Computer And Technologies Holdings Limited — Proxy Solicitation & Information Statement 2005

Jul 28, 2005

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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.

If you are in any doubt about this circular, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisers.

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

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(Stock Code: 31)

PROPOSED REDUCTION OF CAPITAL, CANCELLATION OF SHARE PREMIUM

AND

INCREASE IN AUTHORISED CAPITAL

A notice convening the extraordinary general meeting of the Company to be held at 11:00 a.m. on Thursday, 25 August 2005 (or adjournment thereof) at 17th Floor, China Aerospace Centre, 143 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong is set out on pages 12 to 13 of this circular.

Whether or not you are able to attend and vote at the extraordinary general meeting, you are requested to complete the enclosed proxy form and return it to the Company’s registrars, Standard Registrars Limited, at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the extraordinary general meeting. Completion and return of the proxy form will not preclude you from subsequently attending and voting in person at the extraordinary general meeting or any adjourned meeting should you so wish.

28 July 2005

CONTENTS

Page

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Reduction of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Cancellation of Share Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Increase in Authorised Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Conditions of the Reduction of Capital and the Cancellation
of Share Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Reasons for the Reduction of Capital and the Cancellation
of Share Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Impact of the Reduction of Capital and the Cancellation
of Share Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Undertakings to the Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Free Exchange of New Shares Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12

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DEFINITIONS

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

“Board”	means the Board of Directors of the Company;
“Cancellation of Share Premium”	means the cancellation of the amount of
	HK$939,048,331.50 standing to the credit of the share
	premium account of the Company;
“Capital Reorganisation”	means the capital reorganisation of the Company
	involving the Reduction of Capital, the Cancellation of
	Share Premium and the Increase in Authorised Capital;
“Company”	means China Aerospace International Holdings Limited,
	a company incorporated in Hong Kong with limited
	liability, the shares of which are listed on the Stock
	Exchange;
“Directors”	means the directors of the Company for the time being;
“Effective Date”	means the effective date of the Capital Reorganisation,
	which is expected to be on or about 8 November 2005;
“EGM”	means an extraordinary general meeting of the Company
	to be convened and held at 11:00 a.m. on Thursday, 25
	August 2005 at 17th Floor, China Aerospace Centre, 143
	Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong to
	consider and, if thought fit, approve the Capital
	Reorganisation, notice of which is set out on pages 12 to
	13 of this circular;
“Group”	means the Company and its subsidiaries;
“HK$”	means Hong Kong Dollars, the lawful currency of Hong
	Kong;
“Hong Kong”	means the Hong Kong Special Administrative Region of
	the People’s Republic of China;
“Increase in Authorised Capital”	means the creation of an additional 90,000,000,000 New
	Shares to restore the authorised share capital of the
	Company after the Reduction of Capital back to the
	original amount of HK$10,000,000,000;

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DEFINITIONS

“Latest Practicable Date”	25 July 2005, being the latest practicable date prior to the
	printing of this circular for ascertaining certain
	information contained in this circular;
“New Share(s)”	means share(s) of HK$0.10 each in the share capital of
	the Company resulting from the Reduction of Capital;
“Reduction of Capital”	means the proposed reduction of capital of the Company
	by way of the cancellation of the paid up capital to the
	extent of HK$0.90 on each existing issued share and the
	reduction of the nominal value of all the issued and
	unissued shares from HK$1.00 each to HK$0.10 each;
“Registrar”	means Standard Registrars Limited, the share registrar of
	the Company;
“Share(s)”	means share(s) of HK$1.00 each in the share capital of
	the Company;
“Shareholder(s)”	means shareholder(s) of the Company for the time being;
	and
“Stock Exchange”	means The Stock Exchange of Hong Kong Limited.

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EXPECTED TIMETABLE

The following expected timetable is indicative only and is subject to change due to factors including the availability of the Court and outcome of the Court hearings. Shareholders will be informed of any changes to the expected timetable by press announcement(s).

