Bingo Group Holdings Limited — Proxy Solicitation & Information Statement 2006

May 18, 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Photar Electronics Group Limited (the “Company”), you should at once hand this circular to the purchaser or transferee, or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of the Company.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any losses howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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CHINA PHOTAR ELECTRONICS GROUP LIMITED 中國豐達電子集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8220)

DISCLOSEABLE TRANSACTION

ISSUE OF NEW SHARES TO CONSULTANT AGENTS FOR INCREASE OF OVER 2,800 POINTS-OF-SALE

Financial Adviser to the Company

A letter from the board of directors of the Company is set out on pages 4 to 13 of this circular.

This circular will remain on the GEM website at http://www.hkgem.com on the “Latest Company Announcements” page for seven days from the date of its publication.

18 May 2006

CHARACTERISTICS OF GEM

GEM has been established as a market designed to accommodate companies to which a high investment risk may be attached. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. Furthermore, there may be risks arising out of the emerging nature of companies listed on GEM and the business sectors or countries in which the companies operate. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

The principal means of information dissemination of GEM is publication on the Internet website operated by the Stock Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the GEM website at www.hkgem.com in order to obtain up-to-date information of GEM-listed issuers.

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CONTENT

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
A.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
B.	Consultancy Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
C.	The Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
D.	Utilization of the Issue Mandate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
E.	Effect on shareholding structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
F.	Reasons for entering into Consultancy Agreements and Agreements . . . . . . . . . . . . . .	13
G.	Application for listing of Consideration Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
H.	GEM Listing Rules implication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
I.	Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		14

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DEFINITIONS

In the circular, the following expressions have the meanings set out below unless the context otherwise requires.

“Agreement A”

the agreement dated 25 April 2006 entered into between the Company and Consultant Agent A, pursuant to which the Consultant Agent A shall use its best endeavor to promote and market the Company’s consumer electronic products in the PRC and to maintain the distribution networks through the Points-of-Sale without limiting the obligations under the Consultancy Agreement A

• “Agreement B”

the agreement dated 25 April 2006 entered into between the Company and Consultant Agent B, pursuant to which the Consultant Agent B shall use its best endeavor to promote and market the Company’s consumer electronic products in the PRC and to maintain the distribution networks through the Points-of-Sale without limiting the obligations under the Consultancy Agreement B

• “Agreements”

• Agreement A and Agreement B

• “Announcement” the announcement issued by the Company dated 27 April 2006 in relation to the issue of new Shares to Consultant Agents

• “associate(s)” has the meaning ascribed thereto under the GEM Listing Rules

• “Board” the board of Directors

• “Business Day” any day (excluding a Saturday) on which banks generally are open for business in Hong Kong

• “Company” China Photar Electronics Group Limited, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on GEM

• “Completion” completion of the Agreements in accordance with its terms and conditions

• “Completion Date” within 14 Business Days upon fulfillment of all conditions as set out in the sub-section headed “C.6. Conditions” under the heading “C. The Agreements” in the circular or any other date for the Completion mutually agree in writing by the parties of the Agreement(s)

• “connected persons” has the meaning ascribed thereto under the GEM Listing Rules

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DEFINITIONS

• “Consideration Shares”

• a total of 49,976,000 new Shares to be allotted and issued by the Company (as fully paid or credited as fully paid immediately after the Completion) at the Issue Price, of which, 25,696,000 and 24,280,000 new Shares to be allotted and issued to Consultant Agent A and Consultant Agent B respectively

• “Consultancy Agreement A” the consultancy agreements dated 23 January 2006 entered into between the Company and Consultant Agent A, pursuant to which the Company agreed to appoint Consultant Agent A acts as sales agent coordinator of the Company to identify and introduce certain Points-of-Sale within the entire market in the PRC for a term of two years from the date of the Consultancy Agreement A

• “Consultancy Agreement B” the consultancy agreements dated 23 January 2006 entered into between the Company and Consultant Agent B, pursuant to which the Company agreed to appoint Consultant Agent B acts as sales agent coordinator of the Company to identify and introduce certain Points-of-Sale within the entire market in the PRC for a term of two years from the date of the Consultancy Agreement B

