Ko Yo Chemical (Group) Limited — Proxy Solicitation & Information Statement 2002

Jul 8, 2002

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this document or as to the action you should take, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your ordinary shares in Tse Sui Luen Jewellery (International) Limited you should at once hand this document 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 takes no responsibility for the contents of this document, 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 document.

謝瑞麟珠寶（國際）有限公司 Tse Sui Luen Jewellery (International) Limited (Incorporated in Bermuda with limited liability)

PROPOSALS INVOLVING

GENERAL MANDATES TO REPURCHASE ORDINARY SHARES

AND TO ISSUE ORDINARY SHARES

A notice convening a special general meeting of Tse Sui Luen Jewellery (International) Limited (“the Company”) to be held at Ground Floor, Block B, Summit Building, 30 Man Yue Street, Hunghom, Kowloon, Hong Kong on Monday, the 5th day of August, 2002 at 3:05 p.m. (or sooner thereafter as the annual general meeting convened at the same place and date at 3:00 p.m. shall have been concluded or adjourned) is set out on pages 11 to 13 of this document. Whether or not you propose to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the head office and principal place of business of the Company at Ground Floor, Block B, Summit Building, 30 Man Yue Street, Hunghom, Kowloon, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for the holding of the meeting (or any adjourned meeting as the case may be). Completion and return of a form of proxy will not preclude shareholders from attending and voting at the special general meeting if they so wish (or any adjourned meeting as the case may be).

Hong Kong, 27th June, 2002

DEFINITIONS

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

• “Companies Act” the Companies Act 1981 of the Laws of Bermuda (as amended)

• “Company” Tse Sui Luen Jewellery (International) Limited, a company incorporated in Bermuda with limited liability and listed on the Stock Exchange

• “Directors” directors of the Company

• “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

• “Latest Practicable Date” 22nd June, 2002, being the latest practicable date prior to the printing of this document for the purpose of ascertaining certain information contained therein

• “Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

• “Ordinary Share(s)” ordinary share(s) of HK$0.25 each in the share capital of the Company which are listed on the Stock Exchange

• “Preference Shares” convertible non-voting redeemable preference shares of US$1,000 each in the share capital of the Company which are not listed on any stock exchange

• “Repurchase Proposal” the proposal to give a general mandate to the Directors to exercise the powers of the Company to repurchase during the period as set out in the Repurchase Resolution Ordinary Shares up to a maximum of 10% of the issued ordinary share capital of the Company as at the date of passing the Repurchase Resolution

• “Repurchase Resolution” the proposed ordinary resolution as referred to in resolution numbered 1 set out in the notice of the Special General Meeting

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DEFINITIONS

“Share Repurchase Rules” the relevant rules set out in the Listing Rules to regulate the repurchase by companies with primary listing on the Stock Exchange of their own securities on the Stock Exchange “Special General Meeting” the special general meeting of the Company to be held on Monday, 5th August, 2002 at 3:05 p.m. (or sooner thereafter as the annual general meeting of the Company convened at the same place and date at 3:00 p.m. shall have been concluded or adjourned), notice of which is set out on pages 11 to 13 of this document “Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” the Hong Kong Code on Takeovers and Mergers “HK$” Hong Kong dollars, the lawful currency of Hong Kong

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LETTER FROM THE CHAIRMAN

謝瑞麟珠寶（國際）有限公司 Tse Sui Luen Jewellery (International) Limited

(Incorporated in Bermuda with limited liability)

Directors:

TSE Tat Fung, Tommy (Chairman) CHUNG Yuen Ling (Deputy Chairman) LEUNG Yit Kuen, Raymond HONG Po Kui, Martin CHUI Chi Yun, Robert Gerald Clive DOBBY LUI Pui Kee, Francis

• Independent non-executive Directors

Registered Office: Clarendon House Church Street Hamilton HM11 Bermuda

Head Office and Principal Place of Business in Hong Kong: Ground Floor, Block B Summit Building 30 Man Yue Street Hunghom, Kowloon Hong Kong

Hong Kong, 27th June, 2002

To shareholders of the Company

Dear Sir or Madam,

PROPOSALS INVOLVING GENERAL MANDATES TO REPURCHASE ORDINARY SHARES AND TO ISSUE ORDINARY SHARES

1. GENERAL MANDATE TO REPURCHASE ORDINARY SHARES

At the special general meeting of the Company held on 7th August, 2001, a general mandate was given by the Company to the Directors to exercise the powers of the Company to repurchase Ordinary Shares. Such mandate will lapse at the conclusion of the forthcoming annual general meeting of the Company to be held on 5th August, 2002. The Directors propose to seek your approval of the Repurchase Resolution to be proposed at the Special General Meeting. An explanatory statement as required under the Share Repurchase Rules to provide the requisite information of the Repurchase Proposal is set out in the appendix hereto.

