Youzan Technology Limited — Capital/Financing Update 2003

Sep 10, 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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 or transferred all your shares in SYSCAN Technology Holdings Limited, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of SYSCAN Technology Holdings Limited.

The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim 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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SYSCAN Technology Holdings Limited 矽感科技控股有限公司[*]

(Incorporated in Bermuda with limited liability)

(1) PROPOSED CAPITAL REORGANIZATION INVOLVING CAPITAL REDUCTION, SHARE CONSOLIDATION AND CAPITAL INCREASE (2) PROPOSED REDUCTION OF SHARE PREMIUM ACCOUNT (3) PROPOSED PLACING OF 23,000,000 NEW CONSOLIDATED SHARES, SUBJECT TO THE OVER-ALLOTMENT OPTION

Financial Adviser and Placing Agent to SYSCAN Technology Holdings Limited

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A notice convening a special general meeting of SYSCAN Technology Holdings Limited to be held at Function Room I, City Garden Hotel, 9 City Garden Road, North Point, Hong Kong on Monday, 6th October 2003 at 10:00 a.m., is set out on pages 22 to 24 of this circular. A form of proxy for use at the special general meeting is also enclosed.

Whether or not you are able to attend the special general meeting, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the principal place of business and head office of the Company c/o the Company Secretary at Unit 808, 8th Floor, K. Wah Centre, 191 Java Road, North Point, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the special general meeting if you so wish.

* For identification purposes only

10th September 2003

CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET OF THE STOCK EXCHANGE OF HONG KONG LIMITED

GEM has been established as a market designed to accommodate companies to which a high investment risk may be attached. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. Furthermore, there may be risks arising out of the emerging nature of companies listed on GEM and the business sectors or countries in which the companies operate. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

The principal means of information dissemination on GEM is publication on the internet website operated by the Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the GEM website in order to obtain up-to-date information on GEM-listed issuers.

– i –

TABLE OF CONTENTS

	Page
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	iii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Proposed Capital Reorganization Involving Capital Reduction,
Share Consolidation and Capital Increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Proposed Reduction of Share Premium Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Proposed Placing of 23,000,000 New Consolidated Shares,
Subject to the Over-allotment Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22

– ii –

EXPECTED TIMETABLE

2003

Latest time for lodging the proxy forms

for the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on Saturday, 4th October SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10:00 a.m. on Monday, 6th October

Effective date of the Capital Reorganization . . . . . . . . . . . . . . . .9:30 a.m. on Tuesday, 7th October Dealings in Consolidated Shares commences . . . . . . . . . . . . . . . .9:30 a.m. on Tuesday, 7th October

Temporary counter for trading of Consolidated Shares in board lots of 200 Consolidated Shares in the form of existing certificate(s) for existing Shares opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9:30 a.m. on Tuesday, 7th October

Existing counter for trading in Shares in board lots of 2,000 Shares temporarily closes . . . . . . . . . . . . . . . . . . .9:30 a.m. on Tuesday, 7th October First day for free exchange of certificate(s) for existing Shares into new certificate(s) for Consolidated Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9:30 a.m. on Tuesday, 7th October

Existing counter for trading in Consolidated Shares in board lots of 4,000 Consolidated Shares in the form of new certificate(s) for Consolidated Shares re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Tuesday, 21st October

Parallel trading in Consolidated Shares in the form of existing and new certificates commences . . . . . . . . . 9:30 a.m. on Tuesday, 21st October Designated broker starts to stand in the market to provide matching service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 21st October

Last day for trading in Consolidated Shares in board lots of 200 Consolidated Shares

in the form of existing share certificate(s) . . . . . . . . . . . . 4:00 p.m. on Tuesday, 11th November

Last day for designated broker to stand in

the market to provide matching service . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 11th November

Parallel trading in the forms of existing and

new certificates ends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Tuesday, 11th November Last day for free exchange of certificate(s) for existing Shares into new certificate(s) for Consolidated Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 14th November

– iii –

DEFINITIONS

“Announcement”	the announcement of the Company dated 27th August 2003
	and posted on the GEM website on 28th August 2003 in
	relation to the Capital Reorganization, Share Premium
	Reduction and the Placing
“BMA”	Bermuda Monetary Authority
“Board”	board of Directors
“Business Day”	any day (excluding a Saturday) on which banks generally
	are open for business in Hong Kong
“Bye-laws”	the bye-laws of the Company, as amended
“Capital Increase”	the increase of the authorized share capital of the Company,
	after the implementation of the Capital Reduction and the
	Share Consolidation, to HK$200,000,000 divided into
	20,000,000,000 Consolidated Shares by the creation of
	19,800,000,000 additional unissued Consolidated Shares
“Capital Reduction”	the reduction of the share capital of the Company by
	canceling issued and paid-up capital to the extent of
	HK$0.099 on each of the Shares in issue and by reducing
	the nominal value of issued and unissued Shares from
	HK$0.10 each to HK$0.001 each
“Capital Reorganization”	the reorganization of the share capital of the Company by
	way of the Capital Reduction, the Share Consolidation and
	the Capital Increase
“CCASS”	the Central Clearing and Settlement System established and
	operated by HKSCC
“Companies Act”	the Companies Act 1981 of Bermuda (as amended)
“Companies Ordinance”	the Companies Ordinance (Chapter 32 of the Laws of Hong
	Kong)
“Company”	SYSCAN Technology Holdings Limited, an exempted
	company incorporated in Bermuda whose shares are listed
	on the GEM and is principally engaged in the design,
	research, development, manufacturing and distribution of
	optical image capturing devices and related components
“Completion”	completion of the Placing
“Consolidated Share(s)”	ordinary share(s) of HK$0.01 in the share capital of the
	Company upon the Capital Reorganization becoming
	effective