• “Consultancy Agreements” Consultancy Agreement A and Consultancy Agreement B

• “Consultant Agent A” Whitney Associates International Limited, a company incorporated in the British Virgin Islands with limited liability, which is beneficially wholly-owned by the Independent Third Party

• “Consultant Agent B” Winter Polo Investment Limited, a company incorporated in the British Virgin Islands with limited liability, which is beneficially wholly-owned by the Independent Third Party

• “Consultant Agents” Consultant Agent A and Consultant Agent B

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

• “GEM” the Growth Enterprise Market of the Stock Exchange

• “GEM Listing Committee” the listing sub-committee of GEM

• “GEM Listing Rules” the Rules Governing the Listing of Securities on GEM

• “Group” the Company and its subsidiaries

• “HK$” Hong Kong dollars

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DEFINITIONS

“Hong Kong”

The Hong Kong Special Administrative Region of the PRC

• “Independent Third a person or persons which is/are third party(ies) independent of the Party(ies)” Company and independent of the connected person(s) of the Company

• “Issue Mandate” the issue mandate granted by the Shareholders in the annual general meeting of the Company held on 25 July 2005 to the Directors to allot and issue new Shares

• “Issue Price” HK$0.40 per each of the Consideration Shares “Last Trading Day” being 24 April 2006, being the last trading day immediately before the suspension of trading in the Shares prior to the issue of the Announcement

• “Latest Practicable Date” 15 May 2006, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular

• “Long Stop Date” being 7 July 2006, or any other date mutually agreed by the parties of the Agreement(s)

• “Points-of-Sale” the distribution stores and points-of-sale in the PRC with which the Company has entered into an agreement or arrangement for distribution to make sales of any electronic communication and consumer products of or for behalf of the Company to any customers in the PRC

• “PRC” The People’s Republic of China “SFO” Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong

• “Share(s)” share(s) of the Company of HK$0.01 each “Shareholder(s)” holder(s) of the Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “%” per cent.

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LETTER FROM THE BOARD

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CHINA PHOTAR ELECTRONICS GROUP LIMITED 中國豐達電子集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8220)

Executive Directors: Mr. Chen Jijin Ms. Huang Menghuai Mr. Zhong Min

Independent non-executive Directors:

Mr. Chen Weirong Mr. Lam Hon Kuen Mr. Law Chi Yuen

Registered office: Century Yard Cricket Square Hutchins Drive P.O. Box 2681 GT George Town Grand Cayman Cayman Islands British West Indies

Head office and principal place of business in Hong Kong: Suite 5601 The Center 99 Queen’s Road Central Hong Kong

18 May 2006

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION

ISSUE OF NEW SHARES TO CONSULTANT AGENTS FOR INCREASE OF OVER 2,800 POINTS-OF-SALE

A. INTRODUCTION

On 27 April 2006, the Board announced that the Company has entered into the Agreements with each of Consultant Agent A and Consultant Agent B respectively on 25 April 2006, pursuant to which each of Consultant Agent A and Consultant Agent B shall use its best endeavor to promote and market the Company’s consumer electronic products in the PRC and to maintain the distribution networks through the Points-of-Sale without limiting the obligations under the Consultancy Agreements. The remuneration payable by the Company to each of Consultant Agent A and Consultant Agent B was

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LETTER FROM THE BOARD

determined with reference to the number of reseller contracts entered into between the Company and the Points-of-Sale introduced by Consultant Agent A and Consultant Agent B respectively and a success fee of approximately HK$7,090 per Points-of-Sale. The remuneration will be satisfied by way of allotment and issuance of 25,696,000 and 24,280,000 new Shares at the Issue Price of HK$0.40 per Share respectively. The Issue Price of HK$0.40 per Share was determined after arm’s length negotiations between the Company and each of Consultant Agent A and Consultant Agent B and with reference to the average closing price of HK$0.401 per Share on the daily quotation sheet of the Stock Exchange for the last ten trading days up to and including the Last Trading Day. The total of 49,976,000 Consideration Shares represent approximately 8.51% of the Company’s existing share capital and approximately 7.84% of its issued share capital as enlarged by the Consideration Shares.

As the applicable percentage ratios exceed 5% but less than 25%, the entering into the Agreements constitutes a discloseable transaction of the Company under Chapter 19 of the GEM Listing Rules.

