents respectively, the lawful currency of Hong Kong

– 3 –

LETTER FROM THE CHAIRMAN

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永恩國際集團有限公司 PRIME SUCCESS INTERNATIONAL GROUP LIMITED

(Incorporated in the Cayman Islands with limited liability)

Executive Directors: Mr. Chang Wen I (Chairman) Mr. Chen Hsien Min (Managing Director) Mr. Chen Ying-Chieh

Independent Non-executive Directors: Mr. Kuo Jung-Cheng Mr. Huang Shun-Tsai

Registered Office: Ugland House, South Church Street P.O. Box 309 George Town Grand Cayman Cayman Islands British West Indies

Principal Place of Business: Room 608, Austin Tower 22-26A Austin Avenue Tsimshatsui Kowloon Hong Kong

23 April 2003

To the shareholders of the Company

Dear Sir or Madam,

PROPOSALS FOR

GENERAL MANDATES TO REPURCHASE AND ISSUE SHARES, ADOPTION OF A NEW SHARE OPTION SCHEME AND TERMINATION OF THE EXISTING SHARE OPTION SCHEME, AMENDMENT TO THE ARTICLES OF ASSOCIATION AND NOTICE OF EXTRAORDINARY GENERAL MEETING

1. INTRODUCTION

The purpose of this circular is to provide you with information on the proposals to:

• (a) give general mandates to the Directors to repurchase and issue Shares;

• (b) adopt the New Scheme and terminate the Existing Scheme;

• (c) amend the Articles to permit, subject to certain conditions, the Company to send or otherwise make available corporate communications to its shareholders by electronic means with their prior approval; and

to give you the notice of the EGM which will be held on 29 May 2003 at which resolutions approving items (b) and (c) above will be considered and voted upon.

– 4 –

LETTER FROM THE CHAIRMAN

2. GENERAL MANDATE TO REPURCHASE SHARES

At the annual general meeting of the Company held on 23 May 2002, a general mandate was given to the Directors to exercise the powers of the Company to repurchase Shares. Such mandate will lapse at the conclusion of the forthcoming AGM to be held on 29 May 2003. It is therefore proposed to seek your approval by way of an ordinary resolution to be proposed at the forthcoming AGM to give a new general mandate to the Directors to exercise the powers of the Company to repurchase Shares up to a maximum of 10% of the issued share capital of the Company at the date of the Repurchase Resolution.

An explanatory statement which is required to be sent to shareholders under the Listing Rules to regulate the repurchase by companies with primary listings on the Stock Exchange of their own securities on the Stock Exchange will provide requisite information to you for your consideration of the Repurchase Proposal and it is set out in Appendix I to this circular.

3. GENERAL MANDATE TO ISSUE SHARES

At the annual general meeting of the Company held on 23 May 2002, a general mandate was given to the Directors to exercise the powers of the Company to allot, issue and deal with certain Shares. Such mandate will lapse at the conclusion of the forthcoming AGM to be held on 29 May 2003. The Directors therefore also propose at the AGM an ordinary resolution granting to the Directors a general mandate to allot, issue and deal with Shares not exceeding 20% of the issued share capital of the Company as at the date of the resolution. In addition, an ordinary resolution will be proposed to extend such general mandate by an aggregate nominal amount of Shares repurchased by the Company.

4. THE ADOPTION OF A NEW SHARE OPTION SCHEME AND TERMINATION OF THE EXISTING SCHEME

In compliance with the amended Chapter 17 of the Listing Rules, the Board proposes that the New Scheme be adopted and the Existing Scheme be terminated. A summary of the principal terms of the New Scheme is set out in Appendix II to this circular. Upon termination of the Existing Scheme, no further options will be granted under the Existing Scheme but in all other respects, the provisions of the Existing Scheme shall remain in force and all outstanding options (if any) granted prior to such termination shall continue to be valid and exercisable in accordance therewith.

As at the Latest Practicable Date, the Company had granted share options in respect of 130,052,000 Shares representing 8.68% of the entire issued share capital of the Company as at the Latest Practicable Date to certain employees of the Group pursuant to the Existing Scheme, amongst which, options in respect of 36,748,000 Shares representing 2.45% of the entire issued share capital of the Company as at the Latest Practicable Date had been exercised and the remaining options in respect of 93,304,000 Shares representing 6.23% of the issued share capital of the Company as at the Latest Practicable Date have lapsed. There are no outstanding options under the Existing Scheme. No further options will be granted under the Existing Scheme after the Latest Practicable Date.

The purpose of the New Scheme is to provide incentives to the Participants to contribute to the prosperity, business development or growth of the Group and/or to enable the Group to recruit and/or to retain high-calibre employees and attract resources that are valuable to the Group.

