CORPORATE INFORMATION

BOARD OF DIRECTORS : Chan Wing Kwan (Chairman)

Chang Wing Yiu (Managing Director)

Cheung Kwok Wing

Ho Yin Sang

Zhang Guanghui

Lee Joo Hai

Teo Kiang Kok

Lai Chung Wing, Robert

COMPANY SECRETARIES : Helen ThomasACIS, LL.B. (Hons)

Ira Stuart Outerbridge IIIFCIS

REGISTERED OFFICE : Clarendon House2 Church StreetHamilton HM IIBermuda

REGISTRAR FOR THE INVITATION ANDSINGAPORE SHARE TRANSFERAGENT

: Compact Administrative Services Pte Ltd95 South Bridge Road #10-10Pidemco CentreSingapore 058717

BERMUDA REGISTRAR AND SHARETRANSFER OFFICE

: Butterfield Corporate Services LimitedRosebank Centre11 Bermudiana RoadPembrokeBermuda

MANAGER, UNDERWRITER ANDPLACEMENT AGENT

: The Development Bank of Singapore Ltd6 Shenton WayDBS Building Tower OneSingapore 068809

CO-UNDERWRITERS : BNP Prime Peregrine (Singapore) Ltd30 Cecil Street #19-00Prudential TowerSingapore 049712

Citicorp Investment Bank (Singapore) Limited3 Temasek Avenue #17-00Centennial TowerSingapore 039190

Standard Chartered Merchant Bank Asia Limited6 Battery Road #06-08Singapore 049909

CO-PLACEMENT AGENTS : Yuanta Securities (Hong Kong) Company LimitedSuite 1901, 19th FloorBank of America Tower12, Harcourt RoadCentral, Hong Kong

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BNP Prime Peregrine (Singapore) Ltd30 Cecil Street #19-00Prudential TowerSingapore 049712

G. K. Goh Stockbrokers Pte Ltd50 Raffles Place #33-00Singapore Land TowerSingapore 048623

Vickers Ballas & Co Pte Ltd30 Raffles Place #07-00Caltex HouseSingapore 048622

AUDITORS AND REPORTINGACCOUNTANTS

: Deloitte & ToucheCertified Public Accountants95 South Bridge Road #09-00Pidemco CentreSingapore 058717

SOLICITORS TO THE INVITATION : Shook Lin & Bok1 Robinson Road #18-00AIA TowerSingapore 048542

SOLICITORS TO THE MANAGER,UNDERWRITER AND PLACEMENTAGENT

: Wong Partnership80 Raffles Place #58-01UOB Plaza 1Singapore 048624

LEGAL ADVISORS TO THE COMPANYON HONG KONG LAW

: Kwok & Yih(in association with Blake Dawson Waldron)37th Floor, Gloucester Tower, The LandmarkCentral, Hong Kong

LEGAL ADVISORS TO THE COMPANYON BERMUDA LAW

: Conyers Dill & Pearman3408 Two Exchange Square8 Connaught PlaceCentral, Hong Kong

PRINCIPAL BANKERS : Citibank N.A.47th Floor Citibank TowerCitibank Plaza3 Garden RoadCentral, Hong Kong

Standard Chartered Bank12th Floor, Standard Chartered Tower388 Kwun Tong Road, Kwun TongHong Kong

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DEFINITIONS

For the purpose of this Prospectus and the accompanying Application Forms, the following definitionshave, where appropriate, been used:−

‘‘Act’’ : The Companies Act, Chapter 50 of Singapore

‘‘ATM’’ : Automated teller machine

‘‘Application Forms’’ : The official application forms to be used for the purpose ofthe Invitation and which form part of this Prospectus

‘‘Application List’’ : List of applications for subscription and/or purchase of theInvitation Shares

‘‘Audit Committee’’ : The audit committee of the Company

‘‘Bermuda Act’’ or ‘‘Companies Act’’ : The Companies Act 1981 of Bermuda

‘‘BVI’’ : British Virgin Islands

‘‘Company’’ or ‘‘KBCF’’ : Kingboard Copper Foil Holdings Limited

‘‘CDP’’ : The Central Depository (Pte) Limited

‘‘C-Notes’’ : The guaranteed convertible and exchangeable notesissued by HKCF(BVI) to the Noteholders relating to theloans extended by the Noteholders to HKCF(BVI)pursuant to the terms and conditions of the SubscriptionAgreement.

‘‘Co-Placement Agents’’ : Yuanta Securities (Hong Kong) Company Limited, BNPPrime Peregrine (Singapore) Ltd, G. K. Goh StockbrokersPte Ltd and Vickers Ballas & Co Pte Ltd

‘‘Co-Underwriters’’ : BNP Prime Peregrine (Singapore) Ltd, Citicorp InvestmentBank and Standard Chartered Merchant Bank AsiaLimited

‘‘CPF’’ : Central Provident Fund

‘‘DBS Bank’’ : The Development Bank of Singapore Ltd

‘‘Directors’’ : The directors of the Company as at the date of thisProspectus, unless otherwise stated

‘‘Electronic Applications’’ : Applications for the Invitation Shares through an ATM ofone of the Participating Banks in accordance with theterms and conditions of this Prospectus

‘‘Executive Officers’’ : The executive officers of the Company as at the date of thisProspectus, unless otherwise stated

‘‘FY’’ : Financial year ended or ending 31 March

‘‘Hong Kong, SAR’’ : Hong Kong, Special Administrative Region

‘‘Invitation’’ : The invitation to the public in respect of the InvitationShares, subject to and on the terms of this Prospectus

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‘‘Invitation Shares’’ : The 170,000,000 New Shares and 45,000,000 VendorShares which are the subject of the Invitation

‘‘Issue Price’’ : S$0.53 for each Offer Share and for each PlacementShare

‘‘Manager’’ : DBS Bank

‘‘Management and UnderwritingAgreement’’

: The management and underwriting agreement dated 6December 1999 pursuant to which the Company and theVendors appointed DBS Bank to underwrite the OfferShares

‘‘Market Day’’ : A day on which the SESTL is open for trading in securities

‘‘New Shares’’ : The 170,000,000 new Shares for which the Companyinvites applications to subscribe, subject to and on theterms of this Prospectus

‘‘Noteholders’’ : Yuanta Securities Asia Financial Services Limited, GrandAsia Gemini Fund Limited, High Intelligence Limited, PanAsia Special Opportunities Fund, Mr Lin Yu Wen and MrMa Wei Chien

‘‘NTA’’ : Net tangible assets

‘‘Offer’’ : The offer by the Company of the Offer Shares to thepublic for subscription and/or purchase at the Issue Price

‘‘Offer Shares’’ : The 43,000,000 Invitation Shares which are the subject ofthe Offer

‘‘PRC’’ or ‘‘China’’ : People’s Republic of China

‘‘Participating Banks’’ : DBS Bank (including its POSBank Services division);Keppel TatLee Bank Limited (‘‘KTB’’); Oversea-ChineseBanking Corporation Limited (‘‘OCBC’’) Group(comprising OCBC and Bank of Singapore Limited);Overseas Union Bank Limited (‘‘OUB’’); and UnitedOverseas Bank Limited (‘‘UOB’’) Group (comprising UOB,Far Eastern Bank Limited and Industrial & CommercialBank Limited)

‘‘Placement’’ : The placement of the Placement Shares by thePlacement Agents on behalf of the Company forsubscription and/or purchase at the Issue Price

‘‘Placement Agent’’ : DBS Bank

‘‘Placement Shares’’ : The 172,000,000 Invitation Shares which are the subjectof the Placement

‘‘Restructuring Exercise’’ : The restructuring exercise of the KBCF Groupundertaken in connection with the Invitation, as describedin pages 22 and 23 of this Prospectus

‘‘SCCS’’ : Securities Clearing & Computer Services (Pte) Ltd

‘‘SEHK’’ : The Stock Exchange of Hong Kong Limited

‘‘SESTL’’ : Singapore Exchange Securities Trading Limited

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‘‘Securities Account’’ : Securities account maintained by a depositor with CDP

‘‘Share(s)’’ : Ordinary share(s) of US$0.10 each in the capital of theCompany

‘‘Subscription Agreement’’ : The subscription agreement dated 3 April 1998 madebetween HKCF(BVI), KCHL and the Noteholderspursuant to which the Noteholders inter alia extendedloans amounting to an equivalent of US$13,992,774 toHKCF(BVI)

‘‘Underwriter’’ : DBS Bank

‘‘US’’ or ‘‘USA’’ : United States of America

‘‘Vendors’’ : The Noteholders

‘‘Vendor Shares’’ : The issued and fully paid-up Shares for which theVendors invite applications to purchase on the terms andsubject to the conditions of this Prospectus

Companies

KBCF Group Companies

‘‘KBCF Group’’ or ‘‘Proforma Group’’ : The Company, HKCF(BVI), FKI and CPG

‘‘HKCF(BVI)’’ : Hong Kong Copper Foil Limited

‘‘FKI’’ : Fogang Kingboard Industry Ltd

‘‘CPG’’ : Capital Project Group Ltd

Other Companies

‘‘HML’’ : Hallgain Management Limited

‘‘Jamplan (BVI)’’ : Jamplan (BVI) Limited

‘‘KCHL’’ : Kingboard Chemical Holdings Limited, a companyincorporated in the Cayman Islands and listed on theSEHK

‘‘Kingboard Group’’ : KCHL and its subsidiaries, excluding the KBCF Group

Currencies

‘‘RMB’’ : The Peoples’ Republic of China Renminbi

‘‘S$’’ or ‘‘$’’ and ‘‘cents’’ : Singapore dollars and cents respectively, unlessotherwise stated

‘‘HK$’’ : Hong Kong dollars

‘‘US$’’ : United States dollars

Units

‘‘kg’’ : Kilogram(s)

‘‘tonnes’’ : Metric ton(s)

‘‘sq ft’’ : Square foot (feet)

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‘‘sq m’’ : Square metre(s)

‘‘%’’ or ‘‘per cent.’’ : Per centum

Unless otherwise stated, the exchange rate S$1.00 = HK$4.5879 is used throughout this Prospectus.

Words importing the singular shall, where applicable, include the plural and vice versa and wordsimporting the masculine gender shall, where applicable, include the feminine and neuter genders andvice versa. References to persons shall include corporations.

Any reference in this Prospectus and the Application Forms to any enactment is a reference to thatenactment as for the time being amended or re-enacted. Any word defined under the Bermuda Act, theAct or any statutory modification thereof and used in this Prospectus and the Application Forms shallhave the meaning assigned to it under the Bermuda Act, the Act or statutory modification as the casemay be.

Any reference in this Prospectus and the Application Forms to shares being allotted to an applicantincludes allotment to CDP for the account of that applicant.

A reference to a time of day in this Prospectus and the Application Forms shall be a reference toSingapore time unless stated otherwise.

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GLOSSARY OF TECHNICAL TERMS

To facilitate a better understanding of the business of the KBCF Group, the following glossary providesan explanation on some of the technical terms and abbreviations relating to the KBCF Group’s industry:–

‘‘PCB’’ : Printed circuit board.

‘‘Laminates’’ : An insulated board used as a raw material in the production of PCBs.

‘‘Phase I’’ : Refers to the first phase under which part of the production facilities of theKBCF Group were put in place. Phase I comprises the operation of 30titanium drums giving rise to a designed monthly production capacity of 300tonnes of copper foil. Commercial production commenced in 1995 with thebulk of its products being adhesive copper foil of 35 microns thickness.

‘‘Phase II’’ : Refers to the second phase under which a further part of the productionfacilities of the KBCF Group were or will be put in place. Phase II is itselfsub-divided into three sub-phases, namely, Phase IIA, Phase IIB and PhaseIIC.

Phase IIA comprises the operation of 8 titanium drums giving rise to adesigned monthly production capacity of 200 tonnes. Commercial productioncommenced in January 1999 with the bulk of its products being uncoatedcopper foil of 18 microns and 35 microns thicknesses.

Phase IIB also comprises the operation of 8 titanium drums giving rise to adesigned monthly production capacity of 200 tonnes. Commercial productioncommenced in June 1999 with the bulk of its products being uncoated copperfoil of 18 microns and 35 microns thicknesses.

Phase IIC is in the process of being implemented. Installation of theproduction lines consisting of 8 titanium drums giving rise to a designedmonthly production capacity of 200 tonnes. The KBCF Group intends tocommence commercial production under Phase IIC in January 2001,concentrating on 18 microns and 35 microns thick copper foil and, wherethere is a market demand, double-side and reverse-side treated copper foilas well.

‘‘Phase III’’ : Refers to the third phase under which new production facilities are to beadded to enhance the KBCF Group’s production capacity and capabilities.The plans for Phase III are set out on page 50 of this Prospectus under theheading ‘‘Prospects and Future Plans’’.

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PURCHASE BY THE COMPANY OF ITS OWN SHARES

Under the laws of Bermuda, a company may, if authorised by its memorandum of association orbye-laws, purchase its own shares. The Company has such power to purchase its own sharesunder paragraph 7 of its Memorandum of Association. Such power of the Company to purchaseits own shares shall, subject to the Bermuda Act and its Memorandum of Association, beexercisable by the Directors upon such terms and subject to such conditions as they think fit, inaccordance with Bye-law 3(2).

Under the laws of Bermuda, such purchases may be effected out of the capital paid-up on the purchasedshares or out of the funds of the Company otherwise available for dividend or distribution or out ofproceeds of a fresh issue of shares made for the purpose. Any premium payable on such a purchaseover the par value of the shares to be purchased must be provided for out of the funds of the Companyotherwise available for dividend or distribution or out of the Company’s share premium account. Further,any such purchase may only be made if at least two Directors, by affidavit, declare that on the effectivedate of purchase and taking into account the purchase, the Company is solvent or that all of the creditorsof the Company on that date have consented in writing to such purchase. As the Company’s shares areto be listed on the SESTL, such affidavit may, at the option of the Company, be sworn within thirty daysafter the end of each calendar quarter giving details of all purchases made during each quarter and shallconfirm that, after taking into account such purchases, the Company was solvent at all material timesduring that quarter. The shares so purchased will be treated as cancelled and the Company’s issued, butnot its authorised, capital will be diminished accordingly.

For further details, please see ‘‘Purchase of securities by a company and its subsidiaries’’ inparagraph (c) of Appendix III on page 112 of this Prospectus.

The Company presently has no intention to purchase its shares after the listing. However, if it decidesto do so later, it would seek the shareholders’ approval in accordance with Singapore laws and the rulesof the SESTL. The Company will make prompt public announcement of any such share purchase andhas also given an undertaking to the SESTL to comply with all requirements that the SESTL may imposein the event of any such share purchase.

SELLING RESTRICTIONS

This Prospectus does not constitute an offer, solicitation or invitation to subscribe for and/or purchase theShares in any jurisdiction in which such offer, solicitation or invitation is unlawful or is not authorised orto any person to whom it is unlawful to make such offer, solicitation or invitation. No action has been orwill be taken under the requirements of the legislation or regulations of, or of the legal or regulatoryauthorities of, any jurisdiction, except for the filing and/or registration of this Prospectus in Bermuda andSingapore in order to permit a public offering of the Shares and the public distribution of this Prospectusin Singapore. The distribution of this Prospectus and the offering of the Shares in certain jurisdictionsmay be restricted by the relevant laws in such jurisdictions. Persons who may come into possession ofthis Prospectus are required by the Company, the Manager and the Placement Agents to informthemselves about, and to observe and comply with, any such restrictions.

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PLACEMENT BY YUANTA SECURITIES (HONG KONG) COMPANY LIMITED

Yuanta Securities (Hong Kong) Company Limited (‘‘Yuanta’’), the co-placement agent of the PlacementShares, is an investment advisor and a dealer in securities registered under the Securities Ordinance(Chapter 333 of the Laws of Hong Kong). Yuanta is not directly or indirectly, offering or selling anyInvitation Shares or soliciting any offer or inviting any application for the subscription and/or purchase ofany Invitation Shares in Singapore. No inducement or advice is also being made or offered by Yuanta toany potential or actual investor in Singapore in connection with the Invitation, the KBCF Group or theShares in this Prospectus. This Prospectus (including the Application Forms) is also not being distributedor circulated in Singapore by Yuanta.

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DETAILS OF THE INVITATION

LISTING ON SESTL

Application has been made to SESTL for permission to deal in and for quotation for all the Shares alreadyissued as well as the New Shares on the Official List of SESTL. Such permission will be granted whenthe Company has been admitted to the Official List of SESTL. Acceptance of applications will beconditional upon permission being granted to deal in and for quotation for all the issued Shares as wellas the New Shares. Moneys paid in respect of any application accepted will be returned, without interestor any share of revenue or benefit arising therefrom and at the applicant’s own risk, if the said permissionis not granted.

The SESTL assumes no responsibility for the correctness of any of the statements made, opinionsexpressed or reports contained in this Prospectus. Admission to the Official List of SESTL is not to betaken as an indication of the merits of the Invitation, the Company, its subsidiaries or the Shares.

A copy of this Prospectus, together with copies of the Application Forms, has been lodged with, andregistered by, the Registrar of Companies and Businesses in Singapore who takes no responsibility forits contents.

A copy of this Prospectus, together with copies of the Application Forms, has been filed with the Registrarof Companies in Bermuda. The Bermuda Monetary Authority has given its consent to the issue of theNew Shares and the sale of the Vendor Shares pursuant to the Invitation on the terms referred to in thisProspectus. In accepting this Prospectus for filing and in granting such consent, the Bermuda MonetaryAuthority and the Registrar of Companies in Bermuda accept no responsibility for the financialsoundness of the KBCF Group or any proposal or for the correctness of any of the statements made oropinions expressed herein or any of the other documents referred to in this Prospectus.

This Prospectus has been seen and approved by the Directors and they individually and collectivelyaccept full responsibility for the accuracy of the information given in this Prospectus and confirm, havingmade all reasonable enquiries, that to the best of their knowledge and belief, there are no other materialfacts the omission of which would make any statement in this Prospectus misleading.

No person is authorised to give any information or to make any representation not contained in thisProspectus in connection with the Invitation and, if given or made, such information or representationmust not be relied upon as having been authorised by the Company, the Vendors, the Manager or thePlacement Agents. Neither the delivery of this Prospectus and the Application Forms nor the Invitationshall, under any circumstances, constitute a continuing representation or create any suggestion orimplication that there has been no change in the affairs of the Company or of its subsidiaries or in anystatements of fact or information contained in this Prospectus since the date of this Prospectus. Wheresuch changes occur, the Company may make an announcement of the same to the SESTL. Allapplicants should take note of any such announcement and, upon release of such an announcement,shall be deemed to have notice of such changes. Save as expressly stated in this Prospectus, nothingherein is, or may be relied upon as, a promise or representation as to the future performance or policiesof the Company or its subsidiaries. This Prospectus has been prepared solely for the purpose of theInvitation and may not be relied upon by any persons other than the applicants in connection with theirapplication for the Invitation Shares or for any other purpose. This Prospectus does not constitute anoffer of, or invitation to subscribe for, the Invitation Shares in any jurisdiction in which such offer orinvitation is unauthorised or unlawful nor does it constitute an offer or invitation to any person to whomit is unlawful to make such offer or invitation.

Copies of this Prospectus and the Application Forms and envelopes may be obtained on request, subjectto availability, from:–

The Development Bank of Singapore Ltd6 Shenton Way

DBS Building Tower OneSingapore 068809

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and from DBS Bank branches, members of the Association of Banks in Singapore, members of SESTLand merchant banks in Singapore.

The Application List will open at 10.00 a.m. on 14 December 1999 and will remain open until 12.00noon on the same day or for such further period or periods as the Directors may, in their absolutediscretion, decide.

INDICATIVE TIMETABLE FOR LISTING

In accordance with the SESTL’s News Release of 28 May 1993 on the trading of initial public offeringshares on a ‘‘when issued’’ basis, an indicative timetable is set out below for the reference of applicants:–

Indicative date/time Event

14 December 1999, 12 noon Closing date and time for applications

15 December 1999 Balloting of applications, if necessary

16 December 1999, 9.00 a.m. Commence trading on a ‘‘when issued’’ basis

27 December 1999 Last day of trading on a ‘‘when issued’’ basis

28 December 1999, 9.00 a.m. Commence trading on a ‘‘ready’’ basis

4 January 2000 Settlement date for all trades done on a ‘‘when issued’’ basis andfor all trades done on a ‘‘ready’’ basis on 28 December 1999

The above timetable is only indicative as it assumes that the closing of the Application List is 14December 1999, the date of admission of the Company to the Official List of the SESTL will be 16December 1999, SESTL’s shareholding spread requirement will be complied with and the InvitationShares will be issued and fully paid up prior to 16 December 1999. The actual date on which the Shareswill commence trading on a ‘‘when issued’’ basis will be announced when it is confirmed by SESTL.

The above timetable and procedure may be subject to such modifications as SESTL may in its discretiondecide, including the decision to permit trading on a ‘‘when issued’’ basis, the commencement date ofsuch trading. All persons trading in the Shares on a ‘‘when issued’’ basis do so at their own risk. Inparticular, persons trading in the Shares before their Securities Accounts with CDP are creditedwith the relevant number of Shares do so at the risk of selling Shares which neither they nor theirnominees, if applicable, have been allotted with or are otherwise beneficially entitled to. Suchpersons are also exposed to the risk of having to cover their net sell positions earlier if ‘‘whenissued’’ trading ends sooner than the indicative date mentioned above. Persons who have a netsell position traded on a ‘‘when issued’’ basis should close their position on or before the firstday of ‘‘ready’’ basis trading.

Investors should consult the SESTL announcement on the ‘‘ready’’ listing date on the Internet (at theSESTL website http://www.ses.com.sg), INTV or the newspapers, or check with their brokers on the dateon which trading on a ‘‘ready’’ basis will commence.

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PROSPECTUS SUMMARY

The information contained in this summary is derived from and should be read in conjunction with the fulltext of this Prospectus:–

The Company : The Company was incorporated as an exempted company inBermuda under the Companies Act 1981 of Bermuda on 10September 1999. The KBCF Group is engaged in themanufacture and trading of copper foil, a raw material for thelaminates and PCB industries.

The Invitation

Size : 215,000,000 Shares, comprising 170,000,000 New Shares and45,000,000 Vendor Shares. The New Shares will, when issuedand fully paid-paid, rank pari passu in all respects with the existingShares of the Company.

Issue Price : S$0.53 for each Offer Share and for each Placement Share.

Purpose of the Invitation : The Directors consider that the listing of the Company and thequotation of the Shares on SESTL will raise funds to finance theCompany’s growth and enhance the Company’s public image. Itwill also provide members of the public an opportunity toparticipate in the equity of the Company.

Use of Proceeds : The net proceeds from the issue of the New Shares (afterdeducting estimated expenses in relation to the Invitation) ofapproximately S$86.1 million will be utilised as follows:−

(a) S$8 million for upgrading of production facilities underPhase I;

(b) S$20 million for the installation of production facilitiesunder Phase IIC;

(c) S$38 million for the partial implementation of Phase III;

(d) the balance to be used as working capital.

Pending the deployment of net proceeds as aforesaid, the netproceeds will be added to the KBCF Group’s working capital orused for repayment of revolving banking facilities or investmentin short-term money market instruments, as the Directors maydeem fit.

Listing Status : The Shares will be quoted on the Main Board of SESTL,subject to admission of the Company to the Official List ofSESTL and permission for dealing in and quotation of theShares being granted by SESTL.

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RISK FACTORS

Prior to making an investment decision, prospective subscribers and purchasers of Shares shouldcarefully read the entire Prospectus. Subscribers and purchasers should consider, among other things,certain risk factors including, but not limited to, those set out below with respect to an investment in acompany, a significant proportion of the assets and operations of which are based in the PRC, not usuallyassociated with investments in the securities of issuers incorporated in Singapore and other jurisdictions.

Dependence on Major Customer

The business of the KBCF Group is dependent on a small number of customers, principally theKingboard Group, which is engaged in the manufacture of laminates. A detailed write up on theKingboard Group is set out in Appendix I of this Prospectus.

In FY1997 and FY1998, all the copper foil produced by the KBCF Group were sold to the KingboardGroup. In FY1999, sales to the Kingboard Group accounted for almost 100% of the turnover and profitbefore taxation of the copper foil business of the KBCF Group. There has been limited diversification ofthe customer base of the KBCF Group as the copper foil needs of the Kingboard Group has so farexceeded the KBCF Group’s capacity. The KBCF Group expects that it will continue to sell a substantialpart of its output to the Kingboard Group in the future. If the demand by the Kingboard Group for copperfoil should fall substantially for any reason, there will be a material adverse effect on the financial positionof the KBCF Group.

Although the KBCF Group has received orders of not less than HK$200 million from the KingboardGroup for the six months from October 1999 to March 2000, there can be no assurance that theKingboard Group will continue to demand copper foil from the KBCF Group after that period.

Fluctuations in Prices of Raw Materials

One of the main raw materials used in the manufacture of copper foil are copper scraps and cathodeplates, which are dissolved in sulphuric acid to form copper sulphate solution. The KBCF Group importsthe copper scraps and cathode plates needed for copper foil production from various countries, forexample, Chile, USA, and Australia. Copper is traded as a commodity and its price is therefore subjectto the fluctuations of the world commodity markets. Adverse movement in prices of copper is likely tohave material negative impact on the KBCF Group’s financial position. The chart below shows thechanges in price of copper traded on the London Metal Exchange in the last 30 months.

[Take in CHART]

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Dependence on Supply of Utilities

Due to the nature of the production process of copper foil, the KBCF Group’s copper foil facility inFogang, Guangdong Province, PRC, requires a constant and adequate supply of electricity and water forits operations. In 1995, FKI entered into a long-term water supply contract with the Fogang WaterResource Department under which the Fogang Water Resource Department agreed to supply water toFKI at preferential rates of approximately 25% discount from normal rates, during the period from thebeginning of 1998 to the end of 2005. This has enabled the KBCF Group to keep its production expensesdown, which translates into attractive copper foil prices for its customers. However, the preferential rateswere only agreed to be applicable for a limited period until the end of 2005. Although the water supplycontract is renewable at the end of 2005, the rates to be charged upon renewal will be subject tonegotiations between the parties. There can be no assurance that the Fogang Water ResourceDepartment will continue to offer preferential rates for the KBCF Group’s copper foil facility in Fogangafter 2005.

FKI currently also enjoys preferential rates of approximately 5% discount from normal rates for the supplyof electricity to its copper foil facility, which are offered as an incentive for foreign investors to set upoperations in Fogang. While the supply of electricity to FKI is for an indefinite period, the authorities arenot bound to continue to offer the preferential rates. Thus, any increase in electricity charges will resultin higher production costs for the copper foil business of the KBCF Group.

If FKI is unable to continue to enjoy preferential rates for both the supply of electricity and water, thiswould result in lower profits for the KBCF Group

Foreign Exchange Risk

Any material change in the value of the Hong Kong dollar or Renminbi relative to the US dollar wouldaffect the cost structure of the KBCF Group and may have a material adverse effect on its business,financial condition and results of operations. The sales of the KBCF Group are denominated mainly inHong Kong dollars, with a proportion of the sales (approximately 15%) denominated in Renminbi. TheKBCF Group’s expenses, incurred mainly in the import of raw materials, are denominated primarily in USdollars. Since 1993, the Hong Kong government has maintained the policy of linking the US dollar andthe Hong Kong dollar at an exchange rate of approximately HK$7.80 to US$1.00. The US dollar pegeffectively insures against currency risks but there can be no assurance that this link will be continued.

As up to 15% of the KBCF Group’s sales is also denominated in Renminbi, a devaluation of Renminbiagainst the US dollar may adversely affect the financial position of the KBCF Group. Although the PRCgovernment has repeatedly stated that it would not devalue the Renminbi, some analysts hold the viewthat China will become hard-pressed to do so if deflationary pressures mount and economic growthdecelerates(1).

Notes:−

(1) As reported in the Business Times on 16 August 1999.

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Preferential Income Tax Rates

FKI, a wholly foreign owned enterprise established by HKCF(BVI), is a Foreign Investment Enterprise(‘‘FIE’’) subject to the Income Tax Law of the People’s Republic of China for Foreign InvestmentEnterprises (the ‘‘Income Tax Law’’). Under the Income Tax Law, FKI is subject to income tax at a rateof 24%, which is the tax rate applicable to FIEs located in areas like the Fogang county. Under Article 8of the Income Tax Law, any FIE involved in production shall from the first year in which it generates profit,be exempt from state income tax in the first and second years and be granted a 50% reduction in stateincome tax payable in the third, fourth and fifth years. Currently, FKI is into its fourth year of Phase Iproduction at the plant in Fogang and is therefore entitled to a 50% reduction in income tax. When thetax reduction period expires, the effective tax rate will become 24%. In order to reduce its tax liability andtaking advantage of the local government’s policy of encouraging foreign investment, FKI applied to theprovincial tax authorities for the 2-year tax holiday and 3-year tax reduction period to be extended to itsprofits earned in respect of Phase II of the copper foil production at the Fogang plant. The application hasbeen approved by the provincial tax authorities and FKI is exempt from income tax in respect of theprofits earned from Phase II production for the years 1999 and 2000 and will enjoy a 50% reduction inincome tax liability in the years 2001, 2002 and 2003. There can be no assurance that FKI will be grantedfurther preferential income tax treatment after the year 2003.

PRC Political, Economic and Legal Factors

The manufacturing facilities of the KBCF Group are located in Fogang and the principal market of theKBCF Group is also the PRC and Hong Kong. Therefore, investors should note that there are severalinherent risks of doing business in China.

Internal Political Risks

First, there are the internal political risks of locating the KBCF Group’s operations and assets in acentrally controlled economy like China. Since the adoption of the ‘‘open door’’ reform policy in 1978 andthe ‘‘socialist market economy’’ in 1993, China has seen rapid economic growth and the standards ofliving of the general population have improved significantly. As the political conditions in China change,the economic reform measures may be modified or changed from time to time. This may lead to suddenchanges in the laws and regulations, or their interpretation, as well as changes in currency conversionpolicies, taxation and import and export restrictions. These changes may have a material adverse effecton the business of the KBCF Group, results of operation and financial condition. While the PRCgovernment has been pursuing economic reform policies, encouraging foreign investment and greatereconomic decentralization, there is no assurance that such policies will continue to be pursued or thatthey will not be altered from time to time without notice. Examples of changes in policies which wouldmaterially affect the KBCF Group are: revocation or reduction of tax incentives to FIEs (for example, FKI)and foreign companies, changes in tariff structures, stricter currency controls, as well as imposition ofeconomic austerity measures which may lead to decreased spending in the country.

Tension in the Taiwan Straits

Since the end of the Chinese civil war in 1949, when Taiwan broke away from mainland China toestablish its own political system, the PRC government has regarded the island to be a renegadeprovince. The PRC government has declared repeatedly that it would not hesitate to use military forceif Taiwan should declare independence at any time. In the past, there have been times when relationsbetween Taiwan and PRC were tense and the use of military force had been threatened by the PRCgovernment. Recently, cross-straits relations took a turn for the worse after Taiwan President Lee TengHui made statements in July 1999 as to ‘‘state-to-state’’ relations between Taiwan and the PRC. Shouldthe political tensions between the PRC and Taiwan worsen, the market sentiment and businessenvironment in PRC and Hong Kong would be adversely affected.

15

Current Economic Considerations

There are indications that despite the economic expansion policies implemented by the PRCgovernment, economic growth in China has shown signs of slowing down. The decline in the currenciesof the East Asian economies has caused China’s exports to be less cost-competitive as compared tothose of some other countries. The shrinking external sector will put pressure on the domestic economy,which is already facing deflationary pressures as a result of decreased consumption incentive in thecountry arising from massive lay-offs in the state sector. This may affect the general businessenvironment of the PRC and, in turn, the KBCF Group’s business may, to a certain extent, be affected.

PRC Legal System

As FKI is established as a wholly foreign-owned enterprise in the PRC, its operations would have to bewithin the framework of the PRC legal system and be regulated thereby.

The PRC legal system is based on the PRC Constitution and is made up of written laws, regulations,circulars, directives and other governmental orders. Unlike the common law system, decided cases donot form binding precedents. The National People’s Congress (‘‘NPC’’) and the Standing Committee ofthe NPC are vested with the powers under the PRC Constitution to exercise the legislative power of theState. The PRC government is still in the process of developing a comprehensive set of laws andregulations. Although considerable progress has been made in the promulgation of laws involving theprotection of foreign investors’ interests, some of the laws and regulations, and the interpretation,implementation and enforcement thereof may be subject to policy changes at State levels as well asprovincial and local levels. Further, precedents on the interpretation, implementation and enforcement ofthe PRC laws and regulations are limited. The outcome of dispute resolutions may not be as consistentor predictable as in other more developed legal jurisdictions.

Application of Singapore Take-over Laws and Regulations

Sections 213, 214 and 215 of the Singapore Companies Act, the Tenth Schedule to the SingaporeCompanies Act and the Singapore Code on Take-overs and Mergers (1985 Edition) (collectively the‘‘Singapore Take-over Laws and Regulations’’) apply only to take-over offers for public companiesincorporated in Singapore and not to companies incorporated outside Singapore. Therefore, theSingapore Take-over Laws and Regulations do not apply to take-over offers for the Company as it isincorporated in Bermuda.

Bye-law 168 (as described below) will, due to its binding effect on the members of the Company, requiremembers of the Company who make take-over offers for the Company to comply with the SingaporeTake-over Laws and Regulations. However, it is uncertain whether this can be implemented in practice.As Bye-law 168 only binds the members of the Company, a person (including a corporation) who is nota member of the Company will not be bound to comply with the Singapore Take-over Laws andRegulations.

