Dawnrays Pharmaceutical (Holdings) Limited — Proxy Solicitation & Information Statement 2004

Mar 26, 2004

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 dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Dawnrays Pharmaceutical (Holdings) Limited, you should at once hand this circular to the purchaser or other 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 on the whole or any part of the contents of this circular.

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DAWNRAYS PHARMACEUTICAL (HOLDINGS) LIMITED

(Incorporated in the Cayman Islands with limited liability)

GENERAL MANDATES TO ISSUE SHARES AND REPURCHASE SHARES

AND

AMENDMENTS TO THE ARTICLES OF ASSOCIATION

The notice convening the annual general meeting of Dawnrays Pharmaceutical (Holdings) Limited to be held at Plaza IV, Novotel Century Hong Kong Hotel, 238 Jaffe Road, Wanchai, Hong Kong on 29 April 2004 at 10:00 a.m. is set out on pages 31 to 36 of the 2003 Annual Report.

Whether or not you are able to attend the AGM, you are requested to complete the form of proxy enclosed with the 2003 Annual Report in accordance with the instructions printed thereon and return the same to the registered office of the Company at Suites 3212-13, Shell Tower, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding the AGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the AGM or any adjournment thereof should you so wish.

17 March 2004

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
General mandate to repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
General mandate to issue Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Amendments to the articles of association of the Company . . . . . . . . . . . . . . . . . . . . . . .	3
Annual general meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Appendix — Explanatory Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6

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DEFINITIONS

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

“AGM”	the annual general meeting of the Company to be held at Plaza
	IV, Novotel Century Hong Kong Hotel, 238 Jaffe Road,
	Wanchai, Hong Kong on 29 April 2004 at 10:00 a.m., notice
	of which is set out on pages 31 to 36 of the 2003 Annual
	Report or any adjournment thereof;
“2003 Annual Report”	the annual report of the Company dated 16 March 2004 for the
	year ended 31 December 2003 sent together with this circular;
“Articles”	the existing articles of association of the Company;
“Board”	the board of Directors;
“Companies Law”	the Companies Law, Cap 22 (Law 3 of 1961, as consolidated
	and revised) of the Cayman Islands;
“Company”	Dawnrays Pharmaceutical (Holdings) Limited, a company
	incorporated in the Cayman Islands with limited liability and
	the shares of which are listed on the Stock Exchange;
“Directors”	the directors of the Company;
“Hong Kong”	the Hong Kong Special Administrative Region of the People’s
	Republic of China;
“Latest Practicable Date”	12 March 2004, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	contained herein;
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange;
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong);
“Shareholder(s)”	holder(s) of Shares;
“Share(s)”	Share(s) of HK$0.10 each in the issued share capital of the
	Company;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Takeover Code”	the Hong Kong Code on Takeovers and Mergers as amended
	from time to time; and
“%”	per cent.

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LETTER FROM THE BOARD

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DAWNRAYS PHARMACEUTICAL (HOLDINGS) LIMITED

(Incorporated in the Cayman Islands with limited liability)

Executive Directors:

Ms. LI Kei Ling (Chairman) Mr. HUNG Yung Lai Mr. ZHANG Jing Xing Mr. LI Tung Ming Mr. LAM Kam Wah Mr. XU Kehan

Registered office: Century Yard Cricket Square Hutchins Drive P.O. Box 2681 GT George Town Grand Cayman British West Indies

Independent non-executive Directors:

Mr. PAN Xue Tian

Mr. LEE Cheuk Yin Dannis

Head office and principal

place of business in Hong Kong: Suites 3212-13 Shell Tower Times Square 1 Matheson Street Causeway Bay Hong Kong

17 March 2004

To the Shareholders

Dear Sir or Madam,

GENERAL MANDATES TO ISSUE SHARES AND REPURCHASE SHARES AND AMENDMENTS TO THE ARTICLES OF ASSOCIATION

I. INTRODUCTION

The purpose of this circular is to provide you information regarding the proposed granting of the general mandates to allot and issue Shares and to repurchase Shares and amendments to the Articles to enable you to make a decision on whether to vote for or against the resolutions in connection with such matters to be proposed at the AGM.

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LETTER FROM THE BOARD

II. GENERAL MANDATE TO REPURCHASE SHARES

Pursuant to the written resolutions of the sole shareholder of Company passed on 21 June 2003 prior to the listing of the Shares on the Stock Exchange on 11 July 2003, a general mandate was given to the Directors to exercise powers of the Company to repurchase Shares up to 10% of the issued share capital of the Company immediately following completion of the share offer in connection with the listing of the Shares in July, 2003. Such mandate will expire at the conclusion of the forthcoming AGM.