The purpose of this circular is to provide the Shareholders with further information of the Agreements.

B. CONSULTANCY AGREEMENTS

B.1. The background of the Consultancy Agreements

In order to further expand the distribution network, the Company appointed Consultant Agent A and Consultant Agent B as its sales agent coordinators to introduce and identify appropriate consumer electronic stores and telecommunication stores in the PRC to the Company. Both Consultant Agent A and Consultant Agent B have strong connections in electronic and telecommunication markets and developed extensive networks with electronics and telecommunications stores in the PRC. Therefore, the Company entered into the Consultancy Agreements with each of Consultant Agent A and Consultant Agent B on 23 January 2006 in the ordinary and usual course of business. Details of the Consultancy Agreements are set out as follows:

Date: 23 January 2006 Parties: The Company Consultant Agent A: Whitney Associates International Limited, a limited liability company incorporated in the British Virgin Islands, which is beneficially wholly-owned by the Independent Third Party. The principal business of the Consultant Agent A and its subsidiaries are the provision of telecommunication related services and development of a retail distribution network in the PRC.

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LETTER FROM THE BOARD

Consultant Agent B:

Winter Polo Investment Limited, a limited liability company incorporated in the British Virgin Islands, which is beneficially wholly-owned by the Independent Third Party. The principal business of the Consultant Agent B and its subsidiaries are the provision of mobile services and marketing and analytic services which currently working with over 10,000 retail stores in the PRC.

To the best of the knowledge, information and belief of the Board, and having made all reasonable enquiries, each of Consultant Agent A and Consultant Agent B and their respective associates, together with their ultimate beneficial owners, are (i) Independent Third Parties and (ii) not related to and not connected with each other.

B.2. Terms of the Consultancy Agreements

Agency Services

Pursuant to the Consultancy Agreements, the Company agreed to appoint Consultant Agent A and Consultant Agent B to act as sales agent coordinators of the Company to identify and introduce certain Points-of-Sale within the PRC market for a term of two years from the date of the Consultancy Agreements. Each of Consultant Agent A and Consultant Agent B will provide the following consultancy services on a best-effort basis to the Company in the following phases under the defined scope of work:

Phases

• Phase 1: Identify and introduce appropriate consumer electronics stores and telecommunications stores in the PRC.

• Phase 2: Introduce each store(s) to the Company and assist in the negotiation of sales agreement between the Company and the prospective store(s).

• Phase 3: Ensure that the Points-of-Sale meet the requirements of the Company after the sales agreement(s) entered into between the Company and the prospective store(s).

• Phase 4: Ensure that the qualified Points-of-Sale sign an reseller contract directly with the Company.

Scope of Services

1. Assist the Company in introducing the background information of the Company to the prospective store(s) to be invited;

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LETTER FROM THE BOARD

1. Ensure that the Points-of-Sale complies with the marketing requirements established by the Company; and

2. Ensure that the Points-of-Sale complies with the after-sale service requirements established by the Company.

Term

The Consultancy Agreements shall be valid and in force for a period of 24 months from the date of the Consultancy Agreements (“Service Period”) (i.e. 23 January 2006 up to 22 January 2008). At the end of Service Period, the Consultancy Agreements will expire automatically unless extended by written agreement by both parties.

Basis of remuneration

Each of Consultant Agent A and Consultant Agent B has agreed to waive the retainer advisory fee. Upon entering into an agreement between the Company and the distribution store which was introduced by either Consultant Agent A or Consultant Agent B or their respective agents, of any form during the Service Period, the Company shall pay in cash the success fee of approximately HK$7,090 per individual store to the relevant Consultant Agents. The basis of the success fee of approximately HK$7,090 was determined with reference to the aggregate amount of the product listing and displace leasing fee, marketing cost and other running costs per Points-of-Sale. The remuneration payable by the Company to each of Consultant Agent A and Consultant Agent B were determined after arm’s length negotiations between the Company and each of Consultant Agent A and Consultant Agent B and with reference to the number of reseller contracts entered into between the Company and the Points-of-Sale introduced by Consultant Agent A and Consultant Agent B respectively and a success fee of approximately HK$7,090 per Points-of-Sale.

