KPa-BM Holdings Limited — Proxy Solicitation & Information Statement 2003

Feb 13, 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Resources Logic Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or the transfer was effected for transmission to the purchaser or transferee.

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.

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(Incorporated in Bermuda with limited liability)

DISCLOSEABLE TRANSACTION AND ONGOING CONNECTED TRANSACTIONS

Financial adviser to China Resources Logic Limited

Independent financial adviser to the independent board committee of China Resources Logic Limited

A letter from the Independent Board Committee containing its recommendation to the independent Shareholders in respect of the Ongoing Connected Transactions is set out on page 17 of this circular. A letter from DBS Asia Capital Limited, the independent financial adviser, containing its advice to the Independent Board Committee in respect of the Ongoing Connected Transactions is set out on pages 18 to 22 of this circular.

A notice convening a special general meeting of China Resources Logic Limited to be held at 4: 00 p.m. on Wednesday, 27th March, 2002 at Room 4001, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong is set out on pages 28 to 29 of this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event by not later than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so desire.

• for identification purpose only

11th March, 2002

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
2.	Acquisition Agreement dated 27th February, 2002 . . . . . . . . . . . . . . . . . . . . . . . .	5
3.	Information on Semico and China Huajing Group . . . . . . . . . . . . . . . . . . . . . . . . . .	6
4.	Reasons for the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
5.	Particulars of the Ongoing Connected Transactions . . . . . . . . . . . . . . . . . . . . . . .	10
6.	Reasons for and benefits of the Ongoing Connected Transactions . . . . . . . . .	13
7.	Disclosure requirement and waiver sought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
8.	Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
9.	Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
10.	Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		17
Letter from DBS Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		18
Appendix — General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		23
Notice	of Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28

— i —

DEFINITIONS

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

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----- Start of picture text -----

||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|‘‘Acquisition’’|the|transaction|contemplated|under|the|Acquisition|Agreement|
|‘‘Acquisition|the|sale|and|purchase|agreement|dated|27th|February,|2002|
|Agreement’’|entered|into|between|CRC|Microelectronics|as|the|purchaser|and|
|World Ahead Limited as the vendor in relation to the entire issued|
|share|capital|of|Semico|Microelectronics|(BVI)|Limited,|whose|
|sole|asset|is|a|55%|equity|interest|in|Semico|
|‘‘associate(s)’’|has|the|meanings|ascribed|to|it|under|the|Listing|Rules|
|‘‘Board’’|board|of|Directors|
|‘‘CHEG-I&E’’|China|Huajing|Electronics|Group|Import|&|Export|Company|
|Limited|(|),|a|limited|liability|
|company|incorporated|in|Wuxi,|Jiangsu,|the|PRC,|whose|
|effective|interest|is|held|as|to|about|91.7%|by|China|Huajing|
|Group|
|‘‘China|Huajing|Group’’|China|Huajing|Electronics|Group|Corporation|(|
|),|a|state-owned|enterprise|incorporated|in|Wuxi,|
|Jiangsu,|the|PRC,|which|holds|a|45%|equity|interest|in|Semico|
|and,|after|Completion,|will|become|a|connected|person|of|the|
|Company|
|‘‘Company’’|China|Resources|Logic|Limited|(|),|an|exempted|
|company|incorporated|in|Bermuda|with|limited|liability,|the|
|shares|of|which|are|listed|on|the|main|board|of|the|Stock|
|Exchange|
|‘‘Completion’’|Completion|of|the|Acquisition, which|is subject|to, among|others,|
|the|conditions|as|set|out|in|the|paragraph|headed|‘‘Conditions’’|
|being|fulfilled|and/or|waived|(if|applicable)|by|CRC|
|Microelectronics|
|‘‘connected|person(s)’’|has|the|same|meaning|ascribed|to|it|in|the|Listing|Rules|
|‘‘Consideration’’|RMB28,600,000|(equivalent|to|about|HK$27.0|million),|the|total|
|consideration|payable|pursuant|to|the|Acquisition|Agreement|
|‘‘CRC|Microelectronics’’|CRC|Microelectronics|Company|Limited|(|),|a|
|wholly-owned|subsidiary|of|the|Company|incorporated|in|the|
|British|Virgin|Islands|and|the|purchaser|under|the|Acquisition|
|Agreement|

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— 1 —

DEFINITIONS

‘‘CSMC-HJ’’

Wuxi CSMC-HJ Semiconductor Company Limited ( ), a sino-foreign equity joint venture enterprise incorporated in Wuxi, Jiangsu, the PRC, whose equity interest is held as to 49% by China Huajing Group

‘‘DBS Asia’’ DBS Asia Capital Limited, an investment adviser and securities dealer registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong) and the independent financial adviser to the Independent Board Committee

• ‘‘Directors’’

• the directors of the Company

• ‘‘Group’’

the Company together with its subsidiaries

• ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong

• ‘‘Hong Kong’’ The Hong Kong Special Administrative Region of the PRC

• ‘‘Independent Board an independent committee of the Board consisting of the Committee’’ independent non-executive Directors, namely, Mr. Wong Tak Shing and Mr. Luk Chi Cheong, to advise the independent Shareholders in connection with the Ongoing Connected Transactions

• ‘‘INTECH Technology’’ Wuxi INTECH Technology Company Limited ( ), whose 80% equity interest is held by Semico and the

• remaining 20% equity interest is held by Wuxi IC Design Chuangye Service Centre ( ), an independent third party not connected with the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or their respective associates as at the Latest Practicable Date

• ‘‘Latest Practicable 8th March, 2002, being the latest practicable date before the Date’’ printing of this circular for ascertaining certain information contained herein

‘‘Listing Rules’’ The Rules Governing the Listing of Securities on the Stock Exchange

‘‘Ongoing Connected the connected transactions, as described in the paragraph Transactions’’ headed ‘‘Particulars of the Ongoing Connected Transactions’’ which, as a result of Completion, are subject to disclosure/ shareholders’ approval under the Listing Rules and will be continued between Semico and its connected persons on an ongoing basis

