Sinopec Engineering Group Co Ltd. — Proxy Solicitation & Information Statement 2003

Oct 30, 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

This circular should be read in conjunction with the accompanying annual report of the Company for the year ended 30 June 2003.

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.

UNIVERSE INTERNATIONAL HOLDINGS LIMITED ����������

(Incorporated in Bermuda with limited liability)

ADOPTION OF THE NEW SHARE OPTION SCHEME AND TERMINATION OF THE EXISTING SHARE OPTION SCHEME AND GENERAL MANDATES TO ISSUE SHARES AND TO REPURCHASE SHARES

A notice convening an annual general meeting of Universe International Holdings Limited to be held at 18th Floor, Wyler Centre Phase II, 192-200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong on 26 November 2003 at 12:00 noon or any adjournment thereof is set out on pages 83 to 88 of the annual report of the Company for the year ended 30 June 2003 sent together with this circular. Whether or not you propose to attend the meeting, you are requested to complete the accompanying proxy form enclosed with the annual report of the Company for the year ended 30 June 2003 in accordance with the instructions printed thereon and return the same to the principal place of business of the Company in Hong Kong situated at 18th Floor, Wyler Centre Phase II, 192-200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding of the annual general meeting of the Company or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the meeting should you so wish.

28 October 2003

CONTENTS

		Page
Definitions	......................................................................................................................................	1
Letter from the Board..................................................................................................................		3
1.	Introduction ................................................................................................................	3
2.	Adoption of the New Share Option Scheme and Termination of
	the Existing Share Option Scheme .......................................................................	4
3.	Conditions Precedent of the New Share Option Scheme.........................................	4
4.	Explanation of the Terms of the New Share Option Scheme ..................................	5
5.	Value of All Options that can be Granted Pursuant to
	the New Share Option Scheme..............................................................................	5
6.	General Mandates to Issue and Repurchase Shares .................................................	6
7.	AGM ...........................................................................................................................	6
8.	Action to be Taken .....................................................................................................	7
9.	Document Available for Inspection ..........................................................................	7
10.	Recommendation........................................................................................................	7
11.	Responsibility Statement ...........................................................................................	7
12.	General .......................................................................................................................	7
Appendix I	Explanatory Statement.........................................................................................	8
Appendix II Summary of the Principal Terms of the New Share Option Scheme ............		11

– i –

DEFINITIONS

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

“AGM”	annual general meeting of the Company to be held at 18th Floor,
	Wyler Centre Phase II, 192-200 Tai Lin Pai Road, Kwai Chung,
	New Territories, Hong Kong on 26 November 2003 at 12:00
	noon or any adjournment thereof
“AGM Notice”	notice convening the AGM as set out on pages 83 to 88 of the
	annual report of the Company for the year ended 30 June 2003
“Board”	board of Directors or a duly authorised committee thereof for
	the time being
“Business Day(s)”	a day (other than a Saturday or a Sunday) on which licensed
	banks are open for business in Hong Kong and the Stock
	Exchange is open for business of dealing in securities
“Bye-laws”	bye-laws of the Company for the time being and from time to
	time
“Company”	Universe International Holdings Limited, a company
	incorporated in Bermuda with limited liability and the Shares
	of which are listed on the main board of the Stock Exchange
“Companies Act”	the Companies Act 1981 of Bermuda (as amended)
“Director(s)”	director(s) of the Company for the time being and from time to
	time
“Existing Share Option Scheme”	existing share option scheme for the full-time employees of any
	company in the Group (including any executive directors of any
	member of the Group) adopted by the resolution of the sole
	Shareholder dated 28 June 1999
“Group”	the Company and its subsidiaries from time to time and “member
	of the Group” shall be construed accordingly
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the People’s
	Republic of China
“invested entity”	any entity in which the Group holds any equity interests

– 1 –

DEFINITIONS

• “Latest Practicable Date” 24 October 2003, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

• “Listing Committee” listing sub-committee of the directors of the Stock Exchange

• “Listing Rules”

• Rules Governing the Listing of Securities on the Stock Exchange

• “New Share Option Scheme” new share option scheme to be approved and adopted by the Company at the AGM

• “Ordinary Resolution(s)”

proposed ordinary resolution(s) as referred to in the AGM Notice

• “Share(s)” share(s) of HK$0.02 each in the capital of the Company (or of such nominal amount as shall result from a sub-division, consolidation, reclassification or reconstruction of the share capital of the Company from time to time)

• “Share Issue Mandate” a general mandate proposed to be sought at the AGM authorising the Directors to allot, issue and deal with Shares in the manner set out in the Ordinary Resolution No. 6

• “Share Repurchase Mandate” a general mandate proposed to be sought at the AGM authorising the Directors to repurchase Shares in the manner set out in the Ordinary Resolution No. 7

