Hybrid Kinetic Group Limited — Proxy Solicitation & Information Statement 2002

May 10, 2002

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.

＊

(Incorporated in Bermuda with limited liability)

Directors:

Principal Office in Hong Kong:

Executive: Mr. Yung Yeung (Chairman) Mr. Siu On Ng (Deputy Chairman) Mr. Jun Li (Chief Executive Officer) Mr. Chunhua Huang (Chief Financial Officer) Mr. Keung So Mr. Xing Hong Mr. Maozeng Yang Mr. To Ho Mr. Tung Sun

Suites 612-617, 6th Floor Hutchison House 10 Harcourt Road, Central Hong Kong

Registered Office in Bermuda:

Cedar House 41 Cedar Avenue Hamilton HM 12 Bermuda

Independent non-executive: Mr. Min Li Yi Mdm. Chu Qing Yao

To Shareholders

25th April, 2002

Dear Sir or Madam,

GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES

INTRODUCTION

At the annual general meeting of the Company held on 21st June, 2001, resolutions were passed giving general mandates to the board of directors of the Company (the “Board”) to issue and allot shares and to exercise the powers of the Company to repurchase its own shares in accordance with the rules regulating the share repurchases by companies having a primary listing on The Stock Exchange of Hong Kong Limited (“Stock Exchange”) of their own shares (“Share Buyback Rules”) as contained in the Rules Governing the Listing of Securities on the Stock Exchange (“Listing Rules”). These mandates will lapse at the conclusion of the forthcoming annual general meeting of the Company which is to be held at Grand Room I & II, Grand Hyatt Hong Kong, 1 Harbour Road, Wanchai, Hong Kong on 3rd June, 2002 at 11:00 a.m. (“Annual General Meeting”) unless renewed at that meeting. It is therefore proposed to renew the general mandates to issue and allot shares and to repurchase shares of the Company at the Annual General Meeting.

The purpose of this circular is to provide you with information regarding the above proposed renewal of the general mandates to issue and allot shares and to repurchase shares and to seek your approval of the ordinary resolutions relating to both matters at the Annual General Meeting.

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GENERAL MANDATE TO REPURCHASE SHARES

An ordinary resolution will be proposed at the Annual General Meeting to give a general mandate to the Board to exercise the powers of the Company to repurchase its own shares at any time until the first to occur of either the conclusion of the next annual general meeting of the Company following the passing of the resolution (unless the mandate is renewed at such meeting) or the expiration of the period within which the next annual general meeting of the Company is required by Bermuda laws or the Company’s bye-laws to be held or until the mandate is revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting (“Repurchase Mandate”). The shares of the Company which may be repurchased pursuant to the Repurchase Mandate is limited to a maximum of 10 per cent. of the issued share capital of the Company at the date of the passing of the resolution approving the Repurchase Mandate.

An explanatory statement as required under the Share Buyback Rules to provide the requisite information is set out in the appendix hereto.

GENERAL MANDATE TO ISSUE SHARES

At the Annual General Meeting, an ordinary resolution will be proposed that the Board shall be given a general and unconditional mandate to issue new shares representing up to 20 per cent. of the issued share capital of the Company as at the date of the resolution being passed. In addition, an ordinary resolution will also be proposed to authorise an extension of such general mandate to be granted to the Board to issue new shares during the period up to the conclusion of next annual general meeting of the Company or such earlier period as stated in the relevant resolution by adding to the aggregate number of shares of the Company which may be allotted or agreed conditionally or unconditionally to be allotted by the Board pursuant to such general mandate the number of shares repurchased under the Repurchase Mandate, if granted.

ACTION TO BE TAKEN

A form of proxy for use at the Annual General Meeting is enclosed. Whether or not you intend to attend this meeting, you are requested to complete and return the form of proxy to the principal office of the Company in Hong Kong at Suites 612-617, 6th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong in accordance with the instructions printed thereon as soon as possible and in any event so as to arrive not less than 48 hours before the time fixed for holding the meeting. The return of a form of proxy will not preclude you from attending and voting in person at the Annual General Meeting if you so wish.

