Power Assets Holdings Limited — Proxy Solicitation & Information Statement 2004

Apr 7, 2004

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this document, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.

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(Incorporated in Hong Kong with limited liability)

PROPOSED GENERAL MANDATES TO ISSUE NEW SHARES AND TO REPURCHASE SHARES, PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION AND DIRECTORS PROPOSED TO BE RE-ELECTED

2nd April, 2004

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(Incorporated in Hong Kong with limited liability)

Directors:

GEORGE C. MAGNUS (Chairman)

CANNING FOK KIN-NING (Deputy Chairman)

Registered Office: 44 Kennedy Road Hong Kong

TSO KAI-SUM (Group Managing Director)

• RONALD JOSEPH ARCULLI

SUSAN M.F. CHOW

ANDREW J. HUNTER

• KAM HING-LAM

• HOLGER KLUGE

• FRANCIS LEE LAN-YEE

• VICTOR LI TZAR-KUOI

• RALPH RAYMOND SHEA

• FRANK J. SIXT

• WONG CHUNG-HIN

• EWAN YEE LUP-YUEN

• Independent Non-Executive Director

2nd April 2004

To the Shareholders,

Dear Sir or Madam,

PROPOSED GENERAL MANDATES

TO ISSUE NEW SHARES AND TO REPURCHASE SHARES, PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION AND DIRECTORS PROPOSED TO BE RE-ELECTED

INTRODUCTION

The purpose of this circular is to provide you with information regarding the general mandates to issue shares and to repurchase shares which are proposed to be granted to the Directors, the proposed amendments to the Company’s articles of association, and the proposed re-election of the two Directors who are due to retire. These resolutions will be proposed at the Annual General Meeting of the Company convened for 13th May 2004.

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SHARE BUYBACK AND SHARE ISSUE GENERAL MANDATES

On 15th May 2003 a general mandate was given to the Directors to exercise the powers of the Company to repurchase shares of the Company. Such mandate will lapse at the conclusion of the forthcoming Annual General Meeting of the Company. It is therefore proposed to seek your approval of an ordinary resolution to be proposed at the Annual General Meeting granting the Directors a general mandate to repurchase shares representing not more than 10 per cent. of the share capital of the Company in issue at the date of passing the resolution (the “Buyback Mandate”). In accordance with the relevant rules set out in the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) regulating the repurchase by companies of their own securities on the Stock Exchange, the Company is required to send Shareholders an explanatory statement containing information reasonably necessary to enable Shareholders to make an informed decision on whether to vote for or against the resolution to approve the purchase by the Company of its own shares. This explanatory statement is set out in Appendix I to this document.

Ordinary resolutions will also be proposed at the Annual General Meeting (i) to grant the Directors a general mandate to issue and otherwise deal with shares up to a limit equal to 20 per cent. of the issued shares of the Company at the date of passing of such resolution and (ii) to approve the addition of repurchased shares (up to a maximum of 10 per cent. of the issued shares of the Company at the date of passing of such resolution) to the 20 per cent. general mandate.

AMENDMENTS TO EXISTING ARTICLES OF ASSOCIATION

A special resolution will also be proposed at the Annual General Meeting to amend the existing articles of association of the Company. The purpose of the proposed amendments is to ensure that the articles comply with recent changes in the Companies Ordinance and the Listing Rules. The proposed amendments and their effects are set out in Appendix II to this document.

DIRECTORS PROPOSED TO BE RE-ELECTED

In accordance with article 116 of the Company’s articles of association, the Directors retiring by rotation at the forthcoming Annual General Meeting are Mr Francis Lee Lan-yee and Mr Frank Sixt, who, being eligible, offer themselves for re-election. The particulars of these two Directors which are required to be disclosed by the Listing Rules are set out in Appendix III to this Document.

