Long Investment Corp — Proxy Solicitation & Information Statement 2006

Jul 28, 2006

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 all your shares in Shui On Construction and Materials Limited (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser.

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) (Stock Code: 983)

PROPOSAL FOR ADOPTION OF SHARE AWARD SCHEME

A notice convening a Special General Meeting of the Company to be held at Room 103, 1st Floor, Shui On Centre, 6-8 Harbour Road, Hong Kong on 23 August 2006 at 3:10 p.m. (or so soon thereafter as the annual general meeting of the Company convened at the same place and date at 3:00 p.m. shall have been concluded or adjourned) is set out on pages 19 and 20 of this circular. Whether or not you are able 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 of the Company at 34th Floor, Shui On Centre, 6-8 Harbour Road, 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 adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting should you so wish.

28 July 2006

• For identification purpose only

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Appendix — Principal terms of Share Award Scheme . . . . . . . . . . . . . . . . . . .	8
Notice of Special General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19

— i —

DEFINITIONS

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

“associate”	has the meaning set out in the Listing Rules
“Award”	an award of Shares to a Selected Employee subject
	to such terms and conditions as may be determined
	by the Remuneration Committee pursuant to the
	Share Award Scheme
“Board”	the board of Directors or a duly authorised committee
	thereof
“Company”	Shui On Construction and Materials Limited, a
	company incorporated in Bermuda with limited liability
	and whose securities are listed on the Stock Exchange
“Directors”	the directors of the Company
“Employee”	any person employed by the Company or any
	subsidiaries and any person who is an officer or a
	director of the Company or any subsidiaries, excluding
	independent non-executive directors of the Company
	and associates of directors of the Company. A
	Selected Employee shall not cease to be an Employee
	in the case of any transfers of employment or office
	between the Company and any subsidiaries or
	between subsidiaries
“Existing Share Option Scheme”	the share option scheme of the Company adopted
	on 27 August 2002
“Grant Date”	the date on which an Award is granted in accordance
	the Share Award Scheme, which must be a business
	date, i.e. any day on which the Stock Exchange is
	open for the business of dealing in securities
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the
	People’s Republic of China
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange, as amended from time to time

— 1 —

DEFINITIONS

• “New Award Shares”

• “Remuneration Committee”

• “Selected Employee”

• “Share Award Scheme”

• “Share(s)”

• “Shareholder(s)”

• “Shareholders’ Return”

• “Special General Meeting”

• “Stock Exchange”

• “substantial shareholders”

• “Total Shareholders’ Return of the Hang Seng Index”

the new Shares under an Award which may be issued and alloted by the Company pursuant to the Share Award Scheme

the remuneration committee comprising the independent non-executive directors of the Company as a majority of its member as designated by the Board from time to time

any Employee selected by the Remuneration Committee for an Award of Shares in accordance with the terms of the Share Award Scheme or (where the context so permits) the legal personal representatives of such Employee

the share award scheme proposed to be adopted at the Special General Meeting, the principal terms of which are set out in the Appendix

• share(s) of HK$1.00 each in the issued share capital of the Company

holders of Share(s) in issue

• in respect of any securities, the percentage increase in the value of such securities, including adjustment for dividend income, as the Remuneration Committee may in its absolute discretion determine

the special general meeting of the Company to be held for adopting the Share Award Scheme, notice of which is set out on pages 19 and 20 of this circular, or any adjournment thereof

The Stock Exchange of Hong Kong Limited

has the meaning ascribed thereto in the Listing Rules

the change of the Total Return Index of the Hang Seng Index (both as published by HSI Services Limited from time to time) over the period between the Grant Date and the Vesting Date