– 1 –

DEFINITIONS

“Directors”	directors of the Company
“GEM”	the Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules”	the Rules Governing the Listing of Securities on the GEM
“Group”	the Company and its Subsidiaries
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“HKSCC”	Hong Kong Securities Clearing Company Limited
“Latest Practicable Date”	8th September 2003, being the latest practicable date prior
	to the printing of this circular for the purpose of ascertaining
	certain information in this circular
“Long Stop Date”	31st October 2003 (or such later date as the Company and
	the Placing Agent may agree in writing)
“Over-allotment Option”	the option granted by the Company to the Placing Agent, to
	require the Company to issue up to a maximum of
	23,000,000 additional Consolidated Shares at the Placing
	Price to cover over-allocations in the Placing, if any
“Over-allotment Shares”	the Consolidated Shares which may be allotted and issued
	by the Company pursuant to the exercise of the
	Over-allotment Option
“Placing”	the placing and subscription of the Placing Shares on the
	terms and subject to the conditions set out in the Placing
	Agreement
“Placing Agent”	Baron Capital Limited, a deemed licensed corporation
	registered under the Securities and Futures Ordinance
	(Chapter 571 of the Laws of Hong Kong) which is not a
	connected person as defined under the GEM Listing Rules
“Placing Agreement”	the conditional subscription agreement dated 26th August
	2003 entered into between the Company and the Placing
	Agent regarding the Placing
“Placing Shares”	23,000,000 new Consolidated Shares to be allotted and
	issued pursuant to the Placing Agreement and where
	relevant, any additional new Consolidated Shares to be
	issued pursuant to the exercise of the Over-allotment Option
“Placee(s)”	the subscriber(s) of the Placing Shares procured by the
	Placing Agent pursuant to the Placing Agreement

– 2 –

DEFINITIONS

“Placing Price”	HK$0.55 per Placing Share
“PRC”	the People’s Republic of China
“Reduced Share(s)”	ordinary share(s) of HK$0.001 in the share capital of the
	Company immediately following the implementation of the
	Capital Reduction but before the Share Consolidation
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
“SGM”	the special general meeting of the Company to be held at
	Function Room I, City Garden Hotel, 9 City Garden Road,
	North Point, Hong Kong on 6th October 2003 at 10:00 a.m.,
	a notice of which is set out on pages 22 to 24 of this
	circular, or any adjournment thereof
“Share Consolidation”	the consolidation of the entire share capital of the Company
	whereby every 10 issued and unissued Reduced Shares will
	be consolidated into 1 Consolidated Share
“Share(s)”	ordinary share(s) of HK$0.10 each in the capital of the
	Company
“Share Option(s)”	share option(s) granted under the Share Option Schemes to
	subscribe for Shares
“Share Option Schemes”	Share Option Scheme A, Share Option Scheme B and Share
	Option Scheme C which were adopted by the Company on
	2nd March 2000, 2nd March 2000 and 26th April 2002,
	respectively
“Share Premium Account”	the share premium account of the Company
“Share Premium Reduction”	the proposed reduction of the Share Premium Account as
	announced on the Announcement
“Shareholder(s)”	holder(s) of Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subsidiary”	has the same meaning as in Section 2 of the Companies
	Ordinance as at the date hereof
“%”	per cent.

– 3 –

LETTER FROM THE BOARD

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SYSCAN Technology Holdings Limited 矽感科技控股有限公司[*]

(Incorporated in Bermuda with limited liability)

Executive Directors Cheung Wai (Chairman) Darwin Hu

Independent Non-executive Directors

Lo Wai Ming Lo Hang Fong

Registered office

Cedar House 41 Cedar Avenue Hamilton, HM 12 Bermuda

Principal place of business and head office

Unit 808, 8th Floor K. Wah Centre 191 Java Road North Point Hong Kong

10th September 2003

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

Dear Sir and Madam,

(1) PROPOSED CAPITAL REORGANIZATION INVOLVING CAPITAL REDUCTION, SHARE CONSOLIDATION AND CAPITAL INCREASE (2) PROPOSED REDUCTION OF SHARE PREMIUM ACCOUNT (3) PROPOSED PLACING OF 23,000,000 NEW CONSOLIDATED SHARES, SUBJECT TO THE OVER-ALLOTMENT OPTION

1. INTRODUCTION

It was announced by the Company on 28th August 2003 that the Board proposed to effect the Capital Reorganization comprising the Capital Reduction, Share Consolidation and the Capital Increase, and the Share Premium Reduction. It was also announced that the Board proposed to change the board lot size from 2,000 Shares to 4,000 Consolidated Shares upon the Capital Reorganization becoming effective, and that the Company entered into the Placing Agreement with the Placing Agent on 26th August 2003.

* For identification purposes only

– 4 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with further details relating to the Capital Reorganization, change in board lot size, parallel trading arrangements, arrangements of odd lot facilities, arrangements for free exchange of share certificates for the Consolidated Shares, the Share Premium Reduction and the Placing, and to give you the notice of the SGM at which necessary resolutions will be proposed to consider, and if though fit, approve the Capital Reorganization, the Share Premium Reduction and the Placing.

2. PROPOSED CAPITAL REORGANIZATION INVOLVING CAPITAL REDUCTION, SHARE CONSOLIDATION AND CAPITAL INCREASE

The Board proposes to effect the Capital Reorganization pursuant to which:

• (i) the issued share capital of the Company will be reduced by canceling the paid-up capital to the extent of HK$0.099 on each issued Share and the nominal value of all the Shares comprising the authorized share capital will be reduced from HK$0.10 to HK$0.001 per Share such that the authorized share capital is reduced from HK$200,000,000 to HK$2,000,000;

• (ii) every 10 Reduced Shares of nominal value HK$0.001 each will be consolidated into 1 Consolidated Share of nominal value HK$0.01 each;

• (iii) the authorized share capital of the Company (after the Capital Reduction and Share Consolidation) will be restored back to HK$200,000,000 by the creation of additional unissued 19,800,000,000 Consolidated Shares; and

• (iv) the credit of HK$101,340,684.63 arising from the Capital Reduction on the basis of 1,023,643,279 Shares in issue will be transferred to the contributed surplus account and the Directors will be authorized to fully apply such credit towards the partial elimination of the accumulated losses of the Company as at 31st December 2002, being the date to which the latest published audited accounts of the Company were drawn up as permitted by the laws of Bermuda and the Bye-laws.

