Smart Digital Technology Group Limited — Proxy Solicitation & Information Statement 2005

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

If you have sold or transferred all your shares in Sun Innovation Holdings Limited (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

This circular is addressed to the shareholders of the Company in connection with a special general meeting of the Company to be held on Monday, 12 December 2005. This circular is not and does not constitute an offer of, nor is it intended to invite offers for, shares in or other securities of the Company.

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SUN INNOVATION HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 547)

PROPOSED CAPITAL REORGANISATION

AND

CHANGE IN BOARD LOT SIZE

A notice convening the SGM to be held at 3rd Floor, Chung Nam Building, 1 Lockhart Road, Wanchai, Hong Kong at 10:00 a.m. on Monday, 12 December 2005 is set out on pages 14 to 15 of this circular.

If you are not able to attend the meeting in person, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting should you wish. Such form of proxy is also published on the website of The Stock Exchange of Hong Kong Limited at www.hkex.com.hk.

18 November 2005

CONTENTS

DEFINITIONS

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

• “Authorised Share Capital (i) the increase in the authorised ordinary share capital of the Reclassification” Company upon the Share Consolidation becoming effective from HK$719,333,334 to HK$730,000,000; and (ii) the diminution in the authorised convertible preference share capital from HK$30,666,666 to HK$20,000,000

• “Announcement” the announcement of the Company dated 28 October 2005 relating to the proposed Capital Reorganisation

• “associate(s)” has the same meaning ascribed to it in the Listing Rules

• “Board” the board of Directors

• “Capital Reorganisation”

• the proposed Share Premium Reduction, Share Consolidation and the Authorised Share Capital Reclassification

• “CCASS” the Central Clearing and Settlement System established and operated by HKSCC

• “Company” Sun Innovation Holdings Limited, a company incorporated in Bermuda with limited liability, the Shares of which are listed on the Stock Exchange

• “Companies Act” The Companies Act 1981 of Bermuda

• “Consolidated Share(s)” ordinary consolidated share(s) of HK$1.00 each in the share capital of the Company after the Capital Reorganisation becomes effective

• “CPS” the convertible preference shares of the Company of HK$0.01 each reclassified from the Shares at the special general meeting of the Company held on 28 June 2004, which do not carry any voting rights

• “Director(s)” director(s) of the Company

• “Drive Limited” Drive Limited, previously known as “Limited Liability Company Prehit”, is a company incorporated in Japan

• “Frepar” Freparnetworks Inc., a company incorporated under the laws of Japan

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DEFINITIONS

“Frepar Entitlement”

the entitlement of 294,000,000 Shares granted to Frepar pursuant to the sale and purchase agreement dated 21 December 2004 entered into between MEJL and Frepar as supplemented on 15 November 2005 in relation to the acquisition of Drive Limited

• “Group”

the Company and its subsidiaries

• “HKSCC”

the Hong Kong Securities Clearing Company Limited

• “Hong Kong”

the Hong Kong Special Administrative Region of the People’s Republic of China

• “Independent Shareholders”

any Shareholders who are not required to abstain from voting at the SGM under the Listing Rules

• “Independent Third Party(ies)” independent third party(ies) not connected with the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or their respective associates

• “Last Trading Day” 28 October 2005, being the last trading day before the release of the Announcement

• “Latest Practicable Date” 15 November 2005, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “MEJL”

• Media Elite Japan Limited, a company incorporated under the laws of Japan, is a wholly-owned subsidiary of the Company

• “Registrar”

• the Company’s share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong

• “SGM”

• the special general meeting of the Company expected to be held on Monday, 12 December 2005 at which a relevant resolution will be proposed to consider and, if thought fit, approve the Capital Reorganisation

• “Share(s)”

• ordinary share(s) of HK$0.01 each in the share capital of the Company before the Capital Reorganisation becomes effective

