Coastal Greenland Limited — Proxy Solicitation & Information Statement 2003

Dec 29, 2003

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 your stockbroker or other registered or licensed person in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in SiS International Holdings Limited, you should at once hand this circular 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 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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SiS INTERNATIONAL HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

DISPOSAL OF INTEREST IN A SUBSIDIARY DISCLOSEABLE AND CONNECTED TRANSACTION

Independent Financial Adviser to the Independent Board Committee

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Kingsway Capital Limited

A letter from the Board is set out on pages 4 to 9 of this circular, a letter from the Independent Board Committee is set out on page 10 of this circular and a letter from Kingsway Capital Limited containing its recommendation to the Independent Board Committee is set out on pages 11 to 15 of this circular.

29 December 2003

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Letter from Kingsway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16

DEFINITIONS

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

• “associate” has the meaning ascribed to it in the Listing Rules “Board” the board of directors of the Company “Company” SiS International Holdings Limited, a company incorporated in Bermuda with limited liability, whose shares are listed on the Stock Exchange

• “Completion” completion of the Share Disposal on the Completion Date “Completion Date” the date of the day falling three days after the satisfaction of any and all of the Conditions

• “Conditions” the conditions precedent as stipulated under the Share Disposal Agreements, a summary of which is set out in the section headed “Conditions and Completion” on page 7 of this circular

“Consideration” the aggregate amount of USD5,070,000 payable by the Purchasers for the purchase of the Sale Shares pursuant to the Share Disposal Agreements “Directors” the directors of the Company “Group” the Company and its subsidiaries from time to time “Hong Kong” Hong Kong Special Administrative Region of the PRC

• “Independent Board the independent board committee of the Company comprising Mr. Lee Committee” Hiok Chuan and Mr. Woon Wee Teng, the independent non-executive Directors of the Company, appointed to advise the Independent Shareholders in relation to the Share Disposal

• “Independent Financial Kingsway Capital Limited, a deemed licensed corporation to undertake Adviser” or “Kingsway” types 4, 6 and 9 regulated activities as set out in Schedule 5 to the SFO and the independent financial adviser to the Independent Board Committee in relation to the Share Disposal

• “Independent Shareholders” Shareholders who are not interested in the Share Disposal and not connected with the Purchasers and their respective associates

• “Latest Practicable Date” 23 December 2003, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

– 1 –

DEFINITIONS

• “Listing Rules”

• “Mr. Sombati”

• “Mr. Somchai”

• “PRC”

• “Purchasers”

• “Sale Shares”

• “Sale Price”

• “SFO”

• “Shareholder(s)”

• “Share(s)”

• “Share Disposal”

• “Share Disposal Agreement No. 1”

The Rules Governing the Listing of Securities on the Stock Exchange

• Mr. Sombati Pungsrinont, a Thai national and an executive director and a substantial shareholder of SiS Thailand, holding 750,000 Thai Shares, representing 12.5% of the issued share capital of SiS Thailand, prior to Completion. Save as aforesaid, Mr. Sombati is not connected with the Directors, chief executive and substantial shareholders of the Company and of its subsidiaries and their respective associates, and the Directors have been advised that he and his associates have no interest in the Company

• Mr. Somchai Sittichaisrichart, a Thai national and a managing director and a substantial shareholder of SiS Thailand, holding 750,000 Thai Shares, representing 12.5% of the issued share capital of SiS Thailand, prior to Completion. Save as aforesaid, Mr. Somchai is not connected with the Directors, chief executive and substantial shareholders of the Company and of its subsidiaries and their respective associates, and the Directors have been advised that he and his associates have no interest in the Company

the People’s Republic of China and for the purpose of this circular, excludes Hong Kong, Macau and Taiwan

• Mr. Sombati and Mr. Somchai

• 1,560,000 Thai Shares disposed of by the Vendor to the Purchasers pursuant to the Share Disposal Agreements

US$3.25 per Sale Share

• Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

holder(s) of the Share(s)

• share(s) of HK$0.10 each in the capital of the Company

• the disposal of 780,000 Sale Shares to each of the Purchasers, representing approximately 26% in aggregate of the issued share capital of SiS Thailand by the Company through the Vendor pursuant to the Share Sale Agreements

• the share disposal agreement dated 9 December 2003 and entered into between the Vendor (as vendor) and Mr. Sombati (as purchaser) in relation to the Share Disposal

– 2 –

DEFINITIONS

“Share Disposal the share disposal agreement dated 9 December 2003 and entered into Agreement No. 2” between the Vendor (as vendor) and Mr. Somchai (as purchaser) in relation to the Share Disposal

