XIAMEN YAN PALACE BIOENGINEERING CO., LTD. — Proxy Solicitation & Information Statement 2002

Apr 12, 2002

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, company secretary, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Carry Wealth Holdings Limited (the “Company”), you should at once hand this circular and 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 or transferee.

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.

PROPOSED GENERAL MANDATE FOR PURCHASE OF OWN SHARES,

TERMINATION OF EXISTING SHARE OPTION SCHEME, ADOPTION OF NEW SHARE OPTION SCHEME

AND ADOPTION OF CHINESE NAME

A notice convening the 2002 Annual General Meeting of the Company to be held on Wednesday, 8th May, 2002 at 10:00 a.m. at Tang Room II, 3rd Floor, Sheraton Hong Kong Hotel, 20 Nathan Road, Kowloon, Hong Kong is set out in the 2001 Annual Report of the Company to be despatched to shareholders of the Company together with this circular. A proxy form is also enclosed. Whether or not you intend to attend and vote at the 2002 Annual General Meeting, please complete the proxy form, together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such power or authority, and return the same to the Company’s branch share registrar in Hong Kong, Abacus Share Registrars Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not less than 48 hours before the time appointed for holding the 2002 Annual General Meeting. Completion and return of the proxy form will not preclude any shareholder from attending and voting in person should you so wish.

11th April, 2002

* For identification purposes only

CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
2.	Buyback Mandate to Repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
3.	Share Option Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
4.	Adoption of Chinese Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
5.	Responsibility Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
6.	Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Appendix – Summary of New Scheme. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		10

DEFINITIONS

In this circular, the following expressions shall have the following meanings unless the context requires otherwise:

• “2002 Annual General Meeting”

the annual general meeting of the Company to be held at Tang Room II, 3rd Floor, Sheraton Hong Kong Hotel, 20 Nathan Road, Kowloon, Hong Kong on Wednesday, 8th May, 2002 at 10:00 a.m., notice of which is set out in the 2001 Annual Report of the Company

“associate” has the meaning ascribed thereto in the Listing Rules “Board” the board of Directors “business day” a day on which the Stock Exchange is open for the business of dealing in securities

“Buyback Mandate” the proposed general mandate to be granted to the Directors to exercise the powers of the Company to purchase its own Shares in the terms set out in the notice of the 2002 Annual General Meeting

• “Code” the Hong Kong Code on Takeovers and Mergers “Companies Act” the Companies Act 1981 of Bermuda “Companies Ordinance” the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) “Company” Carry Wealth Holdings Limited, an exempted company incorporated in Bermuda with limited liability, the Shares of which are listed on the Stock Exchange

• “connected person” has the meaning ascribed thereto in the Listing Rules “Directors” the directors of the Company “Eligible Relationship” the relationship between a Participant and the Company or any of its subsidiaries

• “Existing Scheme” the existing share option scheme of the Company adopted on 23rd February, 2000 and expiring on 22nd February, 2010

• “Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

– 1 –

DEFINITIONS

• “HK$” Hong Kong dollars “Latest Practicable Date” 4th April, 2002, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

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

• “New Scheme” the share option scheme proposed to be adopted at the 2002 Annual General Meeting, the principal terms of which are summarised in the Appendix

• “Participant” any person being an employee, director (including executive or non-executive director), consultant, representative, professional adviser, customer, business partner, joint venture partner, strategic partner, landlord or tenant of, or any supplier or provider of goods or services to, the Group, and any trustee(s) of a discretionary trust of which one or more beneficiaries belong to any of the abovementioned category(ies) of persons

• “Shareholders” registered holders of Shares

• “Shares” ordinary shares of HK$0.10 each (or of such other nominal amount as shall result from a sub-division or a consolidation of such shares from time to time) in the capital of the Company

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

“substantial shareholder” has the meaning ascribed thereto in the Listing Rules

– 2 –

LETTER FROM THE BOARD

Executive Directors:

Rusli Hendrawan (Chairman) Lee Sheng Kuang, James (Managing Director) Oey Tjie Ho Tang Chak Lam, Charlie

Registered Office: Clarendon House

2 Church Street Hamilton HM11 Bermuda

Independent Non-Executive Directors:

Lam Chi Kuen, Frank Lau Siu Ki, Kevin

Principal Place of Business:

23rd Floor

9 Wing Hong Street Cheung Sha Wan Kowloon Hong Kong

11th April, 2002

To the Shareholders

Dear Shareholder

PROPOSED GENERAL MANDATE FOR PURCHASE OF OWN SHARES, TERMINATION OF EXISTING SCHEME, ADOPTION OF NEW SCHEME AND ADOPTION OF CHINESE NAME

1. INTRODUCTION

At the 2001 Annual General Meeting of the Company held on 23rd May, 2001, a general mandate was granted to the Directors to exercise the powers of the Company to repurchase Shares. The general mandate will lapse at the conclusion of the 2002 Annual General Meeting to be held on 8th May, 2002 and therefore an ordinary resolution will be proposed at the 2002 Annual General Meeting to grant the Buyback Mandate.

On 23rd August, 2001, the Stock Exchange announced certain amendments to Chapter 17 (Equity Securities – Share Option Schemes) of the Listing Rules which became effective on 1st September, 2001. In compliance with the amended Chapter 17 of the Listing Rules, the Board proposes that the New Scheme be adopted and the Existing Scheme be terminated (without prejudice to the rights and benefits of and attached to all those options granted under the Existing Scheme which are outstanding), subject to the approval of the Shareholders.

* For identification purposes only

– 3 –

LETTER FROM THE BOARD

The Board also proposes to seek Shareholders’ approval of the adoption of “囱富控股有限公司 ” as the Chinese name of the Company for the purpose of registration in Hong Kong.

This circular not only serves as the explanatory statement to the Shareholders required by the Listing Rules containing all information reasonably necessary to enable Shareholders to make an informed decision on whether to vote for or against the ordinary resolution to approve the Buyback Mandate and the New Scheme, but also provides Shareholders with additional information about the proposed adoption of the Chinese name of the Company which require Shareholders’ approval in the 2002 Annual General Meeting.

2. BUYBACK MANDATE TO REPURCHASE SHARES

At the 2002 Annual General Meeting of the Company to be held on Wednesday, 8th May, 2002, an ordinary resolution will be proposed to renew the granting to the Directors of the Buyback Mandate in the terms set out in the notice of 2002 Annual General Meeting allowing the Company to repurchase its own Shares up to a limit of 10 per cent in aggregate of the Company’s issued share capital at the date of passing the resolution during the period ending on the earliest of the date of the next Annual General Meeting, the date by which the next Annual General Meeting of the Company is required to be held by law and the date upon which such authority is revoked or varied. This will allow the Company to repurchase its own Shares, inter alia, on-market in accordance with the Listing Rules.

Share Capital

As at the Latest Practicable Date, the issued share capital of the Company comprised 360,000,000 Shares.

Exercise in full of the Buyback Mandate, on the basis that no further Shares are issued or repurchased prior to 8th May, 2002, being the date of the 2002 Annual General Meeting, could accordingly result in up to a maximum of 36,000,000 Shares being repurchased by the Company during the course of the period from 8th May, 2002 to the earliest of (i) the date of the 2003 Annual General Meeting, (ii) the date by which the next Annual General Meeting of the Company is required to be held by law and (iii) the date upon which such authority is revoked or varied.

Reasons for Repurchases

The Directors believe that it is in the best interests of the Company and its Shareholders to seek a general authority from Shareholders to enable the Directors to purchase Shares 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 and/or its earnings per Share and will only be made when the Directors believe that such a purchase will benefit the Company and its Shareholders.

– 4 –

LETTER FROM THE BOARD

Funding of Repurchases

Pursuant to the Buyback Mandate, repurchases would be funded entirely from the Company’s available cash flow or working capital facilities which will be funds legally available for the purpose in accordance with all applicable laws of Bermuda and the Company’s Memorandum of Association and Bye-laws.

On the basis of the consolidated financial position of the Company as at 31st December, 2001 (being the date to which the latest published financial statements of the Company have been made up), the Directors consider that the exercise in full of the Buyback Mandate to repurchase Shares might have a material adverse impact on the working capital position of the Company as compared with its position as at 31st December, 2001. No purchase would be made in circumstances that might have a material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in the latest published audited financial statements) unless the Directors considered that such purchases were in the best interests of the Company notwithstanding such material adverse impact.