Bye-law 168 provides that for so long as the Shares are listed on the Designated Stock Exchange (asdefined in the Bye-laws), the Singapore Take-over Laws and Regulations, including any amendments,modifications, revisions, variations or re-enactment thereof, shall apply, mutatis mutandis, to alltake-over offers of the Company.

The Company’s substantial shareholder KCHL has undertaken to the SESTL that, as long as it continuesto be a substantial shareholder of the Company, it will endeavour to persuade potential offerors to complywith the requirements of the Singapore Take-over Laws and Regulations in the event of any take-overoffers for the Company.

16

ISSUE STATISTICS

Issue Price for each Offer Share and each Placement Share S$0.53

NET TANGIBLE ASSETS

NTA per Share based on the consolidated balance sheet of the KBCF Group as at31 March 1999, after taking into account the sub-division of shares and theRestructuring Exercise referred to on pages 22 and 23 of this Prospectus:–

(a) Before adjusting for the estimated net proceeds from the issue of the NewShares (and based on the pre-flotation share capital of 500,000,000 Shares)

17.57 cents

(b) After adjusting for the estimated net proceeds from the issue of the NewShares (and based on the post-flotation share capital of 670,000,000 Shares)

25.97 cents

Premium of Issue Price of S$0.53 per Share over the NTA per Share as at 31March 1999:–

(a) Before adjusting for the estimated net proceeds from the issue of the NewShares and based on the pre-flotation share capital of 500,000,000 Shares

201.7%

(b) After adjusting for the estimated net proceeds from the issue of the NewShares and based on the post-flotation share capital of 670,000,000 Shares

104.1%

EARNINGS

Historical net earnings per Share of the KBCF Group for the financial year ended31 March 1999 based on the pre-flotation share capital of 500,000,000 Shares(1)

1.87 cents

Forecast net earnings per Share of the KBCF Group for the financial year ending31 March 2000 based on the weighted average share capital of 542,500,000(2)

Shares

5.25 cents

NET OPERATING CASH FLOW(3)

Historical net operating cash flow per Share for the financial year ended 31 March1999 based on the pre-flotation share capital of 500,000,000 Shares

2.35 cents

Forecast net operating cash flow per Share for the financial year ending 31 March2000 based on the weighted average share capital of 542,500,000(2) Shares

6.27 cents

BASED ON THE ISSUE PRICE OF S$0.53 PER SHARE

Historical price earnings ratio based on the historical net earnings per Share of theKBCF Group for the financial year ended 31 March 1999(1)

28.3 times

Forecast price earnings ratio based on the forecast net earnings per Share of theKBCF Group for the financial year ending 31 March 2000

10.1 times

Historical price to net operating cash flow based on the historical net operatingcash flow per Share for the financial year ended 31 March 1999

22.6 times

Forecast price to net operating cash flow based on the forecast net operating cashflow per Share for the financial year ending 31 March 2000

8.5 times

Notes:–

(1) Had the service agreements been in place in FY1999, the Group’s net earnings per Share in FY1999 would have been1.83 cents and the historical price earnings ratio based on the historical net earnings per share of the KBCF Group would havebeen 29.0 times.

(2) Weighted average share capital is calculated assuming that the Company has the use of the net proceeds from the issue ofNew Shares from 1 January 2000.

(3) Net operating cash flow is defined as net profit after taxation with provision for depreciation added back.

17

SUMMARY OF PROFORMA FINANCIAL INFORMATION

The following selected financial information should be read in conjunction with the Accountants’ Reportand the full text of this Prospectus.

Operating Results of the Proforma Group(1)

(HK$’000) FY1995 FY1996 FY1997 FY1998 FY1999

Unauditedsix months

ended30 September

1999

Turnover — 41,942 113,498 158,679 174,544 177,396

Operating profit/(loss) (4,361) 7,744 38,527 53,354 62,653 84,449

Foreign exchange gain(2) 1,479 148 2,588 133 2,221 1,005

Loss on disposal ofproperty, plant andequipment — — — (196) (424) —

Profit/(Loss) beforedepreciation, interestand taxation (2,882) 7,892 41,115 53,291 64,450 85,454

Depreciation — (4,711) (7,517) (8,501) (10,943) (12,343)

Profit/(Loss) beforeinterest and taxation (2,882) 3,181 33,598 44,790 53,507 73,111

Net interest expense (376) (409) (734) (458) (3,414) (2,226)

Profit/(Loss) beforetaxation(3) (3,258) 2,772 32,864 44,332 50,093 70,885

Taxation — — (66) (1,711) (7,068) (9,756)

Profit/(Loss) after taxation (3,258) 2,772 32,798 42,621 43,025 61,129

Extraordinary items — — — — — —

Profit/ (Loss) attributableto shareholders (3,258) 2,772 32,798 42,621 43,025 61,129

Earnings/(Loss) per Share(cents)(4) (0.65) 0.55 6.56 8.52 8.61 12.23

Average exchange rateof HK$ per S$1.00 5.2155 5.5029 5.4930 4.9814 4.5958 4.5879

Notes:–

(1) The financial results of the Proforma Group for the period under review have been prepared on the basis that the ProformaGroup had been in existence throughout the period under review.

(2) Net foreign exchange gain declined from HK$2.59 million in FY1997 to HK$133,000 in FY1998. Foreign exchange gain arosedue to the difference between the book rates and the market rates of foreign currency transactions and the market rates wereless favourable in FY1998 compared to FY1997. The KBCF Group recorded foreign exchange gain of HK$2.22 million inFY1999 due to favourable difference between its book rates and market rates of foreign currency transactions.

(3) Had the proposed service agreements referred to on page 45 of this Prospectus been in existence in FY1999, the profit beforetaxation for FY1999 would have been HK$49,119,000 instead of HK$50,093,000.

(4) For comparative purposes, the Earnings/(Loss) per Share is calculated using profit/(loss) after taxation but beforeextraordinary items and divided by the pre-flotation share capital of 500,000,000 Shares.

18

(S$’000) FY1995 FY1996 FY1997 FY1998 FY1999

Unauditedsix months

ended30 September

1999

Turnover — 7,622 20,662 31,854 37,979 38,666

Operating profit/(loss) (837) 1,407 7,014 10,711 13,633 18,407

Foreign exchange gain(2) 284 27 471 27 483 219

Loss on disposal ofproperty, plant andequipment — — — (39) (92) —

Profit/(Loss) beforedepreciation, interestand taxation (553) 1,434 7,485 10,699 14,024 18,626

Depreciation — (856) (1,368) (1,707) (2,381) (2,690)

Profit/(Loss) beforeinterest and taxation (553) 578 6,117 8,992 11,643 15,936

Net interest expense (72) (74) (134) (92) (743) (485)

Profit/(Loss) beforetaxation(3) (625) 504 5,983 8,900 10,900 15,451

Taxation — — (12) (343) (1,538) (2,126)

Profit/(Loss) after taxation (625) 504 5,971 8,557 9,362 13,325

Extraordinary items — — — — — —

Profit/(Loss) attributable toshareholders (625) 504 5,971 8,557 9,362 13,325

Earnings/(Loss) per Share(cents)(4) (0.13) 0.10 1.19 1.71 1.87 2.67

Note:–

Please see notes on page 18 of this Prospectus.

19

Financial Position of the Proforma Group(1)

(HK$’000) FY1995 FY1996 FY1997 FY1998 FY1999

Unauditedas at

30 September1999

Property, plant andequipment 66,917 86,258 97,402 107,569 284,620 288,279

Current assets 9,385 15,652 61,123 100,099 242,070 314,371

Current liabilities (10,046) (15,174) (39,577) (21,242) (133,419) (146,652)

Net current assets/(liabilities) (661) 478 21,546 78,857 108,651 167,719

Non-current liabilities (71,724) (92,227) (109,181) (136,985) (247,940) (249,539)

(5,468) (5,491) 9,767 49,441 145,331 206,459

Shareholders’ equity (5,468) (5,491) 9,767 49,441 145,331 206,459

NTA per Share (cents)(2) (1.09) (1.10) 1.95 9.89 29.07 41.29

Closing exchange rateof HK$ per S$1.00 5.4543 5.5029 5.3689 4.7973 4.4813 4.5610

(S$’000) FY1995 FY1996 FY1997 FY1998 FY1999

Unauditedas at

30 September1999

Property, plant andequipment 12,268 15,675 18,142 22,423 63,513 63,205

Current assets 1,721 2,844 11,385 20,866 54,018 68,926

Current liabilities (1,842) (2,757) (7,372) (4,428) (29,772) (32,154)

Net current assets/(liabilities) (121) 87 4,013 16,438 24,246 36,772

Non-current liabilities (13,150) (16,760) (20,336) (28,555) (55,328) (54,711)

(1,003) (998) 1,819 10,306 32,431 45,266

Shareholders’ equity (1,003) (998) 1,819 10,306 32,431 45,266

NTA per Share (cents)(2) (0.20) (0.20) 0.36 2.06 6.49 9.05

Notes:–

(1) The financial results of the Proforma Group for the period under review have been prepared on the basis that the ProformaGroup had been in existence throughout the period under review.

(2) For comparative purposes, the NTA per Share is calculated based on the pre-flotation share capital of 500,000,000 Shares.

20

GENERAL INFORMATION ON THE COMPANY AND THE KBCF GROUP

SHARE CAPITAL

The Company was incorporated in Bermuda on 10 September 1999 under the Bermuda Act as anexempted company limited by shares with an initial authorised share capital of US$12,000 comprising12,000 ordinary shares of par value US$1.00 each. At the meeting of the provisional directors held on15 September 1999, the initial share capital of US$12,000 comprising 12,000 shares of par valueUS$1.00 each was issued nil-paid to Jamplan (BVI), a wholly-owned subsidiary of KCHL.

Pursuant to written resolutions of the shareholders of the Company dated 3 December 1999, theshareholders approved, inter alia, the following:–

(a) the sub-division of each of the ordinary shares of US$1.00 each in the capital of the Company into10 ordinary shares of US$0.10 each in the capital of the Company;

(b) an increase in the authorised share capital of the Company from US$12,000 divided into 120,000ordinary shares of US$0.10 each to US$200,000,000 divided into 2,000,000,000 ordinary shares ofUS$0.10 each by the creation of 1,999,880,000 ordinary shares of US$0.10 each;

(c) the Restructuring Exercise, details of which are set out on pages 22 and 23 of this Prospectus;

(d) the adoption of a new set of Bye-Laws of the Company; and

(e) the issue of 170,000,000 New Shares which, together with the 45,000,000 Vendor Shares, are thesubject of the Invitation.

At the aforesaid meeting, the shareholders also authorised the Directors to issue further shares from timeto time, provided the aggregate number of Shares issued pursuant to such authority shall not exceed themaximum limit permitted under the relevant laws of Singapore and Bermuda (including the rules of theSESTL) prevailing at that time.

Details of the issued and paid-up share capital of the Company since 10 September 1999, being the dateof incorporation of the Company, and its issued and paid-up share capital immediately after the Invitationare as follows:–

Number ofshares US$

At incorporation — —

Issued and nil-paid ordinary shares of US$1.00 each 12,000 Nil

12,000 Nil

Sub-division of ordinary shares of US$1.00 each into ordinaryshares of US$0.10 each 120,000 Nil

Shares (including the 120,000 nil-paid Shares) issued andcredited as fully paid pursuant to the Restructuring Exercise 500,000,000 50,000,000

Pre-Invitation share capital 500,000,000 50,000,000

New Shares to be issued for Invitation 170,000,000 17,000,000

Post-Invitation share capital 670,000,000 67,000,000

21

The authorised share capital of the Company as at 6 December 1999 before and after adjustments toreflect, inter alia, the Restructuring Exercise, the increase in the authorised share capital of theCompany, the sub-division of the ordinary shares from US$1.00 each to 10 ordinary shares of US$0.10each and the issue of New Shares are set forth below. These statements should be read in conjunctionwith the Accountants’ Report set out on pages 56 to 74 of this Prospectus.

As at10 September 1999 As adjusted

US$ US$Authorised Share Capital

Ordinary shares of US$1.00 each 12,000 —

Ordinary shares of US$0.10 each — 200,000,000

Shareholders’ Funds

Issued and paid-up share capital — 50,000,000

Reserves — 809,684

Total Shareholders’ funds — 50,809,684

RESTRUCTURING EXERCISE

To rationalise the KBCF Group’s corporate structure, the Restructuring Exercise, details of which are setout below, was implemented following the Company’s incorporation.

Group Structure Before Restructuring Exercise

The KBCF Group was formed through a series of acquisition and restructuring of the shareholdings inthe respective subsidiaries. The Restructuring Exercise involved the following transactions:−

(1) The Company was incorporated in Bermuda on 10 September 1999 under the Bermuda Act as anexempted company with an initial authorised share capital of US$12,000 of which 12,000 ordinaryshares of par value US$1.00 each were allotted and issued to Jamplan (BVI) nil-paid. The 12,000ordinary shares of par value US$1.00 each were then sub-divided into 120,000 ordinary shares ofUS$0.10 each.

22

KCHL

100%

Jamplan (BVI)

HKCF(BVI)

FKI CPG

100%

100%

(2) As part of the Restructuring Exercise, HKCF(BVI) and the Noteholders undertook the followingtransactions:−

(a) HKCF(BVI) capitalised loans from the Kingboard Group amounting to an equivalent ofUS$18,064,516 (at the exchange rate of US$1.00 : HK$7.75) in exchange for 18,064,516shares in HKCF(BVI); and

(b) The Noteholders issued promissory notes to HKCF(BVI) with an aggregate value equivalent toUS$13,992,774 (at the exchange rate of US$1.00 : HK$7.75) in exchange for an aggregate of13,992,774 shares in HKCF(BVI).

Pursuant to the foregoing, a total of 32,057,290 ordinary shares of US$1.00 each in the capital ofHKCF(BVI) were issued to Jamplan (BVI) and the Noteholders, resulting in an increased sharecapital of US$47,057,290 divided into 47,057,290 ordinary shares of US$1.00 each in the capital ofHKCF(BVI).

Upon the conditions under the Management and Underwriting Agreement being satisfied, thepromissory notes issued by the Noteholders and the C-Notes held by the Noteholders would be setoff against each other.

(3) The Company then acquired the entire issued share capital in HKCF(BVI) from Jamplan (BVI) andthe Noteholders for a consideration which is equal to the aggregate of the audited NTA ofHKCF(BVI) and its subsidiaries as at 31 March 1999 (taking into account the capitalisation of loansas described in the preceding paragraph) amounting to US$50,809,684 . The said considerationwas satisfied in full by the allotment and issue of Shares by the Company to Jamplan (BVI) and theNoteholders in proportion to their shareholdings in HKCF(BVI) and on the basis of 500,000,000Shares for the 47,057,290 ordinary shares of US$1.00 each in HKCF(BVI) acquired save that, aspart of the consideration paid by the Company to Jamplan (BVI), the 120,000 Shares which wereoriginally issued to Jamplan (BVI) nil-paid were deemed to be credited as fully paid upon thecompletion of the Restructuring Exercise.

Adjustment of shareholding interests between Jamplan (BVI) and the Noteholders

For the purpose of giving effect to the agreement contemplated under the Subscription Agreement, theNoteholders executed share transfers in respect of an aggregate of 75,178,069 Shares in favour ofJamplan (BVI), such that the Noteholders hold in aggregate a shareholding interest of 14.7% in thecapital of the Company. None of the Noteholders are substantial shareholders or deemed to besubstantial shareholders of the Company.

The KBCF Group structure after the Restructuring Exercise and the aforesaid adjustment ofshareholding interests, but prior to Invitation is as follows:−

23

14.7%

KBCF

HKCF(BVI)

FKI CPG

100%

100%

Jamplan (BVI) Noteholders

KCHL

100%

85.3%

GROUP STRUCTURE

The KBCF Group structure after the Restructuring Exercise is shown below:–

Details of subsidiaries of the KBCF Group as at the date of this Prospectus are as follows:−

Subsidiaries

Name of CompanyDate and Placeof Incorporation

GroupEquityInterest

Issued and Paid-upCapital/Registered

Capital Principal Activities

HKCF(BVI) 7 August 1992/BVI

100% US$47,057,290 Investment holding

FKI 13 July 1993/PRC

100% RMB166,737,626 Manufacture andsale of copper foil

CPG 8 February 1996/BVI

100% US$50,000 Trading in copperfoil

None of the above subsidiaries of the KBCF Group are listed on any stock exchange.

Save as disclosed in this Prospectus, no Director or substantial shareholder of the Company has aninterest (direct or indirect) in any of the subsidiaries of the KBCF Group.

24

Kingboard Copper FoilHoldings Limited

HKCF(BVI)

FKI CPG

100%

100% 100%

SHAREHOLDERS

The shareholders of the Company and their respective direct and deemed shareholdings immediatelybefore and after the Invitation are set out below:–

Before Invitation

Direct Interest Deemed Interest Total Interest

Number ofShares %

Number ofShares %

Number ofShares %

Directors

Cheung Kwok Wing(1) — — 426,500,000 85.3 426,500,000 85.3

Chan Wing Kwan — — — — — —

Chang Wing Yiu — — — — — —

Ho Yin Sang — — — — — —

Zhang Guanghui — — — — — —

Lee Joo Hai — — — — — —

Teo Kiang Kok — — — — — —

Lai Chung Wing, Robert — — — — — —

Substantial Shareholders

Jamplan (BVI) 426,500,000 85.3 — — 426,500,000 85.3

HML(1) — — 426,500,000 85.3 426,500,000 85.3

KCHL(1) — — 426,500,000 85.3 426,500,000 85.3

Others (holders of less than5% who are related toDirectors or SubstantialShareholders)

Nil — — — — — —

Noteholders 73,500,000 14.7 — — 73,500,000 14.7

Public — — — — — —

Total 500,000,000 100.0

Notes:–

(1) Mr Cheung Kwok Wing has a deemed interest in respect of the 426,500,000 Shares held by Jamplan (BVI) by virtue of his21.5% shareholding interest in HML. HML in turn has a deemed interest in respect of the 426,500,000 Shares held by Jamplan(BVI) through its 36.0% shareholding interest in KCHL. Jamplan (BVI) is a wholly-owned subsidiary of KCHL.

25

After Invitation

Direct Interest Deemed Interest Total Interest

Number ofShares %

Number ofShares %

Number ofShares %

Directors

Cheung Kwok Wing(1) — — 426,500,000 63.7 426,500,000 63.7

Chan Wing Kwan — — — — — —

Chang Wing Yiu — — — — — —

Ho Yin Sang — — — — — —

Zhang Guanghui — — — — — —

Lee Joo Hai — — — — — —

Teo Kiang Kok — — — — —

Lai Chung Wing, Robert — — — — — —

Substantial Shareholders

Jamplan (BVI) 426,500,000 63.7 — — 426,500,000 63.7

HML(1) — — 426,500,000 63.7 426,500,000 63.7

KCHL(1) — — 426,500,000 63.7 426,500,000 63.7

Others (holders of less than5% who are related toDirectors or SubstantialShareholders)

Nil — — — — — —

Noteholders(2) 28,500,000 4.3 — — 28,500,000 4.3

Public 215,000,000 32.0 — — 215,000,000 32.0

Total 670,000,000 100.0

Notes:–

(1) Mr Cheung Kwok Wing has a deemed interest in respect of the 426,500,000 Shares held by Jamplan (BVI) by virtue of his21.5% shareholding interest in HML. HML in turn has a deemed interest in respect of the 426,500,000 Shares held by Jamplan(BVI) through its 36.0% shareholding interest in KCHL. Jamplan (BVI) is a wholly-owned subsidiary of KCHL.

(2) None of the Noteholders are substantial shareholders or deemed to be substantial shareholders.

Jamplan(BVI) is the registered and beneficial holder of 85.3% of the issued and paid-up share capital ofthe Company after the Restructuring Exercise. Jamplan (BVI) is a wholly-owned subsidiary of KCHL.KCHL is an investment holding company incorporated in the Cayman Islands on 12 January 1993, andis listed on the SEHK. It is the ultimate holding company of the KBCF Group and the Kingboard Group.As at the date of this Prospectus, KCHL has an issued and paid up capital of HK$47,207,745 comprising472,077,448 ordinary shares of HK$0.10 each.

The business of the Kingboard Group was founded in 1988 by Mr Cheung Kwok Wing, Dr Chan WingKwan, Mr Lam Ka Po and Mr Lum Gum Wun. The Kingboard Group is principally engaged in themanufacture and sale of laminates and glass cloth for the PCB industry. The directors of KCHL areMessrs Cheung Kwok Wing, Chan Wing Kwan, Lam Ka Po, Lum Gum Wun, Cheung Kwong Kwan,Cheung Kwok Wa, Cheung Kwok Ping, Cheung Kwok Keung and Chang Wing Yiu. Please refer toAppendix I of this Prospectus for background information on the Kingboard Group.

26

As at the date of this Prospectus, the substantial shareholders of KCHL (being, pursuant to the SecuritiesDisclosure of Interest Ordinance of Hong Kong, shareholders holding 10% or more of the issued sharecapital of KCHL) are as follows:−

Interest in KCHL shares Percentage Interest in KCHL

HML 169,916,000 36.0%

HML is an investment holding company incorporated in BVI and its shareholders are as follows:−

Name of shareholder of HML Percentage Interest in HML

Cheung Kwok Wing 21.5%

Chan Wing Kwan 15.0%

Lum Gum Wun 10.0%

Lam Ka Po 5.5%

Cheung Kwong Kwan 8.0%

Cheung Kwok Wa 10.0%

Cheung Kwok Ping 9.0%

Cheung Kwok Keung 5.0%

Chang Wing Yiu 5.0%

Ho Yin Sang 5.0%

Cheung Kun Tong 5.0%

Tsang Chor Chu 1.0%

Messrs Cheung Kwok Wing, Chan Wing Kwan, Chang Wing Yiu and Ho Yin Sang are Directors of KBCF.In addition, Messrs Cheung Kwok Wa, Cheung Kwok Ping, Cheung Kwok Keung are brothers of MrCheung Kwok Wing, the Chairman of KCHL. Mr Cheung Kwong Kwan is the cousin of Mr Cheung KwokWing and Messrs Chang Wing Yiu, Ho Yin Sang and Cheung Kun Tong are brothers-in-law of Mr CheungKwok Wing.

In addition to the indirect shareholding interests which they have in KCHL through HML, Mr CheungKwok Wing, Dr Chan Wing Kwan and Mr Chang Wing Yiu also hold shares directly in KCHL. Their directshareholdings in KCHL as at the date of this Prospectus are as follows:−

Name Percentage Shareholding

Cheung Kwok Wing 3.6%

Chan Wing Kwan 2.0%

Chang Wing Yiu 0.3%

27

MORATORIUM

To demonstrate its commitment to the KBCF Group, Jamplan (BVI), which will own 63.7% of theCompany’s share capital after the Invitation, has given an undertaking to the Company not to realise ortransfer any part of its interests in the Company for a period of 6 months commencing from the date ofadmission of the Company to the Official List of SESTL and for a period of 6 months thereafter not toreduce its shareholding to below 50% of the Company’s issued share capital after the Invitation. KCHL,in turn, has given an undertaking to the Company not to realise or transfer any part of its interests inJamplan (BVI) for a period of 12 months commencing from the date of admission of the Company to theOfficial List of SESTL. HML has also given an undertaking to the Company to maintain beneficialownership of at least 169,916,000(1) ordinary shares of HK$0.10 each in the capital of KCHL (adjustedfor consolidation or sub-division) for a period of 12 months commencing from the date of admission ofthe Company to the Official List of SESTL. In addition, Messrs Cheung Kwok Wing, Chan Wing Kwan,Ho Yin Sang and Chang Wing Yiu have each given an undertaking to the Company to collectively andbeneficially hold not less than 46.5% of the total issued and paid-up capital of HML for a period of 12months commencing from the date of admission of the Company to the SESTL.

Note:–

(1) the shareholding of HML as at the date of this Prospectus.

HISTORY

The Company was incorporated in Bermuda on 10 September 1999 and the KBCF Group was formedas a result of the Restructuring Exercise as described under the section ‘‘Restructuring Exercise’’ onpages 22 and 23 of this Prospectus.

Mr Cheung Kwok Wing, the Chairman of the Kingboard Group, was first engaged in the trading ofelectronic and electrical components in the 1970s. One of the most important components in electronicproducts are PCBs. As the demand for downstream products that require PCBs, such as mobile phonesand computers, increased, and more plants engaged in the manufacture of these products were beingset up in PRC, Mr Cheung decided to tap on the potential for growth of the laminates industry. MrCheung, together with a few of the directors, namely, Dr Chan Wing Kwan, Mr Lam Ka Po and Mr LumGum Wun, established a laminate manufacturing facility in 1988 in Shenzhen, PRC and startedproducing copper clad laminates in 1989. Through expansion and growth over the past decade, thelaminates business of the Kingboard Group has become firmly established in Hong Kong and PRC. Theshares of KCHL, the holding company of the Kingboard Group, were listed on the Stock Exchange ofHong Kong in 1993.

The principal product of the KBCF Group, namely, copper foil, is a key raw material used in theproduction of laminates by the Kingboard Group. In order to ensure continuous supply of the key rawmaterials, the Kingboard Group began exploring the feasibility of producing its own copper foil in anattempt to vertically integrate its operations.

In 1992, the management of the Kingboard Group, led by Dr Chan Wing Kwan, began studies into themanufacture and production of copper foil, including sourcing for the related technologies, skilled labouras well as a suitable site to establish the manufacturing plant and facilities. HKCF(BVI) was establishedin August 1992 as an investment holding company for the copper foil business.

By May 1993, a site in Fogang, Guangdong Province, PRC was identified and a team of engineers withsuitable experience was recruited. Construction of the copper foil factory also began at about the sametime. In July 1993, FKI was established as a wholly foreign-owned enterprise to carry on the businessof manufacture of and trading in copper foil.

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Phase I of the commercial production of copper foil began sometime in June 1995. The KBCF Groupstarted out with 6 production lines comprising 6 drums which give a total annual production capacity ofabout 720 tonnes. Demand for copper foil increased substantially and in just slightly more than a year,that is, by October 1996, the KBCF Group had to increase its production capacity to meet the increasingdemand for copper foil. The number of drums in use was increased from 6 to 24, thus giving the KBCFGroup a total designed annual production capacity of about 2,880 tonnes. By October 1997, the numberof drums in use was further increased from 24 to 30, giving the KBCF Group a total designed annualproduction capacity of about 3,600 tonnes.

Phase II of the commercial production of copper foil was embarked upon primarily to meet further marketdemand for copper foil. The KBCF Group began construction and installation of the factory andproduction facilities in December 1997. Commercial production under Phase II commenced in January1999 with 8 drums (under Phase IIA) and an additional 8 drums were added in June 1999 (underPhase IIB).

To facilitate trading of copper foil outside PRC, CPG was established in February 1996 as awholly-owned subsidiary of HKCF(BVI). CPG sells mainly to the Kingboard Group. Domestic sales ofcopper foil within the PRC are carried out directly by FKI.

INDUSTRY BACKGROUND

The principal use of copper foil is in the manufacture of copper clad laminates, an essential componentin the manufacture of PCBs, and multi-layered PCBs. A study made by BPA Group Ltd in March 1998entitled ‘‘Opportunities for Copper Foil in the Asia/Japan PCB and Laminates Industries’’(1) (‘‘BPAReport’’) noted that laminates and PCB industries represent 95% of the world’s copper foil market.Copper foil is also used in the manufacture of smart cards and decorative laminates in buildings. As such,there is a direct correlation between the market demand for laminates and PCBs and the market demandfor copper foil.

Applications of Laminates and PCBs

Most of the PCB market is made up of 5 key types of boards; namely, paper and composite boards,single-sided glass epoxy boards, double-sided glass epoxy boards, multi-layer boards and flexiblecircuits.

Paper and composite boards

The manufacture of paper and composite boards normally require the use of 35 microns or 70 micronscopper foils. These boards are predominantly used in the consumer and entertainment electronicsindustry and some industrial electronic applications; for instance, the manufacture of television sets,video cassette recorders, house telephones, telephone accessories, domestic electronic devices suchas central heating controllers and other low-end electronic and electrical devises used in cars. Paper andcomposite boards are usually produced in single-sided format using laminates produced by bondingcopper foil to an insulating substrate. The insulating substrate may be a special paper which has beenimpregnated with phenolic resin and then built up in a series of layers and cured or a combination of twolayers of glass cloth sandwiching a central layer of either paper impregnated with epoxy resin or anon-woven glass fleece impregnated with resin.

Note:–

(1) The study was commissioned by Pan Asia Special Opportunities Fund in connection with the Noteholders’ investments intothe Kingboard Group in 1998. The facts extracted from the BPA Report and reproduced in this Prospectus have been updatedand verified in November 1999. BPA Group Ltd is an international consultancy company based in the United Kingdom whichprovides consulting services to organisations and businesses in the global electronics industry. Since 1971, it has beenproviding technical and market forecast information to manufacturers, trade associations, investment banks, venture capitalcompanies and research institutes.

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Single-sided glass epoxy boards

Single-sided glass epoxy boards form a relatively small market. They are made from laminatesconstructed from a woven glass cloth which have been impregnated with epoxy resin and then bondedin layers to form a rigid substrate. The copper foil is applied to only one surface. Single-sided glass epoxyboards are used when a more heat resistant and more mechanically rigid material is required. They aretypically used in industrial control equipment and measuring instruments.

Double-sided glass epoxy boards

Double-sided glass epoxy boards are constructed from laminates which comprise up to 8 plies of wovenglass cloth impregnated with epoxy resin. These 8 plies of glass cloth are sandwiched between twosheets of copper foil, which are then pressed, cured and hardened. The technology involved in theproduction of double-sided glass epoxy boards is complex and costly. They are typically used in themanufacture of electronic equipment such as PABXs, advanced desk telephones, modems, enginecontrol units for cars and mobile radios.

Multi-layer boards

Multi-layer boards are produced in much the same way as double-sided glass epoxy boards. Amulti-layer board is essentially a series of double-sided glass epoxy boards stacked on top of each otherand sharing a common hole pattern. As multi-layer boards use very thin laminates, the copper foilsdeployed for use are also very thin, usually of the 18 microns thickness. Multi-layer boards are commonlyused in high technology electronic equipment including mainframe computers, personal computers andlaptops, mobile phones, data transmission equipment and space electronics.

Flexible circuits

Flexible circuits are constructed from a range of flexible polymer based laminates with a copper layer (orlayers) bonded to the surfaces. Flexible circuits are used in ways which take advantage of their flexibility,in particular, the ability to be folded into small or confined space. They are popularly used in military andaerospace electronics as well as consumer electronic products.

Industry Outlook

The BPA Report reveals the following findings:−

(1) The world market for PCBs is expected to increase by an average growth rate of 7.5% per annumfrom now till 2001. It was further reported that the PCB market for Asia is expected to grow at aCAAGR of 9.8% and for the PRC, a CAAGR of 22.2% for the period between 1996 and 2001.

(2) The laminates market for Asia is expected to achieve a CAAGR of 6% for the period between 1996to 2001 whereas for the laminates market in the PRC, a CAAGR of 7.1% is projected for the sameperiod.

(3) The study also showed that the market for copper foil used in the PCB industry in Asia/Japan isexpected to rise from 78,000 tonnes in 1996 to 118,000 tonnes in 2001, i.e., a CAAGR of 8.5%. ThePRC’s share of the copper foil demand will also rise from 10% of the demand in the Asia/Japanregion in 1996 to 13.2% by 2001.

The BPA Report concluded that in general, the outlook for the laminates and PCB industries arepromising and is likely to have a positive impact on the growth of the copper foil industry.

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According to the BPA Report, about 17% of the copper foil purchased worldwide is used by PCB makersat the point of manufacturing multi-layer circuit boards. The balance is consumed by the laminatesindustry. Copper foil is commercially manufactured and sold in terms of different thicknesses rangingfrom 18 microns (1⁄2 oz), 35 microns (1 oz) to 70 microns (2 oz) and above 70 microns (above 2 oz). Theuses of copper foil include the following:−

Thickness Main Uses

18 microns(1⁄2 oz)

For the production of glass epoxy boards, multi-layer boards and flexiblecircuits

35 microns(1 oz)

For the production of paper boards and composite boards, single-sided glassepoxy boards, double-sided glass epoxy boards and multi-layer boards

70 microns plus(2 oz and above)

For the production of paper and composite boards, single-sided glass epoxyboards and double-sided glass epoxy boards

BUSINESS

The KBCF Group is principally engaged in the production and sale of copper foil which is a key rawmaterial for the production of laminates and PCBs. The BPA Report indicated that the estimated totalcopper foil production capacity in PRC is relatively small (as at November 1999, only 4,800 tonnes) whencompared to the market need of nearly 8,000 tonnes per annum. Based on the feedback from the KBCFGroup’s customers and professional consultants, the Directors note that there are only a few key playersin the PRC which are involved in the large scale production of copper foil for the laminates and PCBindustries in the region. Some of the Chinese copper foil producers are old and between them onlyproduce about 1,800 tonnes per annum (estimation as at 31 March 1998). The Directors further note thatthe copper foil production capacity of the KBCF Group as at 31 March 1999 was 3,386 tonnes,constituting about 70% of the estimated total copper foil production capacity in the PRC of 4,800 tonnesas reported in the BPA Report. As such, the Directors are of the view that the KBCF Group is one ofthe largest manufacturers (if not the largest manufacturer) of copper foil in the PRC.

As explained above, copper foil is produced in various thicknesses, depending on the type of laminatesand PCBs in which it is to be finally deployed for use. They may be coated with a special adhesive oruncoated. The KBCF Group currently commercially produces copper foil of 18 microns, 35 microns and70 microns thicknesses, in both coated as well as uncoated forms.