— 2 —

DEFINITIONS

‘‘PRC’’	The People’s Republic of China, for the purpose of this circular,
	excluding Hong Kong, The Macau Special Administrative Region
	and Taiwan
‘‘Project 908’’	one of the key projects in the 8th five-year (from 1991 to 1995)
	plan of the PRC initiated by the PRC Central Government
‘‘RMB’’	Renminbi, the lawful currency of the PRC
‘‘SDI Ordinance’’	Securities (Disclosure of Interests) Ordinance (Chapter 396 of the
	Laws of Hong Kong)
‘‘Semico’’	Wuxi China Resources Semico Microelectronics Company
	Limited ( ), 55% equity interest of
	which will be acquired effectively by CRC Microelectronics from
	World Ahead Limited under the Acquisition Agreement
‘‘Shareholder(s)’’	shareholder(s) of the Company
‘‘Special General	the special general meeting of the Company to be convened at
Meeting’’ or ‘‘SGM’’	4: 00 p.m. on Wednesday, 27th March, 2002 at Room 4001, China
	Resources Building, 26 Harbour Road, Wanchai, Hong Kong,
	notice of which is set out on pages 28 to 29 of this circular
‘‘STN-LCD’’	super twisted nematic LCD, a type of high density LCD
	technology with monochrome and color variants, used for
	graphic or character display
‘‘Stock Exchange’’	The Stock Exchange of Hong Kong Limited
‘‘%’’	per cent.

Note: For information purpose only, the translation of RMB to HK$ is based on the exchange rate of RMB106.1 = HK$100.0 in this circular.

— 3 —

LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability)

Board of Directors: Registered office: SONG Lin (Chairman) Cedar House CHEN Lang (Deputy Chairman and 41 Cedar Avenue Chief Executive Officer) Hamilton HM 12 ZHU Jinkun Bermuda DAI Zhenhua ONG Thiam Kin Head office and principal YU Min place of business: NING Gaoning Room 4001 WONG Tak Shing China Resources Building LUK Chi Cheong* 26 Harbour Road Wanchai * Non-executive Director Hong Kong

** Independent non-executive Director

11th March, 2002

To the Shareholders and, for information only, holders of share options of the Company

DISCLOSEABLE TRANSACTION

AND

ONGOING CONNECTED TRANSACTIONS

1. INTRODUCTION

The Company announced on 27th February, 2002 that it has, through one of its whollyowned subsidiaries, entered into the Acquisition Agreement with World Ahead Limited, pursuant to which the Company will effectively acquire a 55% equity interest in Semico for a consideration of RMB28,600,000 (equivalent to about HK$27.0 million). The Consideration will be satisfied by cash installments in a three-year interval from Completion.

Semico is a fabless IC design house whose principal activities are designing, testing and sale of IC products and chips. With a unique design technique, Semico’s products are principally used in the fields of consumer electronics appliances and telecommunication devices.

• for identification purpose only

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LETTER FROM THE BOARD

Following Completion, Semico will continue to enter into the Ongoing Connected Transactions with China Huajing Group, which is a substantial shareholder of Semico, or its associates to maintain the smooth operation of Semico since these transactions have already been in place prior to the date of the Acquisition Agreement.

For the purpose of the Listing Rules, the Acquisition constitutes a discloseable transaction for the Company and, after Completion, the Ongoing Connected Transactions will constitute connected transactions for the Company. The Ongoing Connected Transactions are subject to, among other things, the approval by the independent Shareholders at the SGM.

The main purposes of this circular are (i) to provide you with further information relating to the Acquisition and the Ongoing Connected Transactions; (ii) to provide you with the recommendation and opinion of the Independent Board Committee in relation to the Ongoing Connected Transactions; (iii) to set out the letter from DBS Asia containing its recommendation to the Independent Board Committee in relation to the Ongoing Connected Transactions; and (iv) to give you notice of the SGM at which an ordinary resolution as set out in the notice of the SGM will be proposed to approve the Ongoing Connected Transactions.

2. ACQUISITION AGREEMENT DATED 27TH FEBRUARY, 2002

Parties

Purchaser: CRC Microelectronics, a wholly-owned subsidiary of the Company

Vendor: World Ahead Limited, which is wholly-owned by Mr. Liao Yong, Mr. Zheng Ming, Mr. Sun Ming and Mr. Liang Tingchao, who are directors of Semico. (Each of World Ahead Limited and its shareholders an independent third party not connected with the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or their respective associates.)

Assets to be acquired

The entire issued share capital of Semico Microelectronics (BVI) Limited, whose sole asset is a 55% equity interest in Semico.

Consideration

RMB28,600,000 (equivalent to about HK$27.0 million), which will be satisfied by four cash installments payable to World Ahead Limited (or its nominees) as follows:

• (i) RMB5,500,000 (equivalent to about HK$5.2 million) upon Completion; and

• (ii) the remaining RMB23,100,000 (equivalent to about HK$21.8 million) by three equal installments (i.e., each installment of RMB7,700,000 (equivalent to about HK$7.3 million)) on each of the three anniversaries immediately following the date of Completion.

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LETTER FROM THE BOARD

The terms of the Acquisition Agreement were negotiated on arm’s length basis and the Consideration represents a price-earning multiple of about 6.86 times of Semico’s unaudited profit for the year ended 31st December, 2001 attributable to the equity interest to be acquired by the Company.

The Group will satisfy the Consideration in cash from its internal resources.

Conditions

The Acquisition Agreement is conditional upon, among other things, the following conditions being fulfilled or waived (if applicable) on or before 30th April, 2002 or such other date as the parties to the Acquisition Agreement may otherwise agree:

• (i) satisfactory results of the due diligence review on Semico (covering without limitation to the state of affairs, assets and liabilities, financial position and business operation of Semico) to CRC Microelectronics;

• (ii) the obtaining of all the approvals which are required by the relevant laws or otherwise necessary for the Completion;

• (iii) the receipt by CRC Microelectronics of a legal opinion issued by a firm of qualified lawyers in the PRC in such form and substance satisfactory to CRC Microelectronics in respect of the Acquisition; and

• (iv) the passing of an ordinary resolution by the independent Shareholders at the SGM approving the Ongoing Connected Transactions.

In respect of item (i) above, the Company has engaged an auditor to conduct an audit on the state of affairs and profit of Semico for the year ended 31st December, 2001.

