Du Du Holdings Limited - Proxy Solicitation & Information Statement 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Core Healthcare Investment Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of Core Healthcare Investment Holdings Limited.

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CORE HEALTHCARE INVESTMENT HOLDINGS LIMITED 確思醫藥投資控股有限公司[*]

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8250)

(I) PLACING OF NEW SHARES;

(II) ISSUE OF CONVERTIBLE BONDS AND WHITEWASH WAIVER; (III) POSSIBLE ISSUE OF NEW SHARES UNDER THE REFERRAL AGREEMENT; AND

(IV) INCREASE IN AUTHORIZED SHARE CAPITAL

Financial adviser to Core Healthcare Investment Holdings Limited

CIMB-GK Securities (HK) Limited

Independent financial adviser to Core Healthcare Investment Holdings Limited

A letter from the Board is set out on pages 7 to 29 of this circular. A letter from the Independent Board Committee is set out on page 30 of this circular. A letter from Taifook Capital, the independent financial adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 31 to 48 of this circular.

A notice convening the EGM of the Company to be held at Shop No. 1A-C, Level 1, Hilton Plaza Commercial Centre, 3-9 Shatin Centre Street, Shatin, New Territories, Hong Kong on Monday, 24 December 2007 at 9:00 a.m. is set out on pages 104 to 107 of this circular. The form of proxy for use at the EGM is enclosed. Whether or not you are able to attend, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not later than 48 hours before the time appointed for the holding of such meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at such meeting or any adjournment thereof should you so wish.

6 December 2007

for identification purpose only

CHARACTERISTICS OF GEM

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

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

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

– i –

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . .	30
LETTER FROM TAIFOOK CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31
APPENDIX I – FINANCIAL INFORMATION ON THE GROUP. . . . . . . . . . . . . . .	49
APPENDIX II – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	89
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	104

– ii –

DEFINITIONS

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

“acting in concert” has the meaning ascribed to it under the Takeovers Code

“Announcement” the joint announcement dated 15 November 2007 issued by the Company, HK Health Check and Town Health in relation to the JV Agreement, the Placing Agreement, the CB Subscription Agreement, the Referral Agreement and the Service Agreements
“associate(s)” has the meaning ascribed to it under the GEM Listing Rules or the Listing Rules, as the case maybe
“Board” the board of directors of the Company
“Business Day” any day (except Saturday, Sunday or any statutory public holiday) on which banks are generally open for business to the public in Hong Kong
“CB Subscription” the subscription of the Convertible Bonds by Precious Success pursuant to the CB Subscription Agreement
“CB Subscription Agreement” the conditional subscription agreement dated 6 November 2007 entered into between the Company and Precious Success in respect of the CB Subscription
“Class 1 New Drugs” (i) those drugs that fall within the category of “第一類” as defined in Article 7 of the 新生物製品審批辦法（局令第 3號）(The Approval Method of New Biological Products (Ju Ling No.3)) issued by 國家藥品監督管理局局務會 (The Executive Meeting of State Food and Drug Administration) being “國內外尚未批准上市的生物制品 ”; or (ii) other drugs as agreed by the parties to the Referral Agreement from time to time including but not limited to Chinese drugs, chemical drugs and new biological products
“Classictime Investments” Classictime Investments Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of HK Health Check
“Company” Core Healthcare Investment Holdings Limited, a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are listed on GEM

– 1 –

DEFINITIONS

“connected person(s)” has the meaning ascribed to it under the GEM Listing Rules or the Listing Rules, as the case maybe
“Consideration Shares” collectively the 300,000,000 new Shares which may be issued by the Company to the Referral Agent pursuant to the Referral Agreement
“Conversion Shares” up to 789,473,684 Shares falling to be allotted and issued upon exercise of the conversion rights attaching to the Convertible Bonds at the initial conversion price (subject to adjustment) of HK$0.19 per Share
“Convertible Bonds” the 1% convertible bonds with an aggregate principal amount of HK$150 million to be issued by the Company to Precious Success pursuant to the CB Subscription Agreement
“Director(s)” the director(s) of the Company “EGM” an extraordinary general meeting of the Company to be convened and held at 9:00 a.m. on Monday, 24 December 2007 at Shop No. 1A-C, Level 1, Hilton Plaza Commercial Centre, 3-9 Shatin Centre Street, Shatin, New Territories, Hong Kong for the purpose of considering and, if thought fit, passing resolutions to approve, among other things, the Placing Agreement, the CB Subscription Agreement, the Referral Agreement and the transactions contemplated under each of the above mentioned agreements, the Whitewash Waiver and the increase in the authorized share capital of the Company

“Executive”	the Executive Director of the Corporate Finance
	Division of the SFC or any delegate of the Executive
	Director
“GEM”	the Growth Enterprise Market of the Stock Exchange
“GEM Listing Committee”	the listing committee of the board of directors of the
	Stock Exchange with responsibility for GEM
“Group”	the Company and its subsidiaries
“GEM Listing Rules”	the Rules Governing the Listing of Securities on GEM
“HK Health Check”	Hong Kong Health Check and Laboratory Holdings
	Company Limited, a company incorporated in
	Bermuda with limited liability and the issued shares
	of which are listed on the main board of the Stock
	Exchange

– 2 –

DEFINITIONS

“HK Health Check Board”

the board of directors of HK Health Check

“HK Health Check Director(s)” the director(s) of HK Health Check
“HK Health Check Group” HK Health Check and its subsidiaries
“HK Health Check Service the service agreement dated 6 November 2007 entered Agreement” into between HK Health Check and the Company in relation to the provision of consultancy services to the Group

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

“Independent Board Committee” the independent committee of the Board comprising only the non-executive Director and the independent non-executive Directors established for the purpose of advising the Independent Shareholders on the terms of the CB Subscription Agreement and the Whitewash Waiver
“Independent Shareholders”

the Shareholders, other than (i) HK Health Check, Town Health, Precious Success and parties acting in concert with them in relation to the Company; (ii) those who are interested in or involved in the CB Subscription Agreement and/or the Whitewash Waiver; and (iii) those who are required to abstain from voting at the EGM in relation to the CB Subscription Agreement and/or the Whitewash Waiver under the Takeovers Code and the GEM Listing Rules

“JV Agreement”

the joint venture agreement dated 6 November 2007 entered into between Classictime Investments, Spring Biotech and Precious Success which sets out, among other matters, the principal terms of the JV Loan

“JV Loan”

the advance of an aggregate amount of HK$150 million in the form of shareholders’ loan to be made to Precious Success by Classictime Investments and Spring Biotech, based on their respective interest in Precious Success

“Last Trading Day”
5 November 2007, being the last day on which the Shares were traded on GEM prior to the suspension in the trading of the Shares pending the issue of the Announcement
“Latest Practicable Date”
3 December 2007, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

– 3 –

DEFINITIONS

“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange
“Long Stop Date”	31 January 2008 or such later date as the parties to the
	relevant agreements may agree
“Placee”	Atlantis Investment Management Limited, a company
	founded in England with limited liability
“Placing”	the placing of the Placing Shares to the Placee pursuant
	to the Placing Agreement
“Placing Agreement”	the conditional placing agreement dated 6 November
	2007 entered into between the Company and the Placee
	in respect of the Placing
“Placing Price”	HK$0.17 per Placing Share
“Placing Share(s)”	30,000,000 new Shares to be issued to the Placee
	pursuant to the Placing
“PRC”	the Peoples’ Republic of China, which for the purpose
	of this circular, excludes Hong Kong, the Macau
	Special Administrative Region and Taiwan

“PRC Drugs Distribution drugs distribution network in the PRC, which is Networks” required to have an annual turnover of not less than RMB500 million in the latest financial year
“Precious Success” Precious Success Group Limited 珍成集團有限公司 , a joint venture company established in the British Virgin Islands with limited liability which is owned as to 50% by Classictime Investments and as to 50% by Spring Biotech
“Previous Placing” the placing of an aggregate of 304,388,000 new Shares at an issue price of HK$0.17 per Share as stated in the announcements of the Company dated 12 June 2007, 18 July 2007 and 7 September 2007
“Referral Agent” Mr. U Man Iong, a third party independent of and not connected with the Company and its connected persons and is not acting in concert with Town Health, HK Health Check, Precious Success and parties acting in concert with any of them in relation to the Company

– 4 –

DEFINITIONS

“Referral Agreement”	the referral agreement dated 6 November 2007 entered
	into between the Referral Agent and the Company in
	relation to the search for potential Class 1 New Drugs
	acquisition targets and potential PRC Drugs
	Distribution Network acquisition targets in the PRC
	for the Company
“Service Agreements”	collectively, the Town Health Service Agreement and
	the HK Health Check Service Agreement
“SFC”	The Securities and Futures Commission of Hong Kong
“SFO”	The Securities and Futures Ordinance (Chapter 571 of
	the Laws of Hong Kong) (as amended from time to
	time)
“Share(s)”	ordinary share(s) of HK$0.01 each in the issued share
	capital of the Company
“Share Options”	options granted under the share option scheme of the
	Company adopted on 20 April 2004 pursuant to which,
	41,563,959 options have been granted as at the Latest
	Practicable Date
“Spring Biotech”	Spring Biotech Limited, a company incorporated in
	the British Virgin Islands with limited liability and a
	wholly-owned subsidiary of Town Health
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“subsidiary”	shall have the meaning as ascribed to it under the
	Listing Rules or the GEM Listing Rules, as the case
	maybe
“Taifook Capital”	Taifook Capital Limited, a corporation licensed to carry
	out type 6 (advising on corporate finance) regulated
	activity under the SFO and the independent financial
	adviser appointed to advise the Independent Board
	Committee and the Independent Shareholders on the
	terms of the CB Subscription Agreement and the
	Whitewash Waiver
“Takeovers Code”	The Hong Kong Code on Takeovers and Mergers
“Town Health”	Town Health International Holdings Company
	Limited, a company incorporated in the Cayman
	Islands with limited liability whose shares are listed
	on GEM
“Town Health Board”	the board of directors of Town Health
“Town Health Director(s)”	the director(s) of Town Health

– 5 –

DEFINITIONS

“Town Health Group”

Town Health and its subsidiaries

“Town Health Service the service agreement dated 6 November 2007 entered Agreement” into between Town Health and the Company in relation to the provision of consultancy services to the Group

“Whitewash Waiver” a waiver from the obligation to make a mandatory general offer under Rule 26 of the Takeovers Code which would otherwise arise on the part of Precious Success, HK Health Check, Town Health and parties acting in concert with them as a result of the allotment and issue of the Conversion Shares upon the exercise of the Convertible Bonds pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code

“HK$” Hong Kong dollars, the lawful currency of Hong Kong “%” per cent.

– 6 –

LETTER FROM THE BOARD

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CORE HEALTHCARE INVESTMENT HOLDINGS LIMITED 確思醫藥投資控股有限公司[*]

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8250)

Executive Director: Mr. Lui Chi Wah, Johnny Mr. Wu Kai

Registered office: Ugland House, PO Box 309GT South Church Street, Grand Cayman Cayman Islands

Non-executive Director:

Mr. Lau Kam Shan

Independent non-executive Director: Mr. Kwok Shun Tim Mr. Chan Po Kwong Mr. Lam Yan Wing

Head office and principal place of business in Hong Kong: Room 609-610, 6/F Nan Fung Tower 173 Des Voeux Road Central Hong Kong

6 December 2007

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

Dear Sir or Madam,

(I) PLACING OF NEW SHARES;

(II) ISSUE OF CONVERTIBLE BONDS AND WHITEWASH WAIVER; (III) POSSIBLE ISSUE OF NEW SHARES UNDER THE REFERRAL AGREEMENT; AND (IV) INCREASE IN AUTHORIZED SHARE CAPITAL

INTRODUCTION

On 15 November 2007, the Company, HK Health Check and Town Health jointly announced, among other things, that on 6 November 2007, the Company has entered into (i) the Placing Agreement with the Placee; (ii) the CB Subscription Agreement with Precious Success; (iii) the Referral Agreement with the Referral Agent; (iv) the Town Health Service Agreement with Town Health; and (v) the HK Health Check Service Agreement with HK Health Check.

for identification purpose only

– 7 –

LETTER FROM THE BOARD

The Placing Agreement

Pursuant to the Placing Agreement, the Company has conditionally agreed to issue, and the Placee has conditionally agreed to subscribe for, the Placing Shares (being 30,000,000 new Shares) at the Placing Price of HK$0.17 per Placing Share.

As at the Latest Practicable Date, the Placing Shares represent approximately 4.3% of the existing issued share capital of the Company and approximately 4.1% of the issued share capital of the Company as enlarged by the issue of the Placing Shares.

The net proceeds from the Placing are estimated to be approximately HK$4 million. The Directors intend to use the net proceeds for the Group’s acquisition of Class 1 New Drugs in the PRC and/or investment in one or more PRC Drugs Distribution Networks.

The Placing is conditional upon (i) the Shareholders approving the Placing Agreement and the issue of the Placing Shares thereunder at the EGM; (ii) the GEM Listing Committee of the Stock Exchange granting or agreeing to grant the listing of, and permission to deal in, the Placing Shares; and (iii) the Shareholders approving an increase in the authorized share capital of the Company at the EGM.