– 5 –

LETTER FROM THE CHAIRMAN

On the basis of 1,498,392,384 Shares in issue as at the Latest Practicable Date, and assuming no further Shares will be issued or repurchased by the Company on or before the date of the AGM, the Company may initially grant Options in respect of up to 149,839,238 Shares under the New Scheme (representing 10% of the issued share capital of the Company as at the date of adoption of the New Scheme). Such 10% limit may be refreshed by the Company at any time, subject to prior Shareholders’ approval given at a general meeting of the Company in accordance with the relevant provisions of the Listing Rules. In addition, the total number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the New Scheme and any other share option schemes of any member of the Group must not exceed 30% of the number of issued Shares from time to time. No trustees will be appointed under the New Scheme.

Although the rules of the New Scheme provide that the New Scheme is not subject to any performance target, the Board believes that the requirement for a minimum subscription price (which is summarized in paragraph (d) in Appendix II hereto) as well as the selection criteria prescribed by the rules (which are summarized in paragraph (b) in Appendix II hereto) of the New Scheme will serve to protect the value of the Shares as well as to achieve the purpose of the New Scheme. In essence, a Grantee will be able to benefit from an Option only if the trading price of the Shares increases after the grant of the Option.

Any alternation to the terms and conditions of the New Scheme which are of material nature or any change to the terms of Options granted must be approved by the Shareholders in general meeting, except where alternations take effect automatically under the existing terms of the New Scheme.

The Board considers that it is not appropriate to state the value of all Options that can be granted under the New Scheme as if they had been granted on the Latest Practicable Date as a number of variables which are crucial for the calculation of the option value have not been determined. Such variables include the subscription price, the exercise period, the projected trading prices of the Shares during the exercise period, the vesting period (if any) and other relevant factors. The Board believes that any calculation of the value of any option which might have been granted on the Latest Practicable Date would be based on a number of speculative assumptions and therefore not only would such calculation not be meaningful or representative, but it could also potentially be misleading to the Shareholders.

Application will be made to the Listing Committee of the Stock Exchange for listing of and permission to deal in the new Shares which may fall to be issued pursuant to the exercise of the subscription rights under the Options that may be granted under the New Scheme.

In accordance with the requirements of the Listing Rules, the Company will publish in the newspapers announcement on the outcome of the EGM in respect of the resolution relating to the adoption of the New Scheme on the business day following the date of the EGM.

The Company will comply with the relevant Listing Rules from time to time in force in respect of the New Scheme and any other share option scheme(s) of the Company or any of its Subsidiaries.

– 6 –

LETTER FROM THE CHAIRMAN

5. PROPOSED AMENDMENTS TO THE ARTICLES

Chapter 2 of the Listing Rules was amended on 15 February 2002 to allow listed companies to send or otherwise make available corporate communications (within the meaning ascribed thereto under the Listing Rules) to holders of securities by electronic means (within the meaning ascribed thereto under the Listing Rules) with their prior approval if that is allowed under applicable laws and regulations and the listed company’s own constitutional documents.

Pursuant to the Listing Rules, the listed issuer is required to set out in each corporate communication the steps for the holders of its securities to inform the listed issuer of any change of choice in relation to the means of communication notwithstanding any wish to the contrary previously conveyed to the listed issuer. Subject to the shareholders approving the proposed amendments to the Articles and in the event the Company elects to implement the proposal to communicate with its shareholders by electronic means, the Company will carry out the following arrangements:

• (1) a letter, together with a pre-paid reply form in both English and Chinese, will be sent to the shareholders of the Company to enable them to confirm whether they wish to receive or otherwise be made available to them corporate communications by electronic means. The letter will clearly explain the consequential arrangement (see (2) below) if no reply is received from the shareholders by a certain date (the “ Deadline ”);

• (2) if no shareholder’s reply is received on or before the Deadline, corporate communication will not be sent to these shareholders by electronic means;

• (3) when a corporate communication is sent out or is made available to the shareholders of the Company by electronic means, at some prominent place in the sent out version of the corporate communication shall state that:

• (a) shareholders may at any time choose to receive corporate communications either in printed form or using electronic means; and

• (b) shareholders who have chosen to receive the corporate communications using electronic means and who for any reason have difficulty in receiving or gaining access to the corporate communications will promptly upon request be sent the corporate communication in printed form free of charge.

• (4) both the English language version and the Chinese language version of the corporate communications in electronic format will be submitted to the Stock Exchange on the same day as such corporate communication is sent to shareholders.

The relevant notice provisions in the current Articles provide, among other things, that any notice or document from the Company to a member shall be given either personally or by sending it by post to him at his registered address, within or outside the Cayman Islands, supplied by him to the Company for the sending of the notice or documents to him or by transmitting it to such address or transmitting it to any telex or facsimile transmission number supplied by him to the Company for the sending of notices or documents to him or by advertisement to be published in the newspaper. As such, the current Articles do not provide for corporate communications to be sent to or made available to the shareholders of the Company by electronic means.

– 7 –

LETTER FROM THE CHAIRMAN

The Directors believe that it will be desirable for the Articles to be amended to cater for corporate communications by electronic means. A special resolution to amend the Articles to the above effect will be proposed for the consideration and, if thought fit, approval by the shareholders of the Company at the EGM.

