Youzan Technology Limited — Proxy Solicitation & Information Statement 2000

Dec 12, 2000

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in SYSCAN Technology Holdings Limited, you should at once hand this circular to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

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

SYSCAN Technology Holdings Limited *

(Incorporated in Bermuda with limited liability)

PROPOSAL FOR REFRESHING OF THE 10% LIMIT UNDER

THE SHARE OPTION SCHEMES

A notice convening a special general meeting of shareholders of the Company is set out on pages 9 and 10 of this circular. Whether or not you are able to attend the special general meeting, please complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the head office of the Company in Hong Kong at Unit 808, 8th Floor, K. Wah Centre, 191 Java Road, North Point, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the special general meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the special general meeting.

* for identification purposes only

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 Stock 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.

CONTENTS

Page
Definition	1
Responsibility Statement	3
Letter from the Board
Introduction	4
Share Option Schemes Waiver	4
Reasons for Seeking Approval	6
Details of Share Options	6
Special General Meeting	8
Recommendation	8
Notice of Special General Meeting	9

DEFINITION

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

"Announcement"	the announcement issued by the Company dated 12th December 2000 in respect of, inter alia, the Proposal;
"associates"	has the meaning ascribed thereto in the GEM Listing Rules;
"Board"	the board of Directors of the Company;
"Company"	SYSCAN Technology Holdings Limited, an exempted company incorporated in Bermuda with limited liability on 17th August 1999 and listed on GEM on 14th April 2000;
"Committee"	the committee appointed by the Board on 2nd May 2000 to administer the Share Option Schemes, which comprise of, Mr Lo Wai Ming and Mr Cheung Yuk Ming, the independent non executive directors;
"Directors"	directors of the Company from time to time;
"GEM"	the Growth Enterprise Market of the Stock Exchange;
"GEM Listing Rules"	the Rules Governing the Listing of Securities on GEM;
"Group"	the Company and its subsidiaries;
"Hong Kong"	the Hong Kong Special Administrative Region of the People's Republic of China;
"Main Board"	the stock exchange operated by the Stock Exchange prior to the establishment of GEM (excluding the option market) and which stock market continues to be operated by the Stock Exchange in parallel with GEM. For the avoidance of doubt, the Main Board excludes GEM;
"Ordinary Resolution"	the ordinary resolution set out in the notice of the SGM contained in this circular;
"Scheme A"	the Share Option Scheme A adopted by the Company on 2nd March 2000;
"Scheme B"	the Share Option Scheme B adopted by the Company on 2nd March 2000;
"Share Option Schemes"	Scheme A and Scheme B;

DEFINITION

"Shareholders"	shareholders of the Company from time to time;
"Shares"	ordinary shares of HK\$0.10 each in the share capital of the Company;
"Substantial Shareholder"	has the meaning ascribed thereto in the GEM Listing Rules; and
"Stock Exchange"	The Stock Exchange of Hong Kong Limited.

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company.

The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and 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.

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

Non-executive Director: Joseph Liu

Independent non-executive Directors: Lo Wai Ming Cheung Yuk Ming

Registered office: Cedar House 41 Cedar Avenue Hamilton, HM12 Bermuda

Head office and principal place of business: Unit 808, 8th Floor K. Wah Centre 191 Java Road North Point Hong Kong

12th December 2000

To the Shareholders

Dear Sir and Madam.

PROPOSED REFRESHING OF THE 10% LIMIT UNDER THE SHARE OPTION SCHEMES

INTRODUCTION

On 12th December 2000, the Directors announced that they intended to seek approval from the Shareholders to refresh the 10% limit currently set under the Share Option Schemes. This circular sets out the background and the reasons for seeking such refreshing and serves to notify the Shareholders to attend at a special general meeting of the Company ("SGM") to be convened and held to approve such refreshing.

