Date: November 29,2000

To our valued customers,

We have been made aware that an anonymous letter was sent to all POP’s customers highlighting a change of shareholdings in our Company as contained in the Annual Return dated 15 October 2000 (the “Letter”). Base on this fact, we understand that the Letter went on in great length to insinuate, amongst other things, that you are in danger of commercial espionage; our independence as a financial system vendor has been seriously impugned; and that you are at risk for being held for ransom against high maintenance cost in the future.

It is clear that the Letter was written with malicious intent, based on twisted facts, erroneous assumptions and ridiculous accusations for the purpose of injuring POP’s business and reputation, but more importantly, we believe, to solicit and entice your business from POP in due course.

We are grateful for the confidence and trust shown by you and our other customers in light of this matter, especially your willingness to step forward in assisting and supporting us in clarifying the issues at hand and identifying the perpetrator. Dismay as we may, we acknowledge that this type of attack is not unique to us and has been employed by many offenders in the past in an attempt to entice away their competitor’s business. In any event and as a matter for the record, we set out below our response to the unfounded accusations:

  1. The decision to sell shares in POP was clearly a commercial one. Like any other business, POP is and will be interested to partner with other companies who have confidence in our vision and strategy, provide financial backing but enable us to have the autonomy to manage and operate the Company independently. We believe the sale of shares to our existing shareholders are also in line with POP’s future plan for expansion and to remain competitive in providing quality service and state-of-the-art technology to our customers. We trust this change could only be beneficial for us and for you.

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  2. In the present situation, there is nothing persuasive to suggest any shady arrangement and/or that Mr. HP Chan has been secretive relating to the sale of shares. As far as we are concerned, there is no change in the operation or management of the Company and we do not see the necessity in publicizing this matter. Furthermore, the Annual Return is clearly a public document, accessible by anyone who is interested in our Company. It is clear that we have no hesitation in disclosing such information when the need arises.

  3. Since the change of shareholding, POP has remained and will continue to remain independent. Despite the additional directors appointed, Mr. HP Chan has remained to be the mastermind behind and [chief operating officer] of the operation. We do not dispute that our Company Secretary is now Bill Lam and Associates and our registered address has been changed to 5/F Hutchison House, however, this was done for the saving of cost and to ensure that all the statutory records of the Company are received and kept by the Company Secretary. As most of you are aware, our operation and business address has remained at the same location in [Mongkok], Kowloon since [1992].

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  4. We placed great emphasis in protecting our customers’ confidential information and have tried to avoid any potential conflict in this regard. This has been clearly demonstrated in our usual business practices. As an example, in order to minimize/avoid any possibility (even a remote one) of our staff obtaining confidential information relating to your company or operation, or conspiring with your staff in using such information, we have instructed our staff to avoid all contacts, as far as possible, with yours when they are required to provide services to you on your site. Our staff was also prohibited to visit your site unless we have received a Job Order from you. Furthermore, we are fully aware of our obligation to keep your information confidential and as a result, we have in place, systems to ensure no leakage of your confidential information to others including our shareholders.

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  5. It is unclear from the Letter as to who is “the competitor”, Kingsway Securities, Kingsway ATG Asia Limited, or both? We believe the perpetrator intended to confuse you in believing that they are one of the same. You should, however, note that even though they are fellow-subsidiaries, they are in fact two independent companies belonging to two separate groups of companies, each with its own mandate and managed independently from the other. In any event, none of these two companies interfere with or control the management and operation of POP.

The Letter concluded that “whether you like it or not”, “as fact of the matter”, is that your back office systems and data can now be accessed by your competitor. Please rest assured that this is NOT the case. Furthermore, if this is really “the fact of the matter”, there is no reason for the sender to remain anonymous, fearing that he/she will be challenged in court and put to strict proof.

We have been advised that we have a right against the perpetrator and will, if necessary, take legal actions in order to protect our position. As a matter of prudence, we suggest that you should be cautious when approached by third parties in any marketing or promotional efforts in which they use this “information” as part of their marketing strategy in an attempt to shake your confidence and entice your business from us. In which case, we should be grateful if you would keep us informed of those individuals and companies.

Should you have questions in relation to the Letter or the above, please do not hesitate to call our Mr. Chan at 9142 6081 or 2391 8816

Yours faithfully,

For and on behalf of

POP Electronics Products Limited

　

_________________________________

Name: H.P.Chan

Title: Managing Director and General Manager