KLN Logistics Group Limited — Proxy Solicitation & Information Statement 2002

Aug 1, 2002

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt about this circular or as to the action to be taken, you should consult your stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in Vitasoy International Holdings Limited (the “Company”), you should at once hand this circular and the accompanying form of proxy 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 (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 this circular.

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(Incorporated in Hong Kong with limited liability)
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PROPOSALS FOR ADOPTION OF A NEW SHARE OPTION SCHEME AND TERMINATION OF THE EXISTING SHARE OPTION SCHEME, GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES AND NOTICE OF EXTRAORDINARY GENERAL MEETING

A notice convening an extraordinary general meeting of the Company to be held at Chater Rooms II & III, Function Room Level, The Ritz-Carlton Hong Kong, 3 Connaught Road Central, Hong Kong on Wednesday, 4th September, 2002 at 3:30 p.m. (or so soon thereafter as the annual general meeting of the Company convened at the same place and date at 3:00 p.m. shall have concluded or adjourned) is set out on pages 18 to 21 of this circular. Whether or not you intend to attend at the meeting, you are requested to complete and return the form of proxy to the registered office of the Company in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time fixed for the meeting. The completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting if you so wish.

25th July, 2002

CONTENTS

	Page
RESPONSIBILITY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
LETTER FROM THE CHAIRMAN
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Adoption of New Share Option Scheme
and Termination of Existing Share Option Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
General Mandate to Repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
General Mandate to Issue Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Document for Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
APPENDIX I – PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME . . . . . . .	8
APPENDIX II – REPURCHASE MANDATE EXPLANATORY STATEMENT. . . . . . . . . . . .	15
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

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DEFINITIONS

In this circular, the following expressions shall have the following meanings unless the context requires otherwise:

• “Board”

the board of Directors

• “Company”

Vitasoy International Holdings Limited（維他奶國際集團有限公 司）, a company incorporated in Hong Kong, whose shares are listed on the Stock Exchange

• “Directors” the directors, including independent non-executive directors of the Company

• “Eligible Participant”

means any director of the Company or any of the Subsidiaries, and any executive or employee of the Company or any of the Subsidiaries

• “Existing Share Option Scheme”

• the existing share option scheme of the Company adopted on 9th March, 1994

• “Extraordinary General Meeting”

• the extraordinary general meeting of the Company to be held at Chater Rooms II & III, Function Room Level, The Ritz-Carlton Hong Kong, 3 Connaught Road Central, Hong Kong on Wednesday, 4th September, 2002 at 3:30 p.m. (or so soon thereafter as the annual general meeting of the Company convened at the same place and date at 3:00 p.m. shall have concluded or adjourned), notice of which is set out on pages 18 to 21 of this circular

• “Group”

the Company and its Subsidiaries

• “HK$”

Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong”

The Hong Kong Special Administrative Region of the People’s Republic of China

• “Latest Practicable Date”

• 22nd July, 2002, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

• “Listing Rules”

Rules Governing the Listing of Securities on the Stock Exchange

• “New Share Option Scheme”

• the share option scheme which is proposed to be adopted by the Company at the Extraordinary General Meeting, further information and summary of the principal terms are set out in Appendix I

“Option”

an option to subscribe for the Shares granted pursuant to the New Share Option Scheme

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DEFINITIONS

“Repurchase Mandate” a general mandate to be given to the Directors to repurchase Shares not exceeding 10% of the aggregate nominal amount of the issued share capital of the Company as at the date of passing the relevant resolution “Shares” shares of HK$0.25 each in the capital of the Company “Share Issue Mandate” a general and unconditional mandate to be given to the Directors to issue, allot and deal with Shares not exceeding 20% of the aggregate nominal amount of the issued share capital of the Company as at the date of passing the relevant resolution. “Shareholders” holders of Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Subscription Price” the price per Share at which the grantee may subscribe for the Shares on the exercise of an Option “Subsidiary” a subsidiary for the time being of the Company within the meaning of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) and “Subsidiaries” shall be construed accordingly “Takeovers Code” The Hong Kong Codes on Takeovers and Mergers

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LETTER FROM THE CHAIRMAN

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(Incorporated in Hong Kong with limited liability)

Directors:

• Mr. Winston Yau-lai LO (Executive Chairman)

• Dr. The Hon. David Kwok-po LI (Independent Non-executive Director)

• Mr. Iain F. BRUCE (Independent Non-executive Director)

• Mr. Chi-kian SHIU (Non-executive Director)

Registered Office: No.1 Kin Wong Street, Tuen Mun, New Territories, Hong Kong

• Ms. Myrna Mo-ching LO (Non-executive Director)

• Mr. Frank Yau-yee LO (Non-executive Director)

