Sunshine 100 China Holdings Ltd — Proxy Solicitation & Information Statement 2002

Aug 23, 2002

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 securities in Solartech International Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the 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 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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SOLARTECH INTERNATIONAL HOLDINGS LIMITED 榮盛科技國際控股有限公司[*]

(Incorporated in Bermuda with limited liability)

PROPOSED CAPITAL REORGANISATION INVOLVING CAPITAL REDUCTION, CONSOLIDATION AND SHARE PREMIUM CANCELLATION

TERMINATION OF EXISTING SHARE OPTION SCHEME AND ADOPTION OF NEW SHARE OPTION SCHEME

GENERAL MANDATE TO ISSUE SHARES AND

GENERAL MANDATE TO REPURCHASE SECURITIES

A notice convening the SGM of the Company to be held at No. 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong on Monday, 16th September, 2002 at 10:00 a.m. is set out on pages 26 to 30 of this circular. Whether or not you intend to attend and vote at the SGM, you are required to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Secretaries Limited, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong, as soon as possible but in any event not less than 48 hours before the time appointed for holding the SGM or any adjourned meeting thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting thereof (as the case may be) should you so wish.

* The Chinese name is for identification purposes only

23rd August, 2002

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Expected timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Appendix I – Further information and summary of the principal terms of
the New Share Option Scheme. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Appendix II – Explanatory statement relating to grant of
Repurchase Mandate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26

– i –

DEFINITIONS

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

“associates”	has the same meaning ascribed in the Listing Rules
“Board”	the board of Directors
“Business Day”	means a day (other than Saturday and days on which a
	tropical cyclone warning No. 8 or above or a “black
	rainstorm warning signal” is hoisted in Hong Kong at any
	time between 9:00 a.m. and 5:00 p.m.) on which banks are
	open in Hong Kong for general banking business
“Capital Reduction”	the proposed reduction of the issued share capital of the
	Company referred to in the section headed “Capital
	Reduction”
“Capital Reorganisation”	the Capital Reduction, the Consolidation and the Share
	Premium Cancellation
“CCASS”	the Central Clearing and Settlement System established and
	operated by HKSCC
“Company”	Solartech International Holdings Limited, a company
	incorporated in Bermuda with limited liability whose Shares
	are listed on the Stock Exchange
“Connected Person”	has the same meaning ascribed in the Listing Rules
“Consolidated Share(s)”	share(s) of HK$0.01 each in the share capital of the
	Company created following the Capital Reduction and
	Consolidation
“Consolidation”	the proposed consolidation of every 100 issued Reduced
	Shares into one Consolidated Share of HK$0.01 in the share
	capital of the Company after the implementation of the
	Capital Reduction
“Directors”	directors of the Company
“Eligible Employee”	means any employee (whether full time or part time
	employee, including any executive directors but not any
	non-executive director and independent non-executive
	director) of the Company, its Subsidiaries or any Invested
	Entity
“Eligible Grantee(s)”	person(s) who is/are eligible for Options granted/to be
	granted under the Existing Share Option Scheme

– 1 –

DEFINITIONS

“Existing Share Option Scheme”	the existing share option scheme of the Company which
	was adopted by the Company on 26 November 1996 and
	expiring on 25 November 2005 and which is to be
	terminated upon the adoption of the New Share Option
	Scheme
“General Mandate”	the general mandate proposed to be granted to the Directors,
	conditional upon the Capital Reorganisation becoming
	effective, to allot, issue and deal with new Shares as
	described on page 13 of this circular
“General Scheme Limit”	the total number of Shares which may be issued upon the
	exercise of all options to be granted under the New Share
	Option Scheme and any other share option scheme of the
	Group and which must not in aggregate exceed 10 per cent.
	of the Shares in issue as at the day of the passing of the
	relevant ordinary resolution
“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 any member of the Group holds any
	equity interest
“Latest Practicable Date”	21st August, 2002, being the latest practicable date prior to
	the printing of this circular for ascertaining certain
	information for inclusion 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 SGM, a summary of the principal terms of
	which is set out in Appendix I
“Option(s)”	Option(s) granted to the Eligible Grantees under the Existing
	Share Option Scheme (if any) or the Participants under the
	New Share Option Scheme, as the context requires

– 2 –

DEFINITIONS

“Participant(s)”

Means any person(s) belonging to any of the following classes of participants:

• (a) any Eligible Employee;

• (b) non-executive director (including independent nonexecutive directors) of the Company, any of its Subsidiaries 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 agent or consultant of any member of the Group that provides research, development or technological support or other services to the Group or any Invested Entity; and

• (f) any shareholder or 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

“Reduced Share(s)” share(s) of HK$0.0001 each in the share capital of the Company following the Capital Reduction but prior to the Consolidation “Registrar” the branch share registrar of the Company in Hong Kong, Secretaries Limited, whose office is situated at 5th Floor, Wing On Centre, 111 Connaught Road, Hong Kong

“Repurchase Mandate” the general mandate proposed to be granted to Directors, conditional upon the Capital Reorganisation becoming effective, to repurchase Consolidated Shares as described on page 13 of this circular

“SGM” the special general meeting of the Company to be held at No. 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong on Monday, 16th September, 2002 at 10:00 a.m. to consider and approve, inter alia, the Capital Reorganisation and the granting of the General Mandate “Share Premium Cancellation” the proposed cancellation of share premium referred to in the section headed “Share Premium Cancellation” “Share(s)” existing share(s) of HK$0.01 each in the share capital of the Company or the Consolidated Shares, as the context may require

– 3 –

DEFINITIONS

“Shareholders” holders of Shares or Consolidated Shares, as the context may require “Stock Exchange” The Stock Exchange of Hong Kong Limited “HK$” Hong Kong dollar(s), the lawful currency of Hong Kong “%” per cent.