Reasons for the Capital Reorganization

The Board noted that the Shares have been traded at prices below their nominal value of HK$0.10. The closing price of the Shares on 12th August 2003 (being the last day of trading in the Shares on the Stock Exchange immediately preceding 13th August 2003, the day on which the Shares were suspended trading prior to the release of the Announcement) was HK$0.064 per Share. Under Bermuda’s laws, a company, including the Company, is not allowed to issue shares at a discount to the nominal value of such shares. Following the Capital Reorganization, the nominal value of the Consolidated Shares will be HK$0.01 each and the market price of the Consolidated Shares is expected to be higher than their nominal value as a result of the Share Consolidation. With a view to facilitating the proposed Placing and/or any fund-raising exercise or asset acquisition by way of allotment or placement of shares when the Board considers the circumstances so require in the future, the Board considers that the Capital Reorganization will be of interests to the Company and the Shareholders as a whole. Save for the Placing, the Board currently has no planned fund-raising activities following the Capital Reorganization.

– 5 –

LETTER FROM THE BOARD

Effects of the Capital Reorganization

As at the Latest Practicable Date, the authorized share capital of the Company was HK$200,000,000 divided into 2,000,000,000 Shares of which 1,023,643,279 Shares were issued and credited as fully paid. Immediately upon the Capital Reorganization becoming effective and on the basis that 1,023,643,279 Shares will be in issue immediately prior to the Capital Reduction becoming effective, the authorized share capital of the Company will remain unchanged at HK$200,000,000 but the number of authorized shares shall be divided into 20,000,000,000 Consolidated Shares of which 102,364,327 Consolidated Shares will be in issue and credited as fully paid.

The following is a table setting out the effects of the Capital Reorganization on the authorized and issued capital of the Company:

					Immediately after	Immediately after		Immediately after	Immediately after
		As at the	Latest		the Capital	Reduction		the Capital Reorganization
		Practicable Date			becomes effective(Note)			becomes effective
						Number of			Number of
		Nominal	Number of		Nominal	Reduced		Nominal	Consolidated
		Value	Shares		Value	Shares		Value	Shares
	HK$	HK$		HK$	HK$		HK$	HK$
Authorized
share capital	200,000,000	0.10	2,000,000,000	2,000,000	0.001	2,000,000,000	200,000,000	0.01	20,000,000,000
Issue share capital,
credited as
fully paid	102,364,327.90	0.10	1,023,643,279	1,023,643.27	0.001	1,023,643,279	1,023,643.27	0.01	102,364,327

Note: Based on 1,023,643,279 Shares in issue immediately prior to the Capital Reduction becoming effective.

A credit of HK$101,340,684.63 arising from the Capital Reduction will be fully applied towards the partial elimination of the accumulated losses of the Company as at 31st December 2002.

As at the Latest Practicable Date, 175,040,000 Shares are subject to the outstanding Share Options granted under the Share Option Schemes. Assuming that all of the outstanding Share Options were to be exercised in full prior to the effective date of the Capital Reorganization, an additional 175,040,000 Shares would be in issue and an additional credit of HK$17,328,960 would arise from the Capital Reduction as a result of the exercise of the Share Options. Such credit, if so arising, will also be applied towards the partial elimination of the accumulated losses of the Company as at 31st December 2002, which amounted to HK$250,471,038. The potential aggregate credit as a result of the Capital Reduction is HK$118,669,644.63. The exercise price of the Share Options and/or the number of shares subject to the Share Options will be adjusted in accordance with the rules of the Share Option Schemes.

– 6 –

LETTER FROM THE BOARD

The auditors of the Company will upon the Capital Reorganization becoming effective issue a certificate as to the adjustments required under the rules of the Share Option Schemes and Rule 23.03(13) of the GEM Listing Rules to certify the necessary adjustments for the outstanding Share Options, namely, (1) the exercise prices thereof shall be multiplied by 10 and (2) the number of shares to be issued pursuant to the exercise thereof shall be divided by 10, are fair and reasonable.

The Board believes that the Capital Reorganization will not alter the underlying assets and liabilities, business operations or management of the Company or the proportionate interests of the Shareholders, except for the payment of the related expenses, including Placing commission, legal fees, printing fees and other expenses, of approximately HK$800,000.00. The Board believes that the Capital Reorganization will not have any adverse effect on the financial position, business operation or underlying assets of the Group.

The Capital Reorganization will not result in any change in the relative rights of the Shareholders, except that any fractions of the Consolidated Shares to which the Shareholders would otherwise be entitled upon the Capital Reorganization becoming effective will be aggregated and sold for the benefit of the Company.

The Consolidated Shares that will be in issue upon the Capital Reorganization becoming effective will rank pari passu in all respects with each other, having the rights attached to the shares as set out in the Bye-laws.

Conditions of the Capital Reorganization

The Capital Reorganization will be conditional upon the following:–

• (i) the passing by the Shareholders of a special resolution to be proposed at the SGM approving the Capital Reorganization comprising the Capital Reduction, Share Consolidation and the Capital Increase; and

• (ii) the GEM Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Consolidated Shares in issue and the Consolidated Shares which may be issued pursuant to the exercise of the Share Options and options which may be granted under the Share Option Schemes;

and will become effective on 7th October 2003, being the first Business Day immediately after the day on which the resolution for the Capital Reorganization is passed by the Shareholders at the SGM. The Company will make an announcement on the results of the SGM on 7th October 2003. Neither court sanction nor BMA’s approval will be required for the Capital Reorganization under section 46 of the Companies Act but the Company is required to publish a notice in an appointed newspaper in Bermuda in respect of the Capital Reduction and to file a memorandum in respect of the Capital Reorganization with the Registrar of Companies in Bermuda in accordance with the Companies Act.

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LETTER FROM THE BOARD

Application for listing

Application has been made to the GEM Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Consolidated Shares.