Share Prices and Repurchased Shares

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

	Highest	Lowest
	HK$	HK$
April 2001	1.10	0.90
May 2001	1.22	0.99
June 2001	1.26	1.15
July 2001	1.18	1.10
August 2001	1.22	1.10
September 2001	1.18	0.96
October 2001	1.02	0.97
November 2001	1.19	1.00
December 2001	1.24	1.14
January 2002	1.51	1.20
February 2002	1.48	1.35
March 2002	1.59	1.32

The Company has not made any purchase of Shares (whether on the Stock Exchange or otherwise) in the previous six months.

– 5 –

LETTER FROM THE BOARD

Hong Kong Code on Takeovers and Mergers

If as a result of a Share repurchase, a Shareholder’s proportionate interest in the voting capital of the Company increases, such increase will be treated as an acquisition for the purposes of the Code and, if such increase results in a change of control, may in certain circumstances give rise to an obligation to make a general offer for Shares under Rule 26 of the Code, according to Rule 32 of the Code.

As at the Latest Practicable Date, the substantial shareholders of the Company were Respected International Limited (“RIL”) and Greatwood Investment Trading Limited (“GIT”). RIL and GIT respectively hold 162,000,000 Shares and 97,800,000 Shares, representing 45.00 per cent and approximately 27.17 per cent of the issued share capital of the Company. In the event that the Directors exercised in full the power to repurchase Shares which is proposed to be granted pursuant to the Buyback Mandate, the shareholdings of RIL and GIT in the Company would be increased to 50.00 per cent and approximately 30.19 per cent of the issued share capital of the Company respectively. The increase of GIT’s proportionate interest in the voting capital of the Company will be treated as an acquisition for the purpose of the Code. Accordingly, GIT or a group of Shareholders acting in concert, depending on the level of increase of the Shareholders’ interest, could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Code as a result of any such increase. Save as disclosed herein, the Directors are not aware of any consequences which may arise under the Code if the Buyback Mandate is exercised. The Directors have no present intention to exercise the Buyback Mandate to such an extent as would trigger the application of the Code in the manner described above.

GIT has notified the Company that if the Buyback Mandate is approved and exercised, it has no present intention to sell Shares to the Company.

Connected Persons

No persons who are connected persons of the Company have notified the Company that they have a present intention to sell Shares to the Company nor have they undertaken not to do so, if the Buyback Mandate is approved and exercised.

Directors

None of the Directors or, to the best of their knowledge and having made all reasonable enquiries, their associates have any present intention if the Buyback Mandate is approved and exercised to sell any Shares to the Company or its subsidiaries.

The Directors have undertaken to the Stock Exchange that they will exercise the Buyback Mandate in accordance with the Listing Rules and the applicable laws of Bermuda, the jurisdiction in which the Company is incorporated, and in accordance with the regulations set out in the Memorandum of Association and Bye-laws of the Company.

– 6 –

LETTER FROM THE BOARD

3. SHARE OPTION SCHEME

In compliance with the amended Chapter 17 of the Listing Rules, the Board proposes that the New Scheme be adopted and the Existing Scheme be terminated. A summary of the principal terms of the New Scheme is set out in the Appendix to this circular. Upon termination of the Existing Scheme, no further options will be granted thereunder but in all other respects, the provisions of the Existing Scheme shall remain in force and all outstanding options granted prior to such termination shall continue to be valid and exercisable in accordance therewith.

As at the Latest Practicable Date, the Company had granted share options in respect of 36,000,000 Shares to certain employees and directors of the Group pursuant to the Existing Scheme, all of which were still outstanding. No further options will be granted under the Existing Scheme after the Latest Practicable Date.

The purpose of the New Scheme is to provide incentives to Participants to contribute to the Group and/or to enable the Group to recruit and/or to retain high-calibre employees and attract resources that are valuable to the Group. To ensure that this purpose is achieved, the rules of the New Scheme provide that the Board will grant options only to Participants who have made valuable contribution to the business of the Group based on their performance and/or years of service, or who are regarded as valuable human resources of the Group based on their work experience, knowledge in the industry and other relevant factors, or are expected to be able to contribute to the business development of the Group based on their business connection or network or other relevant factors.

