REPT BATTERO Energy Co., Ltd. — Proxy Solicitation & Information Statement 2002

Apr 30, 2002

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Jackley Holdings Limited, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or 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.

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(Incorporated in the Cayman Islands with limited liability)
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BONUS ISSUE OF SHARES AND ADOPTION OF NEW SHARE OPTION SCHEME AND

GENERAL MANDATES TO REPURCHASE SHARES AND TO ISSUE NEW SHARES OF THE COMPANY AND ADOPTION OF CHINESE NAME

A notice convening the annual general meeting of Jackley Holdings Limited to be held at Meeting Rooms 1 & 2, Business Center, PM/F, The Empire Hotel Hong Kong, 33 Hennessy Road, Wanchai, Hong Kong on Thursday, 6 June 2002 at 9:30 a.m. is set out in the 2001 annual report. Whether or not you propose to attend the meeting, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the Company’s Branch Share Registrar in Hong Kong, 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 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 meeting should they so wish.

30 April, 2002

* for identification purpose only

CONTENTS

		Page
Responsibility Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		ii
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		iii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board
I.	Bonus Issue of Shares
	1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
	2. Bonus Share Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
	3. Completion of Bonus Share Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
	4. Listing and Dealings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
	5. Closure of Register of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
	6. Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
II.	Adoption of New Share Option Scheme
	7. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
	8. The New Share Option Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
	9. Application for listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
	10. Reasons for adopting the New Share Option Scheme . . . . . . . . . . . . . . . . . . . . . . .	8
III.	General Mandates to Repurchase Shares and to Issue New Shares
	11. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	12. Buyback and Issuance Mandates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
IV.	Adoption of Chinese name
	13. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
	14. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
V.	Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
VI.	Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
VII.	General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Appendix A – The principal terms of the New Share Option Scheme . . . . . . . . . . . . . . . . . . . .		12
Appendix B – Explanatory statement on the Buyback Mandate. . . . . . . . . . . . . . . . . . . . . . . . .		20

– i –

RESPONSIBILITY STATEMENT

This document 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 document and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

– ii –

2002

EXPECTED TIMETABLE

Last day of dealings in Shares cum entitlements to the Bonus Share Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 29 May First day of dealings in Shares ex entitlements to the Bonus Share Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 30 May Latest time for lodging Share transfers to qualify for the Bonus Share Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m., Friday, 31 May Register of members closed (both days inclusive) from . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 3 June to . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 6 June Latest time for lodging proxy forms for the Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m., Tuesday, 4 June Record date for determination of entitlements to the Bonus Share Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 6 June Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m., Thursday, 6 June Expected day of dispatch of certificates for the Bonus Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 18 June Expected day of commence dealings in the Bonus Shares . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 20 June

– iii –

DEFINITIONS

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

• “Annual General Meeting”

an annual general meeting of the Company to be held at Meeting Rooms 1 & 2, Business Center, PM/F, The Empire Hotel Hong Kong, 33 Hennessy Road, Wanchai, Hong Kong on Thursday, 6 June 2002 at 9:30 a.m., notice of which is set out in the 2001 annual report;

• “associates”

has the same meaning as ascribed in the Listing Rules;

“Board” the board of Directors;

“Bonus Shares” the new Shares to be issued by the Company under the Bonus Share Issue;

• “Bonus Share Issue” the issue by the Company of new Shares on the basis of two Bonus Shares for every one existing Share held by Shareholders on the Record Date upon and subject to the terms and conditions set out in this circular;

• “Buyback Mandate” as defined in paragraph 12(a) of the Letter from the Board;

• “CCASS” the Central Clearing and Settlement System established and operated by Hongkong Clearing;

• “Company” Jackley Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Stock Exchange;

• “Companies Ordinance” Companies Ordinance (Chapter 32 of the Laws of Hong Kong);

• “connected persons” has the same meaning as ascribed in the Listing Rules;

• “Court” has the same meaning as ascribed in the Companies Ordinance;

• “Director(s)” director(s) of the Company; “Eligible Employee(s)” employee(s) (whether full time or part time employee(s), including any executive director but not any non-executive director) of the Company, its Subsidiaries or any Invested Entity;

“Eligible Grantees” persons who are eligible to accept the offer of the grant of an Option in accordance with the Existing Share Option Scheme;

– 1 –

DEFINITIONS

• “Existing Share Option Scheme”

the existing share option scheme of the Company which was the first share option scheme of the Company and adopted by the Company on 23 July 2001 and shall expire on 22 July 2011;

• “General Mandate Resolutions”

the ordinary resolutions to be proposed and passed at the Annual General Meeting for approving the granting of the Buyback Mandate and the Issuance Mandate to the Directors;

• “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;

• “Invested Entity” any entity in which the Group holds any equity interest;

• “Issuance Mandate” as defined in paragraph 12(b) of the Letter from the Board;

• “Latest Practicable Date” 26 April 2002, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular;

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange;

• “New Share Option Scheme” the share option scheme proposed to be adopted by the Company at the Annual General Meeting, a summary of the principal terms of which is set out in the Appendix A;

• “Option(s)” option(s) granted to the Eligible Grantees under the Existing Share Option Scheme or to the Participants under the New Share Option Scheme, as the context requires;

“Ordinary Resolution” the ordinary resolution to be proposed and passed at the Annual General Meeting for the adoption of the New Share Option Scheme and the termination of the Existing Share Option Scheme as set out in item 4 of the notice for the Annual General Meeting;

“Participant(s)” any person belonging to any of the following classes of persons:

• (a) any Eligible Employee;

• (b) any non-executive director (including independent nonexecutive directors) of the Company, any of its Subsidiaries or any Invested Entity;

– 2 –

DEFINITIONS

• (c) any supplier of goods or services to any member of the Group or any Invested Entity;