— 2 —

DEFINITIONS

“Trust”	the trust to be set up pursuant to the Share Award
	Scheme for the purpose of acquiring Shares in the
	market and holding such Shares and the related
	income derived therefrom to satisfy all or any Awards
	granted under the Share Award Scheme
“Vest”	in respect of the Share Award Scheme, means when
	the Selected Employee becomes unconditionally
	entitled to the Shares
“Vesting Date”	the date on which award Shares referable to a
	Selected Employee shall vest in that Selected
	Employee, being such date as the Remuneration
	Committee may in its absolute discretion determine
	in relation to any particular Award, which normally
	shall not be less than 3 years from the Grant Date
	and in any event shall not be more than 10 years
	from the Grant Date;
“HK$ and cents”	Hong Kong dollar and cents respectively, the lawful
	currency of Hong Kong
“%”	per cent

— 3 —

LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability)

(Stock Code: 983)

Executive Directors:

Mr. Vincent Lo Hong Sui (Chairman)

Mr. Lawrence Choi Yuk Keung (Vice-chairman)

Mr. Frankie Wong Yuet Leung (Chief Executive Officer) Mr. Raymond Wong Fook Lam Mrs. Vivien Lowe Hoh Wai Wan

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Non-Executive Director:

Professor Michael John Enright

Independent Non-Executive Directors:

Mr. Anthony Griffiths Mr. Moses Cheng Mo Chi Professor K.C. Chan

Head office: 34th Floor Shui On Centre 6-8 Harbour Road Hong Kong

28 July 2006

To Shareholders

Dear Sirs or Madam,

PROPOSAL FOR ADOPTION OF SHARE AWARD SCHEME

The Directors propose to adopt the Share Award Scheme which will be put to the Shareholders for approval at the Special General Meeting to be held on 23 August 2006. The Share Award Scheme is proposed in addition to the Existing Share Option Scheme.

The Share Award Scheme is subject to the approval of the Shareholders at the Special General Meeting. Application has been made to the Stock Exchange for the grant of listing of and permission to deal in an amount of New Award Shares equivalent to 10% of the issued ordinary share capital of the Company as at the date of the Special General Meeting and such other amount of New Award Shares as allowed under the Share Award Scheme or otherwise permitted under rule 17.03(3) of the Listing Rules. Implementation of the Share Award Scheme is subject to its adoption at the Special General Meeting and the approval by the Stock Exchange of the listing of and permission to deal in the New Award Shares.

• For identification purpose only

— 4 —

LETTER FROM THE BOARD

The Directors believe that the Share Award Scheme will foster and promote the longterm financial success of the Company by enhancing the Company’s ability to attract and retain high quality personnel and motivating Selected Employees through Share ownership and performance-based incentives. To achieve this purpose, the Share Award Scheme provides authority for the grant of performance-based Share Awards to Selected Employees. Awards will vest depending on positive Shareholders’ Return on the Shares that equals to or exceeds the Total Shareholders’ Return of the Hang Seng Index, over a period of not less than 3 years and up to a maximum of 10 years. Under the Share Award Scheme, the Company will be able to award newly issued Shares that are fully paid directly to Selected Employees. The Share Award Scheme also allows the Company to settle the Awards by acquiring Shares in the market through a Trust as and when it deems fit.

A summary of the principal terms of the Share Award Scheme is set out in the appendix to this circular. This serves as a summary of the terms of the Share Award Scheme but does not constitute the full terms of the same. The full terms of the Share Award Scheme can be inspected at the head office of the Company at 34th Floor, Shui On Centre, 6-8 Harbour Road, Hong Kong from the date of this circular up to and including the date of the Special General Meeting and at the Special General Meeting.

NOTICE OF SPECIAL GENERAL MEETING

A notice convening the Special General Meeting to be held at Room 103, 1st Floor, Shui On Centre, 6-8 Harbour Road, Hong Kong on 23 August 2006 at 3:10 p.m. (or so soon thereafter as the annual general meeting of the Company convened at the same place and date at 3:00 p.m. shall have been concluded or adjourned) is set out on pages 19 and 20 of this circular. At the Special General Meeting, an ordinary resolution will be proposed to approve the Share Award Scheme and authorise the Directors to allot and issue Shares pursuant to the Share Award Scheme.