On the basis of 360,000,000 Shares in issue as at the Latest Practicable Date, and assuming no further Shares will be issued or repurchased by the Company on or before the date of the 2002 Annual General Meeting, the Company may initially grant options representing 36,000,000 Shares under the New Scheme (i.e. 10 per cent of the issued share capital of the Company as at the date of the 2002 Annual General Meeting).

Although the rules of the New Scheme provide that the New Scheme is not subject to any performance target and does not prescribe any specific minimum period for which an option must be held before it can be exercised, the Board believes that the ability for the Board to prescribe at its discretion a minimum period for which an option must be held before it can be exercised and the requirement for a minimum subscription price (which is summarised in paragraph (d) in the Appendix) as well as the selection criteria prescribed by the rules (which are summarised in paragraph (b) in the Appendix) of the New Scheme will serve to protect the value of the Shares of the Company as well as to achieve the purpose of the New Scheme. No trustees will be appointed under the New Scheme.

The Board considers that it is not appropriate to state the value of all options that can be granted under the New Scheme as if they had been granted on the Latest Practicable Date as a number of variables which are crucial for the calculation of the option value have not been determined. Such variables include the exercise price, exercise period, vesting period, lock up period (if any) and other relevant factors. The Board believes that any calculation of the value of any option which might have been granted on the Latest Practicable Date would be based on a number of speculative assumptions and therefore not only would such calculation not be meaningful or representative, but it could also potentially be misleading to the Shareholders.

– 7 –

LETTER FROM THE BOARD

Application has been made to the Listing Committee of the Stock Exchange for listing of and permission to deal in the new Shares which may fall to be issued pursuant to the exercise of the subscription rights under the options that may be granted under the New Scheme.

In accordance with the requirements of the Listing Rules, the Company will publish in the newspapers an announcement on the outcome of the 2002 Annual General Meeting in respect of the resolution relating to the adoption of the New Scheme on the business day following the date of the 2002 Annual General Meeting.

The Company will comply with the relevant Listing Rules from time to time in force in respect of the New Scheme and any other share option scheme(s) of the Company or any of its subsidiaries.

Documents for Inspection

A copy of the New Scheme will be available for inspection at the principal place of business of the Company at 23rd Floor, 9 Wing Hong Street, Cheung Sha Wan, Kowloon, Hong Kong during normal business hours up to and including the date of the 2002 Annual General Meeting. A copy of the New Scheme will also be available for inspection at the 2002 Annual General Meeting.

4. ADOPTION OF CHINESE NAME

As an oversea company is now allowed to register a Chinese name in Hong Kong notwithstanding the fact that only the English name appears in its Certificate of Incorporation, the Board proposes to seek Shareholders’ approval of the adoption of “囱富控股有限公司” as the Chinese name of the Company for the purpose of registration in Hong Kong. Completion of the adoption of the Chinese name is subject to the passing of a special resolution by Shareholders at the 2002 Annual General Meeting and the approval of the Registrar of Companies in Hong Kong.

Since the existing share certificates of the Company bear both the English and Chinese names, it is not necessary for the Company to issue any new share certificate in exchange for any existing share certificate following the completion of the adoption of the Chinese name of the Company.

5. RESPONSIBILITY STATEMENT

This circular 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 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.

– 8 –

LETTER FROM THE BOARD

6. RECOMMENDATION

The notice containing resolutions regarding the above proposals to be passed at the 2002 Annual General Meeting is contained in the Company’s 2001 Annual Report, which is being despatched to Shareholders together with this circular.

The Directors recommend the proposals to all Shareholders for their favourable consideration and urge them to vote in favour of the resolutions to be proposed at the 2002 Annual General Meeting as they intend to do themselves in respect of their own holdings.

The Directors believe that the granting of the Buyback Mandate is in the best interest of the Company and the Shareholders as a whole as it will enable the Directors to purchase Shares in the market, which may enhance the net value of the Company and its assets and/or its earnings per Share.

The Directors believe that the adoption of the New Scheme is in the best interests of the Company and the Shareholders as a whole as it will enable the Company to create more incentives and benefits for appropriate eligible Participants and increase their productivity and contribution or potential contribution to the Group.