Subject to the granting of listing of, and permission to deal in, the Consolidated Shares on the Stock Exchange, the Consolidated Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Consolidated Shares on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Change in board lot size and trading arrangements

Upon the Capital Reorganization becoming effective, the Board also proposes that the board lot size for trading on GEM be changed from 2,000 Shares to 4,000 Consolidated Shares. Based on the closing price of HK$0.064 per Share as quoted on the Stock Exchange on 12th August 2003, being the last day of trading in the Shares on the Stock Exchange immediately preceding 13th August 2003, the day on which the Shares were suspended trading prior to the release of the Announcement, each board lot of 4,000 Consolidated Shares will have a market value of HK$2,560.

The proposed change in board lot size will increase the number of Consolidated Shares for each board lot and such increase is expected to result in a reduction of the transaction costs for dealings in the Consolidated Shares.

In order to facilitate the trading of odd lots (if any), the Company has appointed Ping An Securities Limited as an agent on a best effort basis to arrange for the sale and purchase of odd lots on behalf of the Shareholders and potential investors. During the period from Tuesday, 21st October 2003 to Tuesday, 11th November 2003 (both dates inclusive), holders of Consolidated Shares who wish to take advantage of this facility either to dispose of their odd lots or to top them up to a full board lot may contact Ping An Securities Limited during the aforesaid period as follows:

Contact person	Address	Telephone number
Mr. Huton Lee Wai Ming	4th Floor	(852) 2805-2077
	Aon China Building
	29 Queen’s Road Central
	Central, Hong Kong

Holders of Consolidated Shares in odd lots should note that the matching of odd lots is not guaranteed.

– 8 –

LETTER FROM THE BOARD

Assuming the special resolution(s) approving the Capital Reorganization is/are passed by the Shareholders at SGM, from 9:30 a.m. on Tuesday, 7th October 2003, the existing counter for trading in the Shares in board lots of 2,000 Shares will be temporarily closed. A temporary counter will be established for trading in the Consolidated Shares in board lots of 200 Consolidated Shares. Every 10 Shares will be deemed to represent 1 Consolidated Share. Certificates for existing Shares may only be traded at this temporary counter.

With effect from 9:30 a.m. on Tuesday, 21st October 2003, the existing counter for trading in Shares will be reopened for trading in Consolidated Shares in board lots of 4,000 Consolidated Shares.

From 9:30 a.m. on Tuesday, 21st October 2003 to 4:00 p.m. on Tuesday, 11th November 2003 (both dates inclusive), there will be parallel trading at the above two counters. The temporary counter for trading in the Consolidated Shares in board lots of 200 Consolidated Shares will be removed after the close of trading on Tuesday, 11th November 2003. Thereafter, trading will be in Consolidated Shares in board lots of 4,000 Consolidated Shares only and the existing certificates for the Shares will cease to be marketable and will not be acceptable for dealing purpose. However, such certificates will remain effective as documents of title.

If you are in any doubt as to the above arrangements, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

Free exchange of certificates for the Consolidated Shares

Subject to the passing of the special resolution(s) approving the Capital Reorganization, Shareholders may, from 9:30 a.m. on Tuesday, 7th October 2003 until 4:00 p.m. on Friday, 14th November 2003, submit certificates for the Shares to the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at Shops 17121716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, for exchange, at the expense of the Company, for certificates for the Consolidated Shares. Thereafter, certificates for the Shares will be accepted for exchange for certificates for the Consolidated Shares on payment of a fee of HK$2.50 (or such higher amount as may be stipulated in the GEM Listing Rules from time to time) for each new certificate to be issued or each old certificate submitted, whichever number of certificates is higher.

It is expected that new certificates for the Consolidated Shares will be available for collection on or after the 10th Business Day from the date of submission of the existing certificates for the Shares to the Company’s branch share registrar at the above address. Unless otherwise instructed, new certificates will be issued in the board lot size of 4,000 Consolidated Shares.

– 9 –

LETTER FROM THE BOARD

3. PROPOSED REDUCTION OF SHARE PREMIUM ACCOUNT

The Board also proposes to fully reduce the Share Premium Account pursuant to the laws of Bermuda and the Bye-laws. The amount standing to the credit of the Share Premium Account of the Company as at 31st December 2002 was HK$101,377,902. It is proposed that the Share Premium Account as at the effective date of the Share Premium Reduction, being the date on which the special resolution therefor is passed by the Shareholders, be fully reduced to nil and that the credit arising therefrom be applied to eliminate the accumulated loss as at 31st December 2002, which amounted to HK$250,471,038.

Reasons for the Share Premium Reduction

As at 31st December 2002, the Company recorded an accumulated loss of HK$250,471,038. The Share Premium Reduction will enable the Company to eliminate part of the accumulated loss and, as a result, enable the Company to make distribution for payment of dividends from retained earnings account in future. It is considered to be in the best interest of the Company and the Shareholders as a whole to implement the Share Premium Reduction.

Effect of the Share Premium Reduction

The implementation of the Share Premium Reduction will not affect the underlying assets, business operations, management or financial position of the Company or the proportionate interests of the Shareholders. The Directors consider that the Share Premium Reduction will not cause any loss in the Shareholders’ funds of the Company. The Directors consider that the Share Premium Reduction will not have a material adverse effect on the financial position of the Company.

Conditions of the Share Premium Reduction

The Share Premium Reduction is conditional upon, inter alia, the passing of a special resolution to approve the Share Premium Reduction at the SGM. The Company is required to comply with section 46 of the Companies Act, including the publication of a notice of the reduction of the Share Premium Account in an appointed newspaper in Bermuda and the filing of a memorandum in respect of the Share Premium Reduction with the Registrar of Companies in Bermuda. No court sanction is required for the proposed Share Premium Reduction under section 46 of the Companies Act.

The Company will publish a notice in an appointed newspaper in Bermuda in respect of reduction of the Share Premium Account in accordance with the Companies Act on or before 6th October 2003.