C. THE AGREEMENTS

C.1. The background of the Agreements

As of the date of the Agreements, 1,450 and 1,370 Points-of-Sales were successfully introduced to the Company by Consultant Agent A and Consultant Agent B respectively and the Company has signed a total of 2,820 reseller contracts directly with the Points-of-Sale. Pursuant to the Consultancy Agreements, the success fee introduced by each of the Consultant Agents and their respective agents will be approximately HK$7,090 per Point-of-Sale. The remuneration payable in cash to the Consultant Agent A and Consultant Agent B shall be approximately HK$10,280,500 and HK$9,713,300 respectively which were determined with reference to 1,450 and 1,370 reseller contracts entered into between the Company and the Points-of-Sale introduced by Consultant Agent A and Consultant Agent B respectively and the success fee.

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LETTER FROM THE BOARD

With the purpose to maintain the current liquidity position of the Company, the Company proposed to each of the Consultant Agents to accept the Consideration Shares instead of cash for the remuneration. In view of the potential business growth of the Company, each of Consultant Agent A and Consultant Agent B agreed to enter into the Agreements with the Company on 25 April 2006, pursuant to which each of the Consultant Agent A and Consultant Agent B agreed that the remuneration shall be satisfied by way of allotment and issuance of the Consideration Shares instead of satisfied by way of cash resources from the Group. Save as mentioned above, each of Consultant Agent A and Consultant Agent B agreed that all obligations, covenants, stipulations, representations, warranties and undertakings to be performed or observed by each of the Consultancy Agreements and all those rights and powers shall remain and continue to be of full force and effect.

C.2. Agreement A

Date: 25 April 2006 Parties: The Company Consultant Agent A

Terms of the Agreement A

Pursuant to the Agreement A, Consultant Agent A shall use its best endeavor to promote and market the Company’s consumer electronic products in the PRC and to maintain the distribution networks through the Points-of-Sale without limiting the obligations of the Consultant Agent A under the Consultancy Agreement A. Immediately after the date of the Agreement A, Consultant Agent A shall maintain the distribution networks through the existing Points-of-Sale only. Should there are any new or additional Points-of-Sale identified, the prior approval should be obtained from the Company.

Remuneration

The remuneration payable by the Company to Consultant Agent A under the Agreement A was determined with reference to the 1,450 reseller contracts entered into between the Company and the Points-of-Sale introduced by Consultant Agent A and a success fee of approximately HK$7,090 per Points-of-Sale. Pursuant to the terms of the Agreement A, the remuneration shall be satisfied by way of allotment and issuance of 25,696,000 new Shares (represent approximately 4.38% of the existing issued share capital of the Company and approximately 4.03% of the issued share capital of the Company as enlarged by the new Shares to be allotted and issued to Consultant Agent A) at the Issue Price of HK$0.40 on Completion as full settlement of the remuneration payable by the Company to Consultant Agent A under the Consultancy Agreement A.

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LETTER FROM THE BOARD

C.3. Agreement B

Date: 25 April 2006

Parties: The Company

Consultant Agent B

Terms of the Agreement B

Pursuant to the Agreement B, Consultant Agent B shall use its best endeavor to promote and market the Company’s consumer electronic products in the PRC and to maintain the distribution networks through the Points-of-Sale without limiting the obligations of the Consultant Agent B under the Consultancy Agreement B. Immediately after the date of the Agreement B, Consultant Agent B shall maintain the distribution networks through the existing Points-of-Sale only. Should there are any new or additional Points-of-Sale identified, the prior approval should be obtained from the Company.

Remuneration

The remuneration payable by the Company to Consultant Agent B under the Agreement B was determined with reference to the 1,370 reseller contracts entered into between the Company and the Points-of-Sale introduced by Consultant Agent B and a success fee of approximately HK$7,090 per Points-of-Sale. Pursuant to the terms of the Agreement B, the remuneration shall be satisfied by way of issuance and allotment of 24,280,000 new Shares (represent approximately 4.13% of the existing issued share capital of the Company and approximately 3.81% of the issued share capital of the Company as enlarged by the new Shares to be allotted and issued to Consultant Agent B) at the Issue Price of HK$0.40 on Completion as full settlement of the remuneration payable by the Company to Consultant Agent B under the Consultancy Agreement B.