6. EXTRAORDINARY GENERAL MEETING

Set out on pages 19 to 22 of this circular is a notice convening the EGM to consider the ordinary and special resolutions relating to the adoption of the New Scheme and the amendments to the Articles respectively.

A form of proxy for use at the EGM is enclosed herein. Whether or not you are able to attend the EGM, you are requested to complete the proxy form and return it to the registrar of the Company in Hong Kong, Secretaries Limited, at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the EGM. Completion and return of a proxy form will not preclude you from attending and voting at the meeting if you so wish.

7. 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.

8. RECOMMENDATION

The Directors believe that the Repurchase Proposal, the general mandate to issue new Shares and the proposed extension of such general mandate to issue new Shares, the adoption of the New Scheme and the termination of the Existing Scheme, and amendments to the Articles are in the best interests of the Company and its shareholders as a whole. Accordingly, the Directors recommend that the shareholders of the Company should vote in favour of such resolutions to be proposed at the AGM and the EGM.

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company in Hong Kong at Room 608, Austin Tower, 22-26A Austin Avenue, Tsimshatsui, Kowloon, Hong Kong from the date of this circular up to and including the date of the AGM and the EGM:

• (a) the Articles; and

• (b) the rules of the New Scheme.

By Order of the Board Chang Wen I Chairman

– 8 –

EXPLANATORY STATEMENT

APPENDIX I

This Appendix serves as an explanatory statement, as required by the Listing Rules, to provide the requisite information to shareholders of the Company for their consideration of the Repurchase Resolution.

SHARE CAPITAL

1. SHARE REPURCHASE PROPOSAL

As at the Latest Practicable Date, the issued share capital of the Company comprised 1,498,392,384 Shares.

Subject to the passing of the Repurchase Resolution, on the basis that no further securities are issued or repurchased prior to the AGM to be held on 29 May 2003 and ignoring other restrictions, such as the limitation on the basis of trading volume mentioned above, the Company would be allowed under the Repurchase Proposal to purchase up to a maximum of 149,839,238 Shares.

2. REASONS FOR THE REPURCHASE

The Directors believe that the ability to repurchase Shares is in the interests of the Company and its shareholders.

Repurchases may, depending on the circumstances, result in an enhancement in the net assets and/or earnings per Share. The Directors are seeking grant of a general mandate to repurchase Shares to give the Company the flexibility to do so if and when appropriate. The number(s) of Shares to be repurchased on any occasion and the price and other terms upon which the same are repurchased will be decided by the Directors at the relevant time having regard to the circumstances then pertaining.

3. FUNDING OF REPURCHASES

There may be an adverse impact on the working capital or gearing position of the Company (as compared with the financial position disclosed in its latest published audited financial statements) in the event that the proposed securities repurchases were to be carried out in full at any time during the proposed repurchase period. However, repurchases must be made out of funds entirely from the Company’s available cash flow or working capital facilities, which will be funds legally available for such purpose in accordance with the memorandum and articles of association of the Company, the laws of the Cayman Islands and any other applicable laws. It is envisaged that the funds required for any repurchase would be derived from the distributable profits of the Company.

The Directors do not intend to exercise the repurchase mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements or the gearing position of the Company unless the Director consider that such purchases are in the best interest of the Company notwithstanding such material adverse impact.

4. DIRECTORS, THEIR ASSOCIATES AND CONNECTED PERSONS

There are no Directors (to the best of the knowledge of the Directors, having made all reasonable enquiries) or any of their associates (as defined in the Listing Rules), who have a present intention, in the event that the Repurchase Proposal is approved by shareholders of the Company, to sell any Shares to the Company or its Subsidiaries.

– 9 –

EXPLANATORY STATEMENT

APPENDIX I

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the power of the Company to make purchases pursuant to the Repurchase Proposal only in accordance with the Listing Rules and all applicable laws of the Cayman Islands.

If, as a result of a share repurchase, 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 the Takeovers Code. As a result, a shareholder or group of shareholders acting in concert (depending on the level of increase of shareholders’ interests) could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code.

As at the Latest Practicable Date, Lucky Earn International Limited (“ LE ”) was beneficially interested in 449,669,995 Shares, which constituted approximately 30.01 per cent. of the voting rights attaching to the issued share capital of the Company. If the Repurchase Proposal were to be exercised in full, LE would (assuming that there is no change in the relevant facts and circumstances) hold approximately 33.34 per cent. of the voting rights attaching to the issued capital of the Company. In the absence of any special circumstances, no obligation to make a mandatory offer as referred to above as a result of a share repurchase would arise for so long as the shareholding of LE remains in the range of 30 per cent. to less than 35 per cent. of the voting rights attaching to the issued share capital of the Company and until 10 years after 19th October, 2001 on the basis of rule 26.6 of Takeovers Code. Save as aforesaid, the Directors are not aware of any consequences which would arise under the Takeovers Code as a consequence of any repurchase pursuant to the Repurchase Proposal.

