Dongyue Group Limited — Proxy Solicitation & Information Statement 2008

May 14, 2008

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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 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 stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Dongyue Group Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission.

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DONGYUE GROUP LIMITED 東 岳 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(stock code: 189)

CONTINUING CONNECTED TRANSACTIONS AND

REVISION OF ANNUAL CAPS

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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China Everbright Capital Limited

A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on page 11 of this circular. A letter from China Everbright Capital Limited containing its advice and recommendation to the Independent Board Committee and the Independent Shareholders is set out on pages 12 to 19 of this circular.

The notice convening the extraordinary general meeting (the ‘‘EGM’’) of the Company to be held at 12:00 p.m. on 30 May 2008 at Room 3203, 32/F, Admiralty Centre I, 18 Harcourt Road, Admiralty, Hong Kong is set out on pages 26 to 27 of this circular. A form of proxy for the EGM is also enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the office of the Hong Kong branch share registrar and transfer office of the Company, Computershare Hong Kong Investor Services Limited, at Shops 1712–16, 17th 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 EGM or any adjourned meeting thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the EGM or any adjourned meeting thereof should you so desire.

13 May 2008

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Revised Chifeng Peak Copper Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Historical amounts and annual caps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Reasons for Revised Annual Caps and
Revised Chifeng Peak Copper Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Implications of the Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Procedures for demanding a poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Letter from China Everbright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Appendix — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26

– i –

DEFINITIONS

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

‘‘AHF’’ Anhydrous fluoride, which contains 100% hydrofluoric acid. It is typically derived from acid grade fluorspar and is the most commonly used raw material to provide fluorine to manufacture fluorochemicals ‘‘Announcement’’ the announcement of the dated 5 2008 to,

the announcement of the Company dated 5 May 2008 relating to, amongst other things, Revised Chifeng Peak Copper Purchase Agreement and Chifeng Peak Transactions

• ‘‘associates’’ has the meaning ascribed thereto under the Listing Rules

‘‘Board’’ the board of Directors ‘‘ChifengChifeng Peak Copper’’’’ 赤峰金峰銅業有限公司峰金峰銅業有限公司金峰銅業有限公司峰銅業有限公司銅業有限公司業有限公司有限公司限公司公司司 (Chifeng Peak Copper Co., Ltd.), a limited liability company established in the PRC, which owns 29% of the equity interest in Dongyue Peak

• ‘‘ChifengChifeng Peak Copper’’’’ 赤峰金峰銅業有限公司峰金峰銅業有限公司金峰銅業有限公司峰銅業有限公司銅業有限公司業有限公司有限公司限公司公司司 (Chifeng Peak Copper Co., Ltd.), a limited liability company established in the PRC, which owns 29% of the equity interest in Dongyue Peak

• ‘‘Chifeng Peak Copper Purchase Framework Agreement dated 6 July 2007 entered into between Agreement’’ Chifeng Peak Copper and Dongyue Peak in relation to the supply of sulphuric acid, electricity and steam from Chifeng Peak Copper

• ‘‘Chifeng Peak Transactions’’ the transactions between the Group and Chifeng Peak Copper contemplated under the Revised Chifeng Peak Copper Purchase Agreement

• ‘‘China Everbright’’ China Everbright Capital Limited, a corporation licensed to carry out type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities under the SFO, which has been appointed as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Revised Chifeng Peak Copper Purchase Agreement and the Revised Annual Caps

• ‘‘Company’’ Dongyue Group Limited, a company incorporated in the Cayman Islands with limited liabilities, the shares of which are listed on the main board of the Stock Exchange

• ‘‘connected person(s)’’ has the meaning ascribed thereto under the Listing Rules ‘‘Director(s)’’ the director(s) of the Company

– 1 –

DEFINITIONS

‘‘Dongyue Peak’’ 內蒙古東岳金峰氟化工有限公司 (Inner Mongolia Dongyue Peak Fluorine Chemicals Co., Ltd.), a limited liability company established in the PRC, which is indirectly held as to 51% by the Company, and directly held as to 29% by Chifeng Peak Copper and 20% by 錫林浩特通和礦業有限責任公司 (Xilin Haote Tonghe Mining Company Limited) ‘‘EGM’’ the extraordinary general meeting to be convened by the Company to consider, and if thought fit, approve the Revised Chifeng Peak Copper Purchase Agreement and the Revised Annual Caps

‘‘Existing Annual Caps’’ the previously obtained annual caps of the transactions contemplated under the Chifeng Peak Copper Purchase Agreement for the three years ending 31 December 2009

• ‘‘Group’’ the Company and its subsidiaries

• ‘‘Hong Kong’’

• the Hong Kong Special Administrative Region of the PRC

• ‘‘Independent Board Committee’’

• the independent board committee comprising the independent non-executive Directors to advise the Independent Shareholders in respect of the Chifeng Peak Transactions

• ‘‘Independent Shareholder(s)’’

• Shareholder(s) other than Chifeng Peak Copper and its associates who is/are not required to abstain from voting at the EGM in relation to the resolution for approving the transactions contemplated under Revised Chifeng Peak Copper Purchase Agreement and the Revised Annual Caps

• ‘‘Latest Practicable Date’’ 8 May 2008, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular

• ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange

• ‘‘PRC’’

• the People’s Republic of China excluding, for the purpose of this circular, Hong Kong, the Macao Special Administrative Region of the PRC and Taiwan

• ‘‘Prospectus’’ the prospectus of the Company dated 26 November 2007

• ‘‘Revised Annual Caps’’ the revised annual caps for the Chifeng Peak Transactions for the three years ending 31 December 2010

• ‘‘Revised Chifeng Peak Copper Agreement dated 3 May 2008 entered into between Chifeng Peak Purchase Agreement’’ Copper and Dongyue Peak in relation to the supply of sulphuric acid, electricity and steam for a term up to 31 December 2010

– 2 –

DEFINITIONS

‘‘RMB’’ Renminbi, the lawful currency of the PRC ‘‘SFO’’ The Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong

‘‘Share(s)’’ ordinary share of HK$0.1 each in the share capital of the Company ‘‘Shareholders’’ the shareholders of the Company ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited ‘‘substantial shareholder’’ has the meaning ascribed thereto under the Listing Rules ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong ‘‘%’’ per cent

– 3 –

LETTER FROM THE BOARD

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DONGYUE GROUP LIMITED 東 岳 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(stock code: 189)

Executive Directors

Mr. Zhang Jianhong (Chairman)

Mr. Fu Kwan Mr. Liu Chuanqi

Mr. Cui Tongzheng Mr. Zhang Jian Mr. Yang Erning

Non-executive Director

Mr. Shaw Sun Kan, Gordon

Independent Non-executive Directors

Registered Office Scotia Centre 4th Floor, P.O. Box 2804 George Town, Grand Cayman Cayman Islands

Principal place of business in Hong Kong Room 1501

Top Glory Tower 262 Gloucester Road Causeway Bay Hong Kong

Mr. Yue Run Dong

Mr. Liu Yi

Mr. Ting Leung Huel, Stephen

13 May 2008

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS AND REVISION OF ANNUAL CAPS

INTRODUCTION

The Company announced on 5 May 2008 that, Dongyue Peak, a subsidiary of the Company and Chifeng Peak Copper entered into the Revised Chifeng Peak Copper Purchase Agreement to revise, or set, where applicable, the Existing Annual Caps under the Chifeng Peak Copper Purchase Agreement.

