Wang On Group Limited — Share Issue/Capital Change 2001

Oct 8, 2001

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, 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 announcement.

WANG ON GROUP LIMITED

(Incorporated in Bermuda with limited liability)

PROPOSAL FOR REDUCTION OF

SHARE PREMIUM ACCOUNT

The Directors intend to put forward the Proposal to shareholders of the Company to reduce the share premium account of the Company as at the Effective Date by an amount equal to approximately HK$129,270,000 and to set off such amount against the audited accumulated losses of the Company of approximately HK$129,270,000. The share premium account of the Company as at the Effective Date will be not less than HK$285,752,000 (being the approximate amount of the share premium account as at the date of this announcement) and not more than HK$302,208,000 (being the approximate amount of the share premium account on the assumption that (i) there has been exercise in full of subscription rights attaching to all the outstanding share options granted to employees of the Company under the share option scheme adopted by the Company on 6th February, 1995; and (ii) the placing and subscription of an aggregate of 160,000,000 Shares as announced by the Company on 25th September, 2001 is completed).

The Proposal is conditional (see the section headed "Conditions of the Proposal" below).

THE PROPOSAL

It is proposed that the share premium account of the Company as at the Effective Date be reduced by an amount equal to approximately HK$129,270,000 and such amount be set off against the audited accumulated losses of the Company of approximately HK$129,270,000.

The share premium account of the Company as at 31st March, 2001 was approximately HK$257,272,000 which was adjusted to HK$285,752,000 as a result of the exercise in full of conversion rights attaching to all the convertible bonds issued by the Company as announced on 24th July 2001. The share premium account of the Company as at the Effective Date will be not less than HK$285,752,000 (being the approximate amount of the share premium account as at the date of this announcement) and not more than HK$302,208,000 (being the approximate amount of the share premium account on the assumption that (i) there has been exercise in full of subscription rights attaching to all the outstanding share options granted to employees of the Company under the share option scheme adopted by the Company on 6th February, 1995 and; (ii) the placing and subscription of an aggregate of 160,000,000 Shares as announced by the Company on 25th September, 2001 is completed).

REASON FOR THE PROPOSAL

The final audited balance sheet of the Company as at 31st March, 2001 showed accumulated losses of approximately HK$129,270,000. The primary purpose of the Proposal is, therefore, to eliminate this deficit. Accordingly, the Directors propose that the credit arising upon the reduction of the share premium account of the Company as at the Effective Date be set off against the audited accumulated losses of the Company.

EFFECT OF THE PROPOSAL

The Proposal will have no effect upon the amount of the net tangible asset value of the Company and the implementation of the Proposal will not affect the amount of the Company's shareholder's funds. The Proposal does not involve either the diminution of any liability in respect of unpaid capital or the payment to any shareholder of any paid up capital.

CONDITIONS OF THE PROPOSAL

The Proposal is conditional upon, inter alia, the following being fulfilled:-

(i) the passing of a special resolution to approve the Proposal at a special general meeting of the Company which is expected to be held not later than 12th November 2001; and

(ii) compliance with Section 46 of the Companies Act of Bermuda, including the publication of a notice of reduction of capital in the official gazette, the swearing of an affirmation of solvency by two directors and the filing of a memorandum of reduction of capital with the Registrar of Companies in Bermuda, if required.

The Proposal will become effective immediately upon satisfaction of the above conditions which is expected to be after the above mentioned special general meeting (to be held not later than 12th November 2001) and before 10:00 a.m. of the next business day following the date of the special general meeting.

GENERAL

A circular containing further information in relation to the Proposal and a notice of the special general meeting at which the special resolution mentioned above will be proposed will be sent to shareholders and, for information only, holders of share options of the Company as soon as practicable.

DEFINITIONS

In this announcement, the following expressions have the meanings set out below unless the context required otherwise:-

"Companies Act" the Companies Act 1981 of Bermuda (as amended)

"Company" Wang On Group Limited, an exempted company incorporated in Bermuda with limited liability, the securities of which are listed on the Stock Exchange

"Directors" the directors, including the independent non-executive directors, of the Company

"Effective Date" the date on which the Proposal shall become effective, which is expected to be after the special general meeting of the Company to approve the Proposal and before 10:00 a.m. of the next business day following the date of the said special general meeting

"Proposal" the proposed reduction of the share premium account of the Company as at the Effective Date by the amount of approximately HK$129,270,000

"Shares" ordinary shares of HK$0.01 each in the capital of the Company

"Stock Exchange" The Stock Exchange of Hong Kong Limited

"HK$" Hong Kong dollars

By Order of the Board

Wang On Group Limited

Chan Chun Hong, Thomas

Director and Company Secretary

Hong Kong, 4th October 2001

Please also refer to the published version of this announcement in the i-Mail.