The 35 microns copper foil constitutes about 96% of the total copper foil produced by the KBCF Groupfor FY1999, with the balance 1% being 18 microns copper foil and 3% being 70 microns plus copper foil.The KBCF Group is currently able to produce 12 microns copper foil though commercial production willcommence only when there is sufficient market demand. Based on the current market, 35 microns and70 microns plus copper foils have similar profit margins while 18 microns copper foil is able to commandsubstantially higher profit margins due to the higher technical expertise required and limited number ofproducers with such capabilities.

The PCB market in the PRC is expected to grow at a CAAGR of 22.2% for the period 1996 to 2001. Thedemand for laminates and thus, copper foil would correspondingly be expected to increase, therebyresulting in greater demand for copper foil. The Directors believe that the strategic location of the KBCFGroup’s copper foil manufacturing plants in Fogang augurs well for the KBCF Group’s futuredevelopment and expansion.

Currently, the copper foil produced by the KBCF Group is not sold under any brand name. However, thecopper foil is sold and marketed under the trade names of HKCF(BVI) and FKI.

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Year 2000 Issue

With the approach of the year 2000, companies are exposed to the risk of the Y2K issue which may affectthe integrity and stability of any computer-based systems which they use or rely on. The Y2K issue willaffect the software applications of essentially all corporations and bodies (including governmentalagencies and the military).

The Directors are fully aware of the Y2K issue and the potential impact which it can have on the KBCFGroup. A Y2K compliance project team headed by a Director and assisted by an independent consultanthas been commissioned to look into the Y2K issue in respect of both the Kingboard Group and the KBCFGroup since 1998. The KBCF Group has already upgraded all of its in-house computer hardware andsoftware in connection with the Y2K issue and a recent test conducted has shown that they are fully Y2Kcompliant. The KBCF Group has received confirmation from its principal suppliers and other agents thatthey have also taken steps to ensure full Y2K compliance.

The total cost of the KBCF Group’s efforts to resolve the Y2K issue is estimated to be HK$200,000 andthe amount will be capitalised.

PRODUCTION TECHNOLOGY AND PROCESS

Please refer to the production flow chart on page 33 for diagrammatic presentation of the productionprocess of copper foil.

The raw materials used in the production of copper foil include copper, sulphuric acid and additives suchas zinc. Copper in the form of scraps or cathode plates is dissolved in sulphuric acid in a dissolving tankto form copper sulphate solution. This solution will undergo a filtration process before it is passed throughan electrolytic cell in the form of a rotating titanium drum. The electro-depositing process producescopper foil, which is deposited on the surface of the rotating titanium drum. The thickness of the copperfoil is determined at this stage by the speed of rotation of the drum. The copper foil is then rolled off thedrum into a winder. The copper foil roll is then transferred to a treater, where the matt side of the copperfoil is roughened and treated by passing an electric current through a chemical solution that containscopper and zinc elements. This process increases the bond strength as well as thermal and chemicalresistance of the copper foil. The sides of the treated copper foil are then slitted before the product ispackaged. Alternatively, the treated copper foil may be further coated with a resin-based adhesive, driedin a dryer and cut into sheet form before packaging.

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Production Process for Copper Foil

33

Dissolving of copper (in theform of scraps or cathodeplates) in sulphuric acid toform copper sulphate solution

Electro-depositing ofcopper foil

Surface treatment ofcopper foil

Adhesive coating ofcopper foil

Cutting of copper foilinto sheets

Packaging

Waste WaterTreatment

Slittering

Sheet Type

▼

Roll type

▼

▼

▼

▼

▼

▼

▼

RESEARCH AND DEVELOPMENT

The research and development (‘‘R&D’’) department of the KBCF Group has a current strength of 30full-time technical staff, comprising experienced engineers and technical staff, many of whom possesstertiary qualifications. Mr Chang Wing Yiu, an Executive Director, oversees the operations andmanagement of this department. Besides keeping the KBCF Group apprised of the latest availabletechnological developments in the copper foil, the R&D department has, since its inception, been activelyresearching into and developing new processes as well as equipment and raw materials for theproduction of copper foil. In the past three financial years, the KBCF Group invested, in aggregate,approximately HK$10 million in research and development. Major achievements of the R&D departmentinclude the following:−

(i) development of a new formula and improving on the existing formulae for the adhesive used in theproduction of coated copper foil;

(ii) design and improvement on the filtration system engaged in the preparation of copper sulphatesolution thereby enhancing the purity of the copper sulphate solution when used in the electro-depositing process in the production of copper foil;

(iii) development of a production line for the production of 18 microns and 35 microns copper foil, theproperties of which could be customised to serve the requirements of individual clients;

(iv) developing the know-how and technical expertise on, and having successfully produced copper foilof 12 micron thickness on a trial basis; and

(v) modification of existing machinery to enhance the KBCF Group’s production efficiency.

The above achievements have enabled the KBCF Group to enjoy better production efficiency interms of yield rate and production line speed and thus higher profit margins. Looking forward andtaking into account the market trend towards producing more sophisticated and portable electronicequipment (such as mobile phones) which require fine circuit etching patterns on the PCBs, the R&Ddepartment is currently engaged in the development of double-side treated and reverse-side treatedcopper foils which will meet the industry specifications for reproduction of such fine circuit etchingpatterns on PCBs.

QUALITY CONTROL

In order to ensure that the KBCF Group stays ahead of competition and deliver products of high andconsistent quality to its customers, the KBCF Group adopts stringent quality control measures asfollows:−

(1) Each batch of raw materials purchased is inspected and tested by the KBCF Group’s in-houselaboratories to ensure that they meet the standards and specifications set down by the KBCF Groupprior to being deployed for use in any production process.

(2) During each stage of the production process, stringent and intensive quality checks are carried outby the KBCF Group’s production department.

(3) For each batch of products produced, a quality assurance check is conducted by the QualityAssurance (‘‘QA’’) department of FKI. The QA department, with a staff strength of about 15, will runa simulated end-user production test to ensure that the products not only meet with the standardsand specifications of the KBCF Group but also with the special specifications (if any) laid down bythe purchaser or end-user. This simulated end-user production test seeks to replicate the exactproduction process which the end-user would have carried out using the products of the KBCFGroup. Each batch of products is finally packaged with a QA report attached to it before sale orshipment to the purchaser or end-user.

The rejection rates for the KBCF Group’s products in the last three financial years had beennegligible (less than 0.5% of total sales).

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MARKETING AND DISTRIBUTION

The KBCF Group has traditionally sold almost all of its output to its major customer, the KingboardGroup. In line with its plans to expand its production capacity in 1999 and beyond and in order to diversifyits customer base, the KBCF Group has since late 1998 started selling its output to other customers. Forthe three months ended 30 June 1999, the KBCF Group sold approximately 4% of its copper foil tocustomers other than the Kingboard Group in the PRC, United States, Taiwan, India and countries inEurope and Southeast Asia. Customers of the KBCF Group include distributors of copper foil as well aslaminates and PCB manufacturers.

The sales and marketing functions of the KBCF Group is assumed by Dr Chan Wing Kwan together with2 marketing executives. The KBCF Group will expand its sales team as and when required to meet itssales and marketing needs, particularly, as the KBCF Group intends to gradually increase its marketsales to customers (other than the Kingboard Group) in the next few years. Sales of copper foil withinthe PRC (including to subsidiaries of the Kingboard Group which are located in the PRC) are conducteddirectly by FKI. Sales of copper foil to companies located outside the PRC (including to subsidiaries ofthe Kingboard Group which are located outside the PRC) are conducted mainly through CPG.

The KBCF Group also participates in trade fairs and exhibitions (domestic as well as international) tomarket and promote its products and to establish new contacts. In May 1999, the KBCF Groupparticipated in an exhibition held in Shanghai, PRC, organised by the China Printed Circuit Association.The KBCF Group has also reserved a booth at an international exhibition organised by the Institute forInterconnecting and Packaging Electronic Circuits to enhance the KBCF Group’s profile amongstinternational laminates and PCB manufacturers. The exhibition is scheduled to be held in the UnitedStates in year 2000. The KBCF Group has recently launched its internet web-site to further promote itsproducts.

The KBCF Group has traditionally granted to the Kingboard Group credit for approximately 90 days fromthe date of issue of the invoice. Sales to its other newer customers are generally made on letters of creditterms (of up to 60 days sight). Notwithstanding, repeat orders have been received from time to time fromsuch customers. Taking into consideration the size of transactions, the KBCF Group intends to continueto grant credit terms of up to 90 days to the Kingboard Group in future. To ensure the credit terms grantedto the Kingboard Group are not prejudicial to the interest of KBCF’s shareholders, these terms will bereviewed by the Audit Committee.

The KBCF Group believes that the present sales and marketing channels are adequate to meet its needsin view of the volume of the sales of products to customers (other than the Kingboard Group). It willappoint distributors and sales agents in and outside China as the demand increases.

NEW PRODUCTS/ACTIVITIES

As mentioned earlier in this Prospectus, the KBCF Group has embarked on research and developmentof double-side and reverse-side treated copper foils which are particularly suited for PCBs which requirereproduction of fine circuit etching patterns. Although the KBCF Group has not procured orders for thesedouble-side and reverse-side treated copper foils, it plans to commence commercial production of suchcopper foils as part of the expansion of its copper foil production capacity under Phase IIC. The KBCFGroup is expected to undertake trial runs on the production of double-side and reverse-side treatedcopper foils by the fourth quarter of year 2000 and will commence commercial production by first quarterof year 2001 upon completion of the expansion of production capacity under Phase IIC and if the trialruns prove to be successful. The double-side and reverse-side treated copper foils will be supplied to theKingboard Group and to customers based in Europe and the United States. The KBCF Group has alsocompleted its trial runs on the production of 12 microns copper foil. As the 12 microns copper foil is verythin, it is most suited for use in the production of laminates and PCBs or other circuits used insophisticated electronic gadgets or products which require very fine circuit etching pattern. Commercialproduction on a large scale basis is pending as the demand for such copper foil has currently not reacheda viable level.

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FACILITIES AND PRODUCTION

Production Facilities, Machinery and Equipment

The main production facilities of the KBCF Group include the following:−

Dissolving tanks

Titanium drums

Electro-depositing machines

Treaters

Coating machines

Slitters

Cutting machines

Water treatment and recycling systems

Production Capacity

The KBCF Group has production facilities in Fogang, which occupy a gross floor area of approximately45,745.33 sq m. The annual production capacity of the KBCF Group for the past three financial years,namely, FY1997, FY1998 and FY1999 are 1,877 tonnes, 2,640 tonnes and 3,386 tonnes respectively. Ineach of the three financial years, the utilisation rate had been almost 100%.

Under Phase IIC, the installation of additional production facilities at the Fogang factory is expected tocommence in July 2000. The additional production facilities will increase the production capacity of theKBCF Group by another 160 tonnes per month. The increased capacity will initially be utilised for theproduction of 18 microns and 35 microns copper foils (including double-side and reverse-side treatedcopper foils).

STAFF TRAINING

The KBCF Group places strong emphasis on staff training at all levels. Factory operators are requiredto undergo in-house training before they are deployed on the production floor. The training involveslearning the correct procedures to operate tools and machinery, quality awareness, safety regulationsand other operating and technical requirements. After the factory operators have gone through theorientation program, they will start work at the production floor and receive on-the-job training under theguidance of qualified engineers and experienced supervisors. The factory supervisors will periodicallyreview the training requirements of individual departments and identify the areas in which training orretraining are needed. Such training ensures that new as well as existing production staff are equippedwith the necessary skills to meet the KBCF Group’s stringent quality standards.

To further upgrade their technical knowledge on the products and activities, the technical supervisors aresent for relevant training programs, seminars and exhibitions. Other staff are encouraged to attend suchtraining events and are subsidised where the training events are relevant to their jobs. The KBCF Groupperiodically arranges its staff, who are mainly PRC nationals, to attend courses organised by the HongKong Productivity Council. External consultants and instructors are also invited to provide training andconduct courses for the staff.

INTANGIBLE ASSETS

The KBCF Group is not utilising any technology which may be the subject of any patent, patent rights,licences, patented processes or other intangible assets including intellectual properties for its operationsand production. Thus it is not dependent on, nor is it vulnerable to infringement of such intangible assetsor intellectual properties.

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COMPETITION AND COMPETITIVE STRENGTHS

The production capacity of the KBCF Group as at 31 March 1999 was 3,386 tonnes. This constitutedabout 70% of the estimated total copper foil production capacity in the PRC of 4,800 tonnes, as reportedin the BPA Report.

The KBCF Group believes that its products compete directly with those produced by enterprises in China(which include FIEs and state-owned enterprises). The KBCF Group also competes with overseassuppliers of copper foil from Japan (Fukuda and Mitsui group of companies), Korea (Iljin Copper Foil Co.,Ltd) and Luxembourg (Circuit Foil Luxembourg). The close relationship between the Kingboard Groupand the KBCF Group ensures that the KBCF Group will continue to enjoy a stable demand for itsproducts. In addition, KBCF Group currently has approximately 15 third party customers besides theKingboard Group which are mainly laminates and PCB manufacturers. The Directors are of the view thatin the event that the demand from the Kingboard Group ceases or is reduced, KBCF Group has theability to sell its products to its third party customers, occurs suddenly unless such cessation or reductionin demand for copper foils from Kingboard Group

Further, the KBCF Group’s proximity to laminates manufacturers which are concentrated in the southernand eastern parts of China will give the KBCF Group an advantage over overseas suppliers of copperfoil as it is able to provide a faster turnaround time in delivery as well as better after sales service.

The KBCF Group believes that its competitive strengths are as follows:−

Experienced Management Team

The KBCF Group’s continued success is attributable, to a large extent, to its management team andtechnical support personnel. Two of the Executive Directors, Mr Cheung Kwok Wing and Dr Chan WingKwan, have more than 20 years’ experience each in the copper foil, laminates and electronics industries.The other Executive Directors, Mr Chang Wing Yiu, Mr Zhang Guanghui and Mr Ho Yin Sang also haveabout 10 years’ experience each in the same industries. They are supported by a pool of experiencedstaff who are experienced in various functions such as finance, marketing and information systems.

High Entry Barriers to the Copper Foil Industry in PRC

As stated on page 49 of this Prospectus, the laminates industry is expected to grow rapidly in China andthe demand for copper foil is expected to increase correspondingly. At present, copper foil capacity inChina is considered small, about 4,800 tonnes against a market need of 8,000 tonnes and there istherefore room for growth. Whilst new producers may try to break into the market, the followingpre-requisites of high quality copper foil manufacturing will restrict the number of entrants into theindustry:−

— highly skilled engineering and technical personnel with specialised knowledge of the formulations,processes and production techniques involved;

— a strong customer base with sufficient aggregate demand to justify full scale commercial production;

— sufficient financial resources to make capital investments in equipment and technology.

Based on the BPA Report, although there are a number of existing producers of copper foil in the PRC,the technology used by them is outdated and the quality of the products is inconsistent. The yield ratesachieved by these plants are low and consequently, the prices of the copper foil sold by them are lesscompetitive. In comparison, the KBCF Group utilises state of the art technology, such as the use ofimported titanium drums which yield copper foil of high purity and uniform thickness. The high costs ofinstalling such high precision manufacturing equipment represent substantial capital investments to acopper foil manufacturer, but are necessary to achieve high utilisation rates and produce copper foil ofinternational standards. The Directors are of the view that the estimated investments required to gainentrance to the copper foil manufacturing business and to achieve the necessary scale of production isbetween US$80 million and US$100 million. In addition, the operation and maintenance of the equipmentrequire experienced and highly-skilled technical staff.

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In this respect, the KBCF Group has systematic training programs to help its technical staff upgrade theirskills constantly and the low staff turnover of the KBCF Group ensures that there is consistent andreliable technical support for the production processes at all times. For the above reasons, the Directorsare of the view that the Group has a competitive edge over many of the traditional manufacturers andnew entrants in the copper foil industry.

Manufacturing Expertise

Through constant investment in machinery and training, the KBCF Group has over the years acquiredthe relevant manufacturing know-how, information network and skilled personnel to provide responsiveand quality service to its customers. As an upstream supplier of raw materials to the laminates and PCBindustries, the KBCF Group recognises the need to be constantly updated on the latest technologicaldevelopments in these industries by participating in trade fairs and working closely with PCB andlaminates manufacturers to develop new products. Through maintaining close relationships withend-users, who provide support and information to the KBCF Group in evaluating and analysing testsamples and processes, the KBCF Group is able to make improvements to its technical capabilities. Asan endorsement on the quality of its products, FKI received the ‘‘Advanced and High TechnologyEnterprise’’ award from the China Science and Technology Committee at both state and provincial levelsfor its production of coated copper foil.

Wide Range of Products

As a result of the strong research and development capabilities of the KBCF Group, as well as itscommitment to acquire technological expertise, the KBCF Group has been able to offer its customers awide range of products suitable for use in the production of different types of laminates. The KBCF Groupis also able to produce copper foil tailored to customers’ needs.

The KBCF Group strives to improve its process capabilities and production techniques and is currentlycapable of producing copper foil of 12 microns and 18 microns thicknesses as well as double-side andreverse-side treated copper foil on large scale basis.

Cost and Other Advantages

The Directors believe that the location of its manufacturing facilities in the PRC provides the KBCF Groupwith cost advantages (in terms of lower labour costs and cheaper utilities) over many of their overseascompetitors. The availability of constant sources of water and electricity (which are used in largequantities for the production of copper foil) in Fogang further gives the KBCF Group a competitive edgeover some of its overseas competitors.

Close Relationship with Main Customer

The Directors believe that the KBCF Group’s main customer, the Kingboard Group, is the largestmanufacturer of laminates in China(1) and is expected to continue to register growth in sales over the nextfew years. The demand by the Kingboard Group for copper foil is expected to increase with its capacityand output levels. The Directors further believe that the Kingboard Group is likely to continue to sourcefor copper foil from the KBCF Group for the main reason that the KBCF Group’s copper foil operations,having been established by the Kingboard Group as part of its vertical integration plans, are particularlysuited to meet the latter’s requirements in its production of laminates. Owing to the close proximitybetween the production facilities of the two groups, the KBCF Group is able to achieve faster turnaroundtime as compared to other copper foil suppliers. The Directors are of the view that the KBCF Group wouldcontinue to benefit from the synergistic relationship between the two groups, as it is assured of a reliableand stable customer base on which it can develop its future expansion plans.

Note:−

(1) BPA Report.

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MAJOR SUPPLIERS

The suppliers which each accounts for 5% or more of the KBCF Group’s total purchases and thepercentage contribution of each such supplier for each of the last 3 financial years are as follows:–

— Percentage of total purchases (%) —

Supplier FY1997 FY1998 FY1999

Simsen Metals Company Limited 62.9% 51.7% 18.0%

China Wise (Hong Kong) Limited(formerly known as Ying Wah Company Limited) 18.2% 26.1% —

Mitsubitshi Corporation (Hong Kong) Limited 12.7% — —

Chang Chun Petrochemical Company Limited — 10.0% —

Pechiney Far East Limited — — 27.2%

Hang Yip Metal Company Limited — — 10.2%

Cheun Hing Metal Trading Company Limited — — 6.0%

None of the Directors or substantial shareholders have any interest (direct or indirect) in the suppliersmentioned above.

Simsen Metals Company Limited (‘‘Simsen’’) has been the key supplier of copper scraps to the KBCFGroup for the past three financial years as the management is of the opinion that it is a reliable supplierand has been able to offer copper scraps and cathode plates at competitive rates. Simsen’s principalactivity is in the trading of metals (including copper scraps and cathode plates) and is listed on the StockExchange of Hong Kong. The KBCF Group’s purchases from Simsen as a percentage of its totalpurchases had declined from 62.88% in FY1997 to 17.96% in FY1999 as Simsen’s prices had becomeless competitive and the KBCF Group had progressively widened its supplier base to reduce itsdependence on any single raw material supplier.

The KBCF Group does not depend on a single supplier for all its raw materials. The KBCF Group is alsonot dependent on any of the major suppliers of copper scraps or cathode plates listed above as thecopper scraps or cathode plates supplied by these major suppliers can be easily sourced from othersuppliers in and outside the PRC.

To ensure that fluctuations in the price of copper will not adversely affect the KBCF Group’s financialposition, it adopts a hedging policy for its copper purchases. Based on projected production output andtarget delivery schedules, the KBCF Group enters into corresponding copper futures contracts to hedgeagainst fluctuations in the price of copper.

MAJOR CUSTOMERS

Other than the Kingboard Group, the KBCF Group does not have customers or distributors that eachaccounts for 5% or more of the KBCF Group’s total turnover.

The KBCF Group is dependent on the Kingboard Group to the extent of 100% of its operating profit forFY1997 and FY1998, and almost 100% of its operating profit for FY1999.

As explained under the section on ‘‘Competition and Competitive Strengths’’ on pages 37 and 38 of thisProspectus, the Kingboard Group is likely to continue to be an important customer of the KBCF Groupin future. However, as the KBCF Group’s production capacity increases, it will at the same timeendeavour to diversify its customer base to reduce its reliance on the Kingboard Group. It has beenmaking active efforts to establish a wider network of customers both in China and overseas. It hasestablished a marketing team to make regular visits to existing and potential customers both within andoutside PRC to introduce the KBCF Group’s products.

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REVIEW OF PAST PERFORMANCE BY ACTIVITY AND GEOGRAPHICAL MARKETS

Review of Past Performance by Activity

The income and profits of the KBCF Group are derived from the single activity of manufacturing and saleof copper foil and all its assets are deployed in these operations.

Review of Past Performance by Geographical Markets

The income and profits of the KBCF Group are derived almost wholly from customers located in onegeographical market, namely, the PRC (including Hong Kong).

INTERESTED PERSON TRANSACTIONS

Transactions with Directors, Executive Officers or Substantial Shareholders

The value of the transactions between the KBCF Group and the Kingboard Group for each of the pastthree financial years are set out below:−

FY1997 %(1) FY1998 %(1) FY1999 %(1)

HK$ HK$ HK$Purchase of Goods from

the Kingboard Group

Kingboard Laminates Limited 622,819 1.2 1,105,539 1.8 — —

FY1997 %(2) FY1998 %(2) FY1999 %(2)

Sale of Goods to theKingboard Group

Kingboard Laminates Limited 105,008,961 92.5 141,741,923 89.3 148,250,972 84.9

Shanghai Jamplan ChemicalIndustry & InsulatedMaterial Development Co.,Ltd. 3,594,536 3.2 6,589,983 4.2 2,092,819 1.2

Yat Tao Chemical Holdings(H.K.) Limited 2,303,154 2.0 10,347,295 6.5 5,333,040 3.1

Kunshan Yattao ChemicalCo., Ltd. 2,396,358 2.1 — — 16,204,664 9.3

Kingboard LaminatesShenzhen Co., Ltd. 195,140 0.2 — — 2,015,736 1.1

Notes:−

(1) As a percentage of the KBCF Group’s total purchases for the respective financial years.

(2) As a percentage of the KBCF Group’s total sales for the respective financial years.

Purchase of Chemicals from the Kingboard Group

For FY1997 and FY1998, Kingboard Laminates Limited supplied raw materials (such as adhesives) toFKI for use in the latter’s production processes. Kingboard Group purchased these raw materials in largequantities, as such it was able to command better prices. The chemicals were then sold to the KBCFGroup based on Kingboard Group’s purchase prices without any mark-ups. As such, the aforesaidtransactions were conducted on the same commercial terms as those between KCHL and its suppliers.In FY1999, FKI began to source all the chemicals which it required from outside the Kingboard Groupas part of its policy to diversify its base of suppliers. The KBCF Group currently has no plans to resumethe purchase of chemicals from the Kingboard Group.

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Supply of Copper Foil to the Kingboard Group

The KBCF Group has been supplying copper foil to the Kingboard Group since its inception. In the past,for sales of copper foil directly by FKI to subsidiaries of the Kingboard Group which are located in thePRC (approximately 20% of KBCF Group’s sales to the Kingboard Group), the transaction prices wereat a discount of approximately 30% compared to prices of copper foil which the Kingboard Grouppurchased from other third party copper foil suppliers. In the past, for sales of copper foil by CPG tosubsidiaries of the Kingboard Group which are located outside the PRC (approximately 80% of KBCFGroup’s sales to the Kingboard Group), the transaction prices were normally at a bulk purchasediscounts of between 5% and 10% compared to prices of copper foil which the Kingboard Grouppurchased from other third party copper foil suppliers.

The KBCF Group is likely to continue to supply a substantial part of its production output to the KingboardGroup in future. The supply of such products by the KBCF Group to the Kingboard Group is mutuallybeneficial for the KBCF Group and the Kingboard Group for the following reasons:−

(1) from the perspective of the Kingboard Group, there is reliability and assurance of constant supplyof high quality raw materials;

(2) from the perspective of the KBCF Group, there is assurance of constant demand for its products inview of the Kingboard Group’s market position in the laminates industry.

The Kingboard Group obtains its supply of copper foil by placing purchase orders with the KBCF Groupfrom time to time. Presently, the KBCF Group has entered into long-term sales contracts with theKingboard Group for the supply of approximately 6,000,000 sheets of adhesive coated copper foil andapproximately 2,100 tonnes of uncoated copper foil of various thickness, up to March 2000. Thereafter,the KBCF Group would continue to enter into contracts with the Kingboard Group for periods between3 to 6 months. The quantity of such orders would depend on the demand for Kingboard Group’slaminates at the relevant time as well as negotiations between KBCF Group and the Kingboard Group.

In order to regulate the future sales of copper foil to the Kingboard Group, the Company and KCHL, theultimate holding company of the Kingboard Group, have entered into a Supplies Agreement pursuant towhich the Company agrees to procure its subsidiaries to supply to the Kingboard Group upon its requestcopper foil required by the Kingboard Group. The principal terms of the Supplies Agreement aresummarised as follows:−

(a) The price at which any copper foil is to be sold to the Kingboard Group after the listing of the KBCFGroup shall not be lower than that at which the KBCF Group would have at the relevant point of timesold to other customers generally having regards to the quantity, quality and special specificationsof the products ordered, the creditworthiness of the customers and other special circumstances.

(b) In addition, the gross profit margin achieved from sales to the Kingboard Group after the listing ofthe KBCF Group shall not be lower than that currently achieved by the KBCF Group until such timethe KBCF Group meaningfully diversifies its sales to parties other than the Kingboard Group. TheKBCF Group will be deemed to have meaningfully diversified its sales to third parties when it sellsnot less than 30% of its output to customers outside the Kingboard Group. Notwithstanding this, theother provisions in the Supplies Agreement, including the requirement as described in (a) aboveshall continue to be in force.

(c) Any industry-wide decline in the profit margin for laminates may make it unrealistic to expect theKBCF Group to continue achieving the same profit margin from sales to the Kingboard Group asdescribed in paragraph (b) above. The Supplies Agreement provides that in the event of a materialdecline in the pricing of laminates sold by the Kingboard Group, the Audit Committee may permit anadjustment to the gross profit margin level to be achieved by the KBCF Group. A ‘‘material declinein the pricing of laminates’’ shall be deemed to have taken place if the average unit sale price oflaminates sold by the Kingboard Group over a period of 3 months immediately preceding the dateof the relevant purchase of copper foil from the KBCF Group is lower by not less than 5% whencompared to the average unit sale price of laminates sold by the Kingboard Group over a period ofthree (3) months immediately preceding the listing of the KBCF Group.

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(d) Further, if as a result of developments in the market conditions for copper foil to the extent that theAudit Committee deems it no longer practical or viable for the parties to continue to transact inaccordance with the terms of the Supplies Agreement, the Audit Committee is authorised to makesuch amendments or modifications to the terms of the Supplies Agreement as are necessary so asto enable the parties to continue to transact on an arm’s length commercial basis.

(e) The Kingboard Group is not obliged to purchase any copper foil at a unit price which is lessfavourable than that at which KCHL or the relevant Kingboard Group company could have at therelevant point of time bought from its suppliers other than the KBCF Group generally having regardsto the quantity, quality, special specifications of the products ordered, creditworthiness of suchsuppliers and other special circumstances.

The Supplies Agreement will be effective upon the listing and quotation of the shares in the capital of theCompany on SESTL and will continue for as long as the listing continues subject to the provisions ofChapter 9A of the Listing Manual of the SESTL. The Supplies Agreement may not be unilaterallyterminated by KCHL or the Company, but both parties may mutually agree to terminate the SuppliesAgreement. Any decision to be made by the Company with regards to the termination of the SuppliesAgreement shall be subject to the approval of shareholders and the Audit Committee of the Company.

All transactions involving the sale of products of the KBCF Group to the Kingboard Group will besummarised and submitted to the Audit Committee for regular and periodic review to ensure that theterms of the Supplies Agreement, including those relating to the determination of the price of copper foilto be sold to the Kingboard Group, are adhered to.

Rental of Premises

The Group has entered into a tenancy agreement with Kingboard Laminates Limited, a wholly-ownedsubsidiary of KCHL, in respect of the rental of office space for use as the KBCF Group’s headadministration and management office. Details of the tenancy are as follows:−

Landlord Tenant Location of PremisesRental

per Month Term of Lease

KingboardLaminatesLimited

HKCF(BVI) 5thFloor, Block IValiant Industrial Building2−12 Au Pui Wan StreetFo Tan Shatin, N.T.Hong Kong

HK$9,780 2 years (from1 September 1999)

The rental rate is arrived at based on the prevailing market rental rates for similar units in the vicinity.

Cross Guarantees

In the past three years, KCHL, as the ultimate holding company of the Kingboard Group as well as theKBCF Group, has secured several financing facilities from numerous banks and financial institutions foruse by the companies in the Kingboard Group as well as the KBCF Group. As at the date of thisProspectus, the financing facilities are as follows:−

(a) financing facilities amounting to a total of HK$230,000,000 for use by the Kingboard Group(‘‘Kingboard’s Financing Facilities’’);

(b) financing facilities amounting to a total of HK$254,000,000 for use by the Kingboard Group and theKBCF Group (‘‘Joint Financing Facilities’’).

The terms and conditions of the various loan agreements entered into in connection with the Kingboard’sFinancing Facilities inter alia require HKCF(BVI) to issue guarantees on a joint and several basis with theKingboard Group to secure repayment of any and all sums outstanding under the Kingboard’s FinancingFacilities. The terms and conditions of the various loan agreements entered into in connection with theJoint Financing Facilities also inter alia require HKCF(BVI) to issue guarantees on a joint and severalbasis with the Kingboard Group to secure repayment of any and all sums outstanding (whether as aresult of the borrowings of the Kingboard Group or those of the KBCF Group) under the Joint FinancingFacilities.

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With the view to segregating the financing facilities used by the KBCF Group from those used by theKingboard Group, the Kingboard Group obtained written confirmation from the relevant banks andfinancial institutions that the KBCF Group will be released from the joint and several guarantees givenby it in respect of the borrowings of the Kingboard Group, such release to take effect upon the admissionof the Company to the Official List of the SESTL.

Future Related Party Transactions

The Audit Committee will review all existing and future related party transactions on a quarterly basis toensure that they are carried out on normal commercial terms and are not prejudicial to the interests ofthe Company’s shareholders. The Audit Committee will also review all the related party transactions toensure that the then prevailing rules and regulations of the SESTL (in particular, Chapter 9A of the ListingManual) are duly complied with. The KBCF Group will endeavour to comply with the principles and bestpractices set out in the Best Practices Guide, in a manner which best suits its particular circumstances.

POTENTIAL CONFLICTS OF INTEREST

No Director, substantial shareholder or Executive Officer of the KBCF Group has any interest, direct orindirect, in any enterprise or company carrying on the same business or dealing in similar products asthe KBCF Group.

Save as disclosed in ‘‘Interested Person Transactions’’ and ‘‘Potential Conflicts of Interest’’ above:−

(a) No Director, substantial shareholders or Executive Officer of the KBCF Group has any interest,direct or indirect, in any transactions to which the Company was or is to be a party;

(b) No Director, substantial shareholders or Executive Officer of the KBCF Group has any interest,direct or indirect, in any company carrying on the same business or carrying on a similar trade asthe KBCF Group; and

(c) No Director, substantial shareholders or Executive Officer of the KBCF Group has any interest,direct or indirect, in any enterprise or company that is the Company’s customer or supplier of goodsor services.

CORPORATE GOVERNANCE

The Audit Committee comprises Mr Lee Joo Hai, Mr Chang Wing Yiu, Mr Teo Kiang Kok and Mr LaiChung Wing, Robert. The Audit Committee will be chaired by Mr Lee Joo Hai. Mr Chang Wing Yiu is anExecutive Director of the Company and Mr Lee Joo Hai, Mr Teo Kiang Kok and Mr Lai Chung Wing,Robert are independent Directors of the Company.

The Audit Committee will meet periodically to discuss and review the following:−

(a) the audit plan, the system of internal accounting controls and the audit report in conjunction with theexternal auditors;

(b) the assistance given by the Company’s officers to the external auditors;

(c) the accounts of the Company and the consolidated accounts of the KBCF Group; and

(d) the review of all related party transactions entered into by the KBCF Group.