RECOMMENDATION

The Board believes that the Repurchase Mandate and the general mandate to issue new shares are in the best interests of the Company and its shareholders. Share repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the earnings per share of the Company and will only be made when the Board believes that such a share repurchase will benefit the Company and its shareholders. Accordingly, the Board recommends all shareholders to vote in favour of the ordinary resolutions approving the Repurchase Mandate and the general mandate to issue new shares at the Annual General Meeting.

By order of the Board Yung Yeung Chairman

* for identification purpose only

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APPENDIX

REPURCHASE MANDATE EXPLANATORY STATEMENT

The appendix serves as an explanatory statement, as required by Rule 10.06(1)(b) of the Share Buyback Rules, to provide requisite information to you for your consideration of the Repurchase Mandate and should be read in conjunction with the Chairman’s Letter hereinbefore appearing.

1. SHARE CAPITAL

As at 25th April, 2002 (the latest practicable date prior to the printing of this document), the issued share capital of the Company comprised 1,263,634,000 shares of HK$0.10 each.

Subject to the passing of the ordinary resolution to approve the Repurchase Mandate and on the basis that no further shares are issued and repurchased prior to the Annual General Meeting, the Company would be allowed under the Repurchase Mandate to repurchase a maximum of 126,363,400 shares of HK$0.10 each.

2. FUNDING OF SHARE REPURCHASES

Share repurchases must be funded out of funds which are legally available for the purpose and in accordance with the constitutive documents of the Company and the applicable laws of Bermuda.

Share repurchases would be funded entirely from the Company’s available cash flows or working capital facilities. The Companies Act 1981 of Bermuda 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 funds of the Company which would otherwise be available for dividend or distribution or the proceeds of a fresh issue of shares made for the purpose. The amount of premium payable on share repurchases may only be paid out of the funds of the Company which would otherwise be available for dividend or distribution or out of the share premium account of the Company.

In the event that the Repurchase Mandate were to be carried out in full at any time during the proposed repurchase period, there might be a material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in the Company’s latest published audited financial statements for the year ended 31st December, 2001). However, the Board does not propose to exercise the Repurchase Mandate to an extent as would in the circumstances have a material adverse effect on the working capital or gearing position of the Company.

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3. SHARE PRICES

The highest and lowest prices at which the shares of the Company have traded on the Stock Exchange in the previous twelve months prior to the date of this circular were as follows:

	Highest	Lowest
	HK$	HK$
April 2001	0.82	0.60
May 2001	0.79	0.66
June 2001	0.74	0.67
July 2001	0.67	0.54
August 2001	0.51	0.35
September 2001	0.48	0.37
October 2001	0.43	0.355
November 2001	0.49	0.36
December 2001	0.50	0.40
January 2002	0.41	0.35
February 2002	0.60	0.405
March 2002	0.51	0.45

4. GENERAL

The Board has undertaken to the Stock Exchange that, so far as the same may be applicable, the Board will exercise the powers of the Company to make share repurchases pursuant to the ordinary resolution to be proposed at the Annual General Meeting in accordance with the Listing Rules and the applicable laws of Bermuda.

If, on the exercise of the power to repurchase shares pursuant to the Repurchase Mandate, 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 the Hong Kong Code on Takeovers and Mergers (“Code”). As a result, 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 Code. As at 25th April, 2002 (the latest practicable date prior to the printing of this document), Daiweldo Group Limited is the registered owner of 630,304,400 shares, representing 49.88 per cent. of the issued share capital of the Company. In the event that the Board exercises in full the power to repurchase shares of the Company pursuant to the Repurchase Mandate, the interest of Daiweldo Group Limited in the issued share capital of the Company would be increased to approximately 55.42 per cent. Such increase could give rise to an obligation of Daiweldo Group Limited to make a mandatory offer in accordance with Rule 26 of the Code in the event that the Board exercises in full the power to repurchase shares pursuant to the Repurchase Mandate. However, the Board does not propose to exercise the Repurchase Mandate to such an extent. The Board is aware of the consequenses which the exercise in full of the Repurchase Mandate will have under the Code. The Board will not repurchase shares on the Stock Exchange if the share repurchases would result in less than 25 per cent of the issued share capital of the Company in the public hands.

None of the directors nor, to the best of their knowledge having made all reasonable enquiries, any of their associates have a present intention to sell any shares of the Company to the Company under the Repurchase Mandate if such Repurchase Mandate is approved by the shareholders.