• “Share Repurchase Rules” the relevant rules set out in the Listing Rules to regulate the repurchase by companies with primary listings on the Stock Exchange of their own securities on the Stock Exchange

• “Shareholder(s)” holder(s) of Shares

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

• “subsidiary(ies)” a company which is for the time being and from time to time a subsidiary (within the meaning of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)) of the Company

• “HK$”

Hong Kong dollars, the lawful currency of Hong Kong

• “%” per cent

– 2 –

LETTER FROM THE BOARD

UNIVERSE INTERNATIONAL HOLDINGS LIMITED ����������

(Incorporated in Bermuda with limited liability)

Executive Directors: Lam Shiu Ming, Daneil (Chairman) Chiu Suet Ying

Non-Executive Directors:

Ng Kwok Tung Chiu Shin Koi

Head office and principal place of business 18th Floor Wyler Centre Phase II 192-200 Tai Lin Pai Road Kwai Chung New Territories Hong Kong

Registered office Clarendon House 2 Church Street Hamilton HM 11 Bermuda

28 October 2003

To the Shareholders

Dear Sir/Madam,

ADOPTION OF THE NEW SHARE OPTION SCHEME AND TERMINATION OF THE EXISTING SHARE OPTION SCHEME AND GENERAL MANDATES TO ISSUE SHARES AND REPURCHASE SHARES

1. INTRODUCTION

The purpose of this circular, which includes a summary of the principal terms of the New Share Option Scheme and an explanatory statement relating to the proposed Share Repurchase Mandate, is to provide Shareholders with information reasonably necessary to enable the Shareholders to make an informed decision on whether to vote for or against the Ordinary Resolutions to adopt the New Share Option Scheme and to terminate the Existing Share Option Scheme, to approve the grant of the Share Issue Mandate, the Share Repurchase Mandate and the extension of the Share Issue Mandate.

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LETTER FROM THE BOARD

2. ADOPTION OF THE NEW SHARE OPTION SCHEME AND TERMINATION OF THE EXISTING SHARE OPTION SCHEME

The Existing Share Option Scheme was adopted by the Company on 28 June 1999 which will expire on 27 June 2009. In view of the changes introduced to chapter 17 of the Listing Rules with effect from 1 September 2001, which governs the operation of share option schemes, the Directors propose to recommend to the Shareholders at the AGM to approve the adoption of the New Share Option Scheme and simultaneously terminate the Existing Share Option Scheme. As at the Latest Practicable Date, the Company has not adopted any share option scheme other than the Existing Share Option Scheme.

It is proposed that subject to the Shareholders approving the adoption of the New Share Option Scheme at the AGM, the operation of the Existing Share Option Scheme shall be terminated with effect from the conclusion of the AGM and the New Share Option Scheme will take effect, subject to the Listing Committee granting approval of the listing of, and permission to deal in, any Shares fall to be allotted and issued pursuant to the exercise of options that may be granted under the New Share Option Scheme, on the date of its approval and adoption at the AGM. Operation of the New Share Option Scheme will commence after all the conditions precedent as referred to in paragraph 3 below have been fulfilled.

As at the Latest Practicable Date, all options granted under the Existing Share Option Scheme have been surrendered by the option holders and cancelled by the Company. The Board confirms that prior to the AGM, it will not grant any option under the Existing Share Option Scheme.

As at the Latest Practicable Date, the number of Shares in issue are 1,434,605,370 Shares. Assuming that there is no change in the issued Shares between the period from the Latest Practicable Date and the date of the adoption of the New Share Option Scheme, the total number of Shares that may be allotted and issued pursuant to the New Share Option Scheme and any other share option scheme(s) of the Company on the date of the adoption of the New Share Option Scheme will be 143,460,537 Shares.

The Company will publish in the newspaper an announcement on the outcome of the AGM in respect of the resolution relating to the approval and adoption of the New Share Option Scheme on the business day following the date of the AGM.

3. CONDITIONS PRECEDENT OF THE NEW SHARE OPTION SCHEME

The adoption of the New Share Option Scheme is subject to the following conditions:

1. the Listing Committee granting approval of the listing of, and permission to deal in, any Shares fall to be allotted and issued pursuant to the exercise of options that may be granted under the New Share Option Scheme, up to 10% of the Shares in issue as at the date of the approval and adoption of the New Share Option Scheme by the Shareholders at the AGM;

2. the Shareholders approving and adopting the New Share Option Scheme at the AGM; and

3. the Shareholders terminating the Existing Share Option Scheme at the AGM.

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LETTER FROM THE BOARD

Upon the fulfilment of all the above conditions precedent, the Directors will have the right to grant to selected participants options to subscribe for Shares under the New Share Option Scheme that, when aggregated with any Share which may be issued upon exercise of options to be granted under any other schemes for the time being of the Company, represent up to 10% of the Shares in issue as at the date of approval of the New Share Option Scheme unless the Company obtains a fresh approval from the Shareholders in general meeting to renew the 10% limit. In any event, the maximum number of Shares which may 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 scheme for the time being of the Company shall not exceed 30% of the Shares in issue from time to time.

