WEIli Holdings Limited — Proxy Solicitation & Information Statement 2003

Jul 23, 2003

IMPORTANT

If you are in any doubt about this circular or as to the action to be taken, you should consult a stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in Daiwa Associate Holdings Limited (the “Company”), you should at once hand this circular with the enclosed form of proxy 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.

DAIWA ASSOCIATE HOLDINGS LIMITED

(incorporated in Bermuda with limited liability)

Directors: Executive:

LAU Tak Wan (President) WAN Chor Fai MAK Hon Kai, Stanly CHAN Yuen Mei, Pinky

Independent non-executive: Barry John BUTTIFANT YUEN Chi Choi, Simon

Registered office: Cedar House 41 Cedar Avenue Hamilton HM 12 Bermuda

Head office and principal place of business: 11th Floor, Block G East Sun Industrial Centre 16 Shing Yip Street Kwun Tong, Kowloon Hong Kong

23 July 2003

To Shareholders

GENERAL MANDATES TO ISSUE AND TO REPURCHASE SHARES

Dear Sirs,

INTRODUCTION

The purpose of this circular is to provide you with information regarding the following resolutions to be proposed at the annual general meeting (the “Annual General Meeting”) of the Company to be held at Magnolia & Carnomile Room, Lower Level 2, Kowloon Shangri-la, 64 Mody Road, Kowloon, Hong Kong on 22 August 2003, Friday at 3:30 p.m. relating to the granting to the Directors of the general mandates.

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(A) GENERAL MANDATES TO ISSUE SHARES AND TO REPURCHASE SHARES

This is an explanatory statement given to all shareholders of the Company relating to ordinary resolutions to be proposed at the Annual General Meeting authorising the Company to repurchase its own shares and to issue shares.

GENERAL MANDATE TO ISSUE SHARES

Ordinary Resolutions will be proposed at the Annual General Meeting to grant to the directors of the Company (the “Directors”) a general mandate to allot, issue and deal with shares of the Company (the “Shares”) not exceeding 20% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the passing of the resolution (“Share Issue Mandate”) and approving an extension of the Share Issue Mandate by adding to it the aggregate nominal amount of any Shares repurchased by the Company under the Share Repurchase Mandate (as hereinafter defined), details of which are set out in Ordinary Resolutions No. (1) and No. (3) of item 5 of the Notice of Annual General Meeting.

GENERAL MANDATE TO REPURCHASE SHARES

An ordinary resolution will also be proposed at the Annual General Meeting to grant to the Directors a general mandate to exercise the powers of the Company to repurchase Shares with an aggregate nominal amount of up to 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the passing of the resolution (“Share Repurchase Mandate”) as set out in Ordinary Resolution No. (2) of item 5 of the Notice of Annual General Meeting.

This explanatory statement contains all the information required pursuant to rule 10.06(1)(b) and other relevant provisions of the Securities Buy Back Rules in the Listing Rules which is set out as follows:

• (i) Exercise in full of the Share Repurchase Mandate, on the basis of 158,809,600 fully-paid up Shares in issue as at 23 July 2003 (being the Latest Practicable Date prior to the printing of this circular) and assuming no further shares will be issued or repurchased prior to Annual General Meeting, would result in up to 15,880,960 Shares being 10% of issued share capital as at date of approval repurchased by the Company during the period prior to the next Annual General Meeting of the Company following the passing of the resolution referred to above, or the expiration of the period within which such meeting is required by law to be held, or the revocation or variation of such mandate by an ordinary resolution of the shareholders of the Company in general meeting, whichever occurs first.

• (ii) The Directors believe that it is in the best interests of the Company and its shareholders to have a general authority from shareholders to enable the Directors to repurchase Shares on the market. Trading conditions on the Stock Exchange of Hong Kong Limited (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.

• (iii) In repurchasing shares, the Company may only apply funds legally available for such purpose in accordance with its memorandum of association and bye-laws and the laws of Bermuda. The Companies Act 1981 of Bermuda (as amended) (the “Companies Act”)

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provides that the amount of capital repaid in connection with a share repurchase may only be paid from the distributable profits of the Company and/or the proceeds of a new issue of shares, made for the purpose of the repurchase to such extent allowable under the Companies Act.