– 10 –

LETTER FROM THE BOARD

4. PROPOSED PLACING OF 23,000,000 NEW CONSOLIDATED SHARES, SUBJECT TO THE OVER-ALLOTMENT OPTION

Principal terms of the Placing Agreement

The principal terms and conditions of the Placing Agreement were arrived at after arm’s length negotiation between the Company and the Placing Agent and are summarized as below:

Date : 26th August 2003 Issuer : The Company Placing Agent : Baron Capital Limited The Placing Agent and its beneficial owner(s) are independent of and not connected with the directors, chief executives, substantial shareholders or management shareholders of the Company or any its subsidiaries or any of their respective associates (as defined in the GEM Listing Rules) Placee(s) : The Placing Shares will be placed to not less than six Placees. The Directors have confirmed that none of the Placees will become substantial Shareholders immediately after the Placing Number of Placing : 23,000,000 new Consolidated Shares to be issued Shares under the Placing Agreement plus up to a maximum of 23,000,000 additional Consolidated Shares if the Over-allotment Option is exercised in full, which in aggregate represent approximately 44.94% of the existing issued share capital of the Company and approximately 31.00% of the issued share capital of the Company as enlarged by the Placing. None of the Placing Shares is underwritten Placing Price : HK$0.55 per Placing Share (approximately HK$0.53 per Placing Share if net of related expenses and assuming the Over-allotment Option is exercised or approximately HK$0.52 per Placing Share if net of related expenses and assuming the Over-allotment Option is not exercised) Ranking of the Placing : the Placing Shares, when fully paid, will rank pari Shares passu in all respects with the Consolidated Shares then in issue as at the date of the issue of the Placing Shares

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LETTER FROM THE BOARD

The Directors believe that the terms of the Placing Agreement are fair and reasonable and in the interests of the Shareholders as a whole.

Conditions of the Placing

Completion of the Placing Agreement will be conditional, inter alia, upon the following conditions being satisfied at or before 5:00 p.m. on the Long Stop Date:–

• (i) the passing of special resolution(s) by the Shareholders at the SGM approving the Capital Reorganization;

• (ii) the passing of ordinary resolution(s) by the Shareholders at the SGM approving the Placing Agreement and the issue of the Placing Shares and the Overallotment Shares;

• (iii) the GEM Listing Committee of the Stock Exchange granting or agreeing to grant the listing of, and permission to deal in the Placing Shares and the Overallotment Shares; and

• (iv) the obtaining by all parties concerned of all necessary consents, approvals or waivers to effect the signing and completion of the Placing Agreement.

Force majeure

The Placing Agreement will be subject to the following force majeure events, in which the Placing Agent may rescind the Placing Agreement at any time prior to the Completion:–

• (A) if there has come to the notice of the Placing Agent:–

• (i) any material breach of the warranties by the Company as stipulated in the Placing Agreement; or

• (ii) any material breach of any of the obligations imposed upon the Company under the Placing Agreement; or

• (iii) any act or thing done by or omission of any member of the Group otherwise than in the ordinary course of business whereby any of warranties by the Company as stipulated in the Placing Agreement would not be true in any material respect if given at that time;

• (B) if there develops, occurs, or comes into effect the occurrence of any event, development or change (whether or not local, national or international or forming part of a series of events, developments or changes occurring after the date hereof) and including an event or change in relation to or a development of an existing state of affairs of a political, military, industrial, financial, economic,

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LETTER FROM THE BOARD

fiscal, regulatory or other nature, whether or not sui generis with any of the foregoing, resulting in a material adverse change in, or which might be expected to result in a material adverse change in, political, economic, fiscal, financial, regulatory or stock market conditions and which in the reasonable opinion of the Placing Agent would materially prejudice the success of the Placing;

• (C) if there is introduction of any new law or regulation or any change in existing laws or regulations or change in the interpretation or application thereof which materially and adversely affects the business or financial prospects of the Company or any member of the Group; or

• (D) the imposition of any moratorium, suspension or material restriction on trading in securities generally on the Stock Exchange for more than 10 trading days occurring due to exceptional financial circumstances or otherwise.

If the Placing Agent exercises such right to rescind the Placing Agreement, the Placing will not proceed.

The Over-allotment Option

The Company has granted the Over-allotment Option to the Placing Agent, pursuant to which the Placing Agent may require the Company to issue a maximum of 23,000,000 additional Consolidated Shares at the Placing Price to cover over-allocations in the Placing. The Over-allotment Option may be exercisable by the Placing Agent by giving written notice to the Company (in its absolute discretion) from 5:00 p.m. on 26th August 2003, being the date of the Placing Agreement, and will expire on the close of business on the second Business Day before the date of Completion, and may be exercised in whole or in part for one time only during such period.

Application for listing

Application has been made to the GEM Listing Committee of the Stock Exchange for the granting of the listing of, and permission to deal in the Placing Shares and the Over-allotment Shares.

Placees

The Placing Shares will be placed to not less than six Placees. The Directors have confirmed that none of the Placees will become substantial Shareholders immediately after the Placing.

Placing Shares

If the Over-allotment Option is not exercised, a total of 23,000,000 new Consolidated Shares, representing 22.47% of the existing issued share capital of the Company, and approximately 18.35% of the share capital of the Company as enlarged by the Placing, are to be placed to and to be subscribed by independent investors. If the Over-allotment Option

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LETTER FROM THE BOARD

is exercised in full, additional 23,000,000 new Consolidated Shares are to be placed to and to be subscribed by independent investors, which in aggregate representing 44.94% of the existing issued share capital of the Company, and approximately 31.00% of the share capital of the Company as enlarged by the Placing.

Placing Price

The Placing Price of HK$0.55 per Placing Share (or HK$25,300,000 for all the 46,000,000 Placing Shares in aggregate) was arrived at after arm’s length negotiations between the Company and the Placing Agent with reference to prevailing market prices of the Shares. It represents a discount of approximately 14.06% to the closing price of HK$0.64 per 10 Shares as quoted on the Stock Exchange on 12th August 2003, being the last day of trading in the Shares on the Stock Exchange immediately preceding 13th August 2003, being the day on which the Shares were suspended trading prior the release of the Announcement and a discount of approximately 27.06% to the average closing price of approximately HK$0.754 per 10 Shares as quoted on the Stock Exchange for the last five trading days up to and including 12th August 2003. Despite its significant discount to the market price of a Share, the Placing Price is considered by the Directors (including the independent non-executive Directors) to be fair and reasonable as the Company has recorded substantial losses in the past 3 years and the relatively low volatility of the Shares traded on GEM, which makes it very difficult, if not impossible, to attract new investors without offering significant discount.