– 4 –

EXPECTED TIMETABLE

2002

Latest time for lodging proxy forms for the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m., Saturday, 14th September SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m., Monday, 16th September Effective date of the Capital Reorganisation . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 17th September Free exchange of existing share certificates for new share certificates commences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 17th September Closure of original counter for trading in Shares in board lots of 10,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m., Tuesday, 17th September Temporary counter for trading in Consolidated Shares in board lots of 100 Consolidated Shares in the form of existing share certificate(s) opens . . . . . . . . . 9:30 a.m., Tuesday, 17th September Designated broker to stand in the market to provide matching service commences . . . . . . . . . . . . . . . . . . 9:30 a.m., Tuesday, 17th September Original counter for trading in Consolidated Shares in board lots of 10,000 Consolidated Shares in the form of new share certificate(s) re-opens . . . . . . . . . . . . . . . . 9:30 a.m., Wednesday, 2nd October Parallel trading commences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m., Wednesday, 2nd October Temporary counter for trading in Consolidated Shares in board lots of 100 Consolidated Shares in the form of existing share certificate(s) ends . . . . . . . . . . . .4:00 p.m., Thursday, 24th October Parallel trading ends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m., Thursday, 24th October Last day for the designated broker to stand in the market to provide matching service . . . . . . . . . . . . . . . .4:00 p.m., Thursday, 24th October Free exchange of existing share certificates for new share certificates ends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 29th October

– 5 –

LETTER FROM THE BOARD

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SOLARTECH INTERNATIONAL HOLDINGS LIMITED 榮盛科技國際控股有限公司[*]

(Incorporated in Bermuda with limited liability)

Executive Directors: Registered office: Chau Lai Him (Chairman and Managing Director) Clarendon House Zhou Jin Hua (Deputy Chairman) 2 Church Street Yeung Kam Tung Hamilton HM 11 Lau Man Tak Bermuda Szeto Chak Wah Head office and principal Independent Non-executive Directors: place of business: Lo Kao Cheng No. 7, 2nd Floor Lo Wai Ming Kingsford Industrial Centre Wong Chi Pang 13 Wang Hoi Road Kowloon Bay Kowloon Hong Kong 23rd August, 2002 To the Shareholders and, for information only, the optionholders and bondholders

Dear Sir/Madam,

PROPOSED CAPITAL REORGANISATION INVOLVING CAPITAL REDUCTION, CONSOLIDATION AND SHARE PREMIUM CANCELLATION

TERMINATION OF EXISTING SHARE OPTION SCHEME AND ADOPTION OF NEW SHARE OPTION SCHEME

GENERAL MANDATE TO ISSUE SHARES AND GENERAL MANDATE TO REPURCHASE SECURITIES

INTRODUCTION

The Board announced on 5th August, 2002 that proposals would be put forward to the Shareholders for the Capital Reorganisation. As any mandate to the Directors which has been granted at the annual general meeting of the Company held on 23rd August, 2002 will not extend

* The Chinese name is for identification purposes only

– 6 –

LETTER FROM THE BOARD

to the issue and repurchase of the Consolidated Shares to be created upon the Capital Reorganisation becoming effective, it is further proposed that, conditional upon the Capital Reorganisation becoming effective, the Directors be granted the General Mandate and the Repurchase Mandate.

The Board also proposes to put forward to the Shareholders at the SGM, resolutions to approve the adoption of the New Share Option Scheme and the termination of the Existing Share Option Scheme.

The purpose of this circular is to provide you with further information relating to the Capital Reorganisation, the New Share Option Scheme, the proposed granting of the General Mandate and the Repurchase Mandate and the notice convening the SGM at which resolutions will be proposed to approve, inter alia, the Capital Reorganisation, the granting of the General Mandate and Repurchase Mandate.

CAPITAL REORGANISATION

Capital Reduction

The Directors propose that the Capital Reduction will be effected in the following manner:

• (a) the nominal value of all of the issued Shares of HK$0.01 each will be reduced by HK$0.0099 per Share by cancelling an equal amount of paid-up capital per Share so that the nominal value of each such share will be reduced from HK$0.01 to HK$0.0001. Accordingly, based upon the number of Shares in issue as at the Latest Practicable Date, the issued share capital of the Company of HK$189,584,362 will be reduced by HK$187,688,519 to HK$1,895,843 comprising of 18,958,436,251 Reduced Shares of HK$0.0001 each; and

• (b) the credit arising from such reduction will be credited to the contributed surplus account of the Company which will then be applied against setting off the accumulated losses of the Company.

Consolidation

The Directors also propose that, after the Capital Reduction, every 100 issued Reduced Shares of HK$0.0001 each be consolidated into one Consolidated Share of HK$0.01. As at the Latest Practicable Date, there were 18,958,436,251 Shares in issue. On the basis of the same number of Reduced Shares after the Capital Reduction, there will be 189,584,362 Consolidated Shares in issue following the Consolidation.