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DEFINITIONS

“Share Consolidation” the consolidation of every 100 Shares into one Consolidated Share “Share Premium Reduction” the cancellation of the entire amount standing to the credit of the Company’s share premium account as at the date of the SGM “Shareholder(s)” holder(s) of Share(s) or Consolidated Share(s) (as the case may be) “Share Option(s)” the outstanding share option(s) granted by the Company pursuant to the Share Option Scheme and granted on 17 December 2004 and 21 February 2005 under the general mandate granted by the Shareholders in an annual general meeting held on 28 June 2004 “Share Option Scheme” the share option scheme of the Company adopted on 16 May 2002 “Supplementary Guidance” the supplementary guidance issued by the Stock Exchange on 5 September 2005 regarding adjustment of share options under Rule 17.03(13) of the Listing Rules “Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” the Hong Kong Code on Takeovers and Mergers “HK$” Hong Kong dollar, the lawful currency of Hong Kong “¥” Japanese yen, the lawful currency of Japan “%” or “per cent.” percentage or per centum

Unless otherwise specified, the conversion of Japanese Yen into Hong Kong dollar in this circular is based on the approximate exchange rate of HK$0.0656 to ¥1.

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EXPECTED TIMETABLE

2005

Latest time for return of proxy form of SGM . . . . . . . . . . . . . . . . . . . . . 10:00 a.m., Saturday, 10 December SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m., Monday, 12 December Effective date of the Capital Reorganisation . . . . . . . . . . . . . . . . . . after 4:00 p.m., Monday, 12 December Commencement of dealings in Consolidated Shares . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 13 December

Original counter for trading in Shares

(in board lots of 10,000 Shares) closes . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m., Tuesday, 13 December Temporary counter for trading in Consolidated Shares in board lots of 100 Consolidated Shares (in form of existing share certificates) opens . . . . . . . . . . . . . . . . . . . . 9:30 a.m., Tuesday, 13 December Free exchange of existing share certificates for

new share certificates commences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 13 December Original counter for trading in Consolidated Shares (in board lots of 1,000 Consolidated Shares) re-opens . . . . . . . . . . . 9:30 a.m., Thursday, 29 December Parallel trading in Consolidated Shares (in form of new and existing certificates) begins . . . . . . . . . . . . . . . . 9:30 a.m., Thursday, 29 December Designated broker starts to stand in the market to provide matching service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 29 December 2006 Temporary counter for trading in Consolidated Shares in board lots of 100 Consolidated Shares (in form of existing share certificates) closes . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m., Friday, 20 January Parallel trading in Consolidated Shares (in form of new and existing certificates) ends . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m., Friday, 20 January Designated broker ceases to stand in the market to provide matching service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m., Friday, 20 January Free exchange of existing share certificates for new share certificates ends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 25 January

Note: All times and dates refer to Hong Kong local times and dates in this circular.

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LETTER FROM THE BOARD

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SUN INNOVATION HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 547)

Executive Directors: Mr. Michele Matsuda (Chairman, CEO & Executive Managing Director) Mr. Leung To Kwong, Valiant Mr. Cheung Chi Fai, Frank Mr. Daijiro Nishihama

Independent Non-Executive Directors: Mr. Zhou Ji, Jason Mr. Keijiro Hasegawa Professor Chen Tien-yiu Theodore

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal place of business in Hong Kong: 3rd Floor, Chung Nam Building 1 Lockhart Road Wanchai Hong Kong

18 November 2005

• To the Shareholders and, for information only, holders of the CPS and Share Options

Dear Sir or Madam,

PROPOSED CAPITAL REORGANISATION AND CHANGE IN BOARD LOT SIZE

INTRODUCTION

On 28 October 2005, the Company announced the proposed Capital Reorganisation, which is subject to, among others, the approval of the Shareholders at the SGM. In addition, the board lot size of the Company will be changed upon the Capital Reorganisation becoming effective.

The purpose of this circular is to provide you with further details of the Capital Reorganisation and to give you notice of the SGM at which a relevant resolution will be proposed to consider and, if thought fit, approve the Capital Reorganisation.

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LETTER FROM THE BOARD

CAPITAL REORGANISATION

The Company proposes to put forward the Capital Reorganisation as follows, for approval by the Shareholders:

• (a) the Share Premium Reduction involving the cancellation of the entire amount standing to the credit of the Company’s share premium account as at the date of the SGM. The credit arising therefrom will be transferred to the contributed surplus account of the Company where it will be applied to partially set off the unaudited accumulated losses of the Company. As at 30 June 2005, the amount standing to the credit of the Company’s share premium account was approximately HK$35.52 million and the unaudited accumulated losses of the Company were approximately HK$163.32 million;

