First Tractor Company Limited — Proxy Solicitation & Information Statement 2005

Apr 4, 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 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 K. Wah Construction Materials 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.

This circular should be read in conjunction with the accompanying Annual Report for the year ended 31st December 2004.

K. WAH CONSTRUCTION MATERIALS LIMITED

(incorporated in Hong Kong with limited liability)

(Stock Code: 27)

PROPOSALS FOR RE-ELECTION OF DIRECTORS

AND

GENERAL MANDATE TO REPURCHASE SHARES

4th April 2005

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Re-election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
General Mandate to Repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Notice of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
APPENDIX I — DIRECTORS PROPOSED TO BE RE-ELECTED . . . . . . . . . . . . . . . . . . . . . . . .	5
APPENDIX II — EXPLANATORY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8

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DEFINITIONS

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

• ‘‘2004 Annual General Meeting’’

• the annual general meeting of the Company held on 31st May 2004

• ‘‘Annual General Meeting’’ the annual general meeting of the Company to be held at Picasso Room, Basement 1, InterContinental Grand Stanford Hong Kong, 70 Mody Road, Tsim Sha Tsui East, Kowloon, Hong Kong on Thursday, 28 April 2005 at 10: 30 a.m.

• ‘‘Annual Report’’ the annual report of the Company for the year ended 31st December 2004 ‘‘Article(s)’’ article(s) of Articles of Association ‘‘Articles of Association’’ articles of association of the Company ‘‘associates’’ has the meaning ascribed to the expression under the Listing Rules ‘‘Board’’ the board of Directors ‘‘Companies Ordinance’’ Companies Ordinance, Chapter 32 of the Laws of Hong Kong ‘‘Company’’ K. Wah Construction Materials Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the main board of the Stock Exchange

• ‘‘connected persons’’ has the meaning ascribed to the expression under the Listing Rules ‘‘Director(s)’’ the director(s) of the Company ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of The People’s Republic of China

• ‘‘KWIH’’ K. Wah International Holdings Limited, an exempted company incorporated in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange and the holding company of the Company

• ‘‘Latest Practicable Date’’ 30th March 2005, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular

• ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange ‘‘Repurchase Code’’ the Hong Kong Code on Share Repurchases ‘‘Securities and Futures Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong Ordinance’’

• ‘‘Share(s)’’ share(s) of HK$0.10 each in the capital of the Company ‘‘Shareholder(s)’’ holder(s) of the Share(s) ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited ‘‘Takeovers Code’’ the Hong Kong Code on Takeovers and Mergers ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong

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LETTER FROM THE BOARD

K. WAH CONSTRUCTION MATERIALS LIMITED

(incorporated in Hong Kong with limited liability)

(Stock Code: 27)

Executive Directors:

Dr. Lui Che Woo, MBE, JP, LLD, DSSc (Chairman) Francis Lui Yiu Tung (Deputy Chairman) Chan Kai Nang (Managing Director) William Lo Chi Chung Paddy Tang Lui Wai Yu Joseph Chee Ying Keung

Registered Office: 29th Floor K. Wah Centre 191 Java Road North Point Hong Kong

Non-Executive Directors:

Dr. Charles Cheung Wai Bun, JP Moses Cheng Mo Chi, GBS, OBE, JP James Ross Ancell

Dr. William Yip Shue Lam, LLD*

• Independent Non-executive Directors

4th April 2005

To the Shareholders,

Dear Sir or Madam,

PROPOSALS FOR RE-ELECTION OF DIRECTORS AND GENERAL MANDATE TO REPURCHASE SHARES

INTRODUCTION

The purpose of this circular is to provide you with information regarding resolutions to be proposed at the Annual General Meeting relating to (i) the re-election of Directors; and (ii) the granting to the Directors of a general mandate for the repurchase of Shares representing up to 10% of the Company’s issued share capital as at the date of passing of such resolution.