Share Premium Cancellation

The Directors further propose that the share premium account of the Company, as at the effective date of the Capital Reorganisation, will be cancelled and the credit arising will be credited to the contributed surplus account of the Company which will then be used to set off the whole of the accumulated losses of the Company. As at 31st March, 2002, the share premium account of the Company amounted to approximately HK$1,001.47 million. The balance after setting off the accumulated losses will remain in the contributed surplus account of the Company where it may be used in accordance with the bye-laws of the Company and the laws of Bermuda.

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LETTER FROM THE BOARD

Effect of the Capital Reduction and the Consolidation

Upon the Capital Reorganisation becoming effective, the authorised share capital of the Company will remain at its original amount of HK$300,000,000, divided into 30,000,000,000 shares of HK$0.01 each, but 189,584,362 Consolidated Shares each will be in issue and 29,810,415,638 Shares will be unissued. Other than the expenses incurred in relation to the Capital Reorganisation, the implementation thereof will not alter the underlying assets, business operations, management or financial position of the Company or the interests of the Shareholders. The Directors believe that the Capital Reorganisation will not have any material adverse effect on the financial position of the Group.

Reasons for the Capital Reorganisation

The audited financial statements of the Company as at 31st March, 2002 showed that the Company had accumulated losses of approximately HK$601.7 million. The Directors believe that the elimination of the accumulated losses would enable the Company to adopt a more flexible dividend policy in the future. The Directors propose that the Capital Reorganisation be adopted by the Company so that the credit amount arising from the Capital Reduction and Share Premium Cancellation may be applied to eliminate the whole of the accumulated losses of the Company. Based on the accumulated losses of the Company as at 31st March, 2002, the number of Shares in issue and the balance of the share premium as at the Latest Practicable Date, the accumulated losses of the Company will be fully eliminated upon the Capital Reorganisation becoming effective.

Conditions of the Capital Reorganisation

The Capital Reorganisation is conditional on:

• (a) the passing by the Shareholders at the SGM of a special resolution approving the Capital Reorganisation;

• (b) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Consolidated Shares; and

• (c) the publication of a notice in an appointed newspaper in Bermuda in accordance with the requirements of the Companies Act 1981 of Bermuda.

Odd lot matching arrangements

Currently, the Shares are traded in board lots of 10,000 Shares. Upon the Capital Reorganisation becoming effective and subject to the Listing Committee granting the listing of and permission to deal in the Consolidated Shares, the board lot of the Shares will remain unchange and will be traded in board lots of 10,000 Consolidated Shares.

In order to alleviate the difficulties in trading arising from the existence of odd lots of Consolidated Shares, First Securities (HK) Limited has agreed to make arrangements, during the period commencing at 9:30 a.m. on Tuesday, 17th September, 2002 and ending at 4:00 p.m. on Thursday, 24th October, 2002 (both days inclusive) to stand in the market to purchase and sell odd lots of Consolidated Shares. First Securities (HK) Limited has opened a securities trading account for this purpose and holders of odd lots of Consolidated Shares who wish to top up to a board lot or sell in odd lots of Consolidated Shares are asked to contact First Securities (HK) Limited through their brokers during the period commencing at 9:30 a.m. on Tuesday, 17th September,

– 8 –

LETTER FROM THE BOARD

2002 and ending at 4:00 p.m. on Thursday, 24th October, 2002 (both days inclusive). Those holders of odd lots of Consolidated Shares with queries should contact Mr. Sam Lum (telephone number: 2528 1723 and fax number: 2529 8134) of First Securities (HK) Limited at 2401, 24th Floor, Tower I, Admiralty Centre, 18 Harcourt Road, Hong Kong.

The purpose of this arrangement is to provide a mechanism whereby holders of odd lots of Consolidated Shares can round up or dispose of their odd lot holdings. However, holders of the odd lots of Consolidated Shares may purchase additional Consolidated Shares in the market if they so wish.

Adjustment to subscription/conversion price of share options and convertible bonds

As at the Latest Practicable Date, there were outstanding Options entitling the holders thereof to subscribe Shares at the following exercise price:

No. of outstanding Options	Exercise price
	HK$
563,000,000	0.015
285,000,000	0.010

Upon the Capital Reorganisation becoming effective, the exercise price payable upon the exercise of the subscription rights attaching to the Options will be as follows:

Adjusted no. of outstanding Options	Adjusted exercise price
	HK$
5,630,000	1.5
2,850,000	1.0

As at the Latest Practicable Date, the Company had convertible bonds with an outstanding principal amount of HK$32,500,000 convertible into 855,263,000 Shares at the initial conversion price of HK$0.038.

Upon the Capital Reorganisation becoming effective, the conversion price of the outstanding convertible bond will be adjusted from HK$0.038 per Share to HK$3.8 per Share.

The Directors confirm that the aforementioned adjustments are made on a fair and reasonable basis in accordance with the relevant provisions of the Existing Share Option Scheme and the subscription agreement in respect of the issue of HK$32,500,000 convertible bonds.

Application for listing

An application will be made to the Listing Committee of the Stock Exchange by the Company for the granting of the listing of, and permission to deal in, the Consolidated Shares. The Consolidated Shares will rank pari passu in all respects with each other and will not result in any change in relative rights of Shareholders.

– 9 –

LETTER FROM THE BOARD

The existing Shares are listed and dealt in on the Stock Exchange. No part of the Company’s securities are listed or dealt in on any other stock exchange, nor application for the listing of or permission to deal in the existing Shares and the Consolidated Shares on any other stock exchange is being or proposed to be sought.

The Consolidated Shares will be listed on the Stock Exchange only and not on any other stock exchange.

