PegBio Co., Ltd. - Proxy Solicitation & Information Statement 2002

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular, you should consult a 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 Hung Fung Group Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

Hung Fung Group Holdings Limited

(Incorporated in Bermuda with limited liability)

(to be renamed Xin Corporation Limited)

PROPOSED SHARE CONSOLIDATION, CHANGE IN BOARD LOT SIZE, CAPITAL REORGANISATION,

CHANGE OF COMPANY’S NAME TO “XIN CORPORATION LIMITED”, TERMINATION OF THE EXISTING SHARE OPTION SCHEME, ADOPTION OF THE NEW SHARE OPTION SCHEME AND GENERAL MANDATES TO ISSUE SECURITIES AND REPURCHASE SHARES

Financial advisor to the Company

Somerley Limited

A notice convening a special general meeting of Hung Fung Group Holdings Limited to be held at 10:00 a.m. on Monday, 30th December, 2002 at Plaza I to III, Lower Lobby, Novotel Century Hong Kong, 238 Jaffe Road, Wanchai, Hong Kong is set out on pages 29 to 34 of this circular. Whether or not they are able to attend the meeting, shareholders are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the Company’s Hong Kong branch share registrar, Tengis Limited, at 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the special general meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude shareholders from attending and voting in person at the special general meeting should they so wish.

4th December, 2002

	Page
Expected timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
The Share Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
The Capital Reorganisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
The proposed change of name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Trading arrangements and free exchange of new share certificates . . . . . . . . . . . . . . . . . . . . .	10
Listing and dealings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Termination of the Existing Scheme and adoption of the New Scheme . . . . . . . . . . . . . . . . .	12
General Mandates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Documents available for inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Responsibility statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Appendix I – Summary of the principal terms of the New Scheme. . . . . . . . . . . . . . . . . . . . . . .	16
Appendix II – Explanatory statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	29

EXPECTED TIMETABLE

2002

Latest time for lodging forms of proxy for the SGM . . . . . . . . . . 10:00 a.m. on Saturday, 28th December SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on Monday, 30th December The Share Consolidation and the Capital Reorganisation becoming effective . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Tuesday, 31st December Closure of original counter for trading in Shares in board lots of 20,000 (represented by existing green share certificates) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Tuesday, 31st December Establishment of temporary counter for trading in Consolidated Shares in board lots of 400 (represented by existing green share certificates) . . . . . . . . . . . . . 9:30 a.m. on Tuesday, 31st December First day of free exchange of existing green share certificates for new orange share certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 31st December First day of operation of odd lot trading facility . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 31st December 2003 Original counter for trading in Consolidated Shares represented by new orange share certificates in board lots of 4,000 re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Tuesday, 14th January Parallel trading commences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Tuesday, 14th January Closure of temporary counter for trading in Consolidated Shares in board lots of 400 (represented by existing green share certificates) . . . . . . . . . . . . . 4:00 p.m. on Thursday, 6th February Parallel trading ends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Thursday, 6th February Last day of operation of odd lot trading facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 11th February Last day of free exchange of existing share certificates for new share certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 11th February

– 1 –

DEFINITIONS

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

“Adoption Date”	the date on which the proposed New Scheme is adopted by ordinary
	resolution of the Company in general meeting
“Auditors”	the auditors of the Company for the time being
“Authorised Capital Cancellation”	the proposed cancellation of the authorised but unissued share
	capital of the Company of HK$192,237,181 divided into
	384,474,362 Consolidated Shares of HK$0.50 each together with
	such amount arising from the Capital Reduction
“Board”	the board of Directors
“Capital Reduction”	the proposed reduction of the nominal value of each of the issued
	Consolidated Share of HK$0.50 to HK$0.01 as referred to in the
	paragraph headed “The Capital Reduction” in this circular
“Capital Reorganisation”	the capital reorganisation of the Company described herein
	involving the Capital Reduction, the Share Premium Cancellation,
	the Authorised Capital Cancellation and the Increase in Authorised
	Share Capital
“CCASS”	the Central Clearing and Settlement System established and
	operated by HKSCC
“Company”	Hung Fung Group Holdings Limited, a company incorporated in
	Bermuda with limited liability, the securities of which are listed
	on the Stock Exchange
“Consolidated Share(s)”	ordinary share(s) with nominal value of HK$0.50 each in the
	share capital of the Company created upon the Share Consolidation
	becoming effective
“Convertible Bonds”	5 per cent. convertible bonds in the aggregate principal amount of
	HK$6,500,000 issued by the Company on 16th May, 2002
“Convertible Note”	3 per cent. convertible note in the aggregate principal amount of
	HK$16,000,000 issued by the Company on 30th July, 2002
“Date of Grant”	in respect of an Option, the business day on which the Board
	resolves to make an Offer to a Participant
“Directors”	directors of the Company

– 2 –

DEFINITIONS

“Existing Scheme”	the existing share option scheme of the Company adopted on 17th
	February, 1998
“General Mandates”	the proposed general mandate to be granted to the Directors to
	exercise the power of the Company to issue securities in the
	Company and the Repurchase Mandate to be sought at the SGM
	as set out in the notice convening the SGM
“Grantee”	any Participant who accepts an Offer or (where the context so
	permits) a person entitled to any such Option in consequence of
	the death of the original Grantee
“Group”	the Company and its subsidiaries
“Hong Kong”	The Hong Kong Special Administrative Region of the People’s
	Republic of China
“HKSCC”	Hong Kong Securities Clearing Company Limited
“Increase in Authorised	the creation of an additional 1,284,474,362 Reduced Shares (or
Share Capital”	such other number as may be appropriate) of HK$0.01 each to
	increase the number of the authorised shares in the Company
	after the Share Consolidation, the Capital Reduction, the Share
	Premium Cancellation and the Authorised Capital Cancellation to
	1,500,000,000 Reduced Shares
“Latest Practicable Date”	29th November, 2002, being the latest practicable date prior to
	the printing of this circular for ascertaining certain information
	contained herein
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“New Scheme”	the new share option scheme proposed to be adopted by the
	Company, further information and a summary of the principal
	terms of which are set out in Appendix I to this circular
“Offer”	the offer of the grant of an Option made to a Participant pursuant
	to the New Scheme
“Option(s)”	option(s) to subscribe for Shares, Consolidated Shares or Reduced
	Shares (as the case may be) granted pursuant to the New Scheme
“Option Period”	a period to be notified by the Board to each Grantee at the time of
	making an Offer which shall not expire later than 10 years from
	the relevant Date of Grant

– 3 –

DEFINITIONS

“Participant” any directors (including executive directors, non-executive directors and independent non-executive directors) of the Group and employees of the Group and any advisors, consultants, distributors, contractors, suppliers, agents, customers, business partners, joint venture business partners, promoters, service providers to the Group who the Board considers, in its sole discretion, have contributed to the Group and any shareholder of the Group
“Reduced Share(s)” ordinary share(s) with nominal value of HK$0.01 each in the share capital of the Company upon the Share Consolidation and the Capital Reorganisation becoming effective
“Repurchase Mandate” the proposed general mandate to be granted to the Directors to exercise the power of the Company to repurchase Shares, Consolidated Shares or Reduced Shares (as the case may be) an explanatory statement in connection with the Repurchase Mandate is set out in Appendix II to this circular
“SGM” the special general meeting of the Company to be held on 30th December, 2002 to consider and, if appropriate, to approve, among others, the Share Consolidation, the Capital Reorganisation, the change of the Company’s name, the proposed termination of the Existing Scheme, the adoption of the New Scheme and the General Mandates or any adjournment thereof
“Share(s)” existing ordinary share(s) with nominal value of HK$0.01 each in the capital of the Company
“Share Consolidation” the proposed consolidation of every fifty Shares (whether issued or unissued) into one Consolidated Share
“Shareholder(s)” holder(s) of Shares, Consolidated Shares or Reduced Shares, as the context may require
“Share Premium Cancellation” the cancellation of the entire amount standing to the credit of the share premium account of the Company as at the effective date of the Capital Reduction
“Stock Exchange” The Stock Exchange of Hong Kong Limited “Subscription Price” the price per share at which a Grantee may subscribe for shares of the Company on the exercise of an Option pursuant to the terms of the New Scheme
“HK$” Hong Kong dollars, the lawful currency of Hong Kong

– 4 –

LETTER FROM THE BOARD

Hung Fung Group Holdings Limited

(Incorporated in Bermuda with limited liability)

(to be renamed Xin Corporation Limited)

Executive Directors:

Mr. Lo Ming Chi, Charles (Chairman) Mr. Wilson Ng Ms. Sio Ion Kuan Mr. Yu Wai Man Mr. Wu Wing Kit Mr. Wong Kwok Tai

independent non-executive Directors

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal place of business in Hong Kong: Room 3A03-06, 3rd Floor New Mandarin Plaza 14 Science Museum Road Tsimshatsui East Kowloon Hong Kong

4th December, 2002

To the Shareholders,

and for information only, holders of Convertible

Bonds and Convertible Note

Dear Sir or Madam,

PROPOSED SHARE CONSOLIDATION, CHANGE IN BOARD LOT SIZE, CAPITAL REORGANISATION,

CHANGE OF COMPANY’S NAME TO “XIN CORPORATION LIMITED”, TERMINATION OF THE EXISTING SHARE OPTION SCHEME, ADOPTION OF THE NEW SHARE OPTION SCHEME AND GENERAL MANDATES TO ISSUE SECURITIES AND REPURCHASE SHARES

INTRODUCTION

The Directors announced on 13th November, 2002 that they intended to put forward to the Shareholders, inter alia, the Share Consolidation, a change in board lot size from 20,000 shares to 4,000 shares, the Capital Reorganisation, a change of the Company’s name to “Xin Corporation Limited” and the adoption of Chinese name of 「新創綜合企業有限公司」 for identification only.