Ranking of Placing Shares

The Placing Shares, when allotted and issued, will rank pari passu in all respects with the Consolidated Shares then in issue, including the right to receive all dividends, bonuses or distributions declared or proposed to be declared or paid by the Company as from the date of such allotment and issue.

Completion of the Placing

Completion of the Placing will take place at 11:00 a.m. on or before the third Business Day after the fulfillment of the conditions set out under the paragraph headed “Conditions of the Placing” above. If the conditions of the Placing are not fulfilled on or before the Long Stop Date, the Placing will lapse.

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LETTER FROM THE BOARD

Dilution effect pursuant to the Placing

Upon completion of the Placing, the dilution effect on the shareholding of the Company shall be as follows:–

Shareholders Mr. Cheung Wai_Note_ Mr. Darwin Hu_Note_ Public Total:	Before completion of the Placing (assuming the Capital Reorganization becomes effective) No. of % of Consolidated issued share Shares capital 11,030,000 10.78 5,455,600 5.33 85,878,727 83.89 102,364,327 100.00	Immediately after completion of the Placing without exercising the Over-allotment Option (assuming the Capital Reorganization becomes effective) No. of % of Consolidated issued share Shares capital 11,030,000 8.80 5,455,600 4.35 108,878,727 86.85 125,364,327 100.00	Immediately after completion of the Placing with the Over-allotment Option being exercised fully (assuming the Capital Reorganization becomes effective) No. of % of Consolidated issued share Shares capital 11,030,000 7.43 5,455,600 3.68 131,878,727 88.89 148,364,327 100.00	Immediately after completion of the Placing with the Over-allotment Option being exercised fully (assuming the Capital Reorganization becomes effective) No. of % of Consolidated issued share Shares capital 11,030,000 7.43 5,455,600 3.68 131,878,727 88.89 148,364,327 100.00
				100.00

Note: Each of Mr. Cheung Wai and Mr. Darwin Hu is an executive Director.

The Placing Shares will be placed to not less than 6 Placees who are institutional, professional or individual investors and are independent of, not connected with and not acting in concert with any of the Directors, chief executives or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates. The Directors have confirmed that none of the Placees will become substantial Shareholders immediately after the Placing. In addition, the Placing Agent has undertaken to the Company to make arrangement to ensure that no Placee nor the Placing Agent will hold more than 20% or more of the issued share capital of the Company as enlarged by the Placing.

The Directors confirmed that based on the aforesaid, the minimum public float of 15% as required by the GEM Listing Rules can be maintained after the completion of the Placing. The Directors also confirmed that the completion of the Placing will not result in a change of control of the Company.

Information of the Company

The Group’s business is the field of optical electronic industry, and is principally engaged in the design, research, development, manufacturing and distribution of optical image capturing devices and related components.

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LETTER FROM THE BOARD

Reasons for the Placing and the use of proceeds

The Company intends to apply the net proceeds of approximately HK$24.5 million (assuming the Over-allotment Option is exercised in full) or approximately HK$12 million (assuming the Over-allotment Option is not exercised) from the Placing as follows:–

Net proceeds from the Placing of Net proceeds from the Placing of HK$24.5 million if the Over-allotment HK$12 million if the Over-allotment Option is exercised in full Option is not exercised

HK$20 million for repayment of existing accounts payables/debts and repayment of bank loans

HK$10 million for repayment of existing accounts payables/debts

HK$4.5 million for general working HK$2 million for general working capital capital Total: HK$24.5 million Total: HK$12 million

The Directors consider that it is in the best interest of the Company to raise further equity capital by way of Placing instead of raising capital by way of debt financing which would increase the Group’s gearing ratio.

5. SGM

The notice of the SGM is set out on pages 22 to 24. At the SGM, the Directors will seek the approval from the Shareholders for the Capital Reorganization and the reduction of the Share Premium Account. If the Shareholders approve the Capital Reorganization, the Directors will at the SGM immediately seek the approval from the Shareholders for the Placing, which is conditional on the Capital Reorganization becoming effective.

A form of proxy for use at the SGM is enclosed with this circular. In order to be valid, the form of proxy must be deposited at the principal place of business and head office of the Company in Hong Kong at Unit 808, 8th Floor, K. Wah Centre, 191 Java Road, North Point, Hong Kong together with the power or attorney or other authority (if any) under which it is signed or a notarially certified copy of such power of attorney or authority, not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the SGM if you so wish.

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LETTER FROM THE BOARD

6. RECOMMENDATION

The Directors consider that the proposed Capital Reorganization, Share Premium Reduction and the Placing are fair and reasonable and in the interests of the Company and the Shareholders. Accordingly, the Directors recommend the Shareholders to vote in favour of the relevant resolutions to be proposed at the SGM.

7. GENERAL INFORMATION

Your attention is drawn to the information set out in the section headed “General Information” of this circular.

By order of the board of SYSCAN Technology Holdings Limited Cheung Wai Chairman

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GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:– (1) the information contained in this circular is accurate and complete in all material respects and not misleading; (2) there are no other matters the omission of which would make any statement in this circular misleading; and (3) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

2. DISCLOSURE OF INTERESTS

(a) INTERESTS OR SHORT POSITIONS OF DIRECTORS IN THE SHARE CAPITAL OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS

As at the Latest Practicable Date, the interests and short positions of the Directors or chief executives of the Company in the shares, debentures or underlying shares of the Company or any of their associated corporations (within the meaning of Part XV of the SFO) which had to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he was taken or deemed to have under such provisions of the SFO) or which were required pursuant to section 352 of the SFO, to be entered in the register referred therein or which were required, pursuant to Rules 5.40 to 5.58 of the GEM Listing Rules relating to securities transactions by directors, to be notified to the Company and the Stock Exchange were as follows:–

Long position in Shares

			No of Shares	held
	Personal	Family	Corporate		% of
	Interest	Interest	Interest	Total	Interest
Mr. Cheung Wai	7,200,000	–	103,100,000	110,300,000	10.78%
			(Note 1)
Mr. Darwin Hu	38,400,000	16,156,000	–	54,556,000	5.33%
		(Note 2)

Notes:

• (1) 48,000,000 Shares and 55,100,000 Shares were held by Haing Assets Limited and Simrita Investments Limited, respectively, both of which are wholly and beneficially owned by Mr. Cheung Wai.