An ordinary resolution (“Repurchase Resolution”) will be proposed at the AGM to grant a general mandate to the Directors to exercise the powers of the Company to repurchase, at any time until the next annual general meeting of the Company following the passing of the Repurchase Resolution or such earlier date as stated therein, Shares up to a maximum of 10% of the issued share capital of the Company at the date of passing of the Repurchase Resolution (“Repurchase Mandate”).

An explanatory statement, as required under the Listing Rules to provide the requisite information in connection with the Repurchase Mandate, is set out in Appendix to this circular.

III. GENERAL MANDATE TO ISSUE SHARES

Ordinary resolutions will be proposed at the AGM to grant a general mandate to the Directors to allot, issue and deal with Shares not exceeding 20% of the issued share capital of the Company (“Issue Mandate”) and to extend the Issue Mandate by adding to it the number of Shares repurchase by the Company under the Repurchase Mandate.

IV. AMENDMENTS TO THE ARTICLES OF ASSOCIATION OF THE COMPANY

The Board noted that an announcement was issued by the Stock Exchange on 30 January 2004 to introduce certain amendments to the Listing Rules and the amendments to Appendix 3 (Articles of Association) to the Listing Rules will take effect on 31 March 2004. In compliance with the amended Appenidx 3 to the Listing Rules, the Board proposed that the Articles be amended subject to the approval of the Shareholders.

Your attention is drawn to the special resolution to be proposed at the AGM to approve certain amendments to the Articles to effect, amongst other things, the following changes in line with the Listing Rules (“Articles Amendments”):

• (i) to include the definition of “associates” with reference to the Listing Rules;

• (ii) to provide that where any Shareholder is under the applicable stock exchanges (for example, the Stock Exchange) required to abstain from voting on any particular resolution or restricted to voting only for or only against any particular resolution at general meetings of Shareholders, any votes cast by or on behalf of such Shareholder in contravention of such requirement to abstain from voting or restriction shall not be counted;

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LETTER FROM THE BOARD

• (iii) to state that the period for lodgment of the notices to the Company of the intention to propose a person for election as a Director shall commence no earlier than the day after the despatch of the notice of the Shareholders’ meeting appointed for such election and shall end no later than 7 day’s prior to the date of such Shareholders’ meetings; and

• (iv) to set out that, subject to certain exemptions provided under the Articles, both the Director and his associates shall not be permitted to vote (nor be counted in the quorum) on any resolution of the Board approving any contract or arrangement or any other proposal in which such Director or any of his associates is materially interested.

V. ANNUAL GENERAL MEETING

A notice dated 16 March 2004 convening the AGM (“AGM Notice”), which contains, inter alia, ordinary resolutions to approve the Repurchase Mandate and Issue Mandate and special resolution to approve the Articles Amendments, is contained in the 2003 Annual Report.

Pursuant to Article 66 of the Articles, a resolution put to the vote of a general meeting of the Company (including the AGM) shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded by the chairman of such meeting or by:

• (i) at least three shareholders of the Company present in person or in the case of a shareholder being a corporation by its duly authorised representative or by proxy for the time being entitled to vote at the meeting; or

• (ii) a shareholder or shareholders present in person or in the case of a shareholder being a corporation by its duly authorised representative or by proxy and representing not less than one-tenth of the total voting rights of all shareholders having the right to vote at the meeting; or

• (iii) a shareholder or shareholders present in person or in the case of a shareholder being a corporation by its duly authorised representative or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring such right.

In relation to item numbered 3 in the AGM Notice regarding re-election of Directors, Ms. Li Kei Ling, Mr. Hung Yung Lai, Mr. Zhang Jing Xing, Mr. Li Tung Ming, Mr. Lam Kam Wah, Mr. Xu Kehan, Mr. Pan Xue Tian and Mr. Lee Cheuk Yin, Dannis (together, “Retiring Directors”) will retire at the AGM in accordance with the Articles and, being eligible, offer themselves for re-election by the Shareholders. The biographical details and interests in the shares of the Company of the Retiring Directors to be re-elected at the AGM are provided under the sections headed “Biographical Information of Directors and Senior Management” and “Disclosure of Interest” of the “Report of the Directors” included in the 2003 Annual Report. Further details regarding the remuneration of the Retiring Directors are set out in the paragraph headed “Directors’ Service Contracts” in the “Report of the Directors” contained in the 2003 Annual Report.

