Tencent Holdings Limited — Proxy Solicitation & Information Statement 2002

Oct 23, 2002

IMPORTANT

If you are in any doubt about this circular, you should consult your stockbroker, or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in Sunlord Chemical Group Limited 東君化工集團有限公 司 (“the Company”), you should at once hand this circular to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

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

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(Incorporated in the Cayman Islands with limited liability)

Executive Directors Wang Dan Hui (Chairman) Wang Hailou Wu Chieho, Joseph

Independent Non-Executive Directors Feng Jianming Ma Wing Yun, Bryan Meng Fanxi

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

Principal Place of Business: Unit 2303, 23rd Floor, Far East Finance Centre 16 Harcourt Road Admiralty Hong Kong

21 October 2002

To the shareholders

Dear Sir or Madam,

PROPOSED GENERAL MANDATES TO PURCHASE ITS OWN SHARES AND TO ISSUE NEW SHARES

INTRODUCTION

The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) as amended (the “Listing Rules”) contain provisions to regulate the repurchase by companies with primary listings on the Stock Exchange of their own securities on the Stock Exchange (the “Share Buyback Rules”).

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The purpose of this circular is to provide you with information relating to the ordinary resolutions to be proposed at the forthcoming annual general meeting to be held on 18 November 2002 to grant the directors a general mandate to exercise the powers of the Company to undertake repurchases of the Company’s fully paid up shares representing up to a maximum of 10% of the existing issued share capital of the Company on the date of the ordinary resolution and to grant a general mandate to the directors to issue new shares and to increase the number of shares which the directors may issue under their general mandate by the number of shares repurchased.

In accordance with the Listing Rules, this circular also serves as the explanatory statement, to provide you with requisite information reasonably necessary to enable you to make an informed decision on whether to vote for or against resolutions nos. 5 to 7 to be proposed at the annual general meeting of the Company.

REASONS FOR SHARE BUYBACK

Although the directors have no present intention of repurchasing any shares, they believe that the flexibility afforded by the buyback mandate would be beneficial to the Company and its shareholders. Trading conditions on the Stock Exchange have sometimes been volatile in recent years. At any time in the future when shares are trading at a discount to their underlying value, the ability of the Company to repurchase shares will be beneficial to those shareholders who retain their investment in the Company since their percentage interest in the assets of the Company would increase in proportion to the number of shares repurchased by the Company and thereby resulting in an increase in net assets and/or earnings per share of the Company. Such repurchases will only be made when the directors believe that such repurchases will benefit the Company and its shareholders.

SHARE CAPITAL

As at 15 October 2002, the latest practicable date prior to the printing of this circular (the “Latest Practicable Date”), the issued share capital of the Company comprised 873,000,000 shares of HK$0.01 each (the “Shares”).

Subject to the passing of the ordinary resolution no. 6, the Company would be allowed under the buyback mandate to repurchase a maximum of 87,300,000 Shares on the basis that no further shares will be issued or repurchased prior to the date of the forthcoming annual general meeting.

FUNDING OF REPURCHASES

In repurchasing Shares, the Company may only apply funds legally available for such purpose in accordance with the memorandum and articles of association and the Companies Law (Law 3 of 1961, as consolidated and revised) of the Cayman Islands (the “Cayman Islands Companies Law”). The Cayman Islands Companies Law provides that the amount of capital repaid in connection with a share repurchase may only be paid out of profits or out of the proceeds of a fresh issue of shares made for the purpose or, if so authorised by its articles of association and subject to the provisions of the Cayman Islands Companies Law, out of capital. The amount of premium payable on a repurchase may only be paid out of profits or out of the share premium account of the Company or, if so authorised by its articles of association and subject to the provisions of the Cayman Islands Companies Law, out of capital.

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 for the year ended 30 June 2002) in the event that the repurchase mandate was to be carried out in full at any time during the proposed repurchase period. However, the directors do not propose to exercise the repurchase mandate to such extent as would, in the

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circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the directors are from time to time appropriate for the Company. The number of Shares to be repurchased on any occasion and the price and other terms upon which the same are purchased will be decided by the directors at the relevant time having regard to the circumstances then pertaining.