Completion of the Placing Agreement is not conditional on the CB Subscription Agreement, the Referral Agreement or the Service Agreements.

The Referral Agreement

Pursuant to the Referral Agreement, the Referral Agent has agreed to identify for the Company (i) potential Class 1 New Drugs acquisition targets in the PRC; and (ii) potential PRC Drugs Distribution Network acquisition targets. As at the Latest Practicable Date, the Referral Agent does not have any shareholding interest in the Company.

In consideration of the referral services to be provided by the Referral Agent, the Company has agreed to pay (i) a fee equals to HK$34,000,000, which shall be satisfied by way of the issue and allotment of 200,000,000 Consideration Shares, representing approximately 28.4% of the issue share capital of the Company as at the Latest Practicable Date and 19.9% of the share capital of the Company as enlarged by the issue of Consideration Shares, to the Referral Agent which shall be issued and credited as fully paid up at HK$0.17 per Consideration Share, upon completion of the acquisition by the Group of any Class 1 New Drug which shall have been identified by the Referral Agent; and (ii) a fee equals to HK$17,000,000, which shall be satisfied by way of the issue and allotment of 100,000,000 Consideration Shares, representing approximately 14.2% of the issue share capital of the Company as at the Latest Practicable Date and 10.0% of the share capital of the Company as enlarged by the issue of Consideration Shares, to the Referral Agent which shall be issued and credited as fully paid up at HK$0.17 per Consideration Share, upon completion of the acquisition by the Group of any PRC Drugs Distribution Network which shall have been identified by the Referral Agent. The Referral Agent has in the Referral Agreement undertaken not to dispose of or otherwise deal with any of the Consideration Shares within a period of six months from the date of their issue and allotment.

– 8 –

LETTER FROM THE BOARD

Completion of the Referral Agreement is subject to (i) the Shareholders approving the Referral Agreement and the transactions contemplated thereunder (including the issue of the Consideration Shares) at the EGM; (ii) the GEM Listing Committee of the Stock Exchange granting or agreeing to grant the listing of, and permission to deal in, the Consideration Shares; (iii) completion of the CB Subscription; and (iv) the Shareholders approving an increase in the authorized share capital of the Company at the EGM.

The CB Subscription Agreement

Pursuant to the CB Subscription Agreement, Precious Success has conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, the Convertible Bonds with an aggregate principal amount of HK$150 million which can be exercised and converted into 789,473,684 Conversion Shares at an initial conversion price (subject to adjustment) of HK$0.19 per Conversion Share.

The net proceeds from the CB Subscription will be approximately HK$148 million and are intended to be used for the Group’s acquisition of Class 1 New Drugs in the PRC and/or investment in one or more PRC Drugs Distribution Networks.

As at the Latest Practicable Date, Town Health, HK Health Check, Precious Success and parties acting in concert with them owned approximately 4.7% in aggregate of the issued share capital of the Company. Upon full conversion of the Convertible Bonds but before taking into account the issue of the Placing Shares and the Consideration Shares, Town Health, HK Health Check, Precious Success and parties acting in concert with them will, in aggregate, hold approximately 55.1% of the issued share capital of the Company as enlarged by the full conversion of the Convertible Bonds.

Accordingly, upon full conversion of the Convertible Bonds, Town Health, HK Health Check, Precious Success and parties acting in concert with them will be obliged to make an unconditional mandatory general offer for all the issued shares of the Company not already owned or agreed to be acquired by Town Health, HK Health Check, Precious Success and parties acting in concert with them under Rule 26.1 of the Takeovers Code, unless a waiver from strict compliance with Rule 26.1 of the Takeovers Code has been obtained from the Executive.

An application has been made on behalf of Precious Success, Town Health and HK Health Check to the Executive for the Whitewash Waiver. The Executive has indicated he will grant the Whitewash Waiver subject to the approval of the Independent Shareholders by way of poll at the EGM. Town Health, HK Health Check and Precious Success, their respective concert parties and any parties involved in or interested the Whitewash Waiver are required to abstain from voting in respect of the resolution to approve the Whitewash Waiver under the Takeovers Code. If the Whitewash Waiver is granted by the Executive and is approved by the Independent Shareholders at the EGM, Town Health, HK Health Check and Precious Success and parties acting in concert with them would not be required to make a mandatory general offer which would otherwise be required as a result of the full conversion of the Convertible Bonds. If the Whitewash Waiver is not granted or if the approval of the Independent Shareholders is not obtained, the CB Subscription Agreement will lapse and the CB Subscription will not proceed.

– 9 –

LETTER FROM THE BOARD

Completion of the CB Subscription Agreement is subject to, among other matters, (i) the Independent Shareholders approving the CB Subscription Agreement and the transactions contemplated thereunder (including the issue of the Convertible Bonds and the issue of Conversion Shares upon the exercise of any Convertible Bonds) and the Whitewash Waiver at the EGM by way of poll; (ii) the Shareholders approving an increase in the authorized share capital of the Company at the EGM; and (iii) the GEM Listing Committee of the Stock Exchange approving the listing of, and permission to deal in, all the Conversion Shares.

Completion of the CB Subscription Agreement is also conditional on the completion of the JV Agreement (in so far as it relates to the advance of the JV Loan and the HK Health Check Loan).

The Independent Board Committee comprising the non-executive Director and the independent non-executive Directors has been formed to advise the Independent Shareholders on the terms of the CB Subscription Agreement and the Whitewash Waiver. With the approval of the Independent Board Committee, Taifook Capital has been appointed by the Company as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders. Town Health, HK Health Check, Precious Success, and party acting in concert with any of them in relation to the Company, and any parties involved in or interested in the Whitewash Waiver will abstain from voting at the EGM in respect of the resolution to approve the CB Subscription Agreement and the Whitewash Waiver.

The Service Agreements

Pursuant to the Town Health Service Agreement, for the purpose of assisting the Company in its assessment of the feasibility of the acquisition of any Class 1 New Drug which the Referral Agent has identified as a potential acquisition target, Town Health shall, upon the CB Subscription Agreement being unconditional pursuant to its terms, provide interpretation of and other consultancy services in relation to the results of the clinical tests and trials and imaging diagnosis performed on such Class 1 New Drugs within such time as agreed by the parties, participate in consultation sessions with patients engaged in clinical studies, and any other services as reasonably requested by the Company in relation to such Class 1 New Drugs.

Pursuant to the HK Health Check Service Agreement, for the purpose of assisting the Company in its assessment of the feasibility of the acquisition of any Class 1 New Drug which the Referral Agent has identified as a potential acquisition target, HK Health Check shall, upon the CB Subscription Agreement being unconditional pursuant to its terms, provide consultancy services in relation to the design and implementation of medical testing procedures and imaging services to be adopted for testing the effectiveness of any such Class 1 New Drug within such time as agreed by the parties, conduct such clinical tests which are necessary to verify the accuracy of such Class 1 New Drug, and any other services as reasonably requested by the Company in relation to such Class 1 New Drug.

– 10 –

LETTER FROM THE BOARD

The Town Health Service Agreement and the HK Health Check Service Agreement are conditional upon completion of the CB Subscription Agreement. Each of Town Health and HK Health Check will provide the aforesaid services to the Company for no consideration.

Completion of the Referral Agreement, the Town Health Service Agreement and the HK Health Check Service Agreement are conditional upon, among other things, the completion of the CB Subscription Agreement pursuant to its terms.

For the purpose of the allotment and issue of the Placing Shares, the Conversion Shares and the Consideration Shares, the Company proposes to seek the approval from the Shareholders at the EGM of an increase of its authorized share capital from HK$10,000,000 to HK$50,000,000 by the addition thereto of 4,000,000,000 new shares of the Company of HK$0.01 each.

The issue of the Conversion Shares is conditional upon, among other things, the passing of the relevant resolutions in respect of the CB Subscription Agreement and the transactions contemplated thereunder (including the issue of the Convertible Bonds and the issue of the Conversion Shares upon the exercise of any Convertible Bonds), and the Whitewash Waiver by the Independent Shareholders at the EGM by way of poll.

The issue of the Placing Shares and the Consideration Shares are conditional upon, among other things, the passing of the relevant resolutions by the Shareholders at the EGM.

The purpose of this circular is to provide you with, among other things, (i) further information on the Placing Agreement, the CB Subscription Agreement, the Referral Agreement, the Service Agreements, the proposed increase in the authorized share capital of the Company and the Whitewash Waiver; (ii) a letter of advice from Taifook Capital to the Independent Board Committee and the Independent Shareholders; (iii) the recommendation from the Independent Board Committee to the Independent Shareholders; and (iv) the notice of the EGM to the Shareholders.

THE PLACING AGREEMENT

Date

6 November 2007

Issuer

The Company

– 11 –

LETTER FROM THE BOARD

Placee

Atlantis Investment Management Limited was founded in London and is owned by its investment managers.

To the best knowledge of the Directors after making all reasonable enquiries, the Placee and its ultimate beneficial owners are third parties independent of and not connected with the Company and its connected persons and are not acting in concert with nor presumed to be acting in concert with Town Health, HK Health Check, Precious Success and parties acting in concert with any of them.

As at the Latest Practicable Date, the Placee is interested in 840,000,000 Town Health Shares, representing approximately 5.0% of the issued share capital of Town Health, 335,000,000 HK Health Check Shares, representing approximately 7.3% of the issued share capital of HK Health Check, and it does not have any shareholding interest in the Company.

Placing

As at the Latest Practicable Date, the Placing Shares represents approximately 4.3% of the existing issued share capital of the Company and approximately 4.1% of the issued share capital of the Company as enlarged by the issue of the Placing Shares.

The Placing Price of HK$0.17 per Share is determined with reference to the issue price of HK$0.17 per Share of the Previous Placing, and represents (i) a discount of approximately 70.7% to the closing price of HK$0.58 on the Last Trading Day; (ii) a discount of approximately 71.0% to the average closing price of HK$0.586 in the last 5 trading days prior to the Last Trading Day; (iii) a discount of approximately 69.9% to the average closing price of HK$0.564 in the last 10 trading days prior to the Last Trading Day; (iv) a discount of approximately 82.3% to the closing price of HK$0.96 on the Latest Practicable Date; and (v) a premium of approximately 30.8% to the net asset value per Share (as at 30 June 2007, after taking into account the subsequent fund raising activities of the Company up to the Latest Practicable Date) of approximately HK$0.13 per Share.

Taking into consideration the issue price of HK$0.17 per Share of the Previous Placing, the financial results in the past few financial years and the current financial position of the Company, and the audited net asset value per Share as at 30 June 2007, the Directors are of the view that the terms of the Placing Agreement is fair and reasonable.

– 12 –

LETTER FROM THE BOARD

The Placing is conditional upon (i) the Shareholders approving the Placing Agreement and the issue of the Placing Shares pursuant to the terms thereunder at the EGM; (ii) the GEM Listing Committee of the Stock Exchange granting or agreeing to grant the listing of, and permission to deal in, the Placing Shares; and (iii) the Shareholders approving an increase in the authorized share capital of the Company at the EGM.

Completion of the Placing Agreement is not conditional on the CB Subscription Agreement, the Referral Agreement or the Service Agreements.

THE CB SUBSCRIPTION AGREEMENT

Date

6 November 2007

Issuer

The Company

Subscriber

Precious Success, a joint venture company owned as to 50% by Classictime Investments (a wholly owned subsidiary of HK Health Check) and as to 50% by Spring Biotech (a wholly-owned subsidiary of Town Health).

CB Subscription and Whitewash Waiver

Pursuant to the CB Subscription Agreement, Precious Success has conditionally agreed to subscribe for the Convertible Bonds with a principal amount of HK$150 million which can be exercised and converted into 789,473,684 Conversion Shares at an initial conversion price (subject to adjustment) of HK$0.19 per Conversion Share.

As at the Latest Practicable Date, Town Health owns approximately 4.7% of the existing issued share capital of the Company; whereas none of HK Health Check, Precious Success and parties acting in concert with them own any Shares.

Save for the disposal of 1,800,000 Shares by a HK Health Check Director in May 2007, none of Town Health, HK Health Check, Precious Success and any party acting in concert with any of them has dealt in the securities of the Company in the six months period immediately preceding the date of the CB Subscription Agreement.

Upon full conversion of the Convertible Bonds, but before taking into account the issue of the Placing Shares and the Consideration Shares, Town Health, HK Health Check, Precious Success and parties acting in concert with them will, in aggregate, hold approximately 55.1% of the enlarged issued share capital of the Company. Accordingly, upon full conversion of the Convertible Bonds, Town Health, HK Health Check, Precious Success and parties acting in concert with them will be obliged to make an unconditional mandatory general offer for all the issued shares of the Company not already owned or agreed to be acquired by Town Health, HK Health Check, Precious Success and parties acting in concert with them under Rule 26.1 of the Takeovers Code, unless a waiver from strict compliance with Rule 26.1 of the Takeovers Code has been obtained from the Executive. The Town Health Directors and the HK Health Check Directors confirmed that there is no agreement, arrangement or understanding that any Conversion Shares will be transferred, charged, or pledged to any persons following conversion of the Convertible Bonds.