• (b) the Share Consolidation involving the consolidation of every 100 issued and unissued Shares into one Consolidated Share. Since the date of the Announcement and to the best of the knowledge of the Directors, 400,000,000 CPS have been converted into Shares. As at the Latest Practicable Date, the authorised share capital of the Company is HK$750,000,000, comprising HK$719,333,334 divided into 71,933,333,334 Shares and HK$30,666,666 divided into 3,066,666,666 CPS of HK$0.01 each, of which 7,401,505,639 Shares and 1,300,000,000 CPS have been issued and fully paid. Immediately after the completion of the Share Consolidation but before the Authorised Share Capital Reclassification, the authorised share capital of the Company will be HK$750,000,000 comprising HK$719,333,334 divided into 719,333,334 Consolidated Shares of HK$1.00 each and HK$30,666,666 divided into 3,066,666,666 CPS of HK$0.01 each. Assuming no new Shares are issued prior to the SGM, of the authorised ordinary share capital of the Company of 719,333,334 Consolidated Shares, 74,015,056 Consolidated Shares will be issued and fully-paid and 645,318,278 Consolidated Shares will remain unissued. As there will be no consolidation of the CPS, the number of CPS issued and fully paid will remain at 1,300,000,000 CPS. The Consolidated Shares will rank pari passu in all respects with each other and the Share Consolidation will not result in any change in the relative rights of the Shareholders; and

• (c) immediately after the Share Consolidation becomes effective, the Authorised Share Capital Reclassification will be effected, which involves: (i) the increase in the authorised ordinary share capital of the Company from HK$719,333,334 divided into 719,333,334 Consolidated Shares of HK$1.00 each to HK$730,000,000 divided into 730,000,000 Consolidated Shares by the creation of 10,666,666 Consolidated Shares; and (ii) the diminution in the authorised convertible preference share capital of the Company from HK$30,666,666 divided into 3,066,666,666 CPS of HK$0.01 each to HK$20,000,000 divided into 2,000,000,000 CPS of HK$0.01 each by the cancellation of 1,066,666,666 authorised but unissued CPS. Upon completion of the Authorised Share Capital Reclassification, the authorised share capital of the Company will be HK$750,000,000, of which the authorised ordinary share capital of the Company will be HK$730,000,000 divided into 730,000,000 Consolidated Shares of HK$1.00 each, and the authorised convertible preference share capital of the Company will be HK$20,000,000 divided into 2,000,000,000 CPS of HK$0.01 each.

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LETTER FROM THE BOARD

The Capital Reorganisation is conditional upon, inter alia, the approval of the Shareholders at the SGM.

Reasons and effects of the Capital Reorganisation

Share Premium Reduction

As at 30 June 2005, the Company had accumulated losses of approximately HK$163.32 million and the amounts standing to the credit of the share premium and contributed surplus accounts were approximately HK$35.52 million and HK$137.64 million respectively. The Directors are of the view that the Share Premium Reduction and the elimination of the accumulated losses of the Company will enable the Company to have a capital structure which permits dividend payments as and when the Directors deem appropriate in the future, although the Company does not currently have any intention of declaring dividends. The Board believes that the Share Premium Reduction and the elimination of the entire accumulated losses of the Company will be beneficial to the Company and Shareholders as a whole.

Share Consolidation

The closing prices of Shares quoted on the Stock Exchange in the period from 4 July 2005 to the Last Trading Day have been within a range from the highest of HK$0.064 per Share as recorded on several trading days in July 2005 to the lowest of HK$0.035 per Share as recorded on 13 October 2005. As the recent closing prices of Shares have been approaching the extremity of HK$0.01 per Share as stipulated under the Listing Rules, the Directors are of the view that the Share Consolidation will be necessary to increase the absolute price and the nominal value of the Shares.

The Board is of the view that, after the Share Consolidation, the Company will have greater flexibility in issuing new Consolidated Shares in the future. Thus, they believe the Share Consolidation is in the best interests of the Company and Shareholders as a whole. Fractional Consolidated Shares will not be issued to the Shareholders but will be aggregated and, if possible, sold for the benefit of the Company.

Other than the relevant expenses of approximately HK$200,000 incurred under the Capital Reorganisation, the implementation of the Capital Reorganisation will have no effect on the consolidated net asset value of the Group, nor will it alter the underlying assets, business, operations, management or financial position of the Company or the interests of the Shareholders as a whole.

