hmvod Limited — Share Issue/Capital Change 2001

Aug 6, 2001

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 a 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 Systek Information Technology (Holdings) Limited, you should at once hand this circular, together with the form of proxy, to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) 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 its circular.

SYSTEK Information Technology

Systek Information Technology (Holdings) Limited

(Incorporated in the Cayman Islands with limited liability)

GENERAL MANDATES TO REPURCHASE

AND

ISSUE SHARES

This circular, for which the directors of Systek Information Technology (Holdings) Limited (the “Company”) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange (“GEM Listing Rules”) for the purpose of giving information with regard to the Company. The directors of the Company, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief: (i) the information contained in this announcement is accurate and complete in all material respects and not misleading; (ii) there are no other matters the omission of which would make any statement herein misleading; and (iii) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

6 August, 2001

LETTER FROM THE CHAIRMAN

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SYSTEK Information Technology
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Systek Information Technology (Holdings) Limited

(incorporated in the Cayman Islands with limited liability)

Executive Directors:

Mr. To, Cho Kei ( Chairman ) Mr. Poon, Bing-Choi Amos Mr. Yuen, Tat Man Sidney Mr. Wong, Po Fai Mr. Chan, Kai Yan Dr. Chan, Kim Chung

Registered Office: Zephyr House Mary Street George Town Grand Cayman Cayman Islands British West Indies

Non-executive Directors:

Mr. Lee, Tak Ching Mr. Ching, Tai Ming David Ms. Seto, Laurie Rolly Mr. Wu, Yang

Independent Non-executive Directors:

Principal Office in Hong Kong: Suite 2514-2531 25th Floor Sun Hung Kai Centre 30 Harbour Road Wanchai Hong Kong

The Hon. Dr. Wong, Yu Hong Philip Mr. Chan, Wai Dune Charles Dr. Leininger, Joseph William

6 August, 2001

To the Shareholders

Dear Sir or Madam,

GENERAL MANDATES TO REPURCHASE AND ISSUE SHARES

INTRODUCTION

The purpose of this circular is to give you information regarding some of the resolutions to be proposed at the annual general meeting of the Company to be held on Friday, 7 September, 2001 (the “Annual General Meeting”) at Salon 6, 3rd Floor, JW Marriott Hotel, Pacific Place, 88 Queensway, Hong Kong. The resolutions include granting to the Directors of the Company general and unconditional mandates to repurchase and issue shares of the Company.

GENERAL MANDATES

At the Annual General Meeting, separate ordinary resolutions will be proposed to grant to the Directors the general and unconditional mandates to:

• (i) allot and issue shares representing up to 20% of the aggregate nominal amount of the issued share capital of the Company as at the date of the passing of the resolution;

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LETTER FROM THE CHAIRMAN

• (ii) repurchase such number of shares which represents up to 10% of the aggregate nominal amount of the issued share capital of the Company as at the date of the passing of the resolution (“Repurchase Mandate”);

• (iii) add to the general mandate for issuing shares set out in (i) above the number of shares repurchased by the Company pursuant to the Repurchase Mandate.

The General Mandates will end 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 Company’s Articles of Association, or the date upon which such authority is revoked or varied by ordinary resolution of the Company in general meeting.

An explanatory statement containing all the relevant information relating to the proposed Repurchase Mandate is set out in the Appendix to this circular. The information in the explanatory statement is to provide the information reasonably necessary to enable Shareholders of the Company to make an informed decision on whether to vote for or against the relevant resolutions.

ANNUAL GENERAL MEETING

A notice convening the Annual General Meeting is set out in the 2001 Annual Report of the Company which has been despatched to the Shareholders together with this circular. At the Annual General Meeting, resolutions relating to the general mandates will be proposed as ordinary resolutions for your consideration and approval.

A form of proxy for the Annual General Meeting is enclosed with this circular. Whether or not you intend to be present at the Annual General Meeting, you are requested to complete the form of proxy and return it to the Company’s branch share registrar in Hong Kong, Central Registration Hong Kong Limited at Shops 1901-1905, 19th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong in accordance with the instructions printed thereon not less than 48 hours before the time fixed for holding the meeting. The completion of a form of proxy will not preclude you from attending and voting at the meeting in person.

RECOMMENDATION

The Directors are of the opinion that the proposals referred to above are in the best interests of the Company and therefore recommend you to vote in favour of the relevant resolutions to be proposed at the Annual General Meeting. The Directors have indicated that the votes attaching to the shares owned by them would be cast in favour of all the resolutions to be proposed at the Annual General Meeting.

Yours faithfully, To Cho Kei Chairman

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EXPLANATORY STATEMENT

APPENDIX

This is an explanatory statement given to all Shareholders of the Company relating to a resolution to be proposed at the forthcoming Annual General Meeting authorising the Repurchase Mandate.

This explanatory statement contains all the information required pursuant to Rule 13.08 and other relevant provisions of the GEM Listing Rules which is set out as follows:

1. REGULATIONS OF THE GEM LISTING RULES

(a) Shareholders’ approval

All repurchases of securities on Growth Enterprise Market (“GEM”) by a company with its primary listing on GEM must be approved in advance by an ordinary resolution, either by way of general mandate or by specific approval in relation to specific transactions.

