G-Resources Group Limited — Proxy Solicitation & Information Statement 2004

Oct 28, 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 you should take, you should consult a stockbroker or other registered dealer in securities, a bank manager, solicitor, professional accountant or other professional advisers.

If you have sold or transferred all your shares in PALADIN LIMITED (the “ Company ”), 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 was effected for onward transmission to the purchaser or the 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 upon the whole or any part of the contents of this circular.

PALADIN LIMITED

(Incorporated in Bermuda with limited liability) (Stock Code: 495)

GENERAL MANDATES TO REPURCHASE AND ISSUE SECURITIES

AND

ADOPTION OF NEW BYE-LAWS

A notice convening the Annual General Meeting (as defined herein) is set out in Appendix II to this circular. Whether or not you are able to attend the Annual General Meeting, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’ Share Registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 17/F., Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding of the Annual General Meeting or any adjournment thereof. Completion and return of the form of proxy will not prevent you from attending and voting in person at the Annual General Meeting or any adjourned meeting thereof if you so wish.

28 October, 2004

LETTER FROM THE BOARD

PALADIN LIMITED

(Incorporated in Bermuda with limited liability) (Stock Code: 495)

Directors:

Mr. Law Fong (Acting Chairman)

Mr. Chen Te Kuang Mike

Mr. Oung Shih Hua, James[#]

Mr. Zhu Pei Qing*

Regiered office: Canon Court 22 Victoria Street Hamilton HM 12 Bermuda

• Ms. LU Ti Fen*

• Mr. Kwok Wai Chi*

• # Non-Executive Director

• Independent Non-Executive Directors

Head office and principal place of business: 45th Floor, Office Tower Convention Plaza Harbour Road Wan Chai Hong Kong

19 October 2004

To Shareholders

Dear Sir or Madam,

GENERAL MANDATES TO REPURCHASE AND ISSUE SECURITIES AND ADOPTION OF NEW BYE-LAWS

INTRODUCTION

At the annual general meeting of the Company to be held on 3 December 2004 (the “Annual General Meeting”), resolutions will be proposed (i) to grant to the directors of the Company (“Directors”) the general mandates to issue shares and to repurchase shares of the Company since the previous general mandates granted to the Directors on 6 February 2004 to issue shares and to repurchase shares will expire at the forthcoming Annual General Meeting; and (ii) to adopt the new Bye-laws of the Company.

This circular contains the explanatory statement in compliance with The Rules (the “Listing Rules”) Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and to give all the information reasonably necessary to enable you to make an informed decision on whether to vote for or against the resolutions to approve the mandates to the Directors for the issue and allotment of new shares of the Company and the repurchase by the Company of its own shares. This circular also contains information regarding the Company’s adoption of new Bye-laws.

– 1 –

LETTER FROM THE BOARD

GENERAL MANDATE TO ISSUE SHARES

Approval will be sought from shareholders of the Company to grant a general mandate to the Directors to exercise the powers of the Company to allot, issue and deal with new shares in the capital of the Company amounting to up 20% of the aggregate nominal amount of the share capital of the Company in issue by way of an ordinary resolution to be proposed at the Annual General Meeting. The Directors wish to state that they have no immediate plans to issue any new shares pursuant to such general mandate. In the event that it becomes desirable for the Company to issue any new shares, the Directors are given flexibility and discretion to allot and issue new shares amounting to up to 20% of the existing issued share capital of the Company as at the date of the passing of the relevant resolution and by adding to such mandate the number of shares of HK$0.50 each of the Company (the “Shares”) repurchased by the Company pursuant to the Repurchase Mandate (as hereinafter defined).

GENERAL MANDATE TO REPURCHASE SHARES

At the Annual General Meeting, an ordinary resolution will be proposed to approve the granting of a general mandate to the Directors to exercise the powers of the Company to repurchase Shares representing up to a maximum of 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the passing of the relevant resolution (the “Repurchase Mandate”).