3. INFORMATION ON SEMICO AND CHINA HUAJING GROUP

Semico

Semico was established on 21st January, 2000 in the PRC as a limited liability company. The registered capital of Semico is RMB10,000,000 (equivalent to about HK9.4 million), which has been fully paid up. Set out below are the simplified shareholding structures of Semico before and after Completion:

Before Completion

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LETTER FROM THE BOARD

After Completion

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Semico is a fabless IC design house whose principal activities are designing, testing and sale of IC products and chips while the wafer manufacturing and packaging processes of Semico are out-sourced to dedicated foundries and packaging service providers. With a unique design technique, Semico’s products are principally used in the fields of consumer electronics appliances and telecommunication devices including, among others, calculators, display module of fixed line telephones, black and white STN-LCD, remote controls and voice synthesizers. As at 31st December, 2001, Semico had a staff team of about 190 members. After Completion, the Group will also engage in SOC (System on Chip) IC design for a firm foothold in the PRC IC market of consumer appliance, audio, telecommunication and intelligent toys.

Semico has developed about 40 products in the field of logic ICs for consumer and telecommunication products since its establishment. According to China Electronics News ( ) dated 14th December, 2001, Semico was one of the big-four fabless IC design houses in the PRC in terms of revenue in 2000.

Certain key employees of Semico (including Mr. Liao Yong and Mr. Zheng Ming, who are directors of Semico and also shareholders of World Ahead Limited) have undertaken to the Company that each of them will continue his/her service with Semico for at least three years following Completion. The Directors consider such arrangement will favour Semico’s smooth operation.

Semico is interested in an 80% equity interest in INTECH Technology. INTECH Technology was established on 10th December, 2001 in Wuxi, Jiangsu Province, the PRC as one of the key projects in the 10th five-year plan (2001-2005) of Jiangsu Province. The principal business of INTECH Technology is the development of IC design platform and provision of relevant services. INTECH Technology started its operations in January 2002.

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LETTER FROM THE BOARD

The unaudited consolidated net tangible asset value of Semico adjusted for the proposed dividend for the year ended 31st December, 2001 prepared in accordance with the PRC GAAP as at 31st December, 2001 was about RMB22,110,000 (equivalent to about HK$20.8 million). The table herebelow sets out a summary of the unaudited consolidated results of Semico for the period from the date of its establishment on 21st January, 2000 to 31st December 2000 and the year ended 31st December, 2001 prepared in accordance with the PRC GAAP:

	Period from
	21st January,
	2000 to	Year Ended
	31st December,	31st December,
	2000	2001
	RMB’000	RMB’000
	(unaudited)	(unaudited)
Turnover	95,871	116,131
Profit before/after tax (note)	14,249	7,576
Profit attributable to the 55% equity interest
in Semico	7,837	4,167

Note: For the fiscal years 2000 and 2001, Semico enjoyed an exemption of enterprise income tax pursuant to relevant preferential policies.

The decrease of net profit margin for the year ended 31st December, 2001 compared with that for the period from 21st January, 2000 to 31st December, 2000 was mainly due to the downturn of global semiconductor industry on unit price of semiconductor products.

China Huajing Group

China Huajing Group, which has a 45% equity interest in Semico, was established in August 1989 and was designated by the PRC Central Government in 1990 to carry out ‘‘Project 908’’ (908 ). Project 908 was one of the key projects initiated by the PRC Central Government to develop PRC’s semiconductor industry. China Huajing Group is one of the largest semiconductor enterprises in the PRC principally engaged in the businesses of designing, fabrication, packaging, testing and sale of ICs and discrete devices.

At present, the Company’s controlling shareholder, China Resources (Holdings) Company Limited, is in active pursuit of acquiring a controlling interest in China Huajing Group. Subject to the satisfactory result of a debt restructuring and a due diligence review, China Resources (Holdings) Company Limited may, through the Company, acquire a controlling interest in China Huajing Group. As at the Latest Practicable Date, no definitive agreement has been in place between the parties in respect of the timetable, consideration and method of payment in connection with the proposed acquisition of China Huajing Group.

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LETTER FROM THE BOARD

4. REASONS FOR THE ACQUISITION

In February 2001, the Group transformed from an office furniture manufacturer to the technology flagship of China Resources (Holdings) Company Limited. As a result of the restructuring exercise to become the technology flagship of China Resources (Holdings) Company Limited, the Group expanded its business scope to include air-conditioner compressor business, semiconductor business and information technology service business. For the six months ended 30th June, 2001, the Group turned around its loss position and reported an unaudited net profit of about HK$65.2 million.

In October 2001, the Directors announced the implementation of an expansion plan in connection with its air-conditioner compressor business to expand its air-conditioner compressor production capacity by about 900,000 units per annum to about 3,100,000 units per annum and to enhance its product portfolio. The Directors believe that the Group is currently one of the top-four air-conditioner compressor manufacturers in the PRC. For the six months ended 30th June, 2001, the air-conditioner compressor business accounted for about 86% of the Group’s unaudited operating profits.

As to the semiconductor business, the Directors consider it to be another key business area with ample opportunities for the Group. At present, the principal assets of the Company’s semiconductor business include, among others, (a) the production facilities for design, fabrication, packaging and testing of 4-inch wafers for consumer ICs used in clocks, toys and telecommunication products whose annual production capacity is about 360,000 pieces of 4-inch wafers and (b) a fabless IC design house established in April 2001. The Acquisition represents the Group’s initial move to broaden its earning base and makes the semiconductor business another key income contributor along with its air-conditioner compressor business.

Taking into consideration the following factors, the Directors believe that the Acquisition represents an excellent opportunity for the Group to enhance its semiconductor business and will strategically position the Group to capture the market potential of the semiconductor industry, especially in the PRC:

• (i) In the PRC, domestic supply of IC could not by far satisfy total market demand and an increasing number of electronics companies has moved their production bases to the PRC. The Directors expect that the growth potential of the semiconductor industry in the PRC, especially for consumer electronics appliances and telecommunication devices, will remain robust in the foreseeable future.

• (ii) With the trend of vertical specialization in the semiconductor industry, apart from dedicated foundries and dedicated packaging and testing service providers, fabless IC design houses have blossomed in recent years. The Directors believe that the Acquisition represents a good investment opportunity while maintaining a low capital investment profile.