The Company will apply to the Listing Committee of the Stock Exchange for the listing of and permission to deal in the Consolidated Shares in issue after the Capital Reorganisation becoming effective.

Authorised Share Capital Reclassification

Since the Company has no intention to issue further convertible preference shares in the near future, the Directors are of the view that the Authorised Share Capital Reclassification will provide the Company with more flexibility to issue further Consolidated Shares in the future and, thus, is in the interests of the Company and Shareholders as a whole.

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LETTER FROM THE BOARD

Conditions of the Capital Reorganisation

The Capital Reorganisation is conditional upon the following:

• (a) the passing by the Shareholders of the necessary resolution at the SGM to approve the Capital Reorganisation;

• (b) compliance with the relevant legal procedures and requirements under Companies Act to effect the Capital Reorganisation (including the publication of a press notice in an appointed newspaper in Bermuda advertising the Share Premium Reduction); and

• (c) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Consolidated Shares and the Consolidated Shares falling to be issued upon exercise of the Share Options or conversion of the CPS.

Expected effective date of the Capital Reorganisation

Subject to the above conditions being fulfilled, the Capital Reorganisation is expected to become effective after 4:00 p.m. on Monday, 12 December 2005.

Odd lots matching service

In order to alleviate Shareholders’ difficulty in dealing in odd lots that may arise as a result of the Capital Reorganisation or change in board lot size, the Company has appointed Kingston Securities Limited to act as the agent to match, on a “best effort” basis, the sale and purchase of odd lots of Consolidated Shares arising from the Share Consolidation or change in board lot size during the period from Thursday, 29 December 2005 to Friday, 20 January 2006 (both dates inclusive). Such arrangement is to facilitate Shareholders who wish to dispose of or top up their odd lots of Consolidated Shares. Shareholders who wish to take advantage of this matching facility may contact Ms. Rosita Kiu of Kingston Securities Limited at Suite 2801, 28th Floor, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong at telephone number (852) 2298-6215 during the aforementioned period.

Shareholders should note that the matching service is on a “best efforts” basis only and successful matching of the sale and purchase of odd lots of Consolidated Shares is not guaranteed and will depend on there being adequate amounts of odd lots of Consolidated Shares available for such matching.

Shareholders are recommended to consult their licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser if they are not sure about the matching service described above.

Free exchange of Consolidated Share certificates

The new share certificates for the Consolidated Shares will be orange in colour in order to distinguish them from the existing share certificates which are blue in colour. Upon the Capital Reorganisation becoming effective which is expected to be after 4:00 p.m. on Monday, 12 December 2005, Shareholders

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LETTER FROM THE BOARD

may on or after Tuesday, 13 December 2005 until Wednesday, 25 January 2006 (both dates inclusive) submit their share certificates for the existing Shares to the Registrar for exchange, at the expense of the Company, for certificates for Consolidated Shares. Thereafter, certificates for the existing Shares will be accepted for exchange only on payment of a fee of HK$2.50 (or such higher amount as may from time to time be allowed by the Stock Exchange) for each new certificate issued for the Consolidated Shares. Nevertheless, certificates for the existing Shares will continue to be good evidence of legal title and may be exchanged for certificates for the Consolidated Shares at any time.

It is expected that the new share certificates for the Consolidated Shares will be available for collection within a period of 10 Business Days after the submission of the existing share certificates to the Registrar for exchange.

Trading arrangements for Consolidated Shares

Subject to the Capital Reorganisation becoming effective, the arrangements for trading in Consolidated Shares will be as follows:

• (a) from 9:30 a.m. on Tuesday, 13 December 2005, the original counter for trading in Shares in board lots of 10,000 Shares will be temporarily closed;

• (b) with effect from 9:30 a.m. on Tuesday, 13 December 2005, a temporary counter for trading in Consolidated Shares in board lots of 100 Consolidated Shares, in the form of existing share certificates for the Shares, will be opened, and for the purposes of the settlement and delivery for trading at this temporary counter, every 100 Shares will be deemed to represent one Consolidated Share. Only existing share certificates for existing Shares (blue in colour) can be traded in this temporary counter;

