Wang On Group Limited — Proxy Solicitation & Information Statement 2005

Jan 10, 2005

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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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WANG ON GROUP LIMITED

( )[*]

(incorporated in Bermuda with limited liability)

(Stock Code: 1222)

RENEWAL OF GENERAL MANDATES TO REPURCHASE SHARES AND TO ALLOT AND ISSUE SHARES

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

A notice convening a special general meeting of the shareholders of the Company to be held at 35th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong on Friday, 28 January 2005 at 9:45 a.m. is set out on pages 18 to 20 of this circular. Whether or not you intend to be present at the meeting, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company’s Hong Kong branch share registrar, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the special general meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the special general meeting or any adjourned meeting should you so wish.

* For identification purpose only

10 January 2005

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Letter from Baron Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Appendix: Explanatory Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Notice of Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18

−i −

DEFINITIONS

In this circular, the following expressions have the meanings respectively set opposite them unless the context otherwise requires:

• “AGM” the annual general meeting of the Company held on 13 August 2004 for the Shareholders to approve, inter alia, the general mandates to allot and issue shares and to repurchase shares

• “associates” has the meaning ascribed thereto under the Listing Rules “Board” board of Directors “Bye-laws” the bye-laws of the Company “Code” the Hong Kong Codes on Takeovers and Mergers and Share Repurchases

• “Companies Act” the Companies Act 1981 of Bermuda (as amended) “Company” Wang On Group Limited, a company incorporated in Bermuda with limited liability and the shares of which are listed on the main board of the Stock Exchange

• “Conversion Rights” the right attached to the Convertible Notes to convert into new Shares at an initial conversion price of HK$1.30 per Share

• “Convertible Notes” the convertible redeemable notes, bearing 1% interest payable semi-annually to the holders of the Convertible Notes in an aggregate principal amount up to HK$37,180,000 due on the expiry of a period of two and a half years from the date of issue of the Convertible Notes. Please refer the Company’s announcement dated 22 November 2004 for details regarding the Convertible Notes

• “Directors” the directors of the Company “Group” the Company and its subsidiaries “Independent Board Committee” a committee of the Board comprising Dr. Lee Peng Fei, Allen, Mr. Wong Chun, Justein, Dr. Siu Yim Kwan, Sidney and Mr. Siu Kam Chau, being independent non-executive Directors

−1 −

DEFINITIONS

• “Independent Financial Adviser” Baron Capital Limited, a corporation licensed to carry or “Baron Capital” out Type 1 and Type 6 regulated activities under the Securities and Future Ordinance (Chapter 571 of the Laws of Hong Kong)

• “Independent Shareholders” Shareholders other than Mr. Tang Ching Ho and his associate (as defined in the Listing Rules)

• “Latest Practicable Date” 6 January 2005, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion in this circular

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

• “New Issue Mandate” the general and unconditional mandate to be granted to the Board at the SGM to exercise the powers of the Company to allot and issue Shares not exceeding 20% of the aggregate nominal amount of the issued share capital of the Company (such mandate be extended to Shares repurchased by the Company pursuant to the Repurchase Mandate), being the mandate referred to in resolutions numbered (2) and (3) in the SGM Notice

• “Repurchase Mandate” a general and unconditional mandate to be granted to the Board at the SGM to exercise all the powers of the Company to repurchase Shares, being the mandate referred to in resolution numbered (1) in the SGM Notice

• “SGM” the special general meeting of the Company to be held at 35th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong on Friday, 28 January 2005 at 9:45 a.m. to consider and, if appropriate, to approve the ordinary resolutions contained in the notice of the meeting which are set on pages 18 to 20 of this circular

• “SGM Notice” the notice convening the SGM set out on pages 18 to 20 of this circular

• “Share(s)” ordinary share(s) of HK$0.10 each in the capital of the Company

−2 −

DEFINITIONS

“Share Option Schemes”	the share option scheme adopted by the Company on 6
	February 1995 which was subsequently terminated on 3
	May 2002 and the share option scheme adopted by the
	Company on 3 May 2002
“Share Options”	the options to subscribe for Shares granted under the
	Share Option Schemes
“Shareholders”	holders of the Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.

