Yunkang Group Limited — AGM Information 2003

Jun 18, 2003

IMPORTANT

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

If you have sold all your shares in Legend Group Limited , you should at once hand this circular and the accompanying proxy form 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.

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GENERAL MANDATES TO REPURCHASE SHARES AND TO ISSUE SHARES AND NOTICE OF ANNUAL GENERAL MEETING

A notice convening an annual general meeting of Legend Group Limited to be held at Salon 6, Level 3, JW Marriott Hotel, Pacific Place, 88 Queensway, Hong Kong on Tuesday, 15th July 2003 at 9:30 a.m. is set out on pages 8 to 11 of this circular. Whether or not you are able to attend the meeting in person, you are requested to complete and return the accompanying proxy form in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding of the meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting should you so wish.

5th June 2003

LETTER FROM THE CHAIRMAN

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Executive Directors: Mr Liu Chuanzhi (Chairman) Mr Yang Yuanqing (Vice Chairman and President) Ms Ma Xuezheng

Non-executive Director: Mr Zeng Maochao

Registered Office: 23rd Floor Lincoln House Taikoo Place 979 King’s Road Quarry Bay Hong Kong

Independent Non-executive Directors: Mr Wong Wai Ming Professor Woo Chia-Wei Mr Ting Lee Sen

5th June 2003

To the Shareholders

Dear Sir or Madam,

GENERAL MANDATES TO REPURCHASE SHARES AND TO ISSUE SHARES

INTRODUCTION

Pursuant to the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and the Companies Ordinance, Chapter 32 of the Laws of Hong Kong (the “Companies Ordinance”), listed companies incorporated in Hong Kong may in certain circumstances, if authorised by their Articles of Association, purchase their own shares.

At the extraordinary general meeting of the Company held on 9th July 2002, general mandates were given to the directors of the Company (the “Directors”) to exercise the powers of the Company to repurchase shares and to issue shares. Under the Companies Ordinance and the Listing Rules, these general mandates will lapse at the conclusion of the forthcoming annual general meeting of the Company.

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LETTER FROM THE CHAIRMAN

Ordinary resolutions will therefore be proposed at the annual general meeting of the Company to be held on 15th July 2003 (the “Annual General Meeting”) to approve fresh general mandates to repurchase shares and to issue shares.

The purpose of this circular is to provide you with information regarding the proposed general mandates to repurchase shares and to issue shares.

GENERAL MANDATE TO REPURCHASE SHARES

An ordinary resolution will be proposed at the Annual General Meeting to give a general and unconditional mandate to the Directors to exercise the powers of the Company to repurchase shares of HK$0.025 each of the Company (“Shares”) up to a maximum of 10 per cent. of the issued share capital of the Company at the date of passing of the ordinary resolution (the “Repurchase Mandate”). Such authority may only continue in force until the conclusion of the first annual general meeting of the Company following the passing of the ordinary resolution, or revoked or varied by ordinary resolution of the shareholders in general meeting, whichever occurs first.

An explanatory statement as required under the Listing Rules to provide the requisite information is set out in the Appendix hereto.

GENERAL MANDATE TO ISSUE SHARES

At the Annual General Meeting, an ordinary resolution will be proposed to give the Directors a general and unconditional mandate to issue Shares representing up to 20 per cent. of the issued share capital of the Company at the date of passing of the resolution (the “Issue Mandate”). Such authority may only continue in force until the conclusion of the first annual general meeting of the Company following the passing of the ordinary resolution, or revoked or varied by ordinary resolution of the shareholders in general meeting, whichever occurs first. In addition, an ordinary resolution will be proposed to authorise extension of the Issue Mandate which would increase the limit of the Issue Mandate by adding to it the number of Shares repurchased under the Repurchase Mandate.

ANNUAL GENERAL MEETING

Set out on pages 8 to 11 is a notice convening the Annual General Meeting for the purpose of considering and, if thought fit, approving, inter alia , the Repurchase Mandate and the Issue Mandate.