• (c) with effect from 9:30 a.m. on Thursday, 29 December 2005, the original counter will be reopened for trading in Consolidated Shares in board lots of 1,000 Consolidated Shares. Only share certificates for Consolidated Shares (orange in colour) can be traded at this counter;

• (d) during the period from 9:30 a.m. on Thursday, 29 December 2005 to 4:00 p.m. on Friday, 20 January 2006 (both days inclusive), parallel trading will be permitted at the above two counters;

• (e) the temporary counter for trading in the existing share certificates in board lots of 100 Consolidated Shares will be removed after the close of trading at 4:00 p.m. on Friday, 20 January 2006; and

• (f) with effect from 9:30 a.m. on Monday, 23 January 2006, trading will be carried out only in Consolidated Shares in board lots of 1,000 Consolidated Shares (in the form of new share certificates that are orange in colour). Existing share certificates (blue in colour) will only be valid for delivery and settlement in respect of dealings for the period up to and including 4:00 p.m. on Friday, 20 January 2006 and thereafter will not be acceptable for trading and settlement purposes. However, existing certificates for existing Shares (blue in colour) will

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LETTER FROM THE BOARD

continue to be good and valid evidence of legal title to Consolidated Shares on the basis of 100 Shares for one Consolidated Share and may be exchanged for share certificates for Consolidated Shares (orange in colour) at the Registrar at any time on payment of a prescribed fee.

Listing and dealings

The Company will apply to the Listing Committee of the Stock Exchange for the listing of and permission to deal in the Consolidated Shares in issue after the Capital Reorganisation becoming effective. It is expected that dealings in the Consolidated Shares will commence on Tuesday, 13 December 2005.

No part of the share capital of the Company is listed or dealt in on any other stock exchange other than the Stock Exchange and no such listing or permission to deal is being or is proposed to be sought on any other stock exchange.

Subject to the granting of the listing of, and permission to deal in, the Consolidated Shares on the Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the Consolidated Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the Capital Reorganisation becoming effective or such other dates as may be determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Adjustments in relation to the CPS, the Share Options and the Frepar Entitlement

CPS

As at the Latest Practicable Date, the Company has outstanding CPS convertible into 1,300,000,000 Shares at the conversion price of HK$0.0225 per Share. Assuming no new Shares are issued prior to the SGM, upon completion of the Capital Reorganisation, in particular the Share Consolidation, the subscription price and the number of Consolidated Shares to be issued upon conversion of the outstanding CPS will be amended in accordance with the terms and conditions of the CPS.

Upon completion of the Capital Reorganisation which, if approved, will become effective after 4:00 p.m. on 12 December 2005, the conversion price of the CPS on conversion of one CPS into one Share remains at HK$0.0225 on conversion of every 100 CPS into one Consolidated Share.

The above adjustment in relation to the conversion price of the CPS upon completion of the Capital Reorganisation has been certified by Horwath Hong Kong CPA Limited, the auditors of the Company, in accordance with the terms of the CPS.

Share Options

As at the Latest Practicable Date, the Company has outstanding Share Options convertible into 737,000,000 Shares at the subscription prices ranging from HK$0.02 to HK$0.069 per Share. Assuming no new Shares are issued prior to the SGM and upon completion of the Capital Reorganisation, the

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LETTER FROM THE BOARD

Company has outstanding Share Options entitling the holders thereof to subscribe for up to an aggregate of 7,370,000 Consolidated Shares at the subscription price ranging from HK$2.00 to HK$6.90 per Consolidated Share.

The Share Consolidation will cause an adjustment to the subscription prices to be issued under the Share Options. As such, the Company has instructed its auditors to review and certify the basis of such adjustments. In accordance with the terms of the Share Option Scheme and the Supplementary Guidance, the exercise price of and the number of Consolidated Shares falling to be allotted and issued upon full exercise of the outstanding Share Options after the Capital Reorganisation have been reviewed and certified by the Horwath Hong Kong CPA Limited, the auditors of the Company, in the following manner:

Prior to the effect of the Share Consolidation, New subscription price per Consolidated Share the original subscription price per Share and and the number of Consolidated Shares to be issued the number of Shares subject to the outstanding subject to the outstanding Share Options after the Share Options Share Consolidation 230,000,000 Shares exercisable 2,300,000 Consolidated Shares exercisable at HK$0.0468 each at HK$4.68 each 225,000,000 Shares exercisable 2,250,000 Consolidated Shares exercisable at HK$0.0652 each at HK$6.52 each 200,000,000 Shares exercisable 2,000,000 Consolidated Shares exercisable at HK$0.0578 each at HK$5.78 each 34,000,000 Shares exercisable 340,000 Consolidated Shares exercisable at HK$0.065 each at HK$6.50 each 21,800,000 Shares exercisable 218,000 Consolidated Shares exercisable at HK$0.020 each at HK$2.00 each 20,200,000 Shares exercisable 202,000 Consolidated Shares exercisable at HK$0.0346 each at HK$3.46 each 6,000,000 Shares exercisable 60,000 Consolidated Shares exercisable at HK$0.069 each at HK$6.90 each

The auditors of the Company have confirmed that the above adjustments are satisfied with the terms of the Share Option Scheme and the Supplementary Guidance. Separate notification regarding the adjustments of the Share Options will be sent to the holders of the Share Options.

Frepar Entitlement

Under the Frepar Entitlement, Frepar is entitled to 294,000,000 new Shares on the first occasion when the gross profit of Drive Limited as shown in its monthly unaudited profit and loss accounts reaches ¥10,000,000 (equivalent to about HK$656,000). To the best of knowledge of the Directors, as at the date of this circular, the monthly gross profit of Drive Limited has not yet reached ¥10,000,000.

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LETTER FROM THE BOARD

Details in relation to the Frepar Entitlement are set out in the announcement and circular of the Company dated 21 December 2004 and 12 January 2005 respectively. Based on the terms of the Frepar Entitlement, the number of Consolidated Shares entitled under the Frepar Entitlement will be adjusted to 2,940,000 Consolidated Shares upon completion of the Capital Reorganisation.

The above adjustment in relation to the Frepar Entitlement has been reviewed by Altus Capital Limited, the financial adviser of the Company, in accordance with the terms of the Frepar Entitlement. Altus Capital Limited has concluded that such adjustment is in line with the terms of the Frepar Entitlement.

CHANGE IN BOARD LOT SIZE

Based on the closing price quoted on the Stock Exchange on the Last Trading Day of HK$0.04 per Share and if the existing board lot of 10,000 Shares remain unchanged, the value per board lot before and after the Share Consolidation is HK$400 and HK$40,000 respectively. The Directors are of the view that the value per board lot after the Share Consolidation is relatively high. The Board therefore proposes the change in board lot size for trading in the Shares on the Stock Exchange from the existing 10,000 Shares per board lot to 1,000 Consolidated Shares per board lot so as to make it more affordable to Shareholders and investors of the Company to trade in the Consolidated Shares. At 1,000 Consolidated Shares per board lot, the value per board lot shall theoretically be HK$4,000. The Directors are of the view that the Share Consolidation and the change in board lot size are beneficial to the Company and Shareholders as a whole in terms of transaction cost per dollar value of each board lot. The change in board lot size of Consolidated Shares will not result in any change in the relative rights of the Shareholders.

THE SGM

It was originally stated in the Announcement that the SGM will be held at 9:00 a.m. on 12 December 2005. The Board wishes to inform that the time of the meeting has been rescheduled to 10:00 a.m. on 12 December 2005 as referred to the notice of the SGM for more details.

A notice convening the SGM to be held at 3rd Floor, Chung Nam Building, 1 Lockhart Road, Wanchai, Hong Kong at 10:00 a.m. on Monday, 12 December 2005 is set out on pages 14 to 15 of this circular at which a relevant resolution will be proposed to consider and, if thought fit, to approve the Capital Reorganisation.

A form of proxy for use at the SGM is enclosed with this circular. If you are not able to attend the meeting in person, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Registrar as soon as possible and in any event not less than 48 hours before the time appointed for holding such meeting or any adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting at the SGM or any adjourned meeting (as the case may be) should you so wish.

PROCEDURES FOR DEMANDING A POLL

Pursuant to bye-law 66 of the bye-laws of the Company, a resolution put to the vote of a meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded by:

• (i) the chairman of such meeting; or

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LETTER FROM THE BOARD

• (ii) at least three Shareholders present in person (or in the case of a Shareholder being a corporation by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or

• (iii) a Shareholder or Shareholders present in person (or in the case of a Shareholder being a corporation by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all Shareholders having the right to vote at the meeting; or

• (iv) a Shareholder or Shareholders present in person (or in the case of a Shareholder being a corporation by its duly authorised representative) or by proxy and holding Shares conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the Shares conferring that right.

