Global Strategic Group Limited — Proxy Solicitation & Information Statement 2000

Sep 29, 2000

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 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.

This circular, for which the directors of the issuer collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on GEM of The Stock Exchange of Hong Kong Limited for the purpose of giving information with regard to the issuer. The directors, having made all reasonable equiries, confirm that, to the best of their knowledge and belief: (1) the information contained in this circular is accurate and complete in all material respects and not misleading; (2) there are no other matters the omission of which would make any statement in this document misleading; and (3) all opinions expressed in this document have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

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DIGITALHONGKONG.COM

(Incorporated in the Cayman Islands with limited liability)

GENERAL MANDATE TO REPURCHASE SHARES

Characteristics of The Growth Enterprise Market (“GEM”)

GEM has been established as a market designed to accommodate companies to which a high investment risk may be attached. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. Furthermore, there may be risks arising out of the emerging nature of companies listed on GEM and the business sectors or countries in which the companies operate. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

The principal means of information dissemination on GEM is publication on the internet website operated by the Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the GEM website in order to obtain up-to-date information on GEM-listed issuers.

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DIGITALHONGKONG.COM

(Incorporated in the Cayman Islands with limited liability)

Directors : Paul Kan Man Lok John Wong Yuk Lung Shirley Ha Suk Ling Francis Gilbert Knight Fan Sheung Tak

• Independent non-executive directors

Registered office: Zephyr House George Town Grand Cayman British West Indies

Principal office : Room 1702 One Exchange Square 8 Connaught Place Hong Kong

29th September, 2000

To the shareholders

Dear Sir or Madam,

GENERAL MANDATE TO REPURCHASE SHARES

Introduction

It is proposed that at the annual general meeting of DIGITALHONGKONG.COM (the “Company”) for the year ended 30th June, 2000, a resolution will be proposed to grant to the directors of the Company a general mandate to repurchase shares of the Company. This circular contains the explanatory statement in compliance with the Rules Governing the Listing of Securities (the “Listing Rules”) on The Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and to give all the information reasonably necessary to enable shareholders to make an informed decision on whether to vote for or against the resolution to approve the purchase by the Company of its own shares.

General mandate to repurchase shares

At the annual general meeting to be held on 26th October, 2000, 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 of the Company. Under such mandate, the number of shares that the Company may repurchase shall not exceed 10 per cent. of the share capital of the Company in issue on the date of the resolution. The

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Company’s authority is restricted to purchases made on the Stock Exchange in accordance with the Listing Rules of the Stock Exchange. On 25th September, 2000 (the “Latest Practicable Date”), being the latest practicable date prior to printing of this circular, there were in issue an aggregate of 150,000,000 shares of HK$0.10 each in the Company (“Shares”). Exercise in full of the mandate, on the basis that no further Shares are issued prior to the date of the annual general meeting, could accordingly result in up to 15,000,000 Shares being repurchased by the Company. The mandate allows the Company to make or agree to make purchases only during the period ending on the earliest of the date of the next annual general meeting, the date by which the next annual general meeting of the Company is required to be held by law or the date upon which such authority is revoked or varied by an ordinary resolution of the shareholders in a general meeting of the Company.

The directors have no present intention to repurchase any Shares but consider that the mandate will provide the Company the flexibility to make such repurchase when appropriate and beneficial to the Company. Such repurchases may enhance the net value of the Company and/or earnings per Share. As compared with the financial position of the Company as at 30th June, 2000 (being the date of its latest audited accounts), the directors consider that there would not be a material adverse impact on the working capital and on the gearing position of the Company in the event that the proposed purchases were to be carried out in full during the proposed purchase period. No purchase would be made in circumstances that would have a material adverse impact on the working capital or gearing ratio of the Company.

The Company is empowered by its memorandum and articles of association to purchase its Shares. The Cayman Islands 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 distribution by way of dividend or the proceeds of a new issue of shares made for such purpose. The amount of premium payable on redemption may only be paid out of either the profits that would otherwise be available for distribution by way of dividend or out of the share premium of the Company. Under the Cayman Islands law, the repurchased shares will remain part of the authorised but unissued share capital of the Company.

Directors, their associates and connected persons

None of the directors nor, to the best of the knowledge and belief of the directors having made all reasonable enquiries, any of the associates of any of the directors has any present intention, in the event that the proposal is approved by shareholders, to sell Shares to the Company.

No connected person of the Company (as defined in the Listing Rules of the Stock Exchange) has notified the Company that he/she has a present intention to sell Shares to the Company nor has he/she undertaken not to sell any of the Shares held by him/her to the Company in the event that the Company is authorised to make purchases of Shares.

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Undertaking of the directors

The directors have undertaken to the Stock Exchange to exercise the power of the Company to make purchases pursuant to the proposed resolution in accordance with the Listing Rules of the Stock Exchange and all applicable laws of the Cayman Islands, and in accordance with the regulations set out in the memorandum and articles of association of the Company.