(b) Source of funds

Any repurchase must be financed out of funds legally available for the purpose in accordance with the Company’s memorandum and articles of association and the applicable laws of the Cayman Islands.

(c) Trading restrictions

A company is authorised to repurchase on GEM or on any other stock exchange recognised by the Securities and Futures Commission in Hong Kong and the Stock Exchange the total number of shares which represent up to a maximum of 10% of the aggregate nominal amount of the existing issued share capital of that company at the date of passing of the relevant resolution granting the repurchase mandate. A company may not, without the prior approval of the Stock Exchange, issue or announce a proposed issue of new shares for a period of 30 days immediately following a share repurchase whether on GEM or otherwise (other than an issue of shares pursuant to the share options or similar instruments requiring the company to issue shares which were outstanding prior to the repurchase). A company is also prohibited from making share repurchases on GEM if that repurchase would result in the number of the Company’s listed shares in public hands fall below the relevant minimum prescribed percentage for that company as determined by the Stock Exchange. A company may only purchase shares on GEM if (1) the purchase price is not higher than the latest (or current) independent bid price or the last independent sale (contract) price quoted or reported on the system (as defined in the Rules of the Stock Exchange), whichever is higher; and (2) the company has not made the opening bid nor any bid in the last 30 minutes before the close of normal trading hours as stipulated in the Rules of the Stock Exchange.

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EXPLANATORY STATEMENT

APPENDIX

2. EXERCISE OF THE REPURCHASE MANDATE

Exercise in full of the Repurchase Mandate, on the basis of 1,036,375,000 shares of HK$0.10 each of the Company (“Shares”) in issue as at 3 August, 2001, being the latest practicable date for ascertaining certain information in this circular (“Latest Practicable Date”), could result in up to 103,637,500 Shares being repurchased by the Company during the period up to (i) the conclusion of the next annual general meeting of the Company; (ii) the date by which the next annual general meeting of the Company is required by the Company’s articles of association or any applicable laws of the Cayman Islands; or (iii) the revocation, variation or renewal of the Repurchase Mandate by ordinary resolution of the Company in general meeting, whichever occurs first.

3. REASONS FOR REPURCHASES

Repurchases of Shares will only be made when the Directors believe that such a repurchase will benefit the Company and its shareholders. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value of the Company and/or its earnings per Share.

4. FUNDING OF REPURCHASES

In repurchasing Shares, the Company may only apply funds legally available for such purposes in accordance with its memorandum and articles of association and the applicable laws of the Cayman Islands. The Company may not repurchase shares on GEM 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. None of the Directors nor, to the best of their knowledge, having made all reasonable enquiries, any of their associates (as defined in the GEM Listing Rules) has any present intention, if the Repurchase Mandate is approved by the shareholders, to sell shares to the Company and its subsidiaries.

5. GENERAL

There might be a material adverse impact on the working capital or gearing position of the Company in the event that the Repurchase Mandate is exercised in full. However, the Directors do not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or on its gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

6. UNDERTAKING

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 in accordance with the GEM Listing Rules, the Company’s memorandum and the articles of association and the applicable laws of the Cayman Islands.

No connected person (as defined in the GEM Listing Rules) has notified the Company that he has a present intention to sell Shares to the Company or its subsidiaries, or has undertaken not to do so in the event that the Repurchase Mandate is approved by the Shareholders of the Company.

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EXPLANATORY STATEMENT

APPENDIX

7. TAKEOVER CODE

If a shareholder’s proportionate interest in the voting capital of the Company increases as a result of a repurchase of Shares, such increase will be treated as an acquisition for the purposes of the Hong Kong Code on Takeovers and Mergers (the “Code”). As a result, a shareholder, or a group of shareholders acting in concert, depending on the level of increase in the shareholder’s interests, could obtain or consolidate control of the Company and become(s) obliged to make a mandatory offer in accordance with Rule 26 and 32 of the Code.

As at the Latest Practicable Date, Trouble Free Technology Limited, which is a substantial shareholder of the Company, held approximately 45.3% of the issued share capital of the Company. In the event that the Directors exercised in full the power to repurchase Shares of the Company in accordance with the Repurchase Mandate, the total shareholdings of Trouble Free Technology Limited in the Company would be increased to approximately 50.3% of the issued share capital of the Company. The Directors believe that such increase would not give rise to an obligation to make a mandatory offer under Rule 26 and 32 of the Code.

8. SHARE PURCHASE MADE BY THE COMPANY

No purchases of Shares have been made by the Company since the date of listing of the shares on the GEM on 8 September, 2000, whether on the Stock Exchange or otherwise.

9. SHARE PRICES

The highest and lowest prices at which the Shares traded on GEM during each of the previous eleven months since the date of listing and before the printing of this circular are as follows:

	Price per Share	Price per Share
	Highest	Lowest
	HK$	HK$
September, 2000	1.280	0.600
October, 2000	0.910	0.650
November, 2000	0.770	0.400
December, 2000	0.470	0.350
January, 2001	0.395	0.310
February, 2001	0.360	0.250
March, 2001	0.290	0.160
April, 2001	0.260	0.150
May, 2001	0.380	0.190
June, 2001	0.280	0.236
July, 2001	0.250	0.140

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