Youzan Technology Limited — Capital/Financing Update 2003

Aug 27, 2003

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

This announcement 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.

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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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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; (ii) 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; (iii) 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; (iv) 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 (v) the credit of HK$101,340,684.62 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.

The Directors further propose to reduce the Share Premium Account and apply the credit arising therefrom to set off the accumulated losses of the Company. The proposal is conditional upon (i) the passing of a special resolution of the Shareholders at the SGM and (ii) the publication of a notice of the reduction of the Share Premium Account of the Company in accordance with the Companies Act.

The Board is pleased to announce that the Placing Agreement was entered into on 26th August 2003 between the Company and the Placing Agent, pursuant to which the Company has conditionally agreed to issue and the Placing Agent has conditionally agreed, on a best effort basis, to procure not less than 6 independent Placees to subscribe for the Placing Shares at HK$0.55 each. The Placing

* for identification purposes only

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Agreement is conditional upon, amongst others, the approval by the Shareholders of the Capital Reorganization and the Placing. Further details of the conditions of the Placing Agreement are set out in the section headed “Conditions of the Placing” below.

The Placing Shares (upon the Over-allotment Option is exercised in full) 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.

The Placing Price represents a discount of approximately 29.49% to the closing price of HK$0.78 per 10 Shares as quoted on the Stock Exchange on 13th August 2003, being the last trading day of the Shares immediately prior to its suspension pending the release of this announcement and a discount of approximately 27.82% to the average closing price of approximately HK$0.762 per 10 Shares as quoted on the Stock Exchange for the last five trading days up to and including 13th August 2003.

The net proceeds from the Placing will be 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) and the intended usage of which is set out in the section headed “Reasons for the Placing and the use of proceeds” below.

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, further details of which are set out in the section headed “Change in board lot size and trading arrangements” below.

The Placing Agreement constitutes a discloseable transaction for the Company under the GEM Listing Rules. A circular containing details of the Capital Reorganization, parallel trading arrangements, arrangements of odd lot facilities, arrangements for free exchange of share certificates for the Consolidated Shares, the reduction of Share Premium Account and the Placing, and a notice convening the SGM to approve the Capital Reorganization, the reduction of Share Premium Account and the Placing will be sent to the Shareholders as soon as practicable.

Completion of the Placing will take place on the third Business Day after all the conditions are fulfilled.

At the request of the Company, trading in the Shares on GEM has been suspended from 3:49 p.m. on 13th August 2003. The Company has applied for resumption in the Shares on GEM with effect from 9:30 a.m. on 28th August 2003.

(1) 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;

• (ii) 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;

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• (iii) 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;

• (iv) 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

• (v) the credit of HK$101,340,684.62 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 13th August 2003 (being the last day of trading in the Shares on the Stock Exchange prior to the release of this announcement) was HK$0.078 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.

Effects of the Capital Reorganization

As at the date of this announcement, 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.

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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 the	Immediately after the
		As at the date				the Capital Reduction			Capital Reorganization
		of this announcement				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	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
share capital
Issue share capital,	102,364,327.9	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
credited as
fully paid

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

A credit of HK$101,340,684.62 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 date of this announcement, 176,040,000 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 176,040,000 Shares would be in issue and an additional credit of HK$17,427,960 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$118,768,644.62. 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. If any Share Option may become or remains exercisable on the effective date of the Capital Reorganization, the Company will request the auditors of the Company to provide a certificate as to the adjustment (if any) required to be made in accordance with the rules of the Share Option Schemes and Rule 23.03(13) of the GEM Listing Rules, further details of which will be included in the circular to be despatched to the Shareholders.

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.

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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;

• (ii) the Bermuda Monetary Authority granting approval of the Capital Reorganization, if so required; and

• (iii) the 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. No court sanction 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 in accordance with the Companies Act.

If the Bermuda Monetary Authority’s approval is required and the Company is unable to obtain such approval before the date on which the Capital Reorganization becomes effective, the Company will make an announcement in due course.