An application will be made to the Listing Committee for the listing of, and permission to deal in, the Shares to be allotted and issued pursuant to the exercise of the options that may be granted under the New Share Option Scheme up to 10% of the Shares in issue as at the date of the approval and adoption of the New Share Option Scheme by the Shareholders at the AGM.

4. EXPLANATION OF THE TERMS OF THE NEW SHARE OPTION SCHEME

A summary of the principal terms of the New Share Option Scheme is set out in Appendix II to this circular.

The purpose of the New Share Option Scheme is to enable the Company to grant options to selected participants as incentive and/or rewards for their contribution and support to the Group and invested entity. In addition, the terms of the New Share Option Scheme will be in line with the existing provisions of the Listing Rules with regard to share option schemes of listed companies.

The Directors may, at their discretion invite full-time employees of the Company, its subsidiaries and its invested entity, including all executive directors of the Company, its subsidiaries and its invested entity to take up options to subscribe for Shares subject to the rules of the New Share Option Scheme.

5. VALUE OF ALL OPTIONS THAT CAN BE GRANTED PURSUANT TO THE NEW SHARE OPTION SCHEME

The Directors consider that it is not appropriate to state the value of all options that can be granted pursuant to the New Share Option Scheme as if they had been granted on the Latest Practicable Date as a number of variables which are crucial for the calculation of the value of all options that can be granted pursuant to the New Share Option Scheme have not been determined. Such variables include the exercise price, option period and other relevant variables. The Directors believe that any calculation of the value of all options that can be granted pursuant to the New Share Option Scheme as at the Latest Practicable Date based on a great number of speculative assumptions would not be meaningful and would be misleading to the Shareholders.

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LETTER FROM THE BOARD

6. GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES

At the annual general meeting of the Company held on 26 November 2002, resolutions were passed granting the Directors a general mandate to allot, issue or deal with additional Shares up to a maximum of 20% of the aggregate nominal amount of the issued Shares at the date of such meeting and a general mandate to repurchase on the Stock Exchange up to 10% of the aggregate nominal amount of the issued Shares at the date of such meeting. The general mandate to allot, issue and deal with Shares was extended by an amount representing the aggregate nominal amount of the Shares so repurchased. Such mandates will expire at the conclusion of the AGM. It is therefore proposed that the Company will seek the approval of the Shareholders of the relevant resolutions proposed at the AGM in respect of the renewal of the respective general mandates to issue, allot and deal with Shares and to repurchase Shares.

At the AGM, Ordinary Resolutions will be proposed that the Directors be given the Share Issue Mandate and Share Repurchase Mandate. In addition, an Ordinary Resolution will also be proposed at the AGM providing that any Shares repurchased under the Share Repurchase Mandate (up to a maximum of 10% of the issued Shares as at the date of the grant of the Share Repurchase Mandate) will be added to the total number of Shares which may be allotted and issued under the Share Issue Mandate.

The Share Repurchase Mandate and the Share Issue Mandate would continue in force until whichever is the earliest of:

1. the conclusion of the next annual general meeting of the Company;

2. the expiration of the period within which the next annual general meeting of the Company is required by any applicable law of Bermuda or the Bye-laws to be held; and

3. the date on which any such mandate is revoked or varied by an ordinary resolution of the Shareholders in general meeting.

An explanatory statement as required under the Share Repurchase Rules to be given to the Shareholders is set out in Appendix I to this circular.

7. AGM

The AGM Notice which contains the Ordinary Resolutions, as special business, will be respectively proposed at such meeting as follows:

• to approve and adopt the New Share Option Scheme and simultaneously to terminate the Existing Share Option Scheme;

• to grant to the Directors the Share Issue Mandate;

• to grant the Directors the Share Repurchase Mandate; and

• to extend the Share Issue Mandate by adding to it the number of Shares repurchased under the Share Repurchase Mandate.

– 6 –

LETTER FROM THE BOARD

8. ACTION TO BE TAKEN

Whether or not you intend to attend the AGM, you are requested to complete the proxy form and return it to the principal place of business of the Company in Hong Kong situated at 18th Floor, Wyler Centre Phase II, 192-200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong at not later than 48 hours before the time appointed for holding the AGM or any adjournment thereof. Completion and return of the proxy form will not preclude shareholders of the Company from attending and voting in person at the AGM if they so wish.

9. DOCUMENT AVAILABLE FOR INSPECTION

A copy of the New Share Option Scheme will be available for inspection during normal business hours at the principal place of business of the Company in Hong Kong situated at 18th Floor, Wyler Centre Phase II, 192-200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong from the date of this circular up to and including the date of the AGM and at the AGM.