Chifeng Peak Copper is the substantial shareholder of Dongyue Peak. The transactions contemplated under the Revised Chifeng Peak Copper Purchase Agreement and the Revised Annual Caps constitute continuing connected transactions under the Listing Rules.

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LETTER FROM THE BOARD

The purpose of this circular is to provide you with further information regarding, among other things, the Revised Chifeng Peak Copper Purchase Agreement (including the Revised Annual Caps); the recommendation of the Independent Board Committee to the Independent Shareholders in relation to the Chifeng Peak Transactions and the Revised Annual Caps; the advice from China Everbright to the Independent Board Committee and Independent Shareholders in respect of the Chifeng Peak Transactions and the Revised Annual Caps; and to give you the notice of the EGM to be convened for the purpose of considering and, if thought fit, approving the Chifeng Peak Transactions and the Revised Annual Caps.

BACKGROUND

As disclosed in the Prospectus, the Company has obtained the waivers from the Stock Exchange from strict compliance with the announcement requirements under Chapter 14A of the Listing Rules in respect of the continuing connected transactions under the Chifeng Peak Copper Purchase Agreement. The maximum aggregate annual value for the continuing connected transactions under the Chifeng Peak Copper Purchase Agreement shall not exceed the applicable annual caps (including caps for the year ended 31 December 2007 and the years ending 31 December 2008 and 2009) as set out in the Prospectus.

Due to the rapid growth of the Group’s business, the Directors expect that some of the Existing Annual Caps in respect of the continuing connected transactions under the Chifeng Peak Copper Purchase Agreement will be exceeded. As such, the Directors intend to revise, or set, where applicable, the Existing Annual Caps under the Chifeng Peak Copper Purchase Agreement and the Group entered into the Revised Chifeng Peak Copper Purchase Agreement on 3 May 2008 in place of the Chifeng Peak Copper Purchase Agreement. Save for the extension of the term of the Chifeng Peak Copper Purchase Agreement to 31 December 2010, all other principal terms of the Chifeng Peak Copper Purchase Agreement remain unchanged.

REVISED CHIFENG PEAK COPPER PURCHASE AGREEMENT

Details of the Revised Chifeng Peak Copper Purchase Agreement are set out below:

Date:	3 May 2008
Parties:	Purchaser: Dongyue Peak, a subsidiary of the Company
	Supplier: Chifeng Peak Copper, a substantial shareholder of Dongyue
	Peak
Subject:	Pursuant to Revised Chifeng Peak Copper Purchase Agreement, Chifeng Peak
	Copper, which is principally engaged in the manufacture of sulphuric acid,
	electricity and steam, agreed to supply sulphuric acid, electricity and steam to
	any member of the Group from time to time as requested by the Group.

There is no provision in Revised Chifeng Peak Copper Purchase Agreement requiring the Group to exclusively source sulphuric acid, electricity and steam from Chifeng Peak Copper.

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LETTER FROM THE BOARD

Term: Subject to the Independent Shareholders’ approval of the Chifeng Peak Transactions, Revised Chifeng Peak Copper Purchase Agreement shall have a term for the period from 1 January 2008 to 31 December 2010 and replace Chifeng Peak Copper Purchase Agreement.

Purchase price: The purchase prices for the sulphuric acid, electricity and steam payable by the Group to Chifeng Peak Copper shall be paid by means of cheque or remittance with one month credit term and on normal commercial terms which will be determined after arm’s length negotiation between the parties with reference to the then prevailing market price of sulphuric acid, electricity and steam that are no less favorable than those offered to independent third parties.

HISTORICAL AMOUNTS AND ANNUAL CAPS

The historical amounts of the continuing connected transactions under the Chifeng Peak Copper Purchase Agreement for the year ended 31 December 2007 and 3 months ended 31 March 2008 are set out below:

					For the year	For the
					ended	3 months ended
					31 December	31 March
					2007	2008
						(unaudited)
					RMB(’000)	RMB(’000)
Chifeng	Peak	Copper	Purchase	Agreement	14,287	17,351

The Existing Annual Caps for the year ended 31 December 2007 and each of the two years ending 31 December 2008 and 2009 are set out below:

	For the year
	ended	For the year ending
	31 December	31 December
	2007	2008	2009
	RMB(’000)	RMB(’000)	RMB(’000)
Chifeng Peak Copper Purchase Agreement	15,000	35,000	40,000
The Revised Annual Caps for each of the three	years ending 31 December 2010 are set out below:
	For the year ending 31 December
	2008	2009	2010
	RMB(’000)	RMB(’000)	RMB(’000)
Revised Chifeng Peak Copper Purchase
Agreement	155,000	271,000	330,000

– 6 –

LETTER FROM THE BOARD

The Company is optimistic about the future growth in sale of its products which will lead to possible growth in the purchase of direct materials. The expected Revised Annual Caps were determined by reference to a number of factors such as historical transaction amounts, marketing plan of the Group’s products, the expected growth in demand for the Group’s products and the consequential increase in the need for the relevant direct materials to meet the Group’s requirements and the expected increase in costs of raw materials.

If the amount under the Chifeng Peak Transactions for any of the above years exceeds the Revised Annual Caps, the Company will comply with the relevant requirements as stipulated under Chapter 14A of the Listing Rules.

REASONS FOR REVISED ANNUAL CAPS AND REVISED CHIFENG PEAK COPPER PURCHASE AGREEMENT

The Group is principally engaged in manufacture and sale of refrigerants, fluoropolymers and other chemical and petrochemical products such as dichloromethane and liquid alkali.

Being well positioned to benefit from PRC’s strong economic growth which leads to higher consumer spending on electronics and household appliances in the PRC, the Group anticipates growth in domestic demand for and then sales volume of fluoropolymers and other chemical and petrochemical products. Given the nature, size and growth of the Group’s business, the Group is required, and it is of paramount significance, to source and procure raw materials including sulphuric acid, electricity and steam in massive quantity from reliable suppliers at a competitive price for use in its manufacturing process.