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LETTER FROM THE CHAIRMAN

2. GENERAL MANDATE TO ISSUE ORDINARY SHARES

It will also be proposed at the Special General Meeting two ordinary resolutions respectively granting to the Directors a general mandate to allot, issue and deal with new Ordinary Shares not exceeding 20% of the issued ordinary share capital of the Company as at the date of the resolution and adding to such general mandate so granted to the Directors any Ordinary Shares representing the Ordinary Shares repurchased by the Company after the granting of the general mandate to repurchase up to 10% of the issued ordinary share capital of the Company as at the date of the Repurchase Resolution.

3. SPECIAL GENERAL MEETING

On pages 11 to 13 of this document, you will find a notice convening the Special General Meeting at which ordinary resolutions will be respectively proposed:

• to grant to the Directors a general mandate to exercise all powers of the Company to repurchase on the Stock Exchange Ordinary Shares representing up to a maximum of 10% of the issued ordinary share capital of the Company as at the date of passing the Repurchase Resolution;

• to grant to the Directors a general mandate to authorise the Directors to issue, allot and deal with new Ordinary Shares not exceeding 20% of the issued ordinary share capital of the Company as at the date of passing such resolution; and

• to extend the general mandate which will be granted to the Directors to issue, allot and deal with additional Ordinary Shares by adding to it the number of Ordinary Shares repurchased under the Repurchase Proposal after the granting of the general mandate.

4. ACTION TO BE TAKEN

A form of proxy for use at the Special General Meeting is enclosed herein. Whether or not you intend to attend the Special General Meeting, you are requested to complete the form of proxy and return it to the head office and principal place of business of the Company at Ground Floor, Block B, Summit Building, 30 Man Yue Street, Hunghom, Kowloon, Hong Kong in any event not less than 48 hours before the time appointed for holding the Special General Meeting (or any adjourned meeting as the case may be). Completion and return of the form of proxy will not preclude shareholders from attending and voting at the Special General Meeting (or any adjourned meeting as the case may be) if they so wish.

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LETTER FROM THE CHAIRMAN

5. RECOMMENDATION

The Directors believe that the Repurchase Proposal and the general mandate for Directors to issue new Ordinary Shares are all in the best interests of the Company and its shareholders. Accordingly, the Directors recommend that all shareholders should vote in favour of the resolutions set out in the notice of Special General Meeting as they intend to do themselves in respect of their own holdings, if any.

By Order of the Board Tse Tat Fung, Tommy Chairman

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EXPLANATORY STATEMENT

APPENDIX

This appendix serves as an explanatory statement, as required by the Share Repurchase Rules, to provide requisite information to you for your consideration of the proposal to permit the repurchase of Ordinary Shares up to a maximum of 10% of the issued ordinary share capital of the Company as at the date of passing the Repurchase Resolution.

For the purpose of this appendix, the term “shares” shall be as defined in the Code on Share Repurchase and the Listing Rules to mean shares of all classes (including Ordinary Shares) and securities which carry a right to subscribe or purchase shares.

1. SHARE REPURCHASE RULES

The Share Repurchase Rules permit companies whose primary listing are on the Stock Exchange to repurchase their fully paid up shares on the Stock Exchange subject to certain restrictions, the most important of which are summarised below.

(a) Shareholders’ approval

The Share Repurchase Rules provide that all on-market share repurchases by a company with its primary listing on the Stock Exchange must be approved in advance by an ordinary resolution, either by way of a specific approval in relation to specific transactions or by a general mandate to the directors of the company to make such repurchase.

(b) Source of funds

Repurchases must be made out of funds which are legally available for the purpose and in accordance with the company’s constitutive documents and the laws of the jurisdiction in which the company is incorporated or otherwise established.