– 5 –

LETTER FROM THE BOARD

The Board is also putting forward to the Shareholders proposals (i) to terminate the Existing Scheme and adopt the New Scheme; and (ii) to renew the General Mandates.

The purpose of this circular is to give you further information regarding the proposed Share Consolidation, change in board lot size, the Capital Reorganisation, change of the Company’s name, termination of the Existing Scheme, adoption of the New Scheme and renewal of the General Mandates and to give you notice of the SGM convened for the purpose of considering, and if thought fit, approving the necessary resolutions to implement such proposals.

THE SHARE CONSOLIDATION

Every fifty issued and unissued Shares of HK$0.01 each will be consolidated into one Consolidated Share of HK$0.50 each. As at the Latest Practicable Date, there were 10,776,281,900 Shares in issue. On this basis and upon the Share Consolidation becoming effective, there will be 215,525,638 Consolidated Shares in issue. Any fractions which arise upon the Share Consolidation becoming effective will be aggregated and (if possible) sold for the benefit of the Company. The Consolidated Shares will rank pari passu in all respects with each other.

Change in board lot size

At present, the Shares are traded in board lots of 20,000 Shares. Subject to the Share Consolidation becoming effective, the Directors propose to change the size of the board lot for trading on the Stock Exchange to 4,000 Consolidated Shares.

Conditions of the Share Consolidation

The Share Consolidation is conditional on:

(a) the passing by the Shareholders at the SGM of a relevant resolution approving the Share Consolidation; and
(b) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Consolidated Shares.

Reasons for the Share Consolidation

In view of the relatively low market value of existing board lots of the Shares, the Directors believe that the Share Consolidation together with the change in board lot size would reduce the number of board lots in the market and will reduce the handling cost for the Company and the Shareholders dealing in the shares in the Company, including charges on stock withdrawal and share certificate issues, and are beneficial to both the Company and the Shareholders.

Effects of the Share Consolidation on existing convertible securities

As at the Latest Practicable Date, the Company has Convertible Note and Convertible Bonds in issue with an aggregate face value of HK$22,500,000 entitling the holders thereof to convert the face

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LETTER FROM THE BOARD

value into Shares at a conversion price of HK$0.01 per Share, subject to adjustment. In the event that the Convertible Note and the Convertible Bonds are converted in full prior to the SGM, a total of 2,250,000,000 Shares will fall to be issued (equivalent to 45,000,000 Consolidated Shares) if the Share Consolidation becomes effective.

Adjustment to the conversion price of the Convertible Note and the Convertible Bonds as a result of the Share Consolidation calculated in accordance with the terms of the Convertibles Note and the Convertible Bonds respectively and confirmed by an approved merchant bank for the Convertible Bonds, has been notified to the relevant holders thereof, where required.

THE CAPITAL REORGANISATION

The Capital Reorganisation will involve the Capital Reduction, the Share Premium Cancellation, the Authorised Capital Cancellation and the Increase in Authorised Share Capital.

The Capital Reduction

All issued Consolidated Shares of HK$0.50 each will be reduced by cancelling their nominal value to the extent of HK$0.49 per share so that the nominal value of each such issued share will be reduced from HK$0.50 to HK$0.01. Accordingly, based upon the number of Shares in issue as at the Latest Practicable Date and subject to the Share Consolidation becoming effective, the nominal value of the issued share capital of the Company after the Share Consolidation and the implementation of the Capital Reduction will be reduced by HK$105,607,562.62 to HK$2,155,256.38.

The Share Premium Cancellation

The share premium account of the Company as at the effective date of the Capital Reduction will be cancelled and the credit arising therefrom will be credited to the contributed surplus account of the Company. As at the Latest Practicable Date, the unaudited share premium account of the Company amounted to approximately HK$41,465,000.

The application of credit

The expected credit of HK$105,607,562.62 arising from the Capital Reduction and the credit arising from the Share Premium Cancellation on the effective date shall be applied in full, together with such amount standing in the contributed surplus account of the Company as may be necessary, by the Directors to fully eliminate the accumulated losses of the Company. The accumulated losses of the Company as at 31st March, 2002 amounted to approximately HK$206,552,000 as set out in the audited financial statements of the Company.

The Authorised Capital Cancellation

All the authorised but unissued share capital of the Company (including the authorised but unissued share capital arising from the Capital Reduction) will be cancelled. As at the Latest Practicable Date, there are 19,223,718,100 authorised but unissued Shares of HK$0.01 each amounting to an aggregate of HK$192,237,181. Assuming the Share Consolidation becomes effective and on the basis of 10,776,281,900 Shares currently in issue, the entire authorised but unissued 384,474,362 Consolidated Shares, together with that arising from the Capital Reduction, will be cancelled.

– 7 –

LETTER FROM THE BOARD

The Increase in Authorised Share Capital

Subject to the Share Consolidation, the Capital Reduction and the Authorised Capital Cancellation becoming effective, with an aim to increasing the number of authorised shares of the Company to 1,500,000,000, the authorised share capital of the Company will be increased to HK$15,000,000 by the creation of 1,284,474,362 Reduced Shares (or such other number as may be appropriate) of HK$0.01 each.

Conditions of the Capital Reorganisation

The Capital Reorganisation is conditional on:

(a) the passing by the Shareholders at the SGM of a special resolution approving the Capital Reorganisation; and
(b) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Reduced Shares.

Relevant Resolutions

A special resolution will be proposed to approve both the Share Consolidation and the Capital Reorganisation. Pursuant to this resolution, implementation of the Share Consolidation and the Capital Reorganisation will both take place if the resolution is approved. Both the Share Consolidation and the Capital Reorganisation will not be implemented if the resolution is not approved.

An ordinary resolution will be proposed to consider only the Share Consolidation but not the Capital Reorganisation, and to be voted on only in the event that the abovementioned special resolution is not approved at the SGM. Under this resolution, the Share Consolidation is not subject to the Capital Reorganisation being implemented. If this resolution is voted on and approved, only the Share Consolidation will be implemented.

Reasons for the Capital Reduction, Share Premium Cancellation and the Increase in Authorised Share Capital

The Directors believe that the Capital Reduction and the Share Premium Cancellation are beneficial to the Company and the Shareholders as a whole. The audited financial statements of the Company as at 31st March, 2002 showed that the Company had accumulated losses of approximately HK$206,552,000. The Directors believe that it is unlikely that the Company will generate sufficient profits in the foreseeable future to eliminate this deficit and that it would be inappropriate for the Company to pay dividends while the deficit remains. Based on the current information, the credit arising from the proposed Capital Reduction of approximately HK$105,607,562.62 and from the Share Premium Cancellation of approximately HK$41,465,000 together with such necessary amount in the balances in the contributed surplus account of the Company as at the effective date, which amounted to approximately HK$68,509,000 as at the Latest Practicable Date will be applied to eliminate the accumulated losses of the Company. Based on (i) the Company’s accumulated losses of approximately HK$206,552,000 as at 31st March,

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LETTER FROM THE BOARD

2002; (ii) the number of Shares in issue as at the Latest Practicable Date, and the unaudited balances of the share premium and contributed surplus of the Company as at the Latest Practicable Date, it is expected that the accumulated losses of the Company will be fully eliminated upon the Capital Reorganisation becoming effective.

The Directors believe that the Increase in Authorised Share Capital will provide the Company with greater flexibility for any issuance of new Reduced Shares in the future.

Details of the share capital of the Company before and after the Share Consolidation and the Capital Reorganisation

As at the Latest Practicable Date, the authorised share capital of the Company was HK$300,000,000 divided into 30,000,000,000 Shares of HK$0.01 each, of which 10,776,281,900 Shares had been issued and are credited as fully paid.

On the basis of 10,776,281,900 Shares in issue and subject to the Share Consolidation and the Capital Reorganisation becoming effective, the authorised share capital of the Company will be HK$15,000,000 comprising 1,500,000,000 Reduced Shares, of which 215,525,638 Reduced Shares will be issued and credited as fully paid, representing an issued share capital of HK$2,155,256.38 and of which 1,284,474,362 Reduced Shares representing a share capital of HK$12,844,743.62 will be unissued.