10. RECOMMENDATION

The Directors believe that the grant of the Share Issue Mandate and the Share Repurchase Mandate, the extension of the Share Repurchase Mandate, the approval and adoption of the New Share Option Scheme and the termination of the Existing Share Option Scheme are all in the best interests of the Company and the Shareholders and recommend you to vote in favour of the Ordinary Resolutions at the AGM. The Directors will exercise their voting rights in respect of all of their shareholdings (if any) in favour of the Ordinary Resolutions.

11. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are not other facts not contained herein the omission of which would make any statement contained in this circular misleading.

12. GENERAL

Your attention is also drawn to the Appendix I and the Appendix II to this circular.

Yours faithfully For and on behalf of the Board Lam Shiu Ming, Daneil Chairman

– 7 –

EXPLANATORY STATEMENT

APPENDIX I

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

1. SHARE CAPITAL

As at the Latest Practicable Date prior to the printing of this document, there was a total of 1,434,605,370 Shares in issue.

Subject to the passing of the resolution granting the Share Repurchase Mandate and on the basis that no further Shares are issued or repurchased before the AGM, the Company will be allowed to repurchase a maximum of 143,460,537 Shares during the period ending on the earliest of the conclusion of the next annual general meeting of the Company or the expiration of the period within which the next annual general meeting of the Company is required by any applicable law of Bermuda or the by-laws of the Company to be held or when revoked or varied by an ordinary resolution of the Shareholders in general meeting.

2. REASONS FOR REPURCHASES

The Directors believe that it is in the best interests of the Company and the Shareholders to seek a general authority from the Shareholders to enable the Company to repurchase its shares on the Stock Exchange. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value of the Company and/or earnings per share and will only be made when the Directors believe that such a repurchase will benefit the Company and the Shareholders.

3. FUNDING OF REPURCHASES

Repurchases made pursuant to the Share Repurchase Mandate would be funded out of funds legally available for the purpose in accordance with the Company’s memorandum of association, Bye-laws and the applicable laws of Bermuda.

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 30 June 2003) in the event that the Share Repurchase Mandate were to be carried out in full at any time during the proposed repurchase period. However, the Directors do not propose to exercise the Share Repurchase Mandate to such extent as would, in the circumstances, have a material adverse impact 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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EXPLANATORY STATEMENT

APPENDIX I

4. SHARE PRICES

The following table shows the highest and lowest prices at which the Shares have been traded on the Stock Exchange during the 12 months preceding the Latest Practicable Date:

		Per Share
Month	Highest		Lowest
	HK$		HK$
2002
October	0.307		0.307
November	0.273		0.220
December	0.247		0.233
2003
January	0.247		0.247
February	0.293		0.247
March	0.240		0.193
April	0.227		0.220
May	0.220		0.155
June	0.167		0.105
July	0.113		0.081
August	0.124		0.092
September	0.185		0.105
October (up to and including the Latest Practicable Date)	0.212		0.151

5. GENERAL

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

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will only exercise the Share Repurchase Mandate in accordance with the Listing Rules and the applicable laws of Bermuda, and in accordance with the regulations set out in the memorandum of association of the Company and the Bye-laws.

The Company has not been notified by any connected person (as defined in the Listing Rules) that such a person has a present intention to sell any Shares to the Company, or has undertaken not to do so, if the Share Repurchase Mandate is approved by the Shareholders.

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EXPLANATORY STATEMENT

APPENDIX I

If, as a result of a repurchase of Shares, 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 Hong Kong Codes on Takeovers and Mergers (the “ Code ”). Accordingly, a Shareholder, or a group of Shareholders acting in concert, depending on the level of increase of the Shareholders’ interest, could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rules 26 and 32 of the Code.

As at the Latest Practicable Date, the following persons directly or indirectly interested in 10% or more of the issued share capital of the Company are:

		Approximate
		Percentage of
Name	Number of Shares	shareholding
Globalcrest Enterprises Limited_(Note)_	865,131,705	60.3%
Central Core Resources Limited_(Note)_	865,131,705	60.3%

Note: The entire issued share capital of Globalcrest Enterprises Limited is held by Central Core Resources Limited, the trustee of a discretionary trust under which certain immediate family members of Mr. Lam Shiu Ming, Daneil and Ms. Chiu Suet Ying are discretionary objects.

In the event that the Directors exercise the power under the Share Repurchase Mandate in full pursuant to the Ordinary Resolution No. 7 and based on such shareholding, the percentage of shareholding of Globalcrest Enterprises Limited and Central Core Resources Limited would be increased to 67% and 67%, respectively.

Currently, the Directors have no intention to exercise the Share Repurchase Mandate to the extent that it will trigger the obligation under Rule 26 of the Code to make a mandatory offer nor to such extent as to reduce the amount of Shares held by the public to less than 25%.

Save as disclosed above, the Directors are currently not aware of any consequences which will arise under the Code as a result of any purchase made under the Share Repurchase Mandate.