The Directors also believe that the proposed adoption of the Chinese name of the Company is in the interests of the Company and the Shareholders as a whole as it will enable the Company to better represent itself in Hong Kong.

By order of the Board Lee Sheng Kuang, James Managing Director

– 9 –

SUMMARY OF NEW SCHEME

APPENDIX

The following is a summary of the principal terms of the New Scheme proposed to be approved and adopted at the 2002 Annual General Meeting:

(a) PURPOSE

The purpose of the New Scheme is to provide incentives to Participants to contribute to the Group and/or to enable the Group to recruit and/or to retain high-calibre employees and attract resources that are valuable to the Group.

(b) WHO MAY JOIN

The Board may grant options at a price calculated in accordance with paragraph (d) below to any Participant who, in the absolute discretion of the Board, has made valuable contribution to the business of the Group based on his performance and/or years of service, or is regarded as valuable human resources of the Group, based on his work experience, knowledge in the industry and other relevant factors, or is expected to be able to contribute to the business development of the Group based on his/its business connection or network or other relevant factors.

The New Scheme further provides that no grant of options shall be made except to such number of Participants and in such circumstances that the Company will not be required under applicable securities laws and regulations to issue a prospectus or other offer document in respect thereof, and will not result in the breach by the Company or its Directors of any applicable securities laws and regulations or in any filing or other requirements arising.

(c) PAYMENT ON ACCEPTANCE OF OPTION OFFER

HK$1.00 in cash is payable by the grantee of the option to the Company on acceptance of the offer.

(d) SUBSCRIPTION PRICE

The subscription price for the Shares in relation to the options to be granted under the New Scheme will be a price determined by the Board and notified to each Participant at the time the grant of the option is made to (subject to acceptance by) the Participant and will be at least the highest of: (a) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets on the date of grant of the option, which must be a business day; (b) the average closing price of the Shares as stated in the Stock Exchange’s daily quotation sheets for the five business days immediately preceding the date of grant of the option; and (c) the nominal value of the Shares. For the purpose of sub-paragraphs (a) and (b) above, if on any relevant business day there is no trading of Shares on the Stock Exchange, then the closing price for that business day shall be deemed to be the same as the closing price on the immediately preceding business day on which Shares were traded on the Stock Exchange.

(e) MAXIMUM NUMBER OF SHARES SUBJECT TO THE NEW SCHEME

The total number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the New Scheme and any other schemes of the Company and/or its subsidiaries must not exceed 30% of the number of Shares in issue from time to time. No options may be granted if such grant would result in the 30% limit being exceeded.

– 10 –

SUMMARY OF NEW SCHEME

APPENDIX

In addition, the total number of Shares which may be issued upon exercise of all options to be granted under the New Scheme and any other share option scheme(s) of the Company and/or its subsidiary must not in aggregate exceed 10% of the number of Shares in issue as at the date of approval of the New Scheme (the “10% Limit”). Options lapsed in accordance with the terms of the New Scheme or any other share option scheme(s) of the Company and/or its subsidiary shall not be counted for the purpose of calculating the 10% Limit. The Company may seek approval from its Shareholders in general meeting to refresh the 10% Limit at any time in accordance with the provisions of the Listing Rules, provided that the total number of Shares which may be issued upon exercise of all options to be granted under the New Scheme and any other share option scheme(s) of the Company and/or its subsidiary under the limit as refreshed must not exceed 10% of the number of Shares in issue as at the date of approval of the refresher mandate (the “Refreshed Limit”). Options previously granted to (and subject to acceptance by) a Participant under the New Scheme and/or any other share option scheme(s) of the Company and/or its subsidiary (including those exercised, outstanding, cancelled or lapsed in accordance with the New Scheme or such other schemes) shall not be counted for the purpose of calculating the Refreshed Limit.

The Company may also seek separate approval from the Shareholders in general meeting for granting options beyond the 10% Limit, or as the case may be, the Refreshed Limit, to specifically identified Participants in accordance with the provisions of the Listing Rules. Accordingly, if the prior approval of the Shareholders in general meeting is obtained in accordance with the relevant procedural requirements of the Listing Rules, the Board may grant options to such Participants in respect of such number of Shares and on such terms as may be specified in the said Shareholders’ approval.