(c) Maximum number of shares to be repurchased and subsequent issue

A maximum of 10% of the existing issued share capital of a company at the date of passing the relevant resolution may be repurchased on the Stock Exchange and a company may not, without the prior approval of the Stock Exchange, issue new shares or announce a proposed new issue of shares for a period of 30 days immediately following a share repurchase, whether on the Stock Exchange or otherwise (other than an issue of securities pursuant to the exercise of warrants, share options or similar instruments requiring the company to issue securities, which were outstanding prior to the repurchase).

(d) Trading restrictions

All share repurchases on the Stock Exchange in any given calendar month are limited to a maximum of 25% of the trading volume of the company’s shares in the immediately

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EXPLANATORY STATEMENT

APPENDIX

preceding calendar month. The Share Repurchase Rules also prohibit a company from making share repurchases on the Stock Exchange if the result of the repurchase would be that less than 25% (or the relevant prescribed minimum percentage for that company as determined by the Stock Exchange at the time of listing) of the issued share capital would be in public hands. A company shall not repurchase shares on 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.

(e) Status of repurchased shares

The Share Repurchase Rules provide that the listing of all repurchased shares are automatically cancelled and the share certificates must be cancelled and destroyed. Under the Companies Act, the shares repurchased will be treated as cancelled but the aggregate amount of the company’s authorized share capital would not be reduced.

(f) Suspension of repurchase

The Share Repurchase Rules require any share Repurchase programme to be suspended after a price sensitive development has occurred or has been the subject of a decision until the price sensitive information is made publicly available. In particular, during the period of one month immediately preceding either the preliminary announcement of a company’s annual results or the publication of a company’s interim report a company may not repurchase shares on the Stock Exchange, unless the circumstances are exceptional. In addition, the Stock Exchange reserves the right to suspend a share repurchase programme on the Stock Exchange if a company breaches the Listing Rules.

(g) Reporting requirements

Under the Share Repurchase Rules, share repurchases on 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 the form set out in Form G in appendix 5 of the Listing Rules of the Stock Exchange to disclose information on share repurchase including, the total number of shares repurchased by the Company, the purchase price per share or the highest and lowest prices paid for such purchase. In addition, the company’s annual report is required to disclose information regarding share repurchases made during the year, including the number of shares repurchased each month, the purchase price per share or the highest and lowest purchase prices per share and the aggregate price paid. The directors’ report is required to contain reference to the repurchases made during the year and the reason for making such repurchases. A company shall procure that any broker appointed by the company to effect the repurchase of shares shall disclose to the Stock Exchange such information with respect to repurchases made on behalf of the company as the Stock Exchange may request.

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EXPLANATORY STATEMENT

APPENDIX

(h) Connected parties

The Share Repurchase Rules prohibit a company from knowingly repurchasing shares on the Stock Exchange from a “connected person”, that is, a director, chief executive or substantial shareholder of the company or any of its subsidiaries or their respective associates (as defined in the Listing Rules) and a connected person is prohibited from knowingly selling his/her shares to the listed company.

2. SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company comprised 391,889,263 Ordinary Shares and 22,220 Preference Shares.

Subject to the passing of the Repurchase Resolution and on the basis that no further Ordinary Shares are issued or repurchased prior to the Special General Meeting, the Company would be allowed under the Repurchase Resolution to repurchase a maximum of 39,188,926 Ordinary Shares.

3. REASONS FOR REPURCHASE

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

4. FUNDING OF REPURCHASE

In repurchasing Ordinary Shares, the Company may only apply funds legally available for such purpose in accordance with its memorandum of association and bye-laws and the Companies Act. Bermuda law provides that the amount of capital repaid in connection with a share repurchase may only be paid out of either the capital paid up on the relevant Ordinary Shares, or the profits that would otherwise be available for dividend or the proceeds of a fresh issue of Ordinary Shares made for the purpose. The amount of premium payable on repurchase may only be paid out of either the profits that would otherwise be available for dividend or out of the share premium or contributed surplus accounts of the Company. It is presently proposed that any Ordinary Shares repurchased pursuant to the Repurchase Proposal would be funded out of the capital paid up on the repurchased Ordinary Shares, the profits of the Company which could otherwise be available for dividend and/or the Company’s share premium account.