• (iii) Semico’s current business focus on consumer and telecommunication ICs is in line with the Group’s strategy on semiconductor business. The Directors believe that Semico’s strong market presence, rich product portfolio and about 120 experienced

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LETTER FROM THE BOARD

engineers and technicians together with the existing design team of the Group will provide a solid platform for the Group to further enhance its designing and marketing capabilities.

• (iv) In addition to profit contribution, Semico is in a strong position to become one of the leading design houses in the consumer IC market. Semico’s established marketing channels in the PRC will help the Group strengthen its foundation for future penetration into the PRC semiconductor market.

• (v) The Directors consider that the Acquisition also represents a good opportunity for the cooperation between the Group and China Huajing Group and signifies the commencement of a strategic relationship with China Huajing Group. In order to have a more solid position in the PRC semiconductor market, the Group expects to explore more business opportunities and forms of cooperation with China Huajing Group (including but not limited to an equity investment in China Huajing Group as mentioned above) in the future.

The Group will continue its long-term strategy to develop its semiconductor business, to capture the market potential of the semiconductor industry and will actively explore attractive opportunities to expand through consolidation of its investment and/or acquisitions in the PRC and Hong Kong.

5. PARTICULARS OF THE ONGOING CONNECTED TRANSACTIONS

The Directors expect that following Completion, Semico, whose equity interest will be effectively held as to 55% by the Company and 45% by China Huajing Group, will continue to enter into the Ongoing Connected Transactions with China Huajing Group or its associates (namely, CSMC-HJ and CHEG-I&E), which will become connected persons to the Company as a result of the Acquisition, to maintain the smooth operation of Semico since these transactions have already been in place prior to the date of the Acquisition Agreement.

Set out below is a summary of the Ongoing Connected Transactions, which will constitute non-exempted connected transactions for the Company after Completion:

A. Lease of equipment

Transaction nature

Semico will continue to lease certain design and testing equipment from China Huajing Group. Pursuant to a lease agreement dated 27th February, 2002, the lease arrangement will be effective for a period of three years from Completion.

Rental payable to connected person

RMB166,500 (equivalent to about HK$156,900) per month

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LETTER FROM THE BOARD

Pricing basis

The rental payable by Semico to China Huajing Group has been negotiated on an arm’s length basis between the parties and a firm of independent machinery valuers has confirmed on 27th February, 2002 that the above-mentioned rental payable is not higher than the fair market value available to the Group.

B. Supply of utilities and related services by connected person

Transaction nature

Semico will continue to subscribe from China Huajing Group for utilities and related services for its daily operation. The types of utilities and related services provided by China Huajing Group to Semico include:

• (1) Electricity for both lighting and industry usage

• (2) Tap water, purified water, cold water and steam

• (3) Compressed air and nitrogen

• (4) Air-conditioning and vacuum treatment for the environment of the testing process

Pricing basis

According to the relevant agreement dated 27th February, 2002 with an effective period of three years from Completion, the above-mentioned utilities and related services provided to Semico will be charged by China Huajing Group by reference to the costs for the provision of relevant utilities or related services plus a margin of not more than 10%.

C. Provision of wafer fabrication services by connected person

Transaction nature

It is envisaged that CSMC-HJ will continue to provide wafer fabrication services to Semico.

Pricing basis

The fee charged for the wafer fabrication services to be provided to Semico by CSMC-HJ shall not be higher than the fees charged to Semico by independent wafer fabrication service providers. In this regard, the Group will obtain at least two quotations from independent third parties on a bi-monthly basis.

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LETTER FROM THE BOARD

D. Provision of packaging services by connected person

Transaction nature

It is envisaged that China Huajing Group will continue to provide packaging services to Semico.

Pricing basis

The fee charged for the packaging services to be provided to Semico by China Huajing Group shall not be higher than the fees charged to Semico by independent packaging service providers. In this regard, the Group will obtain at least two quotations from independent third parties on a bi-monthly basis.

E. Sale of IC products to connected persons

Transaction nature

It is envisaged that Semico will continue to sell its IC products to CHEG-I&E.

Pricing basis

The prices at which products of Semico are to be sold to CHEG-I&E shall not be lower than the prices at which such products are sold by Semico to independent third parties.

The following is a summary of the transaction value of the above-mentioned categories of transactions for the period from the date of Semico’s establishment on 21st January, 2000 to 31st December 2000 and the year ended 31st December, 2001:

		Period from
		21st January,
		2000 to	Year ended
		31st December,	31st December,
		2000	2001
		HK$’000	HK$’000
A.	Lease of equipment from China
	Huajing Group	1,643	1,879
B.	Provision of utilities and related
	service by China Huajing Group	1,889	2,493
C.	Provision of wafer fabrication
	services by CSMC-HJ	63,365	56,844
D.	Provision of packaging services by
	China Huajing Group	10,427	9,400
E.	Sale of IC products to CHEG-I&E	27,821	37,531

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LETTER FROM THE BOARD

6. REASONS FOR AND BENEFITS OF THE ONGOING CONNECTED TRANSACTIONS

The Ongoing Connected Transactions will be conducted in the ordinary and usual course of business of the Group and its counter-parties. The Ongoing Connected Transactions will be conducted in accordance with the terms of the relevant agreements which were negotiated on an arm’s length basis. The Directors consider it to be in the interests of the Group to engage in the Ongoing Connected Transactions as these transactions will facilitate the smooth operation of Semico after Completion. In view of the observation that many fabless IC design houses have subscribed for the fabrication, packaging services and other supporting services from their shareholders or strategic partners, the Directors consider the business relationship between Semico and China Huajing Group/its associates is synergistic to and in the ordinary course of Semico’s business.

7. DISCLOSURE REQUIREMENT AND WAIVER SOUGHT

For the purpose of the Listing Rules, the Ongoing Connected Transactions would normally require disclosure by way of press announcement and/or prior approval of the independent Shareholders at a special general meeting each time as such transaction occurs.