• Ms. Yvonne Mo-ling LO (Non-executive Director)

• Mr. Fransis Ming-yin KONG (Executive Director)

• Mr. Eric Fat YU (Executive Director)

• Mr. John Shek-hung LAU (Executive Director)

25th July, 2002

To the Shareholders

Dear Sir or Madam,

PROPOSALS FOR ADOPTION OF A NEW SHARE OPTION SCHEME AND TERMINATION OF THE EXISTING SHARE OPTION SCHEME, GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES AND NOTICE OF EXTRORDINARY GENERAL MEETING

INTRODUCTION

At the Extraordinary General Meeting, ordinary resolutions will be proposed to approve the adoption of the New Share Option Scheme and the termination of the Existing Share Option Scheme, the granting of the Repurchase Mandate and the Share Issue Mandate and the extension of the Share Issue Mandate. The purpose of this circular is to provide you with information regarding the above proposals and to seek the approval of Shareholders for the resolutions relating to such matters at the Extraordinary General Meeting.

ADOPTION OF NEW SHARE OPTION SCHEME AND TERMINATION OF EXISTING SHARE OPTION SCHEME

As a result of the changes to Chapter 17 of the Listing Rules which governs the operation of share option schemes of the listed issuers, the Directors would like to seek the approval of the Shareholders at the Extraordinary General Meeting for the termination of the Existing Share Option Scheme and the adoption of the New Share Option Scheme. Principal terms of the New Share Option Scheme are set out in Appendix I to this circular.

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LETTER FROM THE CHAIRMAN

The Directors consider that the adoption of the New Share Option Scheme is in the interests of the Company and the Shareholders as a whole because it enables the Company to recruit, retain, motivate and reward high calibre and loyal employees and officers for their contributions to the Group on a longterm basis.

As at the Latest Practicable Date, the Company has 974,095,500 Shares in issue and a total of 84,015,750 options being granted under the Existing Share Option Scheme, of which 15,942,000 options were exercised, 37,725,750 options lapsed and 30,348,000 options remain outstanding. No further options will be granted under the Existing Share Option Scheme consequent upon its termination and all outstanding options granted thereunder shall continue to be valid and exercisable in accordance with the terms of the Existing Share Option Scheme. Assuming that there is no change in the number of Shares in issue prior to the Extraordinary General Meeting, the total number of Shares which may be issued upon exercise of all Options to be granted under the New Share Option Scheme will be 97,409,550 Shares representing 10% of the issued share capital of the Company as at the Latest Practicable Date.

Unless the Directors otherwise determined, there is no general requirement of any minimum period for which an Option must be held or any performance targets which must be achieved before any Options granted under the New Share Option Scheme can be exercised. In addition, the Directors shall in its absolute discretion to determine the Subscription Price in respect of any particular Option on the basis set out in paragraph 5 of Appendix I to this circular. Participants will then be able to provide with an additional incentive by offering them an opportunity to obtain shareholding interest in the Company so as to reward them for their contributions to the Group.

The Directors consider that it is inappropriate to value the Options that can be granted pursuant to the New Share Option Scheme as if they had been granted as at the Latest Practicable Date as various determinating factors for the calculation of such value cannot be reasonably fixed at this stage. It would not be meaningful and to certain extent would be misleading to the Shareholders if the value of the Options is calculated based on a set of speculated assumptions.

The adoption of the New Share Option Scheme will be subject to and conditional upon:

• (i) the approval by the Shareholders at the Extraordinary General Meeting for the adoption of the New Share Option Scheme and the termination of the Existing Share Option Scheme; and

• (ii) the Listing Committee of the Stock Exchange granting approval for the listing of and permission to deal in the Shares which may be allotted and issued upon the exercise of the Options to be granted under the New Share Option Scheme to the extent of 10% of the issued share capital of the Company at the date of grant.

Application has been made to the Listing Committee of the Stock Exchange for approval of the listing of and permission to deal in the Shares to be issued pursuant to the exercise of any Options to be granted under the New Share Option Scheme. An announcement will be made on the outcome of the Extraordinary General Meeting regarding the adoption of the New Share Option Scheme on the next business day of such meeting pursuant to Rule 17.02 (1)(a) of the Listing Rules.

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LETTER FROM THE CHAIRMAN

None of the Directors are appointed as trustees of the New Share Option Scheme or have a direct or indirect interest in the trustees of the New Share Option Scheme.

GENERAL MANDATE TO REPURCHASE SHARES

An ordinary resolution will be proposed at the Extraordinary General Meeting to give a Repurchase Mandate to the Directors at any time until the first to occur of 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 the Companies Ordinance or the Company’s Articles of Association to be held or until the mandate is revoked or varied by an ordinary resolution of the Company’s Shareholders in general meeting. The Shares which may be repurchased pursuant to the Repurchase Mandate is limited to a maximum of 10% of the issued share capital of the Company at the date of the resolution approving the Repurchase Mandate.