A form of proxy for use at the Special General Meeting is enclosed. Whether or not you are able to attend the Special General 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 of the Company at 34th Floor, Shui On Centre, 6-8 Harbour Road, 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 adjournment thereof. Completion and return of the form of proxy will not prevent shareholders from attending and voting at the Special General Meeting if they so wish.

In accordance with the requirements of the Listing Rules, the Company will publish in the newspapers an announcement on the outcome of the Special General Meeting in respect of the resolution relating to the adoption of the Share Award Scheme on the business day following the date of the Special General Meeting.

— 5 —

LETTER FROM THE BOARD

POLL PROCEDURE

In accordance with bye-law 66 of the bye-laws of the Company, a resolution put to the vote of a meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded:

• (a) by the chairman of such meeting; or

• (b) by at least three Members present in person (or in the case of a Member being a corporation by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or

• (c) by a Member or Members present in person (or in the case of a Member being a corporation by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all Members having the right to vote at the meeting; or

• (d) by a Member or Members present in person (or in the case of a Member being a corporation by its duly authorised representative) or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

A demand by a person as proxy for a Member or in the case of a Member being a corporation by its duly authorised representative shall be deemed to be the same as a demand by a Member.

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, statements of fact expressed herein are true, accurate and not misleading, statements of opinion expressed herein have been arrived at after due and careful consideration and there are no other facts not contained in this circular the omission of which would make any statement herein misleading.

— 6 —

LETTER FROM THE BOARD

RECOMMENDATION

The Directors believe that the proposal for the adoption of the Share Award Scheme is in the best interests of the Company and the Shareholders. Accordingly, the Board recommends that Shareholders should vote in favour of the resolutions relating to the adoption of the Share Award Scheme to be proposed at the Special General Meeting.

Yours faithfully, By order of the Board

Shui On Construction and Materials Limited

Vincent Lo Hong Sui Chairman

— 7 —

PRINCIPAL TERMS OF SHARE AWARD SCHEME

APPENDIX

SHARE AWARD SCHEME

The following is a summary of the principal terms of the Share Award Scheme proposed to be approved at the Special General Meeting:

(a) Purpose

The purpose of the Share Award Scheme is to provide incentives to the employees, officers and directors of the Company and its subsidiaries, and to promote the long term financial success of the Company by aligning the interests of Selected Employees and the Shareholders.

(b) Who may join

On and subject to the terms of the Share Award Scheme and the requirements of the Listing Rules, the Board may offer to grant an Award to the Selected Employees as the Remuneration Committee may in its absolute discretion select.

(c) Administration

The Share Award Scheme shall be subject to the administration of the Remuneration Committee in accordance with the rules of the Share Award Scheme. The Remuneration Committee’s administrative powers include the authority, in its discretion:–

• (i) to select Employees to whom Awards may be granted under the Share Award Scheme;

• (ii) to determine, subject to the requirements of the Listing Rules and the law, the time for granting the Awards;

• (iii) to determine the number of Shares to be covered by each Award;

• (iv) to determine, subject to the terms of the Share Award Scheme and the requirements of the Listing Rules, the terms and conditions of any Award based in each case on such factors as the Remuneration Committee, in its sole discretion, shall determine. Such terms and conditions may include, but are not limited to:

• (A) the allotment price;

• (B) the Vesting Date, which must not be more than 10 years from the Grant Date;

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PRINCIPAL TERMS OF SHARE AWARD SCHEME

APPENDIX

• (C) the performance conditions, if any, that must be achieved before any part of the Award can vest; and

• (D) the minimum period, if any, that a Selected Employee must hold the award Shares that are allotted or otherwise transferred to him on vesting before such Shares can be sold.

