Design Capital Limited — Proxy Solicitation & Information Statement 2009

Mar 24, 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or otherwise transferred all your shares in Yun Sky Chemical (International) Holdings Limited, you should at once hand this circular to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or another agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong 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.

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Yun Sky Chemical (International) Holdings Limited 南嶺化工（國際）控股有限公司

(incorporated in Hong Kong with limited liability)

(Stock code: 00663)

MAJOR TRANSACTION DISPOSAL OF A WHOLLY-OWNED SUBSIDIARY

25 March 2009

CONTENTS

		Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
Introduction . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
The Disposal . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Information on Huahai . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Reasons for and benefits of the Disposal	. . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Information on the Group . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Financial effects of the Disposal . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Use of proceeds . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Sufficiency of operations and/or assets .	. . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Listing Rules implications . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
General . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
APPENDIX I – FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . .		10
APPENDIX II – GENERAL INFORMATION	. . . . . . . . . . . . . . . . . . . . . . . . . . .	11

– i –

DEFINITIONS

In this circular, the following expressions have the meanings respectively set opposite them unless the context otherwise requires:

“Allied Concept”	Allied Concept Investments Limited, an investment
	holding company incorporated in Hong Kong
“associate(s)”	has the meaning ascribed to it under the Listing Rules
“Board”	the board of Directors
“Business Day”	a day (other than Saturday and Sunday) on which
	licensed banks are generally open for business in
	Hong Kong throughout their normal business hours
“Company”	Yun Sky Chemical (International) Holdings Limited, a
	company incorporated in Hong Kong with limited
	liability, whose shares are listed on the main board of
	the Stock Exchange
“Completion”	the completion of the Disposal in accordance with the
	terms of the Sale and Purchase Agreement
“Conditions Precedent”	conditions that Completion is subject to, and are set
	out in the paragraph headed “Conditions Precedent”
	of the “Letter from the Board” in this circular
“Connected Person(s)”	has the same meaning ascribed to it under the Listing
	Rules
“Consideration”	the total purchase price payable by the Purchaser in
	respect of the Disposal which is subject to
	adjustments
“Directors”	the directors of the Company
“Disposal”	the disposal of the Sale Interest by the Vendor to the
	Purchaser pursuant to the Sale and Purchase
	Agreement
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the
	People’s Republic of China

– 1 –

DEFINITIONS

“Huahai”	Fangcheng Huahai Chemicals Co., Ltd.*, 防城港華海
	化工有限公司, a company established in the PRC with
	limited liability and an indirect wholly-owned
	subsidiary of the Company
“Hua Dian”	Kunming Hua Dian Chemicals Co., Ltd.*, 昆明華甸化
	工有限公司, a company established in the PRC with
	limited liability and an indirect wholly-owned
	subsidiary of the Company
“Initial Consideration”	a sum of RMB26 million
“Latest Practicable Date”	20 March 2009, being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information for inclusion in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange
“Long Stop Date”	29 August 2009, or such other date as the Vendor and
	the Purchaser may agree in writing
“PRC”	the People’s Republic of China
“Purchaser”	Allied Concept
“RMB”	Renminbi, the lawful currency of the PRC
“Sale and Purchase Agreement”	the conditional sale and purchase agreement dated 2
	March 2009 entered into between the Vendor and the
	Purchaser in relation to the Disposal
“Sale Interest”	being the entire registered capital of Huahai
“SFO”	Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
“Share(s)”	the ordinary share(s) of HK$0.01 each in the issued
	share capital of the Company
“Shareholder(s)”	holder(s) of the Shares

• for identification purposes only

– 2 –

DEFINITIONS

“Sinogreat” Sinogreat Limited, the controlling Shareholder who is interested in 1,629,464,158 Shares, representing approximately 50.76% of the total issued share capital of the Company as at the Latest Practicable Date

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

“Vendor” Anchorage Trading Limited “Yunphos” 雲南南磷集團股份有限公司(Yunnan Phosphorus Group Co., Ltd.*), a company incorporated in the PRC with limited liability and owned as to approximately 99.56% by Mr. Wang An Kang, a former Director who resigned as an Executive Director with effect from 21 July 2008, and his associates “HK$” Hong Kong dollars, the lawful currency of Hong Kong “%” per cent

For the purpose of this circular, unless otherwise stated and save for the table setting out the financial information of Huahai on page 7 of this circular, conversions of RMB in HK$ are based on the approximate exchange rate of HK$1 to RMB0.88.