“Share Disposal Agreements” Share Disposal Agreement No. 1 and Share Disposal Agreement No. 2, or any of them

“Singapore” The Republic of Singapore “SiS Thailand” SiS Distribution (Thailand) Co. Ltd., a company incorporated under the laws of Thailand with limited liability and an indirect subsidiary of the Company in which the Company is interested in 75% of its issued share capital

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Thailand” The Kingdom of Thailand “Thai Shares” shares of Baht 10 each in the capital of SiS Thailand

• “Vendor” SiS Technologies Pte. Ltd., a company incorporated under the laws of Singapore with limited liability and an indirect wholly-owned subsidiary of the Company

• “Baht” Thai Baht, the lawful currency of Thailand

• “HKD” or “HK$” Hong Kong dollars, the lawful currency of Hong Kong “USD” or “US$” United States dollars, the lawful currency of United States of America “%” per cent.

In this circular, certain amounts quoted in USD have been translated into HKD at the reference rate of US$1.00 to HK$7.80, and the amounts quoted in Baht have translated into HKD at the reference rate of 1Baht to HK$0.19, each for information purpose only. Such translation should not be construed as a representation that the relevant amounts have been, could have been, or could be, converted at that or any other rate or at all.

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LETTER FROM THE BOARD

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SiS INTERNATIONAL HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

Executive Directors: Mr. Lim Siam Kwee (Chairman) Mr. Lim Kiah Meng Mr. Lim Kia Hong Mr. Lim Hwee Hai Ms. Lim Hwee Noi

Independent Non-executive Directors: Mr. Lee Hiok Chuan Mr. Woon Wee Teng

Registered office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Principal place of business in Hong Kong: 301, Eastern Harbour Centre 28 Hoi Chak Street Quarry Bay Hong Kong 29 December 2003

To the Shareholders,

Dear Sir or Madam,

DISPOSAL OF INTEREST IN A SUBSIDIARY DISCLOSEABLE AND CONNECTED TRANSACTION

On 10 December 2003, the Company announced that the Group (through the Vendor) had entered into the Share Disposal Agreements with each of the Purchasers, respectively, to dispose by the Vendor a 26 per cent. equity interest in aggregate in the issued share capital of SiS Thailand for an aggregate consideration of US$5,070,000 (equivalent to approximately HK$39,546,000). The net profit attributable to SiS Thailand for the six months ended 30 June 2003 is more than 15% and less than 50% when compared against the net profit of the Group as disclosed in the Company’s financial results for the same period as shown in its interim results published on 22 September 2003 and the Share Disposal is therefore a discloseable transaction of the Company under the Listing Rules. Moreover, each of the Purchasers is a substantial shareholder of SiS Thailand and is therefore a connected person under the Listing Rules. Accordingly, the Share Disposal also constitutes a connected transaction of the Company under the Listing Rules and is subject to the approval by the Independent Shareholders.

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LETTER FROM THE BOARD

DISPOSAL OF INTEREST IN A SUBSIDIARY

Disposal Agreement No. 1

Date of Share Disposal : 9 December 2003. Agreement No. 1

Vendor : SiS Technologies Pte. Ltd. Purchaser : Mr. Sombati, an executive director and a substantial shareholder of SiS Thailand, who holds approximately 12.5% in the issued share capital of SiS Thailand. Save as aforesaid, Mr. Sombati is not connected with the Directors, chief executive and substantial shareholders of the Company and of its subsidiaries and their respective associates, and the Directors have been advised that he and his associates have no interest in the Company.

Subject matter : 780,000 Thai Shares, representing approximately 13% of the issued share capital of SiS Thailand.

Consideration : USD2,535,000 (equivalent to approximately HK$19,773,000).

Disposal Agreement No. 2

• Date of Share Disposal : 9 December 2003. Agreement No. 2

Vendor : SiS Technologies Pte. Ltd.

Purchaser : Mr. Somchai, a managing director and a substantial shareholder of SiS Thailand, who holds approximately 12.5% in the issued share capital of SiS Thailand. Save as aforesaid, Mr. Somchai is not connected with the Directors, chief executive and substantial shareholders of the Company and of its subsidiaries and their respective associates, and the Directors have been advised that he and his associates have no interest in the Company.

Subject matter : 780,000 Thai Shares, representing approximately 13% of the issued share capital of SiS Thailand.

Consideration : USD2,535,000 (equivalent to approximately HK$19,773,000).

The Group holds a 75% equity interest in the issued share capital of SiS Thailand, a company incorporated under the laws of Thailand with limited liability.