Chifeng Peak Copper has established itself as a reliable supplier to the Group providing raw materials which are reasonably priced and able to meet the Group’s sizable demand in quantity, stringent quality requirements and product variety. Due to the connected party relationship, it is expected that Chifeng Peak Copper will give priority to purchase orders from the Group and allow flexibility in handling the Group’s orders enabling the Group to ensure continued and reliable supply of raw materials to satisfy production needs. In addition, the relatively close vicinity of Chifeng Peak Copper (compared to the geographical locations of independent suppliers) and the existing pipelines in place between Dongyue Peak and Chifeng Peak Copper would save costs and time of transportation, setting up facilities and purchasing equipment. Sourcing raw materials from Chifeng Peak Copper would also enable the Group to streamline and centralise its raw materials procurement process boosting production efficiency and reducing the overall production costs of the Group eventually.

Apart from the above, in determining the Revised Annual Caps for the Revised Chifeng Peak Copper Purchase Agreement, the Directors have made the following assumptions:

• (a) approximate 88,300 units, 135,315 units and 157,140 units of purchases of sulphuric acid with electricity and steam consumption increasing proportionately with production for 2008, 2009 and 2010 respectively;

• (b) an expected increase in the unit purchase price of sulphuric acid of approximate 183%, 15% and 5% for 2008, 2009 and 2010 respectively;

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LETTER FROM THE BOARD

• (c) the expected increase in production of AHF by Dongyue Peak by approximately 248%, 53% and 16% for 2008, 2009 and 2010 respectively;

• (d) the relative close vicinity of Chifeng Peak Copper to Dongyue Peak and the availability of pipelines result in savings in costs and time of transportation. The significant expected increase in the unit purchase price of sulphuric acid and the production of AHF by Dongyue Peak for 2008 are mainly due to the significant increase in the general purchase cost of sulphuric acid in the market and the expected increase in demand for the AHF manufactured by Dongyue Peak so as to achieve cost-saving and sufficient supply of AHF.

In view of the prevailing booming economy of the PRC and the Group’s dedication to expanding its business, the Directors consider that the Existing Annual Caps limit and retard the potential growth of the Group. Further, the Directors consider that the Existing Annual Caps do not reflect the inflation in the PRC and the recent increase in market price of raw materials. In order to ensure the transacted amounts under the Chifeng Peak Copper Purchase Agreement not exceeding the parameters set out by the Existing Annual Caps, the Group would be bound to purchase raw materials from less friendly independent suppliers on possibly less favourable terms to cope with the expanding business. As a result, the Group would suffer a loss in flexibility and business opportunities, not being able to capitalize on the substantial growth of the PRC to the fullest extent. The Directors thereby consider that the upward adjustment of the Existing Annual Caps is well warranted to ensure keeping production costs at a minimum, obtaining reliable supply of raw materials and maximizing its production capacity to achieve greatest profits for the Group.

As agreed under the Revised Chifeng Peak Copper Purchase Agreement, the price of purchases by the Group will be negotiated on an arm’s length basis, with reference to the prevailing market price and on no less favourable terms than that Chifeng Peak Copper offered to independent third parties. The Group is not obligated to purchase raw materials from Chifeng Peak Copper and would only do so if it is in the commercial interests of the Group. The Group is free to source its raw materials from independent third parties which have historically supplied to the Group and there is no restriction in respect of the same under the Revised Chifeng Peak Copper Purchase Agreement.

The Directors (including the independent non-executive Directors) consider that the Chifeng Peak Transactions have been entered into in the ordinary course of business of the Group and the terms of the Revised Chifeng Peak Copper Purchase Agreement are normal commercial terms, fair and reasonable and are in the interests of the Company and the Shareholders as a whole; and the Revised Annual Caps are fair and reasonable.

IMPLICATIONS OF THE LISTING RULES

Chifeng Peak Copper is a substantial shareholder of Dongyue Peak, a subsidiary of the Company. Hence, the Revised Chifeng Peak Copper Purchase Agreement and the Revised Annual Caps constitute continuing connected transactions under the Listing Rules.

Given that the relevant applicable percentage ratios for determining the value for the Chifeng Peak Transactions are expected to be 2.5% or above on an annual basis and the annual consideration is more than HK$10,000,000, such transactions shall fall within Rule 14A.35 of the Listing Rules, and be subject to the disclosure and Independent Shareholders’ approval requirements under the Listing Rules. Chifeng Peak Copper and its associates are required to abstain from voting on the resolution to be

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LETTER FROM THE BOARD

proposed at the EGM regarding the Revised Chifeng Peak Copper Purchase Agreement and the transactions contemplated thereunder. The voting of the Independent Shareholders in relation to the Revised Chifeng Peak Copper Purchase Agreement at the EGM will be taken by way of poll.

EGM

Set out in this circular is a notice convening the EGM, which will be held at 12:00 p.m. on Friday, 30 May 2008 at Room 3203, 32/F, Admiralty Centre I, 18 Harcourt Road, Admiralty, Hong Kong, at which resolution will be proposed to approve the Chifeng Peak Transactions and the Revised Annual Caps.

The form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the office of the Hong Kong branch share registrar and transfer office of the Company, Computershare Hong Kong Investor Services Limited, at Shops 1712– 16, 17th 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 EGM or any adjourned meeting thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the EGM or any adjourned meeting thereof should you so desire.

PROCEDURES FOR DEMANDING A POLL

Pursuant to Article 66 of the Articles of Association of the Company, at any general meeting a resolution put to the vote of the 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

• (i) by the chairman of the meeting; or

• (ii) by 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) by 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) by 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 shares conferring that right; or

• (v) if required by the rules of the designated stock exchange, by any Director or Directors who, individually or collectively, hold proxies in respect of shares representing five percent (5%) or more of the total voting rights at such meeting.

– 9 –

LETTER FROM THE BOARD

RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee set out on page 11 of this circular. Your attention is also drawn to the letter of advice from China Everbright which contains, among other things, their advice to the Independent Board Committee and the Independent Shareholders in respect of the Chifeng Peak Transactions and the Revised Annual Caps, and the principal factors and reasons considered by them in arriving at such advice. The text of the letter from China Everbright is set out on pages 12 to 19 of this circular.

The Independent Board Committee, having taken into account the advice of China Everbright, considers that the Revised Chifeng Peak Copper Purchase Agreement is on normal commercial terms in the ordinary and usual course of business of the Group and the terms thereof and the Revised Annual Caps are in the interest of the Company and the Shareholders as a whole and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, the Directors (including the independent non-executive Directors) recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM.