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DIRECTORS, MANAGEMENT AND STAFF

Directors

The Board of Directors is entrusted with the responsibility for the overall management of the Company.The Directors’ particulars are listed below:−

Name Age Country of Residence Current Occupation

Chan Wing Kwan 53 Hong Kong SARPRC

Executive Chairman

Chang Wing Yiu 33 Hong Kong SARPRC

Managing Director

Cheung Kwok Wing 44 Hong Kong SARPRC

Executive Director

Ho Yin Sang 45 Hong Kong SARPRC

Executive Director

Zhang Guanghui 34 Hong Kong SARPRC

Executive Director

Lee Joo Hai 43 Singapore Certified Public Accountant

Teo Kiang Kok 43 Singapore Advocate & Solicitor

Lai Chung Wing, Robert 52 Singapore General Manager (BusinessDevelopment), L&M GroupInvestments Ltd

The Independent Directors are Messrs Lee Joo Hai, Teo Kiang Kok and Lai Chung Wing, Robert. TheAudit Committee comprises Messrs Chang Wing Yiu, Lee Joo Hai, Teo Kiang Kok and Lai Chung Wing,Robert. The chairman of the Audit Committee will be Mr Lee Joo Hai, who shall have the casting vote inthe event that there is an equality of votes in any resolution of the Audit Committee.

Management

The day-to-day operations of the KBCF Group are entrusted to the Executive Directors and anexperienced and qualified team of Executive Officers responsible for the different functions of the KBCFGroup. The particulars of the Executive Officers are set out below:−

Name Age Country of Residence Current Occupation

Lo Ka Leong 26 Hong Kong SARPRC

Accounting Manager

Li Weiming 25 Guangdong, PRC Quality Control Manager

Chen Xiping 28 Guangdong, PRC Quality Control Manager

Liu Min 31 Guangdong, PRC Plant Manager (Phase I)

Deng Shijun 25 Guangdong, PRC Plant Manager (Phase II)

He Beiyang 29 Guangdong, PRC Production Manager

Liu Zhigang 26 Guangdong, PRC Production Manager

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Staff

As at 31 October 1999, the KBCF Group has approximately 515 full-time employees. The KBCF Groupdoes not experience any significant seasonal fluctuations in the number of employees. Relationshipbetween management and staff are good and there have not been any industrial disputes in theCompany or its subsidiaries.

SERVICE AGREEMENTS

The Executive Directors, Messrs Chan Wing Kwan, Chang Wing Yiu, Cheung Kwok Wing, Ho Yin Sangand Zhang Guanghui, each entered into separate service agreements with the Company on 29November 1999. The principal terms of the service agreements are as follows:−

(a) The appointment of each Director shall be for a term of two years commencing on 29 November1999 (the ‘‘initial period’’) and is thereafter renewable for a succeeding period, the length and termsof which shall be agreed upon at the conclusion of the initial period. The renewed serviceagreements for the succeeding period may be terminated for cause or by either party giving at least6 months’ written notice. The Company may also terminate the respective service agreements bysummary notice, without any compensation to the respective Directors, upon the occurrence ofcertain specified events such as misconduct or bankruptcy.

(b) For the duration of the initial period, Messrs Chang Wing Yiu and Ho Yin Sang are entitled to annualsalaries of HK$2,674,000 in aggregate. The annual salaries may be adjusted with the approval ofthe Board of Directors. The other Executive Directors, Messrs Cheung Kwok Wing, Chan WingKwan and Zhang Guanghui will not receive fixed remuneration or other benefits from the KBCFGroup. However, all the Executive Directors are collectively entitled to an aggregate bonus paymentequivalent to 2 per cent. of the KBCF Group’s audited profit before taxation, exceptional items andextraordinary items but after minority interests (‘‘PBT’’) provided that the aforesaid bonus paymentshall be payable if the KBCF Group achieves an audited PBT of not less than HK$150 million.

The service agreements contain non-competition and non-solicitation clauses which are binding on eachDirector for a period of 1 year after the cessation of his employment with the Company.

The Board of Directors wil review the terms of the service agreeements when they are renewed uponexpiry. However, any Director whose service agreement is being reviewed by the Board of Directors shallabstain from voting and shall refrain from making recommendations in respect of any resolution ordecision by the Board of Directors to be passed in relation to his service agreement.

Had the proposed service agreements been in existence in the last financial year:−

(i) the KBCF Group’s profit before taxation for the financial year ended 31 March 1999 would havebeen HK$49,119,000 instead of HK$50,093,000; and

(ii) the remuneration payable to Executive Directors as a percentage of profit before taxation (with theremuneration of the Executive Directors added back) would have been 5.2% instead of 3.3%.

Save as disclosed above, there are no other existing or proposed service agreements between theKBCF Group and any Director or Executive Officer of the Company.

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DIRECTORS’ REMUNERATION

The remuneration of the Directors on an aggregate basis in the Proforma Group and in remunerationbands for FY1998 and FY1999 are as follows:−

(a) Aggregate Directors’ Remuneration

HK$’000 FY1998 FY1999

Executive Directors 2,787 1,700

Non-Executive Directors — —

Total 2,787 1,700

Aggregate Director’s remuneration in FY1999 was significantly lower than in FY1998 as theDirectors were paid aggregate performance bonuses amounted to approximately HK$1.12 millionin FY1998.

(b) Number of Directors in Each Remuneration Bands

————— FY1998 ————— ————— FY1999 —————

ExecutiveDirectors

Non-ExecutiveDirectors Total

ExecutiveDirectors

Non-ExecutiveDirectors Total

HK$500,000 and above 2 — 2 1 — 1

HK$250,000 to HK$499,999 2 — 2 2 — 2

HK$0 to HK$249,999 1 3 4 2 3 5

Total 5 3 8 5 3 8

PROPERTIES AND FIXED ASSETS

The KBCF Group currently owns the following properties:−

Description/Location Tenure Gross Area

RegisteredOwner ofLand-Use

Rights

Net Book Valueas at

31 March 1999HK$

Shijiao Town, Fogang, GuangdongProvince, PRC(1)

70 years 8,981 sq m HKCF(BVI) 6,020,464

Gangtian Zone, Shijiao Town, Fogang,Guangdong Province, PRC(1)

50 years 18,413.33 sq m FKI 21,043,070

Shijiao Town, Fogang, GuangdongProvince, PRC(1)

50 years 27,332 sq m HKCF(BVI) 28,120,177

Tangtang Town, HuanghuahuDevelopment Area, Fogang,Guangdong Province, PRC(1)

70 years 666 sq m FKI 34,390

Note:−

(1) Land-use rights certificates have been issued by the relevant land authorities in the PRC.

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The KBCF Group currently rents/leases the following properties:−

Description/Location Tenure Gross Area Annual Rental Lessor

5th Floor, Block IValiant Industrial Building2−12 Au Pui Wan StreetFo Tan, Shatin, N.T.Hong Kong

2 years (from1 September 1999)

1,956 sq ft HK$117,360 Kingboard LaminatesLimited

FINANCE

The KBCF Group’s outstanding borrowings as at 31 March 1999 (excluding the C-Notes and loans fromthe Kingboard Group) totalled HK$41.70 million.

Property, plant and equipment (‘‘PPE’’ )

PPE increased from HK$97.40 million in FY1997 to HK$107.57 million in FY1998 due to the addition ofsix drums to the KBCF Group’s Phase I production facilities in FKI. Following the start up of the PhaseII manufacturing facilities in FKI, PPE increased significantly by 165.6% to HK$284.62 million in FY1999.The design and construction of the factory building for Phase II facilities amounted to HK$44.1 million.The additional equipment included electro-depositing machines (HK$32.0 million), treaters (HK$28.5million) and electrical systems (HK$16.6 million).

Current assets

Current assets rose by 63.8% from HK$61.12 million in FY1997 to HK$100.10 million in FY1998. Theincrease was due mainly to higher trade receivables from the Kingboard Group which increased toHK$79.50 million in FY1998 from HK$44.23 million in the previous year. Sales to the Kingboard Grouprose by 39.8% in the corresponding period, from HK$113.50 million in FY1997 to HK$158.68 million inFY1998.

Current assets more than doubled from HK$100.10 million in FY1998 to HK$242.07 million in FY1999.The increase was attributable mainly to higher trade receivables from the Kingboard Group which roseby HK$81.42 million from HK$79.50 million in FY1998 to HK$160.92 million in FY1999 as the KBCFGroup continued to increase the volume of sales to the Kingboard Group whose business had beenexpanding. The cash and bank balances position of the KBCF Group also improved significantly fromHK$871,000 in FY1998 to HK$55.17 million in FY1999 due mainly to cash receipt from the C-Notes.

Current liabilities

Compared to proposed dividend of HK$15.00 million in FY1997, the KBCF Group did not proposeyear-end dividend payment in FY1998 resulting in a decline in dividend payable. In FY1997, theKBCF Group utilised short-term banking facilities to finance the purchase of the six additional drumsfor Phase I of its facilities. It repaid part of these borrowings in FY1998 and as a result, short-termbanking facilities balances as at the end of FY1998 reduced by 50.2% from HK$16.77 million inFY1997 to HK$8.35 million. The above reductions were partly offset by an increase in tax payablewhich rose from HK$66,000 in FY1997 to HK$1.78 million in FY1998 following higher profitability ofthe KBCF Group. Consequently, current liabilities reduced from HK$39.58 million in FY1997 toHK$21.24 million in FY1998.

Current liabilities increased to HK$133.42 million in FY1999 due mainly to (a) a special dividend declaredin respect of FY1999 which amounted to HK$70.00 million; (b) the utilisation of HK$8.35 million ofshort-term facilities to part finance the purchase of machinery; and (c) the utilisation of credit facilities forraw material purchases in line with the KBCF Group’s sales expansion. Short-term banking facilitiesbalances increased by approximately four times from HK$8.35 million in FY1998 to HK$41.70 million inFY1999.

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Non-current liabilities

Non-current liabilities rose by 25.5% from HK$109.18 million in FY1997 to HK$136.99 million in FY1998.The liabilities comprised mainly advances from the Kingboard Group. In FY1999, non-current liabilitiesincreased to HK$247.94 million, a rise of 81.0% compared to HK$136.99 million in FY1998. The increasewas mainly attributable to the issuance of the HK$108.44 million C-Notes as described on page 3 of thisProspectus.

Shareholders’ equity

Shareholders’ equity rose from HK$9.77 million in FY1997 to HK$49.44 million in FY1998, representingan increase of HK$39.67 million. This was in line with the retention of the KBCF Group’s profit aftertaxation of HK$42.62 million for the corresponding period, less the amount of dividend declared ofHK$5.00 million. The KBCF Group’s shareholders’ equity rose from HK$49.44 million in FY1998 toHK$145.33 million in FY1999 due mainly to the capitalisation of HK$117.00 million shareholders’ loansby the issue of new shares. During the same period, the retention of the KBCF Group’s profit alsocontributed to the sharp rise in shareholders’ equity. Nevertheless, the increase was offset by a specialdividend declared of HK$70.00 million before the Invitation.

REVIEW OF PAST PERFORMANCE

FY1997 to FY1998

Turnover rose by 39.8% from HK$113.50 million in FY1997 to HK$158.68 million in FY1998. Theincrease in turnover was derived mainly from the approximately 25% increase in the KBCF Group’sproduction capacity following the addition of six drums in October 1997 to meet the demand of itscustomers. In line with the increase in turnover, the KBCF Group’s operating profit also increased fromHK$38.53 million in FY1997 to HK$53.35 million in FY1998, representing an increase of 38.5%.However, foreign exchange gain declined from HK$2.59 million in FY1997 to HK$133,000. Foreignexchange gain arose due to the difference between the book rates and the market rates of foreigncurrency transactions and the market rates were less favourable in FY1998 compared to FY1997. InFY1998, depreciation expense increased by 13.1% to HK$8.50 million, compared to HK$7.52 million inFY1997 following the addition of the above-mentioned six drums. The increase in profit was furtheraugmented by the lower net interest expenses which reduced from HK$734,000 to HK$458,000 inFY1998 due to lower utilisation of financing facilities. Consequently, profit before taxation was 34.9%higher in FY1998 at HK$44.33 million compared to HK$32.86 million in FY1997.

FY1998 to FY1999

The KBCF Group’s turnover further increased from HK$158.68 million in FY1998 to HK$174.54 millionin FY1999. Turnover increased at a slower rate of about 10% compared to the previous year as theKBCF Group had utilised its manufacturing facilities then to almost their full capacity. The KBCF Groupdid not increase its production capacity in FY1999 save for the Phase IIA production facilities which werein operation for only three months in FY1999. With the increase in turnover, operating margin improvedmarginally resulting in an operating profit of HK$62.65 million. The KBCF Group also recorded foreignexchange gain of HK$2.22 million arising from the favourable difference between its book rate andmarket rates of foreign currency transactions. During the period, depreciation expenses increased byHK$2.44 million to HK$10.94 million, compared to HK$8.50 million in FY1998 as the KBCF Groupcarried out capital expenditure which amounted to approximately HK$190 million, which included thepurchases of plant and machinery and the construction of Phase II of the production facilities in FKI. Inaddition, interest expenses increased significantly from HK$458,000 in FY1998 to HK$3.41 million inFY1999. This was due mainly to the high interest rate environment following the on set of the regionaleconomic crisis and the utilisation of short-term banking facilities to part finance the purchase ofmachinery. During the corresponding period, short-term banking facilities balances increased byapproximately four times. Consequently, profit before taxation rose by 13.0% from HK$44.33 million toHK$50.09 million.

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Six months ended 30 September 1999

For the six months up to 30 September 1999, the Group achieved turnover of HK$177.40 million. Thesignificant increase in turnover was due to full contribution from its Phase IIA production facilities and thecommencement in production at Phase IIB facilities in June 1999. These production facilities hadincreased the Group’s monthly production capacity by 400 tonnes. Profit margins increased substantiallyin the first half of FY2000 due to (a) lower costs of raw material as copper prices declined over thecorresponding period; (b) the introduction of 18 microns copper foil which commanded high profitmargins; and (c) higher efficiency of the new and sophisticated machinery of Phase II productioncapacities. Consequently, operating profit of HK$84.45 million was achieved.

Depreciation expenses for the six months ended 30 September 1999 was HK$12.34 million, which washigher than the full year HK$10.94 million reported in FY1999. The significant increase was due to capitalexpenditure in relation to the phase II production facilities. Following the increase in sales, the Group alsoutilised higher trade facilities to finance the purchase of raw materials, resulting in interest expense ofHK$2.23 million. Thus, the Group achieved profit before tax of HK$70.89 million for the six months ended30 September 1999, a significant increase over the pro-rated six months profit before tax of HK$25.05million achieved in FY1999.

PROSPECTS AND FUTURE PLANS

Prospects

The KBCF Group’s prospects are largely dependent on the laminates and PCB industries and as well asthe performance of the Kingboard Group, its major customer. The KBCF Group’s prospects to a certainextent is also dependent on the economic growth of the PRC. Based on the findings of the BPA Report,the PCB market for Asia and the PRC are expected to grow at a CAAGR of 9.8% and 22.2% respectivelyfor the period 1996−2001. Much of this is due to the high concentration of consumer electronicsmanufacturing companies in Asia. As the PCB content in consumer electronics rises (from 3.1% in 1996to 3.25% in 1999), there is every reason to believe that demand for PCBs will continue to grow. As forthe laminates market, the projected CAAGR are 6% for Asia and 7.1% for PRC.

The application of electronic components have proliferated in the past few years in areas like automotive,consumer electronics, industrial equipment, telecommunications, satellite, avionics and militaryapplications. According to the BPA Report, this development has resulted in the laminates and PCBindustries becoming one of the less volatile sectors of the general electronic manufacturing industry asthey cater to a vast range of sub-industries as aforesaid. The liberalisation of and huge investments intothe telecommunications industries, increased usage of electronic components in automobiles and theincreasing number of manufacturers in the United States and Europe sourcing their laminates and PCBrequirements from countries in the Asia Pacific region are factors which add to the strong and stablegrowth of the laminates and PCB industries. All these factors augur well for the KBCF Group’s prospectsin view of the fact that the bulk of its products are sold to laminates and PCB manufacturers. Despite theAsian economic crisis that had plagued most Asian countries since 1997, the PRC economy continuedto register strong growths of 8.8% in 1997 and 7.8% in 1998. It is widely expected that the PRC economyis likely to continue to grow over the next few years, albeit at a slower pace.

On-going and Future Plans

The KBCF Group will continue to focus on its core business activities of producing and selling copper foil.The Directors believe that the key to stable and strong growth in the short-term is to concentrate onexpanding the production capacities of its plants, as well as to research on and develop new and betterproduction processes and raw materials so as to increase or enhance the production efficiency or yieldrate of its existing or new facilities. In particular, the KBCF Group has undertaken or intends to undertakethe following to achieve its expansion plans:−

(i) Upgrade and expansion of production capacities under Phase I and Phase II

The KBCF Group is currently upgrading its production facilities under Phase I. The upgradinginvolves the modification and replacement of the existing equipment and machinery using thetechnology and expertise developed under Phase IIA and Phase IIB. The upgrading is expected tobe completed by end 2000.

49

The KBCF Group is also actively preparing to embark on Phase IIC of its copper foil production inFogang. The installation of the production facilities is expected to commence in July 2000. UnderPhase IIC, the KBCF Group will concentrate on the production of 18 microns and 35 micronscopper foil, as well as the production of double-side and reverse-side treated copper foil.

(ii) Implementation of Phase III

As part of the KBCF Group’s long-term goal to expand its production capacity to meet the growingdemand for copper foil, in particular, higher quality and thinner copper foil, the management is inthe process of finalising the Phase III expansion plans which are expected to increase the KBCFGroup’s production capacity by another 600 tonnes when implemented. The initial part of Phase IIIwill involve the sourcing and acquisition of suitable land, construction of new factory buildings andpurchase of production facilities in the course of the next two years. Installation of the productionfacilities will commence thereafter. The Directors expect the capital investments for Phase III torequire an estimated US$30 million to US$35 million, part of which will be financed by the proceedsfrom the Invitation. The estimate of US$30 million to US$35 million is calculated based on theKBCF Group’s experience in the implementation of Phase II. As in Phase II, installation of theproduction facilities for Phase III will be in several sub-phases.

(iii) Research and development

As in the case of developing the process which enables 18 microns copper foil to be producedusing production facilities which were originally constructed to produce 35 microns copper foil, theKBCF Group will seek to develop more of such processes which will enable it to enhance the useof and fully tap on the existing available production facilities. Research and development activitiesof the KBCF Group will also focus on the production of new standards or types of copper foil (forinstance, thinner copper foil) so as to stay ahead of its competitors in meeting the rapid changingneeds of the laminates and PCB industries as well as other electronics industries which use copperfoil.

(iv) Diversification of customer base

The KBCF Group recognises the need, and intends, to establish a wider network of customers interms of numbers as well as volume of transactions. Since 1998, the KBCF Group has been makingactive efforts to market its products to customers outside the Kingboard Group, including laminatesmanufacturers located both within and outside the PRC. The KBCF Group will concentrate itsefforts on promoting its products to the increasing number of laminates and PCB manufacturers inthe southern and eastern parts of the PRC.

PROFIT ESTIMATE AND DIVIDENDS

Profit Forecast

The Directors forecast that, in the absence of unforseen circumstances and on the bases andassumptions set out below, the proforma consolidated turnover and profit after taxation and minorityinterests but before extraordinary items of the KBCF Group for the financial year ending 31 March 2000will be approximately HK$378 million and HK$130 million respectively. This represents an increase of116% and 203% respectively over the corresponding figures in FY1999. The Directors are not aware ofany extraordinary items which have arisen or are likely to arise during the financial year ending 31 March2000.

The Directors believe that the projected turnover and profit forecast are achievable for the followingreasons:−

(a) The turnover forecast of HK$378 million is based on the actual sales of HK$177.40 million achievedfor the first six months of FY2000 (from April to September 1999) together with confirmed orders ofnot less than HK$200 million for the six months from October 1999 to March 2000. The confirmedorders for copper foil have been placed by the Kingboard Group to meet its production schedule tofulfill the purchase orders received by the Kingboard Group to date. The confirmed orders placedby the Kingboard Group to the KBCF Group constitute binding contracts between the parties.

50

(b) To meet the increased demand for FY2000, the KBCF Group’s production capacity has beensuccessfully stepped up in 1999 according to the following schedule:−

Phase

MonthlyProductionCapacity

Commencementof Production Copper Foil Type

I 300 tonnes 1997 35 microns

IIA 150 tonnes January 1999 18 microns, 35 microns

IIB 150 tonnes June 1999 18 microns, 35 microns

(c) The 18 microns copper foil carries a higher profit margin than the 35 microns copper foil. With thecompletion of Phase IIA and Phase IIB, the KBCF Group expects to be producing and selling ahigher proportion of 18 microns copper foil against confirmed orders from the Kingboard Group. Therise in proportion of 18 microns copper foil from 1.1% of total sales in FY1999 to an estimated 30.0%of total sales in FY2000 will raise the overall profit margin to help the Group realise the forecastedprofit after taxation of HK$130 million in FY2000.

Dividends

The Directors do not intend to recommend payment of dividends in respect of the financial year ending31 March 2000.

In future the Directors intend to pursue a dividend policy commensurate with the KBCF Group’s earnings,its financial position and future plans.

The profit estimate, for which the Directors are solely responsible, has been prepared on basesconsistent with the accounting policies normally adopted by the KBCF Group in the preparation of itsaudited accounts and has been prepared based on the following assumptions:−

(a) there will be no material changes in interest rates and currency exchange rates to those prevailingat the date of the forecast;

(b) there will be no material changes in the existing political, economic, legal or regulatory environment;and

(c) there will be no material changes in the bases or rates of taxation, tariffs and duties imposed on theKBCF Group.

51

LETTER FROM THE AUDITORS AND REPORTING ACCOUNTANTSIN RELATION TO THE PROFORMA CONSOLIDATED PROFIT FORECAST

FOR THE FINANCIAL YEAR ENDING 31 MARCH 2000

6 December 1999

The Board of DirectorsKingboard Copper Foil Holdings Limited

Dear Sirs

This letter has been prepared for inclusion in the Prospectus of Kingboard Copper Foil Holdings Limited(the ‘‘Company’’) to be dated 6 December 1999 (the ‘‘Prospectus’’) in connection with the Invitation inrespect of 170,000,000 New Shares of US$0.10 each and 45,000,000 Vendor Shares of US$0.10 eachin the capital of the Company, comprising 43,000,000 Offer Shares at S$0.53 for each Offer Share and172,000,000 Placement Shares at S$0.53 for each Placement Share, payable in full upon application.

We have examined the forecast of the Company and its subsidiaries (the ‘‘KBCF Group’’) for the financialyear ending 31 March 2000 set out on page 50 of the Prospectus in accordance with SingaporeStandards on Auditing applicable to the examination of prospective information. The Directors are solelyresponsible for the forecast including the assumptions as set out on page 51 of the Prospectus on whichthe forecast is based.

The forecast includes results shown by unaudited proforma consolidated financial statements for the sixmonths period ended 30 September 1999.

Based on our examination of the evidence supporting the assumptions, nothing has come to ourattention to cause us to believe that these assumptions do not provide a reasonable basis for theforecast. Furthermore, in our opinion, the forecast, so far as the accounting policies and calculations areconcerned, is properly prepared on the basis of the assumptions, is consistent with the accountingpolicies normally adopted by the KBCF Group, and has been presented in accordance with theStatements of Accounting Standard.

Yours faithfully

Deloitte & ToucheCertified Public AccountantsSingapore

Chaly Mah Chee KheongPartner-in-charge

52

UNAUDITED PROFORMA CONSOLIDATED PROFIT AND LOSS STATEMENTAND PROFORMA BALANCE SHEET FOR THE SIX MONTHS

ENDED 30 SEPTEMBER 1999

The unaudited proforma consolidated profit and loss statement of the KBCF Group for the six monthsended 30 September 1999 and the unaudited proforma consolidated balance sheet of the KBCF Groupas at 30 September 1999 set out below have been prepared on the basis set out in the Accountants’Report, on pages 56 to 74 of this Prospectus.

Proforma Consolidated Profit and Loss

HK$’000

Turnover 177,396

Profit before taxation 70,885

Taxation (9,756)

Profit after taxation 61,129

Proforma Consolidated Balance SheetHK$’000

Property, plant and equipment 288,279

Current assets 314,371

Current liabilities (146,652)

Net current assets 167,719

Non-current liabilities (249,539)

206,459

Represented by

Proforma shareholders’ equity 206,459

53

LETTER FROM THE AUDITORS AND REPORTING ACCOUNTANTS IN RELATIONTO THE UNAUDITED PROFORMA CONSOLIDATED BALANCE SHEET

AS AT 30 SEPTEMBER 1999 AND PROFIT AND LOSS STATEMENTFOR THE SIX MONTHS ENDED 30 SEPTEMBER 1999

6 December 1999

The Board of DirectorsKingboard Copper Foil Holdings Limited

Dear Sirs

This letter has been prepared for inclusion in the Prospectus of Kingboard Copper Foil Holdings Limited(the ‘‘Company’’) to be dated 6 December 1999 (the ‘‘Prospectus’’) in connection with the Invitation inrespect of 170,000,000 New Shares of US$0.10 each and 45,000,000 Vendor Shares of US$0.10 eachin the capital of the Company, comprising 43,000,000 Offer Shares at S$0.53 for each Offer Share and172,000,000 Placement Shares at S$0.53 for each Placement Share, payable in full upon application.

We have reviewed the unaudited proforma consolidated balance sheet of the Company and itssubsidiaries (the ‘‘KBCF Group’’) as at 30 September 1999 and the proforma consolidated profit and lossstatement for the six months ended 30 September 1999 as set out on page 53 of the Prospectus. Theseunaudited consolidated balance sheet and profit and loss statement are the responsibility of theCompany’s directors. Our responsibility is to issue a report on the unaudited proforma consolidatedbalance sheet and profit and loss statement based on our review.

A review of the financial information consists principally of obtaining an understanding of the system forthe preparation of financial information, applying analytical review procedures to financial data andmaking inquiries of persons responsible for financial and accounting matters. It is substantially less inscope than an examination in accordance with Singapore Standards on Auditing and Statements ofAuditing Practice, the objective of which is the expression of an opinion regarding the financialstatements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, nothing has come to our attention that causes us to believe that the financialinformation set out on page 53 of the Prospectus has not been presented fairly, in all material aspects,in accordance with Statements of Accounting Standard.

Yours faithfully

Deloitte & ToucheCertified Public AccountantsSingapore

Chaly Mah Chee KheongPartner-in-charge

54

DIRECTORS’ REPORT

6 December 1999

The ShareholdersKingboard Copper Foil Holdings Limited

Dear Sirs

This report has been prepared for inclusion in the Prospectus of Kingboard Copper Foil Holdings Limited(the ‘‘Company’’) to be dated 6 December 1999 in connection with the Invitation in respect of170,000,000 new ordinary shares of US$0.10 each and 45,000,000 existing ordinary shares of US$0.10each in the capital of the Company (the ‘‘Invitation Shares’’).

On behalf of the Directors of the Company, I report that, having made due inquiry in relation to the intervalbetween 31 March 1999, the date to which the last audited accounts of the Company were made up, andthe date hereof:−

(a) the business of the Company and its subsidiaries has, in the opinion of the Directors, beensatisfactorily maintained;

(b) no circumstances have, in the opinion of the Directors, arisen since the date of incorporation of theCompany which would adversely affect the trading or the value of the assets of the Company or itssubsidiaries;

(c) the current assets of the Company and its subsidiaries appear in the books at values which arebelieved to be realisable in the ordinary course of business;

(d) no contingent liabilities have arisen by reason of any guarantees given by the Company or itssubsidiaries; and

(e) there have been no changes in the published reserves or any unusual factors affecting the profit ofthe Company and its subsidiaries since the last audited accounts.

Yours faithfullyfor and on behalf of theBoard of Directors

Chan Wing KwanExecutive Chairman

55

ACCOUNTANTS’ REPORT

6 December 1999

The Board of DirectorsKingboard Copper Foil Holdings LimitedClarendon House2 Church StreetHamilton HM IIBermuda

Dear Sirs

A. INTRODUCTION

This report has been prepared for inclusion in the prospectus to be dated 6 December 1999 (the‘‘Prospectus’’) in connection with an invitation in respect of 170,000,000 new ordinary shares (‘‘NewShares’’) of US$0.10 each and 45,000,000 Vendor Shares of US$0.10 each in the capital ofKingboard Copper Foil Holdings Limited (the ‘‘Company’’), comprising 43,000,000 Offer Shares atS$0.53 for each Offer Share by way of public offer and 172,000,000 Placement Shares by way ofplacement at S$0.53 for each Placement Share, payable in full on application (the ‘‘Invitation’’).

The Company was incorporated in Bermuda on 10 September 1999 as an exempted companyunder the Companies Act 1981 of Bermuda.

The principal activity of the Company is that of investment holding.

The movement in the paid-up capital of the Company since its date of incorporation were asfollows:−

(a) Issue of 12,000 ordinary shares of US$1.00 each, nil-paid, upon incorporation.

(b) Sub-division of each ordinary share of US$1.00 each into 10 ordinary shares of US$0.10 each,resulting in 120,000 ordinary shares of US$0.10 each.

(c) Issue of 500,000,000 ordinary shares of US$0.10 each, credited as fully paid, as considerationto acquire subsidiaries in accordance with a restructuring exercise (the ‘‘RestructuringExercise’’) undertaken for purpose of the Company’s listing on the Singapore ExchangeSecurities Trading Limited. The 500,000,000 shares include the 120,000 nil-paid sharesdescribed in (a) and (b) above.

At the date of this report, the authorised share capital of the Company is US$200,000,000 dividedinto 2,000,000,000 ordinary shares of US$0.10 each and the issued and fully paid-up share capitalof the Company is US$50,000,000 divided into 500,000,000 ordinary shares of US$0.10 each.

The Kingboard Copper Foil Holdings Limited group of companies (collectively the ‘‘KBCF Group’’)was formed as a result of the Restructuring Exercise. The Restructuring Exercise involved thefollowing transactions:−

(a) As part of the Restructing Exercise, Hong Kong Copper Foil Limited (‘‘HKCF(BVI)’’) and theholders of the guaranteed convertible and exchangeable notes (the ‘‘Noteholders’’) undertookthe following transactions:

(1) HKCF(BVI) capitalised loans from Kingboard Chemical Holdings Limited (‘‘KCHL’’) and itssubsidiaries, but excluding the KBCF Group, (hereinafter referred to as the ‘‘KingboardGroup’’) amounting to HK$140,000,000 (equivalent to US$18,064,516) in exchange for18,064,516 ordinary shares of US$1.00 each in HKCF(BVI); and

56

A. INTRODUCTION (continued)

(2) The Noteholders issued promissory notes to HKCF(BVI) with an aggregate valueamounting to HK$108,444,000 (equivalent to US$13,992,774) (see note 12 of Section Hbelow) in exchange for an aggregate of 13,992,774 ordinary Shares of US$1.00 each inHKCF(BVI).

Pursuant to the foregoing a total of 32,057,290 ordinary shares of US$1.00 each in the capitalof HKCF(BVI) were issued to Jamplan (BVI) Limited (‘‘Jamplan (BVI)’’) and the Noteholders,resulting in an increased share capital of 47,057,290 ordinary shares of US$1.00 each in thecapital of HKCF(BVI).

Upon the conditions under the Management and Underwriting Agreement being satisfied, thepromissory notes issued by the Noteholders and the guaranteed convertible and exchangeablenotes issued by HKCF(BVI) and held by the Noteholders would be set off against each other.

(b) The Company then acquired the entire issued share capital in HKCF(BVI) from Jamplan (BVI)and the Noteholders for a consideration equal to the aggregate of the audited net tangibleassets of HKCF(BVI) and its subsidiaries as at 31 March 1999 (taking into account thecapitalisation of loans as described in the preceding paragraph) amounting to HK$393,775,050(equivalent to US$50,809,684). The said consideration was satisfied in full by the allotment andissue of 500,000,000 ordinary shares of US$0.10 each in the Company to Jamplan (BVI) andthe Noteholders in proportion to their shareholdings in HKCF(BVI) save that, as part of theconsideration paid by the Company to Jamplan (BVI), the 120,000 ordinary shares of US$0.10each in the capital of the Company which were originally issued to Jamplan (BVI) nil-paid weredeemed to be credited as fully paid upon the completion of the Restructuring Exercise.

For the purpose of giving effect to the agreement contemplated under the subscription agreementregarding the guaranteed convertible and exchangeable notes, the Noteholders executed sharetransfers in respect of an aggregate of 75,178,069 ordinary shares of US$0.10 each in the capitalof the Company in favour of Jamplan (BVI), such that the Noteholders hold in aggregate ashareholding interest of 14.7% in the capital of the Company. None of the Noteholders aresubstantial shareholders or deemed to be substantial shareholders of the Company.

Pursuant to written resolutions of the shareholders of the Company dated 3 December 1999, theshareholders of the Company approved, inter alia, the following:−

(a) the sub-division of each of the ordinary shares of US$1.00 each in the capital of the Companyinto 10 ordinary shares of US$0.10 each in the capital of the Company;

(b) an increase in the authorised share capital of the Company from US$12,000 divided into120,000 ordinary shares of US$0.10 each to US$200,000,000 divided into 2,000,000,000ordinary shares of US$0.10 each by the creation of 1,999,880,000 ordinary shares of US$0.10each;

(c) the Restructuring Exercise;

(d) the adoption of a new set of Bye-Laws of the Company; and

(e) the issue of 170,000,000 new ordinary shares of US$0.10 each in the capital of the Companywhich, together with the 45,000,000 Vendor Shares, are the subject of the Invitation.

A resolution was also passed by the shareholders authorising the directors of the Company to issuefurther shares from time to time, provided the aggregate number of shares of the Company issuedpursuant to such authority shall not exceed the maximum limit permitted under the relevant laws ofSingapore and Bermuda (including the rules of the Singapore Exchange Securities Trading Limited)prevailing at that time.