−3 −

LETTER FROM THE BOARD

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WANG ON GROUP LIMITED

( )[*]

(incorporated in Bermuda with limited liability)

(Stock Code: 1222)

Executive Directors: Mr. Tang Ching Ho (Chairman and Managing Director) Ms. Yau Yuk Yin (Deputy Chairman and Deputy Managing Director) Mr. Chan Chun Hong, Thomas

Independent non-executive Directors: Dr. Lee Peng Fei, Allen, CBE, JP Mr. Wong Chun, Justein, MBE, JP Dr. Siu Yim Kwan, Sidney, S.B. St.J. Mr. Siu Kam Chau

Registered office: Clarendon House 2 Church Street 41 Cedar Avenue Hamilton HM11 Bermuda

Head office and principal place of business: 5th Floor Wai Yuen Tong Medicine Building 9 Wang Kwong Road Kowloon Bay Kowloon Hong Kong

10 January 2005

To the Shareholders and, for information only, holders of the Share Options

Dear Sir or Madam,

RENEWAL OF GENERAL MANDATES TO REPURCHASE SHARES AND TO ALLOT AND ISSUE SHARES

INTRODUCTION

The purpose of this circular is to provide you with information regarding to (i) the proposed grant of the New Issue Mandate and the Repurchase Mandate; (ii) the recommendation from the Independent Board Committee to the Independent Shareholders on the proposed grant of the New Issue Mandate; (iii) the recommendation from the Independent Financial Adviser to the Independent Board Committee on the grant of the New Issue Mandate; and (iv) give notice of the SGM at which resolutions will be proposed to the Independent Shareholders to consider and if thought fit, approve the grant of the New Issue Mandate and the Repurchase Mandate.

• For identification purpose only

−4 −

LETTER FROM THE BOARD

PROPOSED RENEWAL OF GENERAL MANDATES

As the general mandate granted to the Board to issue new Shares at the AGM of the Company held on 13 August 2004 has been exercised and used up by the new Shares falling to be issued upon full conversion of the Convertible Notes as detailed in the announcement of the Company dated 22 November 2004, the Board would like to propose resolutions at the SGM to grant the New Issue Mandate and the Repurchase Mandate to the Board to (i) exercise the powers of the Company to allot and issue Shares not exceeding 20% of the aggregate nominal amount of the issued share capital of the Company as at the date of the SGM (such mandate be extended to Shares repurchased by the Company pursuant to the general mandate to repurchase Shares referred to in (ii) below); and (ii) purchase Shares on the Stock Exchange not exceeding 10% of the aggregate nominal amount of the issued share capital of the Company as at the date of the SGM.

The Group is principally engaged in the management and sub-licensing of wet markets, shopping centres and car parks as well as in property development and investment in Hong Kong. The Group also has an interest in pharmaceutical business through its investment in Wai Yuen Tong Medicine Holdings Limited, a company the shares of which are listed on the Stock Exchange. The Directors believe that the grant of the New Issue Mandate is in the best interests of the Company and the Shareholders as a whole by maintaining the financial flexibility necessary for the Group’s future business development. The Board considers equity financing to be an important avenue of resources to the Group since it does not create any interest paying obligations on the Group. In appropriate circumstances, the Group will also consider other financing methods such as debt financing or internal cash resources to fund its future business development. As mentioned above, the general mandate granted to the Board to issue new Shares at the AGM has been utilised, therefore, the Board is now proposing to seek the approval of the Independent Shareholders at the SGM of the New Issue Mandate such that should future funding needs arise or attractive terms for investment in the Shares become available from potential investors, the Board will be able to respond to the market promptly.

SPECIAL GENERAL MEETING

Set out on pages 18 to 20 of this circular is the SGM Notice to be held on Friday, 28 January 2005 for the purpose of considering and, if thought fit, passing the resolutions proposed herein.

Under the Listing Rules, any vote of Shareholders taken at the SGM to approve the New Issue Mandate must be taken on a poll. The results of the poll will be announced by the Company by way of an announcement which is published in the newspapers on the business day following the SGM.

A form of proxy is herewith enclosed for use at the SGM. Whether or not you intend to be present at the SGM, you are requested to complete the form of proxy and return it to the Company’s branch share registrar in Hong Kong, Tengis Limited, at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong in accordance with the instructions printed thereon not later than 48 hours before the time for the SGM. Completion and delivery of the form of proxy will not prevent Shareholders from attending and voting at the SGM if they so wish.

