S.A.S. Dragon Holdings Limited — Proxy Solicitation & Information Statement 2003

May 21, 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in S.A.S. Dragon Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser, transferee or to 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 takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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S.A.S. DRAGON HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

PROPOSED CANCELLATION OF THE ENTIRE AMOUNT STANDING

TO THE CREDIT OF THE SHARE PREMIUM ACCOUNT

A notice convening the special general meeting of S.A.S. Dragon Holdings Limited to be held at Rose Room, Lower Level II, Kowloon Shangri-La Hotel, 64 Mody Road, Kowloon, Hong Kong on Monday, 23rd June 2003 at 9:30 am (or so soon thereafter as the annual general meeting of S.A.S. Dragon Holdings Limited for the same place and date shall have been concluded) is set out on pages 5 to 6 of this circular.

Whether or not you are able to attend the special general meeting, you are advised to read the notice and complete and return the accompanying form of proxy in accordance with the instructions printed thereon to Secretaries Limited at G/F, BEA Harbour View Centre, 56 Gloucester Road, Wan Chai, 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 you from attending and voting in person at the special general meeting or any adjournment thereof should you so wish.

13th May 2003

TABLE OF CONTENTS

DEFINITIONS ........................................................................................................................................... 1 LETTER FROM THE CHAIRMAN INTRODUCTION............................................................................................................................ 2 THE PROPOSAL ............................................................................................................................ 3 REASONS FOR THE PROPOSAL AND THE IMPACT ON THE COMPANY AND ITS SHAREHOLDERS .................................................................................................... 3 CONDITION OF THE PROPOSAL.............................................................................................. 4 RECOMMENDATION.................................................................................................................... 4 SPECIAL GENERAL MEETING ................................................................................................. 4 NOTICE OF SPECIAL GENERAL MEETING ................................................................................. 5

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DEFINITIONS

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

	lar, unless the context otherwise requires, the following expressions have the	lar, unless the context otherwise requires, the following expressions have the	lar, unless the context otherwise requires, the following expressions have the
	:S.A.S. Dragon Holdings Limited, a company incorporated in
“Company”S.A.S. Dragon Holdings Limited, a company incorporated inBermuda with limited liability, the Shares of which are listed onthe Stock Exchange“Companies Act”the Companies Act 1981 of Bermuda“Directors”the directors of the Company from time to time“Effective Date”on the close of business on the next business day after the specialresolution to approve the Proposal has been passed“Group”the Company and its subsidiaries“Hong Kong”the Hong Kong Special Administrative Region of the People’sRepublic of China“Latest Practicable Date”9th May 2003, the latest practicable date prior to the printing ofthis circular for ascertaining certain information for inclusion inthis circular“Proposal”the cancellation of the entire amount standing to the credit of theshare premium account of the Company as at the Effective Date,being an amount in the range of approximately HK$237,881,000and approximately HK$242,085,000, which amount will be creditedto the contributed surplus account of the Company“Share(s)”share(s) of HK$0.10 each in the capital of the Company“Shareholder(s)”holder(s) of the Share(s)“Special General Meeting”the special general meeting of the Company to be held at RoseRoom, Lower Level II, Kowloon Shangri-La Hotel, 64 Mody Road,Kowloon, Hong Kong on Monday, 23rd June 2003 at 9:30 am (orso soon thereafter as the annual general meeting of the Companyfor the same place and date shall have been concluded).“Stock Exchange”The Stock Exchange of Hong Kong Limited“HK$”Hong Kong dollars, the lawful currency of Hong Kong	S.A.S. Dragon Holdings Limited, a company incorporated	in
	Bermuda with limited liability, the Shares of which are listedthe Stock Exchange	on
	the Companies Act 1981 of Bermuda

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LETTER FROM THE CHAIRMAN

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S.A.S. DRAGON HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

Executive Directors Mr. Yim Yuk Lun, Stanley (Chairman and Managing Director) Mr. Wong Sui Chuen

Non-executive Director Dr. Chang Chu Cheng Independent non-executive Directors Mr. Chang Ping Kin Dr. Lui Ming Wah, J.P. Mr. Liu Chun Ning, Wilfred Mr. Wong Tak Yuen, Adrian

Registered office Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal place of business in Hong Kong 6th Floor, Tower B Hunghom Commercial Centre 37 Ma Tau Wai Road Hong Kong

13th May 2003

To the Shareholders and for information only, to holders of the share options of the Company

Dear Sirs and Madams,

PROPOSED CANCELLATION OF THE ENTIRE AMOUNT STANDING

TO THE CREDIT OF THE SHARE PREMIUM ACCOUNT

INTRODUCTION

At the Special General Meeting, a resolution will be proposed to seek Shareholders’ approval for the Proposal.

The purpose of this circular is to provide you with information regarding the Proposal and to seek your approval of the special resolution at the Special General Meeting.

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LETTER FROM THE CHAIRMAN

THE PROPOSAL

The Directors have proposed that the entire amount standing to the credit of share premium account of the Company as at the Effective Date be cancelled (the amount standing to the credit of the share premium account of the Company being approximately HK$237,881,000 as at the Latest Practicable Date and approximately HK$242,085,000 on the assumption that between the Latest Practicable Date and the Effective Date, there has been exercised in full all subscription rights attaching to all the outstanding share options granted to the participants under the share option schemes of the Company adopted on 17th September 1994 and 28th June 2002 respectively) and the credit arising from such cancellation be transferred to the contributed surplus account of the Company. As a result of the cancellation of and the relevant transfer from the share premium account of the Company, an amount of approximately HK$180,003,000 in the contributed surplus account will then be set off against the total accumulated deficit of the Company as at 31st December 2002 in the amount of approximately HK$180,003,000.