57

B. BASIS OF PREPARATION OF FINANCIAL INFORMATION

The particulars of the subsidiaries in the KBCF Group which have been included in the preparationof the Proforma Statement of Group Results and the Proforma Statement of Group Balance Sheetsfor each of the financial years ended 31 March 1995 to 1999 and the Proforma Statement of NetAssets as at 31 March 1999 are as follows:−

Name of company

Place and dateof incorporation/

operation

Issued and paidup capital/contributed

capital

Effective equityinterest held

by the CompanyPrincipalactivity

Directly Indirectly

Hong Kong CopperFoil Limited(formerly known asJamplan (China)Group Limited)

British Virgin Islands7 August 1992

British Virgin Islands

Ordinary sharecapitalUS$15,000,000

100% — Investmentholding

Capital Project GroupLtd. (‘‘CPG’’)

British Virgin Islands8 February 1996See note 1 below

Ordinary sharecapitalUS$50,000

— 100% See note 1below

Fogang KingboardIndustry Ltd.(‘‘FKI’’)(see note 2 below)

People’s Republicof China (‘‘PRC’’)

13 July 1993PRC

ContributedcapitalRMB166,737,626

— 100% Manufactureand sale ofcopper foil

Notes:−

(1) CPG is incorporated in the British Virgin Islands to facilitate the transfer of copper foil among related facilities for furtherconversion into finished goods in the PRC.

(2) The registered capital of FKI is RMB248,917,000. The amount was fully contributed subsequent to 31 March 1999 andan official verification report to that effect was issued on 28 June 1999.

The financial information set out in this report is expressed in Hong Kong dollars. The ProformaStatement of Group Results for each of the financial years ended 31 March 1995 to 1999, theProforma Statement of Group Balance Sheets at 31 March of each year and the ProformaStatement of Net Assets as at 31 March 1999 have been prepared on the assumption that thecurrent group structure of the KBCF Group as outlined above had been in existence throughout theperiod under review, or since the dates of incorporation or registration of the companies, if later. Thefinancial information is based on the audited consolidated financial statements of HKCF(BVI) for theperiod from 7 August 1992 (date of incorporation) to 31 March 1998 and for the financial year ended31 March 1999 and has been prepared on the basis of accounting policies set out in Section G aftermaking such adjustments which we considered necessary.

All material inter-company transactions and balances within the KBCF Group have been eliminatedin the preparation of the Proforma Statement of Group Results, the Proforma Statement of GroupBalance Sheets and the Proforma Statement of Net Assets.

The audited consolidated financial statements of HKCF(BVI) for the period from 7 August 1992 (dateof incorporation) to 31 March 1998 and for the financial year ended 31 March 1999 incorporated thefinancial statements of HKCF(BVI) and its subsidiaries, namely, CPG and FKI (hereinaftercollectively referred to as the ‘‘HKCF Group’’).

There were no audit qualifications made to the audited financial statements of the companies withinthe KBCF Group in the last five financial years ended 31 March 1999.

The financial year of FKI covers a twelve months period from 1 January to 31 December. For thepurpose of preparing the consolidated financial statements of HKCF(BVI), the managementaccounts of FKI from 1 April to 31 March were used. Other than the above, as at 31 March 1999,the financial year end of all the subsidiaries within the KBCF Group is co-terminous.

58

We have acted as auditor of the Company since the date of incorporation on 10 September 1999.

Our member firm, Deloitte Touche Tohmatsu Hong Kong, has acted as auditor of HKCF(BVI) sinceits date of incorporation. The first set of audited financial statements of HKCF(BVI) covered theperiod from 7 August 1992 (date of incorporation) to 31 March 1998. We have undertaken anindependent audit of the management accounts of each member of the HKCF Group for each of thefinancial years ended 31 March 1995 to 1998, and are satisfied that the management accounts areappropriate and proper for inclusion in the Proforma Statement of Group Results and the ProformaStatement of Group Balance Sheets.

The financial statements of FKI from its date of establishment to 31 December 1995 were notaudited. The statutory financial statements of FKI for the financial years ended 31 December 1996and 1998 were audited by Fogang Certified Public Accountants, Certified Public Accountants in thePRC and for the financial year ended 31 December 1997 by Certified PublicAccountants in the PRC. There is no statutory audit requirement for CPG. For the purpose ofpreparing the audited consolidated financial statements of HKCF(BVI), we have undertaken anindependent audit of the management accounts of FKI and CPG for each of the relevant financialyears to 31 March.

C. PROFORMA STATEMENT OF GROUP RESULTS

The Proforma Statement of Group Results for each of the five financial years up to 31 March 1999prepared on the basis set out in paragraph B above, after making such adjustments as weconsidered appropriate, are as follows:−

———————————— Proforma ————————————

————————— Year ended 31 March —————————

Notes 1995 1996 1997 1998 1999

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Turnover 1 — 41,942 113,498 158,679 174,544

(Loss) Profit before taxation 2 (3,258) 2,772 32,864 44,332 50,093

Taxation 3 — — (66) (1,711) (7,068)

(Loss) Profit attributable tothe Proforma Group (3,258) 2,772 32,798 42,621 43,025

Notes:–

1. Turnover

Turnover represents the amounts received and receivable from sale of manufactured goods.

59

C. PROFORMA STATEMENT OF GROUP RESULTS (continued)

Notes:− (continued)

2. (Loss) Profit before taxation

(Loss) Profit before taxation has been arrived at after charging (crediting):−

———————————— Proforma ————————————

————————— Year ended 31 March —————————

1995 1996 1997 1998 1999

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000Interest expense to non-related

parties:

— bank borrowings 29 152 880 517 1,485

— finance leases and hirepurchase contracts 361 265 44 35 11

— guaranteed convertibleand exchangeablenotes — — — — 2,268

390 417 924 552 3,764

Amortisation of the issue costsof the guaranteed convertibleand exchangeable notes — — — — 252

390 417 924 552 4,016

Less: Interest capitalised — — — — (545)

390 417 924 552 3,471

Auditors’ remuneration(see note below) 111 66 238 216 207

Non audit fees paid to auditors — — 120 20 122

Depreciation of property, plantand equipment:

— owned assets — 4,025 7,431 8,415 10,943

— assets held under financeleases and hirepurchase contracts — 686 86 86 —

Directors’ remuneration:

— fees — — — — —

— other emoluments 1,160 1,745 1,764 2,787 1,700

Loss on disposal of property,plant and equipment — — — 196 424

Foreign exchange gain (1,479) (148) (2,588) (133) (2,221)

Interest income from non-relatedparties (14) (8) (190) (94) (57)

Note:−

Auditors’ remuneration for the financial year ended 31 March 1996 amounting to HK$60,000 was borne by a relatedparty.

60

C. PROFORMA STATEMENT OF GROUP RESULTS (continued)

Notes:− (continued)

3. Taxation———————————— Proforma ————————————

————————— Year ended 31 March —————————

1995 1996 1997 1998 1999

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

PRC income tax — — 66 1,711 7,068

FKI, the major operating company within the KBCF Group, is a foreign investment enterpriseestablished in the PRC. Under the applicable tax regulations, FKI is exempt from state incometax in the PRC in the first and second years in which it generates profit, and is granted a 50%reduction in state income tax payable in the third, fourth and fifth years. When the tax reductionperiod expires, the effective tax rate of FKI will be 24%.

FKI has successfully applied to the relevant tax authorities in the PRC for the two-year taxholiday and the three-year tax reduction period to be granted to each of its two distinct phasesof production. Consequently, in respect of the first completed phase of production, FKI wasexempt from state income tax in respect of the profits earned in 1996 and 1997 and is currentlyenjoying a 50% reduction in state income tax liability for the three years up to 31 December2000. In respect of the profits derived from the second phase of production, FKI is exempt fromstate income tax for the years 1999 and 2000 and will enjoy a 50% reduction in state income taxliability for the three years up to 31 December 2003.

4. Related party transactions

Significant related party transactions are as follows:−

———————————— Proforma ————————————

————————— Year ended 31 March —————————

1995 1996 1997 1998 1999

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Sales of goods to related parties — 41,942 113,498 158,679 173,897

Purchases of goods from relatedparties — — 623 1,106 —

Recharge of finance costs byrelated parties — — — 156 —

61

D. PROFORMA STATEMENT OF GROUP BALANCE SHEETS

The Proforma Group Balance Sheets for each of the five financial years ended 31 March 1999 whichhave been prepared on the basis set out in paragraph B above, after making such adjustments aswe considered appropriate, are as follows:−

———————————— Proforma ————————————

——————————− As at 31 March −——————————

1995 1996 1997 1998 1999

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Property, plant and equipment 66,917 86,258 97,402 107,569 284,620

Current assets 9,385 15,652 61,123 100,099 242,070

Less: Current liabilities (10,046) (15,174) (39,577) (21,242) (133,419)

Net current (liabilities) assets (661) 478 21,546 78,857 108,651

Non-current liabilities:

Advances from related parties (66,902) (91,734) (108,957) (136,985) (140,000)

Obligations under finance leasesand hire purchase contracts (4,822) (493) (224) — —

Guaranteed convertible andexchangeable notes — — — — (107,940)

Total non-current liabilities (71,724) (92,227) (109,181) (136,985) (247,940)

(5,468) (5,491) 9,767 49,441 145,331

Represented by:

Shareholders’ funds — (deficiency)surplus (5,468) (5,491) 9,767 49,441 145,331

The movements in the proforma shareholders’ equity of the KBCF Group for each of the fivefinancial years are as follows:−

———————————— Proforma ————————————

————————— Year ended 31 March —————————

1995 1996 1997 1998 1999

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Balance brought forward (848) (5,468) (5,491) 9,767 49,441

Add (deduct):

Issue of shares — — — — 117,000

(Loss) Profit attributable to theProforma Group (3,258) 2,772 32,798 42,621 43,025

Dividends — — (15,000) (5,000) (70,000)

Proforma adjustments(see note below) (1,362) (2,795) (2,540) 2,053 5,865

Balance carried forward (5,468) (5,491) 9,767 49,441 145,331

Note:-

See Statement of Adjustments.

62

E. STATEMENT OF ADJUSTMENTS

————————— Year ended 31 March —————————

1995 1996 1997 1998 1999

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(Loss) Profit before taxation per

aggregation of financialstatements of the KBCF Group (4,620) (23) 30,324 46,385 56,983

Proforma adjustments(see note 1 below):

Reversal of net interest expense(income) charged by (to) relatedparties 2,522 4,540 4,304 1,149 (6,188)

Reversal of management fees — — — — 1,200

Directors’ remuneration (1,160) (1,745) (1,764) (2,787) (1,700)

Staff costs — — — (415) (202)

(Loss) Profit before taxation perProforma Statement of GroupResults (3,258) 2,772 32,864 44,332 50,093

Taxation per aggregation of financialstatements of the KBCF Group — — 4,928 6,849 (1,907)

Adjustment to reflect reversal ofoverprovision in the appropriateaccounting year (see note 2below) — — (4,862) (5,138) 10,000

Proforma adjustment:

Effect of reversal of interestincome from a related party — — — — (1,025)

Taxation per Proforma Statement ofGroup Results — — 66 1,711 7,068

Notes:–

(1) During the periods under review, interest were charged by or to related parties of the KBCF Group on intercompanybalances. Salary costs, including those of directors, paid on behalf of the KBCF Group were sometimes, but notnecessarily all the time, recharged by related parties as management fees. As the KBCF Group will bear its ownexpenses and no interest and management fees will be charged by related parties in future, proforma adjustments havetherefore been made.

(2) In the year ended 31 March 1999, tax provisions totalling HK$10,000,000 which were made in prior years as a prudentmeasure in respect of certain of the KBCF Group’s activities were reversed. Adjustments have therefore been made inthe appropriate accounting year to reflect the effect of the reversal.

63

F. PROFORMA STATEMENT OF NET ASSETS

The Proforma Statement of Net Assets of the KBCF Group and the Company as at 31 March 1999is set out below:–

Notes Group Company

HK$’000 HK$’000ASSETS

Current assets:

Inventories 3 23,004 —

Trade receivables 4 160,921 —

Other receivables and prepaid expenses 5 2,973 —

Bank balances and cash 55,172 —

Total current assets 242,070 —

Property, plant and equipment 6 284,620 —

Subsidiaries 7 — 145,331

Total 526,690 145,331

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Trade payables 8 8,362 —

Other payables and accrued charges 9 3,666 —

Income tax payable 9,692 —

Proposed dividend 70,000 —

Bank borrowings 10 41,699 —

Total current liabilities 133,419 —

Non-current liabilities:

Loans from related parties 11 140,000 —

Guaranteed convertible and exchangeable notes 12 107,940 —

Total non-current liabilities 247,940 —

Shareholders’ equity 145,331 145,331

Total 526,690 145,331

64

G. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies which have been adopted in arriving at the financial information set out inthis report and which conform with accounting principles generally accepted in Singapore are asfollows:−

Accounting Convention — The financial statements expressed in Hong Kong dollars are preparedunder the historical cost convention.

Basis of Consolidation — The Proforma Statement of Group Results and the Proforma Statementof Group Balance Sheets incorporate the financial statements of the companies comprising theKBCF Group made up to the respective year ends and have been prepared on the assumption thatthe current group structure had been in existence throughout the periods under review.

All significant intercompany transactions and balances within the KBCF Group are eliminated onconsolidation.

Subsidiaries — A subsidiary is an enterprise in which the Company, directly or indirectly, holds morethan half of the issued share capital, or controls more than half of the voting power, or where theCompany controls the composition of its board of directors or equivalent governing body.

Investment in subsidiaries is stated in the Company’s balance sheet at cost less provision, ifnecessary, for impairment in value. Dividends from subsidiaries are recognised by the Companywhen the Company’s right to receive payments has been established.

Property, Plant and Equipment — Property, plant and equipment are stated at cost less depreciation.The cost of an asset comprises its purchase price and any directly attributable costs of bringing theasset to its working condition and location for its intended use. Expenditure for additions,improvements and renewals is capitalised while expenditure for maintenance and repairs is chargedto the profit and loss account in the period in which it is incurred. The gain or loss arising from thedisposal or retirement of an asset is determined as the difference between the sale proceeds andthe carrying amount of the asset and is recognised in the profit and loss account.

The cost of properties in the PRC is amortised on a straight line basis over the period for which therelevant land use rights have been granted to the KBCF Group.

Assets under construction are stated at cost. No depreciation is provided until the construction iscompleted and the assets are put into use.

Depreciation is provided to write off the cost of other assets, less residual value, if appropriate, overtheir estimated useful lives, using the straight line method at the following rates per annum:−

Plant and machinery 10−20%

All other assets 20%

Inventories — Inventories are stated at the lower of cost and net realisable value. Cost, whichcomprises all costs of purchase and, where applicable, cost of conversion and other costs that havebeen incurred in bringing the inventories to their present location and condition, is calculated usingthe weighted average method. Net realisable value is calculated by reference to actual oranticipated selling price in the ordinary course of business less estimated future costs to be incurredto complete production and to make the sale.

Guaranteed Convertible and Exchangeable Notes — Guaranteed convertible and exchangeablenotes are separately disclosed and regarded as liabilities unless conversion actually occurs. Thefinance cost recognised in the profit and loss account in respect of the notes is calculated so as toproduce a constant periodic rate of charge on the balance of the notes for each accounting period.

65

G. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The costs incurred in connection with the issue of guaranteed convertible and exchangeable notesare deferred and amortised on a straight line basis over the lives of the notes from the date of issueof the notes to their final redemption date.

Recognition of Revenue — Income from the sale of goods is recognised when the goods aredelivered and title has passed.

Interest income is accrued on a time basis by reference to the principal outstanding and theapplicable rate of interest.

Taxation — The charge for taxation is based on the results for the year after adjusting for itemswhich are non-assessable or disallowed. Certain items of income and expenses are recognised fortax purposes in a different accounting period from that in which they are recognised in the financialstatements. The tax effect of the resulting timing differences, computed under the liability method,is recognised as deferred taxation in the financial statements to the extent that it is probable that aliability or asset will crystallise in the foreseeable future.

Capitalisation of Borrowing Costs — Borrowing costs directly attributable to the acquisition,construction or production of qualifying assets, namely assets that necessarily take a substantialperiod of time to get ready for their intended use or sale, are capitalised as part of the cost of theseassets. Capitalisation of borrowing costs ceases when the assets are substantially ready for theirintended use or sale. Any investment income earned on the temporary investment of specificborrowings pending their expenditure on qualifying assets is deducted from the borrowing costscapitalised.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

Foreign Currencies — Transactions in currencies other than Hong Kong dollars are translated at theapproximate rates ruling on the dates of the transactions. Monetary assets and liabilitiesdenominated in currencies other than Hong Kong dollars are re-translated at the rates ruling on thebalance sheet date. Profits and losses arising on exchange are dealt with in the profit and lossaccount.

In preparing consolidated financial statements, the financial statements of operations which are notdenominated in Hong Kong dollars are translated using the closing rate method. Exchangedifferences arising on consolidation are dealt with in the translation reserve.

66

H. NOTES TO THE PROFORMA STATEMENT OF GROUP NET ASSETS AS AT 31 MARCH 1999

1. General

The Company is incorporated in Bermuda. The principal activity of the Company is that ofinvestment holding.

2. Holding Company and Related Party Transactions

The Company is a subsidiary of KCHL which is also the Company’s ultimate holding company.The shares of KCHL are listed on The Stock Exchange of Hong Kong Limited. Related partiesin this report refer to companies in the Kingboard Group other than those in the KBCF Group.

Many of the KBCF Group’s transactions and arrangements are with related parties and theeffect of these on the basis determined between the parties are reflected in this report. Thebalances with related parties are without fixed repayment terms and interest unless statedotherwise.

Significant related party transactions during the year are as follows:−

Group Company

HK$’000 HK$’000

Sales of goods to related parties 173,897 —

3. Inventories (at cost)

Group Company

HK$’000 HK$’000

Raw materials 8,056 —

Work in progress 14,948 —

Total 23,004 —

4. Trade Receivables

Group Company

HK$’000 HK$’000

Related parties (note 2) 160,921 —

5. Other Receivables and Prepaid Expenses

Group Company

HK$’000 HK$’000

Prepayments 2,739 —

Others 234 —

Total 2,973 —

67

H. NOTES TO THE PROFORMA STATEMENT OF GROUP NET ASSETS AS AT 31 MARCH 1999(continued)

6. Property, Plant and Equipment

PropertiesPlant andmachinery

Furnitureand

fixturesMotor

vehicles

Assetsunder

construction Total

Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Cost:

At beginning ofyear 37,485 79,029 1,567 2,972 7,229 128,282

Additions 4,696 4,944 116 416 178,665 188,837

Reclassifications 15,870 96,937 (1,094) — (111,713) —

Disposals (303) (319) (126) (522) — (1,270)

At end of year 57,748 180,591 463 2,866 74,181 315,849

Accumulated depreciation:

At beginning ofyear 1,716 17,276 233 1,488 — 20,713

Depreciation for theyear 834 9,474 100 535 — 10,943

Eliminated ondisposal (20) (4) (80) (323) — (427)

At end of year 2,530 26,746 253 1,700 — 31,229

Net book value:

At beginning ofyear 35,769 61,753 1,334 1,484 7,229 107,569

At end of year 55,218 153,845 210 1,166 74,181 284,620

Depreciation for 1998 671 7,162 94 574 — 8,501

Group

HK$’000The net book value of properties comprises:−

Land and buildings in the PRC with land use rights of 20 to 50 yearsgranted to the KBCF Group 49,218

Other land and buildings in the PRC with terms longer than 50 years 6,000

55,218

Assets under construction included interest capitalised of HK$545,000.

68

H. NOTES TO THE PROFORMA STATEMENT OF GROUP NET ASSETS AS AT 31 MARCH 1999(continued)

7. Subsidiaries

Company

HK$’000

Unquoted equity shares, at cost 145,331

Details of the subsidiaries are as follows:−

Name of subsidiary

Place anddate of

incorporation/operation

Effectiveequity

interest heldby the Group

Principalactivities

Cost ofinvestment

Directly Indirectly HK$’000

Hong Kong CopperFoil Limited(formerly known asJamplan (China)Group Limited)

British Virgin Islands7 August 1992

British Virgin Islands

100% — Investmentholding

145,331

Capital Project GroupLtd.

British Virgin Islands8 February 1996See note below

— 100% See notebelow

—

Fogang KingboardIndustry Ltd.

PRC13 July 1993

PRC

— 100% Manufactureof copperfoil

—

145,331

Note:−

CPG is incorporated in the British Virgin Islands to facilitate the transfer of copper foil among related facilities for furtherconversion into finished goods in the PRC.

8. Trade Payables

Group Company

HK$’000 HK$’000

Outside parties 8,362 —

9. Other Payables and Accrued Charges

Group Company

HK$’000 HK$’000

Outside parties 3,666 —

69

H. NOTES TO THE PROFORMA STATEMENT OF GROUP NET ASSETS AS AT 31 MARCH 1999(continued)

10. Bank Borrowings

Group Company

HK$’000 HK$’000

Trust receipt loans 41,699 —

The bank borrowings are unsecured and bear interest at market rates.

The bank facilities are guaranteed by the Kingboard Group .

11. Loans from Related Parties

Group Company

HK$’000 HK$’000

Loans from related parties (note 2) 140,000 —

The loans are unsecured and interest free.

12. Guaranteed Convertible and Exchangeable Notes

Group Company

HK$’000 HK$’000Principal amount of the notes issued during the

year 108,444 —

Accrued interest 2,268 —

110,712 —

Issue costs:

Amount incurred (3,024) —

Amount amortised during the year 252 —

(2,772) —

Balance at end of year 107,940 —

On 3 April 1998, HKCF(BVI) and KCHL entered into a subscription agreement with severalindependent third parties pursuant to which HKCF(BVI) issued to the subscribers guaranteedconvertible and exchangeable notes in the aggregate principal amount of US$14 million(equivalent to HK$108,444,000) in denomination of US$100,000 each. An interest of 4% perannum will be payable semi-annually in arrears on the principal amount of the notesoutstanding subject to a grace period from the date of completion of the transaction to 30 June1999 (both dates inclusive). During such grace period, there will be neither payment noraccrual of interest.

70

H. NOTES TO THE PROFORMA STATEMENT OF GROUP NET ASSETS AS AT 31 MARCH 1999(continued)

12. Guaranteed Convertible and Exchangeable Notes (continued)

KCHL intends to spin-off HKCF(BVI) within six years on an approved stock exchange. Each ofthe notes carries with it a right of conversion into shares of HKCF(BVI) or its holding companywhich may be set up for the purpose of an initial public offering. If the initial public offering doesnot take place within three years, the Noteholders have the option within the succeeding threeyears to exchange half of the consideration, after adjusting for interest in accordance with theagreement, at a price equal to 95% of the average of the closing prices of KCHL’s sharesquoted on The Stock Exchange of Hong Kong Limited on the 30 trading days immediatelypreceding the date of the exchange, and to receive the other half in cash. If the initial publicoffering does not take place within six years, there will be automatic exchange and redemptionunder the same terms. The obligations of HKCF(BVI) under the notes are guaranteed byKCHL.

13. Contingent Liabilities

GROUP

HK$’000Maximum liabilities in respect of:−

Cross guarantees to financial institutions to secure creditfacilities for related parties 254,000

Corporate guarantees to financial institutions to secure creditfacilities granted to related parties 200,000

Total 454,000

At 31 March 1999, the extent of credit facilities utilised by related parties amounted toapproximately HK$246,967,000.

14. Commitments

As at 31 March 1999, the Group had the following commitments:−

(a) Capital expenditure contracted for but not provided in this report in respect of acquisitionof property, plant and machinery amounting to HK$13,375,000;

(b) Capital expenditure contracted for on behalf of a related party but not provided in thisreport amounting to HK$3,009,000; and

(c) Copper future contracts for the purchase of 3,500 tonnes of copper at prices rangingfrom approximately HK$11,860 (equivalent to US$1,530) to approximately HK$12,750(equivalent to US$1,645) per tonne.

15. Segment Information

The operations of the KBCF Group are in the manufacturing and sale of copper foil in the PRCand most of the assets of the KBCF Group are deployed in these operations. Accordingly, theincome and profits of the KBCF Group are derived substantially from this industry segment.

71

H. NOTES TO THE PROFORMA STATEMENT OF GROUP NET ASSETS AS AT 31 MARCH 1999(continued)

16. Subsequent Events

Pursuant to written resolutions of the shareholders of the Company dated 3 December 1999,the shareholders of the Company approved, inter alia, the following:−

(a) the sub-division of each of the ordinary shares of US$1.00 each in the capital of theCompany into 10 ordinary shares of US$0.10 each in the capital of the Company;

(b) an increase in the authorised share capital of the Company from US$12,000 divided into120,000 ordinary shares of US$0.10 each to US$200,000,000 divided into 2,000,000,000ordinary shares of US$0.10 each by the creation of 1,999,880,000 ordinary shares ofUS$0.10 each;

(c) the Restructuring Exercise;

(d) the adoption of a new set of Bye-Laws of the Company; and

(e) the issue of 170,000,000 new ordinary shares of US$0.10 each in the capital of theCompany which, together with the 45,000,000 Vendor Shares, are the subject of theInvitation.

A resolution was also passed by the shareholders authorising the directors of the Company toissue further shares from time to time, provided the aggregate number of shares of theCompany issued pursuant to such authority shall not exceed the maximum limit permittedunder the relevant laws of Singapore and Bermuda (including the rules of the SingaporeExchange Securities Trading Limited) prevailing at that time.

I. NET TANGIBLE ASSETS BACKING

The net tangible assets backing of the KBCF Group for each ordinary share of US$0.10 is based onthe net tangible assets of the KBCF Group as at 31 March 1999 and after taking into account thefollowing:−

Net Tangible Assets

HK$’000

Net tangible assets as at 31 March 1999 145,331

Capitalisation of loans from the Kingboard Group amounting toHK$140,000,000 (equivalent to US$18,064,516) 140,000

Capitalisation of loans from the Noteholders amounting toHK$108,444,000 (equivalent to US$13,992,774) 108,444

Net tangible assets before the Invitation 393,775

Proceeds from the issue of New Shares at S$0.53 per share which is thesubject of the Invitation 413,370

Less: Estimated issue expenses (18,352)

Adjusted net tangible assets 788,793

72

I. NET TANGIBLE ASSETS BACKING (continued)

Issued Share Capital

Number of shares

At incorporation —

Issue of ordinary shares of US$1.00 each, nil-paid 12,000

12,000

Sub-division of 1 ordinary share of US$1.00 each to 10 ordinary shares ofUS$0.10 each 120,000

New Shares issued pursuant to the Restructuring Exercise 499,880,000

Pre-flotation ordinary shares of US$0.10 each 500,000,000

New Shares which are the subject of the Invitation 170,000,000

Post-invitation ordinary shares of US$0.10 each 670,000,000

Net Tangible Assets Backing Per Issue and Fully Paid Share ofUS$0.10 each

Pre-flotation 78.76 HK cents

Post-flotation 117.73 HK cents

J. DIVIDENDS

The Company has not paid or proposed any dividend since incorporation. However, during theperiods under review, the following companies in the KBCF Group had declared dividends to theirthen shareholders:−

1995 1996 1997 1998 1999

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Hong Kong Copper Foil Limited — — 15,000 5,000 70,000

Capital Project Group Ltd. — — 16,000 11,000 60,000

Fogang Kingboard Industry Ltd.(see note below) — — — — 16,822

— — 31,000 16,000 146,822

Less: Elimination of intra-groupdividend — — (16,000) (11,000) (76,822)

Total — — 15,000 5,000 70,000

Note:−

The dividend declared in the financial year ended 31 March 1999 is equivalent to RMB18,000,000.

73

K. AUDITED FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company or any of its subsidiaries inrespect of any period subsequent to 31 March 1999.

Yours faithfully

Deloitte & ToucheCertified Public AccountantsSingapore

Chaly Mah Chee KheongPartner-in-charge

74

GENERAL AND STATUTORY INFORMATION

INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS

1. The names, ages, addresses and current occupations of the Directors of the Company andExecutive Officers of the KBCF Group are set out on page 44 of this Prospectus.

2. Information on the business and working experience of the Directors is set out below:−

Dr Chan Wing Kwan is an Executive Director and Executive Chairman of the KBCF Group. He isalso the managing director and co-founder of the Kingboard Group. Dr Chan has over 22 years’experience in the sale and distribution of electronic components, as well as upstream products suchas PCBs, laminates and copper foil. Dr Chan is responsible for the overall implementation of thestrategic plans and goals of the KBCF Group and supervises the management in the day to dayoperations of the KBCF Group.

Mr Chang Wing Yiu, an Executive Director and the Managing Director of the KBCF Group, joinedthe Kingboard Group in 1989. He has over 10 years’ experience in laminates and copper foilproduction. Mr Chang is responsible for the day-to-day management and operations of the KBCFGroup (including the purchasing function, market development and all technical aspects of productdevelopment).

Mr Cheung Kwok Wing is an Executive Director in the KBCF Group. He is also the group chairmanand co-founder of the Kingboard Group and has over 20 years’ experience in the production andsales of laminates for use by manufacturers of PCBs and electronic products. Mr Cheung isresponsible for the overall strategic planning of the KBCF Group and sets the general direction andgoals for the KBCF Group. He was awarded the Young Industrialist Award of Hong Kong 1993 by theFederation of Hong Kong Industries.

Mr Ho Yin Sang, an Executive Director and Factory Manager of FKI, joined the Kingboard Group in1989. He has over 10 years’ experience in copper foil production. He became the General Managerof HKCF(BVI) in 1995 and is in charge of overall operations and enterprise management in the KBCFGroup.

Mr Zhang Guanghui, an Executive Director, joined the Kingboard Group in 1989 and has over10 years’ experience in laminates and copper foil production. He was involved in the establishmentof the KBCF Group and is currently the General Manager of Kingboard Group Long Hua factory. MrZhang assists in the strategic planning of the KBCF Group.

Mr Lee Joo Hai was appointed as a non-executive independent Director of the Company on29 November 1999. He is a Certified Public Accountant of Singapore and is a member of the Instituteof Chartered Accountants in England and Wales. He has more than 20 years of experience inaccounting, auditing, taxation and company secretarial work. Mr Lee is currently a partner in a publicaccounting firm.

Mr Teo Kiang Kok was appointed as a non-executive independent Director of the Company on29 November 1999. He is a partner of Shook Lin & Bok, a firm of advocates and solicitors. His mainareas of practice are corporate finance, international finance and securities.

Mr Lai Chung Wing, Robert was appointed as a non-executive independent Director of theCompany on 29 November 1999. He is currently the General Manager (Business Development) ofL&M Group Investments Ltd. He was previously the Managing Director and Chief Executive Officerof Scaunion Holdings Limited (now known as Sen Hong Resources Ltd), an oil and gas companywhich is listed on the SEHK.

75

3. The list of present and past directorships of each Director for the last five years is set out below:−

Name Present Directorships Past Directorships

Chan Wing Kwan Group Companies

KBCF

FKI

Group Companies

Nil

Other Companies

KCHL

Hong Kong Fibre GlassCompany Limited

Jamplan (BVI) Limited

Jamplan Marketing Limited

King Board (Panyu) ChemicalCo., Ltd

Kingboard Investments Limited

Kingboard Laminates Limited

Kingboard Laminates ShenzhenCo., Ltd

Kingboard (Taicang) ChemicalCo. Ltd

Kunshan Yattao Chemical Co.,Ltd

Shanghai Jamplan ChemicalIndustry & Insulated MaterialDevelopment Co., Ltd

Yat Tao Chemical Holdings(H.K.) Limited

Sun Hing Optical ManufacturingLimited

Hallgain Management Limited

Other Companies

Nil

Chang Wing Yiu Group Companies

KBCF

FKI

Group Companies

Nil

Other Companies

KCHL

Hong Kong Fibre GlassCompany Limited

King Board (Panyu) ChemicalCo., Ltd

Kingboard Laminates ShenzhenCo., Ltd

Other Companies

Nil

76

Name Present Directorships Past Directorships

Cheung Kwok Wing Group Companies

KBCF

FKI

Group Companies

Nil

Other Companies

KCHL

Hong Kong Fibre GlassCompany Limited

Jamplan (BVI) Limited

Jamplan Marketing Limited

King Board (Panyu) ChemicalCo., Ltd

Kingboard Investments Limited

Kingboard Laminates Limited

Kingboard Laminates ShenzhenCo., Ltd

Kingboard (Taicang) ChemicalCo. Ltd

Kunshan Yattao Chemical Co.,Ltd

Shanghai Jamplan ChemicalIndustry & Insulated MaterialDevelopment Co., Ltd

Yat Tao Chemical Holdings(H.K.) Limited

Gattopardo Company Limited

Hallgain Management Limited

Other Companies

Victory Group Limited

Ho Yin Sang Group Companies

KBCF

Group Companies

Nil

Other Companies

Nil

Other Companies

Nil

Zhang Guanghui Group Companies

KBCF

Group Companies

Nil

Other Companies

Nil

Other Companies

Nil

Lee Joo Hai Group Companies

KBCF

Group Companies

Nil

Other Companies

IPC Corporation Ltd

Kian Ho Bearings Limited

Lung Kee Metal Holdings Limited

PSL Holdings Limited

Teamsphere Limited

Other Companies

Solid Resources Investment Ltd

77

Name Present Directorships Past Directorships

Teo Kiang Kok(1) Group Companies

KBCF

Group Companies

Nil

Other Companies

Asean Emerging CompaniesGrowth Fund Ltd

Circuit Plus Holdings Ltd

Mayfran International Ltd

Praxair Surface TechnologiesPte Ltd

SLAB Services Private Limited

SM Summit Holdings Limited

The Vittoria Fund Limited

Teamsphere Limited

The Vittoria One Limited

Other Companies

GRP Limited

IPC Corporation Ltd

Malaysian EmergingCompanies Growth Fund Ltd

Solid Resources Investment Ltd

Lai Chung Wing, Robert Group Companies

KBCF

Group Companies

Nil

Other Companies

Nil

Other Companies

Seaunion Holdings Limited

Chancery Saigon Hotel Vietnam

Note:−

(1) Companies in which Mr Teo Kiang Kok was appointed as directors for the purposes of incorporation or as nomineedirectors only and in the course of their professional practive have not been included.