No Shares had been repurchased by the Company, whether on the Stock Exchange or otherwise, in the last six months preceding the date of this circular.

– 10 –

APPENDIX II SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

The following is a summary of the principal terms of the New Share Option Scheme to be approved by an ordinary resolution passed by the Shareholders at the AGM:

1. Purpose

The purpose of the New Share Option Scheme is to enable the Company to grant options to selected Participants (as defined below) as incentive and/or rewards for their contribution and support to the Group and any invested entity.

2. Who may join

The Board may, at its discretion, invite any person belonging to any of the following classes of participants for their contribution and support to the Group and any invested entity (the “ Participants ” and individually, a “ Participant ”) to take up options to subscribe for Shares at a price calculated in accordance with paragraph 3 of this Appendix.

• (a) any full-time employee of the Company, any of its subsidiary or any invested entity, including (without limitation) any executive director of the Company, any of its subsidiary or any invested entity, who is in full time employment of the Company, any of its subsidiary or any invested entity (individually, an “ Employee ”);

• (b) any non-executive director (including independent non-executive directors) of the Company, any of its subsidiary or any invested entity;

• (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 technical support to the Group or any invested entity;

• (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;

• (g) any adviser (professional or otherwise) or consultant to any area of business or business development of any member of the Group or any invested entity;

• (h) any joint venture partner or counter-party to business operation or business arrangements of the Group,

– 11 –

APPENDIX II SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

and for the purposes of the New Share Option Scheme, the options may be granted to any company wholly owned by one or more persons belonging to any of the above classes of the Participants.

The offer of grant of options is open for acceptance by the offerees of such grant of options for 28 days from the date (being a Business Day) of offer of the option (but not later than the date of the tenth anniversary of the date of adoption of the New Share Option Scheme or the date of termination of the New Share Option Scheme) (the “ Date of Grant ”). Upon acceptance of the option, the grantee shall pay HK$1.00 to the Company by way of consideration for the grant.

3. Price of Shares

The subscription price for Shares under the New Share Option Scheme shall be a price notified by the Board to a Participant to whom any offer of the grant of an option is made (subject to any adjustments made pursuant to paragraph 15 of this Appendix) and shall be at least the higher of (a) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet on the Date of Grant which must be a Business Day; and (b) the average closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets for the five Business Days immediately preceding the Date of Grant, provided that the subscription price shall not be lower than the nominal value of a Share. Without prejudice to the generality of the foregoing, the Board may grant Options in respect of which the subscription price is fixed at different prices for different periods during the Option Period (as defined in paragraph 7 of this Appendix) provided that the subscription price for each of the different periods shall not be less than the subscription price determined in the aforesaid manner.

4. Maximum number of Shares

• (a) The maximum number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the New Share Option Scheme and any other schemes for the time being of the Company shall not exceed 30% of the Shares in issue from time to time. No option may be granted under the New Share Option Scheme and any other schemes for the time being of the Company if this will result in the maximum number of Shares referred to this paragraph 4(a) being exceeded. Options lapsed or cancelled in accordance with the terms of the New Share Option Scheme or any other schemes for the time being of the Company shall not be counted for the purpose of calculating the said 30% limit;

• (b) subject to paragraphs 4(a), (c) and (d), the total number of Shares available for issue upon exercise of all outstanding options which may be granted under the New Share Option Scheme and any other schemes for the time being of the Company must not, in aggregate, exceed 143,460,537 Shares, representing 10% of the Shares in issue as at the date the Shareholders conditionally approve and adopt the New Share Option Scheme at the AGM (the “ Scheme Mandate Limit ”) unless an approval by the Shareholders at general meeting has been obtained pursuant to paragraph 4(c) of this Appendix.

– 12 –

APPENDIX II SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

• (c) the Company may seek the approval of the Shareholders in general meeting for “refreshing” the Scheme Mandate Limit such that the total number of Shares in respect of which options may be granted under the New Share Option Scheme and any other schemes for the time being of the Company as “refreshed” shall not exceed 10% of the total number of Shares in issue as at the date of the approval of the Shareholders provided that options previously granted under the New Share Option Scheme or any other schemes for the time being of the Company (including options outstanding, cancelled, lapsed or exercised in accordance with the terms of the New Share Option Scheme or any other schemes for the time being of the Company) will not be counted for the purposes of calculating the limit as “refreshed”. For the purpose of seeking the approval of the Shareholders under this paragraph 4(c), the Company shall issue to the Shareholders a circular containing the information required under rule 17.02(2)(d) of the Listing Rules and the disclaimer required under rule 17.02(4) of the Listing Rules; and

• (d) the Company may seek separate approval of the Shareholders in general meeting to grant options beyond the Scheme Mandate Limit, provided that the options in excess of the Scheme Mandate Limit are granted only to Participants specifically identified by the Company before such approval is sought and the Company shall issue a circular to the Shareholders containing a general description of the specified offerees, the number and terms of the options to be granted, the purpose of granting such options to the offerees with an explanation as to how the terms of the options serve such purpose and the information required under rule 17.02(2)(d) of the Listing Rules and the disclaimer required under rule 17.02(4) of the Listing Rules.