– 13 –

LETTER FROM THE BOARD

An application has been made on behalf of Precious Success, Town Health and HK Health Check to the Executive for the Whitewash Waiver which, if granted, will be subject to the approval by the Independent Shareholders by way of a poll at the EGM. If the Whitewash Waiver is not granted by the Executive or is not approved by the Independent Core Healthcare Shareholders, the CB Subscription Agreement will lapse and the CB Subscription will not proceed.

The HK Health Check Directors and the Town Health Directors have no intention to arrange for Precious Success to immediately exercise the Convertible Bonds upon completion of the CB Subscription.

Principal Terms of the Convertible Bonds

Principal amount HK$150 million Coupon rate 1% per annum Maturity On the date falling on the fourth anniversary of the date of issue of the Convertible Bonds (or, if that is not a Business Day, the first Business Day thereafter) (the “ Maturity Date ”), unless previously redeemed, converted or purchased and cancelled, the Convertible Bonds outstanding as at the Maturity Date shall be redeemed by the Company at 100% of their then outstanding principal amount.

Conversion The holder of the Convertible Bonds will have the right to convert the Convertible Bonds into the Shares at the Conversion Price at any time from the day immediately following the date of the issue of the Convertible Bonds up to 4:00 p.m. (Hong Kong time) on the Maturity Date subject to, and upon compliance with, the provisions of this terms and conditions of the Convertible Bonds. Any conversion shall be made in amounts of not less than a whole multiple of HK$500,000 on each conversion save that if at any time the aggregate outstanding principal amount of the Convertible Bonds is less than HK$500,000, the whole (but not part only) of the outstanding principal amount of the Convertible Bonds may be converted.

Conversion Price HK$0.19 per Conversion Share, representing:

(i) a discount of approximately 67.2% to the closing price of HK$0.58 on the Last Trading Day;
(ii) a discount of approximately 67.6% to the average closing price of HK$0.586 in the last 5 trading days prior to the Last Trading Day;

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LETTER FROM THE BOARD

(iii) a discount of approximately 66.3% to the average closing price of HK$0.564 in the last 10 trading days prior to the Last Trading Day;
(iv) a discount of approximately 80.2% to the closing price of HK$0.96 on the Latest Practicable Date;
(v) a premium of approximately 11.8% over the Placing Price; and
(vi) a premium of approximately 46.2% over the net asset value per Share (as at 30 June 2007, after taking into account the subsequent fund raising activities of the Company up to the Latest Practicable Date).

The initial conversion price of HK$0.19 per Conversion Share was negotiated on an arm’s length basis between the Company and Precious Success and was determined with reference to (a) the Placing Price; (b) the bond element and the interest rate of the Convertible Bonds; (c) the financial results in the past few financial years and the current financial position of the Company; (d) the audited net asset value per Share as at 30 June 2007; and (e) the free consultancy services to be provided by Town Health and HK Health Check pursuant to the Service Agreements. The initial conversion price is subject to standard anti-dilution adjustment provisions applicable in the event of share consolidation, share subdivision, capitalization issue, capital distribution, rights issue (of shares, options or warrants) or issue of convertible securities or new shares in certain circumstances.

Voting

Listing

A holder of Convertible Bonds will not be entitled to receive notice of, attend or vote at any general meeting of the Company by reason only of it being a holder of Convertible Bonds.

No application will be made for the listing of the Convertible Bonds on GEM or any other stock exchange. An application will be made by the Company to the GEM Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares (if any) to be issued as a result of the exercise of the conversion rights attached to the Convertible Bonds.

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LETTER FROM THE BOARD

Transferability

Save with the consent of the Stock Exchange, none of the Convertible Bonds shall be transferable to any connected person of the Company. The Company shall notify the Stock Exchange immediately upon the Company becoming aware of any dealing in the Convertible Bonds by any connected person of the Company.

Subject to all applicable laws and regulations, the Convertible Bonds may be transferable to any person in whole multiples of HK$500,000 (or such lesser amount as may represent the entire principal amount thereof).

Ranking of the Conversion Shares

The Conversion Shares will rank, upon issue, pari passu in all respects with the Shares in issue on the date(s) of allotment and issue of the Conversion Shares.

Conditions of the CB Subscription

The CB Subscription is conditional upon:–

(i) the JV Loan being advanced to Precious Success pursuant to the terms of the JV Agreement;
(ii) the passing by the Independent Shareholders by way of poll at the EGM of an ordinary resolution to approve the CB Subscription Agreement and the transactions contemplated thereunder (including the issue of the Convertible Bonds and the issue of the Conversion Shares upon the exercise of any Convertible Bonds), and the Whitewash Waiver;
(iii) the passing of an ordinary resolution by the Shareholders at the EGM to approve an increase in the authorized share capital of the Company; and
(iv) the GEM Listing Committee of the Stock Exchange granting or agreeing to grant the listing of, and permission to deal in, the Conversion Shares.

If any of the conditions (none of which can be waived by the parties) shall not have been fulfilled by 5:00 p.m. on the Long Stop Date, the CB Subscription shall lapse automatically and neither party shall have any rights and obligations arising out of the agreement save for those arising out of or in connection with any antecedent breaches.

Use of Proceeds

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LETTER FROM THE BOARD

Dilution Effect on Core Healthcare Shareholders

As the Company foresees the future dilution effect on the Shareholders resulting from the exercise of the Convertible Bonds, the Company will keep the Shareholders informed of the level of dilution effect and all relevant details of any conversion in the following manner:

(a) the Company will make a monthly announcement (the “ Monthly Announcement ”) on the website of the Stock Exchange in relation to GEM. Such announcement will be made on or before the fifth business day following the end of each calendar month and will include the following details in a table form:
(i) whether there is any conversion of the Convertible Bonds during the relevant month. If yes, details of the conversion(s), including the conversion date, number of new Conversion Shares issued, conversion price for each conversion. If there is no conversion during the relevant month, a negative statement to that effect;
(ii) the number of outstanding Convertible Bonds after the conversion, if any;
(iii) the total number of Shares issued and/or cancelled pursuant to other transactions, including shares issued pursuant to exercise of options under any share option scheme(s) of the Company and/or shares cancelled pursuant to repurchase of shares by the Company, with a breakdown of the Shares concerned by the relevant transactions; and
(iv) the total issued share capital of the Company announced in the previous Monthly Announcement and the total issued share capital of the Company as at the commencement and the last day of the relevant month; and
(b) in addition to the Monthly Announcement, if the cumulative amount of new Conversion Shares issued pursuant to the conversion of the Convertible Bonds reaches 5% of the issued share capital of the Company as disclosed in the last Monthly Announcement or any subsequent announcement made by the Company in respect of the Convertible Bonds (as the case may be) (and thereafter in a multiple of such 5% threshold), the Company will make an announcement on the website of the Stock Exchange in relation to GEM including details as stated in (a) above for the period commencing from the date of the last Monthly Announcement or any subsequent announcement made by the Company in respect of the Convertible Bonds (as the case may be) up to the date on which the total amount of Conversion Shares issued amounted to 5% of the issued share capital of the Company as disclosed in the last Monthly Announcement or any subsequent announcement made by the Company in respect of the Convertible Bonds (as the case may be).

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LETTER FROM THE BOARD

In addition to (a) and (b) above, further announcement(s) in respect of the issue the Conversion Shares will be issued by the Company in accordance with the disclosure requirements under Rule 17.10(3) of the GEM Listing Rules.

FUND RAISING ACTIVITIES OF THE COMPANY IN THE PAST 12 MONTHS

As stated in the announcements of the Company dated 12 June 2007, 18 July 2007 and 7 September 2007, the Company had raised an aggregate net proceeds of approximately HK$50.3 million by placing of an aggregate of 304,388,000 new Shares at an issue price of HK$0.17 per Share. As disclosed in the announcements, the net proceeds were intended to be used for the development of medical related business and the opening of healthcare products retail chain stores with the remaining balance for general working capital purpose. As at the Latest Practicable Date, such net proceeds remain unutilized.

Save as disclosed above, the Company has not conducted any fund raising activities in the twelve months immediately preceding the Latest Practicable Date.

THE REFERRAL AGREEMENT

Date

6 November 2007

Parties

The Company; and
Referral Agent

To the best knowledge of the Town Health Directors, the HK Health Check Directors and the Directors after making all reasonable enquiries, the Referral Agent is a third party independent of and not connected with the Company and its connected persons and is not acting in concert with nor presumed to be acting in concert with Town Health, HK Health Check, Precious Success and parties acting in concert with any of them.

The Referral Agent principally engaged in pharmaceutical business for over ten years including new drugs development, trading of pharmaceutical products and management consultancy in pharmaceutical distribution channels in the PRC. The Referral Agent has no previous transaction with the Company.

To the best knowledge of the Directors after making all reasonable enquiries, as at the Latest Practicable Date, the Referral Agent holds 19,800,000 Town Health Shares, representing approximately 0.1% of the issued share capital of Town Health, and has no shareholding interest in each of HK Health Check and the Company.

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LETTER FROM THE BOARD

Referral Services

PRC Class I New Drugs referral service

Pursuant to the Referral Agreement, the Referral Agent has agreed to search for potential Class 1 New Drug acquisition targets, such as new chemical drugs and new biological products, in the PRC for the Company. The Referral Agent will also assist the Company in negotiation with the potential vendors of the Class 1 New Drug acquisition targets and the compliance of relevant procedures and regulations in the PRC. Based on the preliminary estimation of the Company, the expected consideration for acquiring a Class 1 New Drug is likely to be approximately RMB200 million.

PRC Drugs Distribution Networks referral service

Pursuant to the Referral Agreement, the Referral Agent has agreed to search for potential PRC Drugs Distribution Network acquisition targets in the PRC for the Company. The Referral Agent will also assist the Company in negotiation with the potential vendors of the PRC Drugs Distribution Network acquisition targets. Based on the preliminary estimation of the Company, the expected consideration for acquiring a PRC Drugs Distribution Network is likely to be approximately RMB50 million.

Consideration

In consideration of the above referral services, the Company has agreed to (i) pay a fee equal to HK$34,000,000, which shall be satisfied by way of the issue and allotment of 200,000,000 Consideration Shares, representing approximately 28.4% of the issue share capital of the Company as at the Latest Practicable Date and approximately 19.9% of the share capital of the Company as enlarged by the issue of Consideration Shares to the Referral Agent which shall be issued and credited as fully paid up at HK$0.17 per Consideration Share, upon completion of the acquisition of the Class 1 New Drugs as identified by the Referral Agent, which the Directors currently expect to be approximately one year from the date of the Referral Agreement becoming unconditional; and (ii) a fee equal to HK$17,000,000, which shall be satisfied by way of the issue and allotment of 100,000,000 Consideration Shares, representing approximately 14.2% of the issue share capital of the Company as at the Latest Practicable Date and approximately 10.0% of the share capital of the Company as enlarged by the issue of Consideration Shares, to the Referral Agent which shall be issued and credited as fully paid up at HK$0.17 per Consideration Share, upon completion of the acquisition of the PRC Drugs Distribution Network as identified by the Referral Agent, of which the Directors currently expect to be approximately one year from the date of the Referral Agreement becoming unconditional. The Consideration Shares, which are issued solely as the consideration of the above referral services, are subject to a lock-up period of six months.

The issue price of the Consideration Share of HK$0.17 per Share is determined with reference to the Placing Price and represents (i) a discount of approximately 70.7% to the closing price of HK$0.58 on the Last Trading Day; (ii) a discount of approximately 32.0% to the average closing price of HK$0.25 for the last calendar year immediately prior to the

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LETTER FROM THE BOARD

Last Trading Day; (iii) a discount of approximately 82.3% to the closing price of HK$0.96 on the Latest Practicable Date; and (iv) a premium of approximately 30.8% to the net asset value per Share (as at 30 June 2007, after taking into account the subsequent fund raising activities of the Company up to the Latest Practicable Date) of approximately HK$0.13 per Share. Taking into account the above, the Directors are of the view that the issue price of the Consideration Share is fair and reasonable.

Conditions of the Referral Agreement

The Referral Agreement is conditional upon:–

(i) completion of the CB Subscription Agreement pursuant to its terms;
(ii) the passing by the Shareholders at the EGM of an ordinary resolution to approve the Referral Agreement and the transactions contemplated thereunder (including the issue of the Consideration Shares);
(iii) the passing of an ordinary resolution by the Shareholders at the EGM to approve an increase in the authorized share capital of the Company; and
(iv) the GEM Listing Committee of the Stock Exchange granting or agreeing to grant the listing of, and permission to deal in, the Consideration Shares.