If any grant of options is proposed to be made to a Participant which, if accepted and exercised in full, would result in the Shares issued and which may fall to be issued upon the exercise of such options proposed to be granted and all options already granted or to be granted (including options exercised, cancelled and outstanding) to such person under the New Scheme and any other share option scheme(s) of the Company and/or its subsidiary in the 12-month period up to and including the proposed date of grant for such options exceeding 1% of the number of Shares in issue as at the proposed date of grant, then such grant of options must first be approved by the Shareholders in general meeting held in accordance with the requirements of the Listing Rules, and such Participant and his associates shall abstain from voting on the relevant resolution at such meeting.

(f) TIME OF EXERCISE OF OPTION

An option may be exercised in accordance with the terms of the New Scheme at any time during a period to be notified by the Board to each grantee at the time of grant of the option, which must not be more than 10 years from the date of grant of the option. Under the New Scheme, the Board may prescribe a minimum period for which an option must be held before it can be exercised.

The exercise of an option is not subject to any performance targets.

(g) RIGHTS ARE PERSONAL TO GRANTEE

An option shall be personal to the grantee and shall not be assignable and no grantee shall in any way sell, transfer, assign, charge, mortgage, encumber or create any interest in favour of any third party over or in relation to any option or purport to do any of the foregoing. Any breach of the foregoing shall entitle the Company to cancel any outstanding option, or any part thereof, in favour of such grantee.

– 11 –

SUMMARY OF NEW SCHEME

APPENDIX

(h) RIGHTS ON DEATH AND TERMINATION

If the grantee of an option ceases to be in an Eligible Relationship with the Company or its subsidiary for any reason (including his death, ill health, disability or insanity) other than: (a) termination (including death, ill health, disability or insanity) during the 12-month period immediately following the date of grant of his option; or (b) termination of his own accord or termination by virtue of him being guilty of misconduct, having committed an act of bankruptcy or having become insolvent or having made any arrangement with creditors or having been convicted of any criminal offence involving his integrity or honesty or a petition of winding-up having been filed against him or on other grounds on which an employer or party would be entitled to terminate the Eligible Relationship at common law or pursuant to any applicable laws or under the contract governing the Eligible Relationship, the grantee (or his legal personal representative(s)) may exercise the option up to his entitlement at the date of cessation (to the extent not already exercised) from the later of the date of commencement of the option period and the date of such cessation until whichever is the earlier of the date of expiry of the option period or the last day of the period of 1 month (or such longer period as the Board may determine) following the date of such cessation, which date shall be the last actual day of the Eligible Relationship with the Company or the relevant subsidiary and, where applicable, whether payment in lieu of notice is made or not.

(i) RIGHTS ON TAKEOVER

If a general offer to acquire Shares (whether by takeover offer, merger, privatisation proposal by scheme of arrangement between the Company and its members or otherwise in like manner) is made to all the Shareholders and such offer, having been approved in accordance with applicable laws and regulatory requirements, becomes or is declared unconditional, the grantee of the option (or his legal personal representatives) shall, even if the option period has not yet commenced, be entitled to exercise the option (to the extent not already exercised) at any time until whichever is the earlier of the date of expiry of the option period or the last day of the period of 1 month after the date on which the offer becomes or is declared unconditional, after which the option shall lapse.

(j) RIGHTS ON WINDING UP

If a notice is given by the Company to its members to convene a general meeting to consider a resolution to voluntarily wind up the Company, the Company shall forthwith after it despatches such notice to each member of the Company give notice thereof to all grantees and thereupon, each grantee (or his legal personal representative(s)) shall, even if the option period has not yet commenced, be entitled to exercise all or any of his options at any time not later than two business days prior to the record date for ascertaining entitlements to attend and vote at the proposed general meeting of the Company by giving notice in writing to the Company, accompanied by a remittance for the full amount of the aggregate subscription price for the Shares in respect of which the notice is given whereupon the Company shall as soon as possible and, in any event, no later than the record date referred to above, allot the relevant Shares to the grantee credited as fully paid.