−5 −

LETTER FROM THE BOARD

PROCEDURES BY WHICH A POLL MAY BE DEMANDED

Pursuant to bye-law 66(C) of the Bye-laws, a resolution put to the vote of a meeting shall be decided on a show of hands unless (before or after the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded:

• (a) by the chairman of such meeting; or

• (b) by at least three Shareholders present in person or by proxy (or in the case of a Shareholder being a corporation, by its representative duly authorised) for the time being entitled to vote at the meeting; or

• (c) by a Shareholder or Shareholders present in person or by proxy (or in the case of a Shareholder being a corporation, by its representative duly authorised) and representing not less than one-tenth of the total voting rights of all Shareholders having the right to attend and vote at the meeting; or

• (d) by a Shareholder or Shareholders present in person or by proxy (or in the case of a Shareholder being a corporation, by its representative duly authorised) having the right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all shares having that right.

GENERAL INFORMATION

Under the Listing Rules, any refreshment of the New Issue Mandate before the next annual general meeting of the Company requires any controlling shareholders and their associates or, where there are no controlling shareholders, directors (excluding independent non-executive directors) and the chief executive of the issuer and their respective associates to abstain from voting in favour of the relevant resolution.

Under the Listing Rules, the Company shall

• (i) establish an independent board committee to advise the Independent Shareholders on the matters in relation to the New Issue Mandate; and

• (ii) appoint an independent financial adviser to advise the independent board committee and the Independent Shareholders in this regard.

An independent board committee, comprising Dr. Lee Peng Fei, Allen, Mr. Wong Chun, Justein, Dr. Siu Yim Kwan, Sidney and Mr. Siu Kam Chau, all being independent non-executive directors of the Company, has been formed to consider the New General Mandates. Baron Capital, being an independent financial adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

−6 −

LETTER FROM THE BOARD

RECOMMENDATION

The Board believes that the resolutions proposed in this circular are in the best interests of the Company and the Shareholders as a whole. The Board recommends that the Shareholders vote in favour of all resolutions to be proposed at the SGM.

The Independent Board Committee, having considered the advice from Baron Capital, considers that the terms of the New Issue Mandate are fair and reasonable and that the grant of the New Issue Mandate is in the best interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee has recommended the Independent Shareholders to vote in favour of the resolution in respect of the grant of the New Issue Mandate to be proposed at the SGM. The text of the letter from the Independent Board Committee is set out on pages 8 to 9 of this circular.

Your attention is also drawn to the text of the letter from Baron Capital containing its advice and recommendation and principal factors and reasons taken into account in arriving at its recommendation, the explanatory statement set forth in the appendix, and the SGM Notice set out in this circular.

Yours faithfully, For and on behalf of

Wang On Group Limited Tang Ching Ho

Chairman and Managing Director

−7 −

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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WANG ON GROUP LIMITED

( )[*]

(incorporated in Bermuda with limited liability)

(Stock Code: 1222)

10 January 2005

To the Independent Shareholders

Dear Sirs,

RENEWAL OF GENERAL MANDATES TO REPURCHASE SHARES AND TO ALLOT AND ISSUE SHARES

We refer to the circular of the Company dated 10 January 2005 (the “Circular”) to the Shareholders, of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

We have been appointed by the Board as members to constitute an independent board committee and to advise Independent Shareholders in respect of the grant of the New Issue Mandate to the Board to exercise the power of the Company to allot and issue Shares not exceeding 20% of the aggregate nominal amount of the issued share capital of the Company as at the date of the SGM (such mandate be extended to Shares repurchased by the Company pursuant to the Repurchase Mandate).

Baron Capital has been appointed to advise us and the Independent Shareholders as to whether the terms of the New Issue Mandate are fair and reasonable as far as the Shareholders are concerned and whether it is in the interests of the Company and the Independent Shareholders as a whole. Details of its advice, together with the principal factors and reasons taken into consideration in arriving at such advice, are set out on pages 10 to 14 of the Circular.

Your attention is also drawn to the letter from the Board set out on pages 4 to 7 of this Circular.

* For identification purpose only

−8 −

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the principal factors and reasons considered by, and the advice of Baron Capital, we are of the opinion that the terms of the New Issue Mandate are fair and reasonable so far as the Shareholders are concerned and that the grant of the New Issue Mandate is in the interests of the Company and its Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the SGM to approve the grant of the New Issue Mandate.