The Directors expect that the transaction amount of the transactions in connection with the provision of wafer fabrication services, provision of packaging services and sale of IC products for each year may exceed the higher of HK$10,000,000 or 3% of the net tangible asset value of the Group. The Directors also expect that each of the transactions in connection with the lease of equipment and supply of utilities and related services for each year may exceed the higher of HK$1,000,000 or 0.03% of the net tangible asset value of the Group but below the higher of HK$10,000,000 or 3% of the net tangible asset value of the Group. The Directors believe that strict compliance with the disclosure/shareholders’ approval requirement in respect of the Ongoing Connected Transactions would be impractical and unduly onerous on the part of the Group as they are of a regular and continuing nature. As such, the Company has made an application to the Stock Exchange for a waiver from the announcement/shareholders’ approval requirement in connection with the Ongoing Connected Transactions as required under the Listing Rules on conditions that:

• (a) the independent Shareholders approve the Ongoing Connected Transactions and the relevant caps at the SGM;

• (b) the Ongoing Connected Transactions for each financial year up to 31st December, 2004 not exceeding the relevant annual caps set forth below:

Types of transactions

Annual cap

• A. Lease of equipment The higher of HK$10 million or 3% of the from China Huajing Group Group’s net tangible asset value as at the end of each corresponding financial year

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LETTER FROM THE BOARD

Types of transactions

Annual cap

• B. Provision of utilities and related service by China Huajing Group

• The higher of HK$10 million or 3% of the Group’s net tangible asset value as at the end of each corresponding financial year

• C. Provision of wafer fabrication services by CSMC-HJ

• 6% of the Group’s turnover for each of the corresponding financial year

• D. Provision of packaging services by China Huajing Group

  • 2% of the Group’s turnover for each of the corresponding financial year

• E. Sale of IC products to 5% of the Group’s turnover for each of the CHEG-I&E corresponding financial year

• (c) details of the Ongoing Connected Transactions will be disclosed in the Company’s annual report as prescribed by Rule 14.25(1)(A) to (D) of the Listing Rules;

• (d) the independent non-executive Directors shall review the Ongoing Connected Transactions annually and confirm in the relevant annual report of the Company that the relevant Ongoing Connected Transactions have been entered into:

• (i) in the ordinary and usual course of business of the Group;

• (ii) on normal commercial terms or on terms that are no less favourable than terms available from or to independent third parties;

• (iii) on terms that are fair and reasonable and in the interests of the Shareholders as a whole;

• (iv) in respect of the lease of equipment and supply of utilities and related services, in accordance with the relevant agreement governing them; and

• (v) in the manner as stated in (b) above;

• (e) China Huajing Group will undertake to the Stock Exchange to provide the Company’s auditors with full access to the relevant records for the purpose of the auditors’ review of the transaction referred to in paragraph (b)(B) above; and

• (f) each year the auditors of the Company shall provide a letter (the ‘‘Letter’’) to the Board and the Stock Exchange confirming that each of the Ongoing Connected Transactions:

• (i) has received the approval of the Board;

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LETTER FROM THE BOARD

• (ii) in respect of the lease of equipment and supply of utilities and related service, has been entered into in accordance with the terms of the relevant agreement governing them;

• (iii) in respect of the provision of wafer fabrication services and provision of packaging services, has been entered in accordance with the pricing basis that fees charged to Semico by relevant connected parties shall not be higher than the fees available from independent service providers;

• (iv) in respect of the sale of IC products by Semico to a connected person, has been entered in accordance with the pricing policies of the Group; and

• (v) has not exceeded the relevant cap amount set out in paragraph (b) above.

Where, for whatever reason, the auditors decline to accept the engagement or are unable to provide the Letter, the Directors shall contact the Stock Exchange as soon as practicable.

In the event of any amendment on the terms of agreements governing the transactions referred to in paragraph (b)(A) or (b)(B) above or any of the Ongoing Connected Transactions exceeds the relevant annual cap, the Company will fully comply with the disclosure and independent shareholders’ approval requirements provided in Chapter 14 of the Listing Rules in respect of the connected transactions unless the Company has obtained a separate waiver from the Stock Exchange.

In the event of any future amendments to the Listing Rules imposing more stringent requirements than those as at the date of the proposed waiver application on transactions of the kind to which the Ongoing Connected Transactions belong, including, but not limited to, a requirement that such transactions be made conditional on approval by the independent Shareholders, the Company will take immediate steps to ensure compliance with such requirements within a reasonable period of time.

8. SPECIAL GENERAL MEETING

Set out on pages 28 to 29 of this circular is a notice convening the SGM to be held at 4: 00 p.m. on Wednesday, 27th March, 2002 at Room 4001, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong. The SGM will be held for the purpose of considering and, if thought fit, approving the Ongoing Connected Transactions.

A form of proxy for use at the SGM is enclosed herewith. Whether or not you are able to attend the SGM, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon to the Company’s principal place of business at Room 4001, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so desire.

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LETTER FROM THE BOARD

9. RECOMMENDATIONS

Your attention is drawn to (i) the letter from the Independent Board Committee set out in this circular which contains the recommendation of the Independent Board Committee to the independent Shareholders concerning the Ongoing Connected Transactions; and (ii) the letter from DBS Asia set out in this circular which contains its recommendations to the Independent Board Committee on the Ongoing Connected Transactions and the principal factors and reasons considered by DBS Asia in arriving at its recommendations.

The Independent Board Committee, having taken into account the advice of DBS Asia, considers that the terms of the Ongoing Connected Transactions are fair and reasonable so far as the independent Shareholders are concerned and that the Ongoing Connected Transactions are in the interests of the Company and the Shareholders as a whole. Accordingly, members of the Independent Board Committee unanimously recommend that the independent Shareholders vote in favour of the ordinary resolution to be proposed at the SGM to approve the Ongoing Connected Transactions.

10. ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendix to this circular.

As the proposed acquisition of China Huajing Group by the Company as mentioned in the paragraph headed ‘‘Information on Semico and China Huajing Group’’ of this circular may or may not proceed, Shareholders and potential investors are advised to exercise caution when dealing in the securities of the Company. Should such acquisition be proceeded in the future, the Company will fully comply with the applicable disclosure and shareholders’ approval requirements pursuant to Chapter 14 of the Listing Rules in due course.