An explanatory statement as required under the Listing Rules to provide the requisite information for your consideration of the Repurchase Mandate is set out in the appendix hereto.

PROPOSED ADOPTION OF NEW BYE-LAWS

Since the Company’s adoption of the existing Bye-laws, a number of amendments have been made to the Listing Rules, the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) and the other securities laws of Hong Kong. In compliance with the relevant laws and regulations and to take advantage of certain amendments to the Listing Rules, the Directors consider that it is in the interest of the Company to amend its existing Bye-laws. In view of the number of amendments involved, the Directors consider that it is in the interest of the Company and its shareholders to adopt the new Bye-laws in substitution for the existing Bye-laws.

Major amendments to be brought about by the new Bye-laws are highlighted below:

(i) Summary Financial Statement

On 4 January 2002, Companies (Amendment) Ordinance 2001 came into force in Hong Kong which permits companies to offer shareholders the option to elect to receive, in place of the long form report, a summary financial report. Subsequently, the Stock Exchange on 17 February 2002 announced amendments to the Listing Rules to permit listed companies to distribute summary financial report in place of the long form report, provided that they have ascertained the wishes of the shareholders and comply with the relevant legal requirements of their own place of incorporation and provisions of their constitutional documents. Furthermore, the Companies Act 1981 of Bermuda (as amended) (the “Act”) was amended with effect on 14 February 2003 to allow for the sending of summarised financial statements subject to the provisions set out in the Act.

– 2 –

LETTER FROM THE BOARD

The new Bye-law 162 will enable the Company to send summarized financial statements to shareholders of the Company who have consented and elected to receive summarized financial statements instead of full financial statements subject to the requirements of the Act and the Listing Rules. The summarized financial statements must be accompanied by an auditor’s report and notice informing the shareholder how to notify the Company that he elects to receive the full financial statements. The summarized financial statements, notice and auditor’s report must be sent not less than twenty-one days before the general meeting to those shareholders that consented and elected to receive the summarized financial statements.

(ii) Electronic Corporate Communication

On 5 February 2002 the Stock Exchange announced amendments to the Listing Rules which came into effect on 15 February 2002. The amendments permit listed companies to send or otherwise make available corporate communication to shareholders by electronic means with their prior approval subject to relevant legal requirements of their own place of incorporation and provisions of their constitutional documents.

New Bye-laws 167 and 169 provide that a notice or document to be served or delivered by the Company to any shareholder by electronic means to such address as may from time to time be authorised by the shareholder concerned or by publishing it on a computer network and notifying the shareholder concerned, in such manner as he may from time to time authorise, that it has been so published. Any notice or document, if sent by electronic means (including through any relevant system), shall be deemed to be have been given on the day following that on which the electronic communication was sent by or on behalf of the Company. And any notice or document posted on a computer network shall be deemed to have been served or delivered on the day it was so published or posted.

(iii) Securities and Futures Ordinance Changes

With the coming into effect of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) on 1 April 2003, the Securities and Futures (Clearing Houses) Ordinance (Chapter 420 of the Laws of Hong Kong) (the “repealed Ordinance”) was repealed. The definition of “Clearing House” has been amended to make reference to this new ordinance.

(iv) Appendix 3 to the Listing Rules Changes

On 30 January 2004, the Stock Exchange announced that subject to certain transitional arrangements, the proposed amendments to the Listing Rules relating to corporate governance issues took effect on 31 March 2004.