No connected person (as defined in the Listing Rules) of the Company has notified the Company of a present intention to sell Shares to the Company and no such persons have undertaken not to sell any of the Shares held by them to the Company in the event that the Repurchase Proposal is authorized by shareholders of the Company. The Company will not repurchase Shares which would result in the amount of Shares held by the public being reduced to less than 25%.

5. SHARES REPURCHASES MADE BY THE COMPANY

During the six months prior to the Latest Practicable Date, the Company has not purchased any Shares (whether on the Stock Exchange or otherwise).

– 10 –

EXPLANATORY STATEMENT

APPENDIX I

6. SECURITIES PRICES

The highest and lowest prices at which Shares have been traded on the Stock Exchange during each of the previous twelve months preceding the latest practicable date before the printing of this circular are as follows:

		Shares
	Highest		Lowest
	HK$		HK$
2002
April	0.151		0.104
May	0.159		0.126
June	0.134		0.110
July	0.138		0.065
August	0.080		0.065
September	0.095		0.080
October	0.119		0.080
November	0.122		0.097
December	0.107		0.101
2003
January	0.118		0.080
February	0.134		0.095
March	0.134		0.117

– 11 –

SUMMARY OF THE PRINCIPAL TERMS OF THE RULES OF THE NEW SCHEME

APPENDIX II

The following is a summary of the principal terms of the New Scheme:

(a) Purpose

The purpose of the New Scheme is to provide incentives to Participants to contribute to the prosperity, business development or growth of the Group and/or to enable the Group to recruit high-calibre employees and attract human resources that are valuable to the Group.

(b) Who may join

The Board may grant (subject to acceptance in accordance with the terms of the New Scheme) an option to subscribe for such number of Shares as it may determine at a price determined in accordance with paragraph (d) below to any individual being an employee, officer, agent or consultant of any member of the Group (including any executive or nonexecutive director of any member of the Group) who, the Board may determine in its absolute discretion, provided that no grants shall be made except to such number of Participants and in such circumstances that the Company will not be required under applicable securities laws and regulations to issue a prospectus or other offer document in respect thereof and will not result in the breach by the Company or its directors of any applicable securities laws and regulations or in any filing or other requirements arising.

(c) Payment on acceptance of option

HK$1.00 is payable by the Participant who accepts the grant of an option in accordance with the terms of the New Scheme on acceptance of the grant of an option.

(d) Subscription price

The subscription price for the Shares under the options to be granted under the New Scheme will be a price determined by the Board and notified to a Participant at the time the grant of the options is made to (and subject to acceptance by) the Participant and will be at least the highest of: (a) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets on the date of the grant (subject to acceptance) of the option, which must be a business day; (b) the average closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets for the five business days immediately preceding the date of the grant (subject to acceptance) of the option; and (c) the nominal value of the Shares.

(e) Maximum number of Shares subject to the New Scheme

The limit on the total number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the New Scheme and any other share option schemes of any member of the Group must not exceed 30% of the number of issued Shares from time to time. Options lapsed or cancelled in accordance with the terms of the relevant share option scheme shall not be counted for the purpose of calculating the 30%-limit.

– 12 –

SUMMARY OF THE PRINCIPAL TERMS OF THE RULES OF THE NEW SCHEME

APPENDIX II

In addition, subject as provided below in this paragraph (e), the total number of Shares which may be issued upon exercise of all options to be granted under the New Scheme, together with all options to be granted under any other share option schemes of any member of the Group, must not represent more than 10% of the nominal amount of all the issued Shares as at 29 May 2003, being the date of approval of the New Scheme by the Shareholders (the “ Scheme Mandate Limit ”). Therefore, it is expected that the Company may grant options in respect of up to 149,839,238 Shares (or such numbers of shares as shall result from a sub-division or a consolidation of such 149,839,238 Shares from time to time) to Participants under the New Scheme. Options lapsed in accordance with the terms of the relevant share option scheme shall not be counted for the purpose of calculating the Scheme Mandate Limit.

The Company may refresh the Scheme Mandate Limit (or further refresh a refreshed Scheme Mandate Limit) at any time, subject to prior Shareholders’ approval given at a general meeting of the Company in accordance with the relevant provisions of the Listing Rules, provided that the maximum number of Shares which may be issued under Options to be granted under the New Scheme (when aggregated with any Shares which may be issued under options to be granted under any other share option scheme(s) of any member of the Group) under the limit as refreshed must not exceed 10% of the number of issued Shares as at the date of the approval of the refreshed limit, excluding any Shares that are subject to options previously granted (subject to acceptance) under the New Scheme or any other share option scheme(s) of any member of the Group (whether the options are outstanding, cancelled or lapsed or have been exercised). The Company may also seek separate approval from the Shareholders in general meeting in accordance with the relevant provisions of the Listing Rules for granting options beyond the Scheme Mandate Limit (or refreshed Scheme Mandate Limit) to such Participants, in respect of such number of Shares and on such terms as may be specified in such approval.