5. Maximum entitlement of each Participant

The total number of Shares issued and to be issued upon exercise of the options granted and to be granted to each grantee under the New Share Option Scheme and any other schemes for the time being of the Company (including both exercised and outstanding options) in any 12-month period up to the Date of Grant to each grantee must not exceed 1% of the aggregate number of Shares for the time being in issue. Where any further grant of options to a grantee would result in the Shares issued and to be issued upon exercise of all options granted and to be granted to such grantee (including exercised, cancelled and outstanding options) in the 12-month period up to and including the date of such further grant representing in aggregate over 1% of the aggregate number of Shares for the time being in issue, such further grant must be separately approved by the Shareholders in general meeting with such grantee and his/her associates abstaining from voting. The Company shall issue a circular to the Shareholders disclosing the identity of the grantees, the number and terms of the options granted and to be granted (including options previously granted), the information required under rule 17.02(2)(d) of the Listing Rules and the disclaimer required under 17.02(4) of the Listing Rules. The number and terms (including the subscription price) of the options to be granted to such grantees must be fixed before the Shareholders’ approval is sought and the date of the meeting of the Board for proposing such further grant shall be taken as the Date of Grant for the purpose of calculating the subscription price.

– 13 –

SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

6. Grant of Options to connected persons

• (a) Any grant of options to a connected person (as defined in the Listing Rules) or its associates (as defined in the Listing Rules) shall be approved by all independent nonexecutive Directors (excluding any independent non-executive Director who is a grantee of the options in question);

• (b) where any grant of options to a connected person (as defined in the Listing Rules) who is also a substantial shareholder (as defined in the Listing Rules) or an independent nonexecutive Director or their respective associates (as defined in the Listing Rules), would result in the Shares issued and to be issued upon exercise of the options granted and to be granted (including all the exercised, cancelled and outstanding options) to such connected person in any 12-month period immediately preceding and including the Date of Grant, and would entitle such connected person to receive more than 0.1% of the Shares in issue for the time being and the aggregate value (based on the closing price of the Shares as stated in the daily quotations sheet issued by the Stock Exchange at each Date of Grant) of which is in excess of HK$5,000,000.00, such grant of options must be approved (voting by way of poll) by Shareholders in general meeting. All connected persons (as defined in the Listing Rules) of the Company shall abstain from voting in such general meeting (except where any such connected person intends to vote against the proposed grant and his/her intention to do so has to be stated in the circular to Shareholders) in connection with obtaining the aforesaid approval;

• (c) for the purposes of approving the proposed grant of options as described under paragraphs 6(a) and (b) of this Appendix, the Company shall issue a circular to Shareholders (i) explaining the proposed grant, disclosing the number and terms (including the subscription price) of the options to be granted to each grantee which must be fixed before the Shareholders’ meeting; (ii) containing a recommendation from the independent nonexecutive Directors on whether or not to vote in favour of the proposed resolution for approving the proposed grant; and (iii) containing the information required under rules 17.02(2)(c) and (d) of the Listing Rules and the disclaimer required under rule 17.02(4) of the Listing Rules; and

• (d) any change in the terms of any options granted to a grantee who is a substantial shareholder (as defined in the Listing Rules) of the Company, an independent non-executive Director or their respective associates shall be approved by the Shareholders in general meeting and such grantee and his/her associates (as defined in the Listing Rules) shall abstain from voting in such general meeting.

7. Time of exercise of option

There is no general requirement that an option must be held for any minimum period before it can be exercised but the Board is empowered to impose at its discretion any such minimum period at the time of grant of any particular option. An option may be exercised in accordance with the terms of the New Share Option Scheme at any time during a period of 10 years commencing on the Date of Grant and expiring on the last day of the said 10-year period (the “ Option Period ”).

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

8. Performance targets

Unless the Board otherwise determines and states in the offer of the grant of those options to a grantee, a grantee is not required to achieve any performance targets before any of his/her options granted under the New Share Option Scheme can be exercised.

9. Rights are personal to grantee

An option may not be transferred or assigned and is personal to the grantee.