2005

Latest time for lodging forms of proxy for the EGM . . . . . . . . . . . . .11:00 a.m., 23 August
EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11:00 a.m., 25 August
Hearing for Summons for Direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 September
Notice of the hearing date of the petition published
in the newspapers (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 September
Hearing for Petition to confirm the Capital Reorganisation
(Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 October
Announcement of the result of hearing of petition to confirm
the Capital Reorganisation to be published (Note 2) . . . . . . . . . . . . . . . . . . . . 26 October
Registration of the Order of the Court to confirm the
Capital Reorganisation (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 November
Minutes of Reduction of Capital and Cancellation of
Share Premium registered with the Companies Registry
and published in newspapers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 November
Capital Reorganisation becomes effective (Notes 3 and 4) . . . . . . . . . . . . . . . . .8 November

Notes:

1. The date of hearing of petition is subject to the availability of the date for the Court to confirm the Capital Reorganisation and is subject to change. Further announcement(s) will be made as and when appropriate.

2. Subject to results of the hearing for the petition.

3. The Capital Reorganisation will become effective when it is confirmed by the Court and a copy of the order of the Court and minutes of order approved by the Court containing the particulars required under the Companies Ordinance are delivered to the Companies Registry for registration, which is expected to take place on 8 November 2005.

4. Arrangement for free exchange of new share certificate will be made immediately after the Capital Reorganisation becomes effective. Details will be disclosed in the announcement of the result of hearing.

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LETTER FROM THE BOARD

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(Stock Code: 31)

Executive Directors: Mr. Zhao Liqiang Mr. Zhou Qingquan Mr. Zhao Yuanchang Mr. Wu Hongju Mr. Guo Xianpeng

Registered Office: 17th Floor China Aerospace Centre 143 Hoi Bun Road Kwun Tong Kowloon Hong Kong

Non-executive Directors:

Mr. Rui Xiaowu (Chairman) Mr. Gong Bo Mr. Chen Dingyi Ms. Chan Ching Har, Eliza Mr. Wang Yujun Mr. Lee Hung Sang (Independent)

Mr. Chow Chan Lum, Charles (Independent)

Mr. Luo Zhenbang (Independent)

28 July 2005

To Shareholders,

Dear Sir or Madam,

PROPOSED REDUCTION OF CAPITAL, CANCELLATION OF SHARE PREMIUM AND INCREASE IN AUTHORISED CAPITAL

INTRODUCTION

The Directors announced on 13 July 2005 their intention to put forward to the Shareholders a proposed reorganisation of the share capital of the Company involving:

• (i) a proposed reduction of the capital of the Company by adjusting the nominal value of the shares of the Company by way of cancelling paid up capital to the extent of HK$0.90 on each of the issued Shares and by reducing the nominal value of all the issued and unissued shares from HK$1.00 to HK$0.10;

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LETTER FROM THE BOARD

• (ii) a proposed cancellation of all the share premium account of the Company as at the effective date of the reduction of capital; and

• (iii) a proposed restoration of the authorised share capital of the Company after the reduction of capital becomes effective to the original amount of HK$10,000,000,000 by the creation of an additional 90,000,000,000 New Shares,

allowing a significant proportion of the Company’s accumulated losses to be written off, which will improve the prospects of raising funds and to increase the possibility of declaring dividend in the future. At present, the Directors have no intention to issue new Shares and have not adopted any dividend policy related arrangement.

The purpose of this circular is to give you further information regarding the Capital Reorganisation.

REDUCTION OF CAPITAL

As at the Latest Practicable Date, the authorised capital of the Company is HK$10,000,000,000 divided into 10,000,000,000 Shares, of which 2,142,419,902 Shares have been issued and are fully paid. The proposed Reduction of Capital will be effected by cancelling paid up capital to the extent of HK$0.90 upon each of the 2,142,419,902 Shares in issue as at the Latest Practicable Date and any further Shares which may be issued prior to the date on which the petition for the confirmation of the Reduction of Capital is heard by the High Court and by reducing the nominal value of all the ordinary shares in the capital of the Company from HK$1.00 to HK$0.10 each.