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LETTER FROM THE CHAIRMAN

A form of proxy for use at the Annual General Meeting is enclosed. Whether or not you intend to be present at the Annual General Meeting, you are requested to complete the proxy form and deposit it at the Company’s share registrar, Abacus Share Registrars Limited of 28/F., BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong in accordance with the instructions printed thereon not less than 48 hours before the time fixed for holding the Annual General Meeting. Completion and deposit of the proxy form will not preclude you from attending and voting at the Annual General Meeting if you so wish.

RECOMMENDATION

The Directors believe that the Repurchase Mandate and the Issue Mandate are in the best interests of the Company and its shareholders. Accordingly, the Directors recommend that all shareholders should vote in favour of Resolution 5 to be proposed at the Annual General Meeting.

Yours faithfully, Liu Chuanzhi Chairman

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EXPLANATORY STATEMENT

APPENDIX

This explanatory statement relates to Resolution 5(II) proposed to be passed at the Annual General Meeting to be held on 15th July 2003, which is an ordinary resolution to grant to the Directors a general mandate to repurchase Shares of the Company on the Stock Exchange. It contains all the information required pursuant to rule 10.06(1)(b) of the Listing Rules to be given to shareholders to enable them to make an informed decision on whether to vote for or against such ordinary resolution.

1. Shareholders’ approval

The Listing Rules provide that all proposed share repurchases on the Stock Exchange by a company with its primary listing on the Stock Exchange must be approved in advance by an ordinary resolution of shareholders, either by way of general mandate or by specific approval in relation to specific transactions. The Shares proposed to be purchased by the Company must be fully paid up.

2. Number of shares subject to the repurchase mandate

As at 5th June 2003, being the latest practicable date prior to printing of this circular for ascertaining certain information contained in this circular, the issued share capital of the Company comprised 7,468,014,108 Shares.

If the ordinary resolution authorising the Directors to repurchase its own Shares is passed at the Annual General Meeting of the Company, and assuming that no further Shares are issued or repurchased prior to the Annual General Meeting, up to 746,801,410 Shares, representing 10 per cent. of the existing issued share capital of the Company, may be repurchased by the Company.

3. Source of funds

Repurchases must be funded out of funds legally available for the purpose in accordance with the Articles of Association of the Company and the laws of Hong Kong. The Companies Ordinance provides that the repurchases may be made either out of distributable profits or the proceeds of a new issue of shares made for such purpose.

4. Reasons for repurchases

The Directors believe that it is in the best interests of the Company and its shareholders for the Directors to have a general authority from the shareholders to enable the Company to repurchase Shares in the market at any appropriate time. Such repurchases may, depending on market conditions and funding arrangements at that time, lead to an enhancement of the net asset value of the Company and/or its earnings per share and will only be made when the Directors believe that such repurchases will benefit the Company and its shareholders.

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EXPLANATORY STATEMENT

APPENDIX

5. Financial effect of repurchases

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 funding requirements of the Company or the gearing position which in the opinion of the Directors are from time to time appropriate for the Company. However, on the basis of the most recent published consolidated financial position of the Company as at 31st March 2003, there might be a material adverse impact on the funding or gearing position of the Company in the event that the Repurchase Mandate is exercised in full.

6. General

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

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 Listing Rules and the applicable laws of Hong Kong.

No connected person (as defined in the Listing Rules) has notified the Company that it has a present intention to sell any of the Shares to the Company, or has undertaken not to do so, if the Company is authorised to make purchases of Shares.

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

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EXPLANATORY STATEMENT

APPENDIX

As at 5th June 2003, according to the register maintained under section 336 of the Securities and Futures Ordinance, 聯想控股有限公司 (Legend Holdings Limited*) (the “controlling shareholder”) and Right Lane Limited beneficially held 2,853,174,724 Shares and 1,469,311,247 Shares representing approximately 38.2% and 19.7% of the issued share capital of the Company respectively. Right Lane Limited is a wholly-owned subsidiary of the controlling shareholder. As such the controlling shareholder is deemed to be interested in the Shares held by Right Lane Limited, representing approximately 57.9% of the issued share capital of the Company. Based on such shareholding and in the event that the Directors exercised in full the power to repurchase Shares pursuant to the Repurchase Mandate, its shareholding would be increased to approximately 64.3% of the issued share capital of the Company. Such increase would not give rise to an obligation to make a mandatory offer in accordance with Rule 26 of the Takeovers Code.