Your attention is drawn to the information contained in the appendix to this circular.

Yours faithfully, For and on behalf of Dongyue Group Limited Zhang Jianhong Chairman

– 10 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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DONGYUE GROUP LIMITED 東 岳 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(stock code: 189)

13 May 2008

To the Independent Shareholders

Dear Sir or Madam,

We refer to the circular issued by the Company to the Shareholders dated 13 May 2008 (the ‘‘Circular’’) of which this letter forms part. Unless the context otherwise defines, terms used in this letter shall have the same meanings as defined in the Circular.

We have been appointed as members of the Independent Board Committee to advise the Independent Shareholders in connection with the terms of the Chifeng Peak Transactions and the Revised Annual Caps. China Everbright has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the terms of the Chifeng Peak Transactions and the Revised Annual Caps.

We wish to draw your attention to the letter from the Board as set out on pages 4 to 10 and the letter from China Everbright as set out on pages 12 to 19 of the Circular respectively.

Having considered the principal factors and reasons considered by, and the advice of China Everbright as set out in its letter of advice, we consider that the terms of the Revised Chifeng Peak Copper Purchase Agreement are on normal commercial terms and in the ordinary and usual course of business of the Group and are in the interests of the Company and the Shareholders as a whole, and the terms thereof including the Revised Annual Caps are fair and reasonable so far as the Company and the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution approving the Chifeng Peak Transactions and the Revised Annual Caps to be proposed at the EGM.

Yours faithfully,

Independent Board Committee Mr. Yue Run Dong Mr. Liu Yi Mr. Ting Leung Huel, Stephen Independent Non-executive Independent Non-executive Independent Non-executive Director Director Director

– 11 –

LETTER FROM CHINA EVERBRIGHT

The following is the full text of the letter of advice from China Everbright Capital Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of incorporation into this circular, setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Revised Chifeng Peak Copper Purchase Agreement.

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China Everbright Capital Limited

13 May 2008

To: The Independent Board Committee and the Independent Shareholders of Dongyue Group Limited

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS AND REVISION OF ANNUAL CAPS

We refer to our appointment as independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the continuing connected transactions pursuant to the Revised Chifeng Peak Copper Purchase Agreement (the ‘‘Revised Purchase Agreement’’ or ‘‘Continuing Connected Transactions’’). Details of the terms of the Revised Purchase Agreement are contained in the letter from the Board (‘‘Letter from the Board’’) of the circular to the Shareholders dated 13 May 2008 (the ‘‘Circular’’), of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise specifies.

Mr. Yue Run Dong, Mr. Liu Yi and Mr. Ting Leung Huel, Stephen, the independent non-executive Directors, have been appointed as members of the Independent Board Committee to advise the Independent Shareholders as to whether the Continuing Connected Transactions are on normal commercial terms, in the ordinary and usual course of business of the Company, fair and reasonable and in the interests of the Company and the Shareholders as a whole; and to advise the Independent Shareholders, taking into account our advice, as to whether to vote in favour of the Continuing Connected Transactions. As the independent financial adviser, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders in this regard.

We are independent of and not connected with any members of the Group or any of their substantial shareholders, directors or chief executives, or any of their respective associates, and is accordingly qualified to give an independent advice in respect of the Continuing Connected Transactions.

In formulating our recommendation, we have relied on the information, facts supplied by the Company, and the opinions expressed by and the representations of the Directors and management of the Company (‘‘Management’’). We have assumed that all the information and representations contained or referred to in the Circular were true and accurate in all respects at the date thereof and may

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LETTER FROM CHINA EVERBRIGHT

be relied upon. We have also assumed that all statements and representations made or referred to in the Circular are true at the time that they were made and continue to be true at the date thereof. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and the Directors have confirmed to us that no material facts have been withheld or omitted from the information provided and referred to in the Circular, which would make any statement in the Circular misleading.

We consider that we have (i) taken reasonable steps as required under Rule 13.80 of the Listing Rules in obtaining all necessary information from the Company and (ii) reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of any member of the Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In considering whether the terms of the transactions are fair and reasonable in so far as the Independent Shareholders are concerned, we have taken into account the following principal factors and reasons:

1. Background and reasons for the transactions

The Group is principally engaged in manufacture and sale of refrigerants, fluoropolymers and other chemical and petrochemical products such as dichloromethane and liquid alkali.

As stated in the Prospectus, with aim to enhance its production capacity of AHF, Dongyue Peak, an indirect non-wholly owned subsidiary of the Company, was established in Inner Mongolia, the PRC in February 2007. Dongyue Peak is principally engaged in the extraction and processing of fluorspar for the purpose of producing AHF. As at the Latest Practicable Date, Dongyue Peak was owned as to 51% by the Group, 29% by Chifeng Peak Copper and 20% by Xilin Tonghe. As such, Chifeng Peak Copper and Xilin Tonghe are connected persons to the Company under the Listing Rules. As stated in the Letter from the Board, Chifeng Peak Copper is principally engaged in the manufacture of sulphuric acid, electricity and steam.

As advised by the Directors, Dongyue Peak does not, at present, have any on-site sulphuric acid, electricity and steam (‘‘Raw Materials’’) generating facilities capable of catering for the needs of fluorspar production. As such, Dongyue Peak is required to source Raw Materials from third parties for its day-to-day production.

Given that (i) Chifeng Peak Copper is located close to Dongyue Peak and is capable of supplying Raw Materials to Dongyue Peak; and (ii) Chifeng Peak Copper agreed to supply Raw Materials to Dongyue Peak at purchase prices which are negotiated on an arm’s length basis and by reference to the then prevailing market prices and no less favorable than that offered to independent third parties, Dongyue Peak entered into the Chifeng Peak Copper Purchase Agreement (‘‘Existing Purchase Agreement’’) with Chifeng Peak Copper on 6 July 2007, according to the Prospectus.

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LETTER FROM CHINA EVERBRIGHT

As disclosed in the Prospectus, the Company has obtained the waiver from the Stock Exchange from strict compliance with the announcement requirements under Chapter 14A of the Listing Rules in respect of the Existing Purchase Agreement. The maximum aggregate annual value pursuant to the Existing Purchase Agreement shall not exceed RMB15 million, RMB35 million and RMB40 million (‘‘Existing Caps’’) for the three years ending 31 December 2009, respectively.