On the assumption that no further Shares will be issued after the Latest Practicable Date, a credit of HK$1,928,177,912 will arise as a result of the reduction of capital. The credit will be set off, to the extent permitted by the High Court, against the accumulated losses of the Company. Remaining credit, if any, will be transferred to a special capital reserve account to be created by the Company, the application of which will be subject to such conditions imposed by the High Court.

CANCELLATION OF SHARE PREMIUM

As at the Latest Practicable Date, the amount standing to the credit of the share premium account of the Company amounted to HK$939,048,331.50. The Board further proposes that the share premium account of the Company, as at the effective date of the capital reduction, be cancelled and that the credit arising be set off, to the extent permitted by the High Court, against the accumulated losses of the Company. Remaining balance, if any, will be credited to a special capital reserve account of the Company, the application of which will be subject to such conditions imposed by the High Court.

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LETTER FROM THE BOARD

INCREASE IN AUTHORISED CAPITAL

It is further proposed that conditional upon the Reduction of Capital and the Cancellation of Share Premium becoming effective, the authorised capital of the Company will immediately be restored to the original amount of HK$10,000,000,000 by the creation of an additional 90,000,000,000 New Shares.

Upon the Increase in Authorised Capital becoming effective and on the basis of 2,142,419,902 Shares in issue at the Latest Practicable Date, the authorised capital of the Company will be HK$10,000,000,000 divided into 100,000,000,000 New Shares, of which 2,142,419,902 New Shares will be in issue and credited as fully paid.

CONDITIONS OF THE REDUCTION OF CAPITAL AND THE CANCELLATION OF SHARE PREMIUM

The Reduction of Capital and the Cancellation of Share Premium are conditional on the following:

1. the passing of a special resolution to approve the Reduction of Capital, the Cancellation of Share Premium and the Increase in Authorised Capital at an extraordinary general meeting to be convened by the Company; and

2. the confirmation of the Reduction of Capital and the Cancellation of Share Premium by the High Court and the registration by the Registrar of Companies in Hong Kong of an office copy of the order of the High Court and the minutes containing the particulars required by Section 61 of the Companies Ordinance (Chapter 32 of Laws of Hong Kong).

Assuming that the above conditions are fulfilled, it is expected that the Reduction of Capital and the Cancellation of Share Premium will become effective immediately following the registration of the order of the High Court and the minutes containing the particulars required by Section 61 of the Companies Ordinance.

An application will be made to the High Court in respect of the Reduction of Capital and the Cancellation of Share Premium after the approval of the Capital Reorganisation at the EGM and further announcement(s) will be made informing the Shareholders of the expected effective date and, if necessary or appropriate, the progress and results of application to the High Court and the Increase in Authorised Capital.

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LETTER FROM THE BOARD

REASONS FOR THE REDUCTION OF CAPITAL AND THE CANCELLATION OF SHARE PREMIUM

The Company recorded accumulated losses of approximately HK$2,266,101,000 as at 31 December 2004 as set out in the latest annual report and accounts of the Company. A breakdown of the losses suffered by the Company and the accumulated losses of the Company during the period from 1 January 1998 to 31 December 2004 as shown in the annual reports of the Company are as follows:

		Accumulated
	(Profits) losses	(profits) losses
	during the	as at the end
Period	period	of the period
	HK$’000	HK$’000
1 January 1998 – 31 December 1998	473,600	266,188
1 January 1999 – 31 December 1999	156,173	422,361
1 January 2000 – 31 December 2000	794,477	1,216,838
1 January 2001 – 31 December 2001	783,641	2,000,479
1 January 2002 – 31 December 2002	337,245	2,337,724
1 January 2003 – 31 December 2003	63,969	2,401,693
1 January 2004 – 31 December 2004	(135,592)	2,266,101

Based on the books and accounts of the Company, the Directors are of the view that such losses were mainly attributable to the following:

• (i) Keen competition of the PRC market: intense competition of the PRC market together with sharp downturn of the operating environment soon after the Asian financial turmoil caused some industrial manufacturing businesses of the Company suffering from substantial losses in 1998, 1999, 2000, 2001 and 2002.