• for identification purposes only

– 3 –

LETTER FROM THE BOARD

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Yun Sky Chemical (International) Holdings Limited 南嶺化工（國際）控股有限公司

(incorporated in Hong Kong with limited liability)

(Stock code: 00663)

Executive Directors: Ms. Liu Yee Nee Mr. Li Wei Ms. Louie Mei Po Ms. Zhou Jing

Principal Place of Business in Hong Kong and Registered Office: Room 1211, 12/F, Tower 1, New World Tower 18 Queen’s Road Central Hong Kong

Independent Non-executive Directors: Mr. Ng Wai Hung Mr. Jacobsen William Keith Mr. Wu Wang Li

25 March 2009

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION DISPOSAL OF A WHOLLY-OWNED SUBSIDIARY

INTRODUCTION

On 5 March 2009, the Board announced that on 2 March 2009, after trading hours of the Stock Exchange, the Vendor, a wholly-owned subsidiary of the Company and the Purchaser, entered into the Sale and Purchase Agreement, whereby the Vendor has conditionally agreed to sell to the Purchaser the Sale Interest for the Initial Consideration of RMB26 million (equivalent to approximately HK$29.5 million), subject to adjustments provided in the Sale and Purchase Agreement as set out in this circular.

The purpose of this circular is to provide you with information on the Sale and Purchase Agreement, the Disposal and further information of the Company.

– 4 –

LETTER FROM THE BOARD

THE DISPOSAL

The Sale and Purchase Agreement

Date: 2 March 2009 (after Stock Exchange trading hours) Parties Vendor: Anchorage Trading Limited, a direct wholly-owned subsidiary of the Company Purchaser: Allied Concept

The Directors confirm that, to the best of their knowledge, information and belief and having made all reasonable enquiry, Allied Concept and its ultimate beneficial owner(s) are independent of and not connected with the Company and its Connected Persons.

Assets to be disposed of

Pursuant to the Sale and Purchase Agreement, the Vendor has conditionally agreed to sell and the Purchaser has agreed to purchase the Sale Interest, being the entire registered capital of Huahai, subject to the terms and conditions set out in the Sale and Purchase Agreement. Huahai is an indirect wholly-owned subsidiary of the Company. Upon Completion, Huahai will cease to be a subsidiary of the Company.

Further information regarding Huahai is set out in the paragraph headed “Information on Huahai” below.

Consideration and terms of payment

The Initial Consideration is RMB26 million (equivalent to approximately HK$29.5 million), subject to adjustments set out in the paragraph headed “Adjustments to the Consideration” below. The Consideration will be paid by the Purchaser to the Vendor in cash in the following manner:

• (a) as to RMB5 million (equivalent to approximately HK$5.7 million) is payable by the Purchaser within 30 days after signing of the Sale and Purchase Agreement as deposit (the “Deposit”); and

• (b) the balance of the Consideration is payable by the Purchaser upon Completion.

The Consideration was determined after arm’s length negotiation between the Vendor and the Purchaser and on normal commercial terms with reference to the net asset value of Huahai (based on its unaudited management accounts) of approximately RMB29.6 million (equivalent to approximately HK$33.6 million) as at 31 December 2008.

