Wang On Group Limited — Share Issue/Capital Change 2002

Jul 31, 2002

IMPORTANT

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)

(the “Company”)

Executive Directors: Mr. Tang Ching Ho (Chairman and Managing Director) Ms. Yau Yuk Yin (Deputy Chairman and Deputy Managing Director)

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Mr. Chan Chun Hong, Thomas

Head office and

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

principal place of business: 12th Floor, Tower 1 South Seas Centre No. 75 Mody Road Tsimshatsui East Kowloon Hong Kong

29 July 2002

To the Shareholders and, for information only,

holders of the share options and Warrants

Dear Sir or Madam,

GENERAL MANDATES TO ISSUE NEW SHARES AND TO REPURCHASE SHARES

INTRODUCTION

The directors of the Company (the “Directors”) consider that it is in the interests of the Company and its shareholders that the Directors should continue to be granted general mandates (i) to allot, issue or otherwise deal with additional shares in the capital of the Company and to make or grant offers, agreements and options which would or might require

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the exercise of such powers; (ii) to repurchase shares in the capital of the Company; and (iii) to extend the general mandate to issue shares in the capital of the Company by adding to it the aggregate nominal amount of the share capital of the Company repurchased under the Repurchase Mandate (as defined below).

GENERAL MANDATE TO ISSUE NEW SHARES

At the annual general meeting of the Company to be held on 22 August 2002 (the “Annual General Meeting”), an ordinary resolution set out in paragraph (A) of item 4 of the Notice (as defined below) will be proposed to grant to the Directors a general mandate to allot, issue 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 the exercise of such powers with an aggregate nominal value not exceeding 20 per cent. of the aggregate nominal amount of the share capital of the Company in issue as at the date of the passing of the resolution.

GENERAL MANDATE TO REPURCHASE SHARES

Under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), listed companies are allowed to repurchase on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) their own issued shares.

At the Annual General Meeting, an ordinary resolution will be proposed granting the Directors a general and unconditional mandate to exercise all powers of the Company to repurchase shares in the capital of the Company up to a maximum of 10 per cent. of the aggregate nominal amount of the issued share capital of the Company as at the date of passing of the resolution (the “Repurchase Mandate”).

In accordance with the Listing Rules, this circular also serves as an Explanatory Statement (as hereinafter stated) to provide the shareholders of the Company with requisite information reasonably necessary to enable the shareholders to make an informed decision on whether to vote for or against the resolution set out in paragraph (B) of item 4 of the notice convening the Annual General Meeting (the “Notice”) to approve the granting of the Repurchase Mandate to the Directors.

EXPLANATORY STATEMENT

1. Share capital

As at 22 July 2002, being the latest practicable date for ascertaining certain information for inclusion in this circular (the “Latest Practicable Date”), the issued share capital of the Company was HK$118,143,655.96 comprising 11,814,365,596 shares of HK$0.01 each (“Shares”). In addition, as at the Latest Practicable Date there were outstanding share options and warrants carrying the rights to subscribe up to an aggregate of 262,800,000 and 2,000,000,000 Shares respectively. If such share options and warrants are exercised in full on or prior to the date of passing of the resolution in respect of the Repurchase Mandate, a further 2,262,800,000 Shares will be in issue.

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Subject to the passing of the relevant ordinary resolutions as set out in paragraph (B) of item 4 of the Notice and assuming that no further Shares are issued and that no further Shares are purchased by the Company, the Directors will be authorised to purchase up to 1,181,436,559 Shares pursuant to the Repurchase Mandate. Assuming that all outstanding share options and warrants carrying the rights to subscribe up to an aggregate of 2,262,800,000 Shares are exercised in full on or before the date of passing of the resolution in respect of the Repurchase Mandate and assuming no further Shares are issued and no further Shares are purchased by the Company, the total number of Shares in issue will be 14,077,165,596 and the Directors will be authorised to purchase up to 1,407,716,559 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 capital of the Company 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 in the capital of the Company, 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.

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 currently intends to sell Shares to the Company under the general mandate to repurchase Shares in the event that it is granted by the shareholders at the Annual General Meeting.

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 general mandate to repurchase Shares is granted by the shareholders at the Annual General Meeting.

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.

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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 on Takeovers and Mergers

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 on Takeovers and Mergers (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 and parties acting in concert with him are interested or deemed to be interested in an aggregate of 2,287,873,119 Shares, representing approximately 19.37% of the existing issued share capital of the Company. In the event that the Directors should exercise in full the power to repurchase shares under the proposed Repurchase Mandate, the shareholding of Mr. Tang Ching Ho and parties acting in concert with him in the Company will be increased to approximately 21.52% of the issued share capital of the Company.

The Directors are not aware of any consequence which may arise under the Code as a result of any repurchase made under the Repurchase Mandate proposed to be granted to the Directors at the Annual General Meeting.

7. Share prices

The highest and lowest prices at which the Shares have traded on the Stock Exchange during the 12 months preceding the Latest Practicable Date were as follows:

	Price	per Share
	Highest	Lowest
	HK$	HK$
2001
July	0.062A	0.049A
August	0.059A	0.045A
September	0.045A	0.032A
October	0.044A	0.034A
November	0.041A	0.036A
December	0.040A	0.036A

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	Price per Share	Price per Share
	Highest	Lowest
	HK$	HK$
2002
January	0.040A	0.029A
February	0.044A	0.027A
March	0.038	0.019
April	0.025	0.021
May	0.024	0.017
June	0.020	0.012
July (up to and including the Latest Practicable Date)	0.016	0.013

A = adjusted

Note: The abovementioned share prices of the Shares have been adjusted as a result of a rights issue as initially announced by the Company on 16th January, 2002. The rights issue became unconditional on 20th March, 2002.

8. Shareholders’ approval

The Listing Rules provides that all proposed repurchases of securities by a company with primary listing on the Stock Exchange must be approved in advance by an ordinary resolution, either by way of general mandate or by specific approval of a particular transaction.

RECOMMENDATIONS

The Directors consider that (i) the grant of a general mandate to allot, issue and deal with shares in the capital of the Company; (ii) the grant of the Repurchase Mandate; and (iii) the extension of the general mandate to issue shares in the capital of the Compnay as described above are all in the best interests of the Company and accordingly recommend the shareholders of the Company to vote in favour of the resolutions set out in item 4 of the Notice which are proposed to be passed at the Annual General Meeting.

Yours faithfully, Tang Ching Ho Chairman and Managing Director

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