• (ii) High interest expenses: the Company used to adopt high gear leverage during 1998 to 2002. As interest rates had been continuously maintained in high level in several years, high finance costs being recorded as a result.

• (iii) Investment projects in the PRC: as the return of certain investment projects in the PRC, mainly, the motor vehicles manufacturing project, the electronic products manufacturing projects and the property development, did not perform well, losses were recorded as a result from 1999 to 2003.

• (iv) Involvement in money lending and trading businesses encountered difficulties: the Company had involved in money lending and trading businesses prior to 1998. As a result of the Asian financial turmoil and the severe downward adjustment in property prices, some of the borrowers had relapsed into financial difficulties and

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LETTER FROM THE BOARD

could not repay their loans in full. Provisions for such business were made in accordance with the accounting policies of the Company and the Hong Kong Statement of Standard Accounting Practice (“SSAP”) No. 31 “Impairment in assets”. On the other hand, the Company had also suffered from the losses attributed to the trading business.

• (v) Fluctuation of property market: market price of properties in Hong Kong fell sharply after 1997 and remained low until the end of 2003, impairment losses were made in accordance with the accounting policies of the Company and SSAP No. 13 “Accounting for investment properties” and SSAP No. 17 “Property, plant and equipment”. In addition, the Company realized losses suffered from the disposal of some non-core properties assets.

• (vi) Strategic investment in securities: the Company has strategically invested in a Hong Kong main board listed company. In the financial year 2000, provision was made to reflect the difference between the purchase cost and market value of those shares in accordance with the accounting policies of the Company and SSAP No. 24 “Accounting for investments in securities”.

The Directors consider that it would be in the interests of the Company to conduct equity fund-raising exercises in the future when suitable market opportunities arise. In addition, the Directors believe that in the light of such accumulated losses, the Company’s capital represented by its share capital and share premium account had been lost, it would be in the Company’s interests to reduce its capital and cancel its share premium account in order to eliminate so far as possible such accumulated losses, as this would be likely to improve the prospects of raising funds and declaring dividend in the future. At present, the Directors have no intention to issue new Shares and have not adopted any dividend policy related arrangement.

As at 31 December 2004, the accumulated losses of the Company were approximately HK$2,266,101,000. On the assumption that no further Shares will be issued or repurchased and not taking into account any profits and losses which may arise from the period commenced from 1 January 2005 and ended on the effective date of the proposed Reduction of Capital and the Cancellation of Share Premium, the credit arising as a result of the proposed Reduction of Capital and the Cancellation of Share Premium will amount to HK$2,867,226,243.50. Accordingly, all the accumulated losses may be set off by the proposed Reduction of Capital and the Cancellation of Share Premium.

Further, since July 2001, the closing prices of the Shares were ranging from HK$0.187 to HK$0.81, which were below their nominal value of HK$1.00 each. The closing price of the Shares on the Stock Exchange on the Latest Practicable Date was HK$0.355 per Share. Under the Companies Ordinance, a company may not issue shares at a discount to the nominal value of such shares unless, among other things, the issue is authorised by a resolution of the Shareholders and is sanctioned by the High Court. The Directors consider that such an exercise will be costly and time consuming, and that it would therefore be desirable in any event to reduce the nominal value of the Shares so as to avoid the necessity for such an exercise to be

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LETTER FROM THE BOARD

undertaken each time the Company wishes to raise funds. The Directors believe that the Reduction of Capital and the Cancellation of Share Premium will therefore give greater flexibility to the Company to raise funds through the issue of New Shares in the future.

IMPACT OF THE REDUCTION OF CAPITAL AND THE CANCELLATION OF SHARE PREMIUM

Implementation of the Reduction of Capital and the Cancellation of Share Premium will not, of itself, alter the underlying assets, business operations, management or financial position of the Company or the proportionate interests of the Shareholders, except for the payment of the related expenses. The Board believes that the Reduction of Capital, the Cancellation of Share Premium and the Increase in Authorised Capital will not have any adverse effect on the financial position of the Company and its subsidiaries.