GENERAL MANDATE TO ISSUE SHARES

At the Extraordinary General Meeting, an ordinary resolution will be proposed that the Directors be given a Share Issue Mandate to issue further new Shares representing up to 20% of the aggregate nominal amount of the share capital of the Company in issue on the date the resolution is passed. In addition, an ordinary resolution will also be proposed to authorise an extension of the Share Issue Mandate to be granted to the Directors to issue new Shares during the period up to the next annual general meeting of the Company or such earlier period as stated in the relevant resolution by adding to it the number of Shares repurchased under the Repurchase Mandate.

EXTRAORDINARY GENERAL MEETING

Set out on pages 18 to 21 of this circular is a notice convening the Extraordinary General Meeting at which ordinary resolutions will be proposed to consider and, if thought fit, to approve the adoption of the New Share Option Scheme and the termination of the Existing Share Option Scheme, the granting of the Repurchase Mandate and the Share Issue Mandate and the extension of the Share Issue Mandate.

A form of proxy for use at the Extraordinary General Meeting is enclosed. Whether or not you intend to attend at the meeting, you are requested to complete and return the form of proxy to the registered office of the Company in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time fixed for the meeting. The completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting if you so wish.

RECOMMENDATION

The Directors are of the opinion that the adoption of the New Share Option Scheme and the termination of the Existing Share Option Scheme, the granting of the Repurchase Mandate and the Share Issue Mandate and the extension of the Share Issue Mandate are in the best interests of the Company and recommend the Shareholders to vote in favour of the ordinary resolutions to be proposed at the Extraordinary General Meeting.

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LETTER FROM THE CHAIRMAN

DOCUMENT FOR INSPECTION

Copy of the New Share Option Scheme will be available for inspection during normal business hours on any business day at the registered office of the Company up to and including the date of Extraordinary General Meeting and will also be available for inspection at the Extraordinary General Meeting.

By Order of the Board Winston Yau-Lai LO Executive Chairman

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APPENDIX I PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

The following is a summary of the principal terms of the New Share Option Scheme to be adopted at the Extraordinary General Meeting:

1. PURPOSE

The purpose of the New Share Option Scheme is to enable the Company to grant Options to director of the Company or any of the Subsidiaries, and any executive or employee of the Company or any of the Subsidiaries as incentives and rewards for their contribution to the Company and/or the Subsidiaries.

2. WHO MAY JOIN

The Board may, at its discretion, offer Eligible Participant, being director of the Company or any of the Subsidiaries, and any executive or employee of the Company or any of the Subsidiaries who, in the sole discretion of the Board, will contribute or have contributed to the Company or any of the Subsidiaries, Options to subscribe for such number of new Shares as the Board may determine at an exercise price determined in accordance with paragraph 5 below. Upon acceptance of the Option, the grantee shall pay HK$10.00 to the Company by way of consideration for the grant.

3. MAXIMUM NUMBER OF SHARES

The maximum number of Shares which may be issued upon exercise of all options to be granted under the New Share Option Scheme and any other share option scheme(s) of the Company (which for this purpose, excludes the Existing Share Option Scheme) must not exceed 10% of the Shares in issue on the date of approval and adoption of the New Share Option Scheme by the Shareholders. Shares which would have been issuable pursuant to options which have lapsed in accordance with the terms of such share option scheme(s) will not be counted for the purpose of the 10% limit.

Subject to the issue of a circular by the Company and the approval of the Shareholders in general meeting and/or such other requirements prescribed under the Listing Rules from time to time, the Board may:

• (a) refresh this limit at any time to 10% of the Shares in issue as at the date of the approval by the Shareholders in general meeting (options previously granted under any share option schemes of the Company (including those outstanding, cancelled, lapsed in accordance with such schemes or exercised options) will not be counted for the purpose of calculating the limit as refreshed); and/or

• (b) grant Options beyond the 10% limit to Eligible Participants specifically identified by the Board whereupon the Company shall send a circular to the Shareholders containing, amongst others, a generic description of the specified participants who may be granted such Options, the number and terms of the Options to be granted and the purpose of granting Options to the specified participants with an explanation as to how the terms of the Options serve such purpose.

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PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX I

Notwithstanding the foregoing, the Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the New Share Option Scheme and any other share option scheme(s) of the Company at any time shall not exceed 30% of the Shares in issue from time to time. No options shall be granted under any scheme(s) of the Company if this will result in the 30% limit being exceeded.