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

Share certificates and trading arrangement

From 9:30 a.m. on Tuesday, 17th September, 2002, the original counter for trading in the existing Shares in board lots of 10,000 Shares will be temporarily closed. A temporary counter will be established for trading in the Consolidated Shares in board lots of 100 Consolidated Shares. Certificates for existing Shares may only be traded at this temporary counter.

With effect from 9:30 a.m. on Wednesday, 2nd October, 2002, the original counter for trading in existing Shares will be re-opened for trading in the Consolidated Shares (in the form of new share certificates in purple colour) in board lots of 10,000 Consolidated Shares.

From 9:30 a.m. on Wednesday, 2nd October, 2002 to 4:00 p.m. on Thursday, 24th October, 2002, both days inclusive, there will be parallel trading at the above two counters.

The temporary counter for trading in the Consolidated Shares in board lots of 100 Consolidated Shares will be removed after the close of trading on Thursday, 24th October, 2002. Thereafter, trading will be in Consolidated Shares (in the form of new share certificates in purple colour) only and existing share certificates for Shares will cease to be marketable and will not be acceptable for dealing purpose. However, such share certificates will remain effective as documents of title.

Assuming that the Capital Reorganisation will become effective, new share certificates for the Consolidated Shares will be issued in purple colour in order to distinguish them from existing share certificates (in yellow colour) for the existing Shares.

Shareholders may exchange their existing share certificate(s) for new share certificate(s) free of charge by delivering their existing share certificate(s) to the Registrar for the period from 17th September, 2002 to 29th October, 2002 after the Capital Reorganisation has become effective. Thereafter, existing share certificate(s) will be accepted for exchange only on payment of a fee of HK$2.50 (or such higher amount as may from time to time be allowed by the Stock Exchange) for each new share certificate issued for the Consolidated Shares. A Shareholder will be entitled to aggregate his/her Consolidated Shares registered in his/her name in order to obtain new share certificates in the board lot size of 10,000 Consolidated Shares. The existing share certificates will

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LETTER FROM THE BOARD

continue to be good evidence of legal title to the existing Shares and may be exchanged into new share certificates in accordance with the foregoing.

THE NEW SHARE OPTION SCHEME

On 23 August 2001, the Stock Exchange has 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 the announcement of the Stock Exchange, 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 which allows wider classes of persons and/or entities to be the Participants and contains terms as are in compliance with the requirements of Chapter 17 of the Listing Rules now in force. Under the provisions of the Existing Share Option Scheme, termination shall be subject to the passing of an ordinary resolution in the general meeting of the Company and such termination is not subject to any other conditions.

At the SGM, an ordinary Resolution will be proposed for the Company to approve the adoption of the New Share Option Scheme for the Participants 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 SGM is set out in the Appendix I to this circular. A copy of the New Share Option Scheme is available for inspection at the head office and principal place of business of the Company at No. 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road Kowloon Bay, Kowloon, Hong Kong during normal business hours from the date hereof up to and including Wednesday, 11th September, 2002.

The New Share Option Scheme is conditional upon:

• (i) the passing of an ordinary resolution at the SGM approving the adoption of the New Share Option Scheme and the termination of the Existing Share Option Scheme;

• (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 and up to the General Scheme Limit.

The Existing Share Option Scheme will be terminated on the date when the New Share Option Scheme comes into effect upon the fulfillment of the conditions set out above. Upon termination of the Existing Share Option Scheme, no further Options will be granted thereunder but in all other respects, the provisions of the Existing Share Option Scheme shall remain in force and all Options which have been granted prior to such termination shall continue to be valid and exercisable in accordance therewith. As at the Latest Practicable Date, the Company had outstanding Options to subscribe for a total of 848,000,000 Shares under the Existing Share Option Scheme to the Eligible Grantees.

Based on an aggregate of 18,958,436,251 Shares in issue as at the Latest Practicable Date and assuming the Capital Reorganisation shall become effective, and no further Shares will be issued or repurchased by the Company on or before the date of the SGM, Options to subscribe for up to 18,958,436 Consolidated Shares may be issued to the Participants under the New Share Option Scheme under Rule 17.03(3) of the Listing Rules should the New Share Option Scheme be adopted.

– 11 –

LETTER FROM THE BOARD

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 critical for the calculation of the value of such Options cannot be determined. The variables which are critical for the determination of the value of such Options include inter alia, (i) the subscription price for the Shares upon the exercise of the subscription rights attaching to the Options, (ii) whether or not Options will be granted under the New Share Option Scheme and the timing of the granting of such Options, (iii) the period during which the subscription rights may be exercised, (iv) the discretion of the Board to impose any performance target that has to be achieved before the subscription rights attaching to the Options can be exercised and any other conditions that the Board may impose on the Options, and (v) whether or not such Options if granted will be exercised by the Participants. 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. With a scheme life of ten years, the Board is of the view that it is too premature to state whether or not Options will be granted under the New Share Option Scheme, and if so, the number of Options that may be granted. It is also difficult to ascertain with accuracy the subscription price of the Shares given the volatility which the Share price may be subject to during the 10-year life of the New Share Option Scheme. In the circumstances, the Directors are of the view that the value of the Options depends on a number of variables which are either difficult to evaluate or can only be evaluated 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.

Application for Listing

Application will be made to the Listing Committee of the Stock Exchange for 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 and up to the General Scheme Limit.

Reasons for adopting the New Share Option Scheme

The purpose of the New Share Option Scheme is to provide incentives or rewards to the Participants thereunder for their contribution or would-be 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.