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SUMMARY OF NEW SCHEME

APPENDIX

(k) RIGHTS ON COMPROMISE OR ARRANGEMENT

If a compromise or arrangement between the Company and its members or creditors is being proposed in connection with a scheme for reconstruction or amalgamation of the Company and a notice is given by the Company to its members to convene a general meeting to consider such scheme or arrangement, the Company shall forthwith after it despatches such notice to each member of the Company give notice thereof to all grantees and thereupon, each grantee (or his legal personal representative(s)) shall, even if the option period has not yet commenced, be entitled to exercise all or any of his options at any time not later than two business days prior to the record date for ascertaining entitlements to attend and vote at the proposed general meeting of the Company by giving notice in writing to the Company, accompanied by a remittance for the full amount of the aggregate subscription price for the Shares in respect of which the notice is given whereupon the Company shall as soon as possible and, in any event, no later than the record date referred to above, allot the relevant Shares to the grantee credited as fully paid.

(l) EFFECTS OF ALTERATIONS TO CAPITAL

Subject to the limit on the number of Shares subject to the New Scheme described in paragraph (e) above, in the event of any capitalisation issue, rights issue, consolidation, or sub-division of Shares or reduction of the share capital of the Company (other than an issue of Shares as consideration in respect of a transaction) whilst an option remains outstanding, corresponding adjustments (if any) will be made to the number of Shares subject to the New Scheme, the number of Shares subject to outstanding options, and/or the subscription price, provided that any adjustments must give a grantee the same proportion of the issued share capital of the Company as that to which he was previously entitled, but no such adjustment shall be made to the extent that a Share would be issued at less than its nominal value. In respect of any adjustment required by the foregoing provisions, other than any made on a capitalisation issue, an independent financial adviser or the auditors of the Company must also confirm to the Board in writing that the adjustments satisfy the foregoing proviso.

(m) LAPSE OF OPTIONS

An option shall lapse automatically (to the extent not already exercised) on the earliest of:

• (i) the expiry of the option period;

• (ii) the expiry of any of the other periods referred to in paragraphs (h), (i) or (k);

• (iii) subject to paragraph (j), the earliest of the close of business on the second business day prior to the record date referred to in paragraph (j) or the date of commencement of the winding-up of the Company;

• (iv) save as otherwise provided in paragraph (k), or by the court in relation to the scheme in question, upon the sanctioning pursuant to the Companies Act by the Supreme Court of Bermuda of a compromise or arrangement between the Company and its members or creditors for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies;

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SUMMARY OF NEW SCHEME

APPENDIX

• (v) where the grantee ceases to be in an Eligible Relationship with the Company or any subsidiary for any reason (including his death, ill health, disability or insanity) during the 12-month period immediately following the date of grant of the option, the date of cessation of the Eligible Relationship, which date shall be the last actual day of the Eligible Relationship, with the Company or the relevant subsidiary and, where applicable, whether payment in lieu of notice is made or not;

• (vi) the date on which the grantee ceases to be in an Eligible Relationship with the Company or any subsidiary by reason of:

• (a) his resignation or termination of the Eligible Relationship of his own accord; or

• (b) the termination of the Eligible Relationship on any one certain grounds specified in the New Scheme including, but not limited to, misconduct, bankruptcy, insolvency and criminal conviction;

• (vii) the date on which the Board exercises the Company’s right to cancel the option because of a breach by the grantee of the rules summarized in paragraph (g) above.

(n) RANKING OF SHARES

The Shares to be allotted upon the exercise of an option will be subject to all the provisions of the Company’s Bye-laws and will rank pari passu with the fully paid Shares in issue on the date of allotment or, if that date falls on a day when the register of members of the Company is closed, the first day of the reopening of the register of members and accordingly will entitle the holders to participate in all dividends or other distributions paid or made on or after the date of allotment or, if that date falls on a day when the register of members of the Company is closed, the first day of the reopening of the register of members, other than any dividend or other distribution previously declared or recommended or resolved to be paid or made with respect to a record date which shall be before the date of allotment, or, if later, before the date of registration of the allotment in the register of members of the Company.

(o) CANCELLATION OF OPTIONS

The Board may effect the cancellation of any outstanding option in a manner that complies with any legal requirements for cancellation, as may be agreed with the relevant grantee.

Where the Company cancels any options granted but not exercised and grants new options to the same grantee, such grant of new options may only be made under the New Scheme if there are available unissued options (excluding the cancelled options) within the limit approved by the Shareholders as referred to in paragraph (e) above.

