Li Ning Company Limited — Proxy Solicitation & Information Statement 2003

Jul 25, 2003

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.

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DECCA HOLDINGS LIMITED 達藝控股有限公司[*]

(incorporated in Bermuda with limited liability)

Executive Directors: Registered office: Tsang Chi Hung, Chairman Clarendon House, Liu Hoo Kuen, Deputy Chairman 2 Church Street, Kwan Yau Choi Hamilton HM 11, Fung Sau Mui Bermuda. Tai Wing Wah Wong Kam Hong Principal office in Hong Kong: Richard W. Herbst 2/F Decca Industrial Centre, Independent Non-executive Directors: 21 Cheung Lee Street, Chu Kwok Man Chaiwan, Lok Wai Kiang Paul Hong Kong. 14 July 2003

To Shareholders Dear Sir or Madam,

GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES

INTRODUCTION

On 22 August 2002, a general unconditional mandate was granted to the directors of the Company (the “Directors”) authorising the repurchase by the Company on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”), or on any other stock exchange recognised for this purpose, of the Company’s shares. This mandate will lapse at the conclusion of the next annual general meeting of the Company which is to be held on 21 August 2003 (the “Annual General Meeting”). It is therefore proposed to renew the general mandate to repurchase shares at the Annual General Meeting.

The purpose of this document is to provide you with information regarding the above proposed general mandate to repurchase shares and further on a proposed general mandate to issue shares and to seek the approval of shareholders for the resolutions relating to both such matters at the Annual General Meeting.

• For identification purpose

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GENERAL MANDATE TO THE DIRECTORS FOR REPURCHASE OF SHARES

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

An explanatory statement as required under the Rules Governing the Listing of Securities on The Stock Exchange (The “Listing Rules”) to provide the requisite information is set out in the appendix hereto.

GENERAL MANDATE TO ISSUE SHARES

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

ACTION TO BE TAKEN

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

RECOMMENDATION

The Directors believe that the granting of the Repurchase Mandate and the general mandate to issue new shares and the extension mandate are in the best interests of the Company and its shareholders. Share repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the earnings per share of the Company and will only be made when the Directors believe that such a share repurchase will benefit the Company and its shareholders. Accordingly, the Directors recommend all shareholders to vote in favour of the ordinary resolutions approving the Repurchase Mandate and the general mandate to issue new shares and they intend to do so themselves in respect of their own shareholdings in the Company.

By order of the Board Tsang Chi Hung Chairman

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APPENDIX

REPURCHASE MANDATE EXPLANATORY STATEMENT

The appendix serves as an explanatory statement, as required by the Listing Rules, to provide requisite information to you for your consideration of the Repurchase Mandate and should be read in conjunction with the Letter from the Board of Directors here in before appearing.

1. The Listing Rules

The Listing Rules permit companies whose primary listing is on the Stock Exchange to repurchase their shares on the Stock Exchange subject to certain restrictions.

2. Share Capital

As at 14 July 2003 (the “Latest Practicable Date”), the issued share capital of the Company comprised 200,000,000 shares of HK$0.10 each (the “Shares”).

Subject to the passing of the ordinary resolution to approve the Repurchase Mandate and on the basis that no further shares are issued prior to the Annual General Meeting, the Company would be allowed under the Repurchase Mandate to repurchase a maximum of 20,000,000 Shares, being 10% of the issued share capital of the Company.

3. Funding of Repurchases

Repurchases would be funded entirely from the Company’s available cash flow or working capital facilities legally available for the purpose and in accordance with the memorandum of association and bye-laws of the Company, the Listing Rules and the applicable laws and regulations of Bermuda and Hong Kong.

There might be a material adverse effect on the working capital or gearing position of the company (as compared with the position disclosed in the company’s financial statements for the year ended 31 March 2003) in the event that the Repurchase Mandate is exercised in full at time. However, the Directors do not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstance, have a material adverse effect on the working capital requirements of the Company or its gearing levels which, in the opinion of the Directors, are from time to time appropriate for the Company.

4. Share Prices

The highest and lowest prices at which the Shares have traded on the Stock Exchange during each of the previous twelve months were as follows:

	Highest	Lowest
	HK$	HK$
July 2002	1.08	1.00
August 2002	1.00	0.90
September 2002	1.00	1.00
October 2002	1.00	1.00
November 2002	1.00	1.00
December 2002	1.00	1.00

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	HighestLowestHK$HK$January 20031.000.95February 20030.950.90March 20030.900.88April 20030.880.68May 20030.700.68June 20030.720.72	HighestLowestHK$HK$January 20031.000.95February 20030.950.90March 20030.900.88April 20030.880.68May 20030.700.68June 20030.720.72	HighestLowestHK$HK$January 20031.000.95February 20030.950.90March 20030.900.88April 20030.880.68May 20030.700.68June 20030.720.72	HighestLowestHK$HK$January 20031.000.95February 20030.950.90March 20030.900.88April 20030.880.68May 20030.700.68June 20030.720.72	HighestLowestHK$HK$January 20031.000.95February 20030.950.90March 20030.900.88April 20030.880.68May 20030.700.68June 20030.720.72
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5. General

None of the Directors or, to the best of their knowledge, having made all reasonable enquiries, any of their respective associates, as defined in the Listing Rules, has any present intention to sell any Shares to the Company or its subsidiaries.

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules and the applicable laws of Bermuda.

No connected person, as defined in the Listing Rules, has notified the Company that he/she has a present intention to sell Shares to the Company, if the Repurchase Mandate is exercised.

If, as a result of a securities repurchase pursuant to the Repurchase Mandate, a shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purpose of the Takeovers Code.

Accordingly, a shareholder, or a group of shareholders acting in concert, depending on the level of increase of shareholders’ interest, could obtain or consolidate control of the Company and become obliged to make mandatory offer in accordance with Rule 26 of the Takeovers Code as a result of any such increase. As at the Latest Practicable Date, the major shareholder of the company, Peasedow Enterprises Limited (the beneficial owners of Peasedow Enterprises Limited are Tsang Chi Hung, Liu Hoo Kuen and Kwan Yau Choi with shareholding of 35%, 30% and 35% respectively in Peasedow Enterprises Limited and they do not hold shares of Decca Holdings Limited through other companies), held approximately 56.26% of the Shares in issue. Such shareholding percentage will be increased to approximately 62.51% if the Repurchase Mandate is exercised in full. On the basis of the current shareholding position of the Company, the Directors are not aware of any consequences which may arise under the Takeovers Code if the Repurchase Mandate is exercised.

6. Share Purchases made by the Company

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

7. Reasons for Repurchases

The Directors believe that it is in the best interests of the Company and its shareholders for the Directors to have a general authority from shareholders to enable the Company to repurchase the Shares in the market. Repurchases of the Shares will only be made when the Directors believe that such repurchases will benefit the Company and its members as a whole. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net value of the Company per share and its assets and/or its earnings per share.

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