Youzan Technology Limited — Proxy Solicitation & Information Statement 2001

Mar 30, 2001

IMPORTANT

If you are in any doubt as to any aspect of this circular or as to the action to be taken, 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.

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**SYSCAN Technology Holdings Limited ***

(Incorporated in Bermuda with limited liability)

PROPOSED GENERAL MANDATES TO ISSUE SHARES AND TO REPURCHASE SHARES

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.

This circular, 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 purpose 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 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.

A form of proxy for the Annual General Meeting is enclosed. Whether or not you intend to be attend at the Annual General Meeting, you are requested to complete the form of proxy and return it to the Head Office of the Company c/o the Company Secretary, at Unit 808, 8/F, K. Wah Centre, 191 Java Road, North Point, Hong Kong in accordance with the instructions printed thereon not less than 48 hours before the time fixed 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 in person at the Annual General Meeting should you so desire.

*For identification purposes only

30th March, 2001

DEFINITION

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

“Company” SYSCAN Technology Holdings Limited; “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; “Latest Practicable Date” 27th March, 2001, being the latest practicable date prior to the printing of this circular; “Shareholders” shareholders of the Company from time to time; “Shares” ordinary shares of HK$0.10 each in the share capital of the Company; and “Stock Exchange” The Stock Exchange of Hong Kong Limited.

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LETTER FROM THE CHAIRMAN

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SYSCAN Technology Holdings Limited

*****

(Incorporated in Bermuda with limited liability)

Executive Directors: Cheung Wai (Chairman) Darwin Hu Zhang Hongru 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

30th March, 2001

To Shareholders of the Company

Dear Sir or Madam,

PROPOSED GENERAL MANDATES TO ISSUE SHARES AND TO REPURCHASE SHARES

INTRODUCTION

The Directors of the Company had announced on 27th March, 2001 the audited consolidated results of the Company and its subsidiaries for the year ended 31st December, 2000. It is proposed that the annual general meeting of the Company to be held at Banquet Room No. 9, City Garden Hotel, 9 City Garden Road, North Point, Hong Kong on 28th April, 2001 (“Annual General Meeting”). Resolutions to grant to the Directors general mandates to issue Shares and to repurchase Shares (“Repurchase Mandate”) will be proposed at the Annual General Meeting.

The purpose of this circular is to provide the Shareholders with details of the proposed general mandates to be dealt with at the Annual General Meeting.

*For identification purposes only

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LETTER FROM THE CHAIRMAN

GENERAL MANDATES

At the Annual General Meeting, separate ordinary resolutions will be proposed to renew the general mandates given to the Directors (i) to allot, issue and otherwise deal with Shares not exceeding the aggregate of 20% of the aggregate nominal amount of the share capital of the Company in issue at the date of the passing of such resolution; (ii) to repurchase Shares comprising the aggregate nominal amount of which does not exceed 10% of the aggregate nominal amount of the share capital in issue of the Company at the date of passing of such resolution; and (iii) to increase the number of shares which the Directors may issue under their general mandate by the number of shares representing the aggregate nominal amount (up to a maximum of 10% of the aggregate nominal amount of the Company’s then issued share capital) of any Shares repurchased by the Company.

Under the GEM Listing Rules, the general unconditional mandates granted on 2nd March, 2000 will lapse at the conclusion of the forthcoming Annual General Meeting, unless renewed at the Annual General Meeting. Resolutions Nos. 4 to 6 set out in the notice of Annual General Meeting will be proposed at the Annual General Meeting to renew these mandates. With reference to these resolutions, the Directors wish to state that they have no present intention to repurchase any Shares pursuant to the relevant mandates.

The explanatory statement, as required by the GEM Listing Rules to be sent to Shareholders in connection with the proposed Repurchase Mandate, is set out in the Appendix to this circular. This contains all the information reasonably necessary to enable the Shareholders to make an informed decision on whether to vote for or against the relevant resolutions.

ANNUAL GENERAL MEETING

Set out on pages 32 to 35 of the annual report of the Company in respect of the financial year ended 31st December, 2000 is the notice convening the forthcoming Annual General Meeting. At the Annual General Meeting, in addition to the ordinary business of the meeting, Resolutions Nos. 4 to 6 will be proposed to approve the general mandates for the issue of Shares and the Repurchase Mandate as special businesses.

A copy of the 2000 Annual Report of the Company incorporating copies of the audited consolidated results of the Group for the year ended 31st December, 2000 and the directors’ and auditors’ reports thereon has been despatched to all the Shareholders together with this circular.