THE SERVICE AGREEMENTS

(A) The Town Health Service Agreement

Date

6 November 2007

Parties

The Company; and
Town Health

Consultancy Services

For the purpose of assisting the Group in its assessment of the feasibility of the acquisition of any Class 1 New Drugs it may have identified as a possible acquisition target (“ Targeted Drugs ”), Town Health, shall, subject to fulfillment of all conditions of the Town Health Service Agreement, provide the following services to the Group at nil consideration:

(i) provide interpretation of and other consultancy services in relation to the results of the clinical tests and trials and imaging diagnosis performed on the Targeted Drugs within such time as agreed by the parties;

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LETTER FROM THE BOARD

(ii) participate in consultation sessions with patients engaged in clinical studies; and
(iii) any other services as reasonably requested by the Company in relation to any Targeted Drugs.

Conditions of the Town Health Service Agreement

The Town Health Service Agreement is conditional upon the CB Subscription Agreement becoming unconditional pursuant to its own terms.

(B) The HK Health Check Service Agreement

Date

6 November 2007

Parties

The Company; and
HK Health Check

Consultancy Services

For the purpose of assisting the Group in its assessment of the feasibility of the acquisition of the Targeted Drugs, HK Health Check, shall, subject to fulfillment of all conditions of the HK Health Check Service Agreement, provide the following services to the Group at nil consideration:

(i) provide consultancy services in relation to the design and implementation of medical testing procedures to be adopted for testing the effectiveness of any the Targeted Drugs within such time as agreed by the parties;
(ii) conduct such clinical tests which are necessary to verify the accuracy of the Targeted Drugs; and
(iii) any other services as reasonably requested by the Company in relation to any Targeted Drugs.

Conditions of the HK Health Check Service Agreement

The HK Health Check Service Agreement is conditional upon the CB Subscription Agreement becoming unconditional pursuant to its own terms.

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LETTER FROM THE BOARD

If the condition shall not have been fulfilled by 5:00 p.m. on the Long Stop Date, the Service Agreements shall lapse automatically and the parties shall not have any rights and obligations arising out of the agreements save for any rights or liabilities in connection with any antecedent breaches.

INCREASE IN AUTHORIZED SHARE CAPITAL

The Company proposes to seek from Shareholders at the EGM an approval to increase its authorized share capital from HK$10,000,000 to HK$50,000,000 by the addition thereto of 4,000,000,000 new shares of the Company of HK$0.01 each.

SHAREHOLDING STRUCTURE OF THE COMPANY

The tables below set out the changes to the shareholding structure of the Company as a result of the issue and allotment of the Placing Shares, the Consideration Shares and the Conversion Shares upon conversion of the Convertible Bonds in full under different scenarios:

HK Health Check, Town Health, Precious Success and their respective concert parties_(note)_ The Directors: Mr. Lui Chi Wah, Johnny Mr. Lau Kam Shan Mr. Chan Po Kwong Referral Agent Public Shareholders: Placee Other public Shareholders Total public Shareholders Total	Immediately Immediately after the issue of after the issue of the Placing Shares the Placing Shares but before the issue of and the Consideration the Consideration Shares Shares but before As at the and the conversion of the conversion of the Latest Practicable Date the Convertible Bonds Convertible Bonds No. of Shares % No. of Shares % No. of Shares % 32,895,524 4.67% 32,895,524 4.48% 32,895,524 3.18% 18,716,000 2.66% 18,716,000 2.55% 18,716,000 1.81% 100,000 0.01% 100,000 0.01% 100,000 0.01% 200,000 0.03% 200,000 0.03% 200,000 0.02% 19,016,000 2.70% 19,016,000 2.59% 19,016,000 1.84% – – – – 300,000,000 29.01% – – 30,000,000 4.09% 30,000,000 2.90% 652,195,143 92.63% 652,195,143 88.84% 652,195,143 63.07% 652,195,143 92.63% 652,195,143 92.93% 652,195,143 65.97% 704,106,667 100.00% 734,106,667 100.00% 1,034,106,667 100.00%	Immediately Immediately after the issue of after the issue of the Placing Shares the Placing Shares but before the issue of and the Consideration the Consideration Shares Shares but before As at the and the conversion of the conversion of the Latest Practicable Date the Convertible Bonds Convertible Bonds No. of Shares % No. of Shares % No. of Shares % 32,895,524 4.67% 32,895,524 4.48% 32,895,524 3.18% 18,716,000 2.66% 18,716,000 2.55% 18,716,000 1.81% 100,000 0.01% 100,000 0.01% 100,000 0.01% 200,000 0.03% 200,000 0.03% 200,000 0.02% 19,016,000 2.70% 19,016,000 2.59% 19,016,000 1.84% – – – – 300,000,000 29.01% – – 30,000,000 4.09% 30,000,000 2.90% 652,195,143 92.63% 652,195,143 88.84% 652,195,143 63.07% 652,195,143 92.63% 652,195,143 92.93% 652,195,143 65.97% 704,106,667 100.00% 734,106,667 100.00% 1,034,106,667 100.00%
		1.81% 0.01% 0.02%
		1.84% 29.01% 2.90% 63.07%
		65.97%
		100.00%

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LETTER FROM THE BOARD

HK Health Check, Town Health, Precious Success and their respective concert parties_(note)_ The Directors: Mr. Lui Chi Wah, Johnny Mr. Lau Kam Shan Mr. Chan Po Kwong Referral Agent Public Shareholders: Placee Other public Shareholders Total public Shareholders Total	Immediately after the conversion of the Convertible Bonds but before the issue of the Placing Shares and the Consideration Shares No. of Shares % 822,369,208 55.06% 18,716,000 1.25% 100,000 0.01% 200,000 0.01% 19,016,000 1.27% – – – – 652,195,143 43.67% 652,195,143 43.67% 1,493,580,351 100.00%	Immediately after the conversion of the Convertible Bonds, the issue of the Placing Shares and the Consideration Shares No. of Shares % 822,369,208 45.10% 18,716,000 1.03% 100,000 0.01% 200,000 0.01% 19,016,000 1.05% 300,000,000 16.45% 30,000,000 1.65% 652,195,143 35.75% 652,195,143 37.40% 1,823,580,351 100.00%	Immediately after the conversion of the Convertible Bonds, the issue of the Placing Shares and the Consideration Shares No. of Shares % 822,369,208 45.10% 18,716,000 1.03% 100,000 0.01% 200,000 0.01% 19,016,000 1.05% 300,000,000 16.45% 30,000,000 1.65% 652,195,143 35.75% 652,195,143 37.40% 1,823,580,351 100.00%
			1.03% 0.01% 0.01%
			1.05% 16.45% 1.65% 35.75%
			37.40%
			100.00%

Note: As at the Latest Practicable Date, 32,895,524 Shares were held by Spring Biotech.

INFORMATION ON THE GROUP

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LETTER FROM THE BOARD

Set out below is the audited consolidated financial information of the Company as extracted from the annual report of the Company for the year ended 30 June 2007:

	For the	For the
	year ended	year ended
	30 June 2007	30 June 2006
	HK$	HK$
Revenue	1,297,939	1,368,404
Net profit/(loss) before taxation	9,787,386	(9,570,460)
Net profit/(loss) after taxation	8,396,386	(9,570,460)
Total assets	40,793,543	28,516,731

REASONS FOR THE PLACING, THE CB SUBSCRIPTION, THE REFERRAL AGREEMENT AND THE SERVICE AGREEMENTS FOR THE COMPANY

The Group is principally engaged in the provision of diagnostic testing services and products and related research and development, investment holding, and sales of health food and pharmaceutical products. As stated in the annual report of the Company for the year ended 30 June 2007, the Directors expect fierce competitions in its cancer diagnosis and health products sale businesses. Accordingly, the Directors have been conducting regular evaluation on the Group’s current business and actively looking for new business opportunities that have promising future prospects.

The economic growth of the PRC remains strong in 2007. According to the National Bureau of Statistics of China, the gross domestic products of the PRC grew at a year-onyear rate of approximately 11.5% in the second quarter of 2007. With the continuous improvement in the living standard of the PRC population, the Directors are of the view that spending on medical products will grow dramatically in the near future. Accordingly, the Directors consider investing in drugs that are safe and with proven track records, through establishing drugs distribution networks, in the PRC will offer good financial return. To capture such business opportunities, the Company has entered into the Referral Agreement with the Referral Agent to identify potential Class 1 New Drugs acquisition targets and potential PRC Drugs Distribution Network acquisition targets in the PRC.

The Directors are of the view that the proceeds from the Placing and the CB Subscription, which will be utilized principally for the acquisition of Class 1 New Drugs and PRC Drugs Distribution Network, will enhance the Group’s business development in the PRC health care market. While the shareholding interest of the existing Shareholders will be substantially diluted upon conversion of the Convertible Bonds, (i) the CB Subscription will provide the Company with the capital needed for the potential investments, including the acquisition of Class 1 New Drugs in the PRC and the investment in PRC Drugs Distribution Network, which the Directors believe will offer good financial return to the Shareholders; and (ii) in view of the interest in the Convertible Bonds, each of Town Health and HK Health Check agrees to provide the consultancy services, as stipulated under the Service Agreements, for free.

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LETTER FROM THE BOARD

Given that the Group does not have the expertise in the design and implementation of medical testing procedures in ascertaining the effectiveness of potential Class 1 New Drugs acquisition targets nor the expertise in the review and analysis of the related medical findings and medical test results, the Group has entered into the Service Agreements to secure the relevant free consultancy services from Town Health and HK Health Check to facilitate the Company to access and evaluate suitable Class 1 New Drugs acquisition targets.

The respective terms of the Placing Agreement, the CB Subscription Agreement, the Referral Agreement and the Service Agreements have been arrived at after arm’s length negotiations. The Directors are of the view that the terms of the Placing Agreement, the CB Subscription Agreement, the Referral Agreement and the Service Agreements are fair and reasonable and are in the interest of the Company and the Shareholders as a whole.

INFORMATION ON TOWN HEALTH AND HK HEALTH CHECK

The Town Health Group is principally engaged in the provision of management service for private medical and dental practices and integrated healthcare service for the general public in Hong Kong. Being an integrated healthcare service provider in Hong Kong, the Town Health Group has been actively participating in the provision of paramedical services and other health care related business, such as the operation of laboratory and the sale of healthcare and pharmaceutical products. The Town Health Directors also proactively look for business opportunities to enhance the Town Health Group profile and to create synergy for its existing operations.

The HK Health Check Group was previously principally engaged in the manufacturing and sales of garment in the PRC. As stated in the circular of HK Health Check dated 25 July 2007, the HK Health Check Group has now diversified into the healthcare business by (i) commencing establishment of its own new health check centres in Hong Kong; and (ii) acquiring established health check centres in Hong Kong for the provision of health check, advanced diagnostic imaging services, day care observation service and medical laboratory related services to the public.

THE INTENTIONS OF TOWN HEALTH, HK HEALTH CHECK AND PRECIOUS SUCCESS

The Board is currently made up of six Directors, comprising two executive Directors, one non-executive Director and three independent non-executive Directors. It is intended that all of the existing Directors will remain on the Board and Town Health, HK Health Check and Precious Success intend to nominate Dr. Hui Ka Wah, Ronnie (“Dr. Hui”) as an executive Director after the despatch of this circular.

Dr. Hui, aged 44, graduated from The University of Hong Kong and holds the qualifications of MBBS (HK), MRCP (UK), DCH (Ireland), DCH (Glasgow), FHKAM (Paed), FHKC Paed, MBA and CFA charterholders. Dr. Hui is a specialist in Paediatrics and is the principal of a private medical clinic in Hong Kong since 1991. Dr. Hui is also an independent non-executive director of CASH Financial Services Group Limited (listed on

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LETTER FROM THE BOARD

GEM), SunCorp Technologies Limited, E2-Capital (Holdings) Limited and Winbox International (Holdings) Limited (all of which are listed on main board of the Stock Exchange). Dr. Hui is also an executive director of Town Health and HK Health Check, the issued shares of which are listed on the GEM and the main board of the Stock Exchange respectively. Dr. Hui was once an independent non-executive director of CASH Retail Management Group Limited the issued shares of which are listed on the main board of the Stock Exchange.

Town Health, HK Health Check and Precious Success will conduct further review on the composition of the Board and may also nominate other Directors as they consider appropriate. As advised by the Directors, following the completion of the CB Subscription Agreement, save for disclosed above, there will be no change in the control or management of the Group and the core business of the Group will be continued. Moreover, Town Health, HK Health Check and Precious Success do not intend to make any significant and immediate changes to the business, management and staff employment of the Group or any significant redeployment of the fixed assets of the Group, save for those which are in the ordinary and usual course of business of the Group. The Group will continue to engage in the provision of diagnostic testing services and products and related research and development, investment holding, and sales of health food and pharmaceutical products.

TAKEOVERS CODE AND LISTING RULES IMPLICATIONS ON THE COMPANY

Upon full conversion of the Convertible Bonds, but before taking into account the issue of the Placing Shares and the Consideration Shares, Town Health, HK Health Check, Precious Success and parties acting in concert with them will, in aggregate, hold approximately 55.1% of the issued share capital of the Company as enlarged by the allotment and issue of the Conversion Shares. Accordingly, upon full conversion of the Convertible Bonds, Town Health, HK Health Check, Precious Success and parties acting in concert with them will be obliged to make an unconditional mandatory general offer for all the issued shares of the Company not already owned or agreed to be acquired by Town Health, HK Health Check, Precious Success and parties acting in concert with them under Rule 26.1 of the Takeovers Code, unless a waiver from strict compliance with Rule 26.1 of the Takeovers Code has been obtained from the Executive.