The New Share Option Scheme permits the Company to grant Options to a wider category of Participants, and not just the Eligible Grantees as is the case 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 and thereby enable the Group or the relevant Invested Entity to continue to benefit from the services and contribution of such Participant. 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 rights to subscribe for Shares at a discount to the traded prices of the Shares on the Stock Exchange (which is essentially the basis on which the subscription price is determined in accordance with the provisions of the Listing Rules), the

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LETTER FROM THE BOARD

Directors are of the view that the flexibility given to the Board in granting Options to Participants, other than to the Eligible Grantees and to impose a 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 whole, in comparison with the Existing Share Option Scheme.

GENERAL MANDATE TO REPURCHASE NEW SHARES

At the SGM, an ordinary resolution will be proposed to grant to the Directors authority, conditional upon the Capital Reorganisation becoming effective, to repurchase, as for the fully paid Consolidated Shares, of up to 10% of the aggregate nominal amount of share capital of the Company in issue immediately following the Capital Reorganisation becoming effective.

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

An explanatory statement in relation to the Repurchase Mandate as required by the relevant provisions of the Listing Rules concerning the regulation of repurchases by companies of their own securities on the Stock Exchange is set out in Appendix II to this circular.

GENERAL MANDATE TO ISSUE NEW SHARES

At the SGM, an ordinary resolution will also be proposed that the Directors be given, conditional upon the Capital Reorganisation becoming effective, a general mandate to allot, issue and deal with Consolidated Shares not exceeding 20% of the aggregate nominal amount of the share capital of the Company in issue immediately following the Capital Reorganisation becoming effective in order to increase the flexibility for raising capital to facilitate expansion plan of the Company as the Directors consider appropriate.

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

SGM

A notice convening the SGM to be held at No. 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong on Monday, 16th September, 2002 at 10:00 a.m. is set out on pages 26 to 30 of this circular for the purpose of considering and, if thought fit, passing the resolutions in respect of the Capital Reorganisation, the termination of Existing Share Option Scheme and adoption of the New Share Option Scheme, and the proposed granting of the General Mandate and the Repurchase Mandate.

A form of proxy for use by the Shareholders at the SGM is enclosed. Whether or not you intend to attend and vote at the SGM in person, you are required to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Secretaries Limited, at 5th Floor, Wing On Centre, 111 Connaught

– 13 –

LETTER FROM THE BOARD

Road Central, Hong Kong, as soon as possible but in any event, not less than 48 hours before the time appointed for holding the SGM or any adjourned meeting thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting thereof (as the case may be) should you so wish.

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

RECOMMENDATION

Having regard to the information described above, the Board is of the opinion that the Capital Reorganisation, the proposed granting of the General Mandate and the Repurchase Mandate to the Directors upon the Capital Reorganisation becoming effective, the termination of the Existing Share Option Scheme and the adoption of the New Share Option Scheme, is in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the resolutions to approve the same at the SGM.

Yours faithfully For and on behalf of

Solartech International Holdings Limited Chau Lai Him Chairman and Managing Director

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FURTHER INFORMATION AND SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX I

The principal terms 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 the Participants thereunder for their contribution or would-be 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 agent or consultant of any member of the Group that provides research, development or other technological support or other services to the Group or any Invested Entity; and

• (ff) any shareholder or 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;

and, for the purposes of the New Share Option Scheme, the Options may be granted to any company wholly and beneficially owned by one or more persons belonging to any of the above classes of Participants or any discretionary object of a Participant which is a discretionary trust.

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 any 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.

• (bb) 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 must not in aggregate exceed 18,958,436 Consolidated Shares (assuming that the Capital Reorganisation shall become effective, and no further issue or

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FURTHER INFORMATION AND SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX I

repurchase of Shares from the Latest Practicable Date), being 10 per cent. of the Shares in issue as at the day of the passing of the relevant Ordinary Resolution.

• (cc) Subject to (aa) above and without prejudice to (dd) below, the Company may seek approval of the Shareholders in general meeting 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 must not exceed 10 per cent. of the Shares in issue as at the date of approval of the General Scheme Limit. For the purpose of calculating the General Scheme Limit, Options previously granted (including those outstanding, cancelled, lapsed or exercised in accordance with 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 exercised, cancelled and outstanding Options) to each Participant in any 12month period shall not exceed 1 per cent. of the issued share capital of the Company in issue (the “Individual Limit”). Any further grant of options in excess of the Individual Limit in any 12month period up to and including the date of such further grant, shall 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 or any other share option schemes to a director, chief executive or substantial shareholder of the Company or any of their respective associates must be approved by independent non-executive Directors (excluding any independent non-executive Director who is the grantee of the Options).

• (bb) In the event of any change in the terms of Options granted to a substantial shareholder or an independent non-executive director of the Company or any of their respective associates; or 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

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FURTHER INFORMATION AND SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX I

• (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.

(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 date 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 of grant of the Option subject to the provisions for early termination thereof and to the minimum period for which the Option has to be held before it can be exercised as the Directors may at their discretion determine (“Option Period”). No minimum period for which the Option has to be held before it can be exercised is specified in the New Share Option Scheme.

(g) Performance targets

Unless otherwise determined and stated by the Directors 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.

(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 higher of (i) the closing price of Shares as stated in the Stock Exchange’s daily quotation 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 quotation sheet for the five trading days immediately preceding the date of the offer of grant; and (iii) the nominal value of a Share. 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 aforesaid manner.