UNDERTAKINGS TO THE COURT

To the extent that the High Court considers that the accumulated losses of the Company are not permanent in nature, it is anticipated that the Company will have to give undertakings to the High Court, inter alia, on terms along the following or similar lines in order to protect the position of the creditors of the Company:

• (a) in the event of the Company makes any future recoveries in respect of the assets, in respect of which provisions for diminution in value were made in the accounts of the Company for the 7 years ended 31 December 2004 (“Non-Permanent Loss Assets”), beyond their written down value in the Company’s audited accounts as at 31 December 2004, all such recoveries beyond that written down value will be credited to a special capital reserve in the accounting records of the Company and that so long as there shall remain outstanding any debt of or claim against the Company which, if the date on which the proposed reduction of capital and cancellation of the share premium account becomes effective were the date of the commencement of the winding up of the Company would be admissible to proof in such winding up and the persons entitled to the benefit of such debts or claims shall not have agreed otherwise, such reserve shall not be treated as realised profits and shall, for so long as the Company shall remain a listed company, be treated as an un-distributable reserve of the Company for the purposes of section 79C of the Companies Ordinance (Cap. 32) or any statutory re-enactment or modification thereof provided that:

• (1) the Company shall be at liberty to apply the said special capital reserve for the same purposes as a share premium account may be applied;

• (2) the amount standing to the credit of the special capital reserve shall not exceed the lesser of (a) the amount of provision provided for in respect of the Non-Permanent Loss Assets for the 7 years ended 31 December 2004; or (b) the amount due at any time to the creditors of the Company as at the date when the proposed reduction of capital and cancellation of share premium shall become effective;

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LETTER FROM THE BOARD

• (3) the said overall aggregate limit in respect of the special capital reserve may be reduced by the amount of any increase, after the effective date, in the paid up share capital or the amount standing to the credit of the share premium account of the Company as the result of the payment up of shares by the receipt of new consideration or the capitalisation of distributable profits;

• (4) the said overall aggregate limit in respect of the special capital reserve may be reduced upon the realisation, after the date on which the proposed reduction of capital and cancellation of the share premium account becomes effective, of any of the Non-Permanent Loss Assets by the amount of the total provision made in relation to each such asset as at 31 December 2004 less such amount (if any) as is credited to the said special capital reserve as a result of such realisation; and

• (5) in the event that the amount standing to the credit of the said special capital reserve exceeds the overall aggregate limit thereof after any reduction of such overall aggregate limit pursuant to provisos (3) and/or (4) above, the Company shall be at liberty to transfer the amount of any such excess to the general reserves of the Company and the same shall become available for distribution; and

• (b) for so long as the undertaking set out in the previous paragraph remains effective, to (1) cause or procure its statutory auditors to report by way of a note or otherwise a summary of the undertaking in its audited financial statements or in the accounts of the Company published in any other form; and (2) publish or cause to be published in any prospectus issued by or on behalf of the Company a summary of the undertaking.

It should be noted that the precise terms of such undertaking(s) will depend on the outcome of the hearings of the Company’s petition seeking confirmation of the Reduction of Capital and Cancellation of Share Premium.

FREE EXCHANGE OF NEW SHARE CERTIFICATES

Subject to the Capital Reorganisation becoming effective, Shareholders may, during a period of approximately three weeks immediately after the Capital Reorganisation becoming effective, submit certificates for the existing Shares to Standard Registrars Limited, at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong for exchange, at the expense of the Company, for certificates for the New Shares. Thereafter, certificates for the existing Shares will be accepted for exchange only on payment of a fee of HK$2.50 (or such higher amount as may from time to time be allowed by the Stock Exchange) for each new certificate issued for the New Shares. Nevertheless, certificates for the Shares will continue to be good evidence of legal title and may be exchanged for certificates for the New Shares at any time.

It is expected that new certificates for the New Shares will be available for collection within a period of 10 business days after the submission of certificates for the existing Shares to the Registrar for exchange.

