Founder Holdings Limited — Proxy Solicitation & Information Statement 2003

Jul 31, 2003

IMPORTANT

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 all your shares in NEW CENTURY GROUP HONG KONG LIMITED, you should at once hand this circular to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

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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NEW CENTURY GROUP HONG KONG LIMITED 新世紀集團香港有限公司[*]

(Incorporated in Bermuda with limited liability)

Executive Directors: Mr. Wilson Ng (Chairman) Mr. Lo Ming Chi, Charles Mr. Chen Ka Chee Ms. Lilian Ng Ms. Sio Ion Kuan Mr. Ng Wee Keat Ms. Ng Siew Lang, Linda

Independent Non-Executive Directors: Mr. Wong Kwok Tai, Wystan Mr. Kwan Kai Kin, Kenneth Mr. Ho Yau Ming, Charles

Registered Office: Clarendon House Church Street Hamilton HM11 Bermuda Head Office and Principal Place of Business: Unit 3808, 38/F West Tower, Shun Tak Centre 168-200 Connaught Road Central Hong Kong

To shareholders

31 July 2003

Dear Sir or Madam,

GENERAL MANDATES TO REPURCHASE SHARES AND ISSUE SHARES

1. INTRODUCTION

At the annual general meeting of New Century Group Hong Kong Limited (the “Company”) held on 23 September 2002 (the “2002 Annual General Meeting”), resolutions were passed granting the directors of the Company (the “Directors”) a general mandate to repurchase up to a maximum of 10% of

* For identification purpose only

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the issued shares of HK$0.01 each of the Company (the “Share(s)”) at the date of the resolution (the “Repurchase Mandate”) and a general mandate to allot, issue and deal with additional Shares of the Company not exceeding 20% of the issued Share capital of the Company at the date of the resolution together with extending such general mandate by adding to any Shares repurchased by the Company pursuant to the Repurchase Mandate.

2. GENERAL MANDATE TO REPURCHASE SHARES

The Repurchase Mandate granted at the 2002 Annual General Meeting to repurchase up to a maximum of 10% of the Shares of the Company will expire at the conclusion of the forthcoming annual general meeting of the Company to be held on 5 September 2003 (the “2003 Annual General Meeting”).

It is proposed that at the 2003 Annual General Meeting, a resolution will be proposed granting the Directors a general mandate to repurchase shares in the capital of the Company. In accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), the Company is required to send to the shareholders an explanatory statement containing all the information reasonably necessary to enable the shareholders to make an informed decision on whether to vote for or against the resolution to approve the repurchase by the Company of its own Shares. The purpose of this circular is to set out such information in relation to the proposed mandate.

At the 2003 Annual General Meeting, an ordinary resolution will be proposed that the Directors be given a general mandate to exercise all powers of the Company to repurchase issued and fully paid Shares in the capital of the Company subject to the criteria set out in this statement. Under such mandate, the number of Shares that the Company may repurchase shall not exceed 10% the issued Share capital of the Company at the date of the resolution. The Company’s authority relates only to repurchases made on at The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) or otherwise in accordance with the Listing Rules.

3. SHARE CAPITAL

On 31 July 2003 (“the Latest Practicable Date”) being the Latest practicable date prior to the printing of this circular for ascertaining information in this circular, there were in issue an aggregate of 831,379,914 Shares. On the assumption that there will be no change in the issued Share capital of the Company from the Latest Practicable Date to the date of the 2003 Annual General Meeting where the relevant resolution is proposed to be passed, the Company will be allowed under the Repurchase Mandate to repurchase a maximum of approximately 83,137,991 Shares.

4. SHARE REPURCHASES BY THE COMPANY

During the six months preceding the Latest Practicable Date, no Shares of the Company have been repurchased by the Company on the Stock Exchange.

5. GENERAL MANDATE TO ISSUE SHARES

The general mandate granted at the 2002 Annual General Meeting to allot, issue and deal with additional Shares of the Company will expire at the conclusion of the 2003 Annual General Meeting.

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At the 2003 Annual General Meeting, a resolution will also be proposed that the Directors be given a general mandate to issue Shares not exceeding 20% of the aggregate nominal amount of the issued Share capital of the Company at the date of passing of the resolution granting the general mandate to provide flexibility and discretion to the Directors to issue Shares. In addition, a resolution will be proposed to extend the general mandate by adding to it the number of Shares repurchased under the Repurchase Mandate.

6. ANNUAL GENERAL MEETING

The ordinary resolutions referred to above are set out in full in the notice of 2003 Annual General Meeting enclosed with the 2003 annual report of the Company. Whether or not you intend to be present at the 2003 Annual General Meeting, you are requested to complete the form of proxy and return it to the principal place of business of the Company at the address stated above in accordance with the instructions printed thereon not less than 48 hours before the time fixed for holding the 2003 Annual General Meeting.