A form of proxy for the Annual General Meeting is also enclosed. Whether or not you intend to be attend at the Annual General Meeting, you are requested to complete the form of proxy and return it to the Head Office of the Company c/o the Company Secretary, at Unit 808, 8/F, K. Wah Centre, 191 Java Road, North Point, Hong Kong in accordance with the instructions printed thereon not less than 48 hours before the time fixed 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 in person at the Annual General Meeting should you so desire.

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LETTER FROM THE CHAIRMAN

RECOMMENDATION

The Directors is of the opinion that the proposals referred to above are in the best interests of the Company and therefore recommend you to vote in favour of the relevant resolutions to be proposed at the Annual General Meeting.

Yours faithfully, Cheung Wai Chairman

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EXPLANATORY STATEMENT

APPENDIX

This appendix serves as an explanatory statement, as required by the GEM Listing Rules, to provide requisite information to you for your consideration of the Repurchase Mandate.

1. GEM LISTING RULES RELATING TO THE REPURCHASE OF SHARES

The GEM Listing Rules permit companies whose primary listing is on the Stock Exchange to repurchase their shares on GEM subject to certain restrictions, the more important of which are summarized below. The Company is empowered by its memorandum of association and bye-laws to repurchase its own shares.

(a) Shareholders’ approval

The GEM Listing Rules provides that all proposed repurchases of securities (which must be fully paid up in the case of shares) by a company with its primary listing on the Stock Exchange must be approved in advance by an ordinary resolution of the shareholders, either by way of a general mandate or by specific approval with reference to a specific transaction.

(b) Source of funds

Repurchases must be funded out of funds legally available for the purpose and in accordance with the memorandum of association and bye-laws of the Company and the Companies Act 1981 of Bermuda (the “Companies Act”). A listed company may not repurchase its own securities on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange. Under the Companies Act, a company may only repurchase its shares out of capital paid up on the Shares to be repurchased or out of the funds of the Company which would otherwise be available for dividend or distribution or out of the proceeds of a fresh issue of shares made for the purpose of the repurchase. Any amount of premium payable on a repurchase over the par value of the shares may only be effected out of funds of the Company which would otherwise be available for dividend or distribution or out of the Company’s share premium account.

(c) Trading restrictions

The total number of shares which a company may repurchase on GEM is the number of shares which represent up to a maximum of 10% of the issued share capital as at the date of the passing of the ordinary resolution approving the Repurchase Mandate. A company may not issue or announce an issue of new shares of the type that has been repurchased for a period of 30 days immediately following a repurchase (other than the exercise of warrants, an option or similar instruments requiring the company to issue securities which were outstanding prior to the repurchase), without the prior approval of the Stock Exchange. A company is also prohibited from making securities repurchases on GEM if the result of the repurchase would be that the number of listed securities in public hands would be below the relevant prescribed percentage as required by the Stock Exchange. The price at which a company repurchases securities on GEM shall not be higher than the latest (or current) independent bid price or the last independent sale (contract) price quoted or reported on the system (as defined in the Rules of the Stock Exchange), whichever is higher. In addition, a company shall not make the opening bid nor any bid in the last 30 minutes before the close of normal trading hours as stipulated in the Rules of the Stock Exchange.

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EXPLANATORY STATEMENT

APPENDIX

(d) Status of repurchased securities

All repurchased securities (whether on GEM or otherwise) are automatically delisted and the certificates for those securities must be cancelled and destroyed.

Under Bermuda law, a company’s repurchased shares shall be treated as cancelled and the amount of the company’s issued share capital shall be reduced by the aggregate nominal value of the repurchased shares accordingly although the authorised share capital of the company will not be reduced.

(e) Suspension of repurchase

Any securities repurchase programme is required to be suspended after a price sensitive development has occurred or has been the subject of directors’ decision until the price sensitive information has been publicly announced. In particular, during the period of one month immediately preceding either the preliminary announcement of a company’s annual results or the publication of a company’s half-year report or a quarterly report, a company may not purchase shares on GEM unless the circumstances are exceptional. In addition, the Stock Exchange may prohibit a company from making repurchases of its own securities on GEM if a company has breached the GEM Listing Rules.