ANNUAL GENERAL MEETING

The ordinary resolutions and special resolution mentioned above are set out in full in the notice of Annual General Meeting included in the Annual Report. Your right to demand a poll on the resolutions at the Meeting is set out in Appendix IV to this Document. Whether or not you intend to be present at the Meeting, you are requested to complete the form of proxy and return it to the registered office of the Company at the address stated above in accordance with the instructions printed thereon not less than 48 hours before the time fixed for holding the Meeting. The Directors believe that the resolutions set out in the notice of the Meeting are in the best interests of the Company and its Shareholders as a whole and recommend you to vote in favour of such resolutions at the Meeting.

Yours faithfully, GEORGE C. MAGNUS

CHAIRMAN

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APPENDIX I

The following is the Explanatory Statement required to be sent to shareholders under the Listing Rules and also constitutes the Memorandum required under section 49BA of the Companies Ordinance.

SHARE CAPITAL

As at 1st April 2004 (the latest practicable date prior to the printing of this document), the issued share capital of the Company comprised 2,134,261,654 shares of HK$1 each (“Shares”).

Exercise in full of the Buyback Mandate, on the basis that no further Shares are issued prior to the date of the Annual General Meeting, could accordingly result in up to 213,426,165 Shares being repurchased by the Company during the course of the period ending on the earlier of the date of the Annual General Meeting in 2005, and the date upon which such authority is revoked or varied.

REASONS FOR REPURCHASE

The Directors believe that it is in the best interests of the Company and its shareholders to seek a general authority from shareholders to enable the Directors to purchase Shares of the Company in the market. Such purchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net assets and/or earnings per Share. The Directors are seeking a general mandate to repurchase Shares to give the Company the flexibility to do so if and when appropriate. The number of Shares to be repurchased on any occasion and the price and other terms upon which the same are repurchased will be decided by the Directors at the relevant time having regard to the circumstances then prevailing.

FUNDING OF REPURCHASE

In repurchasing Shares, the Company may only apply funds legally available for such purpose in accordance with its Memorandum and Articles of Association and the Companies Ordinance. It is envisaged that the funds required for any repurchase would be derived from the distributable profits of the Company.

There could be material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in the audited consolidated accounts contained in the annual report for the year ended 31st December 2003) in the event that the Buyback Mandate were to be exercised in full at any time during the proposed repurchase period. However, the Directors do not propose to exercise the Buyback Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

SHARE PRICES

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

	Highest	Lowest
	HK$	HK$
April 2003	31.70	30.40
May 2003	31.70	29.95
June 2003	31.50	30.30
July 2003	31.20	30.40
August 2003	31.00	30.20
September 2003	31.10	29.80
October 2003	30.40	29.80
November 2003	31.20	30.20
December 2003	31.30	30.30
January 2004	31.60	30.60
February 2004	33.60	31.20
March 2004	34.70	32.10

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DISCLOSURE OF INTERESTS

The Directors have given an undertaking to the Stock Exchange that, so far as the same may be applicable, they will exercise the powers of the Company to make all repurchases pursuant to the Buyback Mandate in accordance with the Listing Rules and the applicable laws of Hong Kong.

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, their associates, have any present intention to sell any Shares to the Company if the Buyback Mandate is approved and exercised. No other connected persons (as defined in the Listing Rules) have notified the Company that they have a present intention to sell Shares to the Company, or have undertaken not to do so, in the event that the Buyback Mandate is approved and exercised.