RE-ELECTION OF DIRECTORS

Pursuant to Article 106(A) of the Articles of Association, Mr. Francis Lui Yiu Tung and Dr. Charles Cheung Wai Bun shall retire by rotation at the Annual General Meeting. In addition, Dr. William Yip Shue Lam, being a Director appointed by the Board after the 2004 Annual General Meeting, will hold office only until the Annual General Meeting pursuant to Article 97 of the Articles of Association. All retiring Directors, being eligible, offered themselves for re-election.

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LETTER FROM THE BOARD

Details of the Directors proposed to be re-elected are set out in Appendix I to this circular.

GENERAL MANDATE TO REPURCHASE SHARES

At the 2004 Annual General Meeting, an ordinary resolution was passed in relation to the granting of a general mandate to the Directors to repurchase Shares not exceeding 10% of the issued share capital of the Company as at that date (‘‘Existing Repurchase Mandate’’). The Existing Repurchase Mandate will expire upon the conclusion of the Annual General Meeting. The Directors consider that the Existing Repurchase Mandate increases the flexibility of the Board in managing the Company’s affairs and is in the interests of the Shareholders, and that the same shall continue to be adopted by the Company.

A new general mandate to repurchase Shares representing up to 10% of the issued share capital of the Company as at the date of passing of such resolution as set out in Resolution 5.1 in the notice of the Annual General Meeting will be proposed at the Annual General Meeting (‘‘New Repurchase Mandate’’).

With reference to the proposed New Repurchase Mandate, the Directors wish to state that they have no immediate plans to repurchase any Shares.

An explanatory statement containing the particulars required by the Listing Rules to enable the Shareholders to make an informed view on whether to vote for or against Resolution 5.1 to be proposed at the Annual General Meeting in relation to the New Repurchase Mandate is set out in Appendix II to this circular.

NOTICE OF MEETING

Notice of the Annual General Meeting is set out in the Annual Report sent to Shareholders on the same date as this circular. A proxy form for use at the Annual General Meeting is enclosed with the Annual Report. Whether or not you are able to attend the meeting, you are reminded to complete the proxy form in accordance with the instructions printed thereon and return it to the registered office of the Company at 29th Floor, K. Wah Centre, 191 Java Road, North Point, Hong Kong as soon as possible and, in any event, so as to be received by the Company, not less than 48 hours before the time appointed for the holding of the meeting. Completion and delivery of the form of proxy will not prevent you from attending and voting in person at the meeting if you so wish.

According to Article 75 of the Articles of Association, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) demanded: (i) by the chairman of the meeting; or (ii) by at least three members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or (iii) by any member or members present in person (or, in the case of a member 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 the members having the right to vote at the meeting; or (iv) by a member or members present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and holding Shares 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 the Shares conferring that right.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider that the re-election of Directors and the New Repurchase Mandate are each in the best interests of the Company, and accordingly, recommend all Shareholders to vote in favour of such resolutions to be proposed at the Annual General Meeting.

GENERAL INFORMATION

Your attention is drawn to the additional information set out in the Appendices to this circular.

Yours faithfully, For and on behalf of the Board Dr. Lui Che Woo Chairman

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DIRECTORS PROPOSED TO BE RE-ELECTED

APPENDIX I

The details of the Directors proposed for re-election at the Annual General Meeting are set out below:

Mr. Francis Lui Yiu Tung, aged 49, joined the Group in 1979. He has been an executive director of the Company since June 1987 and is the Deputy Chairman of the Company. Mr. Lui has also been an executive director and the Managing Director of KWIH. In addition, he is a director of a number of subsidiaries of the Company.

Mr. Lui holds a bachelor of science degree in civil engineering and a master of science degree in structural engineering from the University of California at Berkeley, USA. He is a member of the Town Planning Board of Hong Kong and a member of the Shanghai Committee of the Chinese People’s Political Consultative Conference.

