Digital China Holdings Limited — M&A Activity 2002

Mar 15, 2002

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, 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 announcement.

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ANNOUNCEMENT

The Company confirms that preliminary discussions and negotiations are underway for a proposed acquisition by the Company or its subsidiary of certain equity interest in the Company's non wholly-owned subsidiary, Digital China Networks (defined below).

The Company confirms that preliminary discussions and negotiations have been going on between the Company and D-Link Corporation relating to a proposed acquisition by the Company or its subsidiary of all or part of the 42.5% equity interest held by D-Link in the issued share capital of Digital China Networks (formerly known as Legend Networks, Ltd.). D-Link is a wholly-owned subsidiary of D-Link Corporation.

By a Deed of Adherence dated 19th April 2001 (referred to in the Prospectus issued by the Company dated 23rd May 2001), DC(BVI) became the shareholder holding 56.1% equity interest in the issued share capital of Digital China Networks and were bound by the terms of the JV Agreement. DC(BVI) is a wholly-owned subsidiary of the Company.

Digital China Networks is currently owned as to 42.5% by D-Link, 56.1% by DC(BVI) and as to 1.4% by four employees of Digital China Networks (only one of which is a director of Digital China Networks and none of the others is a director of the Company or its subsidiaries). Digital China Networks was established to engage in the business of development and sales of networking products in the People's Republic of China.

So far, no agreement has been reached and the terms and conditions of the proposed acquisition are still being negotiated.

D-Link is a connected person of the Company under the Listing Rules. If the proposed acquisition materializes, depending on the nature and size of the proposed acquisition, it is possible that such acquisition is discloseable under Paragraph 3 of the Listing Agreement or discloseable under the general obligation under Paragraph 2 of the Listing Agreement.

The shareholders of the Company and the investors are advised to exercise extreme caution when trading in the Company's securities.

Definitions

The following defined terms are used in this announcement:-

"DC(BVI)" means Digital China (BVI) Limited, a company incorporated under the laws of the British Virgin Islands;

"Digital China Networks" means Digital China Networks, Ltd., a company incorporated under the laws of the British Virgin Islands;

"D-Link" means D-Link Holding Co., Ltd., a company incorporated under the laws of the British Virgin Islands;

"D-Link Corporation" means 友訊科技股份有限公司 (D-Link Corporation), a company incorporated under the laws of Taiwan, the shares of which are listed on the Taiwan Stock Exchange; and

"JV Agreement" means the agreement dated 1st April 2000 and supplemented by a supplemental agreement of the same date in respect of the operation and management of the business of Digital China Networks, (as referred to in the Prospectus issued by the Company dated 23rd May 2001) and the Deed of Adherence dated 19th April 2001.

Made by the order of the Board of Directors of Digital China Holdings Limited, the directors of which individually and jointly accept responsibility for the accuracy of this announcement.

By Order of the Board

LI Qin

Chairman

14th March 2002

* For identification purpose only

"Please also refer to the published version of this announcement in the SCMP"