C.4. Consideration Shares

The total of 49,976,000 Consideration Shares will be issued under the Issue Mandate pursuant to a resolution at the annual general meeting of the Company held on 25 July 2005. The Consideration Shares represent approximately 8.51% of the existing issued share capital of the Company and approximately 7.84% of the issued share capital of the Company as enlarged by the Consideration Shares. The market value of the Consideration Shares, based on the closing price of HK$0.390 per Share as quoted on the daily quotation sheet of the Stock Exchange on the Last Trading Day is approximately HK$19.49 million. The Issue Price of HK$0.40 was determined after arm’s length negotiations between the Company and each of Consultant Agent A and Consultant Agent B and with reference to the average closing price of HK$0.401 per Share on the daily quotation sheet of the Stock Exchange for the last ten trading days up to and including the Last Trading Day.

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LETTER FROM THE BOARD

The Issue Price per Consideration Share represents:

• a premium of approximately 4.71% to the average closing price of HK$0.382 per Share on the daily quotation sheet of the Stock Exchange for the last five trading days up to and including the Last Trading Day;

• a discount of approximately 0.25% to the average closing price of HK$0.401 per Share on the daily quotation sheet of the Stock Exchange for the last ten trading days up to and including the Last Trading Day; and

• a premium of approximately 14.29% to the closing price of HK$0.350 per Share on the daily quotation sheet of the Stock Exchange on the Latest Practicable Date.

The Consideration Shares shall be (i) allotted and issued free from all charges, liens, options, encumbrances, equities and other claims and interests and with all rights attach and (ii) rank pari passu in all respects with the existing issued fully paid Shares, including the rights to receive in full all dividends and other distributions declared after the date of allotment of the Consideration Shares.

In view of the fact that the (i) Issue Price represents a premium to the average closing price for the last five trading days up to and including the Last Trading Day; and (ii) the issue of the Consideration Shares to the Consultant Agents can provide the financing alternative of the Group without affecting the cash and liquidity position of the Group, the Board considers that the Issue Price and the Consideration Shares are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

C.5. COMPLETION

Completion shall take place within 14 Business Days upon fulfillment of all conditions as set out the section headed “C.6. Conditions” below or such other date for the Completion as the parties agreed in writing.

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LETTER FROM THE BOARD

C.6. CONDITIONS

Completion is conditional upon, among others, the fulfillment of the following conditions:

• the GEM Listing Committee of the Stock Exchange granting or agreeing to grant listing of, and permission to deal in, the Consideration Shares, delivery of the relative share certificates and all relevant requirements (if any) of the Stock Exchange in respect of granting listing of and permission to deal in the Consideration Shares having been compiles with; and

• full compliance with the GEM Listing Rules.

The above conditions must be fulfilled on or before the Long Stop Date (i.e. 7 July 2006) (or such other date as mutually agreed by the parties agreed in writing), failing which the Agreements shall cease and be terminated. As at the Latest Practicable Date, the GEM Listing Committee has granted the listing of and permission to deal in the Consideration Shares. The Consideration Shares will be allotted and issued to the Consultant Agents as soon as practicable.

C.7. TERMINATION

Should any of the following events or circumstances occur on or prior to 4:00 p.m. on the Completion Date, the Agreement will be terminated and all liabilities and or obligations under the Agreement(s) shall cease and terminate and no parties shall have any claim against any other party in respect of any matter arising out or in connection with the Agreement(s) except for any antecedent breach of any liabilities and/or obligations under the Agreement(s):

• any breach of any of the representation, warranties or undertakings in the agreement or such representation, warranties or undertakings is untrue or incorrect or becomes misleading in any respect or there has been a material breach by the Company of any other provisions of the agreement; or

• the imposition of any moratorium, suspension or material restriction on trading in securities on the Stock Exchange.

Should the Agreement(s) be terminated or lapsed before the Long Stop Date, the Company will publish an announcement to notify the Shareholders in due course.

D. UTILIZATION OF THE ISSUE MANDATE

During the period from the grant of the Issue Mandate to the Latest Practicable Date, the Issue Mandate had been utilized up to 16,888,000 Shares on 20 October 2005 which represented approximately 2.87% of the issued share capital of the Company.