• (d) any customer of the Group or any Invested Entity;

• (e) any person or entity that provides research, development or other technological support to the Group or any Invested Entity; and

• (f) any shareholder of any member of the Group or any Invested Entity or any holder of any securities issued by any member of the Group or any Invested Entity;

“Record Date” the record date for the determination of entitlements to the Bonus Share Issue, being 6 June 2002 “Registrar” Tengis Limited of 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong, the Company’s Branch Registrar in Hong Kong “Share(s)” share(s) of HK$0.10 each in the capital of the Company or if there has been a subsequent sub-division, consolidation, reclassification or reconstruction of the share capital of the Company, shares forming part of the ordinary equity share capital of the Company;

“Shareholder(s)” holder(s) of Share(s);

“Stock Exchange” The Stock Exchange of Hong Kong Limited;

“Subsidiary” a subsidiary for the time being of the Company (within the meaning of Section 2 of the Companies Ordinance), whether incorporated in Hong Kong or elsewhere;

“Takeovers Code” The Hong Kong Code on Takeovers and Mergers; “HK$” Hong Kong dollars.

– 3 –

LETTER FROM THE BOARD

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(Incorporated in the Cayman Islands with limited liability)

Executive Directors: Lam Yat Sing (the Chairman) Cheng Yuk Sui Chew Kean Eng Khoo Chuan Teng

Non-executive Directors: Ahmad Tajuddin Ahmad Zainuddin Dzulkifli Mohamed (an alternate non-executive Director to Ahmad Tajuddin Ahmad Zainuddin) Azizul Rahim Abdul Rahman Saharuddin Zamri (an alternate non-executive Director to Azizul Rahim Abdul Rahman)

Registered Office: Century Yard, Cricket Square Hutchins Drive P.O. Box 2681 GT George Town Grand Cayman British West Indies

Principal Place of Business:

12th Floor Tai Sang Commercial Building 24-34 Hennessy Road Wan Chai Hong Kong

Independent Non-executive Directors:

Liu Ngai Wing Ong Hong Hoon

30 April 2002

To the Shareholders

Dear Sir or Madam,

BONUS ISSUE OF SHARES AND

ADOPTION OF NEW SHARE OPTION SCHEME AND

GENERAL MANDATES TO REPURCHASE SHARES AND TO ISSUE NEW SHARES OF THE COMPANY AND ADOPTION OF CHINESE NAME

I. BONUS ISSUE OF SHARES

1. INTRODUCTION

It was announced on 26 April 2002, in conjunction with the announcement of the annual results of the Company for the year ended 31 December 2001, that the Directors are proposing to make the Bonus Share Issue to Shareholders whose names appear on the Company’s register of members on the Record Date.

• for identification purpose only

– 4 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with further details regarding the resolutions to be proposed at the Annual General Meeting relating to the Bonus Share Issue and to seek your approval of the Bonus Share Issue.

2. BONUS SHARE ISSUE

The Directors have recommended, subject to the conditions set out below, a bonus issue of new Shares on the basis of two Bonus Shares, credited as fully paid, for every one existing Share held by Shareholders whose names appear on the register of members of the Company on the Record Date (including those with registered addresses outside Hong Kong) by way of the capitalisation of amounts standing to the credit of the Company’s share premium account. The Bonus Shares will rank pari passu in all respects with the existing issued Shares except that holders of the Bonus Shares shall not be entitled to any distributions, if any, declared at the Annual General Meeting.

Fractional entitlements to the Bonus Shares will not be issued to Shareholders but will be aggregated and sold for the benefit of the Company.

As at the Latest Practicable Date, there were an aggregate of 415,000,000 Shares in issue, on which basis and assuming no further Shares are issued after the Latest Practicable Date and up to the Record Date, 830,000,000 Bonus Shares will be issued pursuant to the Bonus Share Issue and a total sum of HK$83,000,000 standing to the credit of the share premium account of the Company will be capitalized and the issued share capital of the Company will be enlarged to 1,245,000,000 Shares.

3. COMPLETION OF BONUS SHARE ISSUE

The Bonus Share Issue is conditional and completed upon:

• (a) the passing of an ordinary resolution to approve, inter alia, the Bonus Share Issue and the capitalization of an appropriate amount standing to the credit of the share premium account of the Company for the Bonus Share Issue on the terms set out in the notice of the Annual General Meeting; and

• (b) the Listing Committee of the Stock Exchange granting or agreeing to grant the listing of and permission to deal in the Bonus Shares.

4. LISTING AND DEALINGS

Application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in the Bonus Shares. No part of the Company’s securities is listed or dealt in on any other stock exchange and no such listing or permission to deal is being, or is proposed to be sought. It is expected that shareholders will be able to deal in the Bonus Shares on receipt thereof, i.e. on or about 20 June 2002.

– 5 –

LETTER FROM THE BOARD

Conditional upon the passing of the resolution at the Annual General Meeting approving the Bonus Share Issue, it is expected that certificates for the Bonus Shares (which are not renounceable) will be posted to those entitled thereto at their own risk on or about 18 June 2002. In the case of a joint holding, the certificates for the Bonus Shares will be posted to the address of the person whose name appears first on the register of members of the Company on the Record Date.

Subject to the granting of listing of, and permission to deal in the Bonus Shares, the Bonus 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 Bonus Shares on the Stock Exchange or such other date(s) 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.

Dealings in the Bonus Shares may be settled through CCASS. You should seek the advice of your stockbroker or other professional adviser for details of those settlement arrangements and how such arrangements will affect your rights and interests.

5. CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from 3 June 2002 to 6 June 2002, both days inclusive, in order to determine entitlements to the Bonus Share Issue, during which period no transfer of Shares can be registered and no shares will be allotted and issued on the exercise of the subscription rights attaching to the outstanding share options granted by the Company.