Provided that any such restriction imposed by the Remuneration Committee on any Selected Employee shall not in effect be less restrictive than the restrictions imposed under the Share Award Scheme and the requirements under the Listing Rules;

• (v) to determine and arrange for the setting of the Trust and the execution of the trust deed relating to the Trust and to fix the appointment of the trustee of the Trust;

• (vi) to determine and make arrangements with the trustee of the Trust, when appointed, for acquiring Shares in the market and for holding such Shares and the related income derived therefrom to satisfy all or any Awards granted under the Share Award Scheme; and

• (vii) to construe and interpret the terms of the Share Award Scheme and Awards granted pursuant to the Share Award Scheme.

(d) Grant of Awards

On and subject to the terms of the Share Award Scheme and the requirements of the Listing Rules, the Remuneration Committee shall be entitled at any time within 10 years commencing on the adoption date of the Share Award Scheme (the timing of the grant being subject to the requirements of the Listing Rules and the law) to grant an Award to any Selected Employee as the Remuneration Committee may in its absolute discretion select.

(e) Performance conditions

The Remuneration Committee will impose performance condition(s) on the grant of an Award whereby:

• (i) the Award will vest only where the Shareholders’ Return of the Shares at the end of the period between the Grant Date and the Vesting Date exceeds zero; and

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PRINCIPAL TERMS OF SHARE AWARD SCHEME

APPENDIX

• (ii) the Award will vest only to such extent by reference to the amount by which the Shareholders’ Return on the Shares equals or exceeds the Total Shareholders’ Return of the Hang Seng Index at the end of the period between the Grant Date and the Vesting Date (which may be set at different levels for different Awards).

(f) Allotment price

The allotment price in respect the allotment of any New Award Shares under any particular Award shall be such price as the Remuneration Committee may in its absolute discretion determine at the time of grant which shall not be less than whichever is the higher of:

• (i) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet on the Grant Date;

• (ii) the average closing price of the Shares as stated in the Stock Exchange’s daily quotation sheets for the five business days immediately preceding the Grant Date; and

• (iii) the nominal value of a Share.

(g) Servicing the Awards through purchases in the market

Subject to the conditions of the Share Award Scheme, the Remuneration Committee may cause such monies in such amount as the Remuneration Committee may in its absolute discretion determine to be paid to the trustee of the Trust and give instructions to such trustee to apply such monies and/or such other amount of cash in the trust fund as the Remuneration Committee may in its absolute discretion determine to acquire Shares to satisfy Awards made or to be made under the Share Award Scheme.

(h) Rights are personal to grantee

An Award shall be personal to the Selected Employee and shall not be assignable or transferable.

Any breach of the foregoing shall entitle the Company to cancel any outstanding Award or part thereof granted to such Selected Employee.

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PRINCIPAL TERMS OF SHARE AWARD SCHEME

APPENDIX

(i) Vesting

Within 42 business days of any Vesting Date, the Remuneration Committee shall determine the extent to which any service, performance and/or other vesting conditions have been met and the proportion of the Shares which have become vested in respect of the relevant Award and shall by written notice (“ Vesting Notice ”) notify the relevant Selected Employee, the Board and the trustee of the Trust.

(j) Allotment and/or transfer of vesting Shares

Within 28 business days after the date of the Vesting Notice referred to in paragraph (i) above, and subject to the receipt of the duly signed prescribed transfer documents within the time stipulated in the Vesting Notice, if any,

• (a) the Company shall allot the New Award Shares referred to in Vesting Notice under sub-paragraph (i) above to the Selected Employee credited as fully paid and issue to the Selected Employee a share certificate in respect of the Shares so allotted; and/or

• (b) the trustee of the Trust shall transfer the award Shares referred to in the Vesting Notice under sub-paragraph (i) above to the Selected Employee.

in each case free from all brokerage, stamp duty and other related allotment or transfer expenses.