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LETTER FROM THE BOARD

Pursuant to the Share Disposal Agreements, each dated 9 December 2003, the Company, through the Vendor, has conditionally agreed to dispose of a 26 per cent equity interest in SiS Thailand, in aggregate, to the Purchasers, as to 13% to Mr. Sombati and as to 13% to Mr. Somchai, for the aggregate consideration of USD5,070,000 (equivalent to approximately HK$39,546,000). The Consideration will be settled in cash by installments by the Purchasers in accordance with the terms of the Share Disposal Agreements.

Upon Completion, the Group’s equity interest in SiS Thailand will be reduced from 75% to 49% and therefore, SiS Thailand will become an associated company, not a subsidiary, of the Company.

Description of SiS Thailand

The 75% equity interest in SiS Thailand was acquired by the Group in 2000 for a consideration of US$1,000,000. The authorised share capital of SiS Thailand is Baht 60,000,000 divided into 6,000,000 shares of Baht 10 each and the issued share capital is Baht 60,000,000 divided into 6,000,000 shares of Baht 10 each. Prior to Completion, each of the Group, Mr. Sombati and Mr. Somchai is and will be interested in 75%, 12.5% and 12.5%, respectively of the issued Thai Shares. The principal business activity of SiS Thailand is the distribution of computer and information technology (“IT”) products in Thailand.

The shareholding structure and the board composition of SiS Thailand before and after Completion are set out as follows:

			Number of directors
			represented on board
	Shareholding	interest	of SiS Thailand
	Before Share	After Share	Before Share After Share
	Disposal	Disposal	Disposal Disposal
Vendor	75%	49%	3 2
Purchasers	25%	51%	2 3
Total	100%	100%	5 5

So far as the Directors are aware, the Purchasers themselves are not related to each other.

Consideration and payment terms

The Sale Price and the Consideration for the Share Disposal under the Share Disposal Agreements were arrived at after arm’s length negotiations between the Company and the Purchasers, based on the earnings potential of SiS Thailand and an agreed price-earnings ratio. The Sale Price represents a premium of USD2.68 (representing a premium of approximately 470%) (equivalent to approximately HK$20.90) per issued Thai Share based on the unaudited net assets of SiS Thailand of approximately USD3,425,000 (equivalent to approximately US$0.57 per issued Thai Share) as at 30 June 2003 (based on the unaudited interim results of the Company as at the same date), and a premium of USD2.74 (representing a premium of approximately 537%) (equivalent to approximately HK$21.37) per issued Thai Share based on the audited net assets of SiS Thailand of approximately USD3,038,000 (equivalent to approximately US$0.51 per issued Thai Share) as at 31 December 2002, the date of the latest published audited financial statements of the Company.

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LETTER FROM THE BOARD

The consideration will be satisfied in the manner set out below:

1. At Completion, each of the Purchasers will pay USD25,350 (equivalent to HK$197,730), representing 1% of the consideration payable under its relevant Share Disposal Agreement, in cash to the Vendor against delivery of the certificate(s) relating to the relevant Sale Shares; and

2. The remaining balance (the “Balance”) of USD2,509,650 under each of the Share Disposal Agreements will be payable by the relevant Purchaser by 12 equal installments on a monthly basis after the delivery of the certificate(s) referred to in sub-paragraph 1. above.

Pursuant to the terms of the Share Disposal Agreements, each of the Purchaser will pledge his relevant Sale Shares as security for the payment of the Balance referred to in sub-paragraph 2. above.

The Board (including the independent non-executive Directors) considers that the terms of the Share Disposal Agreements including, without limitation, the Consideration payable thereunder and the manner in which such consideration will be settled, are fair and reasonable so far as the Independent Shareholders are concerned for the reasons set out in the section headed “Reasons for the Share Disposal”.

Conditions and Completion

Completion of the Share Disposal under the Share Disposal Agreements is conditional on (1) the Shareholders (which will be the Independent Shareholders) approving the Share Disposal and the transactions contemplated under the Share Disposal Agreements at general meeting in accordance with the Listing Rules (if required) and (2) the directors of SiS Thailand approving each of the Share Disposal Agreements.

Completion of the Share Disposal is expected to take place on the Completion Date i.e. 3 days after all the Conditions are satisfied.

In the event that any of the Conditions shall not have been fulfilled prior to the date falling six months from the date of the relevant Share Disposal Agreement (or such later date as the parties thereto may agree in writing), such Share Disposal Agreement shall lapse.