Yours faithfully, Independent Board Committee of

Wang On Group Limited

Lee Peng Fei, Allen Wong Chun, Justein Independent Non-executive Director Independent Non-executive Director

Siu Yim Kwan, Sidney Siu Kam Chau Independent Non-executive Director Independent Non-executive Director

−9 −

LETTER FROM BARON CAPITAL

The following is the text of a letter of advice to the Independent Board Committee from Baron Capital dated 10 January 2005 prepared for the purpose of incorporation in this circular:

4/F, Aon China Building 29 Queen’s Road Central Central, Hong Kong

10 January 2005

To the Independent Board Committee and the Independent Shareholders of Wang On Group Limited

Dear Sirs,

RENEWAL OF GENERAL MANDATE TO ALLOT AND ISSUE SHARES

INTRODUCTION

We refer to our appointment as independent financial adviser to the Independent Board Committee in respect of the grant of the New Issue Mandate, details of which are set out in the “Letter from the Board” contained in the circular dated 10 January 2005 (the “Circular”) issued by the Company to its Shareholders of which this letter forms part. Capitalized terms used in this letter shall have the same meanings ascribed to them in the Circular unless the context otherwise requires.

In accordance with Rule 13.36(4)(a) of the Listing Rules, the grant of the New Issue Mandate requires the approval of the Independent Shareholders at which the executive Directors, namely Mr. Tang Ching Ho, Ms. Yau Yuk Yin, and Mr. Chan Chun Hong, Thomas, and their respective associates shall abstain from voting at the SGM. As at the Latest Practicable Date, Mr. Tang Ching Ho and Ms. Yau Yuk Yin and their respective associates together were taken to be interested in approximately 19.34% of the total issued share capital of the Company. Voting of the Independent Shareholders at the SGM shall be taken by poll according to Rule 13.39(4)(b) of the Listing Rules.

The Independent Board Committee, comprising Dr. Lee Peng Fei, Allen, Mr. Wong Chun, Justein, Dr. Siu Yim Kwan, Sidney, and Mr, Siu Kam Chau, all being the independent non-executive Directors, has been formed to advise the Independent Shareholders as to whether the terms of the New Issue Mandate are fair and reasonable so far as the Independent Shareholders are concerned. Baron Capital has been appointed to advise the Independent Board Committee in this respect.

−10 −

LETTER FROM BARON CAPITAL

BASIS OF OUR OPINION

In arriving at our opinion and recommendation, we have relied on the information supplied and the opinion expressed by the Directors and the management of the Company. We have assumed that the information contained and representations made to us or referred to in the Circular are true, accurate and complete at the time they were made and continue to be so at the date of the Circular.

We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading.

Having made all reasonable enquiries, the Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and further confirmed that, to the best of their knowledge, they believe there are no other facts or representations the omission of which would make any statement in the Circular, including this letter, misleading.

We have not, however, carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Company, nor have we considered the taxation implication on the Group or the shareholders of the Company as a result of the New Issue Mandate.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion on the grant of the New Issue Mandate, we have considered the following principal factors and reasons:

Background

The Group is principally engaged in the management and sub-licensing of Chinese wet markets, shopping centers and car parks as well as property development and property investment in Hong Kong. It also has interests in the pharmaceutical business through its investments in Wai Yuen Tong Medicine Holdings Limited (Stock Code: 897), a company whose shares are listed on the Stock Exchange.

The grant to the Directors of the current general mandate was approved at the AGM on 13 August 2004 pursuant to Rule 13.36(2)(b) of the Listing Rules (“Current General Mandate”) and as at the Latest Practicable Date, the Company had an aggregate of 143,320,360 Shares in issue and 20% of which, being 28,664,072 Shares were granted to the Directors to allot and issue under the Current General Mandate.

−11 −

LETTER FROM BARON CAPITAL

During the period from the grant of the Current General Mandate to the Latest Practicable Date, the Current General Mandate had been utilized as to 28,600,000 Shares falling to be issued upon full conversion of the Convertible Notes as disclosed in the Company’s announcement dated 22 November 2004, being approximately 99.78% of the aggregate number of Shares which may be allotted and issued under the Current General Mandate.