7. RECOMMENDATION

The Directors believe that the granting of general mandates to repurchase Shares and to issue Shares are in the interest of the Company as well as its shareholders and accordingly, the Directors recommend you to vote in favour of all the relevant resolutions to be proposed at the 2003 Annual General Meeting.

Yours faithfully, Wilson Ng Chairman

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EXPLANATORY STATEMENT

APPENDIX

This Appendix serves as an explanatory statement given to the shareholders as required by the Listing Rules in connection with of the Repurchase Mandate.

1. LISTING RULES RELATING TO THE REPURCHASE OF SHARES

The Listing Rules permit companies whose primary listing is on the Stock Exchange to repurchase their fully paid-up Shares on the Stock Exchange subject to certain restrictions, the more important of which are summarised below. The Company is empowered by its Memorandum of Association and Byelaws to repurchase its own Shares.

2. REASONS FOR THE REPURCHASES

The Directors believe that the ability to repurchase Shares is in the interests of the Company and its shareholders. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an increase in net asset value. The Directors are seeking a general mandate to repurchase Shares so as to give the Company the flexibility to do so if and when appropriate. The number of Shares to be repurchased on any occasion and the price and other terms upon which the same are repurchased will be decided by the Directors at the relevant time having regard to the circumstances then pertaining.

Whilst it is not possible to anticipate in advance any specific circumstance in which the Directors might think it appropriate to repurchase Shares, a repurchase would be effected where it is considered beneficial to the Company and the shareholders. Shareholders can be assured that the Directors would only make such repurchases in circumstances where they consider them to be in the interests of the Company on the basis that the Shares can be repurchased on favourable terms.

3. FUNDING OF REPURCHASES

Repurchases must be funded entirely from the Company’s available cash flow or working capital facilities, which will be legally available for the purpose in accordance with the Memorandum of Association and Bye-laws of the Company and the laws of Bermuda. Under the laws of Bermuda, a company may only repurchase its Shares out of capital paid up on the Shares to be repurchased or out of the funds of the Company which would otherwise be available for dividend or distribution or out of the proceeds of a fresh issue of the Shares made for the purpose. Any amount of premium payable on a repurchase over the par value of the Shares may only be effected out of the funds of the Company which would otherwise be available for dividend or distribution or out of the Company’s share premium account.

If the Repurchase Mandate were exercised in full during the proposed purchase period, there could be a material adverse effect on the working capital of the Group or the gearing levels (as compared with the position disclosed in the audited consolidated financial statements as at 31 March 2003). The Directors therefore do not propose to exercise the Repurchase Mandate to such an extent unless the Directors determine that, taking account of all relevant factors, such repurchases will be in the interests of the Group.

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EXPLANATORY STATEMENT

APPENDIX

4. SHARE PRICES

The highest and lowest prices at which the Shares have traded on the Stock Exchange during each of the previous twelve months preceding the Latest Practicable Date are as follows:

		Shares
	Highest		Lowest
	HK$		HK$
2002
July	0.490		0.305
August	0.670		0.460
September	0.660		0.540
October	0.580		0.390
November	0.430		0.260
December	0.290		0.255
2003
January	0.280		0.250
February	0.310		0.265
March	0.295		0.250
April	0.270		0.255
May	0.270		0.250
June	0.330		0.260

5. UNDERTAKING

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

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules and the laws of Bermuda.

No connected person 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 Repurchase Mandate is approved by the shareholders.

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EXPLANATORY STATEMENT

APPENDIX

6. HONG KONG CODE ON TAKEOVERS AND MERGERS

If as a result of a Share repurchase, a shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purpose of the Hong Kong Code on Takeovers and Mergers (the “Takeovers Code”). Accordingly, a shareholder, or a group of shareholders acting in concert, 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, New Century Worldwide Capital Limited (“New Century Worldwide”) was beneficially interested in approximately 54.88% of the issued share capital of the Company. In the event that the Directors exercise the Repurchase Mandate in full, the beneficial interest of New Century Worldwide in the Company will increase to approximately 60.98%. Such an increase would not give rise to an obligation to make a mandatory offer under Rule 26 of the Takeovers Code.

Any purchase of Shares which results in the number of Shares held by the public being reduced to less than 25% of the Shares then in issue could only be implemented with the agreement of the Stock Exchange to waive the requirements of the Listing Rules regarding the public shareholding referred to above. It is believed that a wavier of this provision would not normally be given other than in exceptional circumstances.

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