(k) Rights attaching to Shares allotted

The Shares to be allotted or transferred shall be subject to all the provisions of the bye-laws of the Company for the time being in force and will rank pari passu with the fully paid Shares in issue on the Vesting Date or, if that date falls on a day when the register of members of the Company is closed, the first day of the reopening of the register of members and accordingly will entitle the holders to participate in all dividends or other distributions paid or made on or after the Vesting Date or, if that date falls on a day when the register of members of the Company is closed, the first day of the reopening of the register of members, other than any dividend or other distribution previously declared or recommended or resolved to be paid or made with respect to a record date which shall be before the Vesting Date, or, if later, before the date of registration of the allotment or transfer, as the case may be in the register of members of the Company.

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PRINCIPAL TERMS OF SHARE AWARD SCHEME

APPENDIX

(l) Rights on retirement, death or total permanent physical or mental disability

If a Selected Employee retires, is made redundant, dies or becomes totally permanently physically or mentally disabled, the Award shall be deemed to vest to the extent the performance condition in respect of the Award has been met as the Remuneration Committee decides on the day immediately before the Selected Employee’s retirement, death or total permanent physical or mental disability or such later date (no later than 12 months after the relevant Selected Employee’s retirement, redundancy, death or total permanent physical or mental disability) as the Remuneration Committee shall decide. The Award shall vest with the personal representatives of the Selected Employee in the event the Selected Employee has died.

If no part of the Award shall become unconditional within the time specified above, the Award shall lapse.

(m) Termination for misconduct etc.

If a Selected Employee ceases to be an Employee for being guilty of serious misconduct, or having committed any act of bankruptcy or having become insolvent or having made any arrangements or composition with his creditors generally, or having been convicted of any criminal offence involving his integrity or honesty, the Award shall immediately lapse.

(n) Termination other than for retirement, death, permanent disability or misconduct etc.

If a Selected Employee ceases to be an Employee other than for reasons provided under paragraphs (l) or (m) above, any conditional Award shall lapse on his ceasing to be employed by the Company.

(o) Rights on general offer

If a general offer by way of takeover is made to all the holders of Shares (or all such holders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or concert with the offeror), and the offer becomes or is declared unconditional in all respects, the Award shall be deemed to have vested to the extent the performance condition in respect of the Award has been met as the Remuneration Committee decides on the day immediately before such offer becomes or is declared unconditional in all respects. If no part of the Award shall become unconditional on such date of vesting, the Award shall lapse.

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PRINCIPAL TERMS OF SHARE AWARD SCHEME

APPENDIX

(p) Rights on compromise or arrangement

If a compromise or arrangement between the Company and its members or creditors is proposed for the purposes of the amalgamation of the Company with any other company or companies, the Company shall give notice to the Selected Employee on the same date as it despatches the notice to each member or creditor of the Company summoning the meeting to consider such a compromise or arrangement, and thereupon the Award shall, conditional upon such compromise or arrangement becoming effective, vest to the extent the performance condition in respect of the Award has been met as the Remuneration Committee decides on the day immediately before the date of such notice to the member and/or the creditors of the Company. If no part of the Award shall become unconditional on such date of vesting, the Award shall lapse. The Company may require the Selected Employee to transfer or otherwise deal with the Shares issued or transferred as a result of the vesting of the Award in these circumstances so as to place the Selected Employee in the same position, as nearly as possible, as would have been the case had such Shares been subject to such compromise or arrangement.

(q) Rights on voluntary winding-up of the Company

In the event a notice is given by the Company to its members to convene a general meeting for the purposes of considering, and if thought fit, approving a resolution to voluntarily wind-up the Company, the Company shall on the same date as or soon after it despatches such notice to each member of the Company give notice thereof to all Selected Employees (together with a notice of the existence of the provisions of the Share Award Scheme relating to this paragraph (q)) and thereupon, the Award shall be deemed to have vested to the extent the performance condition in respect of the Award has been met as the Remuneration Committee decides on the day before the proposed general meeting of the Company. If no part of the Award shall become unconditional on such date of vesting, the Award shall lapse.