Resulting from the amendment of Appendix 3 to the Listing Rules, the following new provisions are incorporated into the new Bye-laws:

• (i) new Bye-law 103 provides for the minimum seven-day period for lodgment by shareholders of the notice to nominate a director shall commence no earlier than the day after the despatch of the notice of the meeting appointed for such election and end no later than seven days before the date of such meeting;

– 3 –

LETTER FROM THE BOARD

• (ii) new Bye-law 98(H) provides that a director of the Company shall not vote on any board resolution approving any contract or arrangement or any other proposal in which he or any of his associates has/have a material interest nor shall he be counted towards the quorum of the relevant board meeting with the exception of the following:

• (i) the giving of any security or indemnity either:

  • (a) to the Director or his associate(s) in respect of money lent or obligations incurred or undertaken by him or any of them at the request of or for the benefit of the Company or any of its subsidiaries; or

  • (b) to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or his associate(s) has himself/ themselves assumed responsibility in whole or in part and whether alone or jointly under a guarantee or indemnity or by the giving of security;

• (ii) any proposal concerning an offer of shares or debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase where the Director or his associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;

• (iii) any proposal concerning any other company in which the Director or his associate(s) is/are interested only, whether directly or indirectly, as an officer or executive or shareholder or in which the Director or his associate(s) is/are beneficially interested in shares of that company, provided that the Director and any of his associates are not in aggregate beneficially interested in 5% or more of the issued shares of any class of such company (or of any third company through which his interest or that of his associate(s) is derived) or of the voting rights;

• (iv) any proposal or arrangement concerning the benefit of employees of the Company or its subsidiaries including:

  • (a) the adoption, modification or operation of any employees’ share scheme or any share incentive or share option scheme under which the Director or his associate(s) may benefit; or

  • (b) the adoption, modification or operation of a pension fund or retirement, death or disability benefits scheme which relates both to Directors, his associates and employees of the Company or any of its subsidiaries and does not provide in respect of any Director or his associate(s), as such any privilege or advantage not generally accorded to the class of persons to which such scheme or fund relates; and

– 4 –

LETTER FROM THE BOARD

• (v) any contract or arrangement in which the Director or his associate(s) is/are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/their interest in shares or debentures or other securities of the Company; and

• (iii) new Bye-law 76A provides that where any shareholder is, under the Listing Rules, required to abstain from voting on any particular resolution or restricted to voting only for or only against any particular resolution, any votes cast by or on behalf of such shareholder in contravention of such requirement or restriction shall not be counted.

The new Bye-law 98 on director’s interest will also contain new provisions including the following:

• (i) Where arrangements are under consideration concerning the appointment (including the arrangement or variation of the terms thereof, or the termination thereof) of two or more Directors to offices or places of profit with the Company or any other company in which the Company is interested, a separate resolution may be put in relation to each Director and in such case each of the Directors concerned shall be entitled to vote (and be counted in the quorum) in respect of each resolution except that concerning his own appointment (or the arrangement or variation of the terms thereof, or the termination thereof) and except (in the case of an office or place of profit with any such other company as aforesaid) where the other company is a company in which the Director together with any of his associates owns 5 per cent. or more of the issued shares of any class of the equity share capital of such company or of the voting rights of any class of shares of such company;

• (ii) A company shall be deemed to be a company in which a Director together with any of his associates owns five (5) per cent. or more of the issued shares of any class of the equity share capital of such company or of the voting rights of any class of shares of such company if and so long as (but only if and so long as) he together with his associates is (either directly or indirectly) the holder of or beneficially interested in five (5) per cent. or more of any class of the equity share capital of such company (or of any third company through which his interest is derived) or of the voting rights of any class of shares available to shareholders of the company. For the purpose of this paragraph there shall be disregarded any shares held by a Director as bare or custodian trustee and in which he has no beneficial interest, any shares comprised in a trust in which the Director’s interest is in reversion or remainder if and so long as some other person is entitled to receive the income thereof, and any shares comprised in an authorised unit trust scheme in which the Director is interested only as a unit holder; and

• (iii) Where a company in which a Director together with any of his associates holds five (5) per cent. or more of any class of the equity share capital of such company or of the voting rights of any class of shares available to shareholders of the company is materially interested in a transaction, then that Director shall also be deemed materially interested in such transaction.