An application has been made on behalf of Precious Success, HK Health Check and Town Health to the Executive for the Whitewash Waiver. The Executive has indicated he will grant the Whitewash Waiver subject to the approval of the Independent Shareholders by way of poll at the EGM. If the Whitewash Waiver is granted by the Executive, Town Health, HK Health Check and Precious Success and parties acting in concert with them would not be required to make a mandatory general offer which would otherwise be required as a result of the full conversion of the Convertible Bonds. Town Health, HK Health Check and Precious Success, their respective concert parties and any parties involved in or interested the Whitewash Waiver are required to abstain from voting in respect of the resolution to approve the Whitewash Waiver under the Takeovers Code. If the Whitewash Waiver is not granted or if the approval of the Independent Shareholders is not obtained, the CB Subscription Agreement will lapse and the CB Subscription will not proceed.

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LETTER FROM THE BOARD

The Whitewash Waiver, if granted, will be subject to the passing of a resolution to approve it by the Independent Shareholders, the voting on which will be taken by way of poll at the EGM. Town Health, HK Health Check, Precious Success, their respective concert parties and any parties involved in or interested in the Whitewash Waiver will abstain from voting in respect of the resolution to approve the Whitewash Waiver.

The aggregate shareholding of Town Health, HK Health Check and Precious Success and parties acting in concert with them upon full conversion of the Convertible Bonds, but before taking into account the issue of the Placing Shares and the Consideration Shares, will exceed 50% of the issued share capital of the Company as enlarged by the full conversion of the Convertible Bonds. Accordingly, if the Whitewash Waiver is granted by the Executive and is approved by the Independent Shareholders at the EGM, and if upon any conversion of the Convertible Bonds by Precious Success the aggregate shareholding interest in the Company of Precious Success, Town Health, HK Health Check and parties acting in concert with them exceeds 50% of the then issued share capital of the Company, any subsequent increase in shareholding by any of them will not result in their incurring any obligation under Rule 26 of the Takeovers Code to make a mandatory general offer.

INDEPENDENT BOARD COMMITTEE/INDEPENDENT FINANCIAL ADVISER

EGM

The Company will convene the EGM at Shop No. 1A-C, Level 1, Hilton Plaza Commercial Centre, 3-9 Shatin Centre Street, Shatin, New Territories, Hong Kong on Monday, 24 December 2007, at 9:00 a.m. at which ordinary resolutions will be proposed for the purpose of considering and, if thought fit, approving the Placing Agreement, the CB Subscription Agreement, the Referral Agreement and the transactions contemplated under each of the above mentioned agreements, the Whitewash Waiver and the increase in the authorized share capital of the Company. Town Health (which holds approximately 4.7% of the issued share capital of the Company as at the Latest Practicable Date), HK Health Check and Precious Success and parties acting in concert with them and those who are interested in, or involved in, the CB Subscription Agreement and the Whitewash Waiver will abstain from voting in respect of the resolution to approve the CB Subscription Agreement and the Whitewash Wavier to be put forward at the EGM. The voting on the resolution in respect of the Whitewash Waiver will be conducted by way of poll in accordance with the requirements of the Takeovers Code.

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LETTER FROM THE BOARD

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you propose to attend and vote at the EGM in person, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar and transfer office of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited at 1712–1716, 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 the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the EGM, or any adjourned meeting, should you so wish.

PROCEDURES FOR DEMANDING A POLL

According to Article 76, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is required under the Listing Rules or (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 duly demanded. A poll may be demanded by:

(a) the chairman of the meeting; or
(b) at least five Shareholders present in person (or in the case of a corporation, by its duly authorised representative) or by proxy and entitled to vote; or
(c) any shareholder or shareholders present in person (or in the case of a corporation, by its duly authorised representative) or by proxy and representing in the aggregate not less than one-tenth of the total voting rights of all Shareholders having the right to attend and vote at the meeting; or
(d) any Shareholders or Shareholders present in person (or in the case of a corporation, by its duly authorised representative) or by proxy and holding Shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all Shares conferring that right; or
(e) if required by the Listing Rules, the Chairman of the meeting and/or any Director holding the proxies shall demand a poll, if such aggregate proxies held individually or collectively by (i) the Chairman of a particular meeting, and/or (ii) the Directors, account for 5% or more of the total voting rights at that meeting, and if on a show of hands in respect of any resolution, the meeting votes in the opposition manner to that instructed in those proxies.

– 28 –

LETTER FROM THE BOARD

GENERAL

Application will be made by the Company to the GEM Listing Committee of the Stock Exchange for the grant of the listing of, and permission to deal in, the Placing Shares, the Conversion Shares and the Consideration Shares.

The issue of the Placing Shares and the Consideration Shares are conditional upon, among other things, the passing of the relevant resolutions by the Shareholders at the EGM.

As each of the Placing and the CB Subscription is subject to a number of conditions precedent, it may or may not be completed. Shareholders and potential investors in the Company are advised to exercise caution when dealing in Shares.

You are advised to read carefully the letter from the Independent Board Committee, which contains its recommendation to the Independent Shareholders in respect of the Whitewash Waiver, set out on page 30 of this circular. Your attention is also drawn to the letter of advice from Taifook Capital containing its advice to the Independent Board Committee and the Independent Shareholders set out on pages 31 to 48 of this circular.

ADDITIONAL INFORMATION

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

By order of the Board of Core Healthcare Investment Holdings Limited Lui Chi Wah, Johnny Chairman

– 29 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [69 x 52] intentionally omitted <==

CORE HEALTHCARE INVESTMENT HOLDINGS LIMITED 確思醫藥投資控股有限公司[*]

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8250)

6 December 2007

To the Independent Shareholders,

Dear Sir or Madam,

(I) PLACING OF NEW SHARES;

(II) ISSUE OF CONVERTIBLE BONDS AND WHITEWASH WAIVER; (III) POSSIBLE ISSUE OF NEW SHARES UNDER THE REFERRAL AGREEMENT; AND (IV) INCREASE IN AUTHORIZED SHARE CAPITAL

We refer to the circular of the Company dated 6 December 2007 (the “Circular”) of which this letter forms part. Unless the context specifies otherwise, capitalised terms used herein have the same meanings as defined in the Circular.

We have been appointed by the Board to advise the Independent Shareholders as to whether the terms of the CB Subscription Agreement and the Whitewash Waiver are fair and reasonable insofar as the Independent Shareholders are concerned. Taifook Capital has been appointed as the independent financial adviser to advise you and us in this respect.

Having taken into account the principal reasons and factors considered by, and the advice of, Taifook Capital as set out in its letter of advice to you and us on pages 31 to 48 of the Circular, we are of the view that the terms of the CB Subscription Agreement and the grant of the Whitewash Waiver 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 ordinary resolution to be proposed at the EGM to approve the CB Subscription Agreement and the Whitewash Waiver.

Yours faithfully,

Mr. Lau Kam Shan Mr. Kwok Shun Tim Mr. Chan Po Kwong Mr. Lam Yan Wing Non-executive Director Independent non-executive Director

for identification purpose only

– 30 –

LETTER FROM TAIFOOK CAPITAL

The following is the full text of the letter of advice from Taifook Capital, 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 CB Subscription Agreement and the Whitewash Waiver.

25th Floor New World Tower 16–18 Queen’s Road Central Hong Kong

6 December 2007

To the Independent Board Committee and the Independent Shareholders

Core Healthcare Investment Holdings Limited Room 609–610, 6th Floor Nan Fung Tower 173 Des Voeux Road Central Hong Kong

Dear Sirs,

WHITEWASH WAIVER

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders with respect to the terms of the CB Subscription Agreement and the Whitewash Waiver, details of which are set out in the letter from the Board (the “Letter”) contained in the circular of the Company dated 6 December 2007 (the “Circular”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

As referred to in the Letter, on 6 November 2007, Precious Success (a joint venture company owned as to 50% by HK Health Check and as to 50% by Town Health) and the Company entered into the CB Subscription Agreement pursuant to which Precious Success has conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, the Convertible Bonds with an aggregate principal amount of HK$150 million. Based on the initial conversion price (subject to adjustments) of HK$0.19 per Conversion Share (the “Initial Conversion Price”), the Convertible Bonds can be converted into 789,473,684 Conversion Shares. The net proceeds from the CB Subscription will be approximately HK$148 million which are intended to be used for the Group’s acquisition of the Class 1 New Drugs in the PRC and/or investment in PRC Drugs Distribution Network business.

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LETTER FROM TAIFOOK CAPITAL

As at the Latest Practicable Date, Town Health, HK Health Check, Precious Success and parties acting in concert with them own approximately 4.7% in aggregate of the existing issued ordinary share capital of The Company. As referred to in the Letter, save for the disposal of 1,800,000 Shares by a HK Health Check Director in May 2007, none of Town Health, HK Health Check, Precious Success and any party acting in concert with any of them has dealt in the securities of the Company in the six months period immediately preceding the date of the CB Subscription Agreement. Upon full conversion of the Convertible Bonds at the Initial Conversion Price but before taking into account the issue of the Placing Shares and the Consideration Shares, Town Health, HK Health Check, Precious Success and parties acting in concert with them will, in aggregate, hold approximately 55.1% of the issued share capital of the Company as enlarged by the full conversion of the Convertible Bonds. Accordingly, upon full conversion of the Convertible Bonds, Town Health, HK Health Check, Precious Success and parties acting in concert with them will be obliged to make an unconditional mandatory general offer for all the issued shares of the Company not already owned or agreed to be acquired by Town Health, HK Health Check, Precious Success and parties acting in concert with them under Rule 26.1 of the Takeovers Code. An application has been made on behalf of Town Health, HK Health Check and Precious Success to the Executive for the granting of the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26.1 of the Takeovers Code. The Executive has indicated that the Whitewash Waiver will be granted, subject to, among other things, the approval of the Independent Shareholders by way of poll at the EGM, Town Health, HK Health Check, Precious Success, their respective concert parties and any parties involved in or interested in the Whitewash Waiver will abstain from voting on the resolution to approve the Whitewash Waiver.

The Independent Board Committee comprising the non-executive Director and the independent non-executive Directors has been established to advise the Independent Shareholders whether or not to vote in favour of the CB Subscription and the Whitewash Waiver. In our capacity as the independent financial adviser to the Independent Board Committee and the Independent Shareholders, our role is to provide the Independent Board Committee and the Independent Shareholders with an independent opinion and recommendation as to whether the terms of the CB Subscription Agreement and the Whitewash Waiver is fair and reasonable so far as the Independent Shareholders are concerned and whether the issue of the Convertible Bonds under the CB Subscription and the Whitewash Waiver is in the interests of the Company and the Independent Shareholders as a whole.

BASIS OF OUR OPINION

In formulating our recommendation, we have relied on the information, financial information and facts supplied to us and representations expressed by the Directors and/ or management of the Company and have assumed that all such information, financial information and facts and any representations made to us, or referred to in the Circular, in all material aspects, are true, accurate and complete as at the time they were made and as at the date of the Circular, has been properly extracted from the relevant underlying accounting records (in the case of financial information) and made after due and careful inquiry by the Company and/or the management of the Company. The Directors and/or the management of the Company have confirmed that, having made all reasonable enquiries

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LETTER FROM TAIFOOK CAPITAL

and to the best of their knowledge and belief, all relevant information has been supplied to us and that no material facts have been omitted from the information supplied and representations expressed to us. We have also relied on certain information available to the public and have assumed such information to be accurate and reliable. We have no reason to doubt the completeness, truth or accuracy of the information and facts provided and we are not aware of any facts or circumstances which would render such information provided and representations made to us untrue, inaccurate or misleading.

We considered we have reviewed sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent verification of the information nor have we conducted any form of in-depth investigation into the businesses, affairs, financial position or prospects of the Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the terms of the CB Subscription Agreement and the Whitewash Waiver, we have considered the following principal factors and reasons:

1 The CB Subscription

1.1 Review of the Group’s operations

The Group is principally engaged in the provision of diagnostic testing services and products and related research and development, investment holding, and sales of health food and pharmaceutical products. Set out below is a summary of the financial highlights for the two years ended 30 June 2007 as extracted from the section headed “Business and geographical segments” under notes to the financial statements of the Company’s latest published annual report:

	For	the year ended	30 June 2007	30 June 2007		For the	year ended 30 June 2006
	Sales of
	health
	food and	Sales of				Sales of
	pharma-	diagnosis		Research		diagnosis	Research
	ceutical	testing		and		testing	and
	products	services	development		Total	services	development	Total
	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Turnover	150	1,148		–	1,298	1,368	–	1,368
Segment results	(323)	(2,699)		(808)	(3,830)	(5,914)	(4,385)	(10,299)
Other income_(Note)_					16,373			1,061
Operating profit/(loss)					9,787			(9,570)
Net profit/(loss)
attributable to
equity holders of
the Company					8,396			(9,570)

Note: Other income for the year ended 30 June 2007 mainly represented fair value gain on financial assets of HK$4,236,610 and gain on disposal of financial assets of HK$11,362,631.