As at the Latest Practicable Date, if all the subscription rights attaching to the outstanding share options were exercised, 2,200,000 Shares would be issued as a result. In addition, the Directors confirm that the balance of the contributed surplus of the Company was approximately HK$162,787,000 as at the Latest Practicable Date.

REASONS FOR THE PROPOSAL AND THE IMPACT ON THE COMPANY AND ITS SHAREHOLDERS

As stated in the financial statements of the Company for the year ended 31st December 2002, the Company had an audited accumulated deficit of approximately HK$180,003,000. The Proposal will allow the Company to eliminate the accumulated deficit and, as a result, the Company will be put in a position to declare dividends to its Shareholders at an earlier opportunity. However, the Company has no present intention to declare the payment of dividends immediately upon the completion of the Proposal.

The Proposal will not alter the underlying assets, the business operations, management or financial position of the Group. The Directors believe that the Proposal will not have a material adverse effect on the financial position of the Group. The Directors expect that immediately after the completion of the Proposal, the balance of the amount standing to the credit of the contributed surplus account will be in the range from approximately HK$220,665,000 to approximately HK$224,869,000. The Proposal will also, subject to the bye-laws of the Company and all applicable laws, enable the Directors to make a distribution to Shareholders out of the contributed surplus account as and when they consider it appropriate to do so.

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LETTER FROM THE CHAIRMAN

CONDITION OF THE PROPOSAL

The Proposal is conditional on the passing of a special resolution by the Shareholders at the Special General Meeting.

The Proposal also requires compliance with Section 46 of the Companies Act, including the publication of a notice of reduction of share premium in an appointed newspaper in Bermuda and the filing of a memorandum of reduction of share premium with the Registrar of Companies in Bermuda after the Proposal becomes effective.

The Proposal will become effective on the Effective Date.

RECOMMENDATION

The Directors believe that the Proposal is in the best interests of the Company as well as its Shareholders. Accordingly, the Directors recommend that Shareholders should vote in favour of the relevant resolution as set out in the notice convening the Special General Meeting.

SPECIAL GENERAL MEETING

A notice convening the Special General Meeting is set out on pages 5 to 6 of this circular. A form of proxy for use at the Special General Meeting is enclosed. Whether or not you are able to attend the Special General Meeting in person, you are advised to read the notice and complete and return the form of proxy in accordance with the instructions printed thereon as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the Special General Meeting or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the Special General Meeting or any adjournment thereof if you so wish.

Yours faithfully,

By order of the Board

S.A.S. Dragon Holdings Limited Yim Yuk Lun, Stanley

Chairman and Managing Director

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NOTICE OF SPECIAL GENERAL MEETING

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S.A.S. DRAGON HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting of S.A.S. DRAGON HOLDINGS LIMITED (the “Company”) will be held on Monday, 23rd June 2003 at 9:30 am (or so soon thereafter as the annual general meeting of the Company for the same place and date shall have been concluded) at Rose Room, Lower Level II, Kowloon Shangri-La Hotel, 64 Mody Road, Kowloon, Hong Kong for the purpose of considering and, if thought fit, passing the following resolution as a special resolution of the Company:–

SPECIAL RESOLUTION

• 1 THAT the entire amount standing to the credit of the share premium account of the Company as at the close of business on the next business day after this resolution has been passed be cancelled, and the credit arising therefrom be applied to the contributed surplus account of the Company, where it may be utilized by the directors of the Company in accordance with all applicable laws and the bye-laws of the Company, including towards the elimination of the accumulated deficit of the Company as at 31st December 2002 and that the directors of the Company be and are hereby authorized to do all such acts, deeds and things as they may, in their absolute discretion, deem fit in order to effect the foregoing.

By Order of the Board

S.A.S. Dragon Holdings Limited Yim Yuk Lun, Stanley Chairman and Managing Director

13th May 2003

Registered office

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

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NOTICE OF SPECIAL GENERAL MEETING

Head office and principal place of business in Hong Kong

6th Floor, Tower B

Hunghom Commercial Centre 37 Ma Tau Wai Road Hong Kong

1. Any member entitled to attend and vote at a meeting of the Company shall be entitled to appoint another person as his proxy to attend and vote instead of him. A member may appoint a proxy in respect of part only of his holding of shares in the Company. A proxy need not be a member of the Company.

2. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorized in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorized to sign the same. In the case of an instrument of proxy purporting to be signed on behalf of a corporation by an officer thereof it shall be assumed, unless the contrary appears, that such officer was duly authorized to sign such instrument of proxy on behalf of the corporation without further evidence of the fact.

3. The instrument appointing a proxy and (if required by the board of directors of the Company) the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority, shall be delivered to Secretaries Limited at G/F, BEA Harbour View Centre, 56 Gloucester Road, Wan Chai, Hong Kong not less than forty-eight (48) hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, not less than twenty-four (24) hours before the time appointed for the taking of the poll and in default the instrument of proxy shall not be treated as valid.

4. Delivery of an instrument appointing a proxy shall not preclude a member from attending and voting in person at the meeting convened and in such event, the instrument appointing a proxy shall be deemed to be revoked.

5. Where there are joint holders of any share any one of such joint holder may vote, either in person or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at any meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register in respect of the joint holding.

6. A form of proxy for use at the special general meeting is enclosed herewith.

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