The last day for dealings in Shares cum entitlements to the Bonus Share Issue will be 29 May 2002. In order to qualify for the proposed Bonus Share Issue. Shareholders are reminded that they must lodge completed transfer forms together with the relevant Share certificates with the Registrar not later than 4:00 p.m. on 31 May 2002.

6. TAXATION

Shareholders are recommended to consult their professional advisers as to the tax implications of the Bonus Share Issue, in particular, whether the Bonus Share Issue would be regarded as a transaction of an income or capital nature or make such Shareholders liable to taxation. It is emphasised that the taxation implications of the Bonus Share Issue are matters for Shareholders themselves and neither the Company nor any of its Directors can accept responsibility for any tax effect on, or liabilities of, its Shareholders.

Dealings in the Bonus Shares will be subject to Hong Kong stamp duty. No stamp duty will be levied on dealings in the Bonus Shares under the laws of the Cayman Islands.

– 6 –

LETTER FROM THE BOARD

II. ADOPTION OF NEW SHARE OPTION SCHEME

7. INTRODUCTION

On 23 August 2001, the Stock Exchange announced amendments to Chapter 17 of the Listing Rules, which came into effect on 1 September 2001. In compliance with the amendments to the Listing Rules and for reasons set out in this letter, the Board considers that it is in the interest of the Company to terminate the Existing Share Option Scheme and to adopt the New Share Option Scheme.

The purpose of this circular is to provide you with information in respect of the Ordinary Resolution to be proposed at the Annual General Meeting for the approval of the adoption of the New Share Option Scheme and the termination of the Existing Share Option Scheme.

8. THE NEW SHARE OPTION SCHEME

At the Annual General Meeting, the Ordinary Resolution will be proposed for the Company to approve the adoption of the New Share Option Scheme pursuant to which the Participants may be granted Options to subscribe for Shares upon and subject to the terms and conditions of the rules of the New Share Option Scheme.

A summary of the principal terms of the rules of the New Share Option Scheme which is proposed to be approved and adopted by the Company at the Annual General Meeting is set out in the Appendix A to this circular. A copy of the rules of the New Share Option Scheme is available for inspection at the principal place of business of the Company at 12th Floor, Tai Sang Commercial Building, 24-34 Hennessy Road, Wan Chai, Hong Kong during normal business hours from the date hereof up to and including 6 June 2002 and at the Annual General Meeting.

On 23 July 2001, the Company adopted the Existing Share Option Scheme for the Eligible Grantees pursuant to which Options to subscribe for an aggregate of up to ten per cent. of the issued share capital of the Company from time to time can be granted. As at the Latest Practicable Date, the issued share capital of the Company was 415,000,000 Shares. Under the Existing Share Option Scheme, the Company can grant Options to subscribe for up to 41,500,000 Shares to the Eligible Grantees, representing ten per cent. of the issued share capital of the Company. As at the Latest Practicable Date, the Company had not granted any Options to any Eligible Grantees under the Existing Share Option Scheme. The Directors confirm that prior to the Annual General Meeting, they will not grant any Options under the Existing Share Option Scheme. There is no other share option scheme of the Company besides the Existing Share Option Scheme.

The New Share Option Scheme is conditional upon:

• (i) the passing of the Ordinary Resolution at the Annual General Meeting approving the adoption of the New Share Option Scheme and the termination of the Existing Share Option Scheme; and

• (ii) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in any new Shares which may fall to be allotted and issued upon the exercise of the subscription rights attaching to the Options that may be granted under the New Share Option Scheme.

– 7 –

LETTER FROM THE BOARD

The Existing Share Option Scheme will be terminated on the New Share Option Scheme coming into effect upon the fulfillment of the conditions set out above. Upon termination of the Existing Share Option Scheme, no further options can be granted thereunder but in all other respects, the provisions of the Existing Share Option Scheme shall remain in force and any Options granted prior to such termination shall continue to be valid and exercisable in accordance therewith.

Subject to the passing of resolution numbered 4 set out in the notice of the Annual General Meeting on Bonus Share Issue and assuming that there is no other change in the issued share capital of the Company between the Latest Practicable Date and the date of the adoption of the New Share Option Scheme, the number of Shares that may be issued pursuant to the New Share Option Scheme on the date of its adoption and any other share option schemes of the Company will be 124,500,000 Shares representing ten per cent. of the Company’s issued capital as at the date of passing of the Ordinary Resolution as enlarged by the Bonus Shares.

The Directors consider that it is not appropriate to state the value of all the Options that can be granted under the New Share Option Scheme as if they had been granted at the Latest Practicable Date prior to the approval of the New Share Option Scheme given that the variables which are crucial for the calculation of the value of such Option cannot be determined. The variables which are critical for the determination of the value of such Options include, the subscription price for the Shares upon the exercise of the subscription rights attaching to the Options, whether or not Options will be granted under the New Share Option Scheme and the timing of the granting of such Options, the period during which the subscription rights may be exercised, the discretion of the Board to impose any performance target that has to be achieved before the subscription right attaching to the Options can be exercised and any other conditions that the Board imposed on the Options and whether or not such Options if granted will be exercised by the Option holders. The subscription price payable for the Shares depends on the price of the Shares as quoted on the Stock Exchange, which in turn depends on when the Board is to grant Options under the New Share Option Scheme. It is also difficult to ascertain with accuracy the subscription price of the Shares given the volatility the Share price may be subject to during the ten year life span of the New Share Option Scheme. In the premises, the Directors are of the view that the value of the Options depends on a number of variables which are either difficult to ascertain or can only be ascertained subject to a number of theoretical basis and speculative assumptions. Accordingly, the Directors believed that any calculation of the value of the Options will not be meaningful and may be misleading to Shareholders in the circumstances.