– 5 –

LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider that the granting of general mandates to issue and to repurchase shares of the Company, and to add the aggregate nominal amount of shares that may be repurchased to the aggregate nominal amount of the share capital of the Company that may be allotted pursuant to the general mandate to issue shares and the proposed adoption of new Bye-laws are each in the best interests of the Company and its shareholders, and accordingly, recommend all shareholders to vote in favour of the 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. The English text of this circular shall prevail over the Chinese text.

Yours faithfully, For and on behalf of the Board Law Fong Acting Chairman

– 6 –

EXPLANATORY STATEMENT

APPENDIX I

This appendix serves as an explanatory statement, as required by the Listing Rules, to provide requisite information to you for your consideration of the repurchase mandate.

1. SHARE CAPITAL

As at 21 October 2004 (the latest practicable date prior to the printing of this circular, the “Latest Practicable Date”), the issued share capital of the Company was HK$26,413,580.50 divided into 528,271,615 Shares.

Subject to the passing and pursuant to the terms of the ordinary resolution regarding the Repurchase Mandate and on the basis that no further Shares are issued or repurchased prior to the Annual General Meeting to be held on 3 December 2004, the Company would be allowed under the Repurchase Mandate to repurchase a maximum of 52,827,161 Shares.

2. REASONS FOR REPURCHASE

The Directors believe that the Repurchase Mandate is in the best interests of the Company and its shareholders as a whole. Such repurchase may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net assets value and/or earnings per Share and will only be made when the Directors believe that such repurchase will benefit the Company and its shareholders as a whole.

3. FUNDING OF REPURCHASE AND MATERIAL ADVERSE IMPACT

In repurchasing Shares, the Company may only apply funds legally available for such purpose in accordance with its memorandum of association and Bye-Laws and the laws of Bermuda. Bermuda law provides that the amount of capital repaid in connection with a share repurchase may only be paid out of either the capital paid up on the relevant shares, or the profits that would otherwise be available for dividend or the proceeds of a fresh issue of shares made for the purpose. The amount of premium payable on repurchase may only be paid out of either the profits that would otherwise be available for dividend or out of the share premium or contributed surplus accounts of the Company.

There might be an adverse impact on the working capital or gearing position of the Company as compared with the position disclosed in the audited accounts contained in its annual report for the year ended 31 December 2003 in the event that the Repurchase Mandate were to be exercised in full at any time during the proposed repurchase period. However, 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.

– 7 –

EXPLANATORY STATEMENT

APPENDIX I

4. SHARES PRICES

The highest and lowest prices at which the Shares have traded on the Stock Exchange during each of the previous twelve months before the printing of this document were as follows:

		Shares
	Highest		Lowest
	HK$		HK$
2003
October	0.128		0.095
November	0.295		0.149
December	0.214		0.095
2004
January	0.220		0.140
February	0.270		0.210
March	0.280		0.170
April	0.238		0.170
May	0.275		0.151
June	0.355		0.210
July	0.340		0.270
August	0.320		0.270
September	0.335		0.280

5. UNDERTAKING AND EFFECT OF REPURCHASE

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

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 to sell any securities of the Company to the Company or its subsidiaries under the Repurchase Mandate if such is approved by the shareholders.

No connected persons (as defined in the Listing Rules) have notified the Company that they have a present intention to sell securities of the Company to the Company or its subsidiaries or have undertaken not to do so, in the event that the Repurchase Mandate is approved by the shareholders.

If a shareholder’s proportionate interest in the voting rights of the Company increases upon exercise of the powers to repurchase securities of the Company pursuant to the Repurchase Mandate, such increase will be treated as an acquisition for the purposes of the Hong Kong Code on Takeovers and Mergers (the “ Takeovers Code ”). As a result, a shareholder or group of shareholders acting in concert, could obtain or consolidate control of the Company and become obliged to make a mandatory general offer for all Shares in issue at the time in accordance with Rules 26 and 32 of the Takeovers Code.