Set out below is the expected capital position of the Company both immediately before and after the completion of the Share Consolidation and the Capital Reorganisation, on the basis of (i) the issued capital of the Company as at the Latest Practicable Date; (ii) the unaudited balances of the contributed surplus and the share premium of the Company as at the Latest Practicable Date; and (iii) the audited accumulated losses of the Company as at 31st March, 2002.

	The Company’s	The Company’s
	capital position	capital position
	immediately	immediately
	before the completion	after the completion
	of the Share	of the Share
	Consolidation and the	Consolidation and the
	Capital Reorganisation	Capital Reorganisation
Nominal value per share	HK$0.01	HK$0.01
Number of authorised shares	30,000,000,000	1,500,000,000
Authorised share capital	HK$300,000,000	HK$15,000,000
Number of issued shares	10,776,281,900	215,525,638
Total issued share capital	HK$107,762,819	HK$2,155,256.38
Number of unissued shares	19,223,718,100	1,284,474,362
Share premium	HK$41,465,308	nil
Contributed surplus	HK$68,509,199	HK$9,029,190
Accumulated loss	HK$206,552,880	nil

– 9 –

LETTER FROM THE BOARD

Effect of the Capital Reorganisation

Upon the Share Consolidation and the Capital Reorganisation becoming effective, the authorised share capital of the Company will amount to HK$15,000,000, divided into 1,500,000,000 shares of HK$0.01 each, of which 215,525,638 Reduced Shares will be in issue. Other than the expenses incurred in relation to the Capital Reorganisation, the implementation thereof will not alter the underlying assets, business operations, management or financial position of the Company or the interests of the Shareholders. The Directors believe that the Capital Reorganisation will not have any material adverse effect on the financial position of the Company or the Group.

THE PROPOSED CHANGE OF NAME

The Directors propose, subject to Shareholders’ approval, to change the name of the Company to “Xin Corporation Limited” and have resolved to adopt a Chinese name of 「新創綜合企業有限公司」 for identification only. The Directors consider that given the completion of the debt restructuring as announced by the Company on 16th May, 2002, it would be appropriate for the Company to adopt a new company name consequent on the change in the shareholding of the Company with new leadership of the new controlling Shareholder. The proposed change of the Company’s name is subject to the passing of a special resolution by the Shareholders at the SGM and the approval by the Registrar of Companies in Bermuda. The change of the Company’s name will take effect from the date on which the new name is registered by the Registrar of Companies in Bermuda in place of the existing name. Thereafter, the Company will comply with the necessary filing procedures with the Registrar of Companies in Hong Kong and will issue further announcement when the change of Company’s name has become effective.

The proposed change of the Company’s name will not affect any rights of the Shareholders. All existing share certificates in issue bearing the existing name of the Company will, after the change of the Company’s name becoming effective, continue to be evidence of title to the Shares under the new Company’s name and will be valid for trading, settlement and delivery purposes for the same number of Shares or one fiftieth (as the case may be) on the Stock Exchange up to the end of the parallel trading period. As soon as the change of Company’s name has become effective, new share certificates of the Company will be issued in the new name of the Company.

TRADING ARRANGEMENTS AND FREE EXCHANGE OF NEW SHARE CERTIFICATES

In the event that the Share Consolidation becomes effective (which is expected to be on 9:30 a.m. on 31st December, 2002), all existing green share certificates for any number of Shares in issue immediately before completion of the Share Consolidation will be deemed to be share certificates, and will be effective as documents of title, for one fiftieth of that number of Shares upon the Share Consolidation becoming effective. Dealings in the Consolidated Shares are expected to commence on 31st December, 2002. Parallel trading arrangements for the Consolidated Shares in the form of new share certificates (which will be in orange) and share certificates for the existing Shares will be established with the Stock Exchange and parallel trading will be permitted from Tuesday, 14th January, 2003 to Thursday, 6th February, 2003, both days inclusive, at the counters mentioned in (a) and (b) below:

(a) with effect from 9:30 a.m. on Tuesday, 31st December, 2002, a temporary counter for trading in the Consolidated Shares in board lots of 400 Consolidated Shares will be established and only green share certificates for the existing Shares can be traded at this counter. All

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LETTER FROM THE BOARD

green share certificates for the existing Shares will be valid for settlement and delivery for trading transacted at this counter on the basis of every fifty existing Shares represent one Consolidated Share. The original counter for trading in the existing Shares in board lots of 20,000 will be temporarily closed with effect from 9:30 a.m. on Tuesday, 31st December, 2002; and

(b) with effect from 9:30 a.m. on Tuesday, 14th January, 2003, the original counter will be reopened and will become a counter for trading in the Consolidated Shares in board lots of 4,000 Consolidated Shares. Only new orange share certificates for the Consolidated Shares can be traded at this counter.

The temporary counter for trading in the Consolidated Shares in board lots of 400 Consolidated Shares (represented by green share certificates for the existing Shares) will be removed after 4:00 p.m. on Thursday, 6th February, 2003. Thereafter, trading will only be in orange share certificates of the Consolidated Shares in board lots of 4,000. The green share certificates for the existing Shares will then cease to be marketable and not be acceptable for delivery and settlement purposes but will remain effective as documents of title on the basis of every fifty existing Shares for one Consolidated Share.

The expected effective date for the Share Consolidation and the change of the Company’s name and adoption of Chinese name will be 31st December, 2002 and 20th January, 2003 respectively.

Subject to the Share Consolidation and/or the change of the Company’s name becoming effective, Shareholders may from 31st December, 2002 to 11th February, 2003, (both days inclusive) submit their share certificates for existing Shares to the Company’s Hong Kong branch share registrar, Tengis Limited, at 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong, in exchange, at the expense of the Company, for new share certificates for the Shares, the Consolidated Shares or the Reduced Shares (as the case may be). During this period, it is expected that share certificates for the Shares, the Consolidated Shares or the Reduced Shares will be available for collection within ten business days after the submission of the existing share certificates to Tengis Limited. Thereafter, certificates for existing Shares will be accepted for exchange only on payment of a fee of HK$2.50 (or such higher amount as may from time to time be allowed by the Stock Exchange) for each share certificate for the existing Shares cancelled or each new share certificate issued for the Shares, the Consolidated Shares or the Reduced Shares, whichever number of certificates cancelled/issued is higher. Nevertheless, certificates for the existing Shares will continue to be good evidence of legal title and may be exchanged for new share certificates at any time.

In order to facilitate the trading of odd lots of the Consolidated Shares as a result of the Share Consolidation, the Company will, commencing from the effective day of the Share Consolidation, appoint a broker as an agent to match, on a “best effort” basis, the sale and purchase of odd lots of the Consolidated Shares arising from the Share Consolidation from 31st December, 2002 up to and including 11th February, 2003. Such arrangement is to facilitate Shareholders who wish to dispose of or top up their odd lots of Consolidated Shares. Kingston Securities Limited has been appointed as such broker. Shareholders who wish to take advantage of this facility should contact Ms. Rosita Kiu of Kingston Securities Limited at Suite 2801, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong (Tel: 2298 6215) during the period commencing from 31st December, 2002 up to and including 11th February, 2003.

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LETTER FROM THE BOARD

Shareholders are reminded that in order to effect the transaction, they will have to lodge with such broker the relevant share certificate(s) and duly signed and completed transfer form(s) and, if any, other documents of title. Shareholders should note that the matching of the sale and purchase of odd lots of Consolidated Shares are not guaranteed.

Shareholders are recommended to consult their stockbroker, other registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisers if they are in any doubt about the facility described above.

LISTING AND DEALINGS

Application has been made to the Listing Committee of the Stock Exchange for the granting of the listing of, and permission to deal in, the Consolidated Shares or the Reduced Shares (as the case may be) in issue as a result of the Share Consolidation or the Share Consolidation and the Capital Reorganisation becoming effective. All necessary arrangements have been made for the Consolidated Shares or the Reduced Shares to be admitted into CCASS established and operated by HKSCC.

Subject to the granting of the listing of, and permission to deal in the Consolidated Shares or the Reduced Shares on the Stock Exchange, the Consolidated Shares or the Reduced Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Consolidated Shares or the Reduced Shares on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

TERMINATION OF THE EXISTING SCHEME AND ADOPTION OF THE NEW SCHEME

The Board has noted the recent changes to the Listing Rules with respect to the requirements governing share option schemes. In compliance with such changes to the Listing Rules, the Board proposes to adopt the New Scheme. The purpose of the New Scheme is to provide incentives to participants thereunder who contributed to the Group and to enable the Group to recruit high caliber employees.

At the SGM, an ordinary resolution will be proposed for the Company to terminate the Existing Scheme and to approve and adopt a New Scheme, pursuant to which Participants may be granted Options to subscribe for the Consolidated Shares or the Reduced Shares upon and subject to the terms and conditions of the rules of the New Scheme.