The total number of Shares issued and which may be issued upon exercise of all options (whether exercised, cancelled or outstanding) granted under the New Scheme and any other share option schemes of any member of the Group in any 12-month period immediately preceding any proposed date of the grant (subject to acceptance) of options to each Participant must not exceed 1% of the number of Shares in issue as at the proposed grant date. Any further grant of options in excess of this limit is subject to prior Shareholders’ approval given at a general meeting of the Company in accordance with the relevant provisions of the Listing Rules, with the relevant Participant and his associates (as defined in the Listing Rules) abstaining from voting.

(f) Exercise of option

An option may be exercised in accordance with the terms of the New Scheme at any time during a period of 10 years commencing on the date on which the grant (subject to acceptance) of the option is made without the need to hold it for a minimum period before it can be exercised.

The right to exercise an option is not subject to or conditional upon the achievement of any performance target.

– 13 –

SUMMARY OF THE PRINCIPAL TERMS OF THE RULES OF THE NEW SCHEME

APPENDIX II

(g) Rights are personal to Grantee

An option shall be personal to the Grantee and shall not be assignable and no Grantee shall in any way sell, transfer, assign, charge, mortgage, encumber or create any interest in favour of any third party over or in relation to any option or purport to do any of the foregoing. Any breach of the foregoing shall entitle the Company to cancel any outstanding option, or any part thereof, in favour of such Grantee.

(h) Rights on ceasing employment or other engagement

If the Grantee ceases to be an employee (including any executive director), officer (including non-executive director), agent or consultant of the relevant member of the Group for any reason other than death, ill health, disability, insanity, misconduct or certain other grounds specified in the New Scheme, then, if the option period has not at the date of cessation commenced, the option shall lapse and if the option period has commenced, the Grantee may exercise the option up to his entitlement at the date of cessation (to the extent not already exercised) until whichever is the earlier of the date of expiry of the option period or the last day of the period of 2 months (or such longer period as the Board may determine) following the date of such cessation, which date shall be the last actual day of employment, office, agency or consultancy with the relevant member of the Group whether payment in lieu of notice is made or not (if applicable).

For the purposes of this paragraph (h), a Grantee shall not be regarded as ceasing to be an employee (including any executive director), officer (including any non-executive director, agent or consultant of the relevant member of the Group if he ceases to hold a position of employment, office, agency or consultancy with a particular member of the Group but at the same time takes up a different position of employment, office, agency or consultancy with another member of the Group.

(i) Rights on death, ill health, disability or insanity

If the Grantee ceases to be an employee (including any executive director), officer (including any non-executive director, agent or consultant, of the relevant member of the Group by reason of death, ill health, disability or insanity before exercising the option in full and none of certain events which would be a ground for termination of his employment, office, agency or consultancy specified in the New Scheme arises, the Grantee or his legal personal representative(s) shall be entitled after commencement of the option period until whichever is the earlier of the date of expiry of the option period or the last day of the period of 6 months from the date of cessation (or such longer period as the Board may determine) to exercise the option (to the extent not already exercised) in full or to the extent specified in the notice to exercise such option.

(j) Rights on takeover

If a general offer to acquire Shares (whether by takeover offer, merger, privatisation proposal by scheme of arrangement between the Company and its members or otherwise in like manner) is made to all the Shareholders (or all such holders other than the offeror and/ or any person controlled by the offeror and/or any person acting in concert with the offeror) and such offer, having been approved in accordance with applicable laws and regulatory

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requirements, becomes or is declared unconditional, the Grantee (or his legal personal representatives) shall, even though the option period has not yet commenced be entitled to exercise the option (to the extent not already exercised) at any time until whichever is the earlier of the date of expiry of the option period or the last day of the period of 14 days after the date on which the offer becomes or is declared unconditional, after which the option shall lapse.

(k) Rights on winding up

If a notice is given by the Company to its members to convene a general meeting for the purposes of considering, and if thought fit, approving a resolution to voluntarily wind up the Company, the Company shall on the same date as or soon after it despatches such notice to each member of the Company give notice thereof to all Grantees and thereupon, each Grantee (or his legal personal representative(s)) shall be entitled to exercise all or any of his options at any time not later than five business days prior to the proposed general meeting of the Company by giving notice in writing to the Company, accompanied by a remittance for the full amount of the aggregate subscription price for the Shares in respect of which the notice is given whereupon the Company shall as soon as possible and, in any event, no later than the business day immediately prior to the date of the proposed general meeting referred to above, allot the relevant Shares to the Grantee credited as fully paid.