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LETTER FROM THE BOARD

E. EFFECT ON SHAREHOLDING STRUCTURE

There will be no changes in the control of the Company upon Completion. The following are the existing and enlarged shareholding structure of the Company immediately prior to and after the issue of the Consideration Shares to Consultant Agent A and Consultant Agent B:

Name Modern China Holdings Limited_(Note 1) Ms. Wang Li Hua(Note 2)_ Public – Consultant Agent A – Consultant Agent B – Other public Shareholders Total	Before issuance of the Immediately after issuance of Consideration Shares to the Consideration Shares to Consultant Agent A and Consultant Agent A and Consultant Agent B Consultant Agent B Number of % of Number of % of issued Shares shareholding issued Shares shareholding 346,700,000 59.02% 346,700,000 54.39% 2,400,000 0.41% 2,400,000 0.38% – – 25,696,000 4.03% – – 24,280,000 3.81% 238,356,000 40.57% 238,356,000 37.39% 587,456,000 100.00% 637,432,000 100.00%	Before issuance of the Immediately after issuance of Consideration Shares to the Consideration Shares to Consultant Agent A and Consultant Agent A and Consultant Agent B Consultant Agent B Number of % of Number of % of issued Shares shareholding issued Shares shareholding 346,700,000 59.02% 346,700,000 54.39% 2,400,000 0.41% 2,400,000 0.38% – – 25,696,000 4.03% – – 24,280,000 3.81% 238,356,000 40.57% 238,356,000 37.39% 587,456,000 100.00% 637,432,000 100.00%
		100.00%

Notes:

1. Modern China Holdings Limited is wholly-owned by Mr. Chen Jijin, an executive Director.

2. Ms. Wang Li Hua (“Ms. Wang”) was a former executive Director who resigned from the post on 14 June 2005. Based on the Form 3A of Director’s/Chief Executive’s Notice posted on the website of the Stock Exchange dated 23 November 2004 for Vaso Digital International Holdings Limited (the former name of the Company), to the best of the Directors’ knowledge, Ms. Wang holds 2,400,000 Shares. However, as the Company cannot locate Ms. Wang as at the Latest Practicable Date, the shareholding of Ms. Wang cannot be confirmed.

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LETTER FROM THE BOARD

F. REASONS FOR ENTERING INTO CONSULTANCY AGREEMENTS AND AGREEMENTS

The Company is principally engaged in, the manufacturing and sale of electronic communication and consumer products by its distribution network.

The Board is of the view that the entering into Consultancy Agreements and the Agreements could provide the Group with an excellent opportunity to expand the marketing and distribution network of the Group without spending costs for setting up new retail stores itself to promote the Company’s electronic consumer products in various cities of PRC. With an increase of over 2,800 Points-of-Sales in the PRC, particularly covers the provinces and cities in the PRC, including but not limited to, Beijing, Guangdong, Guangxi, Xinjiang, Sichuan, Guizhou, Helongjiang, Hubei, Fujian, Anhui, Tianjin, Henan, Hunan, Shanxi, Liaoning, Jilin, Zhijiang, Gansu, Jiangxi, Shanxi, Yunnan and Hebei, the Board believes that the distribution network of the Company can be further strengthened.

The Board also believes that this arrangement could enhance market recognition of its brand and deepen the market penetration in the PRC market for a long run and at minimal cost. In addition, the Board believes that the issuance of the Consideration Shares to the Consultant Agents can provide the financing alternative of the Group without affecting the cash and liquidity position of the Group. Albeit the minor effect of the issuance of the Consideration Shares may cause dilution effect of shareholding of the other public Shareholders, the Board is of the view that, the Company would have a positive impact on the earnings base of the Group in the long run and it could retain more of its cash resources and working capital for its day-to-day operations and future developments. Taking as a whole of the terms of the Agreements and the expected commercial benefits to the Company, the Board believes that entering into Agreements are in the best interests of the Company and its Shareholders and the terms of the Agreements are fair and reasonable and beneficial to the Company and its Shareholders as a whole.

G. APPLICATION FOR LISTING OF CONSIDERATION SHARES

An application has been made to the Stock Exchange for the listing of and permission to deal in the Consideration Shares. As at the Latest Practicable Date, the GEM Listing Committee has granted the listing of and permission to deal in the Consideration Shares.