The adoption of the New Scheme is conditional upon, inter alia, (i) the approval of the Shareholders at the SGM; (ii) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Shares, the Consolidation Shares or the Reduced Shares (as the case may be) to be issued pursuant to the exercise of the Options granted under the New Scheme; and (iii) if applicable, the Bermuda Monetary Authority granting approval to the issue of the Shares, the Consolidation Shares or the Reduced shares (as the case may be) to be issued pursuant to the exercise of the Options granted under the New Scheme.

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LETTER FROM THE BOARD

An announcement will be published in the newspapers by the Company on the outcome of the SGM in respect of the adoption of the New Scheme on the business day following the SGM.

The Existing Scheme is due to expire on 16th February, 2008. The Company will not grant any further options under the Existing Scheme and, upon the adoption of the New Scheme by the Company, the Existing Scheme will be terminated.

Save for the Existing Scheme, as at the Latest Practicable Date, there were not in existence any other share option scheme of the Company. A summary of the principal terms of the New Scheme is set out in Appendix I to this circular.

There is no general requirement of any minimum period for which an Option must be held before it can be exercised although the Board will be empowered under the New Scheme to impose at its discretion any such minimum period at the time of grant of any particular Option. In addition, the Board will be empowered to determine the exercise price in respect of any particular Option granted under the New Scheme on the basis set out in Appendix I to this circular so that the Participants will be encouraged to subscribe for Shares, Reduced Shares or Consolidated Shares pursuant to the Options which may be granted by the Company as incentives for future contributions and rewards for their past contributions.

Application for Listing

Application has been made to the Listing Committee of the Stock Exchange for the granting of the listing of, and permission to deal in, Shares, Reduced Shares or Consolidated Shares (as the case may be) which may fall to be allotted and issued upon the exercise of the Options that may be granted under the New Scheme. On the basis of the issued share capital of the Company as at the Latest Practicable Date, assuming the Share Consolidation has been implemented, the total number of Consolidated Shares or Reduced Shares issuable from exercise of the Options under the New Scheme will amount to 21,552,563 Consolidated Shares or Reduced Shares.

GENERAL MANDATES

At the SGM, ordinary resolutions will be proposed to (i) grant a general mandate to the Directors to allot, issue and deal with additional Shares, Consolidated Shares or Reduced Shares or other securities, as the case may be, not exceeding 20 per cent. of the issued share capital of the Company immediately upon the Share Consolidation and the Capital Reorganisation or the Share Consolidation becoming effective; and (ii) add to such general mandate the number of any Reduced Shares or Consolidated Shares (as the case may be) repurchased by the Company. Notwithstanding these, the Board has no immediate plans to issue Reduced Shares or Consolidated Shares, as the case may be, pursuant to the above general mandate.

The Directors are also seeking Shareholders’ approval of the Repurchase Mandate to be proposed at the SGM. The Repurchase Mandate grants to the Directors a general and unconditional mandate to exercise all the powers of the Company to repurchase shares subject to the criteria set out in Appendix II to this circular. The Repurchase Mandate will be valid for (i) such number of Consolidated Shares or Reduced Shares as representing 10 per cent. of the issued capital of the Company immediately upon the Share Consolidation and the Capital Reorganisation or the Share Consolidation (alone) becoming effective.

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LETTER FROM THE BOARD

The results of the resolutions to be proposed at the SGM in relation to the general mandate to allot, issue and deal with Shares, Reduced Shares or Consolidated Shares and the Repurchase Mandate will not affect the implementation of the Capital Reorganisation and/or the Share Consolidation.

SGM

The notice of the SGM, which contains the resolutions to approve (i) the Share Consolidation; (ii) the Capital Reorganisation; (iii) the change of the Company’s name; (iv) the termination of the Existing Scheme and the adoption of the New Scheme; and (v) the General Mandates, is set out on pages 29 to 34 of this circular.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you intend to attend the SGM, Shareholders are requested to complete the enclosed form of proxy and return in accordance with the instructions printed thereon to the Company’s Hong Kong branch share registrar, Tengis Limited, at 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the SGM. Completing and returning the form of proxy will not preclude Shareholders from attending and voting in person at the SGM or at any adjournment thereof should they so wish.

RECOMMENDATIONS

The Directors are of the view that the proposals involving (i) the Share Consolidation; (ii) the Capital Reorganisation; (iii) the change of the Company’s name; (iv) the termination of the Existing Scheme and the adoption of the New Scheme; and (v) the General Mandates are in the best interests of the Company and the Shareholders. Accordingly, the Directors recommend Shareholders to vote in favour of the resolutions to be proposed at the SGM.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business of the Company in Hong Kong at Room 3A03-06, 3rd Floor, New Mandarin Plaza, 14 Science Museum Road, Tsimshatsui East, Kowloon, Hong Kong during normal business hours from the date of this circular up to the date of the SGM (both days inclusive) and at the SGM:

(i) the memorandum of association and bye-laws of the Company;
(ii) the New Scheme; and
(iii) the Existing Scheme.

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LETTER FROM THE BOARD

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts not contained on this circular, the omission of which would make any statement herein misleading.

GENERAL

Your attention is drawn to the summary of the principal terms of the New Scheme in Appendix I and the explanatory statement on the Repurchase Mandate as set out in Appendix II of this circular.

By Order of the Board Lo Ming Chi, Charles Chairman

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SCHEME

APPENDIX I

The following is a summary of the principal terms of the New Scheme:

The purpose of the New Scheme is to provide Participants with the opportunity to acquire proprietary interests in the Company and to encourage Participants to work towards enhancing the value of the Company and its shares for the benefit of the Company and its Shareholders as a whole.
The New Scheme shall be subject to the administration of the Board whose decision as to all matters arising in relation to the New Scheme or its interpretation or effect shall be final and binding on all parties.
The categories of the Participant under the New Scheme are any directors (including executive directors, non-executive directors and independent non-executive directors) of the Group and employees of the Group and any advisors, consultants, distributors, contractors, suppliers, agents, customers, business partners, joint venture business partners, promoters, service providers to the Group who the Board considers, in its sole discretion, have contributed to the Group and any shareholders of the Group.
Each grant of Options to any director, chief executive or substantial shareholder (as defined in the Listing Rules) of the Company, or any of their respective associates shall be subject to the prior approval of the independent non-executive directors of the Company (excluding any independent non-executive director who is the proposed Grantee of the Option or an associate thereof). Where any grant of Options to a substantial shareholder or an independent non-executive director of the Company, or any of their respective associates, would result in the shares issued and to be issued upon exercise of all Options already granted and to be granted (including Options exercised, cancelled or outstanding) to such person in the twelvemonth period up to and including the date of such grant:
(i) representing in aggregate over 0.1 per cent. (or such other percentage as may from time to time be specified by the Stock Exchange) of the shares in issue; and
(ii) having an aggregate value, based on the closing price of the shares as stated in the daily quotation sheets issued by the Stock Exchange on the Date of Grant, in excess of HK$5 million (or such other amount as may from time to time be specified by the Stock Exchange),

such grant of Options shall be subject to prior approval by resolution of the Shareholders (voting by way of poll) on which all connected persons of the Company shall abstain from voting in favour but (for the avoidance of doubt), any connected person may without affecting the validity of the relevant resolution vote against the relevant resolution at the general meeting provided that his intention to do so has been stated in the circular to be sent to the Shareholders in connection therewith.

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SCHEME

APPENDIX I

No Offer shall be made to, nor shall any Offer be capable of acceptance by, any Participant at a time when the Participant would or might be prohibited from dealing in the shares by the Listing Rules or by any other applicable rules, regulations or laws.
The maximum number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the New Scheme and other share option schemes of the Company (including the Existing Scheme) shall not exceed 30 per cent. in nominal amount of the issued share capital of the Company from time to time (“Scheme Limit”). No Option may be granted under any schemes of the Company if this will result in the limit being exceeded.
(i) The maximum number of shares in respect of which Options may be granted under the New Scheme shall not (when aggregated with any shares subject to any other share option scheme(s) of the Company) exceed 1,077,628,190 Shares or 21,552,563 Consolidated Shares or 21,552,563 Reduced Shares (as the case may be), being 10 per cent. in nominal amount of the issued share capital of the Company on the Adoption Date (the “Scheme Mandate Limit”). Option lapsed in accordance with the terms of the New Scheme will not be counted for the purpose of calculating the Scheme Mandate Limit.
(ii) The Scheme Mandate Limit referred to in paragraph 6(i) may be renewed at any time subject to prior Shareholders’ approval but in any event shall not exceed 10 per cent. of the issued share capital of the Company as at the date of approval of the renewal of the Scheme Mandate Limit. Options previously granted under the New Scheme or any other share option schemes (including those outstanding, cancelled, lapsed in accordance with the terms or exercised options) will not be counted for the purpose of calculating the refreshed Scheme Mandate Limit. The Company must send a circular to the Shareholders containing the information required under the Listing Rules.
(iii) The Company may grant Options beyond the Scheme Mandate Limit to Participants if:
- (a) the Company has first sent a circular to Shareholders containing a generic description of the specified Participants in question, the number and terms of the Options to be granted, the purpose of granting Options to the specified Participants with an explanation as to how the terms of the Options serve such purpose and other relevant information as required under the Listing Rules; and
- (b) separate Shareholder’s approval in general meeting has been obtained.