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

5. SHARE REPURCHASES MADE BY THE COMPANY

No share repurchases have been made by the Company on the Stock Exchange in the previous six months.

6. REASONS FOR SHARE REPURCHASES

The Board believes that it is in the best interests of the Company and its shareholders for the Board to have the power to repurchase shares pursuant to the Repurchase Mandate. Such share repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the earnings per share of the Company and will only be made when the Board believes that such a share repurchase will benefit the Company and its shareholders.

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*

(Incorporated in Bermuda with limited liability)

Form of proxy for use at the Annual General Meeting or any adjournment thereof

l/We[1]

holder(s) of

of

being[2] shares of HK$0.10 each in the capital of

Compass Pacific Holdings Limited (the “Company”), HEREBY APPOINT the Chairman of the meeting[3] or of

as my/our proxy to act for me/us at the Annual General Meeting (or at any adjournment thereof) of the Company, to be held at Grand Room I & II, Grand Hyatt Hong Kong, 1 Harbour Road, Wanchai, Hong Kong on 3rd June, 2002 at 11:00 a.m. and in particular (but without limitation) at such meeting (or any adjournment thereof) to vote for me/us and in my/our name(s) in respect of the resolutions set out in the notice concerning the said meeting as indicated below, or, if no such indication is given, as my/our proxy thinks fit.

==> picture [469 x 245] intentionally omitted <==

----- Start of picture text ----- For [4] Against [4]1. To receive and consider the audited consolidated financial statements and the reportsof the directors and auditors of the Company for the year ended 31st December,2001.2. A. To re-elect following directors:(i) Mr. Siu On Ng(ii) Mr. Keung So(iii) Mr. Min Li YiB. To authorise the board of directors of the Company (the “Board”) to fixdirectors’ remuneration.3. To re-appoint Arthur Andersen & Co (or the company or accounting firm formedafter the merger with PricewaterhouseCoopers) as auditors of the Company and toauthorise the Board to fix their remuneration.4. A. To grant an unconditional mandate to the Board to issue and allot additionalshares not exceeding 20 per cent. of the issued share capital of the Company.B. To grant an unconditional mandate to the Board to repurchase the Company’sown shares not exceeding 10 per cent. of the issued share capital of theCompany.C. To extend the mandate granted under Resolution No. 4A by including thenumber of shares repurchased by the Company pursuant to Resolution No. 4B.----- End of picture text -----

Signature[5]

Dated

Notes:

1. Full name(s) and address(es) to be inserted in BLOCK CAPITALS.

2. Please insert the number of shares registered in your name(s) to which the proxy relates. If no number is inserted, this form of proxy will be deemed to relate to all those shares in the Company registered in your name(s).

3. If any proxy other than the Chairman of the Meeting is preferred, strike out the words “the Chairman of the meeting” and insert the name and address of the proxy desired in the space provided. ANY ALTERATION MADE TO THIS FORM OF PROXY MUST BE INITIALLED BY THE PERSON(S) WHO SIGN(S) IT.

4. IMPORTANT: IF YOU WISH TO VOTE FOR A RESOLUTION, TICK IN THE BOX MARKED “FOR” THE RELEVANT RESOLUTION. IF YOU WISH TO VOTE AGAINST A RESOLUTION, TICK IN THE BOX MARKED “AGAINST” THE RELEVANT RESOLUTION. Failure to tick either box will entitle your proxy to cast your vote at his discretion. Your proxy will also be entitled to vote at his discretion on any resolution properly put to the meeting other than that referred to in the notice convening the meeting.

5. This form of proxy must be signed by you or your attorney duly authorised in writing or, in the case of a corporation, must be either under its common seal or under the hand of an officer or attorney or other person duly authorised.

6. In order to be valid, this form of proxy, together with the power of attorney or other authority (if any) under which it is signed or a certified copy thereof, must be delivered to the Company’s principal office in Hong Kong at Suites 612-617, 6th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong not less than 48 hours before the time appointed for the holding of the meeting or any adjourned meeting.

7. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy will be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority will be determined by the order in which the names stand in the register of members in respect of the joint holding.

8. The proxy need not be a member of the Company but must attend the meeting in person to represent you.

9. Completion and deposit of the form of proxy will not preclude you from attending and voting at the meeting if you so wish. * for identification purpose only