In the event of an exercise of the Repurchase Mandate, public shareholding in the Company may be reduced to below 25% which will be in breach of the Listing Rules. In accordance with the aforesaid undertaking and unless otherwise approved by the Stock Exchange, the Directors will refrain from exercising the power conferred by the Repurchase Mandate if it will result in a breach of the Listing Rules.

In the previous six months ended 31st May 2003 and up to 5th June 2003, the Company purchased 33,870,000 Shares at prices ranging from HK$2.025 to HK$2.600 per Share on the Stock Exchange, as follows:

	Number of shares	Highest price	Lowest price
	repurchased	per share	per share
		HK$	HK$
17th March 2003	1,200,000	2.500	2.500
18th March 2003	1,200,000	2.600	2.600
19th March 2003	3,000,000	2.600	2.600
21st March 2003	3,000,000	2.575	2.575
24th March 2003	2,000,000	2.575	2.575
25th March 2003	500,000	2.550	2.550
26th March 2003	2,620,000	2.600	2.600
27th March 2003	5,000,000	2.600	2.550
28th March 2003	2,000,000	2.525	2.525
31st March 2003	4,000,000	2.450	2.400
23rd April 2003	4,000,000	2.375	2.225
24th April 2003	350,000	2.050	2.025
25th April 2003	5,000,000	2.050	2.050

* Direct transliteration of its Chinese company name in English is Legend Holdings Limited.

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EXPLANATORY STATEMENT

APPENDIX

The highest and lowest prices at which the Company’s Shares have traded on the Stock Exchange in each of the 12 months prior to the date of this circular and up to 5th June 2003 were as follows:

	Highest	Lowest
	HK$	HK$
2002
June	3.300	2.800
July	3.025	2.675
August	3.200	2.600
September	3.025	2.725
October	2.850	2.125
November	3.075	2.675
December	3.075	2.575
2003
January	3.200	2.600
February	2.950	2.625
March	2.800	2.400
April	2.625	1.990
May	2.500	2.125
June (up to 5th June)	2.725	2.450

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NOTICE OF ANNUAL GENERAL MEETING

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NOTICE IS HEREBY GIVEN that an annual general meeting of Legend Group Limited (the “Company”) will be held at Salon 6, Level 3, JW Marriott Hotel, Pacific Place, 88 Queensway, Hong Kong on 15th July 2003 at 9:30 a.m. for the following purposes:

1. To receive and consider the audited accounts for the year ended 31st March 2003 together with the reports of the directors and auditors thereon.

2. To declare a final dividend and a special dividend for the year ended 31st March 2003.

3. To re-elect the retiring directors and authorise the Board to fix directors’ fees.

4. To re-appoint Messrs. PricewaterhouseCoopers as auditors and authorise the Board to fix auditors’ remuneration.

5. To consider as special business and, if thought fit, pass with or without modification the following resolutions as Ordinary Resolutions:

ORDINARY RESOLUTIONS

(I) “THAT:

• (a) subject to paragraph (c) of this Resolution and pursuant to Section 57B of the Companies Ordinance, the exercise by the directors of the Company during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional shares in the share capital of the Company and to make or grant offers, agreements and options which might require the exercise of such power be and is hereby generally and unconditionally approved;

• (b) the approval in paragraph (a) of this Resolution shall authorise the directors of the Company during the Relevant Period (as hereinafter defined) to make or grant offers, agreements and options which might require the exercise of such power after the end of the Relevant Period;

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NOTICE OF ANNUAL GENERAL MEETING