Such grant may only be made to Participants specifically identified by the Company after such approval is sought.

The maximum number of shares in respect of which Options may be granted to a specifically identified single Grantee under the New Scheme shall not (when aggregated with any shares

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SCHEME

APPENDIX I

in respect of any options granted to him under any other share option scheme(s) of the Company) in any 12-month period exceed 1 per cent. of the shares in issue (the “Individual Limit”). The Company may grant Options beyond the Individual Limit to a Participant at any time if:

(i) the Company has first sent a circular to Shareholders containing the identity of the Participant in question, the number and terms of the Options to be granted (and Options previously granted to such Participant) and other relevant information as required under the Listing Rules; and
(ii) separate Shareholder’s approval has been obtained in general meeting with the proposed relevant Grantee (as the case may be) and his associates abstaining from voting.
The Option Period is a period to be notified by the Board to each Grantee at the time of making an Offer which shall not expire later than 10 years from the Date of Grant.
On and subject to the terms of the New Scheme, the Board shall be entitled at any time within 10 years after the Adoption Date to make an Offer to any Participant as the Board may in its absolute discretion select to take up an Option pursuant to which such Participant may, during the Option Period, subscribe for such number of shares as the Board may determine at the Subscription Price. The Offer shall specify the terms on which the Option is to be granted. Such terms may at the discretion of the Board, include (i) a minimum period for which an Option must be held before it can be exercised and/or (ii) a performance target that must be reached, before the Option can be exercised in whole or in part; and (iii) any other terms, all of which may be imposed (or not imposed) either on a case-by-case basis or generally.
An Offer shall be deemed to have been granted on the Date of Grant and shall be deemed to have been accepted and shall take effect when the duplicate letter comprising acceptance of the Offer duly signed by the Grantee with the number of shares in respect of which the Offer is accepted clearly stated therein together with a remittance in favour of the Company of HK$1.00 by way of consideration for the grant thereof is received by the Company at its principal place of business in Hong Kong or such other address as specified in the Offer. Such remittance shall in no circumstances be refundable. An Offer shall be made to a Participant by letter in such form as the Board may from time to time determine requiring the Participant to undertake to hold the Option on the terms on which it is to be granted and to be bound by the provisions of the New Scheme and shall remain open for acceptance by the Participant concerned for a period of 30 days from the Date of Grant.
The Subscription Price shall be determined by the Board in its absolute discretion but in any event shall not be less than the greater of:
(i) the closing price of the shares as stated in the daily quotation sheets issued by the Stock Exchange on the Date of Grant, which must be a business day;

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SCHEME

APPENDIX I

(ii) the average closing price of the shares as stated in the daily quotations sheets issued by the Stock Exchange for the five business days immediately preceding the Date of Grant; and
(iii) the nominal value of a Share.
The shares to be allotted upon the exercise of an Option shall be subject to all the provisions of the memorandum of association and bye-laws of the Company for the time being in force and shall rank pari passu in all respects with the fully paid shares in issue on the date on which those shares are allotted on exercise of the Option and accordingly shall entitle the holders to participate in all dividends or other distributions paid or made after the date on which shares are allotted other than any dividend or other distribution previously declared or recommended or resolved to be paid or made if the record date thereof shall be on or before the date on which the shares are allotted.
Subject to the provisions of the New Scheme, the New Scheme shall be valid and effective for a period of 10 years commencing on the Adoption Date, after which period no further Options shall be offered or granted but the provisions of the New Scheme shall remain in full force and effect in all other respects. Options granted during the life of the New Scheme shall continue to be exercisable in accordance with their terms of grant after the end of the ten-year period.
In the event of the Grantee ceasing to be a Participant by reason of his death, his legal personal representative(s) may exercise the Option up to the Grantee’s entitlement (to the extent not already exercised) within the period of 12 months following his death provided that where any of the events set out in paragraphs 18, 19, 20 and 21 occurs prior to his death or within such period of 6 months following his death, then his personal representative(s) may so exercise the Option within such of the various periods respectively set out in such paragraphs provided further that if within a period of 3 years prior to the Grantee’s death, the Grantee had committed any of the acts specified in paragraph 22(f) which would have entitled the Company to terminate his employment prior to his death, the Board may at any time forthwith terminate the Option (to the extent not already exercised) by written notice to the Grantee’s legal personal representative(s) and/or to the extent the Option has been exercised in whole or in part by his legal personal representative(s), but shares have not been allotted, he shall be deemed not to have so exercised such Option and the Company shall return to him the amount of the Subscription Price for the shares in respect of the proposed exercise of such Option;
In the event of a Grantee who is an employee or a director of the Company or another member of the Group ceasing to be a Participant for any reason other than his death or the termination of his employment or directorship on one or more of the grounds specified in paragraph 22(f), the Option (to the extent not already exercised) shall lapse on the date of cessation of such employment (which date shall be the last actual working day with that

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SCHEME

APPENDIX I

member of the Group whether salary is paid in lieu of notice or not) and shall cease to be exercisable provided that the Board may by written notice to such Grantee within one month from the date of such cessation determine that the Option (or such remaining part thereof) shall become exercisable within such period as the Board may determine following the date of such cessation;

In the event of a Grantee who is not an employee or a director of the Company or another member of the Group ceasing to be a Participant as and when determined by the Board by resolution for any reason other than his death, the Board may by written notice to such Grantee within one month from the date of such cessation determine the period within which the Option (or such remaining part thereof) shall be exercisable following the date of such cessation;
In the event of the Grantee ceasing to be a Participant by reason of the termination of his employment or directorship on one or more of the grounds specified in paragraph 22(f) and the Grantee has exercised the Option in whole or in part pursuant to the New Scheme, but shares have not been allotted to him, the Grantee shall be deemed not to have so exercised such Option and the Company shall return to the Grantee the amount of the Subscription Price for the shares in respect of the purported exercise of such Option;
If a general offer by way of takeover or otherwise (other than by way of scheme of arrangement pursuant to paragraph 19 below) is made to all the holders of shares (or all such holders other than the offeror, any person controlled by the offeror and any person acting in association or concert with the offeror) and such offer becomes or is declared unconditional prior to the expiry date of the relevant Option, the Company shall forthwith give notice thereof to the Grantee and the Grantee shall be entitled to exercise the Option at any time within such period as shall be notified by the Board;
If a general offer for shares by way of scheme of arrangement is made to all the holders of shares and has been approved by the necessary number of holders of shares at the requisite meetings, the Company shall forthwith give notice thereof to the Grantee and the Grantee may at any time thereafter (but before such time as shall be notified by the Board) exercise the Option;
In the event a notice is given by the Company to its Shareholders to convene a Shareholders’ meeting for the purpose of considering and, if thought fit, approving a resolution to voluntarily wind-up the Company, the Company shall forthwith give notice thereof to the Grantee and the Grantee may at any time thereafter (but before such time as shall be notified by the Company) exercise the Option, and the Company shall as soon as possible and in any event no later than three days prior to the date of the proposed Shareholders’ meeting, allot, issue and register in the name of the Grantee such number of fully paid shares which fall to be issued on exercise of such Option; and
In the event of a compromise or arrangement, other than a scheme of arrangement contemplated in paragraph 19 above, between the Company and its members or creditors

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SCHEME

APPENDIX I

being proposed in connection with a scheme for the restructuring or amalgamation of the Company, the Company shall give notice thereof to all Grantees on the same day as it gives notice of the meeting to its members or creditors to consider such a scheme or arrangement and the Grantee may at any time thereafter but before such time as shall be notified by the Company exercise the Option, and the Company shall as soon as possible and in any event no later than three days prior to the date of the proposed meeting, allot, issue and register in the name of the Grantee such number of fully paid shares which fall to be issued on exercise of such Option.

An Option shall lapse automatically and not be exercisable (to the extent not already exercised) on the earliest of:
(a) the expiry of the Option Period (subject to the provisions of the New Scheme);
(b) the expiry of the periods referred to in paragraphs 14-21;
(c) the expiry of the period referred to in paragraph 18 provided that if any court of competent jurisdiction makes an order the effect of which is to prohibit the offeror from acquiring the remaining shares in the Offer, the relevant period within which Options may be exercised shall not begin to run until the discharge of the order in question or unless the offer lapses or is withdrawn before that date;
(d) subject to the scheme of arrangement (referred to in paragraph 19) becoming effective, the expiry of the period for exercising the Option as referred to in paragraph 19;
(e) the date of the commencement of the winding-up of the Company;
(f) the date on which the Grantee (if an employee or director of the Company or another member of the Group) ceases to be a Participant by reason of the termination of his employment or directorship on the grounds that he has been guilty of serious misconduct, or appears either to be unable to pay or to have no reasonable prospect of being able to pay his debts or has committed any act of bankruptcy or has become insolvent or has made any arrangements or composition with his creditors generally, or has been convicted of any criminal offence involving his integrity or honesty or on any other grounds on which an employer would be entitled to terminate his employment summarily. A resolution of the Board to the effect that the employment of a Grantee has or has not been terminated on one or more of the grounds specified in this paragraph 22(f) shall be conclusive;
(g) the date on which the Grantee commits a breach of paragraph 23; and

subject to paragraph 15, the date the Grantee, ceases to be a Participant for any other reason.