4. MAXIMUM NUMBER OF OPTIONS TO ANY ONE INDIVIDUAL

The total number of Shares issued and which may fall to be issued upon exercise of the options granted under the New Share Option Scheme and any other share option scheme(s) of the Company (including exercised, cancelled and outstanding options) to each Eligible Participant in any 12-month period up to the date of grant shall not exceed 1% of the Shares in issue as at the date of grant.

Any further grant of Options in excess of this 1% limit shall be subject to the issue of a circular by the Company and the approval of the Shareholders in general meeting with such Eligible Participant and his or her associates (as defined in the Listing Rules) abstaining from voting and/or other requirements prescribed under the Listing Rules from time to time.

5. PRICE OF SHARES

The subscription price for a Share in respect of any particular Option granted under the New Share Option Scheme (which shall be payable upon exercise of the Option) shall be such price as the Board in its absolute discretion shall determine, save that such price will not be less than the highest of (a) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet on the date of grant, which must be a business day; (b) the average of the closing prices of the Shares as stated in the Stock Exchange’s daily quotations sheet for the five business days immediately preceding the date of grant; and (c) the nominal value of a Share.

6. GRANTING OPTIONS TO CONNECTED PERSONS

Any grant of Options to a director, chief executive or substantial shareholder of the Company or any of their associates (as defined in the Listing Rules) is required to be approved by the independent non-executive Directors (excluding the independent non-executive Director who is the grantee of the Options).

If the Company proposes to grant Options to a substantial shareholder (as defined in the Listing Rules) of the Company or any independent non-executive Director or their respective associates (as defined in the Listing Rules) which will result in the number of Shares issued and to be issued upon exercise of Options granted (including options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant:

• (a) representing in aggregate over 0.1% of the Shares in issue on the date of grant; and

• (b) having an aggregate value in excess of HK$5 million, based on the closing price of the Shares at the date of each grant,

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PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX I

such further grant of Options will be subject to the issue of a circular by the Company and the approval of the Shareholders in general meeting on a poll at which all connected persons (as defined in the Listing Rules) of the Company shall abstain from voting, and/or such other requirements prescribed under the Listing Rules from time to time. A connected person (as defined in the Listing Rules) of the Company will be permitted to vote against the grant only if his or her intention to do so has been stated in the circular.

7. RESTRICTIONS ON THE TIME OF GRANT OF OPTIONS

A grant of Options may not be made after a price-sensitive event has occurred or a price-sensitive matter has been the subject of a decision until such price-sensitive information has been published in such manner as prescribed by the Listing Rules from time to time. In particular, no Options may be granted during the period commencing one month immediately preceding the earlier of (a) the date of the Board meeting for the approval of the Company’s annual or interim results; and (b) the deadline for the Company to publish its annual or interim results announcement under the listing agreement and ending on the date of actual publication of the results announcement.

8. RIGHTS ARE PERSONAL TO GRANTEE

An Option is personal to the grantee and the grantee may not in any way sell, transfer, charge, mortgage, encumber or create any interest in favour of any third party over or in relation to any Option.

9. TIME OF EXERCISE OF OPTION

There is no general requirement that an Option must be held for any minimum period before it can be exercised but the Board is empowered to impose at its discretion any such minimum period at the time of grant of any particular Option. The date of grant of any particular Option is the date when the duplicate offer document constituting acceptance of the Option duly signed by the grantee, together with a remittance in favour of the Company of HK$10.00 by way of consideration is received by the Company, such date must be on or before the 28th day after the Option is offered to the relevant grantee. The period during which an Option may be exercised will be determined by the Board at its absolute discretion, save that no Option may be exercised more than 10 years after it has been granted. No Option may be granted more than 10 years after the date of approval of the New Share Option Scheme. Subject to earlier termination by the Company in general meeting or by the Board, the New Share Option Scheme shall be valid and effective for a period of 10 years after the date of adoption of the New Share Option Scheme by Shareholders by resolution at a general meeting.

10. PERFORMANCE TARGET

The Board has the discretion to require a particular grantee to achieve certain performance targets specified at the time of grant before any Option granted under the New Share Option Scheme can be exercised.

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APPENDIX I PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

11. RIGHTS ON CEASING TO BE AN ELIGIBLE PARTICIPANT

• (a) If the grantee ceases to be an Eligible Participant by reason of ill-health, injury, disability, death or retirement or by reason of his or her employing company ceasing to be a member of the Group or by termination of his or her employment by his or her employing company on notice or with pay in lieu of notice, then the grantee or (as the case may be) his or her personal representative may exercise all or any of his or her Options within 6 months after he or she ceases to be an Eligible Participant, unless the Option will otherwise have ceased to be exercisable. In any other circumstances where the grantee ceases to be an Eligible Participant (including resignation and termination either for misconduct or certain other grounds including bankruptcy, insolvency or a conviction of criminal offence or on notice), then all his or her Options shall lapse and determine on the date he or she ceases to be an Eligible Participant unless the Directors otherwise determine.