As stated in the Letter from the Board, due to the rapid growth of the Group’s business and the production capacity of Dongyue Peak, the Directors expect that Existing Caps will not be sufficient for Dongyue Peak’s current and future operation requirement. In addition, the Directors consider that the Existing Caps do not reflect the inflation in the PRC and the recent increase in market prices of Raw Materials. As set out in the Letter from the Board, transactions under the Existing Purchase Agreement for the three months ended 31 March 2008 amounted to approximately RMB17,351,000, representing approximately 49.57% of the Existing Caps for the year ending 31 December 2008.

In order to ensure the transacted amounts under the Existing Purchase Agreement not exceeding the parameters set out by the Existing Caps, the Group would be bound to purchase Raw Materials from less friendly independent suppliers on possibly less favourable terms to cope with the expanding business. As a result, the Group would suffer a loss in flexibility and business opportunities, not being able to capitalize on the substantial growth of the PRC to the fullest extent.

The Company therefore proposed that the Existing Caps be revised by entering into the Revised Purchase Agreement on 3 May 2008 on exactly the same terms as the Existing Purchase Agreement, except for the extension of the term of Revised Purchase Agreement to 31 December 2010 and the revision of the maximum aggregate annual value for the Revised Purchase Agreement (‘‘Revised Caps’’). Since Dongyue Peak is a substantial shareholder of Dongyue Peak, the transactions contemplated under the Revised Purchase Agreement constitute continuing connected transactions of the Company under the Listing Rules, and approvals from the Independent Shareholders are required.

Views

Taking into account of the above, we are of the view that the entering into the Revised Purchase Agreement by the Group is within its usual and ordinary course of business.

2. Principal terms of the Revised Purchase Agreement and comparison with independent third parties

As stated in the Letter from the Board, the purchase prices for Raw Materials payable by the Group to Chifeng Peak Copper shall be paid by means of cheque or remittance with one month credit term and on normal commercial terms which will be determined after arm’s length negotiation between the parties with reference to the then prevailing market prices of Raw Materials that are no less favorable than those offered to independent third parties. Subject to approval by the Independent Shareholders at the EGM, the Revised Purchase Agreement shall become effective from 1 January 2008 to 31 December 2010.

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LETTER FROM CHINA EVERBRIGHT

We have reviewed sample copies of certain price quotations for the Raw Materials prepared by (i) Chifeng Peak Copper; and (ii) other independent suppliers. After comparison of such price quotations, we noted that the terms, including the selling prices, offered by Chifeng Peak Copper to Dongyue Peak were not less favourable than those offered by other independent third parties to Dongyue Peak.

Shareholders should note that there is no provision in the Revised Purchase Agreement requiring Dongyue Peak to exclusively source Raw Materials from Chifeng Peak Copper. In other words, Dongyue Peak is not obligated to purchase Raw Materials from Chifeng Peak Copper and would only do so if it is in the commercial interests of Dongyue Peak. Dongyue Peak is free to source Raw Materials from independent third parties which have historically supplied to Dongyue Peak and there is no restriction in respect of the same under the Revised Purchase Agreement.

Views

In view of the above, we consider that the pricing bases for and the terms of the Revised Purchase Agreement are fair and reasonable and in the interests of the Group and the Shareholders as a whole.

3. Revised Caps

The historical transaction amounts of the Existing Purchase Agreement for the year ended 31 December 2007 and 3 months ended 31 March 2008 are set out below:

				For the year	For the three
				ended	months ended
			31	December 2007	31 March 2008
				RMB(’000)	RMB(’000)
					(unaudited)
Existing	Purchase	Agreement		14,287	17,351

The Existing Caps for the year ended 31 December 2007 and each of the two years ending 31 December 2008 and 2009 are set out below:

	For the year
	ended	For the year	ending
	31 December	31 December
	2007	2008		2009
	RMB(’000)	RMB(’000)	RMB(’000)
Existing Purchase Agreement	15,000	35,000		40,000
Year-on-year growth rate	N/A	133.33%		14.29%

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LETTER FROM CHINA EVERBRIGHT

The Revised Caps for each of the three years ending 31 December 2010 are set out below:

	For the year ending 31	For the year ending 31	December
	2008	2009	2010
	RMB(’000)	RMB(’000)	RMB(’000)
Revised Purchase Agreement	155,000	271,000	330,000
Year-on-year growth rate	N/A	74.84%	21.77%

As stated in the Letter from the Board, the Directors have made the following assumptions in calculating the Revised Caps:

• . approximate 88,300 units, 135,315 units and 157,140 units of purchases of sulphuric acid with electricity and steam consumption increasing proportionately with production for 2008, 2009 and 2010 respectively;

• . an expected increase in the unit purchase price of sulphuric acid of approximate 183%, 15% and 5% for 2008, 2009 and 2010 respectively;

• . the expected increase in production of AHF by Dongyue Peak by approximately 248%, 53% and 16% for 2008, 2009 and 2010 respectively;

• . the relative close vicinity of Chifeng Peak Copper to Dongyue Peak and the availability of pipelines result in savings in costs and time of transportation. The significant expected increase in the unit purchase price of sulphuric acid and the production of AHF by Dongyue Peak for 2008 are mainly due to the significant increase in the general purchase cost of sulphuric acid in the market and the expected increase in demand for the AHF manufactured by Dongyue Peak so as to achieve cost-saving and sufficient supply of AHF.

In assessing the reasonableness of the Revised Caps, we have reviewed and discussed with the Management the bases and assumptions underlying the projections of the Revised Caps, and we note that the significant increase in the purchase of Raw Materials from Chifeng Peak Copper are mainly attributable to:

• (1) Expansion of production capacity of Dongyue Peak

As stated in the Prospectus, the Group intends to expand its raw materials production capacity in order to strengthen its integrated production value chain, reduce its production costs, and satisfy its increasing demand for raw materials associated with its production capacity expansion.

At present, the annual production capacity of Dongyue Peak is approximately 1.5 tonnes. As advised by the Management, the annual production capacity of Dongyue Peak is expected to double to 3.0 tonnes in May 2008 when the second phase expansion plan is completed. As advised by the Management, the estimated annual production capacity of

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LETTER FROM CHINA EVERBRIGHT

Dongyue Peak will expand to 4.5 tonne in June 2009, after the third phase expansion plan is completed. As stimulated by the expansion of production capacity, the usage of Raw Materials by Dongyue Peak is expected to increase accordingly.

As set out in the Letter from the Board, transactions under the Existing Purchase Agreement for the three months ended 31 March 2008 amounted to approximately RMB17,351,000. Based on (i) the average monthly purchase amount of Raw Materials during the three months ended 31 March 2008 (approximately RMB5.8 million); and the purchase volume of Raw Materials by Dongyue Peak is expected to double after May 2008 because of the completion of second phase expansion plan in May 2008, the Management projects that the annual purchase volume of Raw Materials by Dongyue Peak from Chifeng Peak Copper will be approximately RMB104,106,000 without taking into account of the potential rise in purchase prices of Raw Materials from April 2008 to December 2008.