• (2) These Shares were held by Mrs. Sonya Hsiu-Yu Hu, the spouse of Mr. Darwin Hu.

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GENERAL INFORMATION

Long positions in underlining shares of the Company (Share Options granted to the Directors)

			Number of
			Share Options held
			as at the Latest
Name	Date of grant	Exercise price	Practicable Date	Exercise period
Mr. Cheung Wai	19th June 2000	HK$0.33	5,000,000	19th June 2001 to
				18th June 2010
Mr. Darwin Hu	19th June 2000	HK$0.33	5,000,000	19th June 2001 to
				18th June 2010
	17th January 2001	HK$0.206	18,000,000	17th January 2002 to
				16th January 2011

• (b) PERSONS WHO HAVE AN INTEREST OR SHORT POSITION WHICH IS DISCLOSEABLE UNDER DIVISION 2 AND 3 OF PART XV OF THE SFO AND SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as was known to the Directors, the following person, not being a Director or a chief executive of the Company, had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or be directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group:–

		Nature of	Number of	% of issued
Name	Capacity	interest	shares	share capital
Mr. Joseph Liu	Beneficial	Personal &	72,000,000	7.03%
(Note)		family

Note: In addition to the 19,200,000 Shares held by Mr. Joseph Liu, 52,800,000 Shares were held by Messrs. Emmy Liu, Shirley Liu, Hui Chuan Liu and H.S.Liu, family associates of Mr. Joseph Liu.

3. AUDIT COMMITTEE

The Company established an audit committee on 2nd May 2000 with written terms of reference in compliance with Rules 5.23 to 5.27 of the GEM Listing Rules. The primary duty of the audit committee are to review the Company’s annual report and accounts, half-yearly reports and quarterly reports and to provide advice and comments thereon to the Board. The audit committee is also responsible for reviewing and supervising the Company’s financial reporting and internal procedures.

– 19 –

GENERAL INFORMATION

The audit committee comprises two independent non-executive Directors, namely, Messrs. Lo Wai Ming and Lo Hang Fung. The chairman of the audit committee is Mr. Lo Wai Ming.

Mr. Lo Wai Ming is the founder and president of Greater China Asset Management Limited. He has over 26 years’ extensive experience in investment, consumer marketing, business development and corporate finance including positions of managing director of Citifood Company International Limited, director of Cosmos Machinery Enterprises Limited and managing director of Ocean Grand Holdings Limited. He holds a master degree in business administration of the Chinese University of Hong Kong. He is also a member of the Chartered Institute of Marketing and Chartered Management Institute of the United Kingdom. Presently, he is also the director and general manager of SW China Strategic Holdings Limited.

Mr. Lo Hang Fong is a solicitor practising in Hong Kong. He holds a bachelor degree in laws from the University of Bristol in England and a diploma in Chinese laws from the Chinese Law Society. Mr. Lo is currently a partner with Messrs. Stevenson, Wong & Co., Solicitors & Notaries in Hong Kong. He has acquired over 12 years of experience in corporate advisory on mergers and acquisitions, initial public offerings and loan syndication.

4. SERVICE CONTRACTS

None of the Directors has or proposes to have a service agreement with any member of the Group which is not expiring or determinable by such member within one year without payment of compensation (other than statutory compensation).

5. INTEREST OF DIRECTORS

• (i) Save for the lease agreement entered into between the Company and Mr. Cheung Wai in respect of the premises of the principal place of business and head office of the Company for a term of 2 years from 8th January 2002 to 7th January 2004 at a monthly rent of HK$18,000, none of the Directors has since 31st December 2002, being the date to which the latest published audited accounts of the Group have been made up, any direct or indirect interests in any assets acquired or disposed of by or leased to or proposed to be acquired or disposed of by or leased to any member of the Group.

• (ii) None of the Directors was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which is significant in relation to the business of the Group.

• (iii) None of the Directors and management shareholders of the Company has any business or interest in any business that competes or may compete with the business of the Group or other conflicts of interest with the Group.

– 20 –

GENERAL INFORMATION

6. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and there was no litigation or claims of material importance known to the Directors to be pending or threatened by or against any member of the Group.

7. MISCELLANEOUS

• (a) The secretary of the Company is Ms. Chow Suk Han, Caroline, an associate member of each of The Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Company Secretaries.

• (b) The qualified accountant of the Company appointed pursuant to Rule 5.10 of the GEM Listing Rules is Mr. Chan Man Ching. Mr. Chan graduated from the University of South Australia with a bachelor degree in accountancy. He is also an associate member of the Hong Kong Society of Accountants and a member of CPA Australia.

• (c) The compliance officer of the Company appointed pursuant to Rule 5.14 of the GEM Listing Rules is Mr. Cheung Wai. Mr. Cheung holds a bachelor degree in electronic engineering from China Central Institute of Technology in PRC.

• (d) The registered office of the Company is situated at Cedar House, 41 Cedar Avenue, Hamilton, HM 12, Bermuda. The principal place of business and head office of the Company in Hong Kong is situated at Unit 808, 8th Floor, K. Wah Centre, 191 Java Road, North Point, Hong Kong.

• (e) In the event of inconsistency, the English text of this circular and the form of proxy shall prevail over the Chinese text.

• (f) Dealings in securities of the Company may be settled through CCASS and that investors should seek the advice of their stockbroker or other professional advisor for details of those settlement arrangement and how such arrangements will affect their rights and interests.