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SCHEME

APPENDIX I

An Option shall be personal to the Grantee and shall not be assignable and no Grantee shall in any way sell, transfer, charge, mortgage, encumber or create any interest in favour of any other person over or in relation to any Option. Any breach of the foregoing shall entitle the Company to cancel any outstanding Option or part thereof granted to such Grantee without incurring any liability on the part of the Company.
In the event of capitalisation of profits or reserves, rights issue, consolidation, subdivision or reduction of the share capital of the Company, whilst any Option remains exercisable, other than any alteration in the capital structure of the Company as a result of an issue of shares as consideration in a transaction to which the Company is a party, such corresponding alterations (if any) shall be made in:
(a) the number or nominal amount of shares subject to the Option so far as unexercised;
(b) the Subscription Price; and
(c) the securities to which the Option relates;

or any combination thereof as the Auditors or the independent financial adviser to the Company shall at the request of the Company certify in writing to the Board either generally or as regards any particular Grantee to be in their opinion fair and reasonable provided that any such adjustments give a Grantee the same proportion of equity capital of the Company as to which that Grantee was previously entitled but 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. The capacity of the Auditors or the independent financial adviser to the Company in this paragraph is that of experts and not of arbitrators and their certification shall, in the absence of manifest error, be final and binding on the Company and the Grantees. The costs of the Auditors or the independent financial adviser to the Company shall be borne by the Company.

The Company by ordinary resolution in general meeting or by resolution of the Board may at any time terminate the operation of the New Scheme and in such event no further Options will be offered or granted but in all other respects the provisions of the New Scheme shall remain in full force and effect. Options which are granted during the life of the New Scheme and remain unexpired immediately prior to the termination of the operation of the New Scheme shall continue to be exercisable in accordance with their terms of issue after the termination of the New Scheme.
Those specific provisions of the New Scheme which relate to the matters set out in Rule 17.03 of the Listing Rules cannot be altered to the advantage of Participants, and no changes to the authority of the Board in relation to any alteration of the terms of the New Scheme shall be made, without the prior approval of Shareholders in general meeting. Any alterations to the terms and conditions of the New Scheme which are of a material nature, or any change to the terms of Options granted, must also, to be effective, be approved by the Shareholders in general meeting, except where the alterations take effect automatically under the existing terms of the New Scheme.

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SCHEME

APPENDIX I

Notwithstanding any other provision of the New Scheme, the Board shall be entitled at its absolute discretion at any time and from time to time to cancel any Option, either in whole or in part, after notice of exercise thereof has been given by the Grantee but before the Company has issued and allotted any shares pursuant to the exercise of that Option, by giving notice in writing to the Grantee stating that such Option is thereby cancelled. Any change to the authority of the Directors or the scheme administrators in relation to any alteration to the terms of the New Scheme shall be approved by Shareholders in general meeting.
If any Option shall be cancelled pursuant to paragraph 27, the Grantee shall, subject as provided in the New Scheme, be entitled to be paid by the Company a refund of the Subscription Price paid on exercise of such Option together with an additional payment in cash to compensate him for such cancellation, calculated in accordance with the formula below, provided that if the calculation shall result in a negative figure it shall be deemed to be zero. Such refund and payment shall be made within 14 business days of the Company giving notice of such cancellation and once such refund and payment has been made by the Company, the Grantee shall have no other claim against the Company in connection with any Option so cancelled. Any refund and payment shall be made by the Company out of funds which are legally available for the purpose in accordance with all applicable laws and shall be charged to its profit and loss accounts or otherwise dealt with in accordance with applicable laws and generally accepted accounting principles in force at the time of such payment. The amount of payment shall be calculated by reference to the following formula:

(A x B) – C

where

A is the number of shares that would have been issued on exercise of the Option (the “Applicable Shares”);
B is the average closing price of the shares as stated in the daily quotations sheets issued by the Stock Exchange for the five business days on which the Stock Exchange is open for business preceding the date the Company receives notice of exercise of the Option; and
C is the aggregate Subscription Price for the Applicable Shares.

Provided that if the calculation shall result in a negative figure, it shall be deemed to be zero.

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SCHEME

APPENDIX I

The Board considers that it is not appropriate or helpful to Shareholders to state the value of all Options that can be granted pursuant to the New Scheme as if they had been granted at the Latest Practicable Date. The Board believes that any statement regarding the value of the Options as at the Latest Practicable Date will not be meaningful to the Shareholders, since the Options to be granted will not be assignable, and no holder of an Option will be able in any way sell, transfer, charge, mortgage or create any interest (legal or beneficial) in favour of any third party over or in relation to any Option.

In addition, the calculation of the value of the Options is based on a number of variables such as the exercise price, the exercise period, interest rate, expected volatility and other relevant variables. The Board believes that any calculation of the value of the Options as at the Latest Practicable Date based on a great number of speculative assumptions would not be meaningful and would be misleading to the Shareholders.

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EXPLANATORY STATEMENT

APPENDIX II

INTRODUCTION

The Listing Rules permit companies with a primary listing on the Stock Exchange to repurchase their own securities, subject to certain restrictions as set out in Rules 10.05 and 10.06 of the Listing Rules, on the Stock Exchange. At the SGM, notice of which is set out on pages 29 to 34 of this circular, an ordinary resolution will be proposed to grant to the Directors authority to repurchase shares of the Company. The aggregate nominal amount of shares to be repurchased pursuant to the Repurchase Mandate shall not exceed 10 per cent. of the share capital of the Company in issue upon the Share Consolidation or the Share Consolidation and the Capital Reorganisation becoming effective or if the Share Consolidation or the Share Consolidation and the Capital Reorganisation is/are not approved, on the date of passing of the resolution to approve the Repurchase Mandate. The existing general mandate granted to the Directors to repurchase shares pursuant to the ordinary resolution passed at the annual general meeting of the Company held on 23rd August, 2002 shall be revoked upon the passing of the resolution granting the Repurchase Mandate.

The Repurchase Mandate will, if granted, remain in effect until the earliest of (i) the conclusion of the next annual general meeting of the Company; (ii) the expiration of the period within which the next annual general meeting of the Company is required to be held by the law or by the bye-laws of the Company; and (iii) its revocation or variation by an ordinary resolution of the Shareholders in general meeting.

The information set out below serves as the explanatory statement in relation to the Repurchase Mandate as required under Rule 10.06(1)(b) of the Listing Rules to provide the Shareholders with all the information reasonably necessary for them to make an informed decision on whether to vote for or against the ordinary resolution approving the Repurchase Mandate.

SHARE CAPITAL OUTSTANDING

As at the Latest Practicable Date, the aggregate nominal amount of the issued share capital of the Company was HK$107,762,819 comprising 10,776,281,900 Shares. On the basis that the Share Consolidation or the Share Consolidation and the Capital Reorganisation is approved by the Shareholders at the SGM, the aggregate nominal amount of the issued share capital of the Company immediately upon the Share Consolidation or the Share Consolidation and the Capital Reorganisation becoming effective will be HK$107,762,819 comprising 215,525,638 Consolidated Shares or HK$2,155,256.38 comprising 215,525,638 Reduced Shares.

Assuming no further Shares are issued or repurchased prior to the SGM, and subject to the passing of the relevant ordinary resolution approving the Repurchase Mandate, the Company would be allowed under the Repurchase Mandate to repurchase (i) a maximum of 21,552,563 Consolidated Shares or Reduced Shares, being 10 per cent. of the Consolidated Shares or the Reduced Shares (as the case may be) in issue immediately upon the Share Consolidation or the Share Consolidation and the Capital Reorganisation becoming effective.

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EXPLANATORY STATEMENT

APPENDIX II

REASON FOR REPURCHASES

The Directors currently have no intention of repurchasing shares of the Company. However, the Directors believe that it is in the best interests of the Company and the Shareholders to have a general authority from the Shareholders to enable the Directors to repurchase shares on the market at appropriate times. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net value of the Company and its asset and/or its earnings per share and will only be made when the Directors believe that such repurchases will benefit the Company and the Shareholders.

FUNDING OF REPURCHASE

In repurchasing shares, the Company may only apply funds legally available for such purpose in accordance with its memorandum of association and bye-laws and the applicable laws.

The exercise of the Repurchase Mandate in full may have a material adverse impact on the working capital or gearing position of the Company as compared with that disclosed in its most recent published audited accounts as at 31st March, 2002 contained in its annual report.

The Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital of the Company or the gearing level (as compared with the position disclosed in its most recent published audited accounts as at 31st March, 2002) which in the opinion of the Directors are from time to time appropriate for the Company.

DISCLOSURE OF INTERESTS

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their respective associates, has a present intention to sell securities to the Company if the Repurchase Mandate is approved by the Shareholders.

No connected person (as defined in the Listing Rules) of the Company has notified the Company that he/she has a present intention to sell securities to the Company, or has undertaken not to do so, in the event that the Company is authorised to make repurchases of its own shares.

UNDERTAKING OF THE DIRECTORS

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.

SECURITIES REPURCHASES MADE BY THE COMPANY

Neither the Company nor any of its subsidiaries had purchased any Shares (whether on the Stock Exchange or otherwise) in the six months preceding the Latest Practicable Date.

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EXPLANATORY STATEMENT

APPENDIX II

PRICES OF SHARES

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

	Highest	Lowest
	HK$	HK$
2001
November	–	–
December	–	–
2002
January	–	–
February	–	–
March	–	–
April	–	–
May	0.014	0.011
June	0.011	0.010
July	0.011	0.010
August	0.010	0.010
September	0.010	0.010
October	0.010	0.010

Note: Trading in the Shares was suspended up to and including 13th May, 2002.

GENERAL

If, as a result of a share repurchase a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition of voting rights for the purpose of the Codes on Takeovers and Mergers and Share Repurchases (the “Code”). As a result, a Shareholder or a group of Shareholders, acting in concert with each other could, depending on the level of increase of the Shareholders’ interest, obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Code.

As at the Latest Practicable Date, Vision Century Group Limited was interested in approximately 55.41 per cent. of the existing issued share capital of the Company. In the event that the Directors exercised in full the power to repurchases shares in accordance with the terms of the Repurchase Mandate and Vision Century Group Limited does not dispose of any Shares, the percentage represented by its shareholding of 5,971,139,500 existing shares in the Company would be increased to 61.57 per cent. of the issued capital of the Company but it would not incur any obligation to make a general offer. Save as aforesaid, the Directors are not aware of any consequences which would arise under the Code as a consequence of any repurchases pursuant to the Repurchase Mandate.

The Directors have no intention to exercise the Repurchase Mandate to such an extent that will result in a requirement of a Shareholder, or a group of Shareholders acting in concert, to make a general offer under the Code.

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EXPLANATORY STATEMENT

APPENDIX II

Any purchase of the Consolidated Shares or the Reduced Shares which results in the amount of the Consolidated Shares or the Reduced Shares held by the public being reduced to less than 25 per cent. could only be implemented with the agreement of the Stock Exchange. Except in extraordinary circumstances, such agreement would not normally be given by the Stock Exchange.

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NOTICE OF SGM

Hung Fung Group Holdings Limited

(Incorporated in Bermuda with limited liability)

(to be renamed Xin Corporation Limited)

NOTICE IS HEREBY GIVEN that a special general meeting of Hung Fung Group Holdings Limited (the “Company”) will be held at 10:00 a.m. on Monday, 30th December, 2002, at Plaza I to III, Lower Lobby, Novotel Century Hong Kong, 238 Jaffe Road, Wanchai, Hong Kong, for the purpose of considering and, if thought fit, passing the following resolutions:

SPECIAL RESOLUTION

THAT , conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited approving the listing of, and granting the permission to deal in, shares of HK$0.01 each in the issued share capital of the Company upon the Capital Reorganisation (as defined below) becoming effective, with effect from 9:30 a.m. on the date falling on business day (not being a Saturday), next falling after the date on which this resolution is passed (the “Effective Date”):
(a) every fifty (50) issued and unissued shares of HK$0.01 each be consolidated into one (1) share of HK$0.50 each in the capital of the Company (the “Consolidation”);
(b) the issued share capital of the Company be reduced by cancelling paid up capital to the extent of HK$0.49 on each of the shares of HK$0.50 each in the capital of the Company in issue on the Effective Date (the “Capital Reduction”) so that each issued share in the capital of the Company shall be treated as one fully paid-up share of HK$0.01 each in the capital of the Company (the “Reduced Share”) and any liability of the holders of the Reduced Shares to make any further contribution to the capital of the Company on each such Reduced Share shall be treated as satisfied;
(c) the entire amount standing to the credit of the share premium account of the Company as at the Effective Date be cancelled (the “Share Premium Cancellation”);
(d) subject to and forthwith upon the Capital Reduction and the Share Premium Cancellation taking effect, the credit arising from the Capital Reduction and the Share Premium Cancellation be credited to the contributed surplus account of the Company and utilized in accordance with the bye-laws of the Company and all applicable laws, to set off the accumulated losses of the Company as at 30th September, 2002 (the “Application of Credit”);

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NOTICE OF SGM

(e) subject to and forthwith upon the Capital Reduction and the Share Premium Cancellation taking effect, all of the authorised but unissued shares of HK$0.50 each in the capital of the Company (including the authorised but unissued share capital resulting from the Share Capital Reduction) be cancelled (the “Diminution”) and forthwith upon such cancellation, the authorised ordinary share capital of the Company be increased by the creation of such number of additional shares of HK$0.01 each (the “Increase”) in the Company as shall be sufficient to increase the authorized share capital to HK$15,000,000; and
(f) the directors of the Company be and are hereby authorised generally to do all such acts, deeds and things as they shall, in their absolute discretion, deem appropriate to effect and implement the Consolidation, the Capital Reduction, the Share Premium Cancellation, the Application of Credit, the Diminution and the Increase (collectively, the “Capital Reorganisation”).

Subject to Special Resolution numbered 1 above not being passed, the Ordinary Resolution numbered 2 will be proposed:

ORDINARY RESOLUTION

THAT , conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited approving the listing of, and granting the permission to deal in, shares of HK$0.50 each in the issued share capital of the Company upon the Consolidation (as defined below) becoming effective, with effect from 9:30 a.m. on the date (the “Effective Date”) falling on the next business day (not being a Saturday) after the date on which this resolution is passed, every fifty (50) issued and unissued shares of HK$0.01 each be consolidated into one (1) share of HK$0.50 each in the capital of the Company (the “Consolidation”) and the directors of the Company be and are hereby authorised generally to do all such acts, deeds and things as they shall, in their absolute discretion, deem appropriate to effect and implement the Consolidation.

SPECIAL RESOLUTION

THAT , subject to the approval of the Registrar of Companies in Bermuda, the name of the Company be changed from “Hung Fung Group Holdings Limited” to “Xin Corporation Limited” and that the Chinese name 「新創綜合企業有限公司」 be approved and adopted as the Chinese name of the Company for identification only and the directors of the Company be and are hereby authorised generally to do all such acts, deeds and things as they shall, in their absolute discretion, deem appropriate to effect and implement the foregoing.

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NOTICE OF SGM

ORDINARY RESOLUTION

THAT , conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited approving the listing of, and granting the permission to deal in, EITHER shares of HK$0.01 each in the issued share capital of the Company upon the Capital Reorganisation (as defined in Special Resolution 1 above) becoming effective OR shares of HK$0.50 each in the issued share capital of the Company upon the Consolidation (as defined in Ordinary Resolution numbered 2 in the notice of general meeting of the Company dated 4th December, 2002) becoming effective:
(a) subject to paragraph (c) below of this Ordinary Resolution numbered 4, the directors of the Company be generally and unconditionally authorized to exercise, during the Relevant Period (as defined in paragraph below of this Ordinary Resolution numbered 4), all powers of the Company to allot, issue or otherwise deal with additional shares in the capital of the Company or securities convertible into shares or options, warrants, bonds or debentures convertible into securities of the Company or similar rights to subscribe for any securities in the capital of the Company, and to make or grant offers, agreements or options which would or might require the exercise of such powers, subject to and in accordance with all applicable laws, in substitution for and to the exclusion of any existing authority previously granted;
(b) the authority given to the directors in paragraph (a) above of this Ordinary Resolution shall authorize the directors of the Company during the Relevant Period to make or grant offers, agreements or options, bonds or debentures convertible into securities of the Company or other similar rights to subscribe for any securities in the Company which would or might require the exercise of such power after the end of the Relevant Period;
(c) the aggregate nominal amount of share capital allotted, issued or dealt with or agreed conditionally or unconditionally to be allotted or issued or dealt with (whether pursuant to an option or otherwise) by the directors of the Company pursuant to the authority given to the directors in paragraph (a) and (b) above of this Ordinary Resolution, otherwise than pursuant to:
- (i) a Rights Issue (as defined in paragraph below of this Ordinary Resolution);
- (ii) the exercise of options granted under any share option scheme or similar arrangement for the time being adopted by the Company for the grant or issue to the employees of the Company and/or any of its subsidiaries of shares or rights of the Company;
- (iii) an issue of shares as scrip dividends or similar arrangement providing for the allotment of shares in accordance with the bye-laws of the Company; or
- (iv) an issue of shares upon the exercise of rights of subscription or conversion under the terms of any warrants, bonds or debentures issued by the Company or any securities issued by the Company which are convertible into Shares of the Company,

shall not exceed 20 per cent. of the greater of the aggregate nominal amount of the share capital of the Company in issue immediately after the Consolidation or the Capital Reorganisation, as the case may be, becoming effective;