There might be an adverse impact on the working capital or gearing position of the Company as compared with the position disclosed in the audited accounts contained in the annual report for the year ended 28th February, 2002 in the event that the power to repurchase Ordinary Shares pursuant to the Repurchase Proposal was to be carried out in full at any time

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EXPLANATORY STATEMENT

APPENDIX

during the proposed repurchase period. However, the Directors do not propose to exercise the power to repurchase Ordinary Shares pursuant to the Repurchase Proposal to such 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.

5. ORDINARY SHARE PRICES

The highest and lowest prices at which the Ordinary Shares have traded on the Stock Exchange during each of the previous twelve months before the Latest Practicable Date are as follows:

ws:
	Highest	Lowest
	HK$	HK$
June 2001	0.160	0.160
July 2001	0.160	0.150
August 2001	– *	– *
September 2001	0.148	0.146
October 2001	0.140	0.102
November 2001	– *	– *
December 2001	0.106	0.090
January 2002	0.090	0.088
February 2002	– *	– *
March 2002	– *	– *
April 2002	0.260	0.260
May 2002	0.223	0.180

* there was no trade during that month

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 Proposal and in accordance with the Listing Rules and the applicable laws of Bermuda.

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 Ordinary Shares to the Company or its subsidiaries under the Repurchase Proposal if such is approved by the shareholders.

No other connected persons (as defined in the Listing Rules) have notified the Company that they have a present intention to sell Ordinary Shares to the Company or its subsidiaries, or have undertaken not to sell any of the Ordinary Shares to the Company or its subsidiaries in the event that the Repurchase Proposal is approved by the shareholders.

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EXPLANATORY STATEMENT

APPENDIX

7. TAKEOVERS CODE

If on the exercise of the power to repurchase Ordinary Shares pursuant to the Repurchase Proposal, 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 Rule 32 of the Takeovers Code. As a result, a shareholder or group of shareholders acting in concert, could obtain or consolidate control of the Company and become obliged of making a mandatory offer in accordance with Rules 26 and 32 of the Takeovers Code.

As at the Latest Practicable Date, the register maintained by the Company pursuant to Section 16(1) of the Securities (Disclosure of Interest) Ordinance shows the following interests in Ordinary Shares being 10% or more of the issued ordinary share capital of the Company:

		% of existing issued
Name	No. of Ordinary Shares	ordinary share capital
Blink Technology Limited (“Blink”)	195,971,535_(Note)_	approximately 50.00

Note: Mr. Tse Sui Luen holds 69,364,210 Ordinary Shares registered in his name and 125,303,664 Ordinary Shares were held through a company beneficially owned by him (Mr. Tse’s company”). These 194,667,874 Ordinary Shares were charged under various financing documents which were assigned to Blink pursuant to a Settlement Agreement entered in April 2000. By a court order filed on 31st May 2001, Blink obtained order against Mr. Tse’s company for, inter alia, foreclosure of 125,303,664 Ordinary Shares comprised in the charge under the financing documents. By another court order filed on 11th March, 2002, Blink obtained court order against the Official Receiver, the trustee of the estate of Mr. Tse Sui Luen for, inter alia, foreclosure of 69,364,209 ordinary shares comprised in the charge under the financing documents referred above.

In the event that the Directors exercise in full the power to repurchase Ordinary Shares under the Repurchase Proposal, then (if the present shareholdings otherwise remained the same) the percentage of shareholding of each of the parties named above would be increased as follows:

% of issued ordinary share capital Name after share repurchase Blink approximately 55.56

Since Blink has already interested in over 50% of the existing issued ordinary share capital, the Directors believe that such an increase may not give rise to an obligation to make a mandatory offer under Rules 26 and 32 of the Takeover Code.

8. ORDINARY SHARES REPURCHASE MADE BY THE COMPANY

The Company had not repurchased any Ordinary Shares whether on the Stock Exchange or otherwise in the six months preceding the Latest Practicable Date.