10. Rights on ceasing to be a Participant

If the grantee of an option ceases to be a Participant by reason of other than his/her death or (where in the case of an Employee) the termination of his/her employment on the ground of misconduct or certain other grounds, the grantee shall be entitled from the date of such cessation until whichever is the earlier of the date of the expiry of the Option Period or the last day of the period of one month following the date of such cessation (where in the case of an Employee, which date shall be the last actual working day with the Company or its relevant subsidiary or invested entity whether salary is paid in lieu of notice or not) to exercise the option up to his/ her entitlement at the date of cessation (to the extent not already exercised or to the extent specified in a notice in writing to the Company stating the option is thereby exercised and the number of Shares in respect of which it is exercised (the “ Exercise Notice ”)). If the grantee who is not an Employee ceases to be a Participant as and when determined by the Board by resolution of any reason other than his/her death, the Board may by written notice to such grantee within one month from the date of such cessation determine the period within which the option (or such remaining part thereof) shall be exercisable following the date of such cessation.

11. Rights on death

If the grantee of an option ceases to be a Participant by reason of death, his/her legal personal representative(s) shall be entitled within a period of 12 months from the date of death to exercise the option in full (to the extent not already exercised) or in part (to the extent specified in the Exercise Notice).

12. Rights on dismissal

If the grantee (as an Employee) ceases to be a Participant by reason of termination of his/her employment or directorship on one or more of the grounds specified in paragraph 21(e) of this Appendix and the grantee has exercised the option in whole or in part pursuant to the terms and conditions of the New Share Option Scheme, but Shares have not been allotted to him/her, the grantee shall be deemed not to have so exercised such option and the Company shall return to the grantee the amount of such subscription price for the Shares in respect of the purported exercise of such option.

13. Cancellation of options

Any options granted but not exercised may be cancelled if the grantee so agrees and new options may be granted to the same grantee provided such new options fall within the limits prescribed by paragraph 4 of this Appendix and otherwise comply with the terms of the New Share Option Scheme.

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

14. Termination of the New Share Option Scheme

The Company by ordinary resolution in general meeting or by resolution of the Board may at any time terminate the operation of the New Share Option Scheme and in such event no further options shall be offered but 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 thereto 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.

15. Effect of alteration to capital

In the event of any alteration in the capital structure of the Company while any option remains exercisable, whether by way of capitalisation of profits or reserve, rights issue, consolidation, sub-division or reduction of the share capital of the Company, such corresponding alterations (if any) shall be made to (i) the number or nominal amount of Shares subject to the option so far as not being exercised; and/or (ii) the subscription price subject to the option so far as not being exercised; and/or (iii) the maximum number of Shares referred to in paragraph 4 of this Appendix to which the option relates; and/or (iv) the method of exercise of the option, as the Company’s independent financial adviser or auditors shall at the request of the Company certify in writing to the Board either generally or with regard to any particular grantee to be in their opinion fair and reasonable, provided that any such alteration shall be made on the basis that the proportion of the issued share capital of the Company to which a grantee is entitled after such alteration will remain the same as that to which he/she was entitled before such alteration; no such alternation shall be made to the extent that the effect of which would be to enable any Share to be issued at less than its nominal value; and the issue of Shares or other securities of the Group as consideration in a transaction shall not be regarded as a circumstances requiring any such alteration. In respect of any such alterations, other than any made on a capitalisation issue, the Company’s independent financial adviser or auditors must confirm to the Board in writing that the alterations satisfy the requirements of the relevant provisions of the Listing Rules.

16. Rights on general offer

If a general offer (including any takeover) to acquire Shares is made to all the holders of Shares and such offer becomes or is declared unconditional, the grantee shall be entitled to exercise his/her option in full (to the extent not already exercised) at any time within 14 days after the date on which the offer becomes or is declared unconditional or to the extent specified in the Exercise Notice. Subject to the above, an option will lapse automatically (to the extent not already exercised) on the expiry of the above 14-day period.

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

17. Rights on winding up

In the event a notice is given by the Company to its members to convene a general meeting for the purposes of considering, and if thought fit, approving a resolution to voluntarily wind up the Company, the Company shall on the same date or as soon as practicable after it despatches such notice to its members give notice thereof to all the grantees and thereupon, each of the grantee (or his/her legal personal representative(s)) shall be entitled to exercise all or any of his/her options at any time not later than two Business Days prior to the proposed general meeting of the Company by giving the Exercise Notice to the Company, accompanied by a remittance for the full amount of the subscription price for the Shares in respect of which the option is exercised whereupon the Company shall as soon as possible and, in any event, no later than the Business Day immediately prior to the date of the proposed general meeting referred to above, allot the relevant Shares to the grantee credited as fully paid.

18. Rights on compromise or arrangement

If, pursuant to the Companies Act, a compromise or arrangement between the Company and its members or creditors is proposed for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies, the Company shall give notice thereof to all grantees (or to their personal representatives) on the same day or as soon as practicable after it despatches to its members or creditors a notice summoning a meeting to consider such a compromise or arrangement, and thereupon the grantee (or his/her legal personal representative(s)) shall be entitled to exercise his/her options in full (to the extent not already exercised) or in part (to the extent specified in the Exercise Notice) at any time not later than two Business Days prior to the date of the proposed meeting for the purposes of considering such compromise or arrangement and the Company shall, as soon as possible and in any event not later than 12:00 noon on the day immediately prior to the date of the proposed meeting, allot and issue such number of Shares to the relevant grantee which falls to be allotted and issued on such exercise, credited as fully paid and register the grantee as holder thereof. With effect from the date of such meeting, the rights of all grantees to exercise their respective options shall forthwith be suspended. Upon such compromise or arrangement becoming effective, all options shall, to the extent they have not been so exercised, lapse and determine.