– 8 –

EXPLANATORY STATEMENT

APPENDIX I

As at the Latest Practicable Date, Five Star Investments Limited beneficially held 267,815,017 Shares, representing approximately 50.70% of the then issued share capital of the Company. To the best knowledge of the Company, no other person, together with any associates thereof, was beneficially interested in Shares representing 10% or more of the entire issued share capital of the Company as at the Latest Practicable Date.

In the event that the Directors exercise in full the power to repurchase Shares which is proposed to be granted pursuant to the Repurchase Mandate then (if the present shareholders’ interests in Shares remained the same) the attributable shareholding of Five Star Investments Limited in the Company would be increased to approximately 56.33% of the issued share capital of the Company. Such increase will not give rise to an obligation on Five Star Investments Limited to make a mandatory offer under Rule 26 of the Takeovers Code. In any event, the Repurchase Mandate will be exercised only if the number of Shares held by the public would not fall below 25%.

The Directors are not aware of any consequences which would arise under Takeovers Code as a result of any repurchases pursuant to the general mandate.

6. SECURITIES REPURCHASE MADE BY THE COMPANY

The Company has not purchased any of its securities (whether on the Stock Exchange or not) in the six months preceding the date of this document.

– 9 –

NOTICE OF ANNUAL GENERAL MEETING

APPENDIX II

PALADIN LIMITED

(Incorporated in Bermuda with limited liability) (Stock Code: 495)

NOTICE IS HEREBY given that the Annual General Meeting of the Company will be held at the Antica Room, Hong Kong Gold Coast Hotel, 1 Castle Peak Road, Castle Peak Bay, Tuen Mun, Hong Kong on 3 December 2004 at 11:00 a.m. for the following purposes.

1. to receive and consider the Financial Statements and the Reports of the Directors and Auditors for the year ended 30 June 2004;

2. to re-elect directors;

3. to fix the directors’ remuneration;

4. to appoint Deloitte Touche Tohmatsu as auditors for the ensuing year and to authorise the directors to fix their remuneration;

5. to pass the Ordinary Resolution:

“ THAT :

• (i) subject to paragraph (iii) below, the exercise by the directors of the Company during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional shares of HK$0.50 each in the capital of the Company and to make or grant offers, agreements and options which might require the exercise of such power be and is hereby generally and unconditionally approved;

• (ii) the approval in paragraph (i) above shall authorise the directors of the Company during the Relevant Period to make or grant offers, agreements and options which might require the exercise of such power after the end of the Relevant Period;

• (iii) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) and issued by the directors of the Company pursuant to the approval given in paragraph (i) above, otherwise than pursuant to (i) a Rights Issue (as hereinafter defined), (ii) an issue of shares as scrip dividends pursuant to the Bye-Laws of the Company from time to time, (iii) an issue of shares upon the exercise of rights of subscription or conversion under the terms of any warrants issued by the Company or any securities which are convertible into shares of the Company or (iv) an issue of shares under any option scheme or similar arrangement for the time being adopted for the grant or issue to employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares of the Company, shall not exceed 20 per cent. of the aggregate nominal amount of the existing share capital of the Company in issue at the date of this resolution and the said approval shall be limited accordingly; and

– 10 –

NOTICE OF ANNUAL GENERAL MEETING

APPENDIX II

• (iv) for the purposes of this Resolution:

“Relevant Period” means the period from the passing of this resolution until whichever is the earliest of:

  - (a) the conclusion of the next annual general meeting of the Company;

  - (b) the expiration of the period within which the next annual general meeting of the Company is required by Bermuda law or the Company’s Bye-Laws to be held; or

  - (c) the time at which the authority set out in this resolution is revoked or varied by way of ordinary resolution in general meeting; and

• (v) for the purpose of this Resolution, “Rights Issue” means the allotment, issue or grant of shares pursuant to an offer of shares or other securities open for a period fixed by the directors of the Company to holders of shares whose names appear on the register of members of the Company on a fixed record date in proportion to their then holdings of such shares (subject to such exclusions or other arrangements as the directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognized regulatory body or any stock exchange in, any territory applicable to the Company)”.