As at 1st April 2004 (the latest practicable date prior to the printing of this document), Cheung Kong Infrastructure Holdings Ltd. (“CKI”) and its subsidiary Hyford Ltd. held through certain subsidiaries of Hyford Ltd. (including Monitor Equities S.A. and Univest Equity S.A.) a total of 829,599,612 Shares, representing 38.87% of the issued share capital of the Company. By virtue of their direct and/or indirect shareholdings in CKI, Hutchison Whampoa Ltd. and its subsidiaries. Hutchison International Ltd. and Hutchison Infrastructure Holdings Ltd., Cheung Kong (Holdings) Limited, Li Ka-Shing Unity Trustee Company Limited as trustee of The Li Ka-Shing Unity Trust, Li Ka-Shing Unity Trustee Corporation Limited as trustee of The Li Ka-Shing Unity Discretionary Trust, Li KaShing Unity Trustcorp Limited as trustee of another discretionary trust, Li Ka-Shing Unity Holdings Limited and Messrs. Li Ka-Shing, Victor Li Tzar-kuoi and Richard Li Tzar-kai (collectively the “Substantial Shareholders”) were each deemed to hold these same 829,599,612 Shares.

In the event that the Directors exercise in full the power to repurchase Shares which is proposed to be granted pursuant to the Buyback Mandate, then (if the present shareholdings otherwise remained the same) the shareholding of CKI in the Company would be increased to approximately 43.19% of the issued share capital of the Company and similarly, so would the deemed shareholdings of each of the Substantial Shareholders be increased. In the opinion of the Directors such increase may give rise to an obligation to make a mandatory offer under Rule 26.1 of the Hong Kong Code on Takeovers and Mergers.

SHARE PURCHASE MADE BY THE COMPANY

The Company has not purchased any of its Shares (whether on the Stock Exchange or otherwise) in the six months preceding the date of this document.

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APPENDIX II

The following are the proposed amendments to be made to the existing Articles:

1. Article 2:

Add the following definition in Article 2 immediately after the definition of “Summary financial report”:—

“Associate” has the meaning assigned thereto in the Listing Rules.

This is to define a new term which appears in the amendments below.

2. Article 85:

Insert in the first line of Article 85, immediately after the words “classes of shares,” the words “and subject to any restrictions under the Listing Rules on the exercise by any member of his voting rights in respect of a particular resolution,”.

Article 85 will read “Subject to any rights or restrictions for the time being attached to any class or classes of shares, and subject to any restrictions under the Listing Rules on the exercise by any member of his voting rights in respect of a particular resolution, on a show of hands every member present in person shall have one vote, and on a poll every member shall have one vote for each share of which he is the holder.”

This is to provide that the exercise of a member’s voting rights is subject to the provisions of the Stock Exchange Listing Rules.

3. Article 107(3):

• (i) Insert in the second line of Article 107(3) the words “or his associate” immediately after the word “he” where it first appears.

• (ii) Insert in Article 107(3)(a), (c), (d), (f), (g) and (h) the words “or his associate” immediately after the word “Director”.

• (iii) Insert in Article 107(3)(a) the word “guarantee,” immediately before the word “security” and inserting in the same Article the words “or his associate” immediately after the word “him” where it twice appears.

• (iv) Insert in Article 107(3)(b) the words “or his associate” immediately after the word “himself”.

• (v) Delete in Article 107(3)(d) the word “with” and substitute therefor the words “in relation to or concerning”, and inserting in the same Article the words “or executive” after the word “officer”.

• (vi) Delete the existing Article 107(3)(e) and substitute the following:—

• “(e) any contract or arrangement or proposal in relation to or concerning any other company in which the Director or any of his associates is interested only, directly or indirectly, as a holder of shares or other securities of that company or a beneficial interest therein, provided that such Director and any of his associates are not in aggregate beneficially interested in five per cent or more of any class of the issued shares or securities of such company (or of any third company through which the interest of the Director or his associates is derived) or of the voting rights attaching thereto.”.

• (vii) Insert in Article 107(3)(g) the words “ (or their associates) ” after the words “to Directors”.

• (viii) Insert in Article 107(3)(h) the words “ or his associates’ ” after the word “his”.