– 5 –

LETTER FROM THE BOARD

Taking into account the net asset value of Huahai and its future business prospects, the Directors (including the independent non-executive Directors) consider that the terms and conditions of the Disposal to be fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Adjustments to the Consideration

Based on the unaudited management accounts of Huahai, the net asset value of Huahai as at 31 December 2008 amounted to approximately RMB29.6 million (equivalent to approximately HK$33.6 million). In the event that the net asset value of Huahai as at 31 December 2008 as audited by qualified accountants (the “NAV”) is lower than RMB26 million (equivalent to approximately HK$29.5 million), the Consideration shall be the NAV. If the NAV is higher than RMB30 million (equivalent to approximately HK$34.1 million), the Initial Consideration shall be increased by the amount equivalent to the difference between the NAV and RMB30 million. If the NAV is more than or equal to RMB26 million but less than or equal to RMB30 million, the Consideration shall be equal to the Initial Consideration.

Conditions Precedent

Completion shall be conditional upon the following conditions:-

• (i) the Shareholders’ approval on the Disposal having been obtained; and

• (ii) if required, all approvals, consents and authorizations in relation to the transactions contemplated under the Sale and Purchase Agreement having been obtained from the relevant governmental authorities and regulatory bodies.

As at the Latest Practicable Date, Condition Precedent set out in paragraph (i) above has been fulfilled. If the Condition Precedent set out in paragraph (ii) above could not be fulfilled on or before the Long Stop Date, the Sale and Purchase Agreement shall cease and terminate, the Deposit shall be repaid to the Purchaser without interest and none of the parties to the Sale and Purchase Agreement shall have any obligations and liabilities hereunder save for any antecedent breaches.

Completion

Completion shall take place on the later of the third Business Day following the date on which all Conditions Precedent have been fulfilled or such other date that the Vendor and the Purchaser may agree in writing.

INFORMATION ON HUAHAI

Huahai is a company established in the PRC with limited liability, principally engaged in the manufacture and sale of phosphorus products.

– 6 –

LETTER FROM THE BOARD

Set out below is the financial information of Huahai:

		For the		For the
	six months		For the	nine months
		ended	year ended	ended
		30 June	31 December	31 December
		2008	2007	2006
	(unaudited)		(audited)	(audited)
	HK$’million		HK$’million	HK$’million
				(Note)
Turnover		138.6	227.3	119.6
Net (loss)/profit before tax		(20.7)	59.5	21.8
Net (loss)/profit after tax		(20.7)	59.5	21.8

Note: Huahai was established on 31 March 2006.

According to the management accounts of Huahai, as at 31 December 2008, the unaudited net asset value of Huahai amounted to approximately RMB29.6 million (equivalent to approximately HK$33.6 million).

REASONS FOR AND BENEFITS OF THE DISPOSAL

Reference is made to the Company’s voluntary announcement dated 8 January 2009.

The Group was engaged in the manufacturing of chemical products including phosphoric products, polyvinyl chloride (“PVC”) and PVC related products for industrial use. The Group conducted these businesses through the leasing of certain production plants, machineries and equipments under lease agreements and these agreements were either terminated or expired in accordance with their terms.

Huahai was principally engaged in the manufacturing and trading of phosphoric products. Following the expiry of the abovementioned lease agreements on 31 December 2008, Huahai ceased the production of phosphoric products. The Disposal represents a step taken by the Group to realize its investment in Huahai and allows the Group to redeploy its resources to other investment opportunities that may offer better return. Moreover, due mainly to the fall in the price of phosphoric products during the first half of year 2008, Huahai recorded a net loss before tax of approximately HK$20.7 million for the six months ended 30 June 2008. In view of the rapid contraction in the global economy, the Directors do not expect that the Group’s phosphorus manufacturing business can turnaround in the near future; therefore, it decided to downsize its phosphorus business by entering into the Sale and Purchase Agreement.