• (b) In no circumstances shall a person ceasing to be an Eligible Participant for any reason be entitled to any compensation for or in respect of any consequent diminution or extinction of his or her rights or benefits (actual or prospective) under any options then held by him or her or otherwise in connection with the New Share Option Scheme.

12. RIGHTS ON TAKEOVER

If, in consequence of any general offer made to the holders of Shares (being an offer made in the first instance on a condition such that, if it is satisfied, the offeror will have control of the Company) or otherwise, any person shall have obtained control of the Company and such offer becomes or is declared unconditional, the grantee (or his or her legal personal representatives) shall be entitled to exercise the Option in full (to the extent not already exercised) at any time within 1 month after the date on which the offer becomes or is declared unconditional.

13. RIGHTS ON LIQUIDATION

If notice is duly given of a general meeting at which a resolution will be proposed for the voluntary winding-up of the Company, each grantee (or his or her legal personal representatives) shall be entitled to exercise all or any of his or her Options in whole or in part (but so that any exercise hereunder shall only be valid if, at the time of such resolution being passed, the Option shall not have lapsed and determined in accordance with the other provisions of the New Share Option Scheme) at any time thereafter until the resolution is duly passed, or defeated or the meeting concluded or adjourned sine die, whichever shall first occur. If such resolution is duly passed, all Options shall, to the extent that they have not been exercised, thereupon lapse and determine.

14. RIGHTS ON RECONSTRUCTION

If under Section 166 of the Companies Ordinance a compromise or arrangement between the Company and its Shareholders or creditors is proposed for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies, the Company shall give notice thereof to all grantees (together with a notice of the existence of the provisions of this clause) on the same date as it despatches to each Shareholder or creditor of the

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PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX I

Company a notice summoning the meeting to consider such a compromise or arrangement, and thereupon each grantee (or his or her legal personal representatives) shall be entitled to exercise all or any of his or her Options in whole or in any part at any time prior to 12 noon on the day immediately preceding the date of the meeting directed to be convened by the Court for the purposes of considering such compromise or arrangement. With effect from the date of such meeting, the rights of all grantees to exercise their respective Options shall forthwith be suspended. Upon such compromise or arrangement becoming effective, all Options shall to the extent that they have not been exercised thereupon lapse and determine. The Directors shall endeavour to procure that the Shares issued as a result of the exercise of Options under this clause shall for the purposes of such compromise or arrangement form part of the issued share capital of the Company on the effective date thereof and that such Shares shall in all respects be subject to such compromise or arrangement. If for any reason such compromise or arrangement is not approved by the Court (whether upon the terms presented to the Court or upon any other terms as may be approved by such Court) the rights of grantees to exercise their respective options shall with effect from the date of the making of the order by the Court be restored in full and shall thereupon become exercisable (but subject to the other terms of the Scheme) as if such compromise or arrangement had not been proposed by the Company and no claim shall lie against the Company or any of its officers for any loss or damage sustained by any grantee as a result of the aforesaid suspension.

15. LAPSE OF THE OPTIONS

An Option will lapse automatically and not be exercisable (to the extent not already exercised) on the earliest of:

• (a) the expiry date relevant to that Option;

• (b) the expiry of any of the periods referred to in paragraphs 11, 12 and 14 above;

• (c) the date of commencement of the winding-up of the Company (as determined in accordance with the applicable law) as referred to in paragraph 13 above;

• (d) the date on which the scheme of arrangement of the Company becomes effective as referred to in paragraph 14 above;

• (e) in the event the grantee is under employment with the Company and/or any of its Subsidiaries, the relevant expiration periods on or after the date on which the grantee ceases to be an Eligible Participant by reason of the termination of his or her employment on any one or more of the grounds specified in paragraph 11 above;

• (f) the date on which the grantee ceases to be an Eligible Participant on or after committing any act of bankruptcy or becoming insolvent or making any arrangements or composition with his or her creditors generally; or

• (g) the date on which the grantee commits a breach of the prohibitions specified in paragraph 8 above or the options are cancelled in accordance with paragraph 19 below.

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PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX I

16. RANKING OF SHARES

The Shares to be allotted upon the exercise of an Option will not carry voting rights until completion of the registration of the grantee (or any other person) as the holder thereof. Subject to the aforesaid, Shares allotted and issued on the exercise of Options will rank pari passu with and shall have the same voting, dividend, transfer and other rights, including those arising on liquidation of the Company as attached to the other fully-paid Shares in issue on the date of issue.