Save as disclosed above and apart from being an executive director of each of the Company and KWIH, Mr. Lui did not hold any directorship in any listed public company in the past three years. Mr. Lui is a son of Dr. Lui Che Woo, Chairman of the Company, and a younger brother of Ms. Paddy Tang Lui Wai Yu, a Director of the Company. Save as disclosed herein and apart from his directorship in the Company, Mr. Lui does not have any relationships with any Directors, senior management or substantial or controlling shareholders of the Company.

Mr. Lui’s service contract did not provide for a specified length of service period. His emoluments comprise an annual salary including allowances of HK$1,988,580, an annual director’s fee to be proposed by the Board and approved by Shareholders at the subsequent year’s annual general meeting, discretionary bonus and discretionary share options. An annual director’s fee of HK$80,000 will be payable to Mr. Lui for the year ended 31st December 2004 subject to the approval of Shareholders at the Annual General Meeting, and the director’s fee for the year ending 31st December 2005 will be proposed by the Board and approved by Shareholders at the annual general meeting of the Company to be held in 2006. His emoluments are determined by reference to his duties and responsibilities with the Company, the Company’s performance and profitability, the Company’s remuneration policy and the market benchmark.

As at the Latest Practicable Date, Mr. Lui has interests in long position in 2,458,397,425 Shares (including deemed interest and share options entitling him to subscribe for 4,470,000 Shares). Save as disclosed in this circular, Mr. Lui has no interest in the Shares within the meaning of Part XV of the Securities and Futures Ordinance.

Dr. Charles Cheung Wai Bun, JP, aged 68, joined the Group in 1986. He was appointed an executive director of the Company in June 1987 and became an independent non-executive director since 1995. He is also the Chairman of the Audit Committee of the Company. In addition, Dr. Cheung is an independent non-executive director and the Chairman of the Audit Committee of KWIH.

Dr. Cheung holds an honorary doctor’s degree, a master’s degree and a bachelor of science degree in business administration. He had been in the banking business for over twenty-two years and held senior management positions. He is the Group Chief Executive and Executive Deputy Chairman of Mission Hills Group. He is also a non-executive director of Pioneer Global Group Limited, Prime Investments Holdings Limited and B&S Entertainment Holdings Ltd, all listed in Hong Kong. Dr. Cheung was a director and Adviser of the Tung Wah Group of Hospitals and is a Vice Chairman of Guangdong Province Golf Association. He was awarded the Directors of the Year Awards 2002 of Listed Company Non-executive Director and was re-appointed by the HKSAR Government as a member of Estate Agents Authority in November 2004.

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DIRECTORS PROPOSED TO BE RE-ELECTED

APPENDIX I

Save as disclosed above and apart from being an independent non-executive director of each of the Company and KWIH, Dr. Cheung did not hold any directorship in any listed public company in the past three years and does not hold any other positions with the Company or any of its subsidiaries.

Save and except for the relationship arising from his directorship in the Company, Dr. Cheung does not have any relationships with any Directors, senior management or substantial or controlling shareholders of the Company.

There is no service contract between the Company and Dr. Cheung. Dr. Cheung is not appointed for a specific term but shall be subject to retirement and re-election at the annual general meeting in accordance with the Articles of Association. The amount of emoluments payable to Dr. Cheung comprises an annual director’s fee and audit committee member’s fee which will be proposed by the Board and approved by Shareholders at the subsequent year’s annual general meeting. An annual director’s fee of HK$80,000 and audit committee member’s fee of HK$80,000 will be payable to Dr. Cheung for the year ended 31st December 2004 subject to the approval of Shareholders at the Annual General Meeting, and the director’s fees for the year ending 31st December 2005 will be proposed by the Board and approved by Shareholders at the annual general meeting of the Company to be held in 2006. His emoluments are determined by reference to his duties and responsibilities with the Company, the Company’s performance and profitability, the Company’s remuneration policy and the market benchmark.