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LETTER FROM THE BOARD

A form of proxy for use at the AGM is enclosed with the 2003 Annual Report. Whether or not you are able to attend the AGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the principal office of the Company in Hong Kong at Suites 3212-13, Shell Tower, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding the AGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you form attending and voting in person at the AGM should you so wish.

VI. RECOMMENDATION

The Directors consider that the grant of the Repurchase Mandate and the Issue Mandate and the proposed Articles Amendments are in the best interests to the Company and the Shareholders as a whole. Accordingly, the Directors recommend you to vote in favour of all the relevant resolutions to be proposed at the AGM.

By Order of the Board LI Kei Ling Chairman

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APPENDIX

EXPLANATORY STATEMENT

This Appendix serves as an explanatory statement, as required by Rule 10.06(1)(b) the Listing Rules, to provide the requisite information to you to enable you to make an informed decision as to whether to vote for or against the Repurchase Resolution.

SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company comprised 800,000,000 Shares. Subject to the passing of the Repurchase Resolution at the AGM and on the basis that no further Shares are issued or repurchased prior to the date of the AGM, the Company would be allowed under the Repurchase Mandate to repurchase a maximum of 80,000,000 Shares.

REASONS FOR REPURCHASE

The Directors believe that the Repurchase Mandate is in the best interests of the Company and the Shareholders. Whilst it is not possible to anticipate in advance any specific circumstance in which the Directors might think it appropriate to repurchase Shares, they believe that an ability to do so would give the Company additional flexibility that would be beneficial to the Company and the Shareholders as such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value of the Company and/or its earnings per Share.

FUNDING OF REPURCHASE

In repurchasing securities, the Company may only apply funds legally available for such purpose in accordance with its memorandum and articles of association, the Listing Rules and the applicable laws of the Cayman Islands.

There might be material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in the audited accounts contained in the 2003 Annual Report for the year ended 31 December 2003) in the event that repurchases of Shares under the Repurchase Mandate were to be carried out in full during the period of the Repurchase Mandate.

The Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements or the gearing levels of the Company, which in the opinion of the Directors are from time to time appropriate for the Company.

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EXPLANATORY STATEMENT

APPENDIX

SHARE PRICES

The highest and lowest prices at which the Shares have been traded on the Stock Exchange in each of the calender months since the listing of the Shares on the Stock Exchange on 11 July 2003 were as follows:

Month	Prices
	Highest	Lowest
	HK$	HK$
July 2003	0.91	0.80
August 2003	0.89	0.79
September 2003	0.88	0.69
October 2003	0.81	0.67
November 2003	0.90	0.75
December 2003	0.81	0.72
January 2004	0.85	0.74
February 2004	0.81	0.76
March 2004 (up to the Latest Practicable Date)	0.80	0.75

DIRECTORS, THEIR ASSOCIATES AND CONNECTED PERSONS

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

No connected persons (as defined in the Listing Rules) of the Company have notified the Company that they have any present intention to sell Shares to the Company, or have undertaken not to do so, in the event that the Company is authorised to make repurchase of its own Shares.

UNDERTAKING OF THE DIRECTORS

The Directors have undertaken to the Stock Exchange to exercise the power of the Company to make repurchases pursuant to the proposed resolution in accordance with the Listing Rules and the applicable laws of the Cayman Islands.

TAKEOVER CODE

If as a result of repurchase(s) of Shares by the Company, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purposes of the Takeover Code. As a result, a Shareholder or a group of Shareholders acting in concert could, depending on the level of increase of his or their interest, obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeover Code.

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EXPLANATORY STATEMENT

APPENDIX

As at the Latest Practicable Date, Fortune United Group held 344,000,000 Shares, representing approximately 43% of the total issued share capital of the Company. On the assumption that the issued share capital of Company remain 800,000,000 Shares and based on the shareholding of Fortune United Group Limited above, in the event that the Directors exercise the power to repurchase Shares in full pursuant to the Repurchase Mandate, the shareholding of Fortune United Group Limited in the Company will increase to approximately 47.78%. As a result, Fortune United Group Limited (and persons acting in concert with it) may be required to make a mandatory offer under Rule 26 of the Takeover Code.

SHARE REPURCHASE BY THE COMPANY

The Company had not purchased any of its Shares (whether on the Stock Exchange or otherwise) in the six months preceding the date of this circular.

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