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NOTICE OF SPECIAL GENERAL MEETING

謝瑞麟珠寶（國際）有限公司 Tse Sui Luen Jewellery (International) Limited

(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a Special General Meeting of the Company will be held at Ground Floor, Block B, Summit Building, 30 Man Yue Street, Hunghom, Kowloon, Hong Kong on Monday, the 5th day of August, 2002 at 3:05 p.m. (or sooner thereafter as the annual general meeting of the Company convened at the same place and date at 3:00 p.m. shall have been concluded or adjourned) for the purpose of considering and, if thought fit, passing the following resolutions which will be proposed as Ordinary Resolutions:

ORDINARY RESOLUTIONS

1. “ THAT :

2. (a) subject to paragraph (b) below, the exercise by the Directors of the Company during the Relevant Period (as hereinafter defined) of all the powers of the Company to repurchase ordinary shares of HK$0.25 each in the capital of the Company on The Stock Exchange of Hong Kong Limited (“the Stock Exchange”) or on any other stock exchange on which the securities of the Company may be listed and recognised by the Securities and Futures Commission of Hong Kong and the Stock Exchange for this purpose, subject to and in accordance with all applicable laws and the requirements of the Rules Governing the Listing of Securities on the Stock Exchange or of any other stock exchange as amended from time to time, be and is hereby generally and unconditionally approved;

3. (b) the aggregate nominal amount of ordinary shares of the Company which the Directors of the Company is authorised to repurchase pursuant to the approval in paragraph (a) above shall not exceed 10% of the aggregate nominal amount of the issued ordinary share capital of the Company as at the date of passing this Resolution, and the said approval shall be limited accordingly; and

4. (c) for the purposes of this Resolution, “Relevant Period” means the period from the passing of this Resolution until whichever is the earliest of:

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

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NOTICE OF SPECIAL GENERAL MEETING

  - (ii) the expiration of the period within which the next annual general meeting of the Company is required by law or the bye-laws of the Company to be held; and

  - (iii) the date on which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting.”

1. “ THAT :

2. (a) subject to paragraph (c) below, the exercise by the Directors of the Company during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional ordinary shares of HK$0.25 each in the capital of the Company and to make or grant offers, agreements and options (including bonds, warrants and debentures convertible into ordinary shares of the Company) which would or might require the exercise of such power be and is hereby generally and unconditionally approved;

3. (b) the approval in paragraph (a) above shall authorise the Directors of the Company during the Relevant Period (as hereinafter defined) to make or grant offers, agreements and options (including bonds, warrants and debentures convertible into ordinary shares of the Company) which would or might require the exercise of such power after the end of the Relevant Period;

4. (c) the aggregate nominal amount of ordinary share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) and issued by the Directors of the Company pursuant to the approval in paragraph (a) above, otherwise than (i) a Rights Issue (as hereinafter defined); (ii) an issue of ordinary shares as scrip dividends pursuant to the byelaws of the Company from time to time; or (iii) an issue of ordinary shares under any option scheme or similar arrangement for the time being adopted for the grant or issue to employees of the Company and/or any of its subsidiaries of ordinary shares or rights to acquire ordinary shares of the Company, shall not exceed 20% of the aggregate nominal amount of the issued ordinary share capital of the Company as at the date of passing this Resolution, and the said approval shall be limited accordingly; and

5. (d) for the purpose of this Resolution,

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

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

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NOTICE OF SPECIAL GENERAL MEETING

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by law or the bye-laws of the Company to be held; and

• (iii) the date on which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting; and

“Rights Issue” means an offer of shares open for a period fixed by the Directors of the Company to the holders of shares of the Company on the register on a fixed record date in proportion to their then holdings of such shares as at that date (subject to such exclusions or other arrangements as the Directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory outside Hong Kong applicable to the Company).”

1. “ THAT subject to the passing of Resolutions No.1 and No.2 set out in the notice convening the meeting, the general mandate granted to the Directors of the Company to allot, issue and deal with additional ordinary shares pursuant to Resolution No.2 set out in the notice convening this meeting be and is hereby extended by the addition thereto of an amount representing the aggregate nominal amount of ordinary shares in the capital of the Company repurchased by the Company under the authority granted pursuant to Resolution No.1 set out in the notice convening this meeting, provided that such amount of shares so repurchased shall not exceed 10% of the aggregate nominal amount of the issued ordinary share capital of the Company as at the date of the said Resolution.”

By Order of the Board Chung Yuen Ling Company Secretary

Hong Kong, 27th June, 2002

Notes:

1. Any member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote instead of him. A proxy need not be a member 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 at the head office and principal place of business of the Company at Ground Floor, Block B, Summit Building, 30 Man Yue Street, Hunghom, Kowloon, Hong Kong in any event not less than 48 hours before the time appointed for holding the meeting (or any adjourned meeting as the case may be).

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