The Board proposed to pass an ordinary resolution at the SGM to approve the New Issue Mandate in accordance with Rule 13.36(4)(a) of the Listing Rules to allow flexibility to issue any additional new Shares so that the Directors would be granted to allot and issue not exceeding 20% of the issued share capital of the Company as at the date of the SGM and extended by the total nominal amount of any Shares in the capital of the Company repurchased by the Company subsequent to the passing of Repurchase Mandate (up to 10% of the issued share capital of the Company as at the date of the SGM). The New Issue Mandate will be in force when it is approved by the Independent Shareholders at the SGM.

History of fund raising exercise and use of proceeds

Over the past twelve months, the Company carried out two fund raising exercises. On 27 January 2004, the Company entered into a placing and subscription agreement of which 23,600,000 new Shares were issued and allotted pursuant to the general mandate granted at the AGM dated 10 July 2003. The net proceeds of approximately HK$25 million were intended for purchasing properties for investment purposes.

On 19 November 2004, the Company entered into a placing agreement to place the Convertible Notes, convertible into 28,600,000 Shares upon full conversion and to be issued pursuant to the Current General Mandate granted at the AGM dated 13 August 2004. The net proceeds of approximately HK$35 million were intended for general working capital purpose.

Financial flexibility

The Directors believe that the granting of the New Issue Mandate will provide the Company with additional flexibility in deciding the source of finance for any acquisition or investment opportunities that may arise in the future and for the purpose of raising general working capital of the Group. We noted that the Company does not have any plan to issue securities as at the Latest Practicable Date.

We consider that the granting of the New Issue Mandate could enhance the financing flexibility of the Company to raise capital and to strengthen the capital base of the Group, if and when required, through placing of Shares for further development of the Group. In addition, the Directors consider that if investment or acquisition opportunities arise, decisions may have to be made within a short period of time. The New Issue Mandate would provide the maximum flexibility as allowed under the Listing Rules to allot and issue new Shares to raise capital through placing of Shares as consideration for funding such potential investments and/or acquisitions in the future as and when such opportunities arise. The increased amount of capital which may be raised under the New Issue Mandate provides more options of financing to the Group when assessing and negotiating potential acquisitions and/or investments in a timely manner. On that basis, we consider the granting of the New Issue Mandate to be in the interest of the Company and the Shareholders as a whole.

−12 −

LETTER FROM BARON CAPITAL

Other financing alternatives

Other than raising funds by way of issuing equity capital, the Directors will consider other financing methods such as bank financing, debt financing, and funding through internal resources in order to meet financing requirements arising from future development of the Group, depending on the then financial position, capital structure and cost of funding of the Group as well as the then market condition. As advised by the Directors, the New Issue Mandate provides another alternative to the Directors to finance the Group’s business, and the Directors will choose the financing method which best serves the interest of the Group. We consider that it is a sensible consideration to make reference to the then financial position of the Group in order to decide on a financing method for the future development of the Group.

Potential dilution to shareholding of the Independent Shareholders

Caister Limited (Note 1) Tang Ching Ho (Note 2) Yau Yuk Yin (Note 3) Tang Mui Fong (Note 4) Tang Mui Fun (Note 5) Yau Yuk Tong (Note 6) Placees of Convertible Notes Shares issued under New Issue Mandate Other (Public) Total	Issued Shares as at the Latest Practicable Date (assuming no conversion of the Convertible Notes) (No. of Shares) % 2,247,227 1.57 614,355 0.43 614,354 0.43 5,551,269 3.87 15,298,239 10.67 3,393,955 2.37 – – – – 115,600,967 80.66 143,320,366 100.00	Issued Shares (assuming full conversion of Convertible Notes prior to the SGM) (No. of Shares) % 2,247,227 1.31 614,355 0.36 614,354 0.36 5,551,269 3.23 15,298,239 8.90 3,393,955 1.97 28,600,000 16.64 – – 115,600,967 67.23 171,920,366 100.00	Issued Shares with full utilization of New Issue Mandate (assuming full conversion of Convertible Notes prior to SGM) (No. of Shares) % 2,247,227 1.09 614,355 0.30 614,354 0.30 5,551,269 2.69 15,298,239 7.42 3,393,955 1.64 28,600,000 13.86 34,384,073 16.67 115,600,967 56.03 206,304,439 100.00	Issued Shares with full utilization of New Issue Mandate (assuming full conversion of Convertible Notes prior to SGM) (No. of Shares) % 2,247,227 1.09 614,355 0.30 614,354 0.30 5,551,269 2.69 15,298,239 7.42 3,393,955 1.64 28,600,000 13.86 34,384,073 16.67 115,600,967 56.03 206,304,439 100.00
				100.00