(l) Effects of alterations to capital

Subject to the limits on the number of Shares which may be issued under the New Scheme described in paragraph (e) above, in the event of any capitalisation issue, rights issue, consolidation, sub-division or reduction of the share capital of the Company (other than an issue of Shares as consideration in respect of a transaction) whilst an option remains outstanding in that it is granted and yet to be exercised (and has not lapsed or been cancelled), such corresponding adjustments (if any) will be made to the number of Shares subject to the New Scheme, the number of Shares subject to outstanding options, the subscription price in relation to each outstanding option and/or the method of exercise of the options, provided that no adjustment shall be made which would give a Grantee a different proportion of the issued share capital of the Company to which he was previously entitled, but so that no such adjustment shall be made to the extent that the effect of such adjustment would be to enable a Share to be issued at less than its nominal value. In respect of any adjustment required by the foregoing provisions, other than any made on a capitalisation issue, an independent financial adviser or the auditors for the time being of the Company must also confirm to the Board in writing that the adjustments satisfy the foregoing proviso.

(m) Lapse of options

An option shall lapse automatically (to the extent not already exercised) on the earliest

of:

• (i) the expiry of the option period;

• (ii) the expiry of any of the other periods referred to in paragraphs (h), (i) or (j) above;

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• (iii) the close of business on the fifth business day prior to the general meeting referred to in paragraph (k) above;

• (iv) save as otherwise provided in paragraph (j) above, or by the Court in relation to the scheme in question, upon the sanctioning pursuant to the Companies Law by the Grant Court of the Cayman Islands of a compromise or arrangement between the Company and its members or creditors for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies;

• (v) the date on which the Grantee ceases to be an employee (including any executive director), officer (including non-executive director), agent or consultant of the relevant member of the Group by reason of the termination of his employment, office, agency or consultancy on certain grounds specified in the New Scheme including, but not limited to, misconduct, bankruptcy, insolvency, having made any arrangement or composition with his creditors and conviction of any criminal offence involving his integrity or honesty or (if so determined by the Board) on any other ground on which an employer or principal would be entitled to terminate his employment, office, agency or consultancy at common law or pursuant to applicable laws or under the Grantee’s contract, agreement or arrangement with the relevant member of the Group; or

• (vi) the date on which the Board exercises the Company’s right to cancel the option because of a breach by the Grantee of the rules summarised in paragraph (g) above.

(n) Ranking and voting rights of Shares

The Shares to be allotted upon the exercise of an option will be subject to all the provisions of the Company’s memorandum and articles of association and will rank pari passu with the fully paid Shares in issue on the date of allotment or, if that date falls on a day when the register of members of the Company is closed, the first day of the reopening of the register of members and accordingly will entitle the holders to participate in all dividends or other distributions paid or made on or after the date of allotment or, if that date falls on a day when the register of members of the Company is closed, the first day of the reopening of the register of members, other than any dividend or other distribution previously declared or recommended or resolved to be paid or made with respect to a record date which shall be before the date of allotment, or, if later, before the date of registration of the allotment in the register of members of the Company.

A Share issued upon the exercise of an option shall not carry any voting rights until the registration of the Grantee (or any other person) as the holder thereof.

(o) Cancellation of options

The Board may effect the cancellation of any options granted but not exercised on such terms as may be agreed with the relevant Grantee, as the Board may in its absolute discretion see fit and in a manner that complies with all applicable legal requirements for such cancellation.

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Where the Company cancels any options granted but not exercised and grants new options to the same Grantee, the grant of such new options may only be made under the New Scheme if there is available unissued options (excluding the cancelled options) within each of the 10%-limits as referred to in paragraph (e) above.

(p) Alteration to the New Scheme

The terms of the New Scheme may be altered in any respect by resolution of the Board except that the provisions of the New Scheme relating to matters contained in Rule 17.03 of the Listing Rules shall not be altered to the advantage of Participants unless with the prior sanction of a resolution of the Shareholders in general meeting.

Any alterations to the terms and conditions of the New Scheme which are of a material nature or any change to the terms of options granted must first be approved by the Shareholders in general meeting, except where the alterations take effect automatically under the existing terms of the New Scheme.

The amended terms of the New Scheme or the options must still comply with the relevant requirements of Chapter 17 of the Listing Rules.

Any change to the authority of the Board in relation to any alteration to the terms of the New Scheme must first be approved by the Shareholders in general meeting.

(q) Termination of the New Scheme

The Company by resolution of its shareholders in general meeting or of the Board may at any time terminate the operation of the New Scheme and in such event no further options will be granted or accepted but the provisions of the New Scheme shall remain in force in all other respects. All options granted and accepted prior to such termination and not then exercised shall continue to be valid and exercisable subject to and in accordance with the New Scheme.

(r) Period of the New Scheme

Subject to termination as referred to in paragraph (q) above, the New Scheme shall be valid and effective for a period of ten years commencing on 29 May 2003 (being the date of approval of the New Scheme by the Shareholders) (after which period no further options will be granted or accepted); and thereafter for so long as there are outstanding any unexercised options granted and accepted pursuant thereto prior to the expiration of the tenyear period and in order to give effect to the exercise of any such options or otherwise as may be required in accordance with the provisions of the New Scheme.