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LETTER FROM THE BOARD

EXTRAORDINARY GENERAL MEETING

Set out on pages 12 to 13 of this circular is a notice convening the EGM to be held at 11:00 a.m. on Thursday, 25 August 2005 (or adjournment thereof) at 17th Floor, China Aerospace Centre, 143 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong, at which resolutions will be proposed to Shareholders to consider and, if thought fit, approve the implementation of the Capital Reorganisation.

You will find a form of proxy accompanying this circular for use at the EGM. Whether or not you are able to attend the EGM in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to Standard Registrars Limited, at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible but in any event not later than 48 hours before the time appointed for the holding of the EGM, or any adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or adjourned meeting should you so wish.

RECOMMENDATION

The Directors consider that the Capital Reorganisation is in the interests of the Company and the Shareholders as a whole and accordingly recommend the Shareholders to vote in favour of all the resolutions to be proposed at the EGM.

Yours faithfully, Rui Xiaowu Chairman

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NOTICE OF EXTRAORDINARY GENERAL MEETING

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(Stock Code: 31)

NOTICE IS HEREBY GIVEN that the Extraordinary General Meeting of China Aerospace International Holdings Limited (the “Company”) will be held at 17th Floor, China Aerospace Centre, 143 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong at 11:00 a.m. on Thursday, 25 August 2005 (or any adjournment thereof), for the purpose of considering and, if thought fit, passing the resolutions set out as follows:

SPECIAL RESOLUTION

1. “ THAT :

2. (a) (1) The capital of the Company of HK$10,000,000,000 divided into 10,000,000,000 shares of HK$1.00 each be reduced to HK$1,000,000,000 divided into 10,000,000,000 shares of HK$0.10 each and that such reduction be effected by cancelling paid up capital to the extent of HK$0.90 upon each of the shares in issue and by reducing the nominal amount of all the issued and unissued shares in the capital of the Company from HK$1.00 to HK$0.10 per share; and

   • (2) the credit arising from the cancellation of the paid up capital of the Company be set off, to the extent permitted by the High Court of Hong Kong, against the accumulated losses of the Company and any remaining balance be credited to a special capital reserve account of the Company the application of which will be subject to such conditions as may be imposed by the High Court of Hong Kong.

3. (b) Upon the reduction of capital referred to in paragraph (a) taking effect, the share premium account of the Company be cancelled and that the credit arising out of the cancellation be set off, to the extent permitted by the High Court of Hong Kong, against the accumulated losses of the Company and any remaining balance be credited to a special capital reserve account of the Company the application of which will be subject to such conditions as may be imposed by the High Court of Hong Kong.

4. (c) The directors of the Company be authorised generally to do all things appropriate to effect and implement any of the foregoing.”

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NOTICE OF EXTRAORDINARY GENERAL MEETING

ORDINARY RESOLUTION

1. “ THAT subject to and forthwith upon the reduction of capital and the cancellation of share premium (as set out in Resolution 1) taking effect, the authorised capital of the Company be increased to HK$10,000,000,000 by the creation of an additional 90,000,000,000 shares of HK$0.10 each.”

By order of the Board Ken Chan Company Secretary

Hong Kong, 28 July 2005

Notes:

1. Any member entitled to attend and vote at the meeting convened by this notice is entitled to appoint a proxy (or proxies) to attend and vote in his stead. A proxy need not be a member of the Company.

2. The proxy form shall be signed under the hand of the member of the Company or his attorney duly authorised in writing. If the member of the Company is a corporation, either under seal or under the hand of an officer or attorney duly authorised.

3. To be valid, a form of proxy, together with the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of that power or authority must be deposited at the share registrar of the Company, Standard Registrars Limited, at Ground Floor, BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for the holding of the meeting or any adjourned meeting.

4. Completion and return of the form of proxy will not preclude a member from attending and voting in person at the meeting or any adjourned meeting thereof. In that event, such form of proxy will be deemed to be revoked.

5. In the case of joint holders of a share, any one of such holders may vote at the meeting either in person or by proxy in respect of such share, but if more than one of such joint holders is present at the meeting personally or by proxy, the holder whose name stands first on the register of member of the Company of such share shall alone be entitled to vote.

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