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LETTER FROM TAIFOOK CAPITAL

As shown from the above, the financial performance of the Group’s principal businesses was not promising, the turnover deriving from which were merely approximately HK$1.4 million and HK$1.3 million for the two financial years ended 30 June 2006 and 30 June 2007 respectively. As stated in the Company’s annual report for the year ended 30 June 2007, the Group’s nasopharyngeal carcinoma diagnosis and testing service encountered fierce competitions from individual private hospitals, which led to a decrease of approximately 16.1% in turnover from approximately HK$1.4 million for the year ended 30 June 2006 to approximately HK$1.1 million for the year ended 30 June 2007. In addition, the revenue generated from “Hong Kong Hepatitis Diagnostic Centre” that provides fibroscan testing service resulted in a small income only which did not contribute much to boost the Group’s operating performance. Despite the Group has turned from its loss-making position and recorded a net profit attributable to the Group of approximately HK$8.4 million for the year ended 30 June 2007, such profit was not generated from its principal businesses, but from making investments in Hong Kong stock market.

During the year ended 30 June 2007, the Group has continued its endeavor to explore and develop cancer diagnosis markets in Europe and Japan, but with a sluggish progress. Coupled with the costly maintenance of patent registrations in those places, the Board finally decided to withdraw all patent registrations upon their maturity except those in the PRC and Australia with significant cut down in the related research and development expenses by approximately 81.6% from approximately HK$4.4 million for the year ended 30 June 2006 to approximately HK$0.8 million for the year ended 30 June 2007. Furthermore, the Group has opened two retail shops for sale of health food for the year ended 30 June 2007, however, the business performance of which was not satisfactory and their income contribution was minimal. Based on the above, the Group stated in its annual report for the year ended 30 June 2007 that it will continue to seek for new directions and explore further medical related businesses with plans to develop additional businesses, including agency, wholesale and retail, related to medicinal products in the PRC market.

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LETTER FROM TAIFOOK CAPITAL

1.2 Principal terms of the Convertible Bonds

1.2.1 Initial Conversion Price

The Initial Conversion Price represents:

		Premium/
		(discount) of the
		Initial Conversion
		Price over/to
	Share price/	the Share price/
	Latest NAV	Latest NAV
	per Share	per Share
	(HK$)	(%)
As at the Latest Practicable Date	0.96	(80.2)
As at the last full trading day prior to the
suspension of the trading in the Shares
pending the release of the Announcement
(the “Last Trading Day”)	0.58	(67.2)
Five-day average prior to the Last Trading Day	0.59	(67.6)
Ten-day average prior to the Last Trading Day	0.56	(66.3)
The audited consolidated net assets value per Share
as at 30 June 2007 after taking into account
the subsequent fund raising activities
of the Company up to the Latest Practicable Date
(the “Latest NAV per Share”)(Note)	0.13	46.2

Note: Based on 704,106,667 Shares in issue as at the Latest Practicable Date

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LETTER FROM TAIFOOK CAPITAL

In assessing the fairness and reasonableness of the Initial Conversion Price, we have considered the following principal factors and reasons:

Share price performance

The chart below shows the closing prices and the trading volume of the Shares on the Stock Exchange during the period from 1 November 2006 up to the Last Trading Day (the “Review Period”):

==> picture [9 x 116] intentionally omitted <==

----- Start of picture text -----

Trading Volume ('000 Shares)
----- End of picture text -----

==> picture [367 x 228] intentionally omitted <==

----- Start of picture text -----

350,000 0.700
300,000 0.600
250,000 0.500
200,000 0.400
150,000 0.300
100,000 0.200
50,000 0.100
0 0
Date
Source: the website of Stock Exchange
Closing Price (HK$)
Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 July-07 Aug-07 Sep-07 Oct-07 Nov-07
----- End of picture text -----

During the Review Period, the closing price of the Shares ranged between HK$0.11 (recorded on 28 November 2006, 27 December 2006 and 29 December 2006) and HK$0.66 (recorded on 9 October 2007) with an average of approximately HK$0.25. The price movement of the Shares was generally stable at around the average closing price of approximately HK$0.17 from the beginning of the Review Period to 31 July 2007 (the “Steady Period”). However, except for a sudden plunge of the Share price on 16 August 2007 and 17 August 2007 which was expected to be due to the overall stock market crash, there was a sharp rise in the trading prices of the Shares from 1 August 2007 and the Share price reached its record high at HK$0.66 on 9 October 2007 during the Review Period.

On 7 September 2007, the Company announced the completion of the placing of 229,552,000 new Shares at HK$0.17 per Share, raising approximately HK$39 million. On 13 September 2007, the Company announced its annual results for the year ended 30 June 2007 which has turned from a loss of approximately HK$9.6 million for the year ended 30 June 2006 to a net profit of approximately HK$8.4 million for the year ended 30 June 2007 (which was mainly derived from other income of both realized and unrealized gain on investments in Hong Kong stock market). The turnover generated from the Group’s principal businesses was only approximately HK$1.3 million and the Company still recorded

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LETTER FROM TAIFOOK CAPITAL

operating losses for the year ended 30 June 2007. Save for the aforesaid, we note that the Company had not made any other public announcement from 1 August 2007 to the Last Trading Day except for the announcements which stated that it was not aware of any reasons for the Share price and trading volume movements. Hence, we consider that there is no conclusive reason or correlation with the fundamentals of the Company for the increase in the Share price during the period from 1 August 2007 to the Last Trading Day.

The average daily number of the Shares traded per month, and the respective percentage of the Shares’ monthly trading volume as compared to (i) the total number of issued Shares held by the public as at the Last Trading Day; and (ii) the total number of issued Shares as at the Last Trading Day during the Review Period are tabulated as below:

		% of the Average
		Volume to
		total number	% of the Average
		of issued Shares	Volume to total
	Average	held by the	number of issued
	daily trading	public as at the	Shares as at the
	volume (the	Last Trading Day	Last Trading Day
Month	“Average Volume”)	(Note 1)	(Note 2)
	Shares	(%)	(%)
2006
November 2006	4,659,455	0.71	0.66
December 2006	2,874,737	0.44	0.41
2007
January 2007	24,710,909	3.79	3.51
February 2007	21,736,667	3.33	3.09
March 2007	31,231,096	4.79	4.44
April 2007	10,341,556	1.59	1.47
May 2007	9,813,905	1.50	1.39
June 2007_(Note 3)_	38,159,400	5.85	5.42
July 2007	12,221,238	1.87	1.74
August 2007	16,597,565	2.54	2.36
September 2007	20,397,008	3.13	2.90
October 2007	11,031,049	1.69	1.57
November 2007
(up to the Last Trading Day)	2,222,667	0.34	0.32

Source: The website of Stock Exchange

Notes:

Based on 652,195,143 Shares in public hands as at the Last Trading Day.
Based on 704,106,667 Shares in issue as at the Last Trading Day.
The trading of the Shares was suspended on 12 June 2007.

– 37 –

LETTER FROM TAIFOOK CAPITAL

We noted from the above table that trading in the Shares was relatively thin during the Review Period, with ranges of approximately 0.34% to 5.85% and approximately 0.32% to 5.42% of the total number of issued Shares held by the public as at the Last Trading Day and the total number of issued Shares as at the Last Trading Day respectively. During the 249 trading days in the Review Period, 18 days had trading volume of less than 1 million Shares, representing approximately 7.2% of the total trading days of the Shares in the Review Period. The above statistics proved that the trading of the Shares was inactive.

Having considered that (i) the trading prices of the Shares fluctuated greatly during the period since August 2007 without any conclusive reasons or correlation with the fundamentals of the Company; (ii) the price of the Shares were traded at a high price despite the Company’s past loss-making history since its listing in 2004 (except for a net profit recorded for the year ended 30 June 2007 which was mainly derived from other income of investment gains); and (iii) the trading volume of the Shares was thin, we are not in a position to conclude with any specific reasons for the surge in Share price since August 2007. Therefore, we consider that the historical trading price of the Shares may not serve as a good benchmark to determine the fairness and reasonableness of the Initial Conversion Price.

In light of the above, we consider that the price performance of the Shares during the Steady Period would be a more appropriate basis for assessing the fairness of the Initial Conversion Price. We note that the closing price of the Shares were between HK$0.11 to HK$0.31 with an average of approximately HK$0.17 within the Steady Period, before the Share price experienced a sharp and unexplainable rise since August 2007. The Initial Conversion Price represents (i) a premium of approximately 72.7% over the lowest closing price of the Shares during the Steady Period; (ii) a premium of approximately 11.8% over the average closing price of the Shares during the Steady Period; and (iii) a discount of approximately 38.7% to the highest closing price of the Shares during the Steady Period.

– 38 –

LETTER FROM TAIFOOK CAPITAL

Comparison with other issues of convertible bond

To assess and compare the terms of the Convertible Bonds, we, to the best of our knowledge and as far as we are aware of, have identified and reviewed for transactions that involved the issue of convertible bond by the companies listed on GEM from 1 September 2007 to the Latest Practicable Date. The table below summarised our relevant findings:

					Premium/
					(discount) of
					the initial
				conversion price
					over/to the
					closing price
	Date of				of the shares
	announ-	Principal			at the last
Name of company	cement	amount	Maturity	Coupon rate	trading day
		(HK$	(years)	(%)	(%)
		million)
China Chief Cable TV Group Ltd.	21-Sep-07	282.9	5	0	(81.2 )
China Medical and Bio Science Ltd.	2-Oct-07	100.0	3	0	61.0
China Photar Electronics Group Ltd.	15-Oct-07	62.4	2	5.0	(20.0 )
Wafer Systems Ltd.	18-Oct-07	606.8	5	0.1	(48.5 )
Tradeeasy Holdings Ltd.	23-Oct-07	1,443.0	3	0	(64.3 )
Prosticks International Holdings Ltd.	24-Oct-07	720.0	3	0	(66.1 )
Kanhan Technologies Group Ltd.	2-Nov-07	10.0	3	1.0	6.4
Palmpay China (Holdings) Ltd.	12-Nov-07	Up to	Up to 3	0	25.0
(Note)		80.0
Maximum of the CB Comparables			5	5.0	25.0
Minimum of the CB Comparables			2	0	(81.2 )
Average of the CB Comparables
with issue price premium			3.0	0.5	15.7
Average of the CB Comparables
with issue price discount			3.6	1.0	(56.0 )
The Company	15-Nov-07	150.0	4	1	(67.2 )

Source: The website of the Stock Exchange and relevant announcements issued by the selected companies

Note: The total principal amount and terms of the convertible bonds to be issued will be determined based on the actual audited consolidated net profits after tax and extraordinary or exceptional items of the acquired company for the year ended 31 March 2009 and the average of the actual audited consolidated net profits after tax and extraordinary or exceptional items of the acquired company for the years ended 31 March 2009 and 31 March 2010 as detailed in the announcement of Palmpay China (Holdings) Ltd dated 12 November 2007.

– 39 –

LETTER FROM TAIFOOK CAPITAL

Given that the convertible bonds of China Medical and Bio Science Limited were issued with free grant of 70,588,235 warrants at nil consideration, the premium represented by its initial conversion price may not be comparable to other market comparables listed above, we have chosen not to include the convertible bonds of China Medical and Bio Science Limited as part of the market comparables (the “CB Comparables”) in the calculation of the maximum, minimum and average figures of the CB Comparables and in the following analysis.

As indicated above, the discount of the Initial Conversion Price to the closing price of the Shares as at the Last Trading Day of approximately 67.2% falls within the range of the CB Comparables from a premium of approximately 25.0% to a discount of approximately 81.2%.

In view that (i) although the Initial Conversion Price represents a discount of approximately 67.2% to the closing price on the Last Trading Day, it still falls within the range of the CB Comparables and we consider that given the unexplained surge in the price of the Shares during the Review Period as stated in the paragraph headed “Share price performance” above, the historical trading price of the Shares may not serve as a good benchmark to determine the fairness and reasonableness of the Initial Conversion Price; (ii) the Initial Conversion Price represents a premium of approximately 72.7% and approximately 11.8% over the lowest closing price and average closing price of the Shares respectively during the Steady Period and a discount of approximately 38.7% to the highest closing price of the Shares during the Steady Period; and (iii) the Initial Conversion Price represents a premium of approximately 46.2% over the Latest NAV per Share, we consider that the Initial Conversion Price is fair and reasonable so far as the Independent Shareholders are concerned.

1.2.2 Coupon rate

As note from the comparison table of the CB Comparables above, the CB Comparables carried an annual coupon rate of 0% to 5% with an average of 1.0%. Since the coupon rate of the Convertible Bonds of 1% is the same as the average of the CB Comparables with issue price discount, we are of the view that the coupon rate of the Convertible Bonds is fair and reasonable so far as the Independent Shareholders are concerned.