(s) Conditions

The New Scheme is conditional upon, the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, any Shares to be issued pursuant to the exercise of options under the New Scheme.

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(t) Restrictions on the timing of grant of option

A grant (subject to acceptance) of options may not be made after a price sensitive event or a price sensitive matter in relation to the securities of the Company has been the subject of a decision, until such price sensitive information has been published in the newspapers. In particular, no option may be granted within the period commencing one month immediately preceding the earlier of: (i) the date of the Board meeting for the approval of the Company’s interim or annual results; and (ii) the deadline for the Company to publish its interim or annual results announcement, and ending on the date of the results announcement.

(u) Grant of options to connected persons

Where any grant of options is proposed to be made to a Participant who is a director, chief executive or substantial shareholder of the Company, or any of their respective associates, such grant must first be approved by all the independent non-executive directors of the Company excluding any independent non-executive director who is the proposed Grantee of the options.

If the grant of options is to be made to a Participant who is a substantial shareholder or an independent non-executive director of the Company, or any of their respective associates, which would result in the Shares issued and to be issued upon exercise of all options already granted and to be granted (including options exercised, cancelled and outstanding) to such person under the New Scheme and any other scheme(s) of any member of the Group in the 12-month period up to and including the proposed date of the grant (subject to acceptance) of the options: (i) representing in aggregate over 0.1% of the number of Shares then in issue; and (ii) having an aggregate value, based on the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets on each relevant date of the grant (subject to acceptance) of the options, in excess of HK$5 million, then such grant of options must first be approved by the Shareholders in general meeting, with all the connected persons of the Company abstaining from voting on the proposed grant (except that any such connected person may vote against the relevant resolution at the general meeting provided that his intention to do so has been stated in the circular required to be issued pursuant to the Listing Rules). Any vote taken at the meeting to approve the proposed grant of such options must be taken on a poll. In addition, any proposed change in the terms of options granted to a Participant who is a substantial shareholder or an independent non-executive director of the Company, or any of their respective associates, must first be approved by the Shareholders in general meeting on a similar basis (as to abstention and voting by poll) as stated above.

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APPENDIX III

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永恩國際集團有限公司 PRIME SUCCESS INTERNATIONAL GROUP LIMITED

(Incorporated in the Cayman Islands with limited liability)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting of the company will be held at Tang Room of Sheraton Hong Kong Hotel and Towers at No. 20 Nathan Road, Tsimshatsui, Kowloon, Hong Kong, on Thursday, 29 May 2003 at 11:15 a.m. (or so soon thereafter as the annual general meeting of the company convened at the same place and on the same day shall have been concluded is adjourned), for the following purposes:–

1. To consider and, if thought fit, to pass with or without amendments the following resolution as ordinary resolution:

ORDINARY RESOLUTION

“ THAT conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, any new ordinary shares of HK$0.10 each (the “ Shares ”) in the capital of the Company which may fall to be issued pursuant to the exercise of options (the “ Options ”) that may be granted under the share option scheme (the “ Share Option Scheme ”) (a copy of which marked “A” is produced to this Meeting and signed for the purpose of the identification by the Chairman of this Meeting):

• (a) the Share Option Scheme be and is hereby approved and adopted;

• (b) the Directors be and are hereby authorized to do all such acts and to enter into such transactions, arrangements as may be necessary or expedient in order to give full effect to the Share Option Scheme including but without limitation:

• (i) to administer the Share Option Scheme under which Options will be granted to participants eligible under the Share Option Scheme to subscribe for Shares in the share capital of the Company;

• (ii) to modify and/or amend the Share Option Scheme from time to time provided that such modification and/or amendment is effected in accordance with the provisions of the Share Option Scheme relating to modification and/or amendments;

• (iii) the Directors of the Company be and are hereby authorized to grant options to subscribe for Shares under the Share Option Scheme, to allot, issue and deal with Shares pursuant to the exercise of options that may be granted under the Share Option Scheme provided that the total number of Shares that may be issued upon exercise of the options to be granted under the Share Option Scheme and any other option schemes of the Company and/or its subsidiaries shall not exceed 10 per cent. of the number of Shares in issue at the date of the passing of this Resolution, and to do so all such acts and things as they consider necessary or expedient to give effect to the Share Option Scheme;

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  - (iv) to make application at the appropriate time or times to The Stock Exchange of Hong Kong Limited, and any stock exchanges upon which the issued Shares of the Company may for the time being be listed, for listing of and permission to deal in any Shares of the Company which may hereafter from time to time be issued and allotted pursuant to the exercise of the Options under the Share Option Scheme; and

  - (v) to consent, if it so deems fit and expedient to such conditions, modifications and/or variations as may be required or imposed by the relevant authorities in relation to the Share Option Scheme; and

• (c) the existing scheme of the Company adopted on 9 October 1995 be and is hereby terminated in accordance with its terms.”