9. APPLICATION FOR LISTING

Application will be made to the Listing Committee of the Stock Exchange for granting the listing of, and permission to deal in, the Shares which may fall to be issued pursuant to the exercise of any Options that may be granted under the New Share Option Scheme.

10. REASONS FOR ADOPTING THE NEW SHARE OPTION SCHEME

The purpose of the New Share Option Scheme is to provide incentives or rewards to Participants thereunder for their contribution to the Group and/or to enable the Group to recruit and retain highcalibre employees and attract human resources that are valuable to the Group and any Invested Entity.

– 8 –

LETTER FROM THE BOARD

The New Share Option Scheme permits the Company to grant Options to a wider category of Participants, and not just the Eligible Grantees as under the Existing Share Option Scheme. Under the rules of the New Share Option Scheme, the Board has discretion to set a minimum period for which an Option has to be held before the exercise of the subscription rights attaching thereto. This discretion allows the Board to provide incentive to a Participant to remain as a Participant during the minimum period and thereby enable the Group or the relevant Invested Entity to continue to benefit from the services of such Participant during such period. This discretion, coupled with the power of the Board to impose any performance target as it considers appropriate before any Option can be exercised, enable the Group to provide incentives to the Participants to use their best endeavours in assisting the growth and development of the Group. Although the New Share Option Scheme does not provide for the granting of Options with right to subscribe for Shares at a discount to the trading price of the Shares on the Stock Exchange, the Directors are of the view that the flexibility given to the Board in granting Options to Participants, other than the Eligible Grantees and to impose minimum period for which the Options have to be held and performance targets that have to be achieved before the Options can be exercised, will place the Group in a better position to attract human resources that are valuable to the growth and development of the Group as a whole, than the Existing Share Option Scheme.

Pursuant to Rule 17.02(1)(a) of the Listing Rules, an announcement on the outcome of the Annual General Meeting for the adoption of the New Share Option Scheme will be published by the Company in the newspapers on the business day following the Annual General Meeting.

III. GENERAL MANDATES TO REPURCHASE SHARES AND TO ISSUE NEW SHARES

11. INTRODUCTION

The purpose of this circular is to provide you with information relating to the General Mandate Resolutions to be proposed at the forthcoming Annual General Meeting to grant to the Directors the Buyback Mandate and the Issuance Mandate.

12. BUYBACK AND ISSUANCE MANDATES

Ordinary resolutions will be proposed at the Annual General Meeting to approve the grant of new general mandates to the Directors:

• (a) to purchase Shares on the Stock Exchange of an aggregate nominal amount of up to ten per cent. of the aggregate nominal amount of the issued share capital of the Company on the date of passing such resolution as enlarged by the issue of the Bonus Shares pursuant to the Bonus Share Issue (in the event that the Bonus Share Issue becomes unconditional) (“Buyback Mandate”);

• (b) to allot, issue or deal with Shares of an aggregate nominal amount of up to twenty per cent. of the aggregate nominal amount of the share capital of the Company in issue on the date of passing such resolution as enlarged by the issue of the Bonus Shares pursuant to the Bonus Share Issue (in the event that the Bonus Share Issue becomes unconditional) (“Issuance Mandate”); and

– 9 –

LETTER FROM THE BOARD

• (c) to extend the Issuance Mandate by an amount representing the aggregate nominal amount of the Shares repurchased by the Company pursuant to and in accordance with the Buyback Mandate.

The Buyback Mandate and the Issuance Mandate will continue in force until the conclusion of the next annual general meeting of the Company or any earlier date as referred to in resolutions numbered 6 and 7 set out in the notice of the Annual General Meeting.

In accordance with the requirements of the Listing Rules, the Company is required to send to the Shareholders an explanatory statement containing all the information reasonably necessary to enable them to make an informed decision on whether to vote for or against the grant of the Buyback Mandate. An explanatory statement as required by the Listing Rules in connection with the Buyback Mandate is set out in Appendix B to this circular.

IV. ADOPTION OF CHINESE NAME

13. INTRODUCTION

As the Company is a company incorporated in the Cayman Islands, only its English name appears in its Certificate of Incorporation. Accordingly, the Company has been registered as an oversea company in its English name only under Part XI of the Hong Kong Companies Ordinance. The Chinese name（美 吉利國際控股有限公司）that now appears in the Company’s documents has been used as a Chinese translation of its English name for identification purpose. As an oversea company is now allowed to register a Chinese name with the Registrar of Companies in Hong Kong notwithstanding the fact that only the English name of a company appears in the Certificate of Incorporation, the Directors propose the adoption of the Chinese name（美吉利國際控股有限公司）to formalize its use by the Company in Hong Kong for identification purpose only.

At present, there is no Chinese name appears on the existing share certificates of the Company. As there is no statutory requirement for the Company to add the aforesaid Chinese name onto its share certificates, the Company will not issue any new share certificates following the adoption of Chinese name.

14. CONDITIONS

The adoption will be subject to the following conditions:

• (i) the passing of a special resolution in relation to the adoption of the Chinese name by the shareholders of the Company at the Annual General Meeting; and

• (ii) the approval of the Registrar of Companies in Hong Kong.

The Company will file a special resolution authorising the adoption of a Chinese name together with the relevant statutory form to the Registrar of Companies in Hong Kong. Further announcement will be made by the Company once the resolution on adoption of Chinese name has been passed at the Annual General Meeting.