– 21 –

NOTICE OF SGM

==> picture [33 x 28] intentionally omitted <==

SYSCAN Technology Holdings Limited 矽感科技控股有限公司[*]

(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting (the “SGM”) of SYSCAN Technology Holdings Limited (the “Company”) will be held at 10:00 a.m. on Monday, 6th October 2003 at Function Room I, City Garden Hotel, 9 City Garden Road, North Point, Hong Kong for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolutions as special resolutions or ordinary resolutions (as the case may be) respectively:–

SPECIAL RESOLUTIONS

• (1) “ THAT with effect from 7th October 2003 (Hong Kong time), being the day following the date on which this resolution is passed (the “Effective Date”) and conditional upon (i) the GEM Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of, and the permission to deal in, the shares of HK$0.01 each in the share capital of the Company upon the Capital Reduction (as defined below), the Share Consolidation (as defined below) and the Capital Increase (as defined below) (together the “Capital Reorganization”) becoming effective:–

• (a) the issued share capital of the Company be reduced by canceling the paid-up capital to the extent of HK$0.099 on each issued share of HK$0.10 each (“Share”) in issue on the Effective Date so that the issued share capital is reduced from HK$102,364,327.90 by HK$101,340,684.63 to HK$1,023,643.27 and the nominal value of all the Shares comprising the authorized share capital be reduced from HK$0.10 to HK$0.001 per Share such that the authorized share capital is reduced from HK$200,000,000 to HK$2,000,000 (the “Capital Reduction”) with the result that the nominal value of all issued and unissued shares in the capital of the Company immediately after the Capital Reorganization shall be HK$0.001 per share (“Reduced Share”);

• (b) every 10 Reduced Shares of nominal value HK$0.001 each be consolidated into 1 share of HK$0.01 each (“Consolidated Share”) in the share capital of the Company (the “Share Consolidation”);

• (c) the authorized share capital of the Company (after the Capital Reduction and Share Consolidation) be increased from HK$2,000,000 to HK$200,000,000 by the creation of additional unissued 19,800,000,000 Consolidated Shares (“Capital Increase”);

* For identification purposes only

– 22 –

NOTICE OF SGM

• (d) the credit of HK$101,340,684.63 arising from the Capital Reduction be transferred to the contributed surplus account and the directors of the Company be and are authorized to fully apply such sums as shall be appropriate from the contributed surplus account towards the partial elimination of the accumulated losses of the Company as at 31st December 2002; and

• (e) the directors of the Company be and are hereby authorized to generally to do all acts and things which they may consider appropriate, necessary or desirable to give effect to or implement the foregoing.”

• (2) “ THAT

• (a) the share premium account of the Company be reduced from HK$101,377,902 to nil and the credit arising therefrom be transferred to the contributed surplus account of the Company and the directors of the Company be and are hereby authorized to apply such sums as shall be appropriate from the contributed surplus account towards the elimination of the accumulated losses of the Company as at 31st December 2002; and

• (b) the directors of the Company be and are hereby authorized to generally to do all acts and things which they may consider appropriate, necessary or desirable to give effect to or implement the foregoing.”

ORDINARY RESOLUTION

• (3) “ THAT subject to and conditional upon (i) the special resolution numbered (1) set out in this notice of the SGM of which this resolution forms part becoming unconditional and effective; (ii) the placing agreement (the “Placing Agreement”) dated 26th August 2003 entered into between the Company and the Placing Agent (as defined therein) in relation to the placing (the “Placing”) of up to a maximum of 46,000,000 shares of HK$0.01 each (“Placing Shares”) at a price of HK$0.55 per Placing Share (“Placing Price”) becoming unconditional (a copy of which has been produced to the meeting marked “A” and signed by the chairman of the meeting for the purpose of identification); and (iii) the GEM Listing Committee of The Stock Exchange of Hong Kong Limited granting or agreeing to grant and not having revoked the listing of, and permission to deal in the Placing Shares:–

• (a) the Placing Agreement and the transactions contemplated thereunder be and the same are hereby approved, confirmed and ratified;

• (b) the directors of the Company be and are hereby authorized to allot and issue up to a maximum of 46,000,000 shares of HK$0.01 each in share capital of the Company to the placees upon completion of the Placing pursuant to the terms and conditions of the Placing Agreement; and

– 23 –

NOTICE OF SGM

• (c) the directors of the Company be and are hereby authorized to sign and execute such documents and to do all such acts and things incidental to the Placing or as they consider necessary or expedient in connection with the implementation of or giving effect to the Placing Agreement and the transactions contemplated thereunder, including the satisfaction or fulfillment of any conditions to which the Placing Agreement is subject (subject to such variations which the directors of the Company may consider necessary, desirable and in the best interests of the Company and the shareholders of the Company as a whole).”

By Order of the Board of SYSCAN Technology Holdings Limited Chow Suk Han, Caroline Company Secretary

Hong Kong, 10th September 2003

Principal place of business and head office in Hong Kong:

Unit 808, 8th Floor

K. Wah Centre 191 Java Road North Point, Hong Kong

Notes:

1. A member of the Company entitled to attend and vote at the SGM is entitled to appoint another person as his proxy to attend and, in the event of a poll vote in his stead. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at the SGM. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which such proxy is so appointed. A proxy need not be a member of the Company, but must attend in person to represent you.

2. In order to be valid, the form of proxy must be deposited at the principal place of business and head office of the Company in Hong Kong at Unit 808, 8th Floor, K. Wah Centre, 191 Java Road, North Point, Hong Kong together with the power or attorney or other authority (if any) under which it is signed or a notarially certified copy of such power of attorney or authority, not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof.

3. Where there are joint holders of any share, any one of such persons may vote at the SGM either personally or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at the SGM personally or by proxy, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of such joint holding.

4. A form of proxy for use in connection with the SGM is enclosed. Completion and delivery of the form of proxy will not preclude a member from attending and voting in person at the SGM if the member so desires and in such event, the instrument appointing a proxy shall be deemed to be revoked.

– 24 –