Effect of Takeovers Code

A repurchase of Shares by the Company may result in an increase in the proportionate interests of a substantial shareholder of the Company in the voting rights of the Company.

As at the Latest Practicable Date, to the best of the knowledge and belief of the Company, Champion Technology Holdings Limited, which held approximately 78.2 per cent. of the issued share capital of the Company, was the only substantial shareholders holding more than 10 per cent. of the issued share capital of the Company. In the event that the directors should exercise in full the power to repurchase Shares which is proposed to be granted pursuant to the resolution, the shareholding of Champion Technology Holdings Limited, together with its associates, in the Company would be increased to more than 86.9 per cent. of the issued share capital of the Company and such increase would not give rise to an obligation to make a mandatory offer under Rule 26 of the Hong Kong Code on Takeovers and Mergers (the “Code”) but will reduce the amount of Shares held by the public to less than 20 per cent.. The directors have no intention to purchase Shares to such an extent which will result in the amount of Shares held by the public being reduced to less than 20 per cent..

Stock Exchange Rules for repurchases of shares

The Listing Rules of the Stock Exchange permit companies whose primary listings are on GEM of the Stock Exchange to repurchase their shares on the Stock Exchange subject to certain restrictions, the most important of which are summarised below:

(a) Shareholders’ approval

The Listing Rules provide that all share repurchases on the Stock Exchange by a company with its primary listing on the Stock Exchange must be approved in advance by an ordinary resolution, which may be by way of general mandate, or by special resolution in relation to specific transactions.

(b) Source of funds

Repurchases must be funded out of funds legally available for the purpose.

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(c) Trading restrictions

A maximum of 10 per cent. of the outstanding share capital may be repurchased on GEM of the Stock Exchange and a company may not issue or propose to issue new shares for a period of 30 days immediately following a repurchase (other than an issue of shares pursuant to an exercise of warrants, share options or similar instruments requiring the company to issue shares which were outstanding prior to such repurchase). The Listing Rules also prohibit a company from making repurchases on the Stock Exchange if the repurchase would result in the number of listed shares which are in the hands of the public falling below the relevant prescribed minimum percentage as determined by the Stock Exchange. The company shall not purchase shares on GEM of the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange from time to time.

(d) Price and Timing of repurchase

The Listing Rules prohibit any repurchase of shares at any price which is higher than the latest (or current) independent bid price or the last independent sale (contract) price quoted or reported on the trading system of the Stock Exchange, whichever is higher. The Listing Rules also prohibit the Company to make any opening bid nor any bid in the last 30 minutes before the close of normal trading hours.

(e) Status of repurchased shares

The Listing Rules provide that the listings on the Stock Exchange of all repurchased shares shall be automatically cancelled, irrespective of whether or not such repurchase took place on the Stock Exchange and that the relevant share certificates must be destroyed. Under the Cayman Islands law, the repurchased shares will remain part of the authorised but unissued share capital of the company.

(f) Suspension of repurchases

The Listing Rules prohibit any repurchase of shares at any time after a price sensitive development has occurred or has been the subject of a decision until such time as the price sensitive information has been publicly announced. In particular, during the period of one month immediately preceding either the preliminary announcement of the company’s annual results or the publication of the company’s half-year report or a quarterly report, the company may not purchase shares on GEM of the Stock Exchange, unless the circumstances are exceptional. In addition, the Stock Exchange may prohibit repurchases of shares on GEM of the Stock Exchange if the company has breached the Listing Rules.

(g) Reporting requirements

Under the Listing Rules, repurchases of shares on GEM of the Stock Exchange or otherwise must be reported to the Stock Exchange not later than 9:30 a.m. (Hong Kong time) on the following business day. In addition, the company's annual report is required to disclose details regarding repurchases of shares made during the year, including the number of shares repurchased and the aggregate price paid. The

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company shall procure that any broker appointed by the company to effect the purchase of shares disclose to the Stock Exchange such information with respect to purchase made on behalf of the company as the Stock Exchange may request.

(h) Connected parties

The Listing Rules prohibit the company from knowingly purchasing its own shares on the Stock Exchange from a “connected person”, that is, a director or substantial shareholder or their associates (as defined in the Listing Rules) and a connected person shall not knowingly sell his shares to the company on GEM of the Stock Exchange.

General

During each of the six months preceding the date of this circular, no Shares have been repurchased by the Company.

During each of the five months from April, 2000, the month that the Shares became listed on GEM of the Stock Exchange to August, 2000, the highest and lowest traded prices for Shares on the Stock Exchange were as follows:-

	Per	Share
	Highest	Lowest
Month	HK$	HK$
2000
April	4.300	1.100
May	2.200	1.080
June	1.310	1.000
July	1.140	0.790
August	0.930	0.520

Recommendation

The directors consider that the granting of the mandate to repurchase Shares of the Company is in the interest of the Company and so recommend you to vote in favour of the resolution at the forthcoming annual general meeting. The directors will vote all their shareholdings in favour of the resolution.

Yours faithfully,

Paul Kan Man Lok

Chairman

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