19. Ranking of Shares

The Shares to be allotted upon the exercise of an option will be subject to all the provisions of the Bye-laws for the time being in force and will rank pari passu in all respects with the fully paid Shares in issue on the date on which the option is duly exercised or; if that date falls on a day when the register of members of the Company is closed, the first Business Day of the reopening of the register of members (the “ Exercise Date ”) and accordingly will entitle the holders to participate in all dividends or other distributions paid or made on or after the Exercise Date other than any dividend or other distributions previously declared or recommended or resolved to be paid or made if the record date therefore shall be before the Exercise Date. A Share allotted upon the exercise of an option shall not carry any voting rights until the name of the grantee has been duly entered into the register of members of the Company as the holder thereof.

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

20. 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 (which is expected to be on 26 November 2003 being the proposed date of the AGM where the New Share Option Scheme will be approved and adopted by the Company).

21. Lapse of option

An option shall lapse automatically and not to be exercisable (to the extent not already exercised) on the earliest of:

• (a) the expiry of the Option Period (subject to the provision of the New Share Option Scheme);

• (b) the expiry of any of the periods or dates referred to in paragraphs 10, 11, 12, 16 or 17 of this Appendix;

• (c) the date of the commencement of the winding-up of the Company referred to in paragraph 17 of this Appendix;

• (d) the proposed compromise or arrangement referred to in paragraph 18 of this Appendix becoming effective;

• (e) the date on which the grantee (as an Employee) ceases to be a Participant by reason of the termination of his/her employment on any one or more of the grounds that he/she has been guilty of misconduct, or has committed an act of bankruptcy or has become insolvent or has made any arrangement or composition with his/her creditors generally, or has been convicted of any criminal offence involving his/her integrity or honesty or (if so determined by the Board) on any other ground on which an employer would be entitled to terminate his/her employment at common law or pursuant to any applicable laws or under the grantee’s service contract with the Company or any of its subsidiary or any invested entity. A resolution of the Board or the board of directors of the relevant subsidiary of the Company or the invested entity to the effect that the employment of a grantee has or has not been terminated on one or more of the grounds specified in this paragraph 21(e) of this Appendix shall be conclusive and binding on the grantee, and where appropriate, his/her legal personal representative(s); and

• (f) the date on which the grantee’s commits a breach of the provisions referred to in paragraph 9 of this Appendix; and

• (g) subject to the last paragraph in paragraph 10 of this Appendix, the date the grantee ceases to be a Participant for any other reason.

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SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX II

22. Alterations of the New Share Option Scheme

• (a) The New Share Option Scheme may be altered at any time in any respect by resolution of the Board without the approval of the Shareholders except that certain specified provisions of the New Share Option Scheme (relating to the matters referred to in rule 17.03 of the Listing Rules) shall not be altered to the advantage of the grantees or prospective grantees (as the case may be) except with the prior sanction of a resolution of the Shareholders who are not grantees in general meeting with any persons to whom or for whose benefits any Share may be issued under the New Share Option Scheme and their associates abstaining from voting;

• (b) any alterations to the terms and conditions of the New Share Option Scheme which are of a material nature or any changes to the terms of the options granted must be first approved by Shareholders, except where the alterations take effect automatically under the exercising provisions of the New Share Option Scheme;

• (c) the amended terms of the New Share Option Scheme or options must comply with the relevant requirements of Chapter 17 of the Listing Rules; and

• (d) any change to the authority of the Board in relation to any alteration to the terms of the New Share Option Scheme must first be approved by the Shareholders in general meeting.

23. Restrictions on the time of grant of Options

• (a) For so long as the Shares are listed on the main board of the Stock Exchange, the Board may not grant any option 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 or announced pursuant to the requirements of the Listing Rules. In particular, the Board is prohibited from granting any option during the period commencing one month immediately preceding the earlier of (i) the date of the Board meeting (as such date is first notified to the Stock Exchange in accordance with the listing agreement entered into between the Company and the Stock Exchange) for the approval of the Company’s interim or annual results; and (ii) the deadline for the Company to publish its interim or annual results announcement under the aforesaid listing agreement, and ending on the date of the results announcement provided that the period during which no option may be granted will cover any period of delay in the publication of the results announcement.

• (b) The Board 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 Transaction by Directors of Listed Companies prescribed by the Listing Rules or any other code or securities dealing restrictions adopted by the Company.

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