The terms of the Sale and Purchase Agreement have been determined after arm’s length negotiation between the Vendor and the Purchaser and on normal commercial terms. Taking into account the above reasons, the Board (including the independent non-executive Directors) is of the view that the terms of the Sale and Purchase Agreement are on normal commercial terms, which are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

– 7 –

LETTER FROM THE BOARD

INFORMATION ON THE GROUP

Principal Activities of the Group

The Company is an investment holding company and its principal subsidiaries are engaged in the trading of phosphoric products and optical products.

Financial and trading prospect of the Group

Following the termination of the PVC leasing agreement (details of which are set out in the Company’s announcement dated 17 September 2008), the Group ceased the production of PVC products. In respect of its phosphorus business, the Group is still engaged in the trading of phosphoric products and the Group will continue to closely monitor the prospects and development of the phosphorus market to assess whether the Group will commit to any manufacturing business through, among others, co-operation with or leasing of premises from other manufacturers.

In view of the declining performance of the chemical business, the Group diversified into a new business and traded optical products in the second half of year 2008. Despite the global economic slowdown, the newly established trading business recorded a revenue of approximately HK$30 million (based on the unaudited management accounts of the Group) in year 2008. Upon Completion, the Group will recoup its investment in Huahai and continue to identify profitable business opportunities.

Facing the current economic conditions, the Board expects that the performance of the Group will be challenging in the future. The Group will continue to closely monitor the latest developments of the chemical sector and optical sector and optimise its product mix. Since the trading of optical products has commenced for the past few months, it is expected that the optical business will continue to provide a stable income stream for the Group. The Board reviews the financial performance of the optical business from time to time for the purpose of the benefit of the Company as a whole. The Board will review the business activities and assets of the Group for the purpose of formulating new business plans and strategies for the future business development of the Group.

FINANCIAL EFFECTS OF THE DISPOSAL

Earnings

Based on the difference between the Consideration (net of expenses relevant to the Disposal) and the net asset value of Huahai as at 31 December 2008, the expected loss to be recorded by the Group in relation to the Disposal will be approximately HK$4.5 million (subject to the adjustments set out in the above paragraph headed “Adjustments to the Consideration”), and the Directors expect that approximately HK$400,000 will be applied for the payment of fees and expenses in connection with the Disposal.

Assets and Liabilities

Upon Completion, Huahai will cease to be a subsidiary of the Company and its financial results will not be consolidated into the Group’s financial statements.

– 8 –

LETTER FROM THE BOARD

Given that the Disposal presents the Group with an opportunity to realize its investments in Huahai and to redeploy its resources to invest in profitable businesses, although the expected loss from Disposal amounts to approximately HK$4.5 million, the Directors do not consider that the Disposal would have a material adverse impact to the Company’s operations.

For illustration purpose only, based on the unaudited consolidated management accounts of the Group as at 31 December 2008, immediately after the Disposal, the total assets of the Group would decrease by approximately HK$55 million and the total liabilities of the Group would decrease by approximately HK$22.7 million.

USE OF PROCEEDS

The Directors expect that approximately HK$400,000 will be applied for payment of fees and expenses in connection with the Disposal. The remaining proceeds from the Disposal of approximately RMB25.6 million (equivalent to approximately HK$29.1 million) will be used for general working capital of the Group, settlement of liabilities and funding any potential investment projects available to the Group in the future.

SUFFICIENCY OF OPERATIONS AND/OR ASSETS

Having regard to the revenue generated from the trading of phosphoric and optical products, the Directors are of the view that the Group is of sufficient operation with reference to Rule 13.24 of the Listing Rules.

LISTING RULES IMPLICATIONS

Since the applicable percentage ratios as defined under Rule 14.07 of the Listing Rules are more than 25% but less than 75%, the Disposal contemplated under the Sale and Purchase Agreement constitutes a major transaction for the Company. To the best of their knowledge, information and belief of the Directors, and having made all reasonable enquiry, none of the Shareholders has a material interest in the Sale and Purchase Agreement or is required to abstain from voting for the resolutions to approve the Sale and Purchase Agreement and the transactions contemplated thereunder. Sinogreat, being the controlling Shareholder, holding approximately 50.76% of the total issued share capital of the Company, has approved the Sale and Purchase Agreement and the transactions contemplated thereunder by written Shareholders’ approval in lieu of resolutions to be passed at the Shareholders’ meeting pursuant to Rule 14.44 of the Listing Rules.