SHARE OPTION SCHEMES WAIVER

Rule 23.03(2) of the GEM Listing Rules requires that the total number of Shares subject to the Share Option Schemes and any other schemes must not, in aggregate exceed 10% of the issued share capital of the Company from time to time (the "Scheme Limit"). For the purpose of the listing of the Shares on GEM, the Group has applied for a waiver from strict compliance with Rule 23.03(2) of the

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GEM Listing Rules so that the Scheme Limit can be increased to 30% of the issued share capital of the Company at the date of approval of the Scheme Limit. Such waiver was granted by the Stock Exchange on 13th April 2000 subject to the following conditions:

• 1. the total number of Shares available for issue under options granted under the Share Option Schemes and any other scheme, must not in aggregate, exceed 10% of the issued share capital of the Company as at the date of listing of the Shares on GEM unless Shareholders' approval has been obtained pursuant to paragraph (2) or (3) below;
• 1. the Company may seek approval by Shareholders in general meeting to refresh the 10% limit. However, the total number of Shares available for issue under options which may be granted under the Share Option Schemes and any other schemes in these circumstances must not exceed 10% of the issued share capital of the Company at the date of approval of the refreshing of the limit;
• 1. the Company may seek separate Shareholders' approval in general meeting to grant options beyond the 10% limit provided that (i) the total number of Shares subject to the Share Option Schemes and any other schemes does not in aggregate exceed 30% of the total issued share capital of the Company and (ii) the options in excess of the 10% limit are granted only to participants specified by the Company before such approval is sought;
• 1. any grant of options to a connected person (as defined in the GEM Listing Rules) must be approved by all independent non-executive Directors of the Company; and
• 1. where options are proposed to be granted to a connected person who is also a Substantial Shareholder of the Company or any of his respective associates, and the proposed grant of options, when aggregated with the options already granted to such connected person in the past 12 months period, would entitle that person to receive more than 0.1% of the total issued shares of the Company for the time being and the value of which is in excess of HK\$5 million, then the proposed grant must be subject to the approval of Shareholders in general meetings. Apart from the connected person involved, all other connected persons of the Company must abstain from voting in such general meeting (except where any connected person intends to vote against the proposed grant). A Shareholders' circular must be prepared by the Company explaining the proposed grant, disclosing the number and terms of the options to be granted and containing a recommendation from the independent Directors on whether or not to vote in favour of the proposed grant.

As at the date of this circular, under the Share Option Schemes, the Company has already granted options under which the total number of Shares available for issue amounted to 81,144,000 shares, representing approximately 9.17 % of the total issued share capital of the Company as at the date of listing of the Shares on GEM. As at the date of listing of the Shares on GEM, the total number of issued shares was 884,641,280. Details of the existing optionees are set out in the section headed "Details of Share Options" in this circular.

The Company is now seeking approval from the Shareholders to refresh the 10% limit pursuant to condition (2) above, so that the Committee, responsible for granting options under the Share Option Schemes, has a new 10% limit and has the general mandate to grant options to subscribe for Shares of up to 10% of the issued share capital of the Company as at the date of approval of the refreshing of the limit (the "Proposal").

As at 12th December 2000, the latest practicable date prior to the printing of this circular, the issued share capital of the Company comprised 888,865,280 fully paid shares of HK\$0.10 each. Subject to the passing of the Ordinary Resolution at SGM, the Company would be allowed to grant options to subscribe for a maximum of 88,886,528 Shares on the basis that no further shares will be issued prior to the date of the forthcoming SGM.

REASONS FOR SEEKING APPROVAL

Share options are important in providing incentives to, and in retaining, key employees. Like other companies listed on GEM, the business of the Company relies to a considerable extent on its key employees and the Company needs to have sufficient share options to attract, and retain, quality employees.

The existing 10% limit is almost exhausted. The Company needs to have the 10% limit refreshed to enable the Company to be competitive in attracting, and retaining, quality employees.

DETAILS OF SHARE OPTIONS

Since the Company listed on GEM on 14th April 2000, the Company has not granted any further options under Scheme A. Details of all the optionees under Scheme A are already set out in the prospectus of the Company dated 10th April 2000.

As at the date of this circular, an aggregate of 52,784,000 options were granted under Scheme A. As a result of the exercise of 1,056,000 options and the lapse of 7,176,000 options, a total of 42 optionees are holding an aggregate of 44,552,000 options as at the date of this circular.

Since the Company listed on GEM on 14th April 2000, a total of 28,360,000 options were granted under Scheme B. Set out below are the details of all the outstanding options, number of options granted but lapsed and number of options granted and exercised.