H. GEM LISTING RULES IMPLICATION

As the applicable percentage ratios exceed 5% but less than 25%, the entering into the Agreements constitutes a discloseable transaction of the Company under Chapter 19 of the GEM Listing Rules.

I. FURTHER INFORMATION

Your attention is also drawn to the additional information set out in the appendix to this circular.

Yours faithfully For and on behalf of the Board Chen Jijin Chairman

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:

• (a) the information contained in this circular is accurate and complete in all material respects and not misleading;

• (b) there are no other matters the omission of which would make any statement in this circular misleading; and

• (c) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

2.

DISCLOSURE OF INTERESTS

(a) Director’s interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the following Director had or was deemed to have interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors to be notified to the Company and the Stock Exchange:

				Approximate
				percentage
				of issued
Name of Director	Nature of interest	No. of Shares held	Position	share capital
Chen Jijin_(Note)_	Corporate	346,700,000	Long	59.02%
(“Mr. Chen”)

Note:

The Shares are owned by Modern China Holdings Limited, a company incorporated in the British Virgin Islands and 100% held by Mr. Chen, an executive Director.

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GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by Directors to be notified to the Company and the Stock Exchange.

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial Shareholders

So far as is known to the Directors, as at the Latest Practicable Date, the following party (not being Directors or chief executive of the Company) had, or was deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

			Approximate percentage
Name of Shareholder	No. of Shares held	Position	of issued share capital
Modern China Holdings	346,700,000	Long	59.02%
Limited_Note_

Note:

The issued share capital of Modern China Holdings Limited is 100% beneficially owned by Mr. Chen, an executive Director.

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other party (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying Shares (including any interests in options in respect of such capital), which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.

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GENERAL INFORMATION

APPENDIX

3. COMPETING INTERESTS

Pursuant to Rule 19.64(9) and Rule 11.04 of the GEM Listing Rules, as at the Latest Practicable Date, the following Director is considered to have interests in businesses which compete or are likely to compete, either directly or indirectly, with the businesses of the Group:

Mr. Chen is an executive Director and a controlling shareholder of the Company. He also holds the shareholdings and directorship in Guangdong Photar High Technology Co., Ltd. (“Guangdong Photar”) which engages principally in manufacturing and selling of electronic communication and consumer products. In this regard, Mr. Chen is considered to have interests in businesses which compete, or might compete, either directly or indirectly, with the businesses of the Group.

As Guangdong Photar is a private company which is not in any way related to the Company except that Mr. Chen holds 100% of its shares and being its executive director. Mr. Chen hereby undertakes to use their best endeavour to procure Guangdong Photar not to compete in any way with the Group in relation to the business of the Group and with effect from 20 June 2005, Guangdong Photar ceased to engage in any business in relation to telefacsimile machine products.

Save as disclosed herein, none of the Directors, the management shareholders or the substantial shareholders of the Company, or any of their respective associates, has engaged in any business that competes or may compete with the business of the Group or has any other conflict of interest with the Group.

4. DIRECTORS’ SERVICE CONTRACTS

Each of Mr. Chen, Ms. Huang Menghuai (“Ms. Huang”) and Mr. Zhong Min (“Mr. Zhong”) has entered into a service agreement with the Company. The service agreement between Mr. Chen, Ms. Huang and Mr. Zhong took effective on 14 June 2005, 16 June 2005 and 4 November 2005 respectively. Brief particulars of these service agreements are set out as follows:

• (a) the term of each of the service agreement shall be for an initial term of three years renewable automatically for successive terms of one year each commencing from the day next after the expiry of the then current term;

• (b) each of the service agreement may be terminated by either party giving to the other not less than three months’ written notice expiring at the end of the initial term or at any time thereafter;

• (c) Mr. Chen, Ms. Huang and Mr. Zhong are entitled to a basic monthly salary of HK$40,000, HK$15,000 and HK$15,000 respectively, subject to such increase as may be determined by the Board from time to time; and

• (d) Each of the service agreement provides for management bonus in respect of each financial year of the Company in an amount to be determined by the Board in its absolute discretion.