Notes:

1. Caister Limited is wholly and beneficially owned by Tang Ching Ho.

2. Tang Ching Ho is the chairman and managing director of the Company.

3. Yau Yuk Yin is the wife of Tang Ching Ho and the deputy managing director and deputy chairman of the Company.

4. Tang Mui Fong is a sister of Tang Ching Ho.

5. Tang Mui Fun is a sister of Tang Ching Ho.

6. Yau Yuk Tong is a brother of Yau Yuk Yin.

−13 −

LETTER FROM BARON CAPITAL

Shareholders should note that the current general mandate will be superceded upon approval at the SGM in connection with the grant of the New Issue Mandate which will be and continue to be in force until the earliest of (i) the conclusion of the Company’s next AGM; and (ii) the revocation or variation or renewal of the authority given under the relevant resolution to be proposed by ordinary resolution of the Shareholders in general meeting. Such duration is in compliance with Rule 13.36(3) of the Listing Rules.

For illustrative purpose, assuming that (i) the Convertible Notes are fully converted into Shares prior to the SGM; (ii) the grant of the New Issue Mandate is approved by the Independent Shareholders at the SGM; and (iii) the New Issue Mandate is fully utilized, 34,384,073 Shares will be issued, representing 20% of the issued share capital of the Company as at the date of the SGM and approximately 16.67% of the issued share capital of the Company as enlarged by the Shares issued under the New Issue Mandate respectively.

In such scenario, the aggregate shareholding of the Independent Shareholders (including those of the holders of the Convertible Notes) will decrease from approximately 83.87% to approximately 69.89% upon full utilization of the New Issue Mandate (assuming no repurchase of Share by the Company), a potential maximum dilution of approximately 13.98%. We take into account (i) the New Issue Mandate will provide an alternative to increase the amount of capital which may be raised under the New Issue Mandate; (ii) the New Issue Mandate provides more flexibility and options of financing to the Group and the Directors for further development of the business and operation as well as in other potential future investment and/or acquisition opportunities as and when such opportunities arise; and (iii) the shareholding of all Shareholders will be diluted proportionally to their respective shareholdings upon any utilization of the New Issue Mandate. As such, we consider the potential maximum dilution to shareholdings of the Independent Shareholders to be justifiable.

RECOMMENDATION

Having considered the above principal factors and reasons, we are of the opinion that the grant of the New Issue Mandate is in the interest of the Company and the terms of which are fair and reasonable so far as Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favor of the ordinary resolution to be proposed at the SGM to approve the grant of the New Issue Mandate.

Yours faithfully, For and on behalf of

Baron Capital Limited Chiu Sui Keung, Thomas Managing Director

−14 −

EXPLANATORY STATEMENT

APPENDIX

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

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 no other facts the omission of which would make any statement herein misleading.

1. SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company was HK$14,332,036.60 comprising 143,320,366 Shares. In addition, as at the Latest Practicable Date there were outstanding Share Options carrying the rights to subscribe up to an aggregate of 25,418,000 Shares and outstanding Convertible Notes attaching the rights to convert up to an aggregate of 28,600,000 Shares based on the initial conversion price of HK$1.30 per Share. If such Share Options and Conversion Rights are exercised in full on or prior to the date of the passing of the resolution in respect of the Repurchase Mandate, a further 54,018,000 Shares will be in issue.

Subject to the passing of the relevant ordinary resolution as set out in the SGM Notice and assuming that no further Shares are issued or purchased by the Company, the Directors will be authorised to purchase up to 14,332,036 Shares pursuant to the Repurchase Mandate. Assuming that all outstanding Share Options and Conversion Rights are exercised in full and an aggregate of 54,018,000 Shares are issued on or before the date of the passing of the resolution in respect of the Repurchase Mandate and assuming no further Shares are issued or purchased by the Company, the total number of Shares in issue will be 197,338,366 and the Directors will be authorised to purchase up to 19,733,836 Shares.

2. REASONS FOR REPURCHASES

The Directors believe that it is in the best interests of the Company and the Shareholders to have a general authority from the Shareholders to enable the Directors to purchase Shares in the market. Such purchases 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 or its earnings per Share or both and will only be made when the Directors believe that such purchases will benefit the Company and the Shareholders as a whole.