Yours faithfully, On behalf of the Board China Resources Logic Limited Song Lin

Chairman

— 16 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [193 x 98] intentionally omitted <==

(Incorporated in Bermuda with limited liability)

11th March, 2002

To the independent Shareholders of China Resources Logic Limited

Dear Sir or Madam,

ONGOING CONNECTED TRANSACTIONS

We have been appointed as members of the Independent Board Committee to advise the independent Shareholders in respect of the Ongoing Connected Transactions, details of which are set out in the letter from the Board in the circular dated 11th March, 2002 (the ‘‘Circular’’) to the Shareholders. Unless the context otherwise requires, terms defined in the Circular shall have the same meanings when used in this letter.

Your attention is drawn to the advice of DBS Asia in respect of the Ongoing Connected Transactions as set out in the letter from DBS Asia in the Circular as well as other information set out in the appendix to the Circular.

Having taken into account the advice of DBS Asia, we consider that the Ongoing Connected Transactions are in the interests of the Company and the terms thereof are fair and reasonable so far as the independent Shareholders are concerned. We therefore recommend that you vote in favour of the ordinary resolution to be proposed at the SGM to approve the Ongoing Connected Transactions.

Yours faithfully,

Independent Board Committee

Wong Tak Shing Luk Chi Cheong

Independent non-executive Director

Independent non-executive Director

• for identification purpose only

— 17 —

LETTER FROM DBS ASIA

The following is the text of a letter from DBS Asia, the independent financial adviser to the Independent Board Committee and prepared for the purpose of incorporation in this circular.

16th Floor Man Yee Building 68 Des Voeux Road Central Central Hong Kong

11th March, 2002

The Independent Board Committee China Resources Logic Limited

Dear Sirs,

ONGOING CONNECTED TRANSACTIONS

We refer to our engagement as the independent financial adviser to the Independent Board Committee in relation to the Ongoing Connected Transactions, details of which are contained in a circular (the ‘‘Circular’’) to the Shareholders dated 11th March, 2002, of which this letter forms part. Expressions used in this letter have the same meanings as defined in the Circular unless otherwise stated.

In formulating our recommendation, we have relied on the information and facts contained or referred to in the Circular. We have also assumed that the information and representations contained or referred to in the Circular were true and accurate at the time they were made and continue to be so at the date of the dispatch of the Circular. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the executive Directors. We have also been advised by the executive Directors and believe that no material facts have been omitted from the Circular. We have also assumed that the opinion made by Sallmanns (Far East) Limited in respect of the lease of equipment is fair and accurate.

We consider that we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our recommendation. We have not, however, conducted an independent verification of the information nor have we conducted any form of in-depth investigation into the businesses and affairs or the prospects of the Company or Semico or China Huajing Group or any of their respective subsidiaries or associates.

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LETTER FROM DBS ASIA

PRINCIPAL FACTORS CONSIDERED

In arriving at our opinion in respect of the Ongoing Connected Transactions, we have considered the following principal factors and reasons:

Background and rationale

We note that prior to the Acquisition, the Ongoing Connected Transactions have already been conducted between Semico and its major shareholder, China Huajing Group and China Huajing Group’s associates. In accordance with the Listing Rules, as Semico will become a 55% owned subsidiary of the Company upon Completion, and China Huajing Group, holding the remaining 45% of equity interest in Semico, together with its associates, will become connected persons of the Company. Thus, the Ongoing Connected Transactions between Semico and China Huajing Group and its associates will constitute connected transactions of the Company.

We note that following Completion, the Ongoing Connected Transactions will continue to be conducted in the ordinary and usual course of business of Semico and China Huajing Group and its associates in accordance with the relevant pricing basis and, in connection with the lease of equipment and provision of utilities and related services, the terms of the relevant agreements governing the Ongoing Connected Transactions, which have been determined after arm’s length negotiations.

Given the above and the fact that the nature of the Ongoing Connected Transactions are all related to Semico’s business and operations, we consider that the entering into of the Ongoing Connected Transactions will facilitate the continued smooth operation of Semico following Completion and would minimize any disruptions to Semico’s business operations and thus are in the interests of the Company and the Shareholders as a whole.

Basis of determination

We summarise the basis of determination for each type of the Ongoing Connected Transactions and our views thereof as follows:

• A. Lease of equipment from China Huajing Group

We note that the monthly rental payable by Semico to China Huajing Group for the lease of equipment of RMB166,500 (equivalent to approximately HK$156,900) has been determined after arm’s length negotiations between the parties. We further note that such equipment rental has also been confirmed by an independent machinery valuer (Sallmanns (Far East) Limited) to be not higher than the fair market rental available to the Group. Having reviewed the bases and assumptions used in arriving at the fair market rental value for the equipment, we have no reasons to doubt the fairness and reasonableness of such bases and assumptions. On this basis, we consider the equipment rental and the basis of determination to be fair and reasonable.

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LETTER FROM DBS ASIA

B. Provision of utilities and related services by China Huajing Group to Semico

We note that the basis of the charges for the provision of utilities and related services has been determined with reference to the costs incurred by China Huajing Group in its provision of such services to Semico plus a margin of not more than 10%. We note that the various types of utilities and related services provided by China Huajing Group to Semico are essential to the daily operation of Semico. We consider that given the fact that Semico is located on China Huajing Group’s premises, it is reasonable for Semico to continue subscribing from China Huajing Group for the provision of utilities and related services so as to avoid disruption to Semico’s normal business operations as well as to save and release its resources from engaging in the relevant administrative work in order to maintain its focus on core business operations. We further note that China Huajing Group will provide the Company’s auditors with full access to its relevant records for the purposes of verifying the pricing basis of these transactions. Based on the above, we consider that the basis of determination for the provision of utilities and related services (cost plus a margin of not more than 10%) to be fair and reasonable.

C. Provision of wafer fabrication services by CSMC-HJ

We note that the fee to be charged by CSMC-HJ in relation to the provision of wafer fabrication services shall not be higher than the fee to be charged to Semico by independent third parties (for the same quality of services over the same quantity of goods), and that the Group will obtain at least two quotations from independent third parties for the provision of wafer fabrication services on a bimonthly basis. Having considered this independent basis and the regular monitoring procedures in place, we consider that the basis of determination of the fee to be charged by CSMC-HJ for the provision of this type of services to be fair and reasonable.