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LETTER FROM THE BOARD

V. ANNUAL GENERAL MEETING

The notice of the Annual General Meeting is contained in the Company’s 2001 Annual Report. At the Annual General Meeting, resolutions will be proposed to approve, inter alia, the Bonus Share Issue, the adoption of the New Share Option Scheme, the granting of the Buyback Mandate and the Issuance Mandate, the extension of the Issuance Mandate by the addition thereto of the number of Shares repurchased pursuant to the Buyback Mandate and the adoption of Chinese name.

A form of proxy for use at the Annual General Meeting is also enclosed with the Company’s 2001 Annual Report. To be valid, the form of proxy must be completed in accordance with the instructions printed thereon and deposited, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power of attorney or authority at the Company’s Branch Share Registrar in Hong Kong, Tengis Limited at 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong not less than 48 hours before the time appointed for holding the Annual General Meeting or any adjournment thereof. Completion and delivery of the form of proxy will not preclude shareholders from attending and voting at the Annual General Meeting if they so wish.

VI. RECOMMENDATION

The Directors consider that the proposed Bonus Share Issue, adoption of the New Share Option Scheme, granting of the Buyback Mandate and granting/extension of the Issuance Mandate and the adoption of Chinese name are in the interests of the Company and the Group and the Shareholders. Accordingly, the Directors recommend Shareholders to vote in favour of the relevant resolutions to be proposed at the Annual General Meeting.

VII. GENERAL INFORMATION

Your attention is drawn to the additional information set out in the Appendix A and Appendix B to this circular.

Yours faithfully, Lam Yat Sing Chairman of the Board

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APPENDIX A THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

This Appendix summaries the principal terms of the New Share Option Scheme but does not form part of, nor was it intended to be, part of the New Share Option Scheme nor should it be taken as effecting the interpretation of the rules of the New Share Option Scheme.

(a) Purpose of the scheme

The purpose of the New Share Option Scheme is to provide incentives or rewards to Participants thereunder for their contribution to the Group and/or to enable the Group to recruit and retain high-calibre employees and attract human resources that are valuable to the Group and any Invested Entity.

(b) Who may join

The Directors may, at their absolute discretion, invite any person belonging to any of the following classes of Participants, to take up Options to subscribe for Shares:

• (aa) any Eligible Employee;

• (bb) any non-executive director (including independent non-executive directors) of the Company, any of its Subsidiaries or any Invested Entity;

• (cc) any supplier of goods or services to any member of the Group or any Invested Entity;

• (dd) any customer of the Group or any Invested Entity;

• (ee) any person or entity that provides research, development or other technological support to the Group or any Invested Entity; and

• (ff) any shareholder of any member of the Group or any Invested Entity or any holder of any securities issued by any member of the Group or any Invested Entity.

For the avoidance of doubt, the grant of any options by the Company for the subscription of Shares or other securities of the Group to any person who fall within any of the above classes of Participants shall not, by itself, unless the Directors otherwise determined, be construed as a grant of Option under the New Share Option Scheme.

The basis of eligibility of any of the above classes of Participants to the grant of any Options shall be determined by the Directors from time to time on the basis of their contribution to the development and growth of the Group and the Invested Entity.

(c) Maximum number of Shares

• (aa) The maximum number of Shares to be issued upon exercise of all outstanding Options granted and yet to be exercised under the New Share Option Scheme and any other share option schemes of the Company must not in aggregate exceed 30 per cent. of the issued share capital of the Company from time to time.

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APPENDIX A THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

• (bb) The total number of Shares which may be issued upon exercise of all Options (excluding, for this purpose, Options which have lapsed in accordance with the terms of the New Share Option Scheme and any other share option schemes of the Company) to be granted under the New Share Option Scheme and any other share option schemes of the Company must not in aggregate exceed 10 per cent. of the Shares in issue as at the date of the passing of the Ordinary Resolution (the “General Scheme Limit”).

• (cc) Subject to (aa) above and without prejudice to (dd) below, the Company may seek approval of the Shareholders in general meeting and issue a circular to the Shareholders to refresh the General Scheme Limit provided that the total number of Shares which may be issued upon exercise of all Options to be granted under the New Share Option Scheme and any other share option schemes of the Company under the limit as “refreshed” must not exceed 10 per cent. of the Shares in issue as at the date of approval of the limit and for the purpose of calculating the limit as “refreshed”, Options (including those outstanding, cancelled, lapsed or exercised in accordance with the New Share Option Scheme and any other share option schemes of the Company) previously granted under the New Share Option Scheme and any other share option schemes of the Company will not be counted.

• (dd) Subject to (aa) above and without prejudice to (cc) above, the Company may issue a circular to the Shareholders and seek separate Shareholders’ approval in general meeting to grant Options beyond the General Scheme Limit or, if applicable, the limit referred to in (cc) above to Participants specifically identified by the Company before such approval is sought.

(d) Maximum entitlement of each Participant

The total number of Shares issued and which may fall to be issued upon exercise of the Options granted under the New Share Option Scheme and any other share option schemes of the Company (including both exercised and outstanding Options) to each Participant in any 12-month period must not exceed 1 per cent. of the issued share capital of the Company for the time being (the “Individual Limit”). Any further grant of Options to a Participant in excess of the Individual Limit (including exercised, cancelled and outstanding Options) in any 12-month period up to and including the date of such further grant must be subject to the issue of a circular to the Shareholders and the Shareholders’ approval in general meeting of the Company with such Participant and his associates abstaining from voting.

(e) Grant of Options to connected persons

• (aa) Any grant of Options under the New Share Option Scheme to a Director, chief executive (other than a proposed director or a proposed chief executive of the Company) or substantial shareholder of the Company or any of their respective associates must be approved by independent non-executive Directors (excluding any independent nonexecutive Director who is the grantee of the Options).