(i) Ranking of Shares

• (aa) Shares issued and allotted upon the exercise of an Option will be subject to all the provisions of the bye-laws of the Company and the Companies Act 1981 of Bermuda and will rank pari passu in all respects with the fully paid Shares in issue as from the

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FURTHER INFORMATION AND SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX I

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 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.

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 for serious misconduct or other grounds referred to in subparagraph (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.

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FURTHER INFORMATION AND SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX I

(m) Rights on death

If the grantee of an Option is an Eligible Employee and ceases to be an Eligible Employee by reason of his or her death before exercising the Option in full, his or her personal representative(s) may exercise the Option (to the extent which has become exercisable and not already exercised) in whole or in part within a period of 12 months, following the date of death or such longer period as the Board may determine.

(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 Eligible Employee ceases to be an Eligible Employee.

(o) Rights on breach of contract

If the Directors will 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 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 creditors generally, the Directors shall determine that the outstanding Option granted to the grantee shall lapse. In such event, his or her Option 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.

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FURTHER INFORMATION AND SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX I

(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 passed, exercise his or her Option (to the extent to which it has become exercisable and has not already been 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 allotted and issued upon the exercise of his or her Option by the Company not later than one Business Day prior to the date on which such resolution is passed, to participate in the distribution of the assets of the Company available in liquidation pari passu with the Shares in issue on the day prior to the date of the passing of the resolution to wind-up 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 Court be entitled to exercise his or her Option (to the extent such 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 on the date the proposed compromise or arrangement becomes effective.

(s) Adjustments to the subscription price or number of securities

In the event of capitalization issue, 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 of Shares falling within the subject matter of the Share Option Scheme and the Option so far as unexercised 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 alteration and that the aggregate subscription price payable by a grantee on the full exercise of any Option shall remain as nearly as possible the same (but shall not be greater than) as it was before such event; (ii) no alteration shall be made the effect of which would be to enable a Share to be issued at less than its nominal value; and (iii) no such adjustment will be required in circumstances whether there is an issue of Shares or other securities of the Group as consideration in a transaction. In addition, in respect of any such adjustments, other than any made on a capitalisation issue, such auditors or independent financial adviser must confirm to the Directors in writing that the adjustments satisfy the requirements of the relevant provisions of the Listing Rules.

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FURTHER INFORMATION AND SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

APPENDIX I

(t) Cancellation of Options

Any cancellation of Options granted but not exercised must be approved by the Board and the Shareholders in general meeting, with Participants and their associates abstaining from voting. Where the Company cancels Options and issues new ones to the same Option holder, the issue of such new Options may only be made under a scheme with available unissued Options (excluding the cancelled Options) within the General Scheme Limit approved by Shareholders as mentioned in paragraph (c).

(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.

(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 Option Period referred to paragraph (f);

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

• (cc) the date on which a breach of the provision 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 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.

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APPENDIX I FURTHER INFORMATION AND SUMMARY OF THE PRINCIPAL TERMS OF THE NEW SHARE OPTION SCHEME

• (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 in force from time to time.

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 shall be approved by the Shareholders in general meeting.

– 22 –

EXPLANATORY STATEMENT RELATING TO GRANT OF REPURCHASE MANDATE

APPENDIX II

This Appendix serves as an explanatory statement, as required by the Listing Rules, to provide all the information in relation to the Repurchase Mandate for your consideration.

I. LISTING RULES RELATING TO THE REPURCHASES OF SECURITIES

The Listing Rules permit companies whose primary listing is on the Stock Exchange to repurchase their securities on the Stock Exchange subject to certain restrictions. The Company is empowered by its bye-laws to repurchase its own securities.

II. REASON FOR REPURCHASE

Upon the Capital Reorganisation becoming effective, any mandate which will be granted at the annual general meetings of the Company to be held on 23rd August, 2002 to the Directors will not extend to the issue and repurchase of the Consolidated Shares. The Directors believe that it is in the interest of the Company and the Shareholders to continue to have a general authority from the Shareholders to enable the Directors to repurchase the Consolidated Shares on the market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net value of the Company and its assets and/or its earnings per Consolidated Share and will only be made when the Directors believe that such repurchases will benefit the Company and the Shareholders as a whole.

The exercise of the Repurchase Mandate in full will not have a material adverse impact on the working capital or gearing position of the Company as compared with that disclosed in its most recent published audited accounts as at 31st March, 2002.

III. SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company comprised of 18,958,436,251 Shares (or 189,584,362 Consolidated Shares upon the Capital Reorganisation becoming effective). As at the Latest Practicable Date, there were outstanding share options granted under the share option scheme of the Company entitling holders thereof to subscribe for an aggregate of 848,000,000 Shares (or 8,480,000 Consolidated Shares upon the Capital Reorganisation becoming effective). The Company also had the convertible bonds with an outstanding principal amount of HK$32,500,000 convertible into 855,263,000 Shares (or 8,552,630 Consolidated Shares upon the Capital Reorganisation becoming effective).

On the basis that none of the outstanding share options and convertible bonds is exercised prior to the Capital Reorganisation becoming effective and subject to the passing of the relevant ordinary resolution approving the Repurchase Mandate, the Company would be allowed under the Repurchase Mandate to repurchase a maximum of 1,895,843,625 Shares (or 18,958,436 Consolidated Shares upon the Capital Reorganisation becoming effective).

IV. FUNDING OF REPURCHASE

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

It is envisaged that the funds required for any repurchase of securities would be derived from the capital paid up on the Consolidated Shares being repurchased or from the funds of the Company otherwise available for dividend or distribution or out of the proceeds of a fresh issue of shares made for the purposes of repurchase.