• (2) Significant increase in market prices of sulphuric acid

As stated in the Prospectus, the projections of the Existing Caps were based on various assumptions, including the change in purchase prices of sulphuric acid in 2007–2009. In calculating the Existing Caps, the Group predicted that the unit purchase price of sulphuric acid would increase only 20% in 2008 and remain unchanged in 2009.

However, the market prices of sulphuric acid surged substantially in both PRC domestic and international market during the last few months. According to the World Monthly Review published by PentaSul Inc., a US industry consultant in sulphur, sulphuric acid, sulphur products, in February 2008, the market price of sulphuric acid in the U.S. Gulf ranged from US$250–US$270 per tonne in February 2008, surged significantly from US$90– US$100 per tonne in August 2007.

According to market data provided by the Management, we noted that the market prices of sulphuric acid (98%) in the PRC surged by 220% from approximately RMB470 per tonne in June 2007 to approximately RMB1,504 per tonne in April 2008, meanwhile, the purchase prices of sulphuric acid (98%) paid by Dongyue Peak to Chifeng Peak Copper increased by approximately 316.6% from approximately RMB304 per tonne to approximately RMB1,268 per tonne during the same period.

As advised by the Management, the market prices of sulphuric acid are expected to continue its uptrend in the second half of 2008 due to supply demand imbalance.

Views

In view of the above, in particular, (i) the projected increment in the purchase amount of Raw Materials arising from the expansion of production capacity of Dongyue Peak; and (ii) the recent surge in the market prices of sulphuric acid during the few months, we are of the view that the bases for determining the Revised Caps on the whole, are fair and reasonable and in the interests of the Group and the Shareholders as a whole.

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LETTER FROM CHINA EVERBRIGHT

4. Reporting requirements and conditions of the Continuing Connected Transactions

Pursuant to Rules 14A.37 to 14A.40 of the Listing Rules, the Continuing Connected Transactions are subject to the following annual review requirements:

• (a) each year the independent non-executive Directors must review the Continuing Connected Transactions and confirm in the annual report and accounts that the Continuing Connected Transactions have been entered into:

• in the ordinary and usual course of business of the Group;

• either on normal commercial terms or, if there are not sufficient comparable continuing connected transaction to judge whether they are on normal commercial terms, on terms no less favourable to the Group than terms available to or from (as appropriate) independent third parties; and

• in accordance with the relevant agreements governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole;

• (b) each year the auditors of the Company must provide a letter to the Board (with a copy provided to the Stock Exchange at least 10 business days prior to the bulk printing of the Company’s annual report) confirming that the Continuing Connected Transactions:

• have received the approval of the Board;

• are in accordance with the pricing policies of the Group;

• have been entered into in accordance with the relevant agreements governing the Continuing Connected Transactions; and

• have not exceeded the Revised Caps;

• (c) the Company shall allow, and shall procure the relevant counterparties to the Continuing Connected Transactions to allow, the Company’s auditors sufficient access to their records for the purpose of reporting on the Continuing Connected Transactions as set out in paragraph (b); and

• (d) the Company shall promptly notify the Stock Exchange and publish an announcement in accordance with the Listing Rules if it knows or has reason to believe that the independent non-executive Directors and/or auditors of the Company will not be able to confirm the matters set out in paragraphs (a) and (b) respectively.

After reviewing the annual report of the Company for the financial year ended 31 December 2007, we noted that the independent non-executive Directors and the auditors of the Company had reviewed the transactions (‘‘2007 Transactions’’) under the Existing Purchase Agreement, and had confirmed that 2007 Transactions were entered into (a) in the ordinary and usual course of business of the Group; (b) either on normal commercial terms or on terms no less favourable to the Group than terms available to or from independent third parties; (c) in accordance with the relevant

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LETTER FROM CHINA EVERBRIGHT

agreements governing them on terms that are fair and reasonable and in the interests of the shareholders of the Company as a whole; (d) have not exceeded the relevant maximum amount capped in accordance to the waiver previously granted by the Stock Exchange.

Views

In light of the reporting requirements attached to the Continuing Connected Transactions, in particular, (i) the restriction of the value of the Continuing Connected Transactions by way of the Revised Caps; (ii) the proven track record of the Company in compliance with the relevant provisions governing the Continuing Connected Transactions in accordance with the Listing Rules; and (iii) the ongoing review by the independent non-executive Directors and auditors of the Company of the terms of the Continuing Connected Transactions and the Revised Caps not being exceeded, we are of the view that appropriate measures will be in place to govern the conduct of the Continuing Connected Transactions and safeguard the interests of the Independent Shareholders.

5. Recommendation

Taking into consideration the above mentioned principal factors and reasons, we consider that the terms of the Revised Purchase Agreement were entered into on normal commercial terms in the ordinary and usual course of business of the Group, and are fair and reasonable and in the interests of the Company and the Shareholders as a whole and so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Shareholders and the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Revised Purchase Agreement and the Revised Caps.

Yours faithfully, For and on behalf of

China Everbright Capital Limited Jacky Ho Managing Director

– 19 –

GENERAL INFORMATION

APPENDIX

1. 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 contained herein misleading.

2. DISCLOSURE OF INTERESTS

Interests of Directors

As at the Latest Practicable Date, the interests or short positions of the Directors and the chief executive of the Company and their respective associates in the Shares, underlying Shares and debentures of the Company or any of its associated corporation(s) (within the meaning of Part XV of the SFO) which (a) 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 and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the ‘‘Model Code’’), were as follows:

			Approximate
			% of issued
			share capital as
		Number of Shares	at the Latest
		or underlying	Practicable
Name of Director	Nature of interest	Shares	Date
Zhang Jianhong	Corporate interest1	166,551,273 (L)	7.99 (L)
	Beneficial interest	10,210,909 (L)	0.49 (L)
	Corporate interest1	16,645,955 (S)	0.80 (S)
Fu Kwan	Corporate interest2	731,781,818 (L)	35.12 (L)
		73,137,865 (S)	3.51 (S)
Cui Tongzheng	Corporate interest3	148,852,364 (L)	7.14 (L)
	Beneficial interest	7,374,544 (L)	0.35 (L)
	Corporate interest3	14,877,034 (S)	0.72 (S)
Liu Chuanqi	Corporate interest4	87,360,000 (L)	4.19 (L)
	Beneficial interest	9,076,364 (L)	0.44 (L)
	Corporate interest4	8,731,190 (S)	0.42 (S)
Yang Erning	Beneficial interest	1,701,818 (L)	0.08 (L)
Zhang Jian	Beneficial interest	567,273 (L)	0.03 (L)

Notes:

1. Pursuant to the SFO, as Mr. Zhang Jianhong held 100% interest in Dongyue Team Limited, Mr. Zhang is deemed to be interested in the 166,551,273 Shares (L) and 16,645,955 Shares (S) held by Dongyue Team Limited.