4. Information on the business and working experience of the Executive Officers of the KBCF Group isgiven below:−

Lo Ka Leong, the Accounting Manager, joined the Kingboard Group in May 1999. Prior to that, hewas an accountant at an international accounting firm. He holds a Bachelor in ProfessionalAccountancy from the Chinese University of Hong Kong. He is in charge of the financialmanagement of the KBCF Group.

Chen Xiping joined the KBCF Group in 1997 and was appointed as a Quality Control Manager ofFKI. He is responsible for the quality control processes and systems at the copper foil plant inFogang. Mr Chen graduated from Hubei University in China with a chemical engineering degree.

He Beiyang is a Production Manager and has been with the KBCF Group since 1994. He isspecialised in the technical aspects of copper foil production, and is responsible for ensuring that theKBCF Group’s products meet the specifications required by customers.

Liu Zhigang is a Production Manager of the KBCF Group and is responsible for planning theoperations of the plant and ensuring the stability of the technical processes. Mr Liu was trained at theHarbin Technological University in Applications Chemical and Electrical Engineering.

Liu Min joined the KBCF Group in 1998 and is currently the Plant Manager for Phase I of the copperfoil production. He is overall in charge of the operational functions of the KBCF Group, including theplanning, design and technological development of the production capabilities of the plant. Mr Liuholds an engineering degree from Harbin University and was working in a copper foil plant beforejoining the KBCF Group.

78

Deng Shijun is the Plant Manager for Phase II of the copper foil production of the KBCF Group.He is mainly responsible for the technical and day to day operations of the plant and coordinatesthe different functions of the technical and operations departments. Mr Deng holds an engineeringdegree from Hubei University in China.

Li Weiming is a Quality Control Manager and is responsible for the technical operations of thequality assurance department. He joined the KBCF Group in 1997 after graduating from HubeiUniversity with a degree in chemical engineering.

5. None of the above Executive Officers hold any present or past directorships for the past five years.

6. None of the Directors or Executive Officers are or were involved in any of the following events:−

(a) a petition under any bankruptcy laws filed in any jurisdiction against him or any partnership inwhich he was a partner or any corporation of which he was a director or an executive officer;

(b) a conviction of any offence, other than a traffic offence, or a judgement, including findings inrelation to fraud, misrepresentation or dishonesty, given against him in any civil proceedingsin Singapore or elsewhere, or any proceedings now pending which may lead to a convictionor judgement, or any criminal investigation pending against him; or

(c) the subject of an order, judgment or ruling of any court, tribunal or government bodypermanently or temporarily enjoining him from acting as an investment adviser, dealer insecurities, director or employee of a financial institution and engaging in any type of businesspractice or activity.

7. The aggregate emoluments (including remuneration) paid to the then existing Directors for servicesrendered in all capacities to the Company and its subsidiaries in FY1999 amounted toapproximately HK$1,700,000. The aggregate emoluments payable to the present Directors inFY2000 under the arrangements in force at the date of this Prospectus, including the serviceagreements referred to on page 45 of this Prospectus, is approximately HK$2,974,000.

8. Save as disclosed on page 45 of this Prospectus, there are no existing or proposed servicecontracts between the Directors and the Company or its subsidiaries.

9. Save as disclosed on page 27 of this Prospectus, the Directors and Executive Officers areunrelated by blood or marriage to one another nor are they so related to any substantialshareholder of the Company.

10. No option to subscribe for shares in, or debentures of, the Company or its subsidiaries has beengranted to, or was exercised by, any Director or Executive Officer within the last financial year.

11. Save for the C-Notes held by the Noteholders, no person has been, or is entitled to be, given anoption to subscribe for any shares in or debentures of the Company or its subsidiaries.

12. Save as disclosed on page 42 of this Prospectus, no Director or expert is interested, directly orindirectly, in the promotion of, or in any assets acquired or disposed of by, or leased to, theCompany or its subsidiaries within two years preceding the date of this Prospectus, or in anyproposal for such acquisition or disposal or lease as aforesaid.

13. Save as disclosed on page 41 of this Prospectus, no Director has any interest in any existingcontract or arrangement that is significant in relation to the business of the KBCF Group taken asa whole.

14. No Director, substantial shareholder or Executive Officer has any interest, direct or indirect, in anybusiness carrying on a similar trade as the Company or its subsidiaries.

79

15. There is no shareholding qualification for Directors in the Bye-laws of the Company.

16. The interests of the Directors and substantial shareholders in the Shares at the date of thisProspectus and as recorded in the Register of Directors’ Shareholdings and the Register ofSubstantial Shareholders maintained by the Company are as follows:−

Name

Number of Sharesregistered inthe names ofDirectors and

substantial shareholder %

Number of Sharesin which the Directors

and substantialshareholders are deemed

to have an interest %

Directors

Cheung Kwok Wing — — 426,500,000 85.3

Chan Wing Kwan — — — —

Chang Wing Yiu — — — —

Ho Yin Sang — — — —

Zhang Guanghui — — — —

Lee Joo Hai — — — —

Teo Kiang Kok — — — —

Lai Chung Wing, Robert — — — —

Holders of 5% or more

Jamplan (BVI) 426,500,000 85.3 — —

KCHL — — 426,500,000 85.3

HML — — 426,500,000 85.3

Save as disclosed above, no Director has any interest in the Shares, including the InvitationShares, which are the subject of this Invitation.

17. No sum has been paid or has been agreed to be paid to any Director or to any firm in which aDirector is a partner in cash or in shares or otherwise by any person to induce him to become aDirector in connection with the promotion or formation of the Company.

Mr Teo Kiang Kok is a partner of Messrs Shook Lin & Bok, which will be receiving a fee from theCompany for legal services rendered in connection with the Invitation. It is envisaged that the KBCFGroup may continue to engage the services of Shook Lin & Bok as and when the need arises. TheDirectors are of the view that the provision by Shook Lin & Bok of such services will not interferewith Mr Teo Kiang Kok’s exercise of independent judgement in his role as a member of the AuditCommittee.

Messrs John C.R. Collis and Anthony D. Whaley, the Company’s Bermuda resident representativeand deputy representative respectively, are partners of Conyers Dill & Pearman, legal advisers tothe Company on Bermuda law. Conyers Dill & Pearman will receive usual professional fees inconnection with the incorporation of the Company and the Invitation. Mr Ira Stuart Outerbridge III,the secretary of the Company, is an employee of the Codan Services Limited, a company affiliatedwith Conyers Dill & Pearman.

80

SHARE CAPITAL

18. As at the date of this Prospectus, there is only one class of shares in the capital of the Company.The rights and privileges attached to the Shares are stated in the Bye-laws of the Company. Thereare no founder, management or deferred shares.

19. Save as disclosed herein, there were no changes in the issued and paid-up share capital of theCompany or its subsidiaries within the three years preceding the date of this Prospectus.

Date of Issue

Number of SharesIssued/Increase

in RegisteredCapital

Issue Priceper share

Purpose of Issue/Consideration

Resultant IssuedShare Capital/

Registered ShareCapital

The Company

15 September 1999 12,000 US$1.00 Issued nil paid uponestablishment andcredited as fully paidpursuant to theRestructuring Exercise

US$12,000

3 December 1999 499,880,000 US$0.10 Acquisition of theKBCF Group pursuantto the RestructuringExercise

US$50,000,000

HKCF(BVI)

20 April 1998 14,999,999 US$1.00 Working capital US$15,000,000

3 December 1999 32,057,290 US$1.00 Capitalisation of loansfrom the KingboardGroup and issue ofShares to Noteholders

US$47,057,290

FKI

7 October 1997 RMB 98.917 million — Working capital RMB248.917 million

20. Save as disclosed in this Prospectus, no shares or debentures were issued or were agreed to beissued by the Company or its subsidiaries for cash or for a consideration other than cash during thelast three years preceding the date of this Prospectus.

BYE-LAWS

21. The provisions in the Bye-laws relating to the Directors’ remuneration, voting rights on proposalsand contracts in which the Directors are interested, borrowing powers of the Directors, voting rightsof the Members, consents necessary for the variation of class rights and restrictions ontransferability of shares are set out in Appendix II.

BANK BORROWINGS AND WORKING CAPITAL

22. Save as disclosed on page 47 of this Prospectus and in the Accountants’ Report, the Company andits subsidiaries had as at 31 March 1999, no other borrowings or indebtedness in the nature ofborrowings including bank overdrafts and liabilities under acceptances (other than normal tradingbills) or acceptances credits, mortgages, charges, hire purchase commitments, guarantees or othermaterial contingent liabilities.

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23. In the opinion of the Directors and for purposes of Section 28 of the Bermuda Act, there are nominimum amounts which must be raised by the issue of the New Shares in order to provide for thefollowing items:−

(a) The purchase price of any assets or properties purchased or to be purchased which is to bedefrayed in whole or in part out of the proceeds of the issue;

(b) Estimated preliminary and issue expenses (including underwriting commission) for thisInvitation payable by the Company;

(c) The repayment of any money borrowed by the KBCF Group in respect of any of the foregoingmatters; and

(d) Working capital.

24. The Directors are of the opinion that, after taking into account the present banking facilities, theKBCF Group has adequate working capital for its present requirements.

MATERIAL CONTRACTS

25. The following contracts not being contracts entered into in the ordinary course of business of theCompany and its subsidiaries (as the case may be) have been entered into by the Company andits subsidiaries (as the case may be) within the two years preceding the date of this Prospectus andare or may be material:−

(a) Subscription Agreement dated 3 April 1998 relating to guaranteed convertible andexchangeable notes made between HKCF(BVI), KCHL and the Noteholders.

(b) Supplies Agreement dated 29 November 1999 made between KCHL and the Companypursuant to which the Company agrees to sell and KCHL agrees to purchase copper foilproduced by the KBCF Group on the terms and conditions set out therein.

(c) Restructuring Agreement dated 3 December 1999 made between the Company, Jamplan(BVI) and the Noteholders pursuant to which the Company acquired the entire issued sharecapital of HKCF(BVI).

(d) The Management and Underwriting Agreement dated 6 December 1999 made between theCompany and DBS Bank referred to in paragraph 27 on page 83 below.

(e) The Placement Agreement dated 6 December 1999 made between HKCF and DBS Bankreferred to in paragraph 27 on page 83 below.

(f) The agreement constituted by the letter referred to on page 84 of this Prospectus.

(g) Depository Agreement dated 3 December 1999 between the Company and CDP pursuant towhich CDP agreed to act as share depository for the Company.

LITIGATION

26. Neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration either asplaintiff or defendant in respect of any claims or amounts which may have or have had during theprevious 12 months a significant effect on the KBCF Group’s financial position. The Directors haveno knowledge of any proceeding, litigation or claim of material importance which are pending orthreatened against the Company or any of its subsidiaries or of any facts likely to give rise to anysuch litigation, arbitration or claim.

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MANAGEMENT AND UNDERWRITING ARRANGEMENTS

27. (a) Pursuant to the Management and Underwriting Agreement dated 6 December 1999, theCompany appointed DBS Bank to manage the Invitation and the Underwriter to underwrite theOffer Shares. The Underwriter has also appointed the Co-Underwriters to co-underwrite theOffer Shares.

DBS Bank will receive a management fee from the Company and the Vendors in proportionin which the number of Invitation Shares offered by each of them pursuant to the Invitationbears to the total number of Invitation Shares, for its services rendered in connection to theInvitation.

(b) Pursuant to the Management and Underwriting Agreement, the Underwriter agreed tounderwrite the Offer Shares for a commission of 1.5% of the Issue Price for each Offer Share,payable by the Company and the Vendors in the proportion in which the number of InvitationShares offered by each of them pursuant to the Invitation bears to the total number ofInvitation Shares, for its services rendered in connection to the Invitation.

(c) Pursuant to the placement agreement (‘‘Placement Agreement’’) dated 6 December 1999, thePlacement Agent agreed to subscribe or procure subscriptions for the Placement Shares fora placement commission of 1.5% of the Issue Price for each Placement Share, payable by theCompany and the Vendors in proportion in which the number of Invitation Shares offered byeach of them pursuant to the Invitation bears to the total number of Invitation Shares, for itsservices rendered in connection to the Invitation. The Placement Agent has also appointed theCo-Placement Agents as co-placement agents for the Placement Shares.

(d) Brokerage will be paid by the Company to the member companies of the SESTL, merchantbanks and members of the Association of Banks in Singapore in respect of acceptedapplications made on Application Forms bearing their respective stamps, or to ParticipatingBanks in respect of successful applications made through Electronic Applications at the ATMsof the relevant Participating Banks, at the rate of 1.0% of the Offer Price for each Offer Shareand at a rate of 1.0% of the Placement Price of each Placement Share.

(e) Save as aforesaid, no commission, discount or brokerage, has been paid or other specialterms granted within the two years preceding the date of this Prospectus or is payable to anyDirector, promoter, expert, proposed Director or any other person for subscribing or agreeingto subscribe or procuring or agreeing to procure subscriptions for any shares in or debenturesof the Company.

(f) The Management and Underwriting Agreement may be terminated by the Underwriter at anytime on or before the closing of the Application List on the occurrence of certain eventsincluding, inter alia, changes in political, financial or economic conditions in Singapore orabroad which result, inter alia, in the Singapore stock market being materially and adverselyaffected.

(g) The Placement Agreement is conditional upon the Management and Underwriting Agreementnot having been terminated or rescinded pursuant to the provisions of the Management andUnderwriting Agreement.

MISCELLANEOUS

28. The nature of the business of the Company is stated on pages 31 and 32 of this Prospectus. At thedate of this Prospectus, all the corporations listed below are, by virtue of Section 6 of theCompanies Act (Chapter 50), deemed to be related to the Company:−

Holding company of the Company

Jamplan (BVI)

Ultimate holding company of the Company

KCHL

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Subsidiaries of the Company

HKCF(BVI)

FKI

CPG

Principal subsidiaries of KCHL

Hong Kong Fibre Glass Company Limited

Jamplan (BVI) Limited

Jamplan Marketing Limited

King Board (Panyu) Chemical Co., Ltd

Kingboard Investments Limited

Kingboard Laminates Limited

Kingboard Laminates Shenzhen Co., Ltd

Kingboard (Taicang) Chemical Co. Ltd

Kunshan Yattao Chemical Co., Ltd

Shanghai Jamplan Chemical Industry & Insulated Material Development Co., Ltd

Yat Tao Chemical Holdings (H.K.) Limited

29. The time of opening of the Application List is set out on page 11 of this Prospectus.

30. The amount payable on application is S$0.53 for each Offer Share and each Placement Share.There has been no previous issue of Shares by the Company or offer for sale of its Shares to thepublic within the two years preceding the date of this Prospectus.

31. Application moneys received by the Company in respect of successful applications (includingsuccessful balloted applications which are subsequently rejected) will be placed in separatenon-interest bearing accounts with DBS Bank (the ‘‘Receiving Bank’’). In the ordinary course ofbusiness, the Receiving Bank will deploy these moneys in the interbank money market. Pursuantto an agreement contained in a letter dated 6 December 1999, the Company and the ReceivingBank have agreed that the Company will receive for its own account an aggregate of a 50% shareof any net revenue in excess of S$50,000 earned by the Receiving Bank from the deployment ofsuch monies in the interbank money market. Any refund of all or part of the application monies tounsuccessful or partially successful applicants will be made without any interest or any share ofsuch revenue or any other benefits.

32. No property has been purchased or acquired or proposed to be purchased or acquired by theCompany or its subsidiaries which is to be paid for wholly or partly out of the proceeds of theInvitation or the purchase or acquisition of which has not been completed at the date of the issueof this Prospectus other than property the contract for the purchase or acquisition whereof wasentered into in the ordinary course of business of the Company or its subsidiaries, the contract notbeing made in contemplation of the Invitation nor the Invitation in consequence of the contract.

33. The estimated amount of the expenses of this issue and of the application for listing, includingunderwriting and placement commission, brokerage, management fee and all other incidentalexpenses in relation to this Invitation is approximately S$4.0 million will be borne by the Companyand the Vendors in the proportion of the number of Invitation Shares to be offered by them in theInvitation. The listing fee and other fees payable to the SESTL for the listing are payable by theCompany.

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34. No amount of cash or securities or benefit has been paid or given to any promoter within the twoyears preceding the date of this Prospectus or is proposed or intended to be paid or given to anypromoter at any time.

35. Save as disclosed in this Prospectus, the Directors are not aware of any relevant materialinformation including trading factors or risks not mentioned elsewhere in this Prospectus which isunlikely to be known or anticipated by the general public and which could materially affect theprofits of the Company and its subsidiaries.

36. Save as disclosed in this Prospectus, the financial condition and operations of the KBCF Group arenot likely to be affected by any of the following:−

(a) known trends or known demands, commitments, events or uncertainties that will result in orare reasonably likely to result in the KBCF Group’s liquidity increasing or decreasing in anymaterial way;

(b) material commitments for capital expenditures;

(c) unusual or infrequent events or transactions or any significant economic changes thatmaterially affected the amount of reported income from operations; and

(d) known trends or uncertainties that have had or that the KBCF Group reasonably expects tohave a material favourable or unfavourable impact on revenues or operating income.

CONSENTS

36. The Auditors and Reporting Accountants have given and have not withdrawn their written consentto the issue of this Prospectus with the inclusion herein of the Accountants’ Report and their lettersin relation to the limited review of the unaudited proforma consolidated profit and loss account forthe six months ended 30 September 1999 and proforma consolidated balance sheet as at 30September 1999 and relating to the profit forecast for the year ending 31 March 2000, in the formand context in which they appear in this Prospectus and references to their name in the form andcontext in which it appears in this Prospectus and to act in such capacity in relation to thisProspectus.

37. The Manager, Underwriter and Placement Agent, the Co-Underwriters, the Co-Placement Agents,the Solicitors to the Invitation, the Solicitors to the Manager, Underwriter and Placement Agent, thelegal advisers to the Company, the Principal Bankers and the Share Registrars have given andhave not withdrawn their consent to the issue of this Prospectus with the inclusion herein of theirnames in the form and context in which they appear in this Prospectus and to act in those capacitiesin relation to this Prospectus.

DOCUMENTS AVAILABLE FOR INSPECTION

38. Copies of the following documents may be inspected at the registered office of the Company andat the offices of Shook Lin & Bok, 1 Robinson Road #18-00, AIA Tower, Singapore 048542 duringnormal business hours for a period of six months from the date of this Prospectus:−

(a) the Memorandum of Association and Bye-laws of the Company;

(b) the Accountants’ Report (including the Statement of Adjustments),

(c) the material contracts referred to on page 82 of this Prospectus;

(d) the letters of consent referred to above;

(e) the audited accounts of the companies within the KBCF Group for the last two financial yearsended 31 March 1998 and 31 March 1999; and

(f) the Companies Act 1981 of Bermuda.

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STATEMENT BY DIRECTORS OF THE COMPANY

39. This Prospectus has been seen and approved by the Directors and they collectively and individuallyaccept full responsibility for the accuracy of the information given in this Prospectus and confirm,having made all reasonable enquiries, that to the best of their knowledge and belief, there are noother facts the omission of which would make any statements herein misleading, and that thisProspectus constitutes full and true disclosure of all material facts about the Invitation and theCompany and its subsidiaries.

STATEMENT BY THE VENDORS

40. This Prospectus has been seen and approved by the Vendors and each of the Vendors accepts fullresponsibility for the accuracy of the information given herein, except that such information shall belimited to the information contained under the headings ‘‘Definitions’’, ‘‘Corporate Information’’,‘‘Purchase by Company of its own shares’’, ‘‘Details of the Invitation’’, ‘‘Prospectus Summary’’,‘‘Risk Factors’’, ‘‘Issue Statistics’’, ‘‘Summary of Proforma Group Financial Information’’, ‘‘ShareCapital’’, ‘‘Shareholders’’, ‘‘Moratorium’’, ‘‘Restructuring Exercise’’, ‘‘Group Structure’’, ‘‘Generaland Statutory Information’’ and information with respect to the name of and the number of theVendor Shares held and to be sold by the Vendors, and confirm, having made all reasonableenquiries, that to the best knowledge and belief of the Vendors, there is no other material facts theomission of which would make any statement herein (for which they are responsible) misleading.

STATEMENT BY DBS BANK

41. DBS Bank acknowledges that, to the best of its knowledge and belief, based on informationfurnished to it by the KBCF Group, this Prospectus constitutes a full and true disclosure of all thematerial facts about the Invitation and the Company and its subsidiaries and it is not aware of anyother facts the omission of which would make any statements herein misleading. It is also satisfiedthat the profit forecast for the financial year ending 31 March 2000 has been stated by the Directorsafter due and careful enquiry.

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TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATIONS

Applications are invited for the subscription and/or purchase of the Invitation Shares at the Issue Pricesubject to the following terms and conditions:−

1. Applications for the Offer Shares may be made by way of the printed Offer Shares Application Formsor by way of Electronic Applications through ATMs of the Participating Banks. Applications forPlacement Shares may only be made by way of printed Placement Shares Application Forms.Applicants may not use their CPF Funds to apply for the Invitation Shares.

2. Only one application may be made for the benefit of one person for either the Offer Sharesor the Placement Shares in his own name. A person submitting an application for the OfferShares by way of a printed Application Form MAY NOT submit a separate application for OfferShares by way of Electronic Application and vice versa. Such separate applications shall bedeemed to be multiple applications and shall be rejected.

A person, other than an approved nominee company, who is submitting an application in hisown name should not submit any other applications for Offer Shares, whether on a printedApplication Form or through an Electronic Application, for any other person. Such separateapplications shall be deemed to be a multiple applications and shall be rejected.

An applicant who has been procured by the Placement Agent to subscribe for and/or topurchase Placement Shares shall not make any separate application for the Offer Shareseither through an Electronic Application or by way of a printed Application Form. Suchseparate applications shall be deemed to be multiple applications and shall be rejected.

Conversely, an applicant who has made an application for the Offer Shares either through anElectronic Application or by way of a printed Application Form shall not make any separateapplication for the Placement Shares. Such separate applications shall be deemed to bemultiple applications and shall be rejected.

Joint or multiple applications will be rejected. Persons submitting or procuring submissionsof multiple share applications (whether for Offer Shares, Placement Shares or both Offer andPlacement Shares) may be deemed to have committed an offence under the Penal Code(Chapter 224) of Singapore and the Securities Industry Act (Chapter 289) of Singapore. Suchapplications may be referred to the relevant authorities for investigation. Multipleapplications or those appearing to be or suspected of being multiple applications will beliable to be rejected at the discretion of the Company.

3. Applications will not be accepted from any person under the age of 21, undischarged bankrupts, soleproprietorships, partnerships, chops or non-corporate bodies, joint Securities Account holders ofCDP and applicants whose addresses (furnished in their printed Application Forms or, in the case ofElectronic Applications, contained in the records of the relevant Participating Banks, as the case maybe) bear post office box numbers.

4. The existence of a trust will not be recognised. Any application by a trustee or trustees must be madein his/her/their own name(s) and without qualification or, where the application is made by way of aprinted Application Form, in the name(s) of a nominee or nominees after complying with paragraph5 below.

5. Only approved nominee companies may make nominee applications. Approved nomineecompanies are defined as banks, merchant banks, finance companies, insurance companies,licensed securities dealers in Singapore and nominee companies controlled by them. Applicationsmade by persons acting as nominees other than approved nominee companies will be rejected.

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6. For non-nominee applications, each applicant must maintain a Securities Account with CDPin his own name at the time of the application. An applicant without an existing SecuritiesAccount with CDP in his own name at the time of application will have his application rejected (inthe case of an application by way of an Application Form) or will not be able to complete hisElectronic Application (in the case of an Electronic Application). An applicant with an existingSecurities Account who fails to provide his Securities Account number or who provides an incorrectSecurities Account number in section B of the Application Form or in his Electronic Application, asthe case may be, is liable to have his application rejected. Subject to paragraph 7 below, anapplication may be rejected if the applicant’s particulars such as his name, NRIC/passport number,nationality and permanent residence status provided in his Application Form or in the records of therelevant Participating Bank at the time of his Electronic Application, as the case may be, differ fromthose particulars in his Securities Account as maintained with CDP. If the applicant possesses morethan one individual direct Securities Account, his application will be rejected.

7. If the address of an applicant stated on the Application Form or, in the case of an ElectronicApplication, contained in the records of the relevant Participating Bank, as the case may be,is different from the address registered with CDP, the applicant must inform CDP of hisupdated address promptly, failing which the notification letter on successful allotmentand/or allocation will be sent to his address last registered with CDP.

8. The Company reserves the right to reject or accept, in whole or in part, or to scale down or ballot,any application without assigning any reason therefor, and no enquiry and/or correspondence onthe decision of the Company will be entertained. This right applies to applications made by way ofprinted Application Forms and by way of Electronic Applications. In deciding the basis of allotment,at the discretion of the Company, due consideration will be given to the desirability of allocating theInvitation Shares to a reasonable number of successful applicants with a view to establishing anadequate market for the Shares.

9. The Company reserves the right to reject any application which does not conform strictly to theinstructions set out in the Application Form and this Prospectus or which does not comply with theinstructions for Electronic Applications or with the terms and conditions of this Prospectus or, in thecase of applications by way of printed Application Forms, which is illegible, incomplete, incorrectlycompleted or which is accompanied by an improperly drawn remittance. The Company furtherreserves the right to treat as valid any applications not completed or submitted or effected in allrespects in accordance instructions set out in this printed Application Forms, the instructions forElectronic Applications or the with the terms and conditions of this Prospectus and also to presentfor payment or other processes all remittances at any time after receipt and to have full access toall information relating to, or deriving from, such remittances or the processing thereof.

10. Share certificates will be registered in the name of CDP and will be forwarded only to CDP. It isexpected that CDP will send to each successful applicant at his own risk, within 15 Market Daysafter the close of the Application List, a statement stating that the applicant’s Securities Account hasbeen credited with the number of Invitation Shares allotted and/or allocated to him. This will be theonly acknowledgement of application moneys received and is not an acknowledgement by theCompany or the Vendors.

11. Each applicant irrevocably authorises CDP to complete and sign on his behalf as transferee orrenouncee any instrument of transfer and/or other documents required for the issue or transfer ofthe Invitation Shares allotted and/or allocated to the applicant. This authorisation applies forapplications made by way of printed Application Forms and by way of Electronic Applications.

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12. By completing and delivering an Application Form and, in the case of an Electronic Application, bypressing the ‘‘Enter’’ or ‘‘OK’’ or ‘‘Confirm’’ or ‘‘Yes’’ key on the ATM in accordance with theprovisions herein, each applicant:−

(a) irrevocably offers to subscribe for and/or purchase the number of Invitation Shares specifiedin his application (or such smaller number for which the application is accepted) at the IssuePrice and agrees that he will accept such Shares as may be allotted and/or allocated to him,in each case on the terms of, and subject to the conditions set out in, this Prospectus and theMemorandum of Association and Bye-laws of the Company; and

(b) warrants the truth and accuracy of the information in his application.

13. Applications must be made in lots of 1,000 Invitation Shares and integral multiples thereof.Applications for any other number of Invitation Shares will be rejected.

14. No Shares will be allotted and/or allocated on the basis of this Prospectus later than six monthsafter the date of this Prospectus.

15. In the event of an under-subscription for the Offer Shares as at the close of the Application List, thatnumber of Offer Shares under-subscribed shall be made available to satisfy applications for thePlacement Shares to the extent there is an over-subscription for the Placement Shares as at theclose of the Application List.

16. In the event of an under-subscription for the Placement Shares as at the close of the ApplicationList, that number of Placement Shares under-subscribed shall be made available to satisfyapplications for the Offer Shares to the extent there is an over-subscription for the Offer Shares asat the close of the Application List.

17. In the event of an over-subscription for the Offer Shares as at the close of the Application List andthe number of Placement Shares are fully subscribed or over-subscribed as at the close of theApplication List, the successful applications for Offer Shares will be determined by ballot, orotherwise as determined by the Directors and approved by SESTL.

18. Acceptance of applications will be conditional upon the Company being satisfied that:−

(a) permission has been granted by the SESTL to deal in, and quotation of, all the existing Sharesand the Invitation Shares on a ‘‘when issued’’ basis on the Official List of the SESTL; and

(b) the Management and Underwriting Agreement and Placement Agreement referred to onpage 83 of this Prospectus have become unconditional and have not been terminated.

19. Each applicant irrevocably authorises CDP to disclose the outcome of his application, including thenumber of Invitation Shares allotted and/or allocated to the applicant pursuant to his application, toauthorised operators.

20. Any reference to the ‘‘applicant’’ in this section shall include a person applying for the Offer Sharesby way of Electronic Application or by way of printed Application Forms and applying for thePlacement Shares through the Placement Agent.

21. Additional terms and conditions for applications by way of printed Application Forms are set out onpages 90 to 92 of this Prospectus.

22. Additional terms and conditions for Electronic Applications are set out on pages 92 to 97 of thisProspectus.

23. No application will be held in reserve.

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ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING PRINTED APPLICATIONFORMS

Applications by way of printed Application Forms shall be made on, and subject to, the terms andconditions of this Prospectus, including but not limited to the terms and conditions appearing below andthose set out under the section on ‘‘Terms and Conditions and Procedures for Application’’ found onpages 87 to 89 of this Prospectus, as well as the Memorandum of Association and Bye-laws of theCompany.

1. Applications for the Offer Shares must be made using the WHITE Application Forms and officialenvelopes ‘‘A’’ and ‘‘B’’ and applications for the Placement Shares must be made using BLUEApplication Forms accompanying and forming part of this Prospectus. Care must be taken to followthe instructions set out in the respective Application Forms and this Prospectus for the completionof the respective Application Forms. Applications which do not conform strictly to these instructionsor to the terms and conditions of this Prospectus or which are illegible, incomplete, incorrectlycompleted or which are accompanied by improperly drawn remittances may be rejected.

2. The Application Forms must be completed in English. Please type or write clearly in ink usingBLOCK LETTERS. All spaces in the Application Form except those under the heading ‘‘FOROFFICIAL USE ONLY’’ must be completed and the words ‘‘NOT APPLICABLE’’ or ‘‘N.A.’’ should bewritten in any space that is not applicable.

3. Individuals, corporations, approved nominee companies and trustees must give their names in full.Applications must be made, in the case of individuals, in their full names as appearing in their identitycards (if applicants have such identification documents) or in their passports and, in the case ofcorporations, in their full names as registered with a competent authority. Applicants, other thanindividuals, completing the Application Form under the hand of an official must state the name andcapacity in which that official signs. A corporation completing the Application Form is required to affixits Common Seal (if any) in accordance with its Memorandum of Association and Bye-laws or theequivalent constitutive documents of the corporation. If an application by a corporate applicant issuccessful, a copy of its Memorandum of Association and Bye-laws or its equivalent constitutivedocuments must be lodged with the Company’s Share Registrar. The Company reserves the right torequire any applicant to produce documentary proof of identification for verification purposes.

4. (a) All applicants must complete Sections A and B and sign page 1 of the Application Form.

(b) All applicants are required to delete either paragraph 7(a) or 7(b) on page 1 of the ApplicationForm. Where paragraph 7(a) is deleted, the applicant must also complete Section C of theApplication Form with particulars of the beneficial owner(s).

(c) Applicants who fail to make the required declaration in Paragraph 7(a) or 7(b) (as the case maybe) on page 1 of the Application Form are liable to have their applications rejected.

5. Applicants may apply for the Invitation Shares using cash only. In the case for an application for OfferShares, each application must be accompanied by a remittance in Singapore currency for the fullamount payable, in respect of the number of Invitation Shares applied for, in the form of a BANKER’SDRAFT, CASHIER’S ORDER or POSB CASHIER’S ORDER drawn on a bank in Singapore, madeout in favour of ‘‘KBCF SHARE ISSUE ACCOUNT’’ crossed ‘‘A/C PAYEE ONLY’’, or in the form ofa DBS AUTOBANK CASHIER’S ORDER EQUIVALENT, with the name and address of the applicantwritten clearly on the reverse side. Applications not accompanied by any payment or accompaniedby any other form of payment will not be accepted. Remittances bearing ‘‘Not Transferable’’ or‘‘Non Transferable’’ crossings will be rejected. No acknowledgement of receipt will be issued by theCompany, the Vendors or the Manager for applications and application moneys received.

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6. Individual applicants and corporate applicants, whether incorporated or unincorporated andwherever incorporated or constituted, will be required to declare whether they are citizens orpermanent residents of Singapore or corporations in which citizens or permanent residents ofSingapore or any body corporate constituted by any statute of Singapore have an interest in theaggregate of more than 50% of the issued share capital of or interests in such corporations.Approved nominee companies are required to declare whether the beneficial owner of the InvitationShares is a citizen or permanent resident of Singapore or a corporation, whether incorporated orunincorporated and wherever incorporated or constituted, in which citizens or permanent residentsof Singapore or any body corporate constituted by any statute of Singapore have an interest in theaggregate of more than 50% of the issued share capital of or interests in such corporation.

7. It is expected that unsuccessful applications and those not successfully balloted or accepted will bereturned to the applicants by ordinary post at the risk of the applicants within three Market Daysafter the close of the Application List without interest or any share of revenue or other benefit arisingtherefrom. Where an application is rejected or accepted in part only, the full amount or the balanceof the application moneys, as the case may be, will be refunded to the applicant by ordinary postat his own risk (without interest or any share of revenue or other benefit arising therefrom) within14 days after the close of the Application List provided that the remittance accompanying suchapplication which has been presented for payment or other processes has been borrowed and theapplication moneys received in the designated share issue account.