Application for listing

Application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Consolidated Shares.

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$0.076 per Share as quoted on the Stock Exchange on 13th August 2003, being the last trading day of the Shares immediately prior to its suspension pending the release of this announcement, each board lot of 4,000 Consolidated Shares will have a market value of HK$3,040.

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.

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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.

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 original 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 original 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.

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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 1712-1716, 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 only 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.

Expected timetable

The SGM is expected to be held on or about 6th October 2003. It is expected that the effective date of the Capital Reorganization will be the first Business Day immediately after the SGM, which is expected to be on or about 7th October 2003, and the Company will publish a notice in Bermuda in respect of the Capital Reduction in accordance with the Companies Act on or before 6th November 2003. The expected timetable for the Capital Reorganization is set out as follows:

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Date of dispatch of circular and notice of SGM . . . . . . . . . . . . . . . . . . . Wednesday, 10th September Latest time for lodging the proxy forms for the SGM . . . . . . 10:00 a.m. on Thursday, 2nd 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

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2003

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

(2) PROPOSED REDUCTION OF SHARE PREMIUM ACCOUNT

The Directors of the Company intend to put forward a proposal to the Shareholders to fully reduce the Share Premium Account (the “Proposal”) 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 Proposal, 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 Proposal

As at 31st December 2002, the Company recorded an accumulated loss of HK$250,471,038. The Proposal 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 Proposal.

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Effect of the Proposal

The implementation of the Proposal 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 Proposal will not cause any loss in the Shareholders’ funds of the Company. The Directors consider that the Proposal will not have a material adverse effect on the financial position of the Company.

Conditions of the Proposal

The Proposal is conditional upon, inter alia, the passing of a special resolution to approve the Proposal at the SGM and the compliance 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. No court sanction is required for the proposed share premium reduction under section 46 of the Companies Act.

If the Proposal is passed by the Shareholders at the SGM, 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 November 2003.

(3) 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 Shares : 23,000,000 new Consolidated Shares to be issued under the Placing Agreement plus up to 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

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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 is not exercised) Ranking of the Placing : the Placing Shares, when fully paid, will rank pari passu in all Shares respects with the Consolidated Shares then in issue as at the date of the issue of the Placing Shares

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 Bermuda Monetary Authority granting approval of the Capital Reorganization and/or the issue of the Placing Shares, if so required;

• (iii) 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 Over-allotment Shares;

• (iv) the Listing Committee of the Stock Exchange granting or agreeing to grant the listing of, and permission to deal in the Placing Shares and the Over-allotment Shares; and

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

If the Bermuda Monetary Authority’s approval is required and the Company is unable to obtain such approval before the date on which the Capital Reorganization becomes effective, the Company will make an announcement in due course.

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

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• (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 of the Placing Agreement) 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, 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 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 will be made to the Listing Committee of the Stock Exchange for the granting of the listing of, and permission to deal in the Placing 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.

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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 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 29.49% to the closing price of HK$0.78 per 10 Shares as quoted on the Stock Exchange on 13th August 2003, being the last trading day of the Shares immediately prior to its suspension pending the release of this announcement and a discount of approximately 27.82% to the average closing price of approximately HK$0.762 per 10 Shares as quoted on the Stock Exchange for the last five trading days up to and including 13th 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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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 (1) Mr. Darwin Hu_Note (1) 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 83.93 102,364,327 100.00	Immediately after Immediately after completion of the completion of the Placing without Placing with the exercising the Over-allotment Option Over-allotment Option being exercised fully (assuming the Capital (assuming the Capital Reorganization Reorganization becomes effective) becomes effective) No. of % of No. of % of Consolidated issued share Consolidated issued share Shares capital Shares capital 11,030,000 8.80 11,030,000 7.43 5,455,600 4.35 5,455,600 3.68 108,878,727 86.85 131,878,727 88.89 125,364,327 100.00 148,364,327 100.00	Immediately after Immediately after completion of the completion of the Placing without Placing with the exercising the Over-allotment Option Over-allotment Option being exercised fully (assuming the Capital (assuming the Capital Reorganization Reorganization becomes effective) becomes effective) No. of % of No. of % of Consolidated issued share Consolidated issued share Shares capital Shares capital 11,030,000 8.80 11,030,000 7.43 5,455,600 4.35 5,455,600 3.68 108,878,727 86.85 131,878,727 88.89 125,364,327 100.00 148,364,327 100.00
			100.00

Note:

(1) 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 25% as required by the GEM Listing Rules can be maintained after the completion of the Placing.