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APPENDIX II EXPLANATORY STATEMENT RELATING TO GRANT OF REPURCHASE MANDATE

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

V. SHARE PRICES

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

	Price per Share	Price per Share
	Highest	Lowest
	HK$	HK$
2001
August	0.015	0.011
September	0.012	0.010
October	0.014	0.010
November	0.013	0.011
December	0.012	0.010
2002
January	0.011	0.010
February	0.010	0.010
March	0.010	0.010
April	0.010	0.010
May	0.013	0.010
June	0.010	0.010
July	0.010	0.010
August (up to the Latest Practicable Date)	0.010	0.010

VI. SHARES REPURCHASES MADE BY THE COMPANY

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

VII. GENERAL

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules and the applicable laws of Bermuda.

If, as a result of a securities repurchase a Shareholder’s proportionate interest in the voting rights of the repurchasing company increases, such increase will be treated as an acquisition of voting rights for the purposes of the Hong Kong Code on Takeovers and Mergers (the “Takeovers Code’’).

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EXPLANATORY STATEMENT RELATING TO GRANT OF REPURCHASE MANDATE

APPENDIX II

As at the Latest Practicable Date, the substantial Shareholders together with their respective associates were beneficially interested in 4,170,200,000 Shares (or 41,702,000 Consolidated Shares upon the Capital Reorganisation becoming effective), representing approximately 22.0% of the issued share capital of the Company. In the event that the Directors exercised in full the power to repurchase Consolidated Shares in accordance with the terms of the Repurchase Mandate and assuming no further Shares are issued by the Company, the interests of the substantial Shareholders together with their respective associates in the Company would be increased to approximately 24.44% of the issued share capital of the Company. Such an increase will not trigger any mandatory general offer obligations under the Takeovers Code.

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their respective associates has any present intention, in the event that the Repurchase Mandate is approved by the Shareholders, to sell any Consolidated Shares or other securities to the Company or its subsidiaries.

No connected person (as defined in the Listing Rules) has notified the Company that he/she has a present intention to sell any Consolidated Shares to the Company nor has any such connected person undertaken not to sell any of the Consolidated Shares held by him/her to the Company, in the event that the Repurchase Mandate is approved by the Shareholders.

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NOTICE OF SGM

==> picture [59 x 62] intentionally omitted <==

SOLARTECH INTERNATIONAL HOLDINGS LIMITED 榮盛科技國際控股有限公司[*]

(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that an SGM of Solartech International Holdings Limited (the “Company”) will be held at No. 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong on Monday, 16th September, 2002 at 10:00 a.m. for the purpose of considering and, if thought fit, passing, with or without modification, the following resolutions as special and ordinary resolutions of the Company:

SPECIAL RESOLUTION

1. “ THAT , with effect from 9:00 a.m. (Hong Kong time) on the Business Day (as defined below) immediately following the day on which this resolution is duly passed and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) granting the listing of, and permission to deal in, the Consolidated Shares (as defined below) upon the Capital Reorganisation (as defined below) becoming effective:–

2. (a) the par value of each of the issued Shares as at the date of this resolution (as defined below) be reduced from HK$0.01 to HK$0.0001 by cancelling paid up capital to the extent of HK$0.0099 on each issued Share (the “ Capital Reduction ”) so that the nominal value of each issued Share (the “Reduced Share”) shall become HK$0.0001;

3. (b) every 100 issued Reduced Shares of HK$0.0001 each in the capital of the Company be consolidated (“ Share Consolidation ”) into one Consolidated Share of HK$0.01 each (“ Consolidated Share ”);

4. (c) all of the shares of HK$0.01 each (the “ Shares ”) in the capital of the Company including the Consolidated Shares upon the Capital Reorganisation (as defined below) becoming effective shall rank pari passu in all respects with each other and have the same rights and privileges and be subject to the same restrictions contained in the bye-laws of the Company;

5. (d) the credit standing to the share premium account of the Company be reduced by an amount of between HK$1,001,470,000 and HK$1,028,232,000 (which actual amount shall be determined by the Directors (as defined below) based on the issued capital and the share premium account of the Company as at the date of this resolution) (the “ Share Premium Cancellation ”);

* The Chinese name is for identification purposes only

– 26 –

NOTICE OF SGM

• (e) the credit which shall arise as a result of the Capital Reduction and Share Premium Cancellation be credited to the contributed surplus account of the Company and the directors of the Company (the “ Directors ”) be and are hereby authorised to apply such credit in such manner as may be permitted by the byelaws of the Company and all applicable law;

• (f) the Directors be and are hereby authorised generally to do all such acts, deeds and things appropriate to effect and implement the Capital Reduction, the Consolidation and the Share Premium Cancellation (the “ Capital Reorganisation ”); and

• (g) for the purpose of this resolution, “ Business Day ” means a day (other than a Saturday) on which banks in Hong Kong are generally open for business.”