(f) Reporting requirements

Repurchases of securities on GEM or otherwise must be reported to the Stock Exchange not later than 9:30 a.m. (Hong Kong time) on the following business day. In addition, a company’s annual report and accounts are required to include a monthly breakdown of securities repurchases made during the financial year under review, showing the number of securities repurchased each month (whether on GEM or otherwise), the purchase price per share or the highest and lowest prices paid for all such repurchases and the total prices paid. The directors’ report is also required to contain reference to the purchases made during the year and the directors’ reasons for making such purchases. The company shall make arrangements with its broker who effects the purchase to provide the company in a timely fashion the necessary information in relation to the purchase made on behalf of the company to enable the company to report to the Stock Exchange.

(g) Connected parties

Under the GEM Listing Rules, a company shall not knowingly repurchasing securities from a connected person (as defined under the GEM Listing Rules) and a connected person shall not knowingly sell his shares to the company. As at the Latest Practicable Date and to the best of the knowledge of the Directors who have made all reasonable enquires, none of the Directors or their associates has a present intention to sell Shares to the Company or has undertaken not to do so.

2. SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company comprised 888,865,280 Shares of HK$0.10 each.

Subject to the passing of the resolution in relation to the Repurchase Mandate and on the basis that no Shares are issued or repurchased by the Company prior to the Annual General Meeting, the Company will be allowed under the Repurchase Mandate to repurchase a maximum of 88,886,528 Shares of HK$0.10 each.

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EXPLANATORY STATEMENT

APPENDIX

3. REASONS FOR REPURCHASES

Repurchases of Shares will only be made when the Directors believe that such a repurchase will benefit the Company and its members. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value of the Company and/or its earnings per Share.

4. FUNDING OF REPURCHASES

In repurchasing Shares, the Company may only apply funds legally available for such purpose in accordance with the memorandum of association and bye-laws of the Company, the GEM Listing Rules and the applicable laws of Bermuda. The Company may not purchase securities on GEM for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange from time to time.

5. GENERAL

There might be a material adverse impact on the working capital or gearing position of the Company in the event that the Repurchase Mandate is exercised in full. However, the Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or its gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

6. UNDERTAKING

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the GEM Listing Rules, the memorandum of association and the bye-laws of the Company and the applicable laws of Bermuda.

7. TAKEOVER CODE

If as a result of a repurchase of Shares, a shareholder’s proportionate interest in the voting rights of the Company increases, such increase may be treated as an acquisition for the purpose of The Code on Takeovers and Mergers (the “Takeover Code”). Accordingly, a shareholder or group of shareholders acting in concert, depending on the level of increase in the shareholder’s interest, could obtain or consolidate control of the Company and become(s) obliged to make a mandatory offer in accordance with Rules 26 and 32 of the Takeover Code.

As at the Latest Practicable Date, the “Hotung Group” (comprising Hotung Venture Capital Corp., Daitung Development and Investment Co. Ltd., Wantung Venture Capital Corp., Baotung Venture Capital Corp., Litung Venture Capital Corp. and Maton Fund I L.P.) which is the substantial shareholder of the Company, held approximately 10.564% of the issued Shares of the Company. In the event that the Directors should exercise in full the power to repurchase Shares of the Company in accordance with the terms of the ordinary resolution to be proposed at the Annual General Meeting, the interest of the Hotung Group in the Shares of the Company would be increased to approximately 11.74% of the issued Shares of the Company. Accordingly, the Hotung Group will not be obliged to make a mandatory offer under Rules 26 and 32 of the Takeover Code in this respect.

In fact, the Directors have no present intention to exercise repurchases to such an extent as would result in takeover obligations.

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EXPLANATORY STATEMENT

APPENDIX

8. SHARE REPURCHASE MADE BY THE COMPANY

No purchases of Shares have been made by the Company since the listing of the Shares on GEM on 14th April, 2000, whether on the Stock Exchange or otherwise up to the date of this circular.

9. CONNECTED PERSON

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

10. SHARE PRICES

The highest and lowest price at which Shares have been traded on GEM during each of the previous eleven months before the Latest Practicable Date were as follows:

	Shares	Shares
	Highest	Lowest
	HK$	HK$
2000
April	1.440	0.440
May	0.590	0.300
June	0.380	0.250
July	0.280	0.225
August	0.280	0.245
September	0.260	0.135
October	0.164	0.127
November	0.131	0.086
December	0.112	0.068
2001
January	0.218	0.091
February	0.181	0.155

11. PROXY

A form of proxy for use at the Annual General Meeting is also enclosed. Whether or not you intend to attend the meeting, you are requested to complete and return the form of proxy to the Head Office of the Company in Hong Kong c/o the Company Secretary as soon as possible and in any event not less than 48 hours before the time fixed 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 in person at the Annual General Meeting should you so desire.

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