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GENERAL INFORMATION

APPENDIX

Save as disclosed above, none of the Directors has entered into any service contract or management agreement, proposed or otherwise with any member of the Group (excluding contracts expiring or terminable by the employer within one year without payment of compensation other than statutory compensation).

5. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against any member of the Group.

6. MISCELLANEOUS

• (a) The authorized and issued share capital of the Company as at the Latest Practicable Date are 10,000,000,000 and 587,456,000 Shares at the nominal value of HK$0.01 each in the share capital of the Company.

• (b) The registered office of the Company is located at Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681 GT, George Town, Grand Cayman, Cayman Islands, British West Indies.

• (c) The head office and principal place of business of the Company in Hong Kong is located at Suite 5601, The Center, 99 Queen’s Road Central, Hong Kong.

• (d) The branch share registrar and transfer office in Hong Kong of the Company is Tengis Limited at 26/F, Tesbury Center, 28 Queen’s Road East, Hong Kong.

• (e) The company secretary and qualified accountant of the Company is Mr. Hung Lap Kay, who is a fellow member of the Association of Chartered Certified Accountants and an associate member of the Hong Kong Institute of Certified Public Accountants, with over 10 years of professional experience in accounting and auditing.

• (f) The compliance officer of the Company is Mr. Chen, an executive Director.

• (g) The Company has established an audit committee with written terms of reference in compliance with GEM Listing Rules. The primary duties of the audit committee are to review and supervise the financial reporting process and internal control system of the Group. As at the Latest Practicable Date, the audit committee comprises three independent non-executive Directors, namely Mr. Chen Weirong, Mr. Lam Hon Kuen and Mr. Law Chi Yuen. The brief biographies of the members of the audit committee are set out as follows:

• (i) Mr. Chen Weirong, aged 46, is currently the president of Eyang Technology Development Co., Ltd. (EYANG) (深圳宇陽科技發展有限公司 ) (“Eyang”) which engages principally in developing new electronic components for electronic goods and providing comprehensive services on components for mobile communication and

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GENERAL INFORMATION

APPENDIX

digital products. Prior to joining Eyang, Mr. Chen Weirong had held offices/positions as vice-president (operation), chief executive officer and vice-president of the board of directors of Konka Group (康佳集團 ). He was also the vice-president of China Oct Group (中國華僑城集團 ). Mr. Chen Weirong is a senior engineer who had graduated from South China University of Technology (中國華南理工大學 ) in 1982. In 1996, he had been awarded with “Top Ten Outstanding Young Enterpriser” （「十大 傑出青年企業家」） of Shenzhen and “China Master Of Operation And Management” （「中國經營管理大師」）. In 1997, Mr. Chen Weirong was also awarded with “National Labor Medal” （「全國五一勞動獎章」） and in 1998, he had been elected as a representative of the Ninth National People’s Congress. Mr. Chen Weirong also serves as an independent non-executive director of Sino Haijing Holdings Limited, a company listed on the GEM.

• (ii) Mr. Lam Hon Kuen, aged 38, was graduated from the University of Hong Kong with a Bachelor Degree in Social Services. Mr. Lam is a fellow member of the Association of Chartered Certified Accountants and an associate member of the Hong Kong Institute of Certified Public Accountants. He has over 16 years of experience in auditing, accounting and financial management.

• (iii) Mr. Law Chi Yuen, aged 48, is a solicitor practicing in Hong Kong. He obtained a bachelor degree in science and a master’s degree in philosophy from the University of Hong Kong in 1978 and 1983 respectively. Mr. Law was admitted as a solicitor in Hong Kong (1983), United Kingdom (1987), Singapore (1991) and Australia (1991). He is also a member of The Chartered Institute of Arbitrators. He is Chairman of the Appeal Board Panel under the Entertainment Special Effects Ordinance appointed by Secretary for Information Technology and Broadcasting. Apart from some social services, such as Free Legal Advice Scheme, he is also member of Solicitors Disciplinary Tribunal, Obscene Articles Tribunal, Appeal Panel (Estate Agents Ordinance), HK Film Development Fund and Market Misconduct Tribunal (SFO). Mr. Law also serves as an independent non-executive director of A & K Educational Software Holdings Limited, a company listed on the GEM.

• (h) The English text of this circular shall prevail over the Chinese text in case of inconsistency.

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