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NOTICE OF SGM

(d) any prior approvals of the kind referred to in paragraphs (a), (b) and (c) of this Ordinary Resolution which have been granted to the directors of the Company previously and which are still in effect be revoked;
(e) for the purposes of this Ordinary Resolution:

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

(i) the conclusion of the next annual general meeting of the Company;
(ii) the expiration of the period within which the next annual general meeting of the Company is required by the Companies Act 1981 or the Company’s bye-laws to be held; or
(iii) the revocation or variation of the approval given by this Resolution by an Ordinary Resolution of the Shareholders of the Company in general meeting; and

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

5. THAT :

(a) subject to paragraph (b) of this Ordinary Resolution, the exercise by the directors of the Company (the “Directors”) during the Relevant Period (as defined below) of all the power of the Company to purchase issued shares in the capital of the Company on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) or any other stock exchange on which the shares of the Company may be listed and recognized by the Securities and Futures Commission and the Stock Exchange for this purpose, to and in accordance with all applicable laws, be and is hereby generally and unconditionally approved;
(b) the aggregate nominal amount of the share capital of the Company which the Company is authorized to purchase pursuant to the approval in paragraph (a) of this Ordinary Resolution during the Relevant Period (as defined below) shall not exceed 10 per cent. of the aggregate nominal amount of the share capital of the Company in issue after the Consolidation referred to in the resolution numbered 1 in the notice of general meeting of the Company dated 4th December, 2002 OR the Capital Reorganisation, as the case may be and the said approval shall be limited accordingly; and

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NOTICE OF SGM

(c) for the purpose of this Ordinary Resolution numbered 5:
- “Relevant Period” means the period from the passing of this Resolution until whichever is the earliest of:
- (i) the conclusion of the next annual general meeting of the Company;
- (ii) 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
- (iii) the revocation or variation of the approval given under this Ordinary Resolution 5 by an Ordinary Resolution of the Shareholders of the Company in general meeting.
THAT , subject to the passing of Special Resolution numbered 1 or Ordinary Resolution numbered 2, as the case may be, and Ordinary Resolutions numbered 4 and 5 above and to Ordinary Resolution numbered 4 becoming unconditional, the general mandate granted to the Directors of the Company and for the time being in force to exercise the powers of the Company to allot, issue and deal with additional shares of the Company pursuant to Ordinary Resolution numbered 4 in the notice of general meeting of the Company dated 4th December, 2002 above be and is hereby extended by the addition to the aggregate nominal amount of the ordinary share capital of the Company which may be allotted or agreed conditionally and unconditionally to be allotted by the Directors pursuant to such general mandate of an amount representing the aggregate nominal amount of the shares repurchased by the Company under the authority granted pursuant to Ordinary Resolution numbered 5 in the notice of general meeting of the Company dated 4th December, 2002, provided that such extended amount shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue immediately after the Consolidation and the Capital Reorganisation becoming effective.
THAT , subject to and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) granting the listing of and permission to deal in such shares (“Shares”) in the capital of the Company (subject to adjustment as is permissible under the rules of the Scheme (as defined in this resolutions)) which may be issued pursuant to the exercise of the subscription rights under any options that may be granted under the new share option scheme of the Company (the “Scheme”), the rules of which are contained in the document marked “A” produced to the meeting and for the purposes of identification signed by the Chairman thereof and the principal terms of which have been summarized in Appendix I to the circular of the Company dated 4th December, 2002, the Scheme be and is hereby approved and adopted and the board of directors of the Company be and is hereby authorised to do all such acts, deeds and things and to enter into all such transactions, arrangements and agreements as they may, in their absolute discretion, deem necessary or expedient in order to give full effect to the Scheme, including, but without limitation:
(a) to administer the Scheme under which options may be granted to eligible persons to subscribe for shares in the capital of the Company, to grant options to, and to allot and issue shares upon the exercise of the subscription rights under such options to, the eligible persons;

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NOTICE OF SGM

(b) to modify and/or amend the Scheme from time to time provided that such modification and/ or amendments is effected in accordance with the provisions of the Scheme relating to modification and/or amendment;
(c) to make application at the appropriate time or times to the Stock Exchange, and any other stock exchanges upon which the issued shares of the Company may for the time being be listed, for listing of and permission to deal in any shares of the Company which may hereafter from time to time be issued and allotted pursuant to the exercise of any options granted under the Scheme; and
(d) to consent, if it so deems fit and expedient, to such conditions, modifications and/or variations as may be required or imposed by the relevant authorities in relation to the Scheme; and

accordingly THAT the existing Share Option scheme of the Company adopted on 17th February, 1998 be and is hereby terminated with effect from the close of this meeting (without prejudice to the rights and benefits of and attached to any such Options as may have been granted thereunder which are outstanding).

By Order of the Board Yu Wai Man Company Secretary

Hong Kong, dated 4th December, 2002

Principal place of business in Hong Kong:

Room 3A03-06, 3rd Floor New Mandarin Plaza 14 Science Museum Road Tsimshatsui East

Kowloon

Hong Kong

Notes:

Any member entitled to attend and vote at the special general meeting convened by the above notice is entitled to appoint another person as his/her proxy to attend and vote instead of him/her. A proxy need not be a member of the Company.
In order to be valid, the form of proxy must be deposited at the Company’s branch share registrar in Hong Kong, Tengis Limited at 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong together with the power of attorney or other authority, (if any), under which it is signed, or a notarially certified copy of such power of attorney or authority, not less than 48 hours before the time appointed for holding the special general meeting.
Where there are joint registered holders of any share, any one of the such persons may vote at the special general meeting either personally or by proxy, in respect of such shares as if he/she were solely entitled thereto, but if more than one of such joint holders be present at the special general meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.
A form of proxy for use in connection with the special general meeting is enclosed.

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AI assistant

PegBio Co., Ltd. — Proxy Solicitation & Information Statement 2002

50676_rns_2002-12-05_c6106466-1578-4357-a82f-62d66ff0c99e.pdf

Hung Fung Group Holdings Limited

PROPOSED SHARE CONSOLIDATION, CHANGE IN BOARD LOT SIZE, CAPITAL REORGANISATION,

Financial advisor to the Company

Somerley Limited

CONTENTS

DEFINITIONS

DEFINITIONS

Hung Fung Group Holdings Limited

To the Shareholders,

PROPOSED SHARE CONSOLIDATION, CHANGE IN BOARD LOT SIZE, CAPITAL REORGANISATION,

CHANGE OF COMPANY’S NAME TO “XIN CORPORATION LIMITED”, TERMINATION OF THE EXISTING SHARE OPTION SCHEME, ADOPTION OF THE NEW SHARE OPTION SCHEME AND GENERAL MANDATES TO ISSUE SECURITIES AND REPURCHASE SHARES

INTRODUCTION

THE SHARE CONSOLIDATION

Change in board lot size

Conditions of the Share Consolidation

Reasons for the Share Consolidation

Effects of the Share Consolidation on existing convertible securities

THE CAPITAL REORGANISATION

The Capital Reduction

The Share Premium Cancellation

The application of credit

The Authorised Capital Cancellation

The Increase in Authorised Share Capital

Conditions of the Capital Reorganisation

Relevant Resolutions

Reasons for the Capital Reduction, Share Premium Cancellation and the Increase in Authorised Share Capital

Details of the share capital of the Company before and after the Share Consolidation and the Capital Reorganisation

Effect of the Capital Reorganisation

THE PROPOSED CHANGE OF NAME

TRADING ARRANGEMENTS AND FREE EXCHANGE OF NEW SHARE CERTIFICATES

LISTING AND DEALINGS

TERMINATION OF THE EXISTING SCHEME AND ADOPTION OF THE NEW SCHEME

Application for Listing

GENERAL MANDATES

SGM

RECOMMENDATIONS

DOCUMENTS AVAILABLE FOR INSPECTION

RESPONSIBILITY STATEMENT

GENERAL

INTRODUCTION

SHARE CAPITAL OUTSTANDING

REASON FOR REPURCHASES

FUNDING OF REPURCHASE

DISCLOSURE OF INTERESTS

UNDERTAKING OF THE DIRECTORS

SECURITIES REPURCHASES MADE BY THE COMPANY

PRICES OF SHARES

GENERAL

Hung Fung Group Holdings Limited

SPECIAL RESOLUTION

Subject to Special Resolution numbered 1 above not being passed, the Ordinary Resolution numbered 2 will be proposed:

ORDINARY RESOLUTION

SPECIAL RESOLUTION

ORDINARY RESOLUTION

5. THAT :

Notes:

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PegBio Co., Ltd. Proxy Solicitation & Information Statement 2002