A demand by a person as proxy for a Shareholder or in the case of a Shareholder being a corporation by its duly authorised representative shall be deemed to be the same as a demand by a Shareholder.

RECOMMENDATION

The Directors believe that the Capital Reorganisation is fair and reasonable and is in the interests of the Company and Shareholders as a whole and therefore recommend the Shareholders to vote in favour of the resolution to be proposed at the SGM to approve the Capital Reorganisation.

DIRECTORS’ RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular, and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

Yours faithfully, For and on behalf of

Sun Innovation Holdings Limited Michele Matsuda

Chairman

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NOTICE OF SGM

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SUN INNOVATION HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 547)

NOTICE IS HEREBY GIVEN that a special general meeting of the shareholders (“ SGM ”) of Sun Innovation Holdings Limited (the “ Company ”) will be held at 3rd Floor, Chung Nam Building, 1 Lockhart Road, Wanchai, Hong Kong on 12 December 2005 at 10:00 a.m. or any adjournment thereof for the purpose of considering and, if thought fit, passing, with or without amendments, the following resolution.

SPECIAL RESOLUTION

“THAT, conditional on the Listing Committee of The Stock Exchange of Hong Kong Limited approving the listing of, and granting permission to deal in, the Consolidated Shares (as defined below), with effect from 4:00 p.m. on the business day in Hong Kong (other than a Saturday) on which this resolution is passed:

• (a) the entire amount standing to the credit of the share premium account of the Company on the date this resolution is passed be cancelled (the “ Share Premium Reduction ”);

• (b) the credit amount arising from the Share Premium Reduction be credited to the contributed surplus account of the Company;

• (c) every one hundred (100) ordinary shares of HK$0.01 each in the issued and unissued share capital of the Company be consolidated into one (1) ordinary share (“ Consolidated Share ”) of HK$1.00 in the share capital of the Company (the “ Consolidation ”) and the directors of the Company be and are hereby authorised generally to settle as it considers expedient any difficulty which arises in relation to the Consolidation including aggregating any fractions of issued Consolidated Shares that arise on the Consolidation and selling them for the benefit of the Company;

• (d) subject to the Consolidation taking effect, the authorised share capital be increased from HK$750,000,000 to HK$760,666,666 by the creation of 10,666,666 Consolidated Shares and thereafter be diminished from HK$760,666,666 to HK$750,000,000 by the cancellation of 1,066,666,666 authorised but unissued convertible preference shares of HK$0.01 each in the share capital of the Company (“ CPS ”) such that the authorised share capital shall, thereafter, be HK$750,000,000 divided into 730,000,000 Consolidated Shares and 2,000,000,000 CPS (the “ Authorised Share Capital Reclassification ”); and

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NOTICE OF SGM

• (e) the directors of the Company be and are hereby authorised generally to do all things appropriate to effect and implement the Share Premium Reduction, the Consolidation and the Authorised Share Capital Reclassification.”

By order of the Board Sun Innovation Holdings Limited Michele Matsuda Chairman

Hong Kong, 18 November 2005

Registered office:

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal place of business in Hong Kong:

3rd Floor, Chung Nam Building

1 Lockhart Road Wanchai Hong Kong

Notes:

1. A member entitled to attend and vote at the SGM convened by the above notice is entitled to appoint one or more proxy to attend and, subject to the provisions of the bye-laws of the Company, to vote on his behalf. A proxy needs not be a member of the Company but must present in person at the SGM to represent the member. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed.

2. A form of proxy for use at the SGM is enclosed. Such form of proxy is also published on the website of The Stock Exchange of Hong Kong Limited at www.hkex.com.hk. In order to be valid, the form of proxy must be duly completed and signed in accordance with the instructions printed thereon and deposited together with a power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power or authority, at the offices of the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof, should you so wish.

3. In the case of joint holders of shares, any one of such holders may vote at the SGM, either personally or by proxy, in respect of such shares as if he was solely entitled thereto, but if more than one of such joint holders are present at the SGM personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such shares shall alone be entitled to vote in respect thereof.

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