MARKET PRICES

The highest and lowest prices at which Shares of the Company have been traded on the Stock Exchange during each of the previous 12 months from October 2001 to September 2002 were as follows:

		Shares
	Highest		Lowest
	HK$		HK$
2001
October	0.3750		0.2750
November	0.6300		0.3700
December	0.5400		0.3600
2002
January	0.4950		0.3700
February	0.4500		0.3950
March	0.4950		0.4200
April	0.5200		0.4150
May	0.5400		0.4750
June	0.5800		0.4900
July	0.5600		0.3650
August	0.4500		0.3800
September	0.4050		0.3600

SHARES PURCHASES MADE BY THE COMPANY

No purchase of Shares has been made by the Company during the last six months (whether on the Stock Exchange or otherwise.)

ORDINARY RESOLUTIONS TO BE PROPOSED AT THE ANNUAL GENERAL MEETING

The ordinary resolution no. 5 to be proposed at the annual general meeting relates to the granting of a general mandate to the directors to issue new shares up to a maximum of 20% of the issued share capital of the Company on the date of the resolution; in addition, subject to a separate approval of shareholders of ordinary resolution no. 7, the number of shares purchased by the Company under the repurchase mandate will also be added to the 20% general mandate as mentioned above.

The ordinary resolution no. 6 to be proposed at the annual general meeting relates to the granting of a general mandate to the directors of the Company to repurchase, on the Stock Exchange, shares up to a maximum of 10% of the issued share capital of the Company (the “Repurchase Proposal”).

The ordinary resolution no. 7 to be proposed at the annual general meeting relates to the extension of the general mandate to be granted to the directors to issue new shares during the relevant period by adding to it the number of shares purchased under the Repurchase Proposal, if any.

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DISCLOSURE OF INTERESTS

The directors have undertaken to the Stock Exchange to exercise the powers of the Company to make purchases under the Repurchase Proposal in accordance with the Listing Rules and the Cayman Islands Companies Law.

None of the directors nor, to the best of their knowledge having made all reasonable enquiries, any of their associates presently intends to sell Shares to the Company under the Repurchase Proposal in the event that the Repurchase Proposal is approved by the shareholders.

The Company has not been notified by any connected persons of the Company that they have a present intention to sell any Shares, or that they have undertaken not to sell any Shares held by them to the Company in the event that the Repurchase Proposal is approved by its shareholders.

HONG KONG CODE OF TAKEOVERS AND MERGERS

If on the exercise of the power to repurchase Shares pursuant to the proposed resolution, a shareholders’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purposes of Rule 32 of the Hong Kong Code on Takeovers and Mergers (the “Takeovers Code”). As a result, a shareholder or group of shareholders acting in concert could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with rules 26 and 32 of the Takeovers Code.

As at the Latest Practicable Date, Noble Resources Investments Limited was beneficially interested in 144,200,000 Shares representing approximately 16.5% of the issued share capital of the Company. In the event that the directors should exercise in full the Repurchase Proposal, the shareholding of Noble Resources Investments Limited will be increased to approximately 18.4% of the issued share capital of the Company.

The directors are not aware of any consequences which may arise under the Takeovers Code as a result of any repurchases made under the proposed resolution.

PROXY ARRANGEMENT

A form of proxy for use at the annual general meeting is enclosed with the annual report for the year ended 30 June 2002. To be valid, the form of proxy must be completed in accordance with the instructions printed thereon and deposited, together with the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power of authority, must be lodged with the Registrar not less than 48 hours before the time fixed for holding the meeting or any adjournment thereof. Completion and delivery of the form of proxy will not prevent you from attending and voting at the annual general meeting.

RECOMMENDATION

The directors consider that the Repurchase Proposal and the granting of the general mandate to issue new shares are in the best interests of the Company and its shareholders and accordingly recommend that all shareholders should vote in favour of resolutions nos. 5 to 7 to be proposed at the annual general meeting as they intend to do so themselves in respect of the shares controlled by them.

Yours faithfully, Wang Dan Hui Chairman and Executive Director

* for identification purpose only

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