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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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 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 HK$10 million for repayment of existing accounts payables/debts and repayment accounts payables/debts of bank loans HK$4.5 million for general working capital HK$2 million for general working 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.

(4) GENERAL

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.

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.

A circular containing details of the Capital Reorganization, parallel trading arrangements, arrangements of odd lot facilities, arrangements for free exchange of share certificates for the Consolidated Shares, the reduction of the Share Premium Account and the Placing, and a notice convening the SGM to approve the Capital Reorganization, the reduction of the Share Premium Account and the Placing will be sent to the Shareholders as soon as practicable.

At the request of the Company, trading in the Shares on GEM has been suspended from 3:49 p.m. on 13th August 2003. The Company has applied for resumption of trading in the Shares on GEM with effect from 9:30 a.m. on 28th August 2003.

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(5) DEFINITIONS

In this announcement, the following expressions shall have the following meaning unless the context requires otherwise:

“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 operated by Hong Kong Securities Clearing Company Limited

“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 becomes effective

“Directors”

directors of the Company

“GEM”

the Growth Enterprise Market of the Stock Exchange

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“GEM Listing Rules”

“Group”

“HK$”

“Hong Kong”

• “Long Stop Date”

“Over-allotment Option”

“Over-allotment Shares”

“Placing”

“Placing Agent”

“Placing Agreement”

“Placing Shares”

“Placee(s)”

“Placing Price”

• “PRC”

“Reduced Share(s)”

the Rules Governing the Listing of Securities on the GEM

the Company and its Subsidiaries

Hong Kong dollars, the lawful currency of Hong Kong

the Hong Kong Special Administrative Region of the PRC

31st October 2003 (or such later date as the Company and the Placing Agent may agree in writing)

the option granted by the Company to the Placing Agent, to require the Company to issue up to an aggregate of 23,000,000 additional Consolidated Shares at the Placing Price to cover over-allocations in the Placing, if any

the Consolidated Shares which may be allotted and issued by the Company pursuant to the exercise of the Over-allotment Option

the placing and subscription of the Placing Shares on the terms and subject to the conditions set out in the Placing Agreement

• 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

the conditional subscription agreement dated 26th August 2003 entered into between the Company and the Placing Agent regarding the Placing;

• 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

the subscriber(s) of the Placing Shares procured by the Placing Agent pursuant to the Placing Agreement

HK$0.55 per Placing Share

the People’s Republic of China

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

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“SGM”	the special general meeting of the Company to be convened
	for the purpose of considering, and if thought fit, approving
	the Capital Reorganization, the reduction of the Share
	Premium Account and the Placing
“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
“Shares”	ordinary shares 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 where were adopted by the Company on
	2nd March 2002, 2nd March 2002 and 26th April 2002,
	respectively
“Share Premium Account”	the share premium account of the Company
“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.

By Order of the Board SYSCAN TECHNOLOGY HOLDINGS LIMITED Cheung Wai Chairman

Hong Kong, 27th August 2003

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This announcement, for which the directors of SYSCAN Technology Holdings Limited collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited for the purposes of giving information with regard to SYSCAN Technology Holdings Limited. The directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:–

1. the information contained in this announcement 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 announcement misleading; and

3. all opinions expressed in this announcement have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

This announcement will remain on the “Latest Company Announcements” page of the GEM website for at least 7 days from the date of its posting and on the Company’s website at www.syscaninc.com

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