• to pass the Ordinary Resolution:

“ THAT :

• (i) subject to paragraph (iii) below, the exercise by the directors of the Company during the Relevant Period (as defined below) of all the powers of the Company to repurchase issued shares in the capital of the Company on the terms and subject to the conditions set out in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited be and is hereby generally and unconditionally approved;

• (ii) the approval in paragraph (i) above shall be in addition to any other authorisation given to the directors of the Company;

• (iii) the aggregate nominal amount of the shares purchased or agreed conditionally or unconditionally to be purchased by the Company pursuant to the approval in paragraph (i) above shall not exceed the aggregate of 10 percent of the aggregate nominal amount of the share capital of the Company in issue as at the time of passing this resolution; and

– 11 –

NOTICE OF ANNUAL GENERAL MEETING

APPENDIX II

• (iv) for the purposes of this resolution:

“Relevant Period” means the period from the time of passing of this resolution until whichever is the earliest of:

• (a) the conclusion of the next annual general meeting of the Company;

• (b) the expiration of the period within which the next annual general meeting of the Company is required by Bermuda law or the Company’s Bye-Laws to be held; or

• (c) the time at which the authority set out in this resolution is revoked or varied by way of ordinary resolution in general meeting.”

• to pass the Ordinary Resolution:

“ THAT conditional upon the passing of ordinary resolutions numbered 5 and 6 set out above of which this resolution forms part, the aggregate nominal amount of the shares in the capital of the Company which are repurchased by the Company under the authority granted to the directors of the Company in the said ordinary resolution numbered 6 shall be added to the aggregate nominal amount of the issued share capital of the Company that may be allotted or agreed conditionally or unconditionally to be allotted by the directors of the Company pursuant to the said ordinary resolution numbered 5.”

2. to pass the Special Resolution:

“ THAT the new Bye-Laws of the Company marked ‘A’ produced to this meeting and for the purposes of identification signed by the Chairman, be and are hereby approved and adopted as the new Bye-Laws of the Company in substitution for and to the exclusion of the existing Bye-Laws of the Company and that the directors of the Company be and is hereby authorized to do all things and acts and sign all documents which they consider recessary, desirable or expedicit in connection with the foregoing.”

By Order of the Board Chan Chi Ho Company Secretary

Hong Kong, 28 October 2004

– 12 –

NOTICE OF ANNUAL GENERAL MEETING

APPENDIX II

Head Office and Principal Place of Business:

45th Floor, Office Tower Convention Plaza

1 Harbour Road Wanchai

Hong Kong

Notes:

1. Any Member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him. A proxy need not be a member of the Company.

2. 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 thereof must be deposited at the Company’s Hong Kong Share Registrars, Computershare Hong Kong Investor Services Limited, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than fortyeight hours before the time appointed for holding the meeting or any adjournment thereof.

3. The Transfer Books and Register of Members of the Company will be closed from 30 November 2004 to 3 December 2004 both days inclusive.

4. Concerning Resolution No. 5 above, approval is being sought from Members as a general mandate in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, in order to ensure flexibility and discretion to the directors of the Company in the event that it becomes desirable to issue any shares of the Company up to 20 percent of the issued share capital.

5. In relation to Resolution No. 6 above, the directors of the Company wish to state that they will exercise the powers conferred thereby to purchase shares of the Company in circumstances which they deem appropriate for the benefit of the shareholders. An explanatory statement containing the information necessary to enable the shareholders to make an informed decision to vote on this Resolution as required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited will be set out in a separate document to be sent to the shareholders with the annual report for the year ended 30 June 2004.

– 13 –