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SUMMARY OF NEW SCHEME

APPENDIX

(p) ALTERATION TO THE NEW SCHEME

Subject to the following provisions, all the terms of the New Scheme may be altered in any respect by resolution of the Board without first obtaining Shareholders’ approval given at a general meeting of the Company:

• (i) The provisions of the New Scheme that relate to matters contained in Rule 17.03 of the Listing Rules shall not be altered to the advantage of the Participants unless with the prior sanction of a resolution of the Shareholders in general meeting.

• (ii) Any alterations to the terms and conditions of the New Scheme which are of a material nature or any change to the terms of options granted must be approved by the Shareholders in general meeting, except where the alterations take effect automatically under the existing terms of the New Scheme.

• (iii) The amended terms of the New Scheme or the options must comply with the relevant requirements of Chapter 17 of the Listing Rules.

• (iv) Any change to the authority of the Board in relation to any alteration to the terms of the New Scheme must be approved by the Shareholders in general meeting.

(q) TERMINATION OF THE NEW SCHEME

The Company by resolution passed at a general meeting of its Shareholders or at a meeting of the Board may at any time terminate the operation of the New Scheme and in such event no further options will be granted or accepted but the provisions of the New Scheme shall remain in force in all other respects. All options granted and accepted prior to such termination and not then exercised shall continue to be valid and exercisable subject to and in accordance with the New Scheme.

(r) PERIOD OF THE NEW SCHEME

The New Scheme shall be valid and effective for a period of ten years commencing on the adoption date (i.e., 8th May, 2002, being the date on which the New Scheme is proposed to be adopted), after which period no further options will be issued, and thereafter for so long as there are outstanding any unexercised options granted and accepted pursuant thereto and in order to give effect to the exercise of any such options or otherwise as may be required in accordance with the provisions of the New Scheme.

(s) CONDITIONS

The adoption of the New Scheme is conditional upon: (a) the passing of an ordinary resolution at the 2002 Annual General Meeting approving the adoption of the New Scheme and the termination of the Existing Scheme; and (b) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, any new Shares which may fall to be issued pursuant to the exercise of the options that may be granted under the New Scheme.

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SUMMARY OF NEW SCHEME

APPENDIX

(t) RESTRICTIONS ON THE TIME OF GRANT OF OPTION

Grant of options may not be made: (a) after a price sensitive event has occurred or a price sensitive matter has been the subject of a decision, until such price sensitive information has been published in the newspapers; or (b) within the period commencing one month immediately preceding the earlier of: (i) the date of the Board meeting for the approval of the Company’s interim or annual results; and (ii) the deadline for the Company to publish its interim or annual results announcement, and ending on the date of the results announcement.

(u) GRANT OF OPTIONS TO CONNECTED PERSONS

Where any grant of options is proposed to be made to a director, chief executive or substantial shareholder of the Company, or any of their respective associates, such offer must first be approved by the independent non-executive directors of the Company (excluding the independent non-executive director who is the proposed grantee of the options).

If the grant of options is to be made to a substantial shareholder or an independent non-executive director of the Company, or any of their respective associates, which would result in the Shares issued and to be issued upon exercise of the options proposed to be granted and all options already granted or to be granted (including options exercised, cancelled and outstanding) to such person under the New Scheme and any other share option scheme(s) of the Company and/or its subsidiary in the 12 month period up to and including the proposed date of grant of the option: (a) representing in aggregate over 0.1 per cent (0.1%) of the Shares then in issue; and (b) having an aggregate value, based on the closing price of the Shares at the proposed date of grant of the option, in excess of HK$5 million, such grant of options must first be approved by the Shareholders in general meeting in accordance with the requirements of the Listing Rules with all the connected persons of the Company abstaining from voting (except that any connected person may vote against the relevant resolution at the general meeting provided that his intention to do so has been stated in the circular required to be issued pursuant to the Listing Rules). Any vote taken at the meeting to approve the proposed grant of such options must be taken on a poll. In addition, any proposed change in the terms of options granted to a Participant who is a substantial shareholder or an independent non-executive director of the Company, or any of their respective associates, must first be approved by the Shareholders in general meeting in the same manner as described above.

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