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GENERAL INFORMATION

APPENDIX

1. These Shares are directly held by MACRO-LINK International Investment Co., Ltd. which in turn is wholly owned by Macro-Link Sdn Bhd, a company in which Mr. Fu Kwan owns a 40% interest.

2. Pursuant to the SFO, as Mr. Cui Tongzheng held 100% interest in Dongyue Initiator Limited, Mr. Cui is deemed to be interested in the 148,852,364 Shares (L) and 14,877,034 Shares (S) held by Dongyue Initiator Limited.

3. These Shares are held by Dongyue Wealth Limited which is wholly owned by Mr. Liu Chuanqi. Mr. Liu is deemed to be interested in the 87,360,000 Shares (L) and 8,731,190 Shares (S) held by Dongyue Wealth Limited under the SFO.

4. L: Long Position, S: Short Position

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company or their respective associates had any interests or short positions in the Shares, underlying Shares and debentures of the Company or any of its associated corporation(s) (within the meaning of Part XV of the SFO) which (a) 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 and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

Interests of substantial shareholders

As the Latest Practicable Date, so far as is known to the Directors and the chief executive of the Company, the following persons (other than the Directors or the chief executive of the Company) had an interest or a short position in the Shares or underlying Shares of the Company 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 member of the Group:

• (i) Interests in the Shares of the Company

			Approximate %
			of issued share
		Number of Shares	capital as at
Name of		or underlying	the Latest
Shareholder	Nature of interest	Shares	Practicable Date
MACRO-LINK	Beneficial interest1	731,781,818 (L)	35.12 (L)
International		73,137,865 (S)	3.51 (S)
Investment Co.,
Ltd.
Macro-Link Sdn	Corporate interest1	731,781,818 (L)	35.12 (L)
Bhd		73,137,865 (S)	3.51 (S)
Baring Private	Corporate interest2	359,231,059 (L)	17.24 (L)
Equity Asia GP III
Limited

– 21 –

GENERAL INFORMATION

APPENDIX

			Approximate %
			of issued share
		Number of Shares	capital as at
Name of		or underlying	the Latest
Shareholder	Nature of interest	Shares	Practicable Date
Baring Private	Corporate interest2	359,231,059 (L)	17.24 (L)
Equity Asia GP
III, L.P.
Baring Private	Beneficial interest2	359,231,059 (L)	17.24 (L)
Equity Asia III
Holding (9A)
Limited
Salata Jean	Corporate interest2	359,231,059 (L)	17.24 (L)
The Baring Asia	Corporate interest2	263,364,019 (L)	12.64 (L)
Private Equity
Fund III,
L.P. 1
International Finance	Beneficial interest	179,615,530 (L)	8.62 (L)
Corporation
Dongyue Team	Beneficial interest3	166,551,273 (L)	7.99 (L)
Limited		16,645,955 (S)	0.80 (S)
Dongyue Initiator	Beneficial interest4	148,852,364 (L)	7.14 (L)
Limited		14,877,034 (S)	0.72 (S)
Bank of China	Corporate interest5	108,000,000 (L)	5.18 (L)
Group Investment
Limited
Bank of China	Corporate interest5	108,000,000 (L)	5.18 (L)
Limited
Central SAFE	Corporate interest5	108,000,000 (L)	5.18 (L)
Investments
Limited
Fulland Enterprises	Beneficial interest 5	108,000,000 (L)	5.18 (L)
Corp.

Notes:

1. These Shares are directly held by MACRO-LINK International Investment Co., Ltd. which in turn is wholly owned by Macro-Link Sdn Bhd, a company in which Mr. Fu Kwan owns a 40% interest.

2. Baring Private Equity Asia GP III Limited is the general partner of a limited partnership (Baring Private Equity Asia GP III, L.P.), which is the general partner of another limited partnership (The Baring Asia Private Equity Fund III, L.P.1), which is one of the limited partnerships comprising Baring Fund and which controls more than one-third of the issued shares in Baring Private Equity Asia III Holding (9A) Limited. Jean Eric Salata is the sole shareholder of Baring Private Equity Asia GP III Limited. Each of Baring Private Equity Asia GP III Limited and Jean Eric Salata is therefore deemed to be interested in the Shares held by Baring Private Equity Asia III Holding (9A) Limited. Jean Eric Salata disclaims beneficial ownership of such Shares, other than to the extent of his economic interest in such entities.

– 22 –

GENERAL INFORMATION

APPENDIX

1. Pursuant to the SFO, as Mr. Zhang Jianhong held 100% interest in Dongyue Team Limited, Mr. Zhang is deemed to be interested in the 166,551,273 Shares (L) and 16,645,955 Shares (S) held by Dongyue Team Limited.

2. Pursuant to the SFO, as Mr. Cui Tongzheng held 100% interest in Dongyue Initiator Limited, Mr. Cui is deemed to be interested in the 148,852,364 Shares (L) and 14,877,034 Shares (S) held by Dongyue Initiator Limited.

3. The 108,000,000 Shares were held directly by Fulland Enterprises Corp., which in turn is a subsidiary of Bank of China Group Investment Limited, which in turn is a subsidiary of Bank of China Limited, and which in turn is a subsidiary of Central SAFE Investments Limited.

4. L: Long Position, S: Short Position

5. (ii) Interests in other members of the Group

			Approximate
			% of issued
			share capital/
			registered
Name of the Company’s	Name of shareholder of	Nature of	capital of the
subsidiary	such subsidiary	interest	member
Shandong Dongyue Fluo	Shandong Hi Tech	Corporate	25%
— Silicon Materials	Investment
Co., Ltd (‘‘Dongyue
Fluorine Silicone’’)
Zibo Dongyue Chlorine	Shandong Hi Tech
Co., Ltd.	Investment (Note)
Dongyue Peak	Chifeng Peak Copper	Corporate	29%
Dongyue Peak	錫林浩特通和礦業有限	Corporate	20%
	責任公司(Xilin
	Haote Tonghe Mining
	Company Limited)
Shandong Dongyue	Hong Da Mining	Corporate	40%
Organosilicon Material	Industry
Co., Ltd
Guangdong Dongyue	Xiamen Hui Guong	Corporate	40%
Fluorine Chemical Co.,	Yuan
Ltd

Note: Shandong Hi Tech Investment is a 25% equity holder in Dongyue Fluorine Silicone which, in turn, owns 100% of Zibo Dongyue Chlorine Co., Ltd. Consequently, Shandong Hi Tech Investment indirectly owns more than 10% of Zibo Dongyue Chlorine Co., Ltd.