D. Provision of packaging services by China Huajing Group

Given that the fee to be charged by China Huajing Group in relation to the provision of packaging services shall not be higher than the fee to be charged to Semico by independent third parties, and that the Group will obtain at least two quotations from independent third parties for the provision of packaging services on a bi-monthly basis, we consider the basis of determination of the fee to be charged by China Huajing Group for the provision of this type of services to be fair and reasonable.

E. Sale of IC products to CHEG-I&E

Given the prices at which Semico’s IC products are sold to CHEG-I&E shall not be lower than the prices at which such products are sold to independent third parties, we consider the basis of determination of the prices at which Semico’s IC products are sold to CHEG-I&E to be fair and reasonable.

— 20 —

LETTER FROM DBS ASIA

Annual Cap

As a condition for the waiver granted by the Stock Exchange, details of which are set out on pages 13 to 15 of the Circular, each type of the Ongoing Connected Transactions will be subject to, among other things, the relevant annual caps for each financial year up to 31st December, 2004. We summarise the proposed annual cap amount for each type of Ongoing Connected Transactions with their respective historic transaction value as follows:

		Period from
		21st January,	For the year
Type of Ongoing		2000 to 31st	ended 31st
Connected Transactions		December, 2000	December, 2001	Cap
		(HK$’000)	(HK$’000)
A.	Leasing of equipment	1,643	1,879	The higher of (i) HK$10
	from China Huajing Group			million or (ii) 3% of the
				Group’s net tangible
				asset value at the end of
				each corresponding
				financial year
B.	Provision of utilities and	1,889	2,493	The higher of (i) HK$10
	related services by China			million or (ii) 3% of the
	Huajing Group			Group’s net tangible
				asset value at the end of
				each corresponding
				financial year
C.	Provision of wafer	63,365	56,844	6% of the Group’s turnover
	fabrication services by			for each of the
	CSMC-HJ			corresponding financial
				year
D.	Provision of packaging	10,427	9,400	2% of the Group’s turnover
	services by China Huajing			for each of the
	Group			corresponding financial
				year
E.	Sale of IC products to	27,821	37,531	5% of the Group’s turnover
	CHEG-I&E			for each of the
				corresponding financial
				year

We understand from the Directors that in determining the annual caps for the Ongoing Connected Transactions set out in category (A) and (B) above, they have made reference to the historic and forecast transaction value for each type of the transactions and the relevant provisions in the Listing Rules. We note that the historic annual consideration paid by Semico for the Ongoing Connected Transactions set out in category (A) and (B) above was less than the higher of either HK$10 million or 3% of the latest unaudited consolidated net tangible asset value of the Group as at 30th June, 2001. Relevant provisions of Chapter 14 of the Listing Rules stipulate that should the

— 21 —

LETTER FROM DBS ASIA

connected transaction amount be less than the higher of either HK$10 million or 3% of the net tangible asset value of the issuer, those type of connected transactions are normally only subject to the disclosure requirements and no shareholders’ prior approval is required.

We understand from the Directors that in determining the annual caps for the Ongoing Connected Transactions set out in category (C) to (E), they have taken into account the historical transaction amount of these types of Ongoing Connected Transactions and the estimated future business expansion of Semico. Given the fact that the Company’s turnover for the year ended 31st December, 2001 has yet to be made publicly available, for reference purposes, we have halved the transaction amount for each of the three types of Ongoing Connected Transactions for the year ended 31st December, 2001 in order to ascertain their respective approximate percentage (the ‘‘Percentage’’) as comparison to the Group’s unaudited turnover for the six months ended 30th June, 2001. We note that for the provision of wafer fabrication services, the Percentage amounts to approximately 4.6% in comparison to the proposed cap of 6%. For the provision of packaging services, the Percentage amounts to approximately 0.8% in comparison to the proposed cap of 2% while the Percentage of the sale of IC products amount to approximately 3.0% in comparison to the proposed cap of 5%.

Having considered the above bases of determination of the annual caps, we consider the annual cap amount for each type of the Ongoing Connected Transactions to be fair and reasonable so far as the Company and the independent Shareholders are concerned.

RECOMMENDATION

Having considered the principal factors and reasons referred to above, we consider that the Ongoing Connected Transactions are in the interests of the Company and the terms thereof are fair and reasonable so far as independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the independent Shareholders to vote in favour of the ordinary resolution to be proposed at the Special General Meeting to approve the Ongoing Connected Transactions.

Yours faithfully, For and on behalf of DBS ASIA CAPITAL LIMITED Alex Lau Flavia Hung Director Director

— 22 —

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of providing information with regard to the Group.

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 not contained in this circular the omission of which would make any statement contained herein misleading.

2. DISCLOSURE OF INTERESTS

(a) Interest in the Company

As at the Latest Practicable Date, the interests of the Directors in the shares of the Company as recorded in the register maintained by the Company pursuant to Section 29 of the SDI Ordinance were as follows:

		Number of	Number of
		Shares held
		Personal	Family
		Interest	Interest
Mr.	Zhu Jin Kun	300,000	160,000
Mr.	Yu Min	300,000	—

Interest in options of the Company

As at the Latest Practicable Date, the following Directors had personal interests within the meaning of the SDI Ordinance in respect of options granted under the existing share option schemes of the Company as follows:

	Number of options
Name of Director	shares held
Mr. Song Lin	8,000,000
Mr. Chen Lang	6,000,000
Mr. Zhu Jinkun	3,000,000
Mr. Dai Zhenhua	3,000,000
Mr. Ong Thiam Kin	3,000,000
Mr. Yu Min	1,000,000

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GENERAL INFORMATION

APPENDIX

(b) Interest in the associated companies

(i) Interest in options of China Resources Enterprise, Limited (‘‘CRE’’)

As at the Latest Practicable Date, the following Directors had personal interests within the meaning of the SDI Ordinance in respect of options granted under the existing share option schemes of CRE as follows:

Name of Director

Number of options shares held

Mr. Ning Gaoning 7,800,000 Mr. Song Lin 2,000,000

• (ii) Interest in options of China Resources Land Limited (‘‘CR Land’’)

As at the Latest Practicable Date, the following Director had personal interests within the meaning of the SDI Ordinance in respect of options granted under the existing share option scheme of CR Land as follows:

Number of options Name of Director shares held Mr. Ning Gaoning 5,000,000

Save as disclosed above, none of the Directors or any of their associates or chief executive of the Company had any interests in the share capital or options over the share capital of the Company or any of its associated corporations as defined in the SDI Ordinance which are required to be notified to the Company and the Stock Exchange pursuant to section 28 of the SDI Ordinance (including interest which they were taken or deemed to have under section 31 of, or Part I of the Schedule to, the SDI Ordinance) or which are required, pursuant to section 29 of the SDI Ordinance, to be entered in the register referred to therein or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules, to be notified to the Company and the Stock Exchange.