Article 107(3) will read “A Director shall not vote or be counted in the quorum in respect of any contract or arrangement or proposal in which he or his associate is materially interested, and if he shall do so his vote shall not be counted, but this prohibition shall not apply to:—

• (a) any contract or arrangement or proposal for giving any Director or his associate any guarantee, security or indemnity in respect of money lent by him or his associate or obligations incurred or undertaken by him or his associate at the request of or for the benefit of the Company or any of its subsidiaries; and/or

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• (b) any contract or arrangement or proposal for the giving by the Company of any guarantee, security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director himself or his associate has assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security; and/or

• (c) any contract or arrangement or proposal in relation to an offer or invitation of shares or debentures or other securities by the Company (or any other company which the Company may promote or be interested in) for subscription or purchase where the Director or his associate is or is to be interested as a participant in the underwriting or sub-underwriting of the offer or invitation; and/or

• (d) any contract or arrangement or proposal in relation to or concerning any other company in which the Director or his associate is interested only as an officer or executive of that other company; and/or

• (e) any contract or arrangement or proposal in relation to or concerning any other company in which the Director or any of his associates is interested only, directly or indirectly, as a holder of shares or other securities of that company or a beneficial interest therein, provided that such Director and any of his associates are not in aggregate beneficially interested in five per cent or more of any class of the issued shares or securities of such company (or of any third company through which the interest of the Director or his associates is derived) or of the voting rights attaching thereto; and/or

• (f) any contract or arrangement or proposal in relation to or concerning the adoption, modification or operation of any employees’ share scheme under which the Director or his associate may benefit; and/or

• (g) any contract or arrangement or proposal in relation to the adoption, modification or operation of a pension fund or retirement, death or disability benefits scheme which relates both to Directors (or their associates) and employees of the Company or any of its subsidiaries and does not provide in respect of any Director or his associate as such any privilege or advantage not generally accorded to the class of persons to which such scheme or fund relates; and/or

• (h) any contract or arrangement or proposal in which the Director or his associate is interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his or his associates’ interest in shares or debentures or other securities of the Company.”

This is (i) to provide that a Director shall not vote or be counted in the quorum in respect of any contract or arrangement or proposal in which he or his associate is materially interested; (ii) to make consequential amendments to the sub-paragraphs of this Article; and (iii) to improve and clarify the wording of certain sub-paragraphs.

4. Article 110:

Delete in Article 110 the words “shall not, while he continues to hold that office be liable to retire by rotation, and he shall not be taken into account in determining the rotation in which the other Directors shall retire or the number to retire, but he”.

Article 110 will read “A Managing Director shall be subject to the same provisions as regards resignations, removal, and disqualification as the other Directors and if he ceases to hold the office of Director from any cause he shall ipso facto cease to be the Managing Director.”

This is to remove the provision that exempts the Managing Director of the Company from retirement by rotation.

5. Article 116:

Insert at the beginning of Article 116 the words “Subject to the manner of retirement by rotation as from time to time prescribed by The Stock Exchange of Hong Kong Limited,”.

Article 116 will read “Subject to the manner of retirement by rotation as from time to time prescribed by The Stock Exchange of Hong Kong Limited, at each Annual General Meeting the two Directors who have been longest in office shall retire..........................................................................................................”.

This is to provide that the Directors of the Company will retire by rotation at the annual general meeting in accordance with the Code of Corporate Governance Practices to be published by the Stock Exchange.

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6. Article 120:

Delete the existing Article 120 and substitute therefor the following new Article:—

“ 120. No person, other than a retiring Director, shall, unless recommended by the Directors for election, be eligible for election to the office of Director at any General Meeting, unless he and the shareholder intending to propose him have each, during a period of seven days ending on the date seven days before the date appointed for the meeting, left at the office of the Company a notice in writing duly signed, signifying respectively his candidature for the office and the intention of such shareholder to propose him.”

This is to reflect requirements of the Stock Exchange Listing Rules regarding the starting and ending of the minimum seven-day period for shareholders to lodge any notice of intention to propose a person for election as a Director.