Save as disclosed above, as the Latest Practicable Date, so far as is known to the Directors and the chief executive of the Company, no other person (other than the Directors or the chief executive of the Company) had any interest or a short position in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of

– 23 –

GENERAL INFORMATION

APPENDIX

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 member of the Group.

3. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed services contracts with the Company or any member of the Group which does not expire or which is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2007, the date to which the latest published audited financial statements of the Group were made up.

5. COMPETING INTERESTS

As at the Latest Practicable Date, none of Directors or their respective associates had any interests in a business which is considered to compete or likely to compete, directly or indirectly, with the business of the Group.

6. OTHER INTERESTS OF THE DIRECTORS

None of the Directors had any interests, either directly or indirectly, in any assets which had been acquired or disposed of by or leased to any member of the Group, or which were proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2007, the date to which the latest published audited consolidated accounts of the Group were made up.

None of the Directors was materially interested in any contract or arrangement entered into by any member of the Group, which was subsisting as at the Latest Practicable Date, and was significant in relation to the business of the Group.

7. EXPERT AND CONSENT

The following is the qualification of the expert who has given opinion or advice which is contained in this circular:

Name Qualification China Everbright a corporation licensed to carry on type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities under the SFO

China Everbright has given and has not withdrawn its written consent to the issue of this circular with reference to its name and its letter in the form and context in which it appears.

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GENERAL INFORMATION

APPENDIX

As at the Latest Practicable Date, China Everbright does not have any shareholding, directly or indirectly, in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for shares in any member of the Group.

As at the Latest Practicable Date, China Everbright does not have any interest, either direct or indirect, in any assets which had been since 31 December 2007 (being the date to which the latest published audited consolidated financial statements of the Group were made up) acquired or disposed of by or leased to or were proposed to be acquired or disposed of by or leased to any member of the Company.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copy of the following documents are available for inspection during 9:00 a.m. to 5:00 p.m. on any weekday (except for Saturdays and public holidays) at the office of the Company at Room 1501, Top Glory Tower, 262 Gloucester Road, Causeway Bay, Hong Kong up to and including the date of the EGM:

• (a) the Revised Chifeng Peak Copper Purchase Agreement;

• (b) the letter from the Independent Board Committee, the text of which is set out on page 11 of this circular;

• (c) the letter of advice from China Everbright, the text of which is set out on pages 12 to 19 of this circular; and

• (d) written consent of China Everbright, referred to in the paragraph headed ‘‘Expert and Consent’’ in this Appendix.

9. MISCELLANEOUS

The English text of this circular shall prevail over the Chinese text in case of inconsistency.

– 25 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [74 x 58] intentionally omitted <==

DONGYUE GROUP LIMITED 東 岳 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(stock code: 189)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the ‘‘Meeting’’) of Dongyue Group Limited (the ‘‘Company’’) will be held at 12:00 p.m. on Friday, 30 May 2008 at Room 3203, 32/F, Admiralty Centre I, 18 Harcourt Road, Admiralty, Hong Kong for the purpose of considering and, if thought fit, passing the following resolution as ordinary resolution of the Company:

ORDINARY RESOLUTION

‘‘THAT

• (i) the purchase agreement dated 3 May 2008 entered into between Inner Mongolia Dongyue Peak Fluorine Chemicals Co., Ltd. (‘‘Dongyue Peak’’), a subsidiary of the Company, and Chifeng Peak Copper Co., Ltd. (the ‘‘Revised Chifeng Peak Copper Purchase Agreement’’) (a copy of which has been produced to the Meeting and marked ‘‘A’’ and initialed by the chairman of the Meeting for the purpose of identification) in relation to, among other matters, the supply of sulphuric acid, electricity and steam for a term up to 31 December 2010 and the transactions contemplated thereunder be and are hereby approved, ratified and confirmed;

• (ii) the proposed annual caps in relation to the transactions under the Revised Chifeng Peak Copper Purchase Agreement for the period commencing from the date on which the Revised Chifeng Peak Copper Purchase Agreement becoming effective until 31 December 2010 and each of the years ending 31 December 2008, 31 December 2009 and 31 December 2010 will not exceed RMB155,000,000, RMB271,000,000 and RMB330,000,000 respectively be and are hereby approved; and

• (iii) the Directors be and are hereby authorised to execute such other documents, do all other acts and things and take such action as they may consider necessary, desirable or expedient to implement and/or give effect to or otherwise in connection with the Revised Chifeng Peak Copper Purchase Agreement and any or all the matters contemplated in the Revised Chifeng Peak Copper Purchase Agreement and this resolution.’’

By Order of the Board Dongyue Group Limited Zhang Jianhong Chairman

Hong Kong, 13 May 2008

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NOTICE OF EXTRAORDINARY GENERAL MEETING

Registered Office: Principal place of business in Hong Kong: Scotia Centre Room 1501 4th Floor, P.O. Box 2804 Top Glory Tower George Town, Grand Cayman 262 Gloucester Road Cayman Islands Causeway Bay Hong Kong

Notes:

• (1) Any member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on the poll, vote in his stead. A proxy need not be a member of the Company.

• (2) To be valid, a form of proxy, together with the power of attorney (if any) or other authority (if any) under which it is signed or a notarially certified copy of that power attorney or authority must be delivered to the Company’s share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712–16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding the meeting.

• (3) The register of members will be closed from Monday, 26 May 2008 to Friday, 30 May 2008 (both days inclusive) during which period no transfer of shares will be effected. In order to qualify for attending the Meeting, all transfer documents, accompanied by the relevant share certificates, must be lodged with the Company’s share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712–16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not later than 4:30 p.m. on Friday, 23 May 2008.

• (4) Where there are joint registered holders of any share, any one of such persons may vote at the Meeting, either personal or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at the meeting, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for the purpose seniority shall be determined by the order in which name stand in the register of members in respect of the joint holdings.

• (5) As at the date hereof, the Board comprises six executive directors, namely Mr. Zhang Jianhong, Mr. Fu Kwan, Mr. Liu Chuanqi, Mr. Cui Tongzheng, Mr. Yang Erning and Mr. Zhang Jian, one non-executive director, Mr. Shaw Sun Kan, Gordon and three independent non-executive directors, namely Mr. Yue Run Dong, Mr. Liu Yi and Mr. Ting Leung Huel, Stephen.

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