• To consider and if thought fit, to pass with or without amendments the following resolution as special resolution:

SPECIAL RESOLUTION

THAT the Articles of Association of the Company be amended as follows:

• (a) by substituting the existing definition of “in writing” or “written” in Article 2 with the following new definition:

“expressions referring to writing or written shall, unless the contrary intention appears, be construed as including printing, lithography, photography and other modes of representing words or figures in a visible form, and including where the representation takes the form of electronic display, provided that both the mode of service of the relevant document or notice and the member’s election comply with all applicable statutes, rules and regulations, including the Law and the rules and regulations of the Stock Exchange; and”

• (b) by inserting the following new Article 3(E):

“(E) References to a document being executed including references to it being executed under hand or under seal or by electronic signature or by any other method and references to a notice or document include a notice or document recorded or stored in any digital, electronic, electrical, magnetic or other retrievable form of medium and information in visible form whether having physical substance or not.”

• (c) by inserting the following new Article 159(A):

“159(A). The requirement to send to a person referred to in Article 159 the documents referred to in that Article shall be deemed satisfied where, in accordance with all applicable statutes, rules and regulations, including, without limitation, the rules of the Stock Exchange, the Company publishes copies of the documents referred to in Article 152 on the Company’s computer network or in any other permitted manner (including by sending any form of electronic communication), and that person has agreed or is deemed to have agreed to treat the publication or receipt of such documents in such manner as discharging the Company’s obligation to send to him a copy of such documents.

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• (d) by substituting the existing Article 164 with the following new Article 164:

• “164. Any notice or document (including any “corporate communication” within the meaning ascribed thereto under the rules of the Stock Exchange), whether or not, to be given or issued under these Articles from the Company to a member shall be in writing or by cable, telex or facsimile transmission message or other form of electronic transmission or communication and any such notice and document may be served or delivered by the Company on or to any member either personally or by sending it through the post in a prepaid envelope addressed to such Member at his registered address as appearing in the register or at any other address supplied by him to the Company for the purpose or, as the case may be, by transmitting it to any such address or transmitting it to any telex or facsimile transmission number or electronic number or address or website supplied by him to the Company for the giving of notice to him or which the person transmitting the notice reasonably and bona fide believes at the relevant time will result in the notice being duly received by the Member or may also be served by advertisement in appropriate newspaper in accordance with the requirements of the Stock Exchange or, to the extent permitted by the applicable laws, by placing it on the Company’s website and giving to the member a notice stating that the notice or other document is available there (a “notice of availability”). The notice of availability may be given to the member by any of the means set out above. In the case of joint holders of a share all notices shall be given to that one of the joint holders whose name stands first in the register and notice so given shall be deemed a sufficient service on or delivery to all the joint holders. A member who has no address of either type or telex or facsimile transmission number or electronic transmission address as aforesaid shall be deemed to have received any notice which shall have been displayed at the office or at the principal place of business for the time being of the Company in Hong Kong and shall have remained there for the period of 24 hours and such notice shall be deemed to have been received by such member on the day following that on which it shall have been first so displayed.”

• (e) by inserting the following new Article 165(b) in place of the existing Article 165(b) and by re-numbering the existing Article 165(b) as Article 165(c):

• “(b) if sent by electronic communication, shall be deemed to be given on the day on which it is transmitted from the server of the Company or its agent. A notice placed on the Company’s website is deemed given by the Company to a member on the day following that on which a notice of availability is deemed served on the member; and” and

• (f) by inserting the following new Article 171(A):

• “171(A). For the purposes of these Articles, a cable or telex or facsimile or electronic transmission message purporting to come from a holder of shares or, as the case may be, a Director or alternate Director, or, in the case of a corporation which is a holder of shares, from a director or the secretary thereof or a duly appointed attorney or duly authorized representative thereof for it and on its behalf, shall in the absence of express evidence to the contrary available to the person relying thereon at the relevant time be deemed to be a document or instrument in writing signed by such holder or Director or alternative Director in the terms in which it is received.”

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and the directors the Company be and are hereby authorized generally to do all such acts, deeds and things as they may, in their absolute discretion, consider necessary or appropriate to effect, implement and complete such amendments of the Articles.

By Order of the Board Ip Ching Bun Ben Company Secretary

Hong Kong, 23 April 2003

Notes:

1. Any member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him. A proxy need not be a member of the Company.

2. To be valid, the proxy form, together with any power of attorney or other authority (if any) under which it is signed, or a notarially certified copy thereof, must be lodged with the registrar of the Company in Hong Kong, Securities Limited, at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

3. The register of members of the Company will be closed from Tuesday, 27 May 2003 to Thursday, 29 May 2003, both days inclusive, during which no share transfers will be effected. In order to qualify for the attendance of the extraordinary general meeting, all transfers of shares accompanied by the relevant share certificates must be lodged with the registrar of the Company in Hong Kong, Secretaries Limited at G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not later than 4:00 p.m. on Monday, 26 May 2003.

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