EFFECTS OF THE SHARE DISPOSAL ON THE GROUP

It is noted that as at 30 June 2003, SiS Thailand had unaudited net assets of approximately US$3,425,000 (equivalent to approximately HK$26,715,000), of which approximately US$891,000 (equivalent to approximately HK$6,950,000) is attributable to the Sale Shares. Based on the net asset value of SiS Thailand as at 30 June 2003 and the estimated net proceeds from the Share Disposal of approximately US$4,980,000 (equivalent to approximately HK$38,844,000), the Directors estimate that a capital gain of approximately HK$32,622,000 will arise from the Share Disposal.

As a result of the Share Disposal, the Group’s equity interest in SiS Thailand will decrease from 75% to 49% and the Company will cease to have control over the board of SiS Thailand. Accordingly, SiS Thailand will cease to be a subsidiary of the Company and the Company will cease to consolidate the

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LETTER FROM THE BOARD

results of SiS Thailand into its own results. However, the Group will account SiS Thailand as an associated company and will have a share of 49% of profit from SiS Thailand.

REASONS FOR THE SHARE DISPOSAL

SiS Thailand is engaged in the distribution of computer and IT products in Thailand and accounted for 27% of the Group’s turnover for the six months ended 30 June 2003. The Board considers that the Share Disposal will allow the Group to retain an interest in the distribution network in Thailand whilst at the same time the Group will be able to enjoy a healthy return as a result of the Share Disposal. The proceeds from the Share Disposal will be applied towards general working capital of the Company.

For the six months ended 30 June 2003, the profit before tax for SiS Thailand was Baht 25,213,000 (equivalent to approximately HK$4,790,000) and the profit after tax was Baht 15,877,000 (equivalent to approximately HK$3,017,000). For the year ended 31 December 2002, the profit before tax and the profit after tax for SiS Thailand was respectively Baht 49,030,000 and Baht 30,209,000 (equivalent to approximately HK$9,316,000 and HK$5,740,000). For the year ended 31 December 2001, the profit before tax and the profit after tax for SiS Thailand was respectively Baht 39,561,000 and Baht 22,452,000 (equivalent to approximately HK$7,517,000 and HK$4,266,000).

CONNECTED TRANSACTIONS

Each of the Purchasers is a connected person of the Company under Rule 14.26 of the Listing Rules as he is a substantial shareholder of SiS Thailand, an indirect non-wholly owned subsidiary of the Company. The Share Disposal under the Share Disposal Agreements constitute a connected transaction of the Company under the Listing Rules and will be subject to Independent Shareholders’ approval pursuant to the Listing Rules.

None of the Shareholders is interested in the Share Disposal and therefore no Shareholder is required to be abstained from voting at any special general meeting convened for the purpose of approving the Share Disposal.

The Company has applied to the Stock Exchange for a waiver (the “Waiver”) from the requirement under the Listing Rules to obtain the approval of the Independent Shareholders of the Share Disposal in general meeting on the basis that: (1) a closely allied group of Shareholders holding a total of 66.52% of the nominal value of the issued share capital of the Company who would be eligible to vote at any special general meeting convened for the purpose of approving the Share Disposal (the “Relevant Shareholders”) have approved in writing the Share Disposal; and (2) no Shareholder is required to abstain from voting at any such special general meeting.

The Relevant Shareholders are Gold Sceptre Limited (holding 140,360,000 Shares or 52.27% of the issued share capital of the Company) and Kelderman Limited, Valley Tiger Limited and Swan River Limited (each holding 12,760,000 Shares or 4.75% of the issued share capital of the Company). The Relevant Shareholders hold more than 50% of the issued share capital of the Company and are eligible to vote at any special general meeting convened for the purpose of approving the Share Disposal. Consequently, no physical meeting to approve the Share Disposal is required.

– 8 –

LETTER FROM THE BOARD

The Directors are beneficially interested in the share capital of the companies mentioned in the preceding paragraph as disclosed in paragraph (a) (Interests and short positions of the Directors in the share capital and/or debenture of the Company and its associated corporations) under the section headed “Disclosure of Interests” in the Appendix to this Circular.

DISCLOSEABLE TRANSACTION

The Share Disposal also constitutes a discloseable transaction of the Company under the Listing Rules as the net profit attributable to SiS Thailand for the six months ended 30 June 2003 is more than 15% and less than 50% when compared against the net profit of the Group as disclosed in the Company’s financial results for the same period as shown in its interim results published on 22 September 2003.

GENERAL

An independent board committee of the Company comprising Mr. Lee Hiok Chuan and Mr. Woon Wee Teng, the independent non-executive Directors of the Company, has been formed to advise the Independent Shareholders in relation to the Share Disposal. Kingsway Capital Limited has been appointed as independent financial adviser to advise the Independent Board Committee.