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APPENDIX A THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

• (bb) Where any grant of Options to a substantial shareholder or an independent non-executive Director, 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 and outstanding) to such person in the 12-month period up to and including the date of such grant:

• (i) representing in aggregate over 0.1 per cent. of the Shares in issue; and

• (ii) having an aggregate value, based on the closing price of the Shares at the date of each grant, in excess of HK$5,000,000;

such further grant of Options must be approved by the Shareholders. The Company must send a circular to the Shareholders. All connected persons of the Company must abstain from voting at such general meeting, except that any connected person may vote against the relevant resolution at the general meeting provided that his intention to do so has been stated in the circular. Any vote taken at the meeting to approve the grant of such Options must be taken on a poll. Any change in the terms of the Options granted to a substantial shareholder or an independent non-executive Director of the Company, or any of their respective associates must be approved by the Shareholders in general meeting.

(f) Time of acceptance and exercise of an Option

An offer of grant of an Option may be accepted by a Participant within 28 days from the date of the offer of grant of the Option. A consideration of HK$1 is payable on acceptance of the offer of grant of an Option.

An Option may be exercised in accordance with the terms of the New Share Option Scheme at any time during a period to be determined and notified by the Directors to each grantee, which period may commence on the day on which the offer for the grant of Options is made but shall end in any event not later than 10 years from the date the Board makes an offer of the grant of an Option subject to the provisions for early termination thereof.

Unless the Directors otherwise determined and stated in the offer of the grant of Options to a Participant, there is no minimum period for which an Option granted under the New Share Option Scheme must be held before it can be exercised.

(g) Performance targets

Unless the Directors otherwise determined and stated in the offer of the grant of Options to a Participant, a Participant is not required to achieve any performance targets before any Options granted under the New Share Option Scheme can be exercised.

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APPENDIX A THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

(h) Subscription price for Shares

The subscription price for Shares under the New Share Option Scheme shall be a price determined by the Directors, but shall not be less than the highest of (i) the closing price of Shares as stated in the Stock Exchange’s daily quotations sheet on the date of the offer of grant, which must be a trading day; (ii) the average closing price of Shares as stated in the Stock Exchange’s daily quotations sheets for the five trading days immediately preceding the date of the offer of grant; and (iii) the nominal value of the Shares. Without prejudice to the generality of the foregoing, the Directors may grant Options in respect of which the subscription price is fixed at different prices for different periods during the Option period provided that the subscription price for Shares for each of the different periods shall not be less than the subscription price determined in the manner set out herein.

(i) Ranking of Shares

• (aa) Shares allotted upon the exercise of an Option will be subject to all the provisions of the articles of association of the Company and will rank pari passu in all respects with the fully paid Shares in issue as from the day when the name of the grantee is registered on the register of members of the Company and accordingly will entitle the holders to participate in all dividends or other distributions paid or made on or after the date when the name of the grantee is registered on the register of members of the Company other than any dividend or other distribution previously declared or recommended or resolved to be paid or made with respect to a record date which shall be before the date when the name of the grantee is registered on the register of members of the Company, provided always that when the date of exercise of the Option falls on a day upon which the register of members of the Company is closed then the exercise of the Option shall become effective on the first business day in Hong Kong on which the register of members of the Company is re-opened. A Share allotted upon the exercise of an Option shall not carry voting rights until the completion of the registration of the grantee as the holder thereof.

• (bb) Unless the context otherwise requires, references to “Shares” in this paragraph include references to shares in the ordinary equity share capital of the Company of such nominal amount as shall result from a sub-division, consolidation, re-classification or reduction of the share capital of the Company from time to time.

(j) Restrictions on the time of grant of Options

No offer for grant of Options shall be made after a price sensitive event has occurred or a price sensitive matter has been the subject of a decision until such price sensitive information has been published in the newspapers. In particular, during the period commencing one month immediately preceding the earlier of (i) the date of the meeting of the Directors (as such date is first notified to the Stock Exchange in accordance with the terms of the Company’s listing agreement) for the approval of the Company’s interim or annual results, and (ii) the last date on which the Company must publish its interim or annual results announcement under its listing agreement with the Stock Exchange, and ending on the date of the announcement of the results, no Option may be granted.

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APPENDIX A THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

The Directors may not grant any Option to a Participant who is a Director during the periods or times in which Directors are prohibited from dealing in shares pursuant to the Model Code for Securities Transactions by Directors of Listed Companies prescribed by the Listing Rules or any corresponding code or securities dealing restrictions adopted by the Company.

(k) Period of the New Share Option Scheme

The New Share Option Scheme will remain in force for a period of 10 years commencing on the date on which the New Share Option Scheme becomes unconditional.

(l) Rights on ceasing employment

If the grantee of an Option is an Eligible Employee and ceases to be an Eligible Employee for any reason other than death or serious misconduct or other grounds referred to in sub-paragraph (n) below before exercising his Option in full, the Option (to the extent which has become exercisable and not already exercised) will lapse on the date of cessation and will not be exercisable unless the Directors otherwise determine in which event the grantee may exercise the Option (to the extent not already exercised) in whole or in part within such period as the Directors may determine following the date of such cessation, which will be taken to be the last day on which the grantee was at work with the Group or the Invested Entity whether salary is paid in lieu of notice or not.

(m) Rights on death

If the grantee of an Option ceases to be a Participant by reason of death before exercising the Option in full (provided that none of the events which would be a ground for termination of his or her employment under sub-paragraph (n) below arises prior to his or her death), the legal personal representative of this grantee shall be entitled within a period of 12 months from the date of death (or such longer period as the Board may determine) to exercise the Option (to the extent which has become exercisable and not already exercised).