(r) Lapse of Award

Subject to the discretion of the Remuneration Committee to postpone the Vesting Date, an Award shall lapse (or in case of sub-paragraph (iv) below, cancelled) automatically on the earliest of:—

• (i) the date on which the Remuneration Committee determines that the performance condition imposed on the Award cannot be met;

• (ii) the Vesting Date to the extent where any part of the Award fails to become unconditional on such date;

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PRINCIPAL TERMS OF SHARE AWARD SCHEME

APPENDIX

• (iii) the expiry of any of the periods referred to in paragraphs (l) to (q) above (as the case may be) to the extent where any part of the Award fails to become unconditional on such date;

• (iv) the date on which the Remuneration Committee certifies that for the reason of a breach of paragraph (h) above, the Award should be cancelled; and

• (v) when the Selected Employee fails to return the prescribed transfer documents stipulated in the Vesting Notice to the extent where any part of the award Shares shall be transferred to the Selected Employee under such transfer documents.

(s) Scheme limit

(i) Overriding Limit

The number of New Award Shares which may be awarded under the Share Award Scheme must not exceed 10% of the Shares in issue from time to time, and the number of New Award Shares which may be issued on vesting, when aggregated with all Shares which may be issued upon the exercise of all outstanding options under any other schemes must not exceed 30% of the Shares in issue from time to time.

No Awards may be granted if this will result in the limit being exceeded.

(ii) Mandate Limit

In addition to the limit set out in sub-paragraph (s)(i) above and prior to the approval of a refreshed mandate limit as referred to in sub-paragraph (s)(iii) below, the total number of New Award Shares which may be awarded upon vesting of all Awards to be granted under the Share Award Scheme and upon the exercise of all options to be granted under all other schemes must not in aggregate exceed 10% of the Shares in issue immediately on the adoption date of the Share Award Scheme (the “ Initial Mandate Limit ”). Awards and options granted and lapsed in accordance with the terms of the Share Award Scheme or any other schemes will not be counted for the purpose of calculating the 10% limit.

(iii) Refreshing of Mandate Limit

The Company may by ordinary resolution of the shareholders refresh the mandate limit. However, the total number of New Award Shares which may be awarded upon vesting of all Awards to be granted under the Share

— 14 —

PRINCIPAL TERMS OF SHARE AWARD SCHEME

APPENDIX

Award Scheme, and the exercise of all options to be granted under all other schemes of the Company under the limit as refreshed (the “ Refreshed Mandate Limit ”) must not exceed 10% of the Shares in issue as at the date of approval of refreshing the limit. Awards previously granted under the Share Award Scheme (including those vested, outstanding, cancelled or lapsed in accordance with the Share Award Scheme) will not be counted for the purpose of calculating the limit as refreshed.

(iv) Grant to specifically identified Selected Employees

Specifically identified Selected Employees may be granted New Award Shares beyond the above mandate limit. The Company may in addition seek separate approval by its shareholders in general meeting for granting New Award Shares beyond the above mandate limit provided that the New Award Shares in excess of the limit are granted only to Selected Employees specifically identified by the Company before such approval is sought and in which event, the Company shall send a circular to the shareholders containing details and information as required under the Listing Rules.

(v) Limit for each Selected Employee

No Selected Employees shall be granted any Award if the total number of New Award Shares awarded and to be awarded on vesting of Awards to such Selected Employee (including Awards already vested and outstanding) in any 12-month period exceed 1% of the Shares in issue, or the total market value of the award Shares under the relevant Award within any 12month period exceed 200% of the annual base salary of such Selected Employee on the Grant Date.

Where any grant of Awards to a Selected Employee would result in the New Award Shares awarded and to be awarded upon vesting of all Awards granted and to be granted to such person (including Awards already vested, lapsed and outstanding) in the 12-month period up to and including the date of such further grant representing in aggregate over 1% of the Shares in issue, such further grant shall be subject to separate approval by the shareholders of the Company in general meeting with the relevant Selected Employee and his associates abstaining from voting.