FURTHER INFORMATION

Your attention is drawn to the letter from the Independent Board Committee set out on page 10 of this circular which contains its recommendation to the Independent Shareholders and the letter from Kingsway set out on pages 11 to 15 of this circular which contains its recommendation to the Independent Board Committee and the principal factors and reasons taken into consideration.

Yours faithfully For and on behalf of the Board of

SiS INTERNATIONAL HOLDINGS LIMITED Lim Kia Hong

Executive Director and Chief Executive Officer

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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SiS INTERNATIONAL HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

29 December 2003

To the Independent Shareholders,

Dear Sir or Madam,

DISPOSAL OF INTEREST IN A SUBSIDIARY DISCLOSEABLE AND CONNECTED TRANSACTION

We refer to the circular dated 29 December 2003 issued by the Company (the “Circular”), of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires.

The Independent Board Committee has been established by the Board for the purpose of advising the Independent Shareholders in connection with the Share Disposal, details of which are set out in the letter from the Board in the Circular. The Independent Board Committee comprises two independent nonexecutive Directors. Kingsway Capital Limited has been appointed as the independent financial adviser to advise the Independent Board Committee regarding the Share Disposal. Details of the advice from Kingsway together with the principal factors and reasons taken into consideration in arriving at such advice, are set out on pages 11 to 15 of the Circular.

Having considered the Share Disposal, the interests of the Independent Shareholders, the principal factors and reasons considered by Kingsway and the advice of Kingsway, we consider that the Share Disposal is fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and its Shareholders as a whole.

Accordingly, we recommend the Share Disposal to the Independent Shareholders.

Yours faithfully

Independent Board Committee of

SiS INTERNATIONAL HOLDINGS LIMITED Lee Hiok Chuan Woon Wee Teng Independent Non-executive Directors

– 10 –

LETTER FROM KINGSWAY

The following is the full text of the letter of advice to the Independent Board Committee from Kingsway dated 29 December 2003 prepared for incorporation in this circular.

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Kingsway Capital Limited

29 December 2003

To the Independent Board Committee of SiS International Holdings Limited

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee in respect of the Share Disposal Agreements, details of which are set out in the circular dated 29 December 2003 (the “Circular”) of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

As at the Latest Practicable Date, each of the Purchasers is a substantial shareholder and director of SiS Thailand and is therefore a connected person under Rule 14.26 of the Listing Rules. Accordingly, the Share Disposal constitutes a connected transaction of the Company under the Listing Rules and is subject to the approval of the Independent Shareholders.

The Directors have indicated that none of the Shareholders is interested in the Share Disposal and therefore no Shareholder is required to abstain from voting at any special general meeting convened for the purpose of approving the Share Disposal. The Company has applied to the Stock Exchange for a waiver from the requirement under the Listing Rules to obtain the approval of the Independent Shareholders for the Share Disposal in general meeting on the basis that: (1) a closely allied group of Shareholders holding a total of 66.52% of the nominal value of the issued share capital of the Company who would be eligible to vote at any special general meeting convened for the purpose of approving the Share Disposal (the “Relevant Shareholders”) have approved in writing the Share Disposal; and (2) no Shareholder is required to abstain from voting at any such special general meeting.

The Relevant Shareholders are Gold Sceptre Limited (holding 140,360,000 Shares or 52.27% of the issued share capital of the Company) and Kelderman Limited, Valley Tiger Limited and Swan River Limited (each holding 12,760,000 Shares or 4.75% of the issued share capital of the Company). The Relevant Shareholders hold more than 50% of the issued share capital of the Company and are eligible to vote at any special general meeting convened for the purpose of approving the Share Disposal. Consequently, no physical meeting to approve the Share Disposal is required.

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LETTER FROM KINGSWAY

The Directors are beneficially interested in the share capital of the companies mentioned in the preceding paragraph as disclosed in paragraph (a) (Interests and short positions of the Directors in the share capital and/or debenture of the Company and its associated corporations) under the section headed “Disclosure of Interests” in the Appendix to the Circular.

In formulating our opinion, we have relied on the Directors to ensure that the information and facts supplied to us by the Company are true, accurate and complete. We have also relied on the information contained in the Circular and have assumed that the statements made were true, accurate and complete at the time they were made and continue to be true on the date of the Circular. We have also assumed that all statements of belief, opinion and intention made by the Directors in the Circular were reasonably made after due enquiry. We consider that we have reviewed sufficient information to reach an informed view and have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors. We have been advised by the Directors that no material facts have been withheld or omitted from the information provided and referred to in the Circular. We have not, however, carried out any independent verification of the information provided by the Company and the Directors, nor have we conducted any independent investigation into the affairs of the Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion, we have taken into consideration the following factors and reasons:

1. Reasons for the Share Disposal and use of proceeds

The Group is principally engaged in the wholesale distribution of computer and related hardware and software products. SiS Thailand is a company registered in Thailand and is engaged in the distribution of computer and IT products in Thailand.