Unsuccessful applicants using DBS Autobank Cashier’s Order Equivalent will have the full amountof their application moneys (without interest or any share of revenue or other benefit arisingtherefrom) automatically credited to their accounts maintained with DBS Bank.

8. Capitalised terms used in the Application Forms and defined in this Prospectus shall bear themeanings assigned to them in this Prospectus.

9. In consideration of the Company having distributed the Application Form to the applicant andagreeing to close the Application List at 12.00 noon on 14 December 1999 or such later time or dateas the Directors may in their absolute discretion decide and by completing and delivering theApplication Form, each applicant agrees that:−

(a) his application is irrevocable;

(b) his remittance will be honoured on first presentation and that any moneys returnable may beheld pending clearance of his payment and he will not be entitled to any interest or any shareof revenue or other benefit arising therefrom;

(c) in respect of the Invitation Shares for which his application has been received and not rejected,acceptance of his application shall be constituted by written notification by or on behalf of theCompany and not otherwise, notwithstanding any remittance being presented for payment byor on behalf of the Company;

(d) he will not be entitled to exercise any remedy of rescission for misrepresentation at any timeafter acceptance of his application; and

(e) all applications, acceptances and contracts resulting therefrom under the Invitation shall begoverned by and construed in accordance with the laws of Singapore and that he irrevocablysubmits to the non-exclusive jurisdiction of the Singapore courts.

10. Applications for Offer Shares

(a) Applications for Offer Shares must be made using the WHITE Offer Shares Application Formsand WHITE official envelopes ‘‘A’’ and ‘‘B’’.

(b) The applicant must:−

(i) enclose the Offer Shares Application Form, duly completed, together with the correctremittance in the WHITE envelope ‘‘A’’ which is provided;

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(ii) in the appropriate spaces on the WHITE envelope ‘‘A’’:−

(A) write his name and address;

(B) state the number of Offer Shares applied for;

(C) tick the box if cash payment is by DBS Autobank Cashier’s Order Equivalent; and

(D) affix adequate Singapore postage;

(iii) SEAL WHITE ENVELOPE ‘‘A’’ ;

(iv) write, in the special box provided on the larger WHITE envelope ‘‘B’’ addressed toDBS BANK, 6 SHENTON WAY #28-00, DBS BUILDING TOWER ONE, SINGAPORE068809, the number of Offer Shares for which the application is made; and

(v) insert WHITE envelope ‘‘A’’ into WHITE envelope ‘‘B’’. The applicant must seal WHITEenvelope ‘‘B’’, affix adequate Singapore postage on envelope ‘‘B’’ (if despatching byordinary post) and thereafter DESPATCH BY ORDINARY POST OR DELIVER BYHAND at his own risk to DBS BANK, 6 SHENTON WAY #28,00, DBS BUILDINGTOWER ONE, SINGAPORE 068809, so as to arrive by 12.00 noon on 14 December1999 or such later time or date as the Directors may, in their absolute discretion, decide.Local Urgent Mail or Registered Post must NOT be used.

Applications that are illegible, incompleted or incorrectly completed or accompanied by animproperly drawn remittance are liable to be rejected.

(c) ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement ofreceipt will be issued for any application or remittance received.

11. Applications for Placement Shares

(a) Applications for Placement Shares must be made using the BLUE Application Forms.

(b) The completed Placement Shares Application Form and the applicant’s remittance inaccordance with the terms of this Prospectus must be enclosed and sealed in any envelopeto be provided by the applicant. The sealed envelope must be despatched by ORDINARYPOST OR DELIVERED BY HAND at the applicant’s own risk to DBS BANK, 6 SHENTONWAY #28-00, DBS BUILDING TOWER ONE, SINGAPORE 068809, so as to arrive by 12.00noon on 14 December 1999 or such later time or date as the Directors may, in their absolutediscretion, decide. Local Urgent Mail or Registered Post must NOT be used.

(c) ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement ofreceipt will be issued for any application or remittance received.

ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS

The procedures for Electronic Applications at ATMs of the Participating Banks are set out on the ATMscreens of the relevant Participating Banks (the ‘‘Steps’’). For illustration purposes, the procedure forElectronic Applications at ATMs of DBS Bank is set out in the ‘‘Steps for Electronic Applications’’appearing on page 97 of this Prospectus. Please read carefully the terms of this Prospectus, the Stepsand the terms and conditions for Electronic Applications set out below before making an ElectronicApplication. Any reference to the ‘‘Applicant’’ in these terms and conditions for Electronic Applicationsand the Steps shall mean the applicant who applies for the Offer Shares through an ATM of aParticipating Bank.

The Steps set out the actions that the Applicant must take at ATMs of DBS Bank to complete anElectronic Application. The actions that the Applicant must take at the ATMs of the other ParticipatingBanks are set out on the ATM screens of the relevant Participating Banks. Upon the completion of hisElectronic Application transaction, the Applicant will receive an ATM transaction slip (‘‘TransactionRecord’’), confirming the details of his Electronic Application. The Transaction Record is for retention bythe Applicant and should not be submitted with any printed Application Form.

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An Applicant must have an existing bank account with, and be an ATM cardholder of, one of theParticipating Banks before he can make an Electronic Application at an ATMs of that ParticipatingBank. An ATM card issued by one Participating Bank cannot be used to apply for the Offer Sharesat an ATM belonging to any of the other Participating Banks. An Applicant who fails to use hisown ATM card or who does not key in his own Securities Account number will have hisapplication rejected.

An Applicant, including one who has a joint bank account with a Participating Bank, must ensurethat he enters his own Securities Account number when using the ATM Card issued to him in hisown name. Using his own Securities Account number with an ATM Card which is not issued tohim in his own name will render his application liable to be rejected.

An Electronic Application shall be made on, and subject to, the terms and conditions of this Prospectusincluding but not limited to the terms and conditions appearing below as well as those set out under thesection on ‘‘Terms and Conditions and Procedures for Application’’ found on pages 87 to 89 of thisProspectus, as well as the Memorandum of Association and Bye-laws of the Company.

1. In connection with his Electronic Application for the Offer Shares, the Applicant is required to confirmstatements to the following effect in the course of activating the ATM for his Electronic Application:−

(a) that he has received a copy of this Prospectus and has read, understood and agreed toall the terms and conditions of application for the Offer Shares and this Prospectus priorto effecting the Electronic Application and agrees to be bound by the same;

(b) that he consents to the disclosure of his name, NRIC/passport number, address,nationality and permanent residence status, CDP Securities Account number, CPFInvestment Account number (if applicable) and share application amount (the ‘‘RelevantParticulars’’ ) from his account with that Participating Bank to the Share Registrars,SCCS, CDP, CPF, the Company and the Manager (the ‘‘Relevant Parties’’ ); and

(c) that this application is his only application for the Offer Shares and it is made in his nameand at his own risk.

His application will not be successfully completed and cannot be recorded as a completedtransaction in the ATM unless he presses the ‘‘Enter’’ or ‘‘OK’’ or ‘‘Confirm’’ or ‘‘Yes’’ key. By doingso, the Applicant shall be treated as signifying his confirmation of each of the three statements. Inrespect of statement 1(b) above, his confirmation, by pressing the ‘‘Enter’’ or ‘‘OK’’ or ‘‘Confirm’’ or‘‘Yes’’ key, shall signify and shall be treated as his written permission, given in accordance with therelevant laws of Singapore, including Section 47(4) of the Banking Act (Chapter 19) of Singapore, tothe disclosure by that Participating Bank of the Relevant Particulars of his account(s) with thatParticipating Bank to the Relevant Parties.

2. An applicant may make an Electronic Application at an ATM of any Participating Bank for the OfferShares using cash only by authorising such Participating Bank to deduct the full amount payablefrom his account with such Participating Bank.

3. The Applicant irrevocably agrees and undertakes to subscribe for and/or purchase and to accept thenumber of Offer Shares applied for as stated on the Transaction Record or any lesser number ofOffer Shares that may be allotted and/or allocated to him in respect of his Electronic Application. Inthe event that the Company decides to allot any lesser number of such Offer Shares or not to allotand/or allocate any Offer Shares to the Applicant, the Applicant agrees to accept the decision asfinal. If the Applicant’s Electronic Application is successful, his confirmation (by his action of pressingthe ‘‘Enter’’ or ‘‘OK’’ or ‘‘Confirm’’ or ‘‘Yes’’ key on the ATM) of the number of Offer Shares applied forshall signify and shall be treated as his acceptance of the number of Offer Shares that may beallotted to him and his agreement to be bound by the Memorandum of Association and Bye-laws ofthe Company.

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4. The Applicant irrevocably requests and authorises the Company to:−

(a) register the Offer Shares allotted and/or allocated to him in the name of CDP for deposit into hisSecurities Account;

(b) send the relevant Share certificate(s) to CDP;

(c) return or refund (without interest or any share of revenue or other benefit arising therefrom) theapplication moneys, should his Electronic Application not be accepted, by automaticallycrediting the Applicant’s bank account with his Participating Bank with the relevant amountwithin three Market Days after the close of the Application List; and

(d) return or refund (without interest or any share of revenue or other benefit arising therefrom) thebalance of the application moneys, should his Electronic Application be accepted in part only,by automatically crediting the Applicant’s bank account with his Participating Bank with therelevant amount within 14 days after the close of the Application List.

5. BY MAKING AN ELECTRONIC APPLICATION, THE APPLICANT CONFIRMS THAT HE IS NOTAPPLYING FOR THE OFFER SHARES AS NOMINEE OF ANY OTHER PERSON AND THAT ANYELECTRONIC APPLICATION THAT HE MAKES IS THE ONLY APPLICATION MADE BY HIM ASBENEFICIAL OWNER.

THE APPLICANT SHALL MAKE ONLY ONE ELECTRONIC APPLICATION AND SHALL NOTMAKE ANY OTHER APPLICATION FOR THE INVITATION SHARES WHETHER AT THE ATMsOF ANY PARTICIPATING BANK OR ON THE PRESCRIBED PRINTED APPLICATION FORMS.

6. The Applicant irrevocably agrees and acknowledges that his Electronic Application is subject to risksof electrical, electronic, technical and computer-related faults and breakdowns, fires, acts of God andother events beyond the control of the Participating Banks, the Company, the Vendors and theManager and if, in any such event, the Participating Banks and/or the Company and/or the Vendorsand/or the Manager do not record or receive the Applicant’s Electronic Application, or data relatingto the Applicant’s Electronic Application or the tape containing such data is lost, corrupted, destroyedor not otherwise accessible, whether wholly or partially for whatever reason, the Applicant shall bedeemed not to have made an Electronic Application and the Applicant shall have no claimwhatsoever against the Participating Banks, the Company, the Vendors or the Manager for the OfferShares applied for or for any compensation, loss or damage.

7. Electronic Applications shall close at 12.00 noon on 14 December 1999 or such other time as theDirectors may in their absolute discretion decide.

8. All particulars of the Applicant in the records of his Participating Bank at the time he makes hisElectronic Application shall be deemed to be true and correct and the relevant Participating Bank andthe Relevant Parties shall be entitled to rely on the accuracy thereof. If there has been any changein the particulars of the Applicant after the time of the making of his Electronic Application, theApplicant shall promptly notify his Participating Bank.

9. The Applicant must have sufficient funds in his bank account(s) with his Participating Bank at thetime he makes his Electronic Application, failing which his Electronic Application will not becompleted or accepted. Any Electronic Application made at ATMs of DBS Bank which does notstrictly conform to the instructions set out in the Steps will be rejected. Any Electronic Applicationmade at the ATMs of the other Participating Banks which does not strictly conform to the instructionsset out on the ATM screens of such Participating Banks will be rejected.

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10. No reserve application will be kept. Where an Electronic Application is not accepted, it isexpected that the full amount of the application moneys will be refunded (without interest or anyshare of revenue or other benefit arising therefrom) to the Applicant by being automatically creditedto the Applicant’s account with the relevant Participating Bank within three Market Days of the closeof the Application List. Trading on a ‘‘when issued’’ basis, if applicable, is expected tocommence after such refund has been made. Where an Electronic Application is accepted inpart only, the balance of the application moneys will be refunded (without interest or any share ofrevenue or other benefit arising therefrom) to the Applicant by being automatically credited to theApplicant’s account with his Participating Bank within 14 days after the close of the Application List.

If the Applicant’s Electronic Application is made through the ATMs of KTB or UOB Group and isunsuccessful, it is expected that a computer-generated notice will be sent to the Applicant by therelevant Participating Bank (at the address of the Applicant as stated in the records of the relevantParticipating Bank at the date of his Electronic Application) by ordinary post at the Applicant’s ownrisk within three Market Days after the close of the Application List. If the applicant’s ElectronicApplication is made through the ATMs of OCBC Group, OUB Group or DBS Bank (includingits POSBank Services division) and is unsuccessful, no notification will be sent by therelevant Participating Bank.

Applicants who make Electronic Applications through the ATMs of the following banks may checkthe provisional results of their Electronic Applications as follows:−

Bank Telephone Available at ATM Operating Hours Service expected from

DBSBank

1800-222 2222

SPH Hotline

Internet Bankingor Internet Kiosk

24 hours a day 7.00 p.m. on theballoting day

KTB 222 8228 ATM ATM — 24 hours a day

Phone Banking —Mon-Fri 0800−2200

Sat 0800−1500

ATM — Evening of theballoting day

Phone Banking —8.00 a.m. on the dayafter the balloting day

OCBC 1800-363 3333 ATM ATM — 24 hours a day

Phone Banking —

Mon-Fri 0800−2200

Sat 0800−1500

Evening of the ballotingday

OUB 1800-224 2000www.oub2000.com.sg

Not Available Phone Banking/InternetBanking — 24 hours aday

OUB Mobile Buzz*24 hours a day

Evening of the ballotingday

UOB 1800-533 5533

1800-222 2121

ATM (OtherTransactions —‘‘IPO Enquiry’’)

ATM/Phone Banking —24 hours a day

6.00 p.m. on theballoting day

*Application who make Electronic Applications through the ATMs of OUB and who have activated theirOUB Mobile Buzz services will be notified of the results of their Electronic Applications via their mobilephones.

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11. In consideration of the Company arranging for the Electronic Application facility through the ATMsof the Participating Banks and agreeing to close the Application List at 12.00 noon on 14 December1999 or such later time or date as the Directors may in their absolute discretion decide, and bymaking and completing an Electronic Application, the Applicant agrees that:−

(a) his Electronic Application is irrevocable;

(b) his Electronic Application, the acceptance of his Electronic Application by the Company andthe Vendors and the contract resulting therefrom under the Invitation shall be governed by andconstrued in accordance with the laws of Singapore and he irrevocably submits to thenon-exclusive jurisdiction of the Singapore courts;

(c) neither the Company, the Vendors, the Manager nor the Participating Banks shall be liable forany delays, failures or inaccuracies in the recording, storage or in the transmission or deliveryof data relating to his Electronic Application to the Company or CDP or the Vendors due to abreakdown or failure of transmission, delivery or communication facilities or any risks referredto in paragraph 6 on page 94 of this Prospectus or to any cause beyond their respectivecontrols;

(d) he will not be entitled to exercise any remedy of rescission for misrepresentation at any timeafter acceptance of his application; and

(e) in respect of the Offer Shares for which his Electronic Application has been successfullycompleted and not rejected, acceptance of the Applicant’s Electronic Application shall beconstituted by written notification by or on behalf of the Company and the Vendors and nototherwise, notwithstanding any payment received by or on behalf of the Company and theVendors.

12. The Applicant should ensure that his personal particulars as recorded by both CDP and the relevantParticipating Banks are correct and identical. Otherwise his Electronic Application may be liable tobe rejected. The Applicant should promptly inform CDP of any change in his address, failing whichthe notification letter on successful allotment and/or allocation will be sent to his address lastregistered with CDP.

13. The existence of a trust will not be recognised. Any electronic application by a trustee must bemade in his own name and without qualification. The Company will reject any application by anyperson acting as nominee.

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Steps for Electronic Applications through ATMs of DBS Bank (other than those of its POSBankServices division)

Instructions for Electronic Applications will appear on the ATM screen of the Participating Banks. Forillustrative purposes, the steps for making an Electronic Application through a DBS Bank or POSBankATM are shown below. Certain words appearing on the screen are in abbreviated form (‘‘A/c’’, ‘‘amt’’,‘‘appln’’, ‘‘&’’, ‘‘I/C’’ and ‘‘No.’’ refer to ‘‘Account’’, ‘‘amount’’, ‘‘application’’, ‘‘and’’, ‘‘NRIC’’ and ‘‘Number’’,respectively). Instructions for Electronic Applications on the ATM screens of Participating Banks (otherthan DBS Bank) may differ slightly from those represented below.

Steps for Offer Shares Application

Step 1 : Insert your personal DBS or POSBank ATM Card

2 : Enter your Personal Identification Number

3 : Select ‘‘CASH CARD & MORE SERVICES’’

4 : Select ‘‘ESA — IPO SHARE/BOND/RIGHTS’’

5 : Select ‘‘ELECTRONIC SECURITY APPLN (IPO-SHARE/BOND) to ‘‘KBCF’’

6 : Press the ‘‘ENTER’’ key again to confirm:−

— You have read, understood & agreed to all terms of appln & Prospectus

— You consent to disclose your name, I/C/passport No., address, nationality, CDPSecurities A/c No., CPF Investment A/c No. & share appln amount from yourBank Account(s) to share registrars, SCCS, CDP, CPF, issuer/vendor(s)

— For FIXED price share appln, this is your only appln and it is made in your ownname and at your own risk

7 : Select the DBS Bank account (Autosave/Current/Savings/Savings Plus) or the POSBankaccount (Current/Savings) from which to debit your application moneys

8 : Enter the number of securities you wish to apply for using cash

9 : Select your nationality

10 : Enter your own 12-digit CDP Securities Account number. (Note: This step will be omittedautomatically if your CDP Securities Account number has already been stored in DBSBank’s records)

11 : Check the details of your security application, your I/C/passport number, CDP A/c No. andno. of securities on the screen and press ‘‘ENTER’’ key to confirm application

12 : Remove the Transaction Record for your reference and retention only

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Appendix I

BACKGROUND INFORMATION ON THE KINGBOARD GROUP

PRODUCTS AND PRINCIPAL ACTIVITIES

The Kingboard Group is principally engaged in the manufacture and trading of industrial laminates, glasscloth, formalin and, before the restructuring of the Kingboard Group involving the formation of the KBCFGroup (the ‘‘Restructuring’’), copper foil. The laminates manufactured by the Kingboard Group are soldmainly to manufacturers of PCBs and electrical and electronic products. The glass cloth produced ismainly for the Kingboard Group’s own use in its manufacture of laminates, as was the copper foil itproduced before the Restructuring. The Kingboard Group also trades in insulating and electroplatingmaterials.

The holding company of the Kingboard Group, Kingboard Chemical Holdings Limited (‘‘KCHL’’), wasincorporated in the Cayman Islands on 12 January 1993, and its shares have been listed on The StockExchange of Hong Kong Limited since October 1993.

HISTORY AND DEVELOPMENT

The Kingboard Group was founded by Mr Cheung Kwok Wing and Dr Chan Wing Kwan in 1988 with theestablishment of a laminates manufacturing facility in Shenzhen, PRC. Mr Cheung and Dr Chan hadacquired extensive experience in the electronic and electrical components industries and recognized atthat time the potential which electrical components such as copper clad laminates had in a rapidlyexpanding market. Whilst major overseas suppliers provided products of high and consistent quality,delivery time and customer service, as well as quantities of available products were often inflexible owingto the distances involved. Building on the extensive network of customers and the foundation establishedthrough their trading experience, Mr Cheung and Dr Chan established a local manufacturing facilitywhich, under appropriate management control and production techniques, produced copper cladlaminates of high and consistent quality.

Since then, the Kingboard Group has rapidly expanded and its production capacity has increased tomeet the growing demand for its products. The Kingboard Group maintains its head office in Hong Kongwhile all its production facilities are located in the PRC. Between 1991 to 1999, the Kingboard Group setup further laminates production facilities in Shenzhen, Kunshan and Shanghai. Its glass cloth facilitiesand formalin plants are located in Shenzhen, Panyu and Taicang respectively.

As part of its vertical integration plans, the Kingboard Group set up its copper foil facility in Fogang,Guangdong, PRC. The Kingboard Group decided to adopt the vertical integration strategy in order tokeep its material costs at a competitive level and to ensure the availability and consistency in quality ofthe copper foil used in its production of laminates. HKCF(BVI), FKI and CPG were the subsidiaries in theKingboard Group before the Restructuring which were involved in the manufacture and/or trading ofcopper foil.

BUSINESS

The Kingboard Group’s base of not less than 400 customers comprises foreign and internationalcompanies as well as PRC state-owned enterprises. Sales of laminates, majority of which are made tocustomers in the PRC, including Hong Kong, account for more than 90% of the Kingboard Group’s salesand operating profits. The laminates production plants of the Kingboard Group employ modernproduction methods and equipment, and operate at very high utilisation levels. The Directors of KBCFbelieve that the Kingboard Group is the largest manufacturer of laminates in the PRC, including HongKong, supplying mainly to large scale PCB and electronics manufacturers located there.

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The turnover and profit attributable to shareholders for the Kingboard Group for the financial yearended 31 March 1999 were HK$975 million and HK$128 million respectively. These represent anincrease of 8.5% in turnover and 15.1% in profit attributable to shareholders over the previousfinancial year. A comparison table on the Kingbaord Group’s performance in FY1998 and FY1999 isset out in Figure 1, and the charts showing its turnover and profits since establishment are set out inFigure 2(1).

Note:−

(1) Source: Annual Report 1999 of KCHL.

PROSPECTS

According to the Annual Report 1999 of KCHL, with the relocation by many PCB manufacturers(especially multi-layered PCB manufacturers) of their manufacturing facilities to PRC from countries likeJapan and Taiwan in the past decade and as a result of a growing demand for laminates in the worldwidemarket, the monthly production of laminates increased from 12 million sq m in the early 1990s to25 million sq m at present, with an annual increment of 12%. The Annual Report further stated that thetrend is expected to continue and the Kingboard Group’s profit margin in the next few years is expectedto continue to increase.

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DIRECTORS OF THE KINGBOARD GROUP

The current directors of KCHL are:−

Executive directors

Cheung Kwok Wing(2), Chairman

Chan Wing Kwan(2), Managing Director

Lam Ka Po

Lam Gum Wun

Cheung Kwong Kwan

Cheung Kwok Wa

Cheung Kwok Ping

Cheung Kwok Keung

Chang Wing Yiu(2)

Non-executive director

Fan Chor Wah, Vincent

Independent non-executive directors

Lee Peng Fei, Allen

Tsao Kwang Yung, Peter

Note:−

(2) Messrs Cheung Kwok Wing, Chan Wing Kwan and Chang Wing Yiu are also directors of KBCF.

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APPENDIX II

SELECTED BYE-LAWS OF THE COMPANY

The provisions in the Bye-laws relating to the Directors’ remuneration, voting rights on proposals andcontracts in which the Directors are interested, borrowing powers of the Directors, voting rights of theMembers, consents necessary for the variation of class rights and restrictions on transferability of sharesare as follows:−

DIRECTORS’ REMUNERATION

Director’s Fees and Expenses

Bye-law 95

The ordinary remuneration of the Directors shall from time to time be determined by the Company ingeneral meeting, shall not be increased except pursuant to an ordinary resolution passed at a generalmeeting where notice of the proposed increase shall have been given in the notice convening the generalmeeting, and shall (unless otherwise directed by the resolution by which it is voted) be divided amongstthe Board in such proportions and in such manner as the Board may agree or, failing agreement, equally,except that any Director who shall hold office for part only of the period in respect of which suchremuneration is payable shall be entitled only to rank in such division for a proportion of remunerationrelated to the period during which he has held office. Such remuneration shall be deemed to accrue fromday to day.

Bye-law 96

Each Director shall be entitled to be repaid or prepaid all travelling, hotel and incidental expensesreasonably incurred or expected to be incurred by him in attending meetings of the Board or committeesof the Board or general meetings or separate meetings of any class of shares or of debentures of theCompany or otherwise in connection with the discharge of his duties as a Director.

Bye-law 97

(1) Any Director who, upon request by the Board, goes or resides abroad for any purpose of theCompany or who performs services which in the opinion of the Board go beyond the ordinary dutiesof a Director may be paid such extra remuneration (whether by way of salary, commission,participation in profits or otherwise) as the Board may determine and such extra remuneration shallbe in addition to or in substitution for any ordinary remuneration provided for by or pursuant to anyother Bye-law.

(2) The remuneration (including any remuneration under Bye-law 97(1) above) in the case of a Directorother than an executive Director shall be payable by a fixed sum and shall not at any time be bycommission on or percentage of the profits or turnover, and no director whether an executiveDirector or otherwise shall be remunerated by a commission on or percentage of turnover.

Bye-law 98

The Board shall obtain the approval of the Company in general meeting before paying pensions or otherretirement, superannuation, death or disability benefits to (or to any person in respect of) any Director forthe time being holding any executive office or for the purpose of providing any such pensions or otherbenefits, paying any sum in contribution to any scheme or fund or to pay premiums. The Board shallobtain the approval of the Company in general meeting before making any payment to any Director orpast Director of the Company by way of compensation for loss of office, or as consideration for or inconnection with his retirement from office (not being payment to which the Director is contractuallyentitled).

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Bye-law 99

A Director may:−

(a) hold any other office or place of profit with the Company (except that of Auditor) in conjunction withhis office of Director for such period and, subject to the relevant provisions of the Act and ifapplicable any rules or regulations of the Designated Stock Exchange, upon such terms as theBoard may determine. Any remuneration (whether by way of salary, commission, participation inprofits or otherwise) paid to any Director in respect of any such other office or place of profit shallbe in addition to any remuneration provided for by or pursuant to any other Bye-law; and/or

(b) act by himself or his firm in a professional capacity for the Company (otherwise than as Auditor) andhe or his firm may be remunerated for professional services as if he were not a Director;

Executive Directors

Bye-law 90

Notwithstanding Bye-laws 95, 96, 97 and 98, an executive director appointed to an office under Bye-law89 hereof shall receive such remuneration (whether by way of salary, commission, participation in profitsor otherwise or by all or any of those modes) and such other benefits (including pension and/or gratuityand/or other benefits on retirement) and allowances as the Board may from time to time determine, andeither in addition to or in lieu of his remuneration as a Director, but he shall not in any circumstances berenumerated by a commission on or a percentage of turnover.

Alternate Directors

Bye-law 92

An alternate Director shall only be a Director for the purposes of the Act and shall only be subject to theprovisions of the Act insofar as they relate to the duties and obligations of a Director when performingthe functions of the Director for whom he is appointed in the alternative and shall alone be responsibleto the Company for his acts and defaults and shall not be deemed to be the agent of or for the Directorappointing him. An alternate Director shall be entitled to contract and be interested in and benefit fromcontracts or arrangements or transactions and to be repaid expenses and to be indemnified by theCompany to the same extent mutatis mutandis as if he were a Director but he shall not be entitled toreceive from the Company any fee in his capacity as an alternate Director except only such part, if any,of the remuneration otherwise payable to his appointor as such appointor may by Notice to the Companyfrom time to time direct.

Voting Rights on Proposals, Arrangements and Contracts in which the Directors are interested

Bye-law 102

(1) A Director shall not vote (nor be counted in the quorum) on any resolution of the Board in respectof any contract or arrangement or any other proposal in which he is interested, but this prohibitionshall not apply to any of the following matters namely:−

(a) any contract or arrangement for the giving to such Director any security or indemnity in respectof money lent by him or obligations incurred or undertaken by him at the request of or for thebenefit of the Company or any of its subsidiaries;

(b) any contract or arrangement for the giving of any security or indemnity to a third party inrespect of a debt or obligation of the Company or any of its subsidiaries for which the Directorhas himself assumed responsibility in whole or in part whether alone or jointly under aguarantee or indemnity or by the giving of security;

(c) any contract or arrangement concerning an offer of shares or debentures or other securities ofor by the Company or any other company which the Company may promote or be interestedin for subscription or purchase, where the Director is or is to be interested as a participant inthe underwriting or sub-underwriting of the offer;

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(d) any contract or arrangement in which he is interested in the same manner as other holders ofshares or debentures or other securities of the Company or any of its subsidiaries by virtueonly of his interest in shares or debentures or other securities of the Company;

(e) any contract or arrangement concerning any other company in which he is interested only,whether directly or indirectly, as an officer or executive or a shareholder other than a companyin which the Director together with any of his associates (as defined by the rules, whereapplicable, of the Designated Stock Exchange) is beneficially interested in (other than throughhis interest (if any) in the Company) five (5) per cent or more of the issued shares or of thevoting rights of any class of shares of such company (or any third company through which hisinterest is derived); or

(f) any proposal concerning the adoption, modification or operation of a share option scheme, apension fund or retirement, death or disability benefits scheme or other arrangement whichrelates both to directors and employees of the Company or of any of its subsidiaries and doesnot provide in respect of any Director as such any privilege or advantage not accorded to theemployees to which such scheme or fund relates.

(2) A company shall be deemed to be a company in which a Director owns five (5) per cent. or moreif and so long as (but only if and so long as) he and his associates (as defined by the rules, whereapplicable, of the Designated Stock Exchange), (either directly or indirectly) are the holders of orbeneficially interested in (other than through his interest (if any) in the Company) five (5) per cent.or more of any class of the equity share capital of such company or of the voting rights available tomembers of such company (or of any third company through which his interest is derived). For thepurpose of this paragraph there shall be disregarded any shares held by a Director as bare orcustodian trustee and in which he has no beneficial interest, any shares comprised in a trust inwhich the Director’s interest is in reversion or remainder if and so long as some other person isentitled to receive the income thereof, and any shares comprised in an authorised unit trust schemein which the Director is interested only as a unit holder.

(3) Where a company in which a Director together with his associates (as defined by the rules, whereapplicable, of the Designated Stock Exchange) holds five (5) per cent. or more is materiallyinterested in a transaction, then that Director shall also be deemed materially interested in suchtransaction.

(4) If any question shall arise at any meeting of the Board as to the materiality of the interest of aDirector (other than the chairman of the meeting) or as to the entitlement of any Director (other thansuch chairman) to vote and such question is not resolved by his voluntarily agreeing to abstain fromvoting, such question shall be referred to the chairman of the meeting and his ruling in relation tosuch other Director shall be final and conclusive except in a case where the nature or extent of theinterest of the Director concerned as known to such Director has not been fairly disclosed to theBoard. If any question as aforesaid shall arise in respect of the chairman of the meeting suchquestion shall be decided by a resolution of the Board (for which purpose such chairman shall notvote thereon) and such resolution shall be final and conclusive except in a case where the natureor extent of the interest of such chairman as known to such chairman has not been fairly disclosedto the Board.

Borrowing Powers

Bye-law 109

The Board may exercise all the powers of the Company to raise or borrow money and to mortgage orcharge all or any part of the undertaking, property and assets (present and future) and uncalled capitalof the Company and, subject to the Act, to issue debentures, bonds and other securities, whether outrightor as collateral security for any debt, liability or obligation of the Company or of any third party.

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Voting rights of Members

Bye-law 65

Subject to any special rights or restrictions as to voting for the time being attached to any shares by orin accordance with these Bye-laws, at any general meeting on a show of hands every Member presentin person (or being a corporation, is present by a representative duly authorised under Section 78 of theAct), or by proxy shall have one vote, the chairman of the meeting to determine which proxy shall beentitled to vote where a Member (other than the Depository) is represented by two proxies and on a pollevery Member present in person or by proxy or, in the case of a Member being a corporation, by its dulyauthorised representative shall have one vote for every fully paid share of which he is the holder or whichhe represents and in respect of which all calls due to the Company have been paid, but so that noamount paid up or credited as paid up on a share in advance of calls or instalments is treated for theforegoing purposes as paid up on the share. A resolution put to the vote of a meeting shall be decidedon a show of hands unless (before or on the declaration of the result of the show of hands or on thewithdrawal of any other demand for a poll) a poll is demanded:−

(a) by the chairman of such meeting; or

(b) by at least three Members present in person (or in the case of a Member being a corporation by itsduly authorised representative) or by proxy for the time being entitled to vote at the meeting; or

(c) by a Member or Members present in person (or in the case of a Member being a corporation by itsduly authorised representative) or by proxy , or where such a Member has appointed two proxiesany one of such proxies, or any proxy appointed by the Depository, or any number or combinationof such Members or proxies, holding or representing as the case may be not less than one-tenth ofthe total voting rights of all Members having the right to vote at the meeting; or

(d) by a Member or Members present in person (or in the case of a Member being a corporation by itsduly authorised representative) or by proxy, or where such a Member has appointed two proxiesany one of such proxies, or any proxy appointed by the Depository, or any number or combinationof such Members or proxies, holding or representing as the case may be shares in the Companyconferring a right to vote at the meeting being shares on which an aggregate sum has been paidup equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

A demand by a person as proxy for a Member or in the case of a Member being a corporation by its dulyauthorised representative shall be deemed to be the same as a demand by a Member.

Bye-law 66

Unless a poll is duly demanded and the demand is not withdrawn, a declaration by the chairman that aresolution has been carried, or carried unanimously, or by a particular majority, or not carried by aparticular majority, or lost, and an entry to that effect made in the minute book of the Company, shall beconclusive evidence of the fact without proof of the number or proportion of the votes recorded for oragainst the resolution.

Bye-law 67

If a poll is duly demanded the result of the poll shall be deemed to be the resolution of the meeting atwhich the poll was demanded.