(vi) Grant to substantial shareholder

Insofar and for so long as the Listing Rules so require, no Award may be granted to any substantial shareholder of the Company or its associate, which would result in the New Award Shares awarded and to be awarded upon vesting of all Awards already granted or to be granted (including

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PRINCIPAL TERMS OF SHARE AWARD SCHEME

APPENDIX

Awards vested and outstanding) to such person under the Share Award Scheme and options under any other scheme(s) of the Company in the 12month period up to and including the date of board meeting for proposing such further grant:

• (i) representing in aggregate over 0.1% of the issued share capital of the Company in issue; and

• (ii) having an aggregate value, based on the closing price of the Shares at the date of the board meeting for proposing such further grant, in excess of HK$5 million

unless such further grant is approved by the shareholders in general meeting by way of a poll. The Company shall also comply with any applicable requirements of the Listing Rules in respect of such meeting.

(t) Effects of reorganisation of capital structure

In the event of any alteration in the capital structure of the Company whilst any Award remains outstanding, whether by way of capitalisation of profits or reserves, rights issue, consolidation, subdivision, reduction of the share capital of the Company, such corresponding alterations (if any) shall be made to:

• (i) the number or nominal amount of award Shares subject to the Awards remaining vested; and/or

• (ii) the allotment price; and/or

• (iii) the maximum number of Shares that can be awarded pursuant to the Share Award Scheme,

as the auditors of the Company shall certify in writing to the Board either generally or as regards any particular Award to be in their opinion fair and reasonable (except in the case of a capitalisation issue where no such certification shall be required), provided that:

• (i) any such alterations shall be made on the basis that the aggregate allotment price in respect of all the award Shares under an Award shall remain as nearly as possible the same (but shall not be greater than) it was before such event;

• (ii) no such alterations shall be made the effect of which would be to enable a Share to be issued at less than its nominal value; and

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PRINCIPAL TERMS OF SHARE AWARD SCHEME

APPENDIX

• (iii) no such alterations shall be made the effect of which would be to increase the proportion of the issued share capital of the Company which any Selected Employee shall be awarded pursuant to the Awards.

For the avoidance of doubt only, the issue of securities as consideration in a transaction shall not be regarded as a circumstance requiring any such alterations. The Company will make an announcement in the event that organisation of capital structure occurs.

(u) Alteration to the Share Award Scheme

The Share Award Scheme may be altered in any respect by resolution of the Board except that the provisions of the Share Award Scheme as to:

• (i) the definitions of “Employee”, “Selected Employee” and “Vesting Date” in the Share Award Scheme, which have the same meanings when used in this circular; and

• (ii) the provisions of the Share Award Scheme including the timing of award, custodian arrangements, and the matters referred to in paragraphs (d)-(g), (r) to (t), (w) and this paragraph (u);

shall not be altered to the advantage of Employees except with the prior sanction of a resolution of the Company in general meeting, provided that no such alteration shall operate to affect adversely the terms of any Award granted or agreed to be granted prior to such alteration except with the consent or sanction of such majority of the Selected Employee as would be required of the shareholders of the Company under the bye-laws for the time being of the Company for a variation of the rights attached to the Shares.

Any alterations to the terms and conditions of the Share Award Scheme, which are of a material nature, shall be approved by the shareholders of the Company, except where the alterations take effect automatically under the existing terms of the Share Award Scheme or otherwise simplify or facilitate better administration of the Share Award Scheme.

The amended terms of the Share Award Scheme shall comply with the relevant requirements of Chapter 17 of the Listing Rules.

Any change to the authority of the Board in relation to any alteration to the terms of the Share Award Scheme shall be approved by the shareholders of the Company.

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PRINCIPAL TERMS OF SHARE AWARD SCHEME

APPENDIX

(v) Termination of Share Award Scheme

• (i) The Company by resolution in general meeting or the Board may at any time terminate the operation of the Share Award Scheme and in such event no further Awards will be granted after the Share Award Scheme is terminated but in all other respects the provisions of the Share Award Scheme shall remain in full force and effect. All Awards granted prior to such termination and not then vested shall remain valid.