GENERAL

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

By Order of the Board Yun Sky Chemical (International) Holdings Limited Li Wei Executive Director

– 9 –

APPENDIX I

FINANCIAL INFORMATION

1. INDEBTEDNESS

As the close of business on 31 January 2009, being the latest practicable date for ascertaining certain information relating to this indebtedness statement, the Group had the following borrowing:

• (i) unsecured and non-interest bearing borrowing from a related company, Rightlink Trading Limited of HK$69,680,000.

Save as aforesaid, at the close of business on 31 January 2009, the Group had no material outstanding mortgages, charges, debentures, or other loan capital or bank overdrafts or loans or other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptance or acceptance credits, debt securities, guarantees or other materials contingent liabilities.

The Directors confirmed that save as disclosed above, there has no material change in the indebtedness and contingent liabilities of the Group since 31 January 2009 up to the Latest Practicable Date.

2. MATERIAL CHANGE

The Directors confirm that, as at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Company since 31 December 2007, being the date to which the latest published audited financial statements of the Company were made up.

3. WORKING CAPITAL STATEMENT

The Directors are after due and careful consideration of the opinion that upon completion of the Disposal and after taking into account the financial resources available to the Group and its internal generated funds, the Group has sufficient working capital to satisfy its requirements for at least the next twelve months from the date of this circular in the absence of unforeseen circumstances.

– 10 –

APPENDIX II

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. 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, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts the omission of which would make any statement in this circular misleading.

2. CORPORATE INFORMATION OF THE COMPANY

The Company was incorporated in Hong Kong with limited liability under the law of Hong Kong. Its registered office and its principal place of business in Hong Kong are at Room 1211, 12/F, Tower 1, New World Tower, 18 Queen’s Road Central, Hong Kong.

3. DIRECTORS’ INTERESTS

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

None of the Directors or the chief executives of the Company had, as at the Latest Practicable Date, any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) 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 deemed or taken to have under such provisions of the SFO), or which were recorded in the register required to be kept by the Company under Section 352 of the SFO, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

(b) Competing interest

Upon the Sale and Purchase Agreement becoming effective, the Group would be principally engaged in the trading of phosphorus products and optical products.

– 11 –

APPENDIX II

GENERAL INFORMATION

As at the Latest Practicable Date, interest of the Directors in businesses which are likely to compete, either directly or indirectly with the phosphorus business were as follows:

Entity whose business(es) Nature of may compete or are likely to Description of interest of compete with the business of businesses of Name of the Director the Group (the “Entity”) the Entity Director in the Entity 雲南尋甸意甸磷化工有限公司 Principally engaged Ms. Zhou Jing Director (Yunnan Xundian Italphos in the production YP Co., Ltd.*) of yellow phosphorus

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and his associates had any interests which competes or was likely to compete, either directly or indirectly, with the Company’s business.

(c) Service contracts

As at the Latest Practicable Date, no Director has a service contract with the Company which is not determinable by the Company within one year without payment of compensation other than statutory compensation.

(d) Directors’ interests in assets

None of the Directors had any direct or indirect interest in any asset which had been, since 31 December 2007, being the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group.

(e) Directors’ interests in contracts

There was no contract of significance in relation to the Group’s business to which the Company, its subsidiaries, its fellow subsidiaries or its holding company was a party and in which a Director had a material interest, whether directly or indirectly, subsisting as at the Latest Practicable Date.

4. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, the following persons (other than the Directors or chief executive of the Company) had an interest or short position in the Shares or/and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or, who were, directly or indirectly, interested in

• for identification purposes only

– 12 –

APPENDIX II

GENERAL INFORMATION

5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group were as follows:

(a) Interests in the Shares

		Approximate
		percentage of
		issued share capital
	Number of	as at the Latest
Name	Shares held	Practicable Date
Chan Yuen Ming	1,647,746,948 (note 1)	51.33
Sinogreat Limited	1,629,464,158 (note 1)	50.76
Gouw Hiap Kian	321,125,636 (note 2)	10.00
Ng Choi Yue Mary	321,125,636 (note 2)	10.00
China Time Investment
Holdings Limited	208,324,182 (note 3)	6.67
Wang An Kang	208,324,182 (note 3)	6.67
Mu Yucun	208,324,182 (note 4)	6.67
Choi Koon Shum, Jonathan
(“Mr. Choi”)	188,702,795 (note 5)	5.88
Kwan Wing Kum, Janice
(“Ms. Kwan”)	188,702,795 (note 5)	5.88
Lam William Ka Chung
(“Mr. Lam”)	188,702,795 (note 5)	5.88
Lam Wong Yuk Sin, Mary
(“Mrs. Lam”)	188,702,795 (note 5)	5.88
Kingsway International
Holdings Limited
(“Kingsway International”)	188,702,795 (note 5)	5.88
Innovation Assets Limited
(“Innovation”)	188,702,795 (note 5)	5.88
World Developments Limited
(“World Developments”)	188,702,795 (note 5)	5.88
SW Kingsway Capital
Holdings Limited
(“SW Kingsway”)	188,702,795 (note 5)	5.88
Festival Developments
Limited (“Festival
Developments”)	188,702,795 (note 5)	5.88

Save as disclosed above, as at the Latest Practicable Date, the Directors are not aware of any person who is, directly or indirectly, interested in 5% or more of the issued share capital of the Company, has short positions on the Shares or underlying Shares, or has any rights to subscribe for Shares in respect of such capital.

– 13 –

APPENDIX II

GENERAL INFORMATION

Notes:

1. Chan Yuen Ming is the sole shareholder of Sinogreat Limited which owns 1,629,464,158 Shares. Probest Holdings Inc., a company incorporated in the British Virgin Islands and a wholly-owned subsidiary of Tomorrow International Holdings Limited, shares of which are listed on the Main Board of the Stock Exchange and is controlled by Chan Yuen Ming, owns 18,282,790 Shares.

2. Ng Choi Yue Mary is Gouw Hiap Kian’s spouse and she is deemed to be interested in Gouw Hiap Kian’s interest in the Shares.

3. Wang An Kang is the sole shareholder of China Time Investment Holdings Limited.

4. Mu Yucun is Wang An Kang’s spouse and she is deemed to be interested in Wang An Kang’s interest in the Shares.

5. Mr. Choi and his spouse Ms. Kwan were deemed to be interested in 188,702,795 ordinary shares in the Company by virtue of their 46% shareholding in Kingsway International. Mr. Lam and his spouse Mrs. Lam were deemed to be interested in 188,702,795 ordinary shares in the Company by virtue of their 40% shareholding in Kingsway International. Kingsway International, in turn, held 100% shareholding in Innovation. Innovation, in turn, held 100% shareholding in World Developments. World Developments, in turn, held 74% shareholding in SW Kingsway. SW Kingsway, in turn, held 100% direct shareholdings in Festival Developments.

(b) Substantial Shareholders of other member of the Group

As at the Latest Practicable Date, save as disclosed above, so far as was known to the Directors, no other person (other than the Directors or chief executive of the Company) had, or was deemed or taken to have an interest or short position in the Shares or/and underlying Shares which would fall to be disclosed to the Company 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 other members of the Group.

5. LITIGATION

As at the Latest Practicable Date, none of the members of the Group was engaged in any litigation, claim or arbitration of material importance and there was no litigation, claim or arbitration of material importance known to the Directors to be pending or threatened by or against any member of the Group.