17. EFFECT OF ALTERATIONS TO CAPITAL

In the event of a capitalisation issue, rights issue, sub-division or consolidation of shares or reduction of capital whilst any Option may become or remains exercisable, such corresponding alterations (if any) shall be made in the number of Shares subject to any outstanding Options and/or the exercise price of each outstanding Option and/or the number of Shares in respect of which any further Options may be granted as the auditors of the Company or an independent financial adviser shall certify in writing to the Board to be in their opinion fair and reasonable and in compliance with the Listing Rules. Any such alterations will be made on the basis that a grantee shall have the same proportion of the issued share capital of the Company for which any grantee of an Option is entitled to subscribe pursuant to the Options held by him or her before such alteration and the aggregate Subscription Price payable on the full exercise of any Option is to remain as nearly as possible the same as (and in any event not greater than) it was before such event. No such alteration will be made the effect of which would be to enable a Share to be issued at less than its nominal value. The issue of securities as consideration in a transaction is not to be regarded as a circumstance requiring any such alterations.

18. ALTERATION OF NEW SHARE OPTION SCHEME

The New Share Option Scheme may be altered in any respect by resolution of the Board except that the provisions of the New Share Option Scheme relating to matters contained in the Listing Rules shall not be altered to extend the class of Eligible Participants or to the advantage of grantees or prospective grantees except with the prior approval of the Shareholders in general meeting (with participants and their associates abstaining from voting). No such alteration shall operate to affect adversely the terms of issue of any option granted or agreed to be granted prior to such alteration except with the consent or sanction of such majority of the grantees as would be required of the Shareholders under the Articles of Association of the Company for the time being for a variation of the rights attached to the Shares.

Any alterations to the terms and conditions of the New Share Option Scheme, which are of a material nature, must be approved by the Shareholders of the Company in general meeting and the Stock Exchange, except where the alterations take effect automatically under the exiting terms of the New Share Option Scheme.

19. CANCELLATION OF OPTIONS

Any cancellation of Options granted but not exercised must be approved by the grantee of the relevant Options. Where the Company cancels Options and issues new ones to the same grantee, the issue of such new Options may only be made under the New Share Option Scheme with available unissued Options (excluding the cancelled Options) within the limit approved by Shareholders.

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APPENDIX I PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

20. TERMINATION OF THE NEW SHARE OPTION SCHEME

The Company may by resolution in general meeting or the Directors may at any time terminate the New Share Option Scheme and in such event no further Option shall be offered but the provisions of New Share Option Scheme shall remain in force to the extent necessary to give effect to the exercise of any Option granted prior to the termination or otherwise as may be required in accordance with the provisions of the New Share Option Scheme. Options granted prior to such termination at the time of termination shall continue to be valid and exercisable in accordance with the New Share Option Scheme.

21. DISCLOSURE IN ANNUAL AND INTERIM REPORTS

The Company will disclose details of the New Share Option Scheme in its annual and interim reports including the number of Options, date of grant, exercise price, exercise period, vesting period and (if appropriate) a valuation of Options granted during the financial year/period in accordance with the Listing Rules in force from time to time.

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APPENDIX II REPURCHASE MANDATE EXPLANATORY STATEMENT

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 and should be read in conjunction with the Letter from the Chairman on pages 4 to 7 of this circular.

1. SHARE CAPITAL

As at 22nd July, 2002 (the “Latest Practicable Date” prior to the printing of this document), the issued share capital of the Company comprised 974,095,500 shares of HK$0.25 each (“Share”).

Subject to the passing of the ordinary resolution to approve the Repurchase Mandate and on the basis that no further Shares are issued or repurchased prior to the Extraordinary General Meeting, the Company would be allowed under the Repurchase Mandate to repurchase a maximum of 97,409,550 Shares.

2. FUNDING OF REPURCHASES

Repurchases would be funded entirely from the Company’s available cash flow or working capital facilities legally available for the purpose and in accordance with the laws of Hong Kong Special Administrative Region and the Memorandum and Articles of Association of the Company.

In the event that the proposed Share repurchases were to be carried out in full at any time during the proposed repurchase period there could 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 consolidated accounts for the year ended 31st March, 2002). 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 the gearing levels which, in the opinion of the Directors, are from time to time appropriate for the Company.

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APPENDIX II REPURCHASE MANDATE EXPLANATORY STATEMENT

3. SHARE PRICES

The highest and lowest prices at which the Shares have traded on the Stock Exchange in each of the previous twelve months prior to the Latest Practicable Date were as follows:

		Per Share
	Highest		Lowest
	HK$		HK$
July 2001	1.310		1.160
August 2001	1.270		1.100
September 2001	1.160		1.020
October 2001	1.190		1.100
November 2001	1.380		1.120
December 2001	1.340		1.220
January 2002	1.300		1.230
February 2002	1.300		1.210
March 2002	1.330		1.220
April 2002	1.380		1.210
May 2002	1.600		1.340
June 2002	1.470		1.330

4. GENERAL

The Directors have undertaken to the Stock Exchange that they will exercise the powers of the Company to make repurchases pursuant to the ordinary resolution proposed at the Extraordinary General Meeting in accordance with the Listing Rules and the laws of Hong Kong.