3. FUNDING OF REPURCHASES

In repurchasing Shares, the Company must fund the repurchase entirely from the Company’s available cash flow or working capital facilities legally available for such purpose in accordance with its memorandum of association and bye-laws and the laws of Bermuda.

−15 −

EXPLANATORY STATEMENT

APPENDIX

There might be an adverse impact on the working capital or gearing position of the Company as compared with the positions disclosed in the Company’s interim report for the six month ended 30 September 2004 in the event that the Repurchase Mandate was to be carried out in full at any time during the proposed repurchase period.

The Directors do not propose to exercise the Repurchase Mandate to such extent as could, in the circumstances, have a material adverse effect on the working capital or the gearing level of the Company which in the opinion of the Directors is from time to time appropriate for the Company.

4. DIRECTORS, THEIR ASSOCIATES AND CONNECTED PERSONS

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their associates, have any present intention, in the event that the Repurchase Mandate is approved by the Shareholders at the SGM, to sell Shares to the Company under the Repurchase Mandate.

No connected person, as defined in the Listing Rules, has notified the Company that he has a present intention to sell any Shares to the Company, or that he has undertaken not to sell any Shares held by him to the Company, in the event that the Repurchase Mandate is granted by the Shareholders at the SGM.

The Company has not repurchased any of its Shares (whether on the Stock Exchange or otherwise) in the six months preceding the date of this circular.

5. DIRECTORS’ UNDERTAKING

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

6. EFFECT OF THE CODE

If, on the exercise of the power to repurchase Shares pursuant to the Repurchase Mandate, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purpose of Rule 32 of the Code. As a result, a Shareholder or a group of Shareholders acting in concert (as defined in the Code), depending on the level of such increase, could obtain or consolidate control of the Company and may become obliged to make a mandatory offer in accordance with Rule 26 of the Code.

As at the Latest Practicable Date, Mr. Tang Ching Ho, the Chairman and Managing Director of the Company, and parties acting in concert with him were interested or deemed to be interested in approximately 19.34% of the existing issued share capital of the Company. In the event that the Directors should exercise the power to repurchase Shares under the Repurchase Mandate in full, the shareholding of Mr. Tang Ching Ho and parties acting in concert with him will be increased to approximately 21.49% of the issued share capital of the Company.

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EXPLANATORY STATEMENT

APPENDIX

The Directors are not aware of any consequence which may arise under the Code as a result of any purchases made under the Repurchase Mandate.

The Directors have no present intention to exercise the power to repurchase Shares to the extent that the aggregate amount of the share capital of the Company in public hands would be reduced to less than 25%.

7. SHARE PRICES

The highest and lowest prices at which the Shares have traded on the Stock Exchange in each of the last twelve months are as follows:

	Shares
	Highest	Lowest
	HK$	HK$
2004
January	1.75	1.00
February	2.50	1.43
March	1.79	1.19
April	1.34	0.98
May	1.00	0.64
June	0.97	0.75
July	1.42	0.84
August	1.24	0.97
September	1.14	1.02
October	1.32	1.08
November	1.50	1.16
December	2.175	1.36

8. EXPERTS’ QUALIFICATION AND CONSENTS

Baron Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and the reference to its name in the form and context in which it appears.

Baron Capital is a corporation licensed to carry out Type 1 and Type 6 regulated activities under the Securities and Future Ordinance (Chapter 571 of the Laws of Hong Kong).

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NOTICE OF SPECIAL GENERAL MEETING

==> picture [82 x 61] intentionally omitted <==

WANG ON GROUP LIMITED

( )[*]

(incorporated in Bermuda with limited liability)

(Stock Code: 1222)

NOTICE IS HEREBY GIVEN that the Special General Meeting of the Company will be held at 35th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong on Friday, 28 January 2005 at 9:45 a.m. (“Meeting”) for the purposes of considering and, if thought fit, pass with or without amendments the following resolutions as Ordinary Resolutions:

(1) “ THAT :

• (a) the general mandate granted to the directors of the Company (the “Directors”) to exercise the powers of the Company to purchase shares in the capital of the Company (“Shares”) as approved by the shareholders of the Company at the annual general meeting held on 13 August 2004, to the extent not already exercised be and is hereby revoked (but without prejudice to any valid exercise of such general mandate prior to the passing of this Resolution);

• (b) subject to paragraph (c) below, the exercise by the Directors during the Relevant Period (as hereinafter defined) of all the powers of the Company to repurchase Shares be and is hereby generally and unconditionally approved;

• (c) the aggregate nominal amount of the Shares which may be repurchased by the Company pursuant to the approval in paragraph (b) above shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this Resolution, and the said approval shall be limited accordingly; and

• (d) 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;

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

• (iii) the revocation or variation of the authority given under this Resolution by an ordinary resolution of the shareholders of the Company in general meeting.”