As at the Latest Practicable Date, Dr. Cheung has interests in 1,810 Shares and share options entitling him to subscribe for 300,000 Shares. Save as disclosed in this circular, Dr. Cheung has no interest in the Shares within the meaning of Part XV of the Securities and Futures Ordinance.

Dr. William Yip Shue Lam, LLD, aged 67, has been an independent non-executive director of the Company since December 2004.

Dr. Yip holds a Bachelor of Arts degree and an honorary Doctor of Laws degree from Concordia University, Canada. Dr. Yip is the founder and the Chairman of Canada Land Limited, a company listed on the Australian Stock Exchange and engaged in real estate development and tourist attraction business. He is also the Chairman of Cantravel Limited, Guangzhou. Dr. Yip has been active in public services and is presently a Standing Committee Member of The Chinese General Chamber of Commerce and the President of Concordia Hong Kong Foundation Limited. He also serves on the Board of Governors of The Canadian Chamber of Commerce in Hong Kong. In addition, Dr. Yip has been elected a Guangzhou Municipal Honorable Citizen.

Save as disclosed above and apart from being an independent non-executive director of the Company, Dr. Yip did not hold any directorship in any listed public company in the past three years and does not hold any other positions with the Company or any of its subsidiaries.

Save and except for the relationship arising from his directorship in the Company, Dr. Yip does not have any relationships with any Directors, senior management or substantial or controlling shareholders of the Company.

Dr. Yip’s service contract provides for a fixed term of three years. The amount of emoluments payable to Dr. Yip as specified in his service contract comprises an annual director’s fee which will be proposed by the Board and approved by Shareholders at the subsequent year’s annual general meeting. An annual director’s fee of HK$80,000 will be payable to Dr. Yip for the year ended 31st December 2004 subject to

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APPENDIX I

DIRECTORS PROPOSED TO BE RE-ELECTED

the approval of Shareholders at the Annual General Meeting, and the director’s fee for the year ending 31st December 2005 will be proposed by the Board and approved by Shareholders at the annual general meeting of the Company to be held in 2006. His emoluments are determined by reference to his duties and responsibilities with the Company, the Company’s performance and profitability, the Company’s remuneration policy and the market benchmark.

As at the Latest Practicable Date, Dr. Yip did not have any interests in the Shares within the meaning of Part XV of the Securities and Futures Ordinance.

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EXPLANATORY STATEMENT

APPENDIX II

This Appendix contains the particulars that are required by the Listing Rules to be included in an explanatory statement to enable the Shareholders to make an informed view on whether to vote for or against the resolution to be proposed at the Annual General Meeting in relation to the proposed repurchase mandate.

SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company comprised 1,297,191,563 Shares. As at the same date, there are outstanding share options granted under the Company’s share option schemes to subscribe for 19,626,000 Shares.

Subject to the passing of the resolution granting the proposed mandate to repurchase Shares and on the basis that no further Shares are issued (whether generally or pursuant to the exercise of the subscription rights attaching to the outstanding options) or repurchased before the Annual General Meeting, the Company will be allowed to repurchase a maximum of 129,719,156 Shares during the period ending on the earliest of: (i) the conclusion of the next annual general meeting of the Company; or (ii) the date by which the next annual general meeting of the Company is required to be held by the Articles of Association or by law; or (iii) the date upon which such authority is revoked or varied by a resolution of the Shareholders in general meeting.

REASONS FOR REPURCHASES

The Directors believe that it is in the best interests of the Company and the Shareholders to seek a general authority from the Shareholders to enable the Company to repurchase Shares on the Stock Exchange. Such repurchases may, depending on market conditions, and funding arrangements at the time, lead to an enhancement of the net assets value of the Company and/or earnings per Share and will only be made when the Directors believe that such a repurchase will benefit the Company and the Shareholders.