7. Article 122:

Delete the words “Special Resolution” in the first line of Article 122 and substitute therefor the words “Ordinary Resolution”.

Article 122 will read “The Company may by Ordinary Resolution remove any Director before the expiration of his period of office and may elect another qualified person in his stead. Any person so elected shall hold office during such time only as the Director in whose place he is elected would have held the same if he had not been removed.”

This is to provide that a Director may be removed by an Ordinary Resolution instead of by a Special Resolution, in alignment with a recent amendment of the Companies Ordinance.

8. Article 169:

Delete the existing Article 169 and substitute therefor the following new Article:

“169. Every Director, Manager or Officer of the Company or any person (whether an Officer of the Company or not) employed by the Company as Auditor may be indemnified out of the funds of the Company against all liability incurred by him as such Director, Manager, Officer or Auditor to the extent permitted pursuant to the Companies Ordinance. The Company may purchase insurance for any such person against liabilities incurred by him to the extent so permitted.”.

This is to provide that the Company may undertake any indemnification or purchase of insurance against liabilities incurred by the persons mentioned in the Article, provided that it does not breach the Companies Ordinance.

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APPENDIX III

The following are the details (as required by the Listing Rules) of the two Directors who will retire by rotation and, being eligible, offer themselves for re-election at the Annual General Meeting to be held on 13th May, 2004.

1. Mr. Francis Lee Lan-yee, aged 63, has been an Executive Director of the Company since September 1997. Mr. Lee is also General Manager (Engineering) of the Group. He has served the Group for more than 30 years in various capacities and his present major responsibilities are in power generation including the construction and operation of power station, transmission and distribution of energy, system planning and development. He is a Chartered Engineer and a Fellow of the Institute of Mechanical Engineers in Hong Kong and the United Kingdom. Mr. Lee does not have any relationships with any other director, senior management or substantial or controlling shareholders of the Company. He has a personal interest in 739 shares in the Company. The annual remuneration package for Mr. Lee under his service contract with the Company amounts to approximately HK$7.6 million. The emoluments of the Directors are determined by the board with reference to the Company’s performance and profitability, as well as remuneration benchmark in the industry and the prevailing market conditions.

2. Mr. Frank John Sixt, aged 52, has been an Executive Director of the Company since January 1998. He holds a Master’s degree in Arts and a Bachelor’s degree in Civil Law, and is member of the Bar and of the Law Society of the Provinces of Quebec and Ontario, Canada. He is also Chairman of TOM Group Limited and TOM Online Inc., Executive Director of Hutchison Global Communications Holdings Limited, and Director of Partner Communications Company Ltd., Hutchison Telecommunications (Australia) Limited and Husky Energy Inc.. He was previously a Director of VoiceStream Wireless Corporation ( resigned on 31st May 2001 ) and Concord Pacific Group Inc. ( resigned on 23rd March 2002 ). In addition, he is Executive Director of Cheung Kong Infrastructure Holdings Limited, Group Finance Director of Hutchison Whampoa Limited and Director of Cheung Kong (Holdings) Limited, all being the substantial and controlling shareholders of the Company. Save as disclosed above, he does not have any relationship with any other director, senior management or substantial shareholders of the Company. Mr. Sixt does not have any interests in shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance. There is no service contract between the Company and him. The emoluments of the Directors are determined by the board with reference to the Company’s performance and profitability, as well as remuneration benchmark in the industry and the prevailing market conditions.

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APPENDIX IV

Article 80 of the Company’s Articles of Association sets out the procedure by which shareholders may demand a poll:

At any General Meeting a Resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded:—

• (a) by the Chairman; or

• (b) by at least five members present in person or by proxy; or

• (c) by any member or members present in person or by proxy and representing not less than onetenth of the total voting rights of all the members having the right to vote at the meeting; or

• (d) by a member or members holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

Unless a poll be so demanded, a declaration by the Chairman that a Resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of the Company shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such Resolution.

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