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 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 under Rule 26 of the Takeovers Code. In the event that any exercise of the Repurchase Mandate would, to the knowledge of the Directors, have such a consequence, the Directors would not exercise the Repurchase Mandate to such an extent. The public shareholding will not be reduced to less than 25% even if the Directors have fully exercised the power under the Repurchase Mandate to repurchase Shares on the Stock Exchange.

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, their associates, have any present intention to sell any Shares 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) 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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APPENDIX II REPURCHASE MANDATE EXPLANATORY STATEMENT

5. SHARE REPURCHASES MADE BY THE COMPANY

No Share repurchases have been made by the Company (whether on the Stock Exchange or otherwise) in the six months prior to the Latest Practicable Date before the printing of this document.

6. REASONS FOR REPURCHASES

The Directors believe that it is in the best interests of the Company and its Shareholders to seek a general authority from the Shareholders to enable the Directors to repurchase Shares of the Company in the market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net assets and/or earnings per Share of the Company. 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 prevailing.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

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(Incorporated in Hong Kong with limited liability)

NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of the Company will be held at Chater Rooms II & III, Function Room Level, The Ritz-Carlton Hong Kong, 3 Connaught Road Central, Hong Kong on Wednesday, 4th September, 2002 at 3:30 p.m. (or so soon thereafter as the Annual General Meeting of the Company convened at the same place and date at 3:00 p.m. shall have concluded or adjourned) for the purpose of considering and, if thought fit, passing with or without modifications, the following resolutions as Ordinary Resolutions:

ORDINARY RESOLUTIONS

1. “ THAT subject to and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) granting approval for the listing of and permission to deal in the shares of the Company (the “Shares”) to be issued pursuant to the exercise of any options (the “Options”) to be granted pursuant to the new share option scheme of the Company (the “New Share Option Scheme”), the rules of which are contained in the document marked “A” produced to the meeting and for the purposes of identification signed by the Chairman thereof,

2. (a) the New Share Option Scheme be and is hereby approved and adopted and the Directors of the Company be and are hereby authorised to do all such acts and to enter into all such transactions, arrangements and agreements as may be necessary or expedient in order to give full effect to the New Share Option Scheme including but without limitation:

   • (i) to administer the New Share Option Scheme under which Options may be granted to participants eligible under the New Share Option Scheme to subscribe for Shares in the capital of the Company;

   • (ii) to modify and/or amend the New Share Option Scheme from time to time provided that such modification and/or amendment is effected in accordance with the provisions of the New Share Option Scheme relating to modifications and/or amendments and of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”) from time to time in force;

   • (iii) to allot and issue from time to time such number of Shares in the capital of the Company as may be required to be issued pursuant to the exercise of the Options under the New Share Option Scheme provided always that the maximum number of Shares to be issued upon exercise of all Options to be granted pursuant to the New Share Option Scheme and any other schemes shall not exceed 10 per cent of the Shares in issue as at the date of passing this resolution (excluding any lapsed Options); but the Company may seek approval of its shareholders in general meeting for refreshing the 10 per cent limit under the New Share Option Scheme (but, for the purpose of calculating the 10 per cent limit as “refreshed”, excluding

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NOTICE OF EXTRAORDINARY GENERAL MEETING

all Options previously granted under the New Share Option Scheme or any other schemes of the Company, whether exercised, outstanding, cancelled, or lapsed); and the maximum number of Shares which may be issued upon exercise of all outstanding Options granted and yet to be exercised under the New Share Option Scheme and any other schemes of the Company shall not exceed 30 per cent of the Shares in issue from time to time;

  - (iv) to make application at the appropriate time or times to the Stock Exchange, and any other stock exchanges upon which the issued Shares of the Company may for the time being be listed, for listing of and permission to deal in any Shares which may hereafter from time to time be allotted and issued pursuant to the exercise of the Options under the New Share Option Scheme;

  - (v) to consent to such conditions, modifications and/or variations as may be required or imposed by the relevant authorities and/or the Listing Rules in relation to the New Share Option Scheme; and

• (b) upon the New Share Option Scheme becoming unconditional, the operation of the existing share option scheme of the Company adopted on 9th March, 1994 (“Existing Share Option Scheme”) be terminated such that no further options will be granted under the Existing Share Option Scheme but in all other respects, the provisions of the Existing Share Option Scheme shall remain in full force and effect in respect of any options granted prior to the adoption of the New Share Option Scheme and any such options shall continue to be exercisable in accordance with their terms of issue.”