Bye-law 68

A poll demanded on the election of a chairman, or on a question of adjournment, shall be taken forthwith.A poll demanded on any other question shall be taken in such manner (including the use of ballot orvoting papers or tickets) and either forthwith or at such time (being not later than thirty (30) days after thedate of the demand) and place as the chairman directs. It shall not be necessary (unless the chairmanotherwise directs) for notice to be given of a poll not taken immediately.

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Bye-law 69

The demand for a poll shall not prevent the continuance of a meeting or the transaction of any businessother than the question on which the poll has been demanded, and, with the consent of the chairman,it may be withdrawn at any time before the close of the meeting or the taking of the poll, whichever is theearlier.

Bye-law 70

On a poll votes may be given either personally or by proxy.

Bye-law 71

A person entitled to more than one vote on a poll need not use all his votes or cast all the votes he usesin the same way.

Bye-law 72

In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of such meetingshall be entitled to a second or casting vote in addition to any other vote he may have.

Bye-law 73

Where there are joint holders of any share any one of such joint holder may vote, either in person or byproxy, in respect of such share as if he were solely entitled thereto, but if more than one of such jointholders be present at any meeting the vote of the senior who tenders a vote, whether in person or byproxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purposeseniority shall be determined by the order in which the names stand in the Register in respect of the jointholding. Several executors or administrators of a deceased Member in whose name any share standsshall for the purposes of this Bye-law be deemed joint holders thereof.

Bye-law 74

(1) A Member who is a patient for any purpose relating to mental health or in respect of whom an orderhas been made by any court having jurisdiction for the protection or management of the affairs ofpersons incapable of managing their own affairs may vote, whether on a show of hands or on a poll,by his receiver, committee, curator bonis or other person in the nature of a receiver, committee orcurator bonis appointed by such court, and such receiver, committee, curator bonis or other personmay vote on a poll by proxy, and may otherwise act and be treated as if he were the registeredholder of such shares for the purposes of general meetings, provided that such evidence as theBoard may require of the authority of the person claiming to vote shall have been deposited at theOffice, head office or Registration Office, as appropriate, not less than forty-eight (48) hours beforethe time appointed for holding the meeting, or adjourned meeting or poll, as the case may be.

(2) Any person entitled under Bye-law 53 to be registered as the holder of any shares may vote at anygeneral meeting in respect thereof in the same manner as if he were the registered holder of suchshares, provided that forty-eight (48) hours at least before the time of the holding of the meeting oradjourned meeting, as the case may be, at which he proposes to vote, he shall satisfy the Boardof his entitlement to such shares, or the Board shall have previously admitted his right to vote atsuch meeting in respect thereof.

Bye-law 75

No Member shall, unless the Board otherwise determines, be entitled to attend and vote and to bereckoned in a quorum at any general meeting unless he is duly registered and all calls or other sumspresently payable by him in respect of shares in the Company have been paid.

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Bye-law 76

If:−

(a) any objection shall be raised to the qualification of any voter; or

(b) any votes have been counted which ought not to have been counted or which might have beenrejected; or

(c) any votes are not counted which ought to have been counted;

the objection or error shall not vitiate the decision of the meeting or adjourned meeting on any resolutionunless the same is raised or pointed out at the meeting or, as the case may be, the adjourned meetingat which the vote objected to is given or tendered or at which the error occurs. Any objection or error shallbe referred to the chairman of the meeting and shall only vitiate the decision of the meeting on anyresolution if the chairman decides that the same may have affected the decision of the meeting. Thedecision of the chairman on such matters shall be final and conclusive.

Bye-law 77

(1) Any Member entitled to attend and vote at a meeting of the Company who is the holder of two ormore shares shall be entitled to appoint not more than two proxies to attend and vote instead of himat the same general meeting provided that if the Member is the Depository:−

(a) the Depository may appoint more than two proxies to attend and vote at the same generalmeeting and each proxy shall be entitled to exercise the same powers on behalf of theDepository as the Depository could exercise, including, notwithstanding Bye-law 65, the rightto vote individually on a show of hands;

(b) the Company shall be entitled and bound:−

(i) to reject any instrument of proxy lodged if the proxy first named in that instrument, beingthe Depositor, is not shown in the records of the Depository as at a time not earlier thanforty-eight (48) hours prior to the time of the relevant general meeting supplied by theDepository to the Company, to have any shares credited to a Securities Account; and

(ii) to accept as the maximum number of votes which in aggregate all the proxies appointedby the Depository in respect of a particular Depositor are able to cast on a poll a numberwhich is the number of shares credited to the Securities Account of that Depositor, asshown in the records of the Depository as at a time not earlier than forty-eight (48) hoursprior to the time of the relevant general meeting supplied by the Depository to theCompany, whether that number is greater or smaller than the number specified in anyinstrument of proxy executed by or on behalf of the Depository; and

(iii) the Company shall accept as valid in all respects the form of proxy approved by theDepository (the ‘‘CDP Proxy Form’’) for use at the date relevant to the general meetingin question notwithstanding that the same permits the Depositor concerned to nominatea person or persons other than himself as the proxy or proxies appointed by theDepository. The Company shall be entitled and bound, in determining rights to vote andother matters in respect of a completed CDP Proxy Form submitted to it, to have regardto the instructions given by and the notes (if any) set out in the CDP Proxy Form.

(2) In any case where a form of proxy appoints more than one proxy (including the case where suchappointment results from a nomination by a Depositor), the proportion of the shareholdingconcerned to be represented by each proxy shall be specified in the form of proxy.

(3) A proxy need not be a Member. In addition, subject to sub-paragraph (1) of this Bye-law, a proxyor proxies representing either a Member who is an individual or a Member which is a corporationshall be entitled to exercise the same powers on behalf of the Member which he or they representas such Member could exercise.

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Bye-law 78

The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorneyduly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand ofan officer, attorney or other person authorised to sign the same or, in the case of the Depository, signedby its duly authorised officer by some method or system of mechanical signature as the Depository maydeem appropriate. In the case of an instrument of proxy purporting to be signed on behalf of acorporation by an officer thereof it shall be assumed, unless the contrary appears, that such officer wasduly authorised to sign such instrument of proxy on behalf of the corporation without further evidence ofthe fact.

Bye-law 79

The instrument appointing a proxy and (if required by the Board) the power of attorney or other authority(if any) under which it is signed on behalf of the appointer (which shall, for this purpose, include aDepositor), or a certified copy of such power or authority, shall be delivered to such place or one of suchplaces (if any) as may be specified for that purpose in or by way of note to or in any documentaccompanying the notice convening the meeting (or, if no place is so specified at the Registration Officeor the Office, as may be appropriate) not less than forty-eight (48) hours before the time appointed forholding the meeting or adjourned meeting at which the person named in the instrument proposes to voteor, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, not less thantwenty-four (24) hours before the time appointed for the taking of the poll and in default the instrumentof proxy shall not be treated as valid. No instrument appointing a proxy shall be valid after the expirationof twelve (12) months from the date named in it as the date of its execution, except at an adjournedmeeting or on a poll demanded at a meeting or an adjourned meeting in cases where the meeting wasoriginally held within twelve (12) months from such date. Delivery of an instrument appointing a proxyshall not preclude a Member from attending and voting in person at the meeting convened and in suchevent, the instrument appointing a proxy shall be deemed to be revoked.

Bye-law 80

Instruments of proxy shall be in any usual or common form (including any form approved from time totime by the Depository) or in such other form as the Board may approve (provided that this shall notpreclude the use of the two-way form) and the Board may, if it thinks fit, send out with the notice of anymeeting forms of instrument of proxy for use at the meeting. The instrument of proxy shall be deemedto confer authority to demand or join in demanding a poll and to vote on any amendment of a resolutionput to the meeting for which it is given as the proxy thinks fit. The instrument of proxy shall, unless thecontrary is stated therein, be valid as well for any adjournment of the meeting as for the meeting to whichit relates.

Bye-law 81

A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding theprevious death or insanity of the principal, or revocation of the instrument of proxy or of the authorityunder which it was executed, provided that no intimation in writing of such death, insanity or revocationshall have been received by the Company at the Office or the Registration Office (or such other placeas may be specified for the delivery of instruments of proxy in the notice convening the meeting or otherdocument sent therewith) two (2) hours at least before the commencement of the meeting or adjournedmeeting, or the taking of the poll, at which the instrument of proxy is used.

Bye-law 82

Anything which under these Bye-laws a Member may do by proxy he may likewise do by his dulyappointed attorney and the provisions of these Bye-laws relating to proxies and instruments appointingproxies shall apply mutatis mutandis in relation to any such attorney and the instrument under whichsuch attorney is appointed.

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Bye-law 83

(1) Any corporation which is a Member may by resolution of its directors or other governing bodyauthorise such person as it thinks fit to act as its representative at any meeting of the Company orat any meeting of any class of Members. The person so authorised shall be entitled to exercise thesame powers on behalf of such corporation as the corporation could exercise if it were an individualMember and such corporation shall for the purposes of these Bye-laws be deemed to be presentin person at any such meeting if a person so authorised is present thereat.

(2) If permitted by the Act, where a Member is the Depository (or its nominee, in each case, being acorporation), it may authorise such persons as it thinks fit to act as its representatives at anymeeting of the Company or at any meeting of any class of Members provided that the authorisationshall specify the number and class of shares in respect of which each such representative is soauthorised. Each person so authorised under the provisions of this Bye-law shall be entitled toexercise the same rights and powers as if such person was the registered holder of the shares ofthe Company held by the Depository (or its nominee).

(3) Any reference in these Bye-laws to a duly authorised representative of a Member being acorporation shall mean a representative authorised under the provisions of this Bye-law.

Variation of Rights

Bye-law 10

Whenever the share capital of the Company is divided into different classes of shares, subject to theprovisions of the Statutes, preference capital other than redeemable preference capital may be repaidand the special rights attached to any class may be varied or abrogated either with the consent in writingof the holders of three-quarters in nominal value of the issued shares of the class or with the sanctionof a special resolution passed at a separate general meeting of the holders of the shares of the class (butnot otherwise) and may be so repaid, varied or abrogated either whilst the Company is a going concernor during or in contemplation of a winding-up. To every such separate general meeting and alladjournments thereof all the provisions of these Bye-laws relating to general meetings of the Companyand to the proceedings thereat shall mutatis mutandis apply, except that the necessary quorum (otherthan at an adjourned meeting) shall be two persons at least holding or representing by proxy at leastone-third in nominal value of the issued shares of the class and at any adjourned meeting of such holder,two holders present in person or by proxy (whatever the number of shares held by them) shall be aquorum and that any holder of shares of the class present in person or by proxy may demand a poll andthat every such holder shall on a poll have one vote for every share of the class held by him, providedalways that where the necessary majority for such a special resolution is not obtained at such generalmeeting, consent in writing if obtained from the holders of three-quarters in nominal value of the issuedshares of the class concerned within two months of such general meeting shall be as valid and effectualas a special resolution carried at such general meeting. The foregoing provisions of this Bye-law shallapply to the variation or abrogation of the special rights attached to some only of the shares of any classas if each group of shares of the class differently treated formed a separate class the special rightswhereof are to be varied.

Restrictions on Transferability of Shares

Bye-law 46

Subject to these Bye-laws, any Member may transfer all or any of his shares by an instrument of transferin the form for the time being approved by the Designated Stock Exchange or where the Company is nolonger listed on the Designated Stock Exchange, in any other form acceptable to the Board.

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Bye-law 47

The instrument of transfer shall be executed by or on behalf of the transferor and the transferee providedthat an instrument of transfer in respect of which the transferee is the Depository shall be effectivealthough not signed or witnessed by or on behalf of the Depository and provided further that the Boardmay dispense with the execution of the instrument of transfer by the transferee in any case which it thinksfit in its discretion to do so. The Board may also resolve, either generally or in any particular case, uponrequest by either the transferor or transferee, to accept mechanically executed transfers. The transferorshall be deemed to remain the holder of the share until the name of the transferee is entered in theRegister in respect thereof. Nothing in these Bye-laws shall preclude the Board from recognising arenunciation of the allotment or provisional allotment of any share by the allottee in favour of some otherperson.

Bye-law 48

(1) The Board may, in its absolute discretion, refuse to register a transfer of any share (not being a fullypaid up share) to a person of whom it does not approve, or any share issued under any shareincentive scheme for employees upon which a restriction on transfer imposed thereby still subsists,and it may also, without prejudice to the foregoing generality, refuse to register a transfer of anyshare to more than four (4) joint holders or a transfer of any share (not being a fully paid up share)on which the Company has a lien.

(2) No transfer shall be made to an infant or to a person of unsound mind or under other legal disability.

(3) The Board in so far as permitted by any applicable law may, upon request by a shareholder and inits absolute discretion, at any time and from time to time transfer any share upon the Register to anybranch register or any share on any branch register to the Register or any other branch register. Inthe event of any such transfer, the shareholder requesting such transfer shall bear the cost ofeffecting the transfer unless the Board otherwise determines.

(4) Unless the Board otherwise agrees (which agreement may be on such terms and subject to suchconditions as the Board in its absolute discretion may from time to time determine, and whichagreement the Board shall, without giving any reason therefor, be entitled in its absolute discretionto give or withhold), no shares upon the Register shall be transferred to any branch register nor shallshares on any branch register be transferred to the Register or any other branch register and alltransfers and other documents of title shall be lodged for registration, and registered, in the case ofany shares on a branch register, at the relevant Registration Office, and, in the case of any shareson the Register, at the Office or such other place in Bermuda at which the Register is kept inaccordance with the Act.

(5) Save as provided in the Bye-laws, there shall be no restriction on the transfer of fully paid up shares(except where required by law, or the listing rules of the Designated Stock Exchange).

Bye-law 49

Without limiting the generality of the last preceding Bye-law, the Board may decline to recognise anyinstrument of transfer unless:−

(a) a fee of such maximum sum as the Designated Stock Exchange may determine to be payable orsuch lesser sum as the Board may from time to time require is paid to the Company in respectthereof;

(b) the instrument of transfer is in respect of only one class of share;

(c) the instrument of transfer is lodged at the Office or such other place in Bermuda at which theRegister is kept in accordance with the Act or the Registration Office (as the case may be)accompanied by the relevant share certificate(s) and such other evidence as the Board mayreasonably require to show the right of the transferor to make the transfer (and, if the instrument oftransfer is executed by some other person on his behalf, the authority of that person so to do); and

(d) if applicable, the instrument of transfer is duly and properly stamped.

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Bye-law 50

If the Board refuses to register a transfer of any share, it shall, within one (1) month after the date onwhich the transfer was lodged with the Company, send to each of the transferor and transferee notice ofthe refusal, stating the facts which are considered to justify the refusal.

Bye-law 51

The registration of transfers of shares or of any class of shares may, after notice has been given byadvertisement in an appointed newspaper and, where applicable, any other newspapers in accordancewith the requirements of any Designated Stock Exchange to that effect, be suspended at such times andfor such periods (not exceeding in the whole thirty (30) days in any year) as the Board may determine.

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APPENDIX III

SUMMARY OF BERMUDA COMPANY LAW

BERMUDA COMPANY LAW

The Company is incorporated in Bermuda and, therefore, operates subject to Bermuda law. Thefollowing sets out a summary of certain provisions of Bermuda company law, although this does notpurport to contain all applicable qualifications and exceptions or to be a complete review of all mattersof Bermuda company law and taxation, which may differ from equivalent provisions in jurisdictions withwhich interested parties may be more familiar. Prospective investors should consult their ownprofessional advisers as to consequences (legal, tax or otherwise) of the acquisition, ownership ordisposition of the Shares, including, in particular, the effect of any foreign state or local laws to which theyare subject.

The statements made herein are based on the laws of Bermuda in force as at the date of this Prospectusand are subject to changes in such laws, or in the interpretation of these laws, occurring after such date,which changes could be made on a retroactive basis.

(a) Share capital

The Companies Act provides that where a company issues shares at a premium, whether for cashor otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shallbe transferred to an account, to be called the ‘‘share premium account’’, to which the provisions ofthe Companies Act relating to a reduction of share capital of a company shall apply as if the sharepremium account were paid up share capital of the company except that the share premiumaccount may be applied by the company:−

(i) in paying up unissued shares of the company to be issued to members of the company as fullypaid bonus shares;

(ii) in writing off:−

(aa) the preliminary expenses of the company; or

(bb) the expenses of, or the commission paid or discount allowed on, any issue of shares ordebentures of the company; or

(iii) in providing for the premiums payable on redemption of any shares or of any debentures ofthe company.

However, only premiums arising on the same class of shares can be used to pay up bonus sharesor in providing for the premiums payable on redemption of shares or debentures referred to in (i) and(iii) above respectively.

In the case of an exchange of shares, the excess value of the shares acquired over the nominalvalue of the shares being issued may be credited to a contributed surplus account of the issuingcompany.

The Companies Act permits a company limited by shares or any other company having a sharecapital to issue preference shares and subject to the conditions stipulated therein, to convert thosepreference shares into redeemable preference shares.

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The Companies Act includes certain protections for holders of special classes of shares, such asrequiring their consent to be obtained before their rights may be varied. Where provision is madeby the memorandum of association or bye-laws for authorising the variation of rights attached toany class of shares in the company, the consent of the specified proportions of the holders of theissued shares of that class or the sanction of a resolution passed at a separate meeting of theholders of those shares is required, and where no provision for varying such rights is made in thememorandum of association or bye-laws and nothing therein precludes a variation of such rights(unless otherwise provided by the terms of the issue of the shares of that class), the written consentof the holders of three-fourths of the issued shares of that class or the sanction of a resolutionpassed as aforesaid is required.

(b) Financial assistance to purchase shares of a company or its holding company

A company is prohibited from providing financial assistance, directly or indirectly, for the purpose ofan acquisition of its own or its holding company’s shares before or at the same time as theacquisition takes place unless there are reasonable grounds for believing that the company is, andwould after the giving of such financial assistance be, able to pay its liabilities as they become dueand the realisable value of the company’s assets, after the giving of such financial assistance, wouldnot thereby be less than the aggregate of its liabilities, issued share capital and share premiumaccounts. However, in certain circumstances, the prohibition from giving financial assistance maybe excluded such as where the assistance is only an incidental part of a larger purpose and theassistance is given in good faith in the interests of the company. In addition, the Companies Actexpressly permits the grant of financial assistance where (i) the financial assistance does notreduce the company’s net assets or, to the extent the net assets are reduced, such financialassistance is provided for out of funds of the company which would otherwise be available fordividend or distribution; (ii) before the date on which the financial assistance is to be given, anaffidavit of solvency is sworn by at least two the directors of the company declaring either that onthat date, after taking into account the giving if the financial assistance, the company will be solventor that all the creditors of the company on that date have expressed in writing their concurrence inthe giving of the financial assistance; and (iii) the financial assistance, is approved by resolution ofshareholders of the company.

(c) Purchase of securities by a company and its subsidiaries

A company limited by shares or any other company having a share capital may, if authorised by itsmemorandum of association or bye-laws, purchase its own shares. Such purchases may only beeffected out of the capital paid up on the purchased shares or out of the funds of the company whichwould otherwise be available for dividend or distribution or out of the proceeds of a fresh issue ofshares made for the purposes of such purchase. Any premium payable on a purchase over the parvalue of the shares to be purchased must be provided for out of funds of the company otherwisewhich would otherwise be available for dividend or distribution or out of the company’s sharepremium account. Any purchase by a company of its own shares may be authorised by its board ofdirectors or otherwise by or in accordance with the provisions of its bye-laws. Such purchase mayonly be made if at least two directors of the company o the date on which the purchase is to be madedeclare, by affidavit, declare that on the effective date of the purchase and taking into account thepurchase, the company is solvent or that all of the creditors of the company on that date haveconsented in writing to the purchase. In the case where a company is listed on an appointed stockexchange (as defined in the Companies Act), the affidavit may, at the option of the company, besworn within thirty days after the end of each calendar quarter giving details of the purchases madeduring each quarter and the affidavit shall confirm that the company was solvent at all material timesduring the quarter. The shares so purchased will be treated as cancelled and the company’s issued,but not its authorised, capital will be diminished by the nominal value of those shares accordingly.In addition, a company may not purchase its own shares if, as a result of the purchase of sharesif, as a result of the purchase of shares in question, the issued share capital of the company wouldbe reduced below the minimum capital specified for the company in its memorandum of association.

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A company is not prohibited from purchasing and may purchase its own warrants subject to and inaccordance with the terms and conditions of the relevant warrant instrument or certificate. There isno requirement under Bermuda law that a company’s memorandum of association or its bye-lawscontain a specific provision enabling such purchases and the directors of a company may rely uponthe general power contained in its memorandum of association to buy and sell and deal in personalproperty of all kinds.

Under Bermuda law, a subsidiary may hold shares in its holding company and in certaincircumstances, may acquire such shares. The holding company is, however, prohibited from givingfinancial assistance for the purpose of the acquisition, subject to certain circumstances provided bythe Companies Act. A company, whether a subsidiary or a holding company, may only purchase itsown shares for cancellation if it is authorised to do so in its memorandum of association or bye-lawspursuant to section 42A of the Companies Act.

(d) Dividends and distributions

Section 54 of the Companies Act provides that a company shall not declare or pay a dividend, ormake a distribution out of contributed surplus, if there are reasonable grounds for believing that (i)the company is, or would after the payment be, unable to pay its liabilities as they become due; or(ii) the realisable value of the company’s assets would thereby be less than the aggregate of itsliabilities and its issued share capital and share premium accounts. Contributed surplus is definedfor purposes of section 54 of the Companies Act to include the proceeds arising from donatedshares, credits resulting from the redemption or conversion of shares at less than the amount setup as nominal capital and donations of cash and other assets to the company.

(e) Protection of minorities

Class actions and derivative actions are generally not available to shareholders under the laws ofBermuda. The Bermuda courts, however, would ordinarily be expected to permit a shareholder tocommence an action in the name of a company to remedy a wrong done to the company where theact complained of is alleged to be beyond the corporate power of the company or is illegal or wouldresult in the violation of the company’s memorandum of association and bye-laws. Furthermore,consideration would be given by the court to acts that are alleged to constitute a fraud against theminority shareholders or, for instance, where an act requires the approval of a greater percentageof the company’s shareholders than actually approved it.

Any member of a company who complains that the affairs of the company are being conducted orhave been conducted in a manner oppressive or prejudicial to the interests of some part of themembers, including himself, may petition the court for an order under section 111 of the CompaniesAct. If on any petition, the Court is of the opinion that the company’s affairs are being conducted orhave been conducted or have been conducted as aforesaid and that to wind up the company wouldunfairly prejudice that part of the members but that otherwise the facts would justify the making ofa winding up order on just and equitable grounds, the Court may, with a view to bringing an end thematters complained of, make such order as it thinks fit, whether for regulating the conduct of thecompany’s affairs in future or for the purchase of shares of any members of the company by othermembers of the company or by the company itself and in the case of a purchase by the companyitself, for the reduction accordingly of the company’s capital, or otherwise. Bermuda law alsoprovides that the company may be wound up by the Bermuda court, if, inter alia, the court is of theopinion that it is just and equitable to do so. Both these provisions are available to minorityshareholders seeking relief from the oppressive conduct of the majority, and the court has widediscretion to make such orders as it thinks fit.

Except as mentioned above, claims against a company by its shareholders must be based on thegeneral laws of contract or tort applicable in Bermuda.

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A statutory right of action is conferred on subscribers of shares in a company against persons,including directors and officers, responsible for the issue of a prospectus in respect of loss ordamage suffered by reason of an untrue statement therein, but this confers no right of action againstthe company itself. In addition, a company, as opposed to its shareholders, may take action againstits officers including directors, for breach of their statutory and fiduciary duty to act honestly and ingood faith with a view to the best interests of the company.

(f) Management

The Companies Act contains no specific restrictions on the power of directors to dispose of assetsof a company, although it specifically requires that every officer of a company, which includes adirector, managing director and secretary, in exercising his powers and discharging his duties mustdo so honestly and in good faith with a view to the best interests of the company and exercise thecare, diligence and skill that a reasonably prudent person would exercise in comparablecircumstances. Furthermore, the Companies Act requires that every officer should comply with theCompanies Act, regulations passed pursuant to the Companies Act and the bye-laws of thecompany.

(g) Accounting and auditing requirements

The Companies Act requires a company to cause proper records of accounts to be kept with respectto (i) all sums of money received and expended by the company and the matters in respect of whichthe receipt and expenditure takes place; (ii) all sales and purchases of goods by the company and(iii) the assets and liabilities of the company.

Furthermore, it requires that a company keeps its records of account at the registered office of thecompany or, subject to the Companies Act, at such other place as the directors think fit and thatsuch records shall at all times be open to inspection by the directors.

The Companies Act requires that the directors of the company must, at least once a year, lay beforethe company in general meeting financial statements for the relevant accounting period. Further, thecompany’s auditor must audit the financial statements so as to enable him to report to the members.Based on the results of his audit, which must be made in accordance with generally acceptedauditing standards, the auditor must then make a report to the members. The generally acceptedauditing standards may be those of Bermuda or a country or jurisdiction other than Bermuda or suchother generally accepted auditing standards as may be appointed by the Minister of Finance ofBermuda under the Companies Act; and where the generally accepted auditing standards used areother than those of Bermuda, the report of the auditor shall identify the generally accepted auditingstandards used. All members of the company are entitled to receive a copy of every financialstatement prepared in accordance with these requirements, at least seven days before the generalmeeting of the company at which the financial statements are to be tabled.

(h) Exchange control

An exempted company is usually designated as ‘‘non-resident’’ for Bermuda exchange controlpurposes by the Bermuda Monetary Authority. Where a company is so designated, it is free to dealin currencies of countries outside the Bermuda exchange control area which are freely convertibleinto currencies of any other country. The permission of the Bermuda Monetary Authority is requiredfor the issue of securities (including shares, warrants, debentures and bonds) by a company and thesubsequent transfer of such securities. In granting such permission, the Bermuda MonetaryAuthority accepts no responsibility for the financial soundness of any proposals or for thecorrectness of any statements made or opinions expressed in any document with regard to suchissue. Before a company can issue or transfer any further shares and warrants in excess of theamounts already approved, it must obtain the prior written consent of the Bermuda MonetaryAuthority.

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Permission of the Bermuda Monetary Authority will normally be granted for the issue and transferof securities to and between persons regarded as resident outside Bermuda for exchange controlpurposes without specific consent for each issue or as the case may be, transfer for so long as thesecurities are listed on an appointed stock exchange (as defined in the Companies Act). Issues toand transfers involving persons regarded as ‘‘resident’’ for exchange control purposes in Bermudawill be subject to specific exchange control authorisation.

(i) Taxation

Under present Bermuda law, no Bermuda withholding tax on dividends or other distributions, norany Bermuda tax computed on profits or income or on any capital asset, gain or appreciation willbe payable by an exempted company or its operations, nor is there any Bermuda tax in the natureof estate duty or inheritance tax applicable to shares, debentures or other obligations of thecompany held by non-residents of Bermuda. Furthermore, a company may apply to the Minister ofFinance of Bermuda for an assurance, under the Exempted Undertakings Tax Protection Act 1966of Bermuda, that no such taxes shall be so applicable until 28th March 2016, although thisassurance will not prevent the imposition of any Bermuda tax payable in relation to any land inBermuda leased or let to the company or to persons ordinarily resident in Bermuda.

(j) Stamp duty

An exempted company is exempt from all stamp duties except on transactions involving ‘‘Bermudaproperty’’. This term relates, essentially, to real and personal property physically situated inBermuda, including shares in local companies (as opposed to exempted companies). Transfers ofsecurities in all exempted companies are exempt from Bermuda stamp duty.

(k) Loans to directors

Bermuda law prohibits the making of loans by a company to any of its directors or director of itsholding company or to (a) their spouse or children or (b) a company (other than a company whichis a holding company or a subsidiary of the company making the loan) which a director, his spouseor children own or control directly or indirectly more than 20% of the capital or loan debt, without theconsent of any member or members holding in aggregate not less than nine-tenths of the totalvoting rights of all members having the right to vote at any meeting of the members of the company.These prohibitions do not apply to anything done to provide a director with funds to meet theexpenditure incurred or to be incurred by him for the purposes of the company, provided that thecompany gives its prior approval at a general meeting at which the purposes of the expenditure andthe amount of the loan are disclosed or, if not, the loan is made on condition that it will be repaidwithin six months of the next following annual general meeting if the loan is not approved at orbefore such meeting. If the approval of the company is not given for a loan, the directors whoauthorised it will be jointly and severally liable for any loss arising therefrom.

(l) Inspection of corporate records

Members of the general public have the right to inspect the public documents of a companyavailable at the office of the Registrar of Companies in Bermuda which will include the company’scertificate of incorporation, its memorandum of association (including its objects and powers) andany alteration to the company’s memorandum of association. The members of the company havethe additional right to inspect the bye-laws of a company, and the company’s audited financialstatements, which must be presented to the annual general meeting. Minutes of general meetingsof a company are also open for inspection by the members or directors of the company withoutcharge for not less than two hours during business hours each day subject to such reasonablerestrictions as the company may impose. Except where the register of members is closed under theprovisions of the Companies Act, the register of members of a company shall during business hours(subject to such reasonable restrictions as the company may impose, so that not less than 2 hoursin each day be allowed for inspection) be open for inspection by members without charge and to anyother person for a fee. The company is required to maintain its share register in Bermuda but may,subject to the provisions of the Companies Act, establish a branch register outside Bermuda.Bermuda law does not, however, provide a general right for members to inspect or obtain copies ofany other corporate records.

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A company is required to maintain a register of directors and officers at its registered office and suchregister shall during business hours (subject to such reasonable restrictions as the company mayimpose, so that not less than 2 hours in each day be allowed for inspection) be made available forinspection by members of the public without charge.

(m) Winding up

A company may be wound up by the Bermuda court on application presented by the company itself,its creditors or its contributors. The Bermuda court also has authority to order winding up in anumber of specified circumstances including where it is, in the opinion of the Bermuda court, justand equitable that such company be wound up.

A company may be wound up voluntarily when the members so resolve in general meeting, or, inthe case of a limited duration company, when the period fixed for the duration of the company byits memorandum expires, or the event occurs on the occurrence of which the memorandumprovides that the company is to be dissolved. In the case of a voluntary winding up, such companyis obliged to cease to carry on its business from the time of passing the resolution for voluntarywinding up or upon the expiry of the period or the occurrence of the event referred to above. Uponthe appointment of a liquidator, the responsibility for the company’s affairs rests entirely in his handsand no future executive action may be carried out without his approval.

Where, on a voluntary winding up, a majority of directors each make a statutory declaration to theeffect that they have formed the opinion that the company will be able to pay its debts in full withinsuch period not exceeding 12 months from the commencement of the winding up, the winding upwill be a members’ voluntary winding up. In any case where such declaration has not been made,the winding up will be a creditors’ voluntary winding up.

In the case of a members’ voluntary winding up of a company, the company in general meeting mustappoint one or more liquidators within the period prescribed by the Companies Act for the purposeof winding up the affairs of the company and distributing its assets. If the liquidator at any time formsthe opinion that such company will not be able to pay its debts in full within the period specified inthe director’ statutory declaration (referred to in the preceding paragraph), he shall forthwithsummon a meeting of creditors and shall lay before the meeting a statement of the assets andliabilities of the company.

Subject to the Companies Act, as soon as the affairs of the company are fully wound up, theliquidator must make up an account of the winding up, showing how the winding up has beenconducted and the property of the company has been disposed of, and thereupon call a generalmeeting of the company for the purposes of laying before it the account and giving an explanationthereof. This final general meeting requires at least one month’s notice and shall be called by theadvertisement in an appointed newspaper (as defined in the Companies Act) in Bermuda,specifying the time, place and object thereof.

In the case of a creditors’ voluntary winding up of a company, the company must call a meeting ofcreditors of the company to be summoned on the day or the next day following the day on whichthe meeting of the members at which the resolution for winding up is to be proposed is held. Noticeof such meeting of creditors must be sent by post to the creditors at the same time as notice is sentto the members of the company. In addition, such company must cause a notice to appear in anappointed newspaper on at least two occasions.

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The creditors and the members at their respective meetings may nominate a person to be liquidatorfor the purposes of winding up the affairs of the company provided that if the creditors or themembers nominate a different person, the person nominated by the creditors shall be the liquidator.If no person is nominated by the creditors as the liquidator, the person nominated by the membersshall be the liquidator. The creditors at the creditors’ meeting may also appoint a committee ofinspection consisting of not more than five persons. If such a committee is appointed by thecreditors as the liquidator, the person nominated by the creditors, the members may, wither at themeeting at which the resolution for voluntary winding up is passed or at any time subsequently ingeneral meeting, appoint such number of persons as they think fit to act as members of thecommittee not exceeding 5 in number. However, the creditors may, if they think fit, resolve that allor any of the persons so appointed by the members ought not be members of the committee ofinspection. If the creditors so resolve, the persons mentioned in the resolution shall not, unless theCourt otherwise directs, be qualified to act as members of the committee and on any application tothe Court under section 218 of the Companies Act, the Court may, if it thinks fit, appoint otherpersons to act as such members in place of the persons mentioned in the resolution.

If a creditors’ winding up continues for more than one year, the liquidator is required to summon ageneral meeting of the company and a meeting of the creditors at the end of each year to lay beforesuch meetings an account of his acts and dealings and of the conduct of the winding up during thepreceding year. As soon as the affairs of the company are fully wound up, the liquidator must makean account of the winding up, showing how the winding up has been conducted and the propertyof the company has been disposed of, and thereupon shall call a general meeting of the companyand a meeting of the creditors for the purposes of laying the account before such meetings andgiving an explanation thereof.

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