(a) Details of all the outstanding options granted under Scheme B since its adoption up to the date of this circular are as follows:

Name	Date of grant	Exercise price (HK\$)	Exercise period	No. of underlying shares comprising the options granted and outstanding
Darwin Hu (Director)	19/6/2000	0.33	19/6/2001 to 18/6/2010	5,000,000
Cheung Wai (Director)	19/6/2000	0.33	19/6/2001 to 18/6/2010	5,000,000
Bobby G. Clark (Employee)	12/7/2000	0.246	12/7/2001 to 11/7/2010	750,000

Name	Date of grant	Exercise price (HK\$)	Exercise period	No. of underlying shares comprising the options granted and outstanding
Lam Shuk Ling (Employee)	(i) 12/7/2000	0.246	12/7/2001 to 11/7/2010	100,000
	(ii) 4/12/2000	0.1016	4/12/2001 to 3/12/2010	200,000
(Employee) Sam Tsui	12/7/2000	0.246	12/7/2001 to 11/7/2010	750,000
Alpha Hou (General Manager)	12/7/2000	0.246	12/7/2001 to 11/7/2010	3,200,000
Po Juang (Employee)	12/7/2000	0.246	12/7/2001 to 11/7/2010	120,000
Paul Cheung (Employee)	12/7/2000	0.246	12/7/2001 to 11/7/2010	500,000
C.F. Kou (Employee)	12/7/2000	0.246	12/7/2001 to 11/7/2010	200,000
Sam Chung (Employee)	12/7/2000	0.246	12/7/2001 to 11/7/2010	40,000
Sunny Huang (Employee)	12/7/2000	0.246	12/7/2001 to 11/7/2010	40,000
Lucy Wang (Employee)	12/7/2000	0.246	12/7/2001 to 11/7/2010	60,000
Hongru Zhang (Chief Financial Officer)	4/12/2000	0.1016	4/12/2001 to 3/12/2010	5,000,000
Chan Man Ching (Qualified Accountant)	4/12/2000	0.1016	4/12/2001 to 3/12/2010	500,000
Chow Suk Han, Caroline (Company Secretary)	4/12/2000	0.1016	4/12/2001 to 3/12/2010	500,000
(Employee) Shenlin Li	4/12/2000	0.1016	4/12/2001 to 3/12/2010	500,000

22,460,000

• (b) A total of 5,900,000 options granted under Scheme B have already lapsed due to resignation of the relevant optionees as employees of the Group.
• (c) No options granted under Scheme B have been exercised by the relevant optionees.

SPECIAL GENERAL MEETING

Set out on pages 9 and 10 of this circular is a notice convening the SGM to be held at Banquet Room No. 7, City Garden Hotel, 9 City Garden Road, North Point, Hong Kong on 8th January 2001 at 9:30 a.m., where an ordinary resolution will be proposed to approve the Proposal. Whether or not you intend to attend the SGM, you are requested to complete and return the proxy form, which is enclosed in this circular, to the 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 a power of attorney or other authority, if any, under which it is signed or a certified copy of the 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 proxy form will not preclude you from attending and voting in person at the SGM or the adjourned meeting should you so wish.

RECOMMENDATION

After taking into account the reasons for the Proposal, the Directors are of the opinion that the Proposal is in the interests of the Company and the Shareholders and recommend you to vote in favour of such resolution set out in the notice of the SGM.

Yours faithfully, By order of the Board Cheung Wai Chairman

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 ("SGM") of SYSCAN Technology Holdings Limited (the "Company") will be held at Banquet Room No. 7, City Garden Hotel, 9 City Garden Road, North Point, Hong Kong on 8th January 2001 at 9:30 a.m. for the purpose of considering and, if thought fit, passing the following resolution, with or without amendments, as an Ordinary Resolution:

ORDINARY RESOLUTION

"THAT the existing 10% limit under the Share Option Schemes of the Company be refreshed and a general mandate be granted to the Committee administering the Share Option Schemes of the Company to grant options to the extent that the total number of the Company's shares available for issue under such options will not exceed 10% of the issued share capital of the Company as at the date of this resolution."

By order of the Board Cheung Wai Chairman

Hong Kong, 12th December 2000

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

Head office and principal place of business: Unit 808, 8th Floor K. Wah Centre 191 Java Road North Point Hong Kong

* for identification purposes only

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NOTICE OF SPECIAL GENERAL MEETING

Notes:

• 1. The Register of Members of the Company will be closed from Thursday, 4th January 2001 to Monday, 8th January 2001, both days inclusive, during which period no transfer of shares can be registered.
• 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 vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to attend and vote on his behalf. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed. A proxy need not be a member of the Company.
• 1. In order to be valid, a form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a certified copy thereof, must be deposited at the head office of the Company in Hong Kong at Unit 808, 8th Floor, K. Wah Centre, 191 Java Road, North Point, Hong Kong not less than 48 hours before the time appointed for the holding of the SGM or any adjourned meeting.