– 40 –

LETTER FROM TAIFOOK CAPITAL

1.2.3 Other financing alternatives

As advised by the Directors, in view of the financial results of the Company in the past few financial years, it may be difficult for the Company to secure bank financing with a principal amount of HK$150 million and it would inevitably incur substantial interest expense even if such an amount of bank financing is obtained. As for other forms of equity financing, most would immediately result in a dilution to the interests of the existing Shareholders. In considering the Convertible Bonds, the Directors believe that this fund raising exercise, out of the other financing sources, offers the best balance in terms of financing flexibility and relatively low recurring interest expense and we concur with the Directors’ view after reviewing the principle factors set out under this letter.

1.2.4 Dilution of Independent Shareholders’ shareholdings

Upon full conversion of the Convertible Bonds at Initial Conversion Price, a total of 789,473,684 Conversion Shares will be issued, representing approximately 112.1% of the existing issued Shares and approximately 43.3% of the issued Shares as enlarged by the issue of the Consideration Shares, the Placing Shares and the Conversion Shares. Assuming the Consideration Shares, the Placing Shares and the Conversion Shares are issued, shareholding of the Independent Shareholders will be diluted from approximately 92.6% to approximately 37.4%.

In view that (i) the issue of the Convertible Bonds is one of the best method of fund raising as compared to other alternatives; (ii) the net assets value per Share would be enhanced upon full conversion of the Convertible Bonds from the Latest NAV per Share of approximately HK$0.13 per Share to approximately HK$0.16 per Share (based on the Latest NAV per Share as adjusted by the full conversion of the Convertible Bonds); and (iii) the prospects of the business in which the net proceeds of the Convertible Bonds are intended to be invested as detailed below, we consider the potential dilution on the shareholding of the Independent Shareholders to be acceptable so far as the Independent Shareholders are concerned.

1.3 Reasons for the CB Subscription and use of proceeds from the Convertible Bonds

1.3.1 Reasons for the CB Subscription

As stated in 1.1 above, the financial performance of the Group’s principal businesses was not promising and the Group is looking for business opportunities that are complimentary to its existing principal businesses. As stated in the Letter, the economic growth of the PRC

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LETTER FROM TAIFOOK CAPITAL

remains strong in 2007. According to the National Bureau of Statistics of China, the gross domestic products of the PRC (the “GDP”) grew at a year-on-year rate of approximately 11.5% in the second quarter of 2007. With the continuous improvement in the living standard of the PRC population, the Directors are of the view that spending on medical products will grow dramatically in the near future. The Group stated in its first quarterly report for the three months ended 30 September 2007 that it has via various channels sought for related business opportunities in the PRC healthcare and drug markets which it considered would provide a tremendous potential for the Group’s development. In this regard, the Group plans to recruit talents that are familiar with the markets to make all necessary cultivations. As stated in the Letter, to capture such business opportunities, the Company has entered into the Referral Agreement with the Referral Agent, pursuant to which the Referral Agent has agreed to identify potential Class 1 New Drugs acquisition targets and potential PRC Drugs Distribution Network acquisition targets in the PRC for the Company. As advised by the Board, the Company intends to acquire Class 1 New Drugs for cardiocerebrovascular diseases which has already been granted with a Certificate of New Drug (新藥證書 ) and a Drug Approval Document (藥品批准文號) from the State Food and Drug Administration (the “SFDA”) and is required to undergo a safety monitoring period of not more than five years that no application for registration of a new drug of the same type will be accepted by the SFDA. Based on the preliminary estimation by the Company, the consideration for acquiring a Class 1 New Drugs is likely to be approximately RMB200 million and the consideration for acquiring a PRC Drugs Distribution Network is likely to be approximately RMB50 million, both of which shall be partly financed by the CB Subscription.

1.3.2 Prospects of the Class 1 New Drugs in the PRC

Background information of the Class 1 New Drugs in the PRC

The Drug Registration Administration Policy (the “Policy”) (葯品註冊管理辦法 ) promulgated by the SFDA on 10 July 2007 sets out the guidance on drug registration application for the following, namely Chinese drugs, chemical drugs and new biological products. Each of the Chinese drugs, chemical drugs and new biological products category is further classified into 9 classes, 6 classes and 15 classes respectively where each of its class 1 drugs to which the Class 1 New Drugs belongs, is the drugs that has not yet approved for sale in the PRC and/or globally. It also stated in the Policy that most of the class 1 drugs are required to undergo a safety monitoring period of four and five years and no application for registration of a new drug of the same type will be accepted by the SFDA during that period.

– 42 –

LETTER FROM TAIFOOK CAPITAL

Business prospects of pharmaceutical industry in the PRC

According to the China Statistical Yearbook 2007 issued by National Bureau of Statistics of China, the GDP increased from approximately RMB7,897.3 billion in 1997 to approximately RMB21,087.1 billion in 2006, representing a compound annual growth rate (“CAGR”) of approximately 11.5%, which signified the rapid growth of the PRC economy. The average annual disposable income of urban residents per capita increased from approximately RMB5,160.3 in 1997 to approximately RMB11,759.5 in 2006, representing a CAGR of approximately 9.6% and the average annual disposable income of rural residents per capita increased from approximately RMB2,090.1 in 1997 to approximately RMB3,587.0 in 2006, representing a CAGR of approximately 6.2%. The sustained rapid growth of PRC economy and increase in annual disposable income of both urban and rural residents per capita will lead to increase in health awareness in the PRC, as evidenced by the increase in healthcare expenditure for urban and rural households, representing a CAGR of approximately 12.4% (from approximately RMB414.0 billion in 2004 to approximately RMB523.4 billion in 2006) and approximately 16.9% (from approximately RMB101.0 billion in 2004 to approximately RMB138.0 billion in 2006) respectively.

The growth in aging population also raised the need for healthcare products and services. Based on the statistics on national population census as stated in the China Statistical Yearbook 2007, the number of people aged 65 or above increased from approximately 49.5 million in 1982 to approximately 88.1 million in 2000, representing a CAGR of approximately 3.3%. If representing as a percentage of the total population in the PRC, the statistics of aging population increased from approximately 4.9% in 1982 to approximately 7.0% in 2000. Furthermore, the PRC government has been spending more resources on public health. According to the China Statistical Yearbook 2007, the PRC government budgetary expenditure for public health had increased from approximately 64.1 billion in 1999 to approximately 155.3 billion in 2005, representing a CAGR of approximately 15.9%. As a percentage of total expenditure on public health, it also increased from approximately 15.8% in 1999 to approximately 17.9% in 2005. Hence, higher public awareness

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LETTER FROM TAIFOOK CAPITAL

and spending on healthcare products and services including consumption of pharmaceutical products by the PRC nationals are expected. As stated in the China Statistical Yearbook 2007, the gross industrial output value of state-owned and non-state-owned industrial enterprises above designated size for manufacture of medicines increased from approximately RMB237.8 billion in 2002 to approximately RMB501.9 billion in 2006, representing a CAGR of approximately 20.5%, while their sales revenue increased from approximately RMB228.0 billion in 2002 to approximately RMB471.9 billion in 2006, representing a CAGR of approximately 20.0%

1.3.3 Technical Expertise from Town Health and HK Health Check

The Town Health Group is principally engaged in the provision of management service for private medical and dental practices and integrated healthcare service for the general public in Hong Kong. Being an integrated healthcare service provider in Hong Kong, the Town Health Group has been actively participating in the provision of para-medical services and other health care related business, such as the operation of laboratory and the sale of healthcare and pharmaceutical products.

After the introduction of the controlling shareholders as stated in the circular of HK Health Check dated 28 May 2007 and according to the circular of HK Health Check dated 25 July 2007, the HK Health Check Group has now diversified into the healthcare business by commencing establishment of its own new health centres in Hong Kong and acquiring established health check centres in Hong Kong for the provision of health check, advanced diagnostic imaging services, day care observation service and medical laboratory related services to the public.

Given that the Group is inexperienced in the design and implementation of medical testing procedures in ascertaining the effectiveness of the potential Class 1 New Drugs acquisition targets and in the review and analysis of the related medical findings and medical test results, the Group has entered into the Service Agreements to secure the relevant free consultancy services from Town Health and HK Health Check and leverage on the technical expertise of the Town Health Group and the HK Health Check Group in the healthcare business to facilitate the Company to access and evaluate the suitable Class 1 New Drugs acquisition targets.

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LETTER FROM TAIFOOK CAPITAL

1.3.4 Our View

Given that the aging population is increasing in the PRC, the public health awareness is raising in the PRC as a result of the sustained rapid growth of PRC economy and increase in annual disposable income of both urban and rural residents per capita; and coupled with the technical expertise from Town Health and HK Health Check through the Service Agreements, we concur with the Directors’ view that the business of Class 1 New Drugs has considerable development potential.

1.4 Financial effect of the CB Subscription

The following illustrates the effect on net tangible assets value, earnings, working capital position and gearing of the Group as a result of the CB Subscription assuming that there will not be any changes to the total issued share capital of the Company as at the Latest Practicable Date.

1.4.1 Net tangible assets value

The Group had an audited consolidated net tangible assets value attributable to the equity shareholders of the Company of approximately HK$38.1 million as at 30 June 2007. Upon completion of the CB Subscription, the Group’s net tangible assets value attributable to the equity shareholders of the Company would be increased as a result of the recognition of the equity portion of the Convertible Bonds, which is in the interests of the Company and the Independent Shareholders as a whole.

1.4.2 Earnings

The Group had an audited consolidated net profit after taxation for the year ended 30 June 2007 of approximately HK$8.4 million. Upon completion of the CB Subscription, the nominal interest expenses of the Convertible Bonds (together with 1% annual coupon expenses) would have to be recognized in the financial statements of the Group and for the years onward, the nominal interest expenses of the Convertible Bonds will continuously be incurred by the Group until conversion and/or redemption of the Convertible Bonds in full. As advised by the Company, positive contribution to the Group’s revenue would be expected after acquisition of the potential Class 1 New Drugs in the PRC and/or investment in the PRC Drug Distribution Network business, which we considered is in the interests of the Company and the Independent Shareholders as a whole.

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LETTER FROM TAIFOOK CAPITAL

1.4.3 Working Capital

The Group had an audited cash and bank balances of approximately HK$4.1 million as at 30 June 2007. The net proceeds of approximately HK$148 million to be raised from the issue of the Convertible Bonds by the Company, which are intended to be used for acquisition of the Class 1 New Drugs in the PRC and/or investment in the PRC Drugs Distribution Network business upon identification of appropriate acquisition targets by the Referral Agent, would improve the working capital position of the Group and we consider is in the interests of the Company and the Independent Shareholders as a whole.

1.4.4 Gearing

The Group did not have any long-term borrowings as at 30 June 2007. Upon completion of CB Subscription, the 4-year Convertible Bonds would be recognized as non-current liabilities which the gearing ratio (being long-term debt to equity) of the Group would be increased. The gearing ratio of the Group will be decreased gradually from time to time during the term of the Convertible Bonds upon conversion which will reduce the Group’s liabilities and provide contribution to the Group’s equity. In view that the net proceeds of the CB Subscription would provide immediate funding for the Company to acquire the Class 1 New Drugs in the PRC and/or invest in the PRC Drugs Distribution Network business which the Group considered would generate positive contribution to the Group’s revenue and is beneficial to the long-term development of the Group, we consider that the increase in the gearing ratio as a result of the CB Subscription is justifiable in so far as the Independent Shareholders and the Company are concerned.

1.4.5 Our view

In view that (i) the Group’s net tangible assets value attributable to the equity shareholders of the Company would be increased as a result of the recognition of the equity portion of the Convertible Bonds; (ii) positive contribution to the Group’s revenue would be expected after acquisition of the Class 1 New Drugs in the PRC and/or investment in the PRC Drug Distribution Network business despite the recognition of nominal interest expenses (together with 1% annual coupon expenses) of the Convertible Bonds; (iii) the acquisition of the Class 1 New Drugs in the PRC and/or investment in the PRC Drugs Distribution Network business would be funded by the net proceeds from the issue of the Convertible Bonds; and (iv) the increase in gearing ratio of the Group is justifiable with respect to the future prospects and benefits to be generated to the Group upon the acquisition of the Class 1 New Drugs in the PRC and/or investment in the PRC Drugs Distribution Network business, we consider the financial effect of the CB Subscription on the Group as set out above is in the interests of the Company and the Independent Shareholders as a whole.

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LETTER FROM TAIFOOK CAPITAL

2 Whitewash Waiver

2.1 Background

As at the Latest Practicable Date, Town Health, HK Health Check, Precious Success and parties acting in concert with them own approximately 4.7% in aggregate of the existing issued ordinary share capital of the Company. Upon full conversion of the Convertible Bonds but before taking into account the issue of the Placing Shares and the Consideration Shares, Town Health, HK Health Check, Precious Success and parties acting in concert with them will, in aggregate, hold approximately 55.1% of the issued share capital of the Company as enlarged by the full conversion of the Convertible Bonds. Accordingly, upon full conversion of the Convertible Bonds, Town Health, HK Health Check, Precious Success and parties acting in concert with them will be obliged to make an unconditional mandatory general offer for all the issued shares of the Company not already owned or agreed to be acquired by Town Health, HK Health Check, Precious Success and parties acting in concert with them under Rule 26.1 of the Takeovers Code. An application has been made on behalf of Town Health, HK Health Check and Precious Success to the Executive for the granting of the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. The Executive has indicated that subject to the approval of the Whitewash Waiver by the Independent Shareholders by way of poll at the EGM, he will grant the Whitewash Waiver.