• “ THAT there be granted to the Directors of the Company an unconditional general mandate to issue, allot and deal with additional shares in the capital of the Company, and to make or grant offers, agreements and options in respect thereof, subject to the following conditions:

• (a) such mandate shall not extend beyond the Relevant Period (as defined below) save that the Directors of the Company may during the Relevant Period make or grant offers, agreements and options which might require the exercise of such powers after the end of the Relevant Period;

• (b) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors of the Company otherwise than pursuant to (i) a Rights Issue (as defined below); (ii) any scrip dividend scheme or similar arrangement providing for the allotment of shares in lieu of the whole or part of a dividend on shares of the Company in accordance with the Articles of Association of the Company; and (iii) an issue of shares pursuant to the exercise of any options which may be granted under any option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/ or employees of the Company and/or any of its subsidiaries of shares or rights to acquire shares of the Company, shall not exceed the aggregate of (aa) 20 per cent of the aggregate nominal amount of the share capital of the Company in issue at the date of passing of this resolution plus (bb) (if the Directors of the Company are so authorised

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NOTICE OF EXTRAORDINARY GENERAL MEETING

by a separate ordinary resolution of the shareholders of the Company) the nominal amount of share capital of the Company repurchased by the Company subsequent to the passing of this resolution (up to a maximum equivalent to 10 per cent of the aggregate nominal amount of the share capital of the Company in issue at the date of passing this resolution), and the said approval shall be limited accordingly; and

• (c) for the purposes of this resolution:

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

• (i) the conclusion of the next Annual General Meeting of the Company;

• (ii) the expiration of the period within which the next Annual General Meeting of the Company is required by the Articles of Association of the Company or any applicable laws to be held; and

• (iii) the revocation or variation of this resolution by an ordinary resolution of the shareholders of the Company in General Meeting.

“Rights Issue” means an offer of shares open for a period fixed by the Directors of the Company made to holders of shares on the Register of the Company on a fixed record date in proportion to their then holdings of 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 restriction or obligation under the laws of, or the requirements of any recognized regulatory body or any stock exchange in, or in any territory outside, Hong Kong.”

1. “ THAT there be granted to the Directors of the Company an unconditional general mandate to repurchase shares of HK$0.25 each in the capital of the Company, and THAT the exercise by the Directors of the Company of all powers of the Company to purchase shares subject to and in accordance with all applicable laws, rules and regulations be and is hereby generally and unconditionally approved, subject to the following conditions:

2. (a) such mandate shall not extend beyond the Relevant Period (which shall have the same meaning for the purpose of this resolution, mutatis mutandis, as given in paragraph (c) of Ordinary Resolution No. 2 set out in the Notice of Extraordinary General Meeting);

3. (b) such mandate shall authorise the Directors of the Company to procure the Company to repurchase shares at such prices as the Directors of the Company may at their discretion determine; and

4. (c) the aggregate nominal amount of shares repurchased or agreed to be repurchased by the Company pursuant to paragraph (a) of this resolution during the Relevant Period shall not exceed 10 per cent of the aggregate nominal amount of the share capital of the Company in issue at the date of passing of this resolution and the said approval shall be limited accordingly.”

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NOTICE OF EXTRAORDINARY GENERAL MEETING

1. “ THAT , conditional upon the passing of Ordinary Resolutions Nos.2 and 3 set out in the Notice of Extraordinary General Meeting, the aggregate nominal amount of the shares which are repurchased by the Company pursuant to and in accordance with Ordinary Resolution No.3 set out in the Notice of Extraordinary General Meeting shall be added to the aggregate nominal amount of the shares which may be allotted or agreed, conditionally or unconditionally, to be allotted by the Directors of the Company pursuant to and in accordance with Ordinary Resolution No. 2 set out in the Notice of Extraordinary General Meeting.”

By Order of the Board Paggie Ah-hing TONG Company Secretary

Hong Kong, 25th July, 2002

Notes:

1. A shareholder entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy need not be a shareholder of the Company.

2. To be valid, the 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 with the Company Secretary at the Registered Office of the Company at No. 1 Kin Wong Street, Tuen Mun, New Territories, Hong Kong not less than 48 hours before the appointed time for holding the meeting or any adjournment hereof (as the case may be).

3. The Register of Members of the Company will be closed from Thursday, 29th August, 2002, to Wednesday, 4th September, 2002 (both days inclusive) during which period no transfer of shares will be effected. In order to qualify for the final dividend, all transfers, accompanied by the relevant share certificates should be lodged with the Company’s Share Registrar, Computershare Hong Kong Investor Services Limited, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration not later than 4:00 p.m. on Wednesday, 28th August, 2002.

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