• (ii) On the business date following the settlement, lapses or cancellation of the last outstanding Awards granted or to be granted under the Share Award Scheme:

• (A) all Shares and non-cash income remaining in the Trust shall be sold by the trustee of the Trust within 14 business days (on which trading of the Shares has not been suspended) of receiving notice of the settlement or the lapse of such last outstanding Award (or such longer period as the Remuneration Committee may otherwise determine); and

• (B) all cash and net proceeds of sale referred to in sub-paragraph (v)(ii)(A) above and such other funds remaining in the Trust (after making appropriate deductions in respect of all disposal costs, expenses and other liabilities in accordance with the trust deed of the Trust) shall be remitted to the Company. For the avoidance of doubt, the Trustee shall not transfer any Shares to the Company nor may the Company otherwise hold any Shares whatsoever (other than the proceeds in the sale of such Shares pursuant to sub-paragraph (v)(ii)(A) above).

(w) Offers made to a director, chief executive or a substantial shareholder of the Company or any associates of such chief executive or substantial shareholder

Subject to sub-paragraphs (s)(iv) and (s)(vi) above, but only insofar as and for so long as the Listing Rules require, where any Award is proposed to be granted to a director, or chief executive or substantial shareholder of the Company or any associates of such chief executive or substantial shareholder, such Award must first be approved by the independent non-executive directors of the Company.

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NOTICE OF SPECIAL GENERAL MEETING

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(Incorporated in Bermuda with limited liability)

(Stock Code: 983)

NOTICE IS HEREBY GIVEN that a Special General Meeting of the Shareholders of Shui On Construction and Materials Limited (the “Company”) will be held at Room 103, 1st Floor, Shui On Centre, 6-8 Harbour Road, Hong Kong on 23 August 2006 at 3:10 p.m. (or so soon thereafter as the Annual General Meeting of the Company convened at the same place and date at 3:00 p.m. shall have been concluded or adjourned) for the purpose of considering, if thought fit, passing with or without amendments, the following resolution as an ordinary resolution of the Company:–

ORDINARY RESOLUTION

“ THAT

conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of and permission to deal in any award shares falling to be issued pursuant to the vesting of the award granted under the share award scheme referred to in the circular dispatched to the shareholders on the same day as this notice, the terms of which are set out in the printed document marked “A” now produced to the Meeting and for the purpose of identification signed by the Chairman hereof (the “ Share Award Scheme ”), the Share Award Scheme be approved and adopted to be the share award scheme for the Company and that the Directors of the Company be authorised to allot and issue shares pursuant to the Share Award Scheme and take all such steps as may be necessary or desirable to implement such Share Award Scheme.”

By Order of the Board

Edmond Chong Wai Sang

Company Secretary

Hong Kong, 28 July 2006

• For identification purpose only

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NOTICE OF SPECIAL GENERAL MEETING

Notes:

• (1) Any member entitled to attend and vote at the above meeting is entitled to appoint one or more proxies to attend and, on a poll, vote in his stead. A proxy need not be a member of the Company.

• (2) To be valid, a 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 lodged with the head office of the Company at 34th Floor, Shui On Centre, 6-8 Harbour Road, Hong Kong not less than 48 hours before the time fixed for holding the meeting.

• (3) The register of members of the Company will be closed from Wednesday, 16 August 2006 to Wednesday, 23 August 2006, both days inclusive, during which period no transfer of shares will be effected.

The Directors of the Company as at the date of this notice are as follows:

Executive Directors:

Mr. Vincent Lo Hong Sui (Chairman), Mr. Lawrence Choi Yuk Keung (Vice-chairman), Mr. Frankie Wong Yuet Leung (Chief Executive Officer), Mr. Raymond Wong Fook Lam and Mrs. Vivien Lowe Hoh Wai Wan

Non-Executive Director:

Professor Michael John Enright

Independent Non-Executive Directors:

Mr. Anthony Griffiths, Mr. Moses Cheng Mo Chi and Professor K.C. Chan

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