– 14 –

APPENDIX II

GENERAL INFORMATION

6. MATERIAL CONTRACTS

The following contracts (being contracts not entered into in the ordinary course of business of the Group) have been entered into by the members of the Group within two years immediately preceding the date of this circular, and are or may be material:

• (a) the Yunnan factories coal supply contract entered into between Yunphos and Huahai dated 9 July 2007 in respect of Huahai’s purchase of coal from Yunphos and, or its associates, from 1 November 2007, being the effective date of the contract, up to 31 December 2008;

• (b) the phosphorus ancillary materials procurement agreement entered into between Yunphos and Huahai dated 9 July 2007 in respect of Huahai’s purchase of ancillary materials for repairing and, or maintaining the production facilities for phosphorus products from Yunphos and, or its associates, from 1 November 2007, being the effective date of the agreement, up to 31 December 2008;

• (c) the PVC ancillary materials procurement agreement entered into between Yunphos and Huahai dated 9 July 2007 in respect of Huahai’s purchase of ancillary materials for repairing and, or maintaining the production facilities for PVC products from Yunphos and, or its associates, from 1 November 2007, being the effective date of the agreement, up to 31 December 2009;

• (d) the PVC distribution agreement entered into between Yunphos and Huahai dated 9 July 2007 in respect of Huahai’s appointment of Yunphos and, or its associates as its distributor to distribute sodium tripolyphosphate produced at the PVC Premises to customers outside the PRC from 1 November 2007, being the effective date of the agreement, up to 31 December 2008;

• (e) the PVC leasing agreement entered into between Huahai and Yunphos on 9 July 2007, pursuant to which Huahai agreed to lease the production factories together with the ancillary structures and the machinery and equipment at the leased production factories located in Jin Suo Industrial Small District, Xundian Hui Zu Yi Zu Autonomous County, Kunming City, Yunnan Province, the PRC for the production of PVC and PVC related products, details of the agreement were set out in the circular of the Company dated 9 August 2007;

• (f) the sale and purchase agreement entered into between the Company and Asset Up Limited in relation to the Company’s disposal of a 70% equity interest in Profitown Investment Corporation at nominal consideration of HK$1 dated 2 November 2007;

• (g) the PVC leasing termination agreement entered into between Huahai and Yunphos on 11 September 2008, pursuant to which parties have agreed to terminate the PVC leasing agreement mentioned above with effect from the termination date;

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APPENDIX II

GENERAL INFORMATION

• (h) the conditional subscription agreement entered into on 8 January 2009 between the Company and Mr. Gouw Hiap Kian in relation to the subscription for, and allotment of, the aggregate of 84,880,636 new shares; and

• (i) the Sale and Purchase Agreement.

7. GENERAL

The company secretary and the qualified accountant of the Company is Miss Law Pik Kam Peggy, who is a member of the Hong Kong Institute of Certified Public Accountants.

The share registrar and transfer office of the Company in Hong Kong is Tricor Secretaries Limited at level 25, Three Pacific Place, 1 Queen’s Road East, Hong Kong.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business of the Company in Hong Kong at Room 1211, 12/F, Tower 1, New World Tower, 18 Queen’s Road Central, Hong Kong during normal business hours (i.e. from 9:30 a.m. to 6:00 p.m. on Monday to Friday except public holidays) up to and including at least 14 days from the date of this circular:

• (a) the Sale and Purchase Agreement;

• (b) the memorandum and articles of association of the Company;

• (c) the annual reports of the Company for each of the two financial years ended 31 December 2007;

• (d) the interim report of the Company for the six months ended 30 June 2008;

• (e) the material contracts referred to under the paragraph headed “Material contracts” in this Appendix; and

• (f) the circular of the Company dated 8 October 2008 and this circular.

9. MISCELLANEOUS

In the event of inconsistency, the English text of this circular shall prevail over the Chinese text.

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