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NOTICE OF SPECIAL GENERAL MEETING

(2) “ THAT :

• (a) the general mandate granted to the directors of the Company (the “Directors”) to exercise the powers of the Company to allot, issue and otherwise deal with the shares in the capital of the Company (the “Shares”) as approved by the shareholders of the Company at the annual general meeting held on 13 August 2004, to the extent not already exercised be and is hereby revoked (but without prejudice to any valid exercise of such general mandate prior to the passing of this Resolution);

• (b) subject to paragraph (d) below, the exercise by Directors during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional Shares, and to make or grant offers, agreements and options which would or might require the exercise of such powers, subject to and in accordance with all applicable laws, be and is hereby generally and unconditionally approved;

• (c) the approval in paragraph (b) above shall be in addition to any other authorisations given to the Directors and shall authorise the Directors during the Relevant Period to 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 share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors pursuant to the approval in paragraph (b) above, otherwise than pursuant to:

• (i) a Rights Issue (as hereinafter defined);

• (ii) the exercise of rights of subscription or conversion under terms of any warrants issued by the Company or any securities which are convertible into Shares;

• (iii) the exercise of any option under the share option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of the Company and/or any of its subsidiaries of Shares or rights to acquire Shares; and

• (iv) any scrip dividend or similar arrangement providing for the allotment of shares in lieu of the whole or part of a dividend on the Shares in accordance with the bye-laws of the Company in force from time to time,

  • (aa) shall not exceed 20% of the aggregate nominal amount of share capital of the Company in issue at the date of the passing of this Resolution; and

  • (bb) if the Directors are so authorised by a separate ordinary resolution of the shareholders of the Company, the nominal amount of share capital of the Company purchased by the Company subsequent to the passing of this Resolution up to a maximum equivalent to 10 per cent. of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this Resolution and the said approval shall be limited accordingly; and

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NOTICE OF SPECIAL GENERAL MEETING

• (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;

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

• (iii) the revocation or variation of the authority given under this Resolution by an ordinary resolution of the shareholders of the Company in general meeting; and

“Rights Issue” means the allotment, issue or grant of Shares pursuant to an offer of Shares open for a period fixed by the Directors to holders of Shares or any class thereof on the register of members on a fixed record date in proportion to their then holdings of such Shares or class thereof (subject to such exclusions 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 stock exchange in any territory outside Hong Kong).”

• (3) “ THAT conditional upon the resolutions numbered (1) and (2) above, the general mandate granted to the Directors to exercise the powers of the Company to allot, issue and otherwise deal with additional shares of the Company pursuant to the resolution numbered (2) above be and is hereby extended by the addition to the aggregate nominal amount of the share capital of the Company which may be allotted by the Directors pursuant to such general mandates an amount representing the aggregate nominal amount of the share capital of the Company repurchased by the Company under the authority granted pursuant to the resolution numbered (1) above, provided that such amount shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of this Resolution.”

By Order of the Board Wang On Group Limited Chan Chun Hong, Thomas Executive Director

Hong Kong, 10 January 2005

Notes:

• (1) A member entitled to attend and vote at the above Meeting is entitled to appoint one or more than one proxy to attend and to vote in his stead. A proxy need not be a member of the Company.

• (2) To be valid, a form of proxy, together with any 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 deposited at the Company’s Hong Kong branch share registrar, Tengis Limited, Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the Meeting.

• (3) Completion and delivery of the form of proxy will not preclude members from attending and voting at the above Meeting or any adjournment thereof, in which case the form of proxy shall be deemed to be revoked.

As at the date of this notice, the Board comprises three executive Directors, namely Mr. Tang Ching Ho, Ms. Yau Yuk Yin and Mr. Chan Chun Hong, Thomas, and four independent non-executive Directors, namely Dr. Lee Peng Fei, Allen, Mr. Wong Chun, Justein, Dr. Siu Yim Kwan, Sidney and Mr. Siu Kam Chau.

• For identification purpose only

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