ORDINARY RESOLUTION

1. “ THAT :–

2. (a) conditional upon the Capital Reorganisation becoming effective, the exercise by the directors of the Company during the Relevant Period (as defined below) of all the powers of the Company to purchase Consolidated Shares be and is hereby generally and unconditionally approved;

3. (b) the aggregate nominal amount of the Consolidated Shares to be purchased pursuant to the approval in paragraph (a) above shall not exceed 10 per cent. of the aggregate nominal amount of the share capital of the Company in issue immediately after the Capital Reorganisation becoming effective and the said approval shall be limited accordingly; and

4. (c) for the purpose of this Resolution, ’’Relevant Period’’ means the period from immediately after the Capital Reorganisation becoming effective until whichever is the earliest of:

   • (aa) the conclusion of the next annual general meeting of the Company;

   • (bb) the expiration of the period within which the next annual general meeting of the Company is required by the law or the articles of association of the Company to be held; and

   • (cc) the revocation or variation of this Resolution by an ordinary resolution of the shareholders of the Company in general meeting.’’

3. “ THAT :

• (a) the general mandate granted to the directors of the Company (the “ Directors ”) to exercise the powers of the Company to allot shares of the Company pursuant to the ordinary resolution set out in Resolution No. 4 of the notice convening the annual general meeting dated 23rd August, 2002 and approved by the shareholders of the Company at the annual general meeting held on 23rd August, 2002 be revoked (but without prejudice to any exercise of such mandate prior to the date on which this resolution becomes effective);

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• (b) subject to paragraphs (c) and (d) hereunder, the granting of an unconditional general mandate to the board of Directors (“ Board ”), during the Relevant Period (as defined in paragraph (e) below) to issue, allot and deal with additional shares in the capital of the Company, and to make or grant offers, agreements and options which would or might require shares in the capital of the Company, to be issued, allotted or dealt with, be and is hereby generally and unconditionally approved;

• (c) the unconditional general mandate under paragraph (b) above shall not extend beyond the Relevant Period save the Board may during the Relevant Period make or grant offers, agreements and options which might require the exercise of such powers after the end of the Relevant Period;

• (d) the aggregate nominal amount of shares in the capital of the Company allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Board otherwise than pursuant to:

• (i) a Rights Issue (as defined in paragraph (e) below);

• (ii) the exercise of options granted under any option scheme or similar arrangement for the time being adopted for the grant of issue of shares or rights to acquire shares in the capital of the Company to officers and/ or employees of the Company and/or any of its subsidiaries and/or any eligible participants;

• (iii) the exercise of subscription rights attaching to the warrants issued by the Company and from time to time outstanding; or

• (iv) any scrip dividend or similar arrangement providing for the allotment of shares in the share capital of the Company implemented in accordance with the bye-laws of the Company,

shall not exceed 20 per cent. of the aggregate nominal amount of the share capital of the Company in issue immediately upon the Capital Reduction and the Share Consolidation (each as defined in Resolution No. 1 as set out in the notice convening the SGM dated 21st August, 2002 of which this Resolution forms part) becoming effective or if the Capital Reduction and the Share Consolidation are not approved, on the date of the passing of this resolution; and

• (e) for the purpose of this resolution:

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

• (i) the conclusion of the next annual general meeting of the Company; or

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Company’s bye-laws or any applicable laws to be held; or

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• (iii) the date on which the authority set out under this resolution is revoked or varied by an ordinary resolution of the Company’s shareholders in general meeting.

• “ Rights Issue ” means the allotment, issue or grant of shares or other securities in the capital of the Company pursuant to an offer of shares or other securities open for a period fixed by the Directors made to holders of shares in the capital of the Company on the register of members of the Company on a fixed record date in proportion to their then holdings of such shares (subject to such exclusion or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of, any recognised regulatory body or any stock exchange in, or in any territory application to the Company).”

• “ THAT conditional on the Listing Committee of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) granting listing of, and permission to deal in, the 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 share option scheme (a copy of which is produced to the meeting marked “A” and signed by the chairman of this meeting for the purpose of identification) (“ New Share Option Scheme ”), the New Share Option Scheme be and is hereby approved and adopted by the Company and with effect from the date of the New Share Option Scheme becoming unconditional and coming into effect, the existing share option scheme of the Company which was adopted by the Company on 26 November 1996 be terminated therefrom and the directors of the Company (“ Directors ”) be and are hereby authorised to allot and issue Shares pursuant to the exercise of any options which may fall to be granted under the New Share Option Scheme, and that to the extent permissible under the bye-laws of the Company, the Rules Governing the Listing of Securities on the Stock Exchange and the rules of the New Share Option Scheme, the Directors may vote in respect of any resolution(s) under or affecting the New Share Option Scheme (including the granting of options thereunder or approving the allotment and issue of Shares upon exercise of options thereunder) notwithstanding any interest(s) of any Director(s).”

By Order of the Board Solartech International Holdings Limited Chau Lai Him Chairman and Managing Director

Hong Kong, 23rd August, 2002

Head office and principal place of business:

No. 7, 2nd Floor Kingsford Industrial Centre 13 Wang Hoi Road Kowloon Bay Kowloon Hong Kong

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Notes:

1. A form of proxy for use at the meeting is enclosed herewith.

2. The form of proxy shall be in writing under the hands of the appointor or of his/her attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of any officer or attorney authorised to sign the same.

3. Any member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote instead of him/her. A proxy need not be a member of the Company but must be present in person to represent the member.

4. In order to be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, must be lodged at the branch share registrar of the Company in Hong Kong, Secretaries Limited, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or any adjourned meeting thereof (as the case may be).

5. Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting or at any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.

6. Where there are joint registered holders of any Share(s), any one of such joint holders may vote at the meeting, either in person or by proxy, in respect of such Share(s) as if he/she solely entitled thereto, but if more than one of such joint holders are present at the meeting, the most senior shall alone be entitled to vote, whether in person or by proxy. For this purpose, seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding of the Share(s).

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