2.2 The Whitewash Waiver as a condition of the CB Subscription

The CB Subscription is conditional upon, among other things, the passing by the Independent Shareholders by way of poll at the EGM of an ordinary resolution to approve, inter alia , the Whitewash Waiver. In the event that the Whitewash Waiver is not granted by the Executive or if the condition imposed thereon is not fulfilled, the CB Subscription will not proceed and the Group may not have additional fund for acquisition of the Class 1 New Drugs in the PRC and/or investment in the PRC Drugs Distribution Network business.

2.3 CB Subscription Agreement

Given the prospects of the business in which the net proceeds of the Convertible Bonds are intended to be invested and as stated in the Letter, the Directors consider the terms of the CB Subscription Agreement to be fair and reasonable, we are of the view that the approval of the Whitewash Waiver, which is a pre-requisite for the completion of the CB Subscription, is in the interests of the Company and the Independent Shareholders as a whole.

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LETTER FROM TAIFOOK CAPITAL

RECOMMENDATION

Having considered the above principle factors and reasons, in particular:

the terms of the Convertible Bonds, including the discount of the Initial Conversion Price to the closing price of the Shares as at the Last Trading Day, are fair and reasonable as analyzed above;
the net proceeds of the CB Subscription would allow the Company to further invest and capture the business opportunities in the Class 1 New Drugs in the PRC which are expected to be of considerable development potential;
the issue of the Convertible Bonds will provide fresh working capital to the Group and further improve its working capital position following completion of the CB Subscription and is one of the best methods of fund raising as compared to other alternatives under present circumstances;
the CB Subscription is conditional upon, among other things, the passing by the Independent Shareholders at the EGM of an ordinary resolution to approve, inter alia , the Whitewash Waiver and the Executive granting the Whitewash Waiver; and
the Whitewash Waiver is subject to the approval by the Independent Shareholders at the EGM,

we are of the view that the terms of the CB Subscription Agreement and the Whitewash Waiver are fair and reasonable so far as the Independent Shareholders are concerned and the issue of the Convertible Bonds under the CB Subscription and the Whitewash Waiver are in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the CB Subscription and the Whitewash Waiver.

Yours faithfully, For and on behalf of

Taifook Capital Limited Derek C.O. Chan April Chan Managing Director Executive Director

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

SUMMARY OF FINANCIAL INFORMATION FOR EACH OF THE THREE YEARS ENDED 30 JUNE 2007 AND THE THREE MONTHS ENDED 30 SEPTEMBER 2007

The following is a summary of the financial results of the Group for each of the three years ended 30 June 2007 and the three months ended 30 September 2007 as extracted from the annual reports of the Company for the years ended 30 June 2006 and 2007 as well as the first quarterly report of the Company for the three months ended 30 September 2007.

Turnover Cost of sales Gross profit Other income Selling and distribution expenses Administration expenses Other operating expenses Profit/(Loss) before tax Income tax expense Profit/(Loss) for the period attributable to equity holders of the Company Earning/(loss) per share – basic_(note 3) – diluted(note 4)_ Dividend per share	For the 2005 HK$’000 (audited) 1,133,297 (1,048,689) 84,608 596,679 681,287 (556,026) (4,097,754) (1,618,180) (5,590,673) – (5,590,673) (1.62 cents) N/A Nil	For the three months ended 30 year ended 30 June September 2006 2007 2007 HK$’000 HK$’000 HK$’000 (audited) (audited) (unaudited) 1,368,404 1,297,939 325,411 (1,308,230) (1,087,647) (255,357) 60,174 210,292 70,054 1,182,374 16,417,159 12,610,339 1,242,548 16,627,451 12,680,393 (510,437) (137,676) (6,174) (4,737,887) (5,264,743) (1,225,264) (5,564,684) (1,437,646) (43,874) (9,570,460) 9,787,386 11,405,081 – (1,391,000) – (9,570,460) 8,396,386 11,405,081 (2.55 cents) 2.23 cents 2.20 cents N/A 2.22 cents 2.17 cents Nil Nil Nil

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Notes:

(1) The reports of the auditors in respect of the financial statements of the Group for each of the three years ended 30 June 2007 issued by RSM Nelson Wheeler did not contain any qualification.
(2) There was no profit or loss attributable to minority interest and no extraordinary or exceptional item during the three years ended 30 June 2007 and the three months ended 30 September 2007.
(3) The calculation of the basic earnings/loss per share for each of three years ended 30 June 2007 is based on (i) the loss attributable to the equity holders of the Company of HK$5,590,673 for the year ended 30 June 2005; (ii) the loss attributable to the equity holders of the Company of HK$9,570,460 for the year ended 30 June 2006; and (iii) the profit attributable to the equity holders of the Company of HK$8,396,386 for the year ended 30 June 2007 and on the weighted average number of (i) 345,897,501 ordinary shares in issue during the year ended 30 June 2005; (ii) 375,982,170 ordinary shares in issue during the year ended 30 June 2006; and (iii) 375,883,507 ordinary shares in issue during the year ended 30 June 2007. The calculation of the basic earnings per share for the three months ended 30 September 2007 is based on the unaudited profit for the three months ended 30 September 2007 attributable to the equity holders of the Company of HK$11,405,081 and the weighted average number of ordinary shares of 517,526,860 in issue during the period.
(4) The computation of diluted loss per share for the years ended 30 June 2005 and 2006 has not been presented because the assumed exercises of share options, which were outstanding during the years, had anti-dilutive effects on the basic loss per share. The calculation of the diluted earnings per share for the year ended 30 June 2007 is based on the profit attributable to equity holders of the Company of HK$8,396,386 and the weighted average number of 379,036,662 shares, being the weighted average number of ordinary shares outstanding during the year, adjusted for the effects on assumed exercise of share options. The calculation of diluted earnings per share for the three months ended 30 September 2007 is based on the profit attributable to equity holders of the Company of HK$11,405,081 and the weighted average number of 525,655,351 shares, being the weighted average number of ordinary shares outstanding during the period, adjusted for the effects on assumed exercise of share options.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

AUDITED FINANCIAL INFORMATION FOR THE YEAR ENDED 30 JUNE 2007

The following is the audited financial statements of the Group for the year ended 30 June 2007 as extracted from the annual report of the Company for the year ended 30 June 2007.

Consolidated Income Statement

For the year ended 30 June 2007

Note Turnover 6 Cost of sales Gross profit Other income 7 Selling and distribution expenses Administration expenses Other operating expenses Profit/(Loss) before tax Income tax expense 9 Profit/(Loss) for the year attributable to equity holders of the Company 10 Earnings/(Loss) per share – basic 14 – diluted	2007 HK$ 1,297,939 (1,087,647) 210,292 16,417,159 16,627,451 (137,676) (5,264,743) (1,437,646) 9,787,386 (1,391,000) 8,396,386 2.23 cents 2.22 cents	2006 HK$ 1,368,404 (1,308,230) 60,174 1,182,374 1,242,548 (510,437) (4,737,887) (5,564,684) (9,570,460) – (9,570,460) (2.55 cents) N/A

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Consolidated Balance Sheet

As at 30 June 2007

Note Non-current assets Intangible assets 15 Property, plant and equipment 16 Current assets Inventories 17 Trade and other receivables 18 Financial assets at fair value through profit or loss 19 Cash and bank balances 20 Current liabilities Trade and other payables 21 Current tax liabilities Net current assets Net assets Capital and reserves Share capital 23 Reserves Total equity	2007 HK$ – 3,256,023 3,256,023 100,527 18,051,965 15,262,864 4,122,164 37,537,520 1,347,165 1,391,000 2,738,165 34,799,355 38,055,378 3,825,920 34,229,458 38,055,378	2006 HK$ – 2,421,980
		2,421,980
		44,846 612,568 7,398,530 18,038,807
		26,094,751
		652,935 –
		652,935
		25,441,816
		27,863,796

		3,735,920 24,127,876
		27,863,796

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Consolidated Statement of Changes in Equity

For the year ended 30 June 2007

Share capital HK$ Balance at 1 July 2005 3,830,760 Shares repurchase (94,840) Recognition of share-based payments – Loss for the year – Balance at 30 June 2006 and 1 July 2006 3,735,920 Issue of shares upon exercise of share options 90,000 Transfer of reserve upon exercise of share options – Transfer of reserve upon lapse of share options – Recognition of share-based payments – Profit for the year – Balance at 30 June 2007 3,825,920		Reserves	Reserves	Sub-total of reserves HK$ 33,162,576 (1,383,566) 1,919,326 (9,570,460) 24,127,876 919,900 – – 785,296 8,396,386 34,229,458	Total HK$ 36,993,336 (1,478,406) 1,919,326 (9,570,460) 27,863,796 1,009,900 – – 785,296 8,396,386 38,055,378
	Share premium HK$ 46,628,204 (1,383,566) – – 45,244,638 919,900 788,450 – – – 46,952,988	Share options reserve HK$ – – 1,919,326 – 1,919,326 – (788,450) (215,786) 785,296 – 1,700,386	Accumulated losses HK$ (13,465,628) – – (9,570,460) (23,036,088) – – 215,786 – 8,396,386 (14,423,916)

Nature and purpose of reserves

(i) Share premium

Under the Companies Law (Revised) of the Cayman Islands, the funds in the share premium account are distributable to the shareholders of the Company provided that immediately following the date on which the dividend is proposed to be distributed, the Company will be in a position to pay off its debts as they all due in the ordinary course of business.

(ii) Share options reserve

The Group has a share option scheme under which options to subscribe for the Company’s shares have been granted to certain directors, employees, other eligible participants and Chinese University as set out in note 24.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Consolidated Cash Flow Statement

For the year ended 30 June 2007

CASH FLOWS FROM OPERATING ACTIVITIES Profit/(Loss) before tax Adjustments for: Interest income Dividend income from listed investments Depreciation Loss/(Gain) on disposal of property, plant and equipment Amortisation of intangible assets Impairment losses of intangible assets Share-based payments expenses Fair value (gain)/loss of financial assets at fair value through profit or loss Gain on disposal of financial assets at fair value through profit or loss Write-off of inventories Write-off of property, plant and equipment Operating loss before working capital changes Increase in inventories (Increase)/Decrease in trade and other receivables Increase in trade and other payables Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment Payments for licences and patents Proceeds from disposal of property, plant and equipment Purchases of financial assets at fair value through profit or loss Proceeds from disposals of financial assets at fair value through profit or loss Dividend received from listed investments Interest received Net cash from/(used) in investing activities	2007 HK$ 9,787,386 (677,887) (85,383) 317,689 270,717 – – 785,296 (4,236,610) (11,362,631) 77,328 – (5,124,095) (133,009) (17,439,397) 694,230 (22,002,271) (1,422,449) – – (51,650,514) 59,385,421 85,383 677,887 7,075,728	2006 HK$ (9,570,460) (1,061,081) – 679,082 (108,000) 459,757 3,158,397 1,919,326 332,459 – – 133,127 (4,057,393) (11,332) 189,328 106,333 (3,773,064) (2,628,080) (113,443) 108,000 – – – 1,061,081 (1,572,442)

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares upon exercise of share options Shares repurchase Net cash from/(used in) financing activities NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances	2007 HK$ 1,009,900 – 1,009,900 (13,916,643) 18,038,807 4,122,164 4,122,164	2006 HK$ – (1,478,406) (1,478,406) (6,823,912) 24,862,719 18,038,807 18,038,807

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Notes to the Financial Statements

For the year ended 30 June 2007

1. GENERAL

The Company is incorporated as an exempted company with limited liability under the Companies Law of the Cayman Islands and its shares are listed on the Growth Enterprise Market (“GEM”) of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The address of the registered office and principal place of business of the Company are disclosed in the “Corporate Information” of this annual report.

The Company is an investment holding company. The activities of its principal subsidiaries are set out in note 31 to the financial statements.

2. ADOPTION OF NEW AND REVISED HKFRSS

In the current year, the Group has adopted all the new and revised Hong Kong Financial Reporting Standards (“HKFRSs”), issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) that are relevant to its operations and effective for accounting periods beginning on or after 1 January 2006, 1 May 2006 and 1 June 2006. The adoption of these new and revised HKFRSs did not result in substantial changes to the Group’s accounting polices and amounts reported for the current year and prior years.

The Group has not applied the new HKFRSs that have been issued but not yet effective. The application of these new HKFRSs will not have material impact on the financial statements of the Group.

3. SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared in accordance with HKFRSs, accounting principles generally accepted in Hong Kong and the applicable disclosures