As stated in the Letter from the Board as contained in the Circular (the “Letter from the Board”), the 75% equity interest in SiS Thailand was acquired by the Group in 2000 for a consideration of US$1,000,000 (equivalent to approximately HK$7,800,000). The Sale Shares therefore represent an original investment cost to the Group of approximately US$347,000 (equivalent to approximately HK$2,707,000). Based on the consideration amount of US$5,070,000 (equivalent to approximately HK$39,546,000), the Board considers that the Share Disposal will allow the Group to enjoy a healthy return as a result of the Share Disposal. The Directors further consider that, with the Group’s retention of a 49% equity interest in SiS Thailand following Completion, the Group will be able to retain an interest in the distribution network in Thailand. As mentioned in the section headed “Financial effect of the Share Disposal on the Group”, the Directors estimate that a capital gain of approximately HK$32,622,000 will arise from the Share Disposal.

The net proceeds from the Share Disposal of approximately US$4,980,000 (equivalent to approximately HK$38,844,000) will be applied towards general working capital of the Company.

Having considered the above reasons, we concur with the view of the Directors that the Share Disposal can allow the Group to enjoy a healthy return as a result of the Share Disposal and retain an interest in the distribution network in Thailand, and is therefore in the interests of the Company and the Independent Shareholders as a whole.

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LETTER FROM KINGSWAY

2. Terms of the Share Disposal Agreements

Basis of the Consideration

As mentioned in the Letter from the Board, the total consideration for the Share Disposal is US$5,070,000 (equivalent to approximately HK$39,546,000). The Sale Price and the Consideration for the Share Disposal under the Share Disposal Agreements were arrived at after arm’s length negotiations between the Company and the Purchasers, based on the earnings potential of SiS Thailand and an agreed price-earnings ratio. The Sale Price represents a premium of US$2.68 (representing a premium of approximately 470%) (equivalent to approximately HK$20.90) per issued Thai Share based on the unaudited net assets of SiS Thailand of approximately US$3,425,000 (equivalent to approximately US$0.57 per issued Thai Share) as at 30 June 2003 (based on the unaudited interim results of the Company as at the same date), and a premium of US$2.74 (representing a premium of approximately 537%) (equivalent to approximately HK$21.37) per issued Thai Share based on the audited net assets of SiS Thailand of approximately US$3,038,000 (equivalent to approximately US$0.51 per issued Thai Share) as at 31 December 2002, the date to which the latest published audited financial statements of the Company were made up. It is noted that the Consideration represents a price-earnings ratio of approximately 26.5 based on the audited net profit after tax of SiS Thailand for the year ended 31 December 2002 of approximately Baht 7,854,000 (equivalent to approximately HK$1,492,000) attributable to the Sale Shares.

We have reviewed the price-earnings ratios of 28 companies listed on the main board of the Stock Exchange which are similarly engaged in the business of distribution of computer and related hardware and software products and which may or may not have operations in Thailand (the “HK Companies”). Of the HK Companies, 11 were loss-making as per their respective latest year-end reported financial results. The remaining 17 HK Companies had price-earnings ratios as at the Latest Practicable Date ranging from approximately 0.04 to 26.37 with an average of approximately 13.10. In addition, we have reviewed the priceearnings ratios of 3 companies listed in Thailand which are similarly engaged in the business of distribution of computer and related hardware and software products (the “Thai Companies”). The Thai Companies had price-earnings ratios as at the Latest Practicable Date ranging from approximately 7.19 to 25.44 with an average of approximately 14.30.

Taking into account (i) the substantial premium of the Sale Price over both the net assets per Thai Share as at 30 June 2003 and 31 December 2002; and (ii) the premium of the price-earnings ratio in respect of the Share Disposal over the average price-earnings ratios of the HK Companies and the Thai Companies with due regard to the fact that SiS Thailand does not have a listing status on its own and therefore the Thai Shares do not have liquidity in the open market, we are of the view that the Consideration is fair and reasonable so far as the Independent Shareholders are concerned.