• (iv) The Directors do not propose to exercise the Share Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse impact on the working capital requirement of the Company or the gearing level which in the opinion of the Directors are from time to time appropriate for the Company. However, there might be a material adverse impact on the working capital or gearing position of the Company as compared with the position disclosed in the audited consolidated accounts contained in the annual report for the year ended 31 March 2003 in the event that the Share Repurchase Mandate is exercised in full.

• (v) None of the Directors or, to the best of their knowledge having made all reasonable enquiries, any of their associates has any present intention, in the event that the Share Repurchase Mandate is approved by shareholders of the Company, to sell any Shares to the Company or its subsidiaries.

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

• (vii) If a shareholder’s proportionate interest in the voting right of the company increases as a result of a share repurchase, such increase will be treated as an acquisition for the purposes of the Code on Takeovers and Mergers (the “Takeover Code”). In certain circumstances, a shareholder or a group of shareholders acting in concert could, as a result of such increase, obtain or consolidate control of the company and become obliged to make a mandatory offer in accordance with Rules 26 and 32 of the Takeover Code.

As at the Latest Practicable Date, to the best knowledge and belief of the Directors, the following substantial shareholders have direct or indirect interest in 10% or more of the issued share capital of the Company:

	Beneficially	held in
Substantial Shareholder	% of interest	Shares
China Capital Holdings Investment Ltd.	17.7%	28,121,300

Note: The entire issued share capital of China Capital Holdings Investment Ltd. is owned by a trustee for the benefit of a discretionary trust the beneficiaries of which include Mr. LAU Tak Wan, Ms CHAN Yuen Mei, Pinky (the spouse of Mr. Lau) and certain of his family members.

In additions, Mr. LAU Tak Wan and Ms. CHAN Yuen Mei, Pinky beneficially own 3,112,000 and 2,012,000 shares which represented 1.96% and 1.27% of issued share capital respectively of the Company. The aggregate percentage of interest in shares of Mr. LAU Tak Wan and Ms. CHAN Yuen Mei, Pinky represented 20.93% of issued share capital of the Company.

In the event that the Directors exercise in full the power to repurchase shares in accordance with the terms of the ordinary resolution to be proposed at the Annual General Meeting of the Company, the respective shareholdings together with the options of each of the above mentioned substantial shareholder and of the directors in the Company would be increased to approximately 19.68%, 2.18% and 1.41% respectively. The aggregate percentage of interest in shares of Mr. LAU Tak Wan and Ms. CHAN Yuen Mei, Pinky represented 23.27% of issued share capital of the Company.

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To the best knowledge and belief of the Directors, such increase would not give rise to an obligation to make a mandatory offer in accordance with Rules 26 and 32 of the Code.

• (viii) No purchases of Shares have been made by the Company during the previous 6 months, whether on the Stock Exchange or otherwise.

• (ix) The Listing Rules prohibit a company from knowingly repurchasing shares of the company on the Stock Exchange from a “connected person”, that is, a director or substantial shareholder or their associates (as defined in the Listing Rules). A connected person shall not knowingly sell his shares to the company.

No connected person (as defined in the Listing Rules) has notified the Company that he has a present intention to sell Shares to the Company, or has undertaken not to do so, in the event that the Share Repurchase Mandate is approved by shareholders of the Company.

• (x) The highest and lowest trading prices for Shares recorded on the Stock Exchange during each of the previous 12 months were as follows.

	Lowest	Highest
	(HK$)	(HK$)
July 2002	0.38	0.69
August 2002	0.36	0.54
September 2002	0.39	0.51
October 2002	0.36	0.42
November 2002	0.41	0.47
December 2002	0.42	0.49
January 2003	0.40	0.48
February 2003	0.43	0.49
March 2003	0.45	0.64
April 2003	0.46	0.53
May 2003	0.48	0.54
June 2003	0.52	0.59

This document 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 document 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.

For and on behalf of Daiwa Associate Holdings Limited LAU Tak Wan Chairman

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