(n) Rights on dismissal

If the grantee of an Option is an Eligible Employee and ceases to be an Eligible Employee by reason that he has been guilty of misconduct or has committed an act of bankruptcy or has become insolvent or has made any arrangements or composition with his or her creditors generally, or has been convicted of any criminal offence involving his or her integrity or honesty or (if so determined by the Board) on any ground on which an employer would be entitled to terminate his or her employment at common law or pursuant to any applicable laws or under the Eligible Employee’s service contract with the Company or the relevant Subsidiary or the relevant Invested Entity, his or her Option will lapse automatically on the date the grantee ceases to be an Eligible Employee.

(o) Rights on breach of contract

If the Directors at their absolute discretion determine that the grantee of any Option (other than an Eligible Employee) or his or her associate has committed any breach of any contract entered into between the grantee or his or her associate on the one part and the Group or any

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APPENDIX A THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

Invested Entity on the other part or that the grantee has committed any act of bankruptcy or has become insolvent or is subject to any winding-up, liquidation or analogous proceedings or has made any arrangement or composition with his or her creditors generally, the Directors shall determine that the outstanding Options granted to the grantee shall lapse. In such event, his or her Options will lapse automatically and will not in any event be exercisable on or after the date on which the Directors have so determined.

(p) Rights on a general offer

If a general or partial offer, whether by way of take-over offer, share re-purchase offer, or scheme of arrangement or otherwise in like manner is made to all the holders of Shares, or all such holders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or concert with the offeror, the Company shall use all reasonable endeavours to procure that such offer is extended to all the grantees on the same terms, mutatis mutandis, and assuming that they will become, by the exercise in full of the Options granted to them, Shareholders of the Company. If such offer becomes or is declared unconditional, a grantee shall be entitled to exercise his or her Option (to the extent not already exercised) to its full extent or to the extent specified in the grantee’s notice to the Company in exercise of his or her Option at any time before the close of such offer (or any revised offer). Subject to the above, an Option will lapse automatically (to the extent not exercised) on the date on which such offer (or, as the case may be, revised offer) closes.

(q) Rights on winding up

In the event of an effective resolution being proposed for the voluntary winding-up of the Company during the option period, the grantee may, subject to the provisions of all applicable laws, by notice in writing to the Company at any time no later than two business days prior to the date on which such resolution is to be passed, exercise his or her Option (to the extent which has become exercisable and not already exercised) either to its full extent or to the extent specified in such notice in accordance with the provisions of the New Share Option Scheme and shall accordingly be entitled, in respect of the Shares falling to be allotted and issued upon the exercise of his or her Option, to participate in the distribution of the assets of the Company available in liquidation pari passu with the Shares in issue on the date prior to the date of the passing of the resolution to windup the Company. Subject to the above, an Option will lapse automatically (to the extent not exercised) on the date of the commencement of the winding-up of the Company.

(r) Rights on compromise or arrangement between the Company and its creditors

In the event of a compromise or arrangement between the Company and its creditors (or any class of them) or between the Company and its members (or any class of them), in connection with a scheme for the reconstruction 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 thereupon any grantee (or his or her legal representative(s)) may forthwith and until the expiry of the period commencing with such date and ending with the earlier of the date falling two calendar months thereafter and the date on which such compromise or arrangement is sanctioned by the Court be entitled to exercise his or her

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APPENDIX A THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

Option (to the extent which has become exercisable and not already exercised), but the exercise of the Option shall be conditional upon such compromise or arrangement being sanctioned by the Court and becoming effective. The Company may thereafter require such grantee to transfer or otherwise deal with the Shares issued as a result of such exercise of his or her Option so as to place the grantee in the same position as nearly as would have been the case had such Shares been subject to such compromise or arrangement. Subject to the above, an Option will lapse automatically (to the extent not exercised) on the date the proposed compromise or arrangement becomes effective.

(s) Adjustments of the subscription price or other terms

In the event of a capitalisation issue of profits or reserves, rights issue, sub-division or consolidation of Shares or reduction of capital of the Company whilst an Option remains exercisable, such corresponding alterations (if any) certified by the auditors for the time being of or an independent financial adviser to the Company as fair and reasonable will be made to the number or nominal amount of Shares the subject matter of the Share Option Scheme and the Option so far as unexercised and/or the subscription price for Shares, provided that (i) any adjustments shall give a grantee the same proportion of the issued share capital to which he was entitled prior to such adjustments; (ii) no such adjustment will be required in circumstances where there is an issue of Shares or other securities of the Group as consideration in a transaction; and (iii) no adjustments shall be made the effect of which would be to enable a Share to be issued at less than its nominal value. In addition, in respect of any such adjustments, other than any made on a capitalisation issue, the Company’s auditors or independent financial adviser must confirm to the Directors in writing that the adjustments satisfy the requirements of the relevant provision of the Listing Rules.

(t) Cancellation of Options

Any cancellation of Options granted but not exercised must be approved by Shareholders in general meeting, with the relevant grantees and their associates abstaining from voting.

Where the Company cancels Options and issued new ones to the same grantee, the issue of such new options may only be made under the New Share Option Scheme and any other share options schemes of the Company with available unissued options (excluding the cancelled Options) within the limit approved by Shareholders as mentioned in note (1) to Rule 17.03 (3) of the Listing Rules.

(u) Termination of the New Share Option Scheme

The Company may by resolution in general meeting at any time terminate the New Share Option Scheme and in such event no further Options shall be offered but in all other respects the provisions of the New Share Option Scheme shall remain in force to the extent necessary to give effect to the exercise of any Options (to the extent not already exercised) granted prior to the termination or otherwise as may be required in accordance with the provisions of the New Share Option Scheme. Options (to the extent not already exercised) granted prior to such termination shall continue to be valid and exercisable in accordance with the New Share Option Scheme.