– 13 –

LETTER FROM KINGSWAY

Payment terms

The consideration will be satisfied in the manner set out below:

1. At Completion, each of the Purchasers will pay US$25,350 (equivalent to HK$197,730), representing 1% of the consideration payable under its relevant Share Disposal Agreement, in cash to the Vendor against delivery of the certificate(s) relating to the relevant Sale Shares; and

2. The remaining balance (the “Balance”) of US$2,509,650 (equivalent to HK$19,575,270) under each of the Share Disposal Agreements will be payable by the relevant Purchaser by 12 equal installments on a monthly basis after the delivery of the certificate(s) referred to in sub-paragraph (1) above.

Pursuant to the terms of the Share Disposal Agreements, each of the Purchasers will pledge his relevant Sale Shares as security for the payment of the Balance referred to in sub-paragraph (2) above.

Although 99% of the Consideration will be received by the Company through 12 equal monthly installments, as the Purchasers will pledge the Sale Shares as security for the payment of the Balance and the entire consideration is payable in cash, we consider such payment terms acceptable.

3. Financial effect of the Share Disposal on the Group

(a) Earnings

For the year ended 31 December 2002, SiS Thailand recorded audited profit after tax of approximately Baht 30,209,000 (equivalent to approximately HK$5,740,000), of which approximately Baht 7,854,000 (equivalent to approximately HK$1,492,000) was attributable to the Sale Shares. Such profit contribution of SiS Thailand to the Group attributable to the Sale Shares represented approximately 17.2% of the Group’s audited net profit attributable to the Shareholders of approximately HK$8,698,000 for the same financial year. For the six months ended 30 June 2003, SiS Thailand recorded unaudited profit after tax of Baht 15,877,000 (equivalent to approximately HK$3,017,000), of which approximately Baht 4,128,000 (equivalent to approximately HK$784,000) was attributable to the Sale Shares. Such profit contribution of SiS Thailand to the Group attributable to the Sale Shares represented approximately 14.0% of the Group’s unaudited net profit attributable to the Shareholders for the six months ended 30 June 2003 of approximately HK$5,601,000 for the same period.

It is noted that as at 30 June 2003, SiS Thailand had unaudited net assets of approximately US$3,425,000 (equivalent to approximately HK$26,715,000), of which approximately US$891,000 (equivalent to approximately HK$6,950,000) is attributable to the Sale Shares. Based on the net asset value of SiS Thailand as at 30 June 2003 and the estimated net proceeds from the Share Disposal of approximately US$4,980,000 (equivalent to approximately HK$38,844,000), the Directors estimate that a capital gain of approximately HK$32,622,000 will arise from the Share Disposal.

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LETTER FROM KINGSWAY

As a result of the Share Disposal, the Group’s equity interest in SiS Thailand will decrease from 75% to 49% and the Company will cease to have control over the board of SiS Thailand. Accordingly, SiS Thailand will cease to be a subsidiary of the Company and the Company will cease to consolidate the results of SiS Thailand into its own results. However, the Group will account SiS Thailand as an associated company and will have a share of 49% of the profit from SiS Thailand.

On the basis that following Completion the Group will realise a substantial gain on disposal and will share 49% of the profit from SiS Thailand, the Directors consider the Share Disposal is not likely to have a material adverse impact on the Group’s results.

(b) Net assets

As mentioned in the paragraph headed “Earnings” above, the Directors expect that a capital gain of approximately HK$32,622,000 will arise from the Share Disposal. After making adjustments for goodwill and exchange difference as a result of the Share Disposal, the consolidated net assets of the Group will increase to HK$443,563,000, representing an increase of approximately 7.8% as compared to the Group’s unaudited consolidated net assets of approximately HK$411,492,000 as at 30 June 2003. We consider that such increase in the Group’s consolidated net asset value arising from the Share Disposal is favourable to the Group.

(c) Liquidity and gearing

As at 30 June 2003, the Group had total bank loans and bank overdrafts and net assets of approximately HK$150,898,000 (of which approximately HK$96,718,000 was attributable to SiS Thailand) and HK$411,492,000 respectively, and the gearing ratio of the Group (as defined by total bank loans and bank overdrafts to net assets) was approximately 36.7%. Upon completion of the Share Disposal and based on the net asset value of SiS Thailand as at 30 June 2003 of approximately US$3,425,000 (equivalent to approximately HK$26,715,000), the Group’s total bank loans and bank overdrafts and net assets will be approximately HK$54,180,000 and HK$443,563,000 respectively, and the gearing ratio of the Group will be reduced to approximately 12.2%. The working capital position of the Group will also be enhanced after Completion as a result of the monthly payments to be received by the Company pursuant to the Share Disposal Agreements.

Having considered the above effect arising from the Share Disposal, we consider that the reduced gearing ratio and the enhancement of the working capital position of the Group as a result of the Share Disposal is favourable to the Group.