The Directors have no present intention to repurchase any Shares and they would only exercise the power to repurchase in circumstances where they consider that the repurchase would be in the best interests of the Company and in circumstances where they consider that the Shares can be repurchased on terms favourable to the Company. On the basis of the consolidated financial position of the Company as at 31st December 2004, being the date to which the latest published audited accounts of the Company were made up, the Directors consider that if the general mandate to repurchase Shares were to be exercised in full at the currently prevailing market value, there might be a material adverse impact on the working capital position and gearing position of the Company. The Directors do not propose to exercise the mandate to repurchase Shares to such an extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company as compared with the position disclosed in the latest published audited financial statements or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

FUNDING OF REPURCHASES

Repurchases made pursuant to the proposed mandate to repurchase Shares would be funded out of funds legally available for the purpose in accordance with the Articles of Association and the Companies Ordinance.

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EXPLANATORY STATEMENT

APPENDIX II

EFFECT OF THE TAKEOVERS CODE

If as a result of a repurchase of Shares, 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 Rule 32 of the Takeovers Code and Rule 6 of the Repurchase Code. Accordingly, a Shareholder, or a group of Shareholders acting in concert, depending on the level of increase of the Shareholders’ interest, could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code.

As at the Latest Practicable Date, KWIH, through its wholly owned subsidiary, was indirectly interested in 852,775,351 Shares representing 65.74% of the issued share capital of the Company and a discretionary trust interested in more than one-third of the issued share capital of KWIH is deemed to be interested in the same 852,775,351 Shares. 3,946,227 Shares representing 0.30% of the issued share capital of the Company were held by another discretionary trust. Dr. Lui Che Woo, Mr. Francis Lui Yiu Tung and Ms. Paddy Tang Lui Wai Yu, as either direct or indirect discretionary beneficiaries of the discretionary family trusts established by Dr. Lui Che Woo as founder, are deemed to be interested in these 852,775,351 Shares and 3,946,227 Shares. Besides, apart from the shareholding interest disclosed hereinabove, these three directors had an aggregate interest (including family interests and corporate interests) in 88,299,478 Shares representing approximately 6.81% of the issued share capital of the Company.

Based on the above shareholding interests, in the event that the power to repurchase Shares pursuant to the New Repurchase Mandate is exercised in full, and taking no account of the exercise of outstanding options, the aforesaid interests of Dr. Lui Che Woo, Mr. Francis Lui Yiu Tung and Ms. Paddy Tang Lui Wai Yu would be increased to approximately 80.95% of the issued share capital of the Company and the Shares held by the public will fall below 25% of the total number of Shares in issue. The Directors are not aware of any consequence which would give rise to an obligation to make a mandatory offer under Rule 26 of the Takeovers Code. The Directors have no present intention to exercise the New Repurchase Mandate which will result in the number of the Shares held by the public being reduced to less than 25%.

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EXPLANATORY STATEMENT

APPENDIX II

SHARE PRICES

The following table shows the highest and lowest prices at which the Shares have been traded on the Stock Exchange in each of the past twelve months preceding the Latest Practicable Date:

Month	Highest	Lowest
	(HK$)	(HK$)
2004
March	0.940	0.730
April	0.890	0.610
May	0.720	0.520
June	0.800	0.700
July	0.780	0.690
August	0.750	0.700
September	1.360	0.690
October	2.675	1.180
November	3.550	2.475
December	6.050	2.750
2005
January	9.450	3.800
February	8.700	5.900
March (up to the Latest Practicable Date)	8.550	7.350

REPURCHASE OF SHARES

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.

GENERAL

To the best of their knowledge and having made all reasonable enquiries, none of the Directors nor any of their associates currently intend to sell Shares to the Company or its subsidiaries.

No connected persons of the Company, as defined in the Listing Rules, have notified the Company that they have a 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 repurchases of the Shares.

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the proposed mandate to repurchase Shares in accordance with the Listing Rules and the applicable laws of Hong Kong.

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