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APPENDIX A THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

(v) Rights are personal to the grantee

An Option is 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 third party 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.

(w) Lapse of Option

An Option shall lapse automatically (to the extent not already exercised) on the earliest of:

• (aa) the expiry of the period referred to in paragraph (f);

• (bb) the expiry of the periods or dates referred to in paragraphs (l), (m), (n), (o), (p), (q) and (r); or

• (cc) the date on which a breach of the provision of restriction on transfer and assignment of an Option referred to in paragraph (v) is committed.

(x) Others

• (aa) The terms and conditions of the New Share Option Scheme relating to the matters set out in Rule 17.03 of the Listing Rules shall not be altered to the advantage of grantees of the Options except with the prior approval of the Shareholders in general meeting.

• (bb) Any alterations to the terms and conditions of the New Share Option Scheme which are of a material nature or any change to the terms of Options granted must be approved by the Shareholders in general meeting, except where the alterations take effect automatically under the existing terms of the New Share Option Scheme. There is no specific term of the New Share Option Scheme that can be changed by the Directors or any scheme administrators without the approval of Shareholders in general meeting.

• (cc) The amended terms of the New Share Option Scheme or the Options must still comply with the relevant requirements of Chapter 17 of the Listing Rules.

• (dd) Any change to the authority of the Directors or the scheme administrators in relation to any alteration to the terms of the New Share Option Scheme must be approved by the Shareholders in general meeting.

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APPENDIX B EXPLANATORY STATEMENT ON THE BUYBACK MANDATE

This Appendix serves an explanatory statement, as required by the Listing Rules, to provide requisite information to you for your consideration of the Buyback Mandate.

1. REASONS FOR SHARE BUYBACK

The Directors believe that the proposed granting of the Buyback Mandate is in the interests of the Company and the Shareholders.

Repurchases may, depending on market conditions and funding arrangements at the time, result in an enhancement of the net assets and/or earnings per Share. The Directors are seeking the granting of the Buyback Mandate 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 pertaining.

2. SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company comprised 415,000,000 Shares.

Subject to the passing of the resolution no.4 set out in the notice of the Annual General Meeting on Bonus Share Issue and assuming that no other Shares are issued or repurchased by the Company prior to the Annual General Meeting, the Company will comprise 1,245,000,000 issued Shares. The Company would be allowed under the Buyback Mandate to repurchase a maximum of 124,500,000 Shares during the period in which the Buyback Mandate remains in force.

3. FUNDING OF REPURCHASES

In repurchasing Shares, the Company may only apply funds legally available for such purpose in accordance with its memorandum and articles of association, the laws of the Cayman Islands and other applicable laws.

The Company is empowered by its memorandum and articles of association to repurchase its Shares. The laws of the Cayman Islands provide that the amount of capital paid in connection with a share repurchase may only be paid out of either the profits of the Company or the proceeds of a fresh issue of Shares made for such purpose or, subject to the provisions of the Cayman Islands laws, out of capital. The amount of premium payable on repurchase may be paid out of the profits of the Company or out of the share premium account of the Company, or, subject to the provisions of the Cayman Islands laws, out of capital, before the shares are repurchased.

There might be material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in the audited accounts contained in the annual report of the Company for the year ended 31 December 2001) in the event that the Buyback Mandate was to be carried out 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.

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APPENDIX B EXPLANATORY STATEMENT ON THE BUYBACK MANDATE

4. GENERAL

None of the Directors or, to the best of their knowledge and having made all reasonable enquiries, any of their respective associates, have any present intention to sell any Shares to the Company or its subsidiaries in the event that the granting of the Buyback Mandate is approved by the Shareholders.

The Directors have undertaken to the Stock Exchange to exercise the Buyback Mandate in accordance with the Listing Rules and the applicable laws of the Cayman Islands.

No connected person has notified the Company that he has a present intention to sell Shares to the Company, or has undertaken not to do so in the event that the granting of the Buyback Mandate is approved by the Shareholders.

If, on the exercise of the power to repurchase Shares pursuant to the Buyback Mandate, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purposes of the Takeovers Code. As a result, a Shareholder, or group of Shareholders acting in concert, could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code for all Shares not already owned by such Shareholder or group of Shareholders.

As at the Latest Practicable Date, Prosperous Statesman Limited, the substantial Shareholder of the Company, was interested in 59.3% of the total issued Shares. On the basis that no further Shares are issued or repurchased prior to the Annual General Meeting, in the event that the Directors exercise in full the power to repurchase Shares pursuant to the Buyback Mandate, the shareholdings of Prosperous Statesman Limited in the Company would be increased to approximately 65.9% (on the assumption that the Bonus Share Issue will not be effected and no further Shares will be issued or repurchased by the Company) of the total issued share capital of the Company. The Directors will not make repurchase of Shares on the Stock Exchange if the result of the repurchase would be that less than 25% of the issued share capital of the Company would be in public hands. The Directors are not aware of any consequences which will arise under the Takeovers Code as a consequence of any repurchases pursuant to the Buyback Mandate.

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APPENDIX B EXPLANATORY STATEMENT ON THE BUYBACK MANDATE

5. MARKET PRICES OF SHARES

The highest and lowest prices per Share at which the Shares have been traded on the Stock Exchange since 26 July 2001 (date of listing) were as follows:

Month	Highest	Lowest
	HK$	HK$
2001
July	0.810	0.610
August	0.700	0.440
September	0.450	0.270
October	0.470	0.310
November	0.600	0.320
December	0.650	0.510
2002
January	0.640	0.350
February	0.700	0.435
March	0.820	0.580

6. SHARE REPURCHASES MADE BY THE COMPANY

No repurchase of Shares has been made by the Company during the six months (whether on the Stock Exchange or otherwise) preceding the date of this circular.

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