RECOMMENDATION

Having considered the above principal factors and reasons, we are of the opinion that the terms of the Share Disposal Agreements are in the interests of the Company and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the Share Disposal to the Independent Shareholders.

Yours faithfully For and behalf of Kingsway Capital Limited Chu Tat Hoi Director

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the 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.

2. DISCLOSURE OF INTERESTS

• (a) Interests and short positions of the Directors in the share capital and/or debenture of the Company and its associated corporations

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

The Company

Long position in Shares

			Approximate
			percentage of
Name of Director	Number of Shares	Nature of interest	interest (%)
Lim Siam Kwee	8,424,400	Beneficial	3.14%
Lim Kiah Meng	2,531,200	Beneficial	0.94%
	178,640,000	Deemed interest of	66.52%
	(note)	controlled company
Lim Kia Hong	2,531,200	Beneficial	0.94%
	178,640,000	Deemed interest of
	(note)	controlled company	66.52%
Lim Hwee Hai	2,531,200	Beneficial	0.94%
Lim Hwee Noi	2,276,000	Beneficial	0.85%

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APPENDIX

GENERAL INFORMATION

• Note: Gold Sceptre Limited holds 140,360,000 Shares and Kelderman Limited, Valley Tiger Limited and Swan River Limited each holds 12,760,000 Shares. Mr. Lim Kiah Meng and Mr. Lim Kia Hong and their spouses together own 40.5% and 39.5% respectively of the issued share capital of Summertown Limited which owns the entire issued share capital of each of the above-mentioned companies.

Save as disclosed above, the Directors are not aware of any beneficial interests (including interests and short positions in the Shares, underlying Shares and debentures) of the Directors in the shares or securities of the Company or any associated corporation (within the meaning of Part XV of the SFO) which will be required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have taken under such provisions of the SFO), or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to in that section, or will be required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules, to be notified to the Company and the Stock Exchange.

• (b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial shareholders (as defined in the Listing Rules) of other members of the Group.

So far as is known to the Directors according to the register required to be kept under section 336 of the SFO, no person, not being a Director or chief executive of the Company, has an interest or short position in the Shares or underlying Shares of the Company which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of part XV of the SFO or are directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group (which is discloseable under the Listing Rules).

• (c) Save as disclosed in the Company’s annual report 2002, none of the Directors is materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which is significant in relation to the business of the Group.

• (d) As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to any member of the Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Group, since 31 December 2002, the date to which the latest published audited financial statements of the Group were made up.

3. QUALIFICATION

The following are the qualifications of the expert who has given opinion or advice in this circular.

Name Qualification

Kingsway Capital Limited

a deemed licensed corporation to undertake types 4, 6 and 9 regulated activities as set out in Schedule 5 to the SFO

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GENERAL INFORMATION

APPENDIX

4. CONSENT

Kingsway has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name in the form and context in which they appear.

As at the Latest Practicable Date, Kingsway was not beneficially interested in the share capital of any member of the Group nor did it have any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscriber for securities in any member of the Group.

5. MATERIAL CHANGES

The Directors are not aware of any material adverse changes in the financial or trading position of the Group since 31 December 2002 (being the date to which the latest published audited financial statements of the Group were made up).

6. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and the Directors are not aware of any litigation, arbitration or claims of material importance pending or threatened against any member of the Group.

7. DIRECTORS’ INTEREST IN SERVICE CONTRACTS

None of the Directors had entered into any service agreements with any member of the Group (excluding contracts expiring or determinable by the employer within 1 year without payment of compensation (other than statutory compensation)).

8. MISCELLANCEOUS

• (a) The registered office of the Company is located at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda.

• (b) The principal place of business of the Company in Hong Kong is at 301, Eastern Harbour Centre, 28 Hoi Chak Street, Quarry Bay, Hong Kong.

• (c) The Hong Kong branch share registrars and transfer office of the Company is Secretaries Limited, Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (d) The secretary of the Company is Ms. Chu Chung Yi who is a fellow member of Association of Chartered Accountant and an associate member of each of Hong Kong Society of Accountants, The Hong Kong Institute of Company Secretaries and The Institute of Chartered Secretaries & Administrators.

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

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GENERAL INFORMATION

APPENDIX

9. DOCUMENTS FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business of the Company in Hong Kong at 301, Eastern Harbour Centre, 28 Hoi Chak Street, Quarry Bay, Hong Kong during normal business hours on any Business Day up to and including 12 January 2004:

• (a) Share Disposal Agreements;

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

• (c) the letter from Kingsway as set out in this circular; and

• (d) written consent referred to in paragraph no. 4 of this appendix.

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