(c) Others

As at the Latest Practicable Date, none of the Directors was materially interested in any contracts or arrangements to which any member of the Group was a party and which are significant to the business of the Group.

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which have been acquired or disposed of by or leased to any member of the Group or which are proposed to be acquired or disposed of by or leased to any member of the Group since 31st December, 2000 (being the date to which the latest published audited accounts of the Company were made up).

— 24 —

GENERAL INFORMATION

APPENDIX

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the register of substantial shareholders maintained by the Company pursuant to Section 16(1) of the SDI Ordinance showed that the Company was notified of the following shareholders with an interest representing 10% or more of the issued share capital of the Company:

Percentage Number of of issued Name of Substantial Shareholders shares held share capital Gold Touch Enterprises Inc. (‘‘Gold Touch’’) 297,229,604 Waterside Holdings Limited (‘‘Waterside’’) 825,347,743 China Resources (Holdings) Company Limited (‘‘CRH’’) 1,122,577,347 China Resources National Corp. (‘‘CRN’’) 1,122,577,347

Gold Touch and Waterside directly hold 297,229,604 Shares and 825,347,743 Shares respectively in the Company. Gold Touch and Waterside are wholly owned subsidiaries of CRH, which in turn is a wholly owned subsidiary of CRN.

CRN is the holding company of CRH and therefore is deemed to have the same interests in the share capital of the Company as CRH by virtue of Section 8 of the SDI Ordinance.

4. SERVICE CONTRACT

None of the Directors has entered or is proposing to enter into any service contract with any member of the Group (excluding contracts expiring or determinable within one year without payment of compensation other than statutory compensation).

5. NO MATERIAL ADVERSE CHANGE

The Directors confirm that there has been no material adverse change in the financial and trading position or prospects of the Group since 31st December, 2000 being the date to which the latest audited consolidated financial statements of the Group were made up.

6. LITIGATION

Neither the Company nor any other member of the Group is engaged in any litigation or arbitration of material importance and so far as the Directors are aware no litigation, arbitration or claim of material importance is pending or threatened by or against the Company or any member of the Group.

— 25 —

GENERAL INFORMATION

APPENDIX

7. QUALIFICATION OF EXPERTS

Name

Qualifications

DBS Asia Capital Limited

An investment adviser and securities dealer registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

Sallmanns (Far East) Limited Plant and machinery valuers

As at the Latest Practicable Date, none of the experts referred to above has any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, none of the experts referred to above had any interest, direct or indirect, in any assets which have been acquired or disposed of by or leased to any member of the Group or which are proposed to be acquired or disposed of by or leased to any member of the Group since 31st December, 2000 (being the date to which the latest published audited accounts of the Company were made up).

8. CONSENTS OF EXPERTS

Each of the experts named in the above paragraph in this appendix has given and has not withdrawn its respective written consent to the issue of this circular with inclusion of its letter and/or the references to its name in the form and context in which they respectively appear in this circular.

9. GENERAL

• (a) The secretary of the Company is Mr. Lee Yip Wah, Peter, who is a solicitor of the High Court of Hong Kong.

• (b) The principal share registrar and transfer office is Butterfield Corporate Services Limited at Rosebank Centre, 14 Bermudiana Road, Pembroke, Bermuda. The Hong Kong branch registrar and transfer office is Secretaries Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong.

• (c) The English text of this circular shall prevail over the Chinese text.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company at Room 4001, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong from the date of this circular up to and including 27th March, 2002:

• (a) the Acquisition Agreement;

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GENERAL INFORMATION

APPENDIX

• (b) the letter from the Independent Board Committee set out on page 17 of this circular;

• (c) the letter of advice received from DBS Asia set out on pages 18 to 22 of this circular;

• (d) the agreements in connection with the Ongoing Connected Transactions; and

• (e) the written consents referred to in this appendix.

— 27 —

NOTICE OF SPECIAL GENERAL MEETING

==> picture [193 x 97] intentionally omitted <==

(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting of China Resources Logic Limited (the ‘‘Company’’) will be held at 4: 00 p.m. on Wednesday, 27th March, 2002 at Room 4001, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

‘‘THAT:

each of the Ongoing Connected Transactions (as defined and described in the circular of the Company dated 11th March, 2002 and despatched to the shareholders of the Company) and the relevant caps, a copy of which has been produced to this meeting marked ‘‘A’’ and signed by the chairman of the meeting for the purpose of identification, and the transactions contemplated therein be and are hereby generally and unconditionally approved, ratified and confirmed and the directors of the Company be and are hereby authorised to take all steps necessary or expedient in their opinion to implement and/or to give effect to the Ongoing Connected Transactions.’’

By order of the Board Lee Yip Wah, Peter Company Secretary

Hong Kong, 11th March, 2002

Registered Office: Cedar House 41 Cedar Avenue Hamilton HM 12 Bermuda

Head Office and Principal Place of Business: Room 4001 China Resources Building 26 Harbour Road Wanchai Hong Kong

• for identification purpose only

— 28 —

NOTICE OF SPECIAL GENERAL MEETING

Notes:

• (1) Any member entitled to attend and vote at the meeting may appoint one or more proxies to attend and, on a poll, to vote instead of him. A proxy need not be a member of the Company.

• (2) Where there are joint holders of any shares, any one of such joint holders may vote at the meeting, either personally or by proxy, in respect of such shares as if he was solely entitled thereto, but if more than one of such joint holders be present at the meeting personally or by proxy, then the joint holder whose name stands first on the register of members of the Company in respect of such shares shall (personally or by his proxy) alone be entitled to vote in respect hereof.

• (3) In order 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 of such power or authority, must be deposited at Room 4001, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or any adjourned meeting thereof. Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting.

— 29 —