• (c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the directors of the Company pursuant to the approval in paragraph (a) of this Resolution, otherwise than pursuant to (i) a Rights Issue (as hereinafter defined), or (ii) an issue of shares upon the exercise of options granted under any share option scheme or similar arrangement for the time being adopted for the grant or issue of shares or rights to acquire shares in the Company, or (iii) an issue of shares as scrip dividends pursuant to the Articles of Association of the Company from time to time, shall not exceed 20 per cent. of the aggregate nominal amount of the issued share capital of the Company at the date of passing this Resolution, and the said approval shall be limited accordingly; and

• (d) for the purpose of this Resolution:

“Relevant Period” means the period from the passing of this Resolution until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Companies Ordinance or the Articles of Association of the Company to be held; and

• (iii) the date on which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the shareholders in general meeting of the Company; and

“Rights Issue” means an offer of shares in the share capital of the Company open for a period fixed by the directors of the Company to holders of shares whose names appear on the register of members of the Company on a fixed record date in proportion to their then holdings of such shares (subject to such exclusion or other arrangements as the directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of, any recognised regulatory body or any stock exchange in any territory applicable to the Company). ”

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NOTICE OF ANNUAL GENERAL MEETING

(II) “THAT:

• (a) subject to paragraph (b) of this Resolution, the exercise by the directors of the Company during the Relevant Period (as hereinafter defined) of all the powers of the Company to repurchase securities of the Company on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) or on any other stock exchange on which the securities of the Company may be listed and recognised by the Securities and Futures Commission and the Stock Exchange for this purpose, subject to and in accordance with all applicable laws and the requirements of the Rules Governing the Listing of Securities on the Stock Exchange or of any other stock exchange as amended from time to time, be and is hereby generally and unconditionally approved;

• (b) the amount of the securities of the Company which the Company is authorised to repurchase pursuant to the approval in paragraph (a) of this Resolution shall not exceed 10 per cent. of the aggregate nominal amount of the issued share capital of the Company at the date of passing this Resolution, and the said approval shall be limited accordingly; and

• (c) for the purpose of this Resolution:

“Relevant Period” means the period from the passing of this Resolution until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the Companies Ordinance or the Articles of Association of the Company to be held; and

• (iii) the date on which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the shareholders in general meeting of the Company. ”

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NOTICE OF ANNUAL GENERAL MEETING

• (III) “THAT conditional upon the passing of Resolutions 5(I) and 5(II) as set out in the notice convening this meeting, the general mandate granted to the directors of the Company to exercise the powers of the Company to allot, issue and deal with the shares in the Company pursuant to Resolution 5(I) set out in the notice convening this meeting be and is hereby extended by the addition to the aggregate nominal value of the share capital which may be allotted and issued or agreed conditionally or unconditionally to be allotted and issued by the directors of the Company pursuant to such general mandate of an amount representing the aggregate nominal value of the share capital of the Company repurchased by the Company pursuant to the mandate to repurchase securities of the Company as referred to in Resolution 5(II) set out in the notice convening this meeting, provided that such extended amount shall not exceed 10 per cent. of the aggregate nominal amount of the issued share capital of the Company at the date of passing this Resolution. ”

By Order of the Board Liu Chuanzhi Chairman

Hong Kong, 28th May 2003

Notes :

1. Any member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him. A proxy need not be a member of the Company.

2. To be valid, a proxy form, together with any power of attorney or other authority (if any) under which it is signed or a notarially certified copy thereof must be completed and lodged with the Company’s share registrar, Abacus Share Registrars Limited of 28/F., BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the meeting.

3. The register of members of the Company will be closed from Thursday, 10th July 2003 to Tuesday, 15th July 2003, both days inclusive, during which period no transfer of shares will be effected. In order to qualify for the proposed dividends, all transfers, accompanied by the relevant share certificates, must be lodged for registration with the Company’s share registrar, Abacus Share Registrars Limited at the above address not later than 4:00 p.m. on Wednesday, 9th July 2003.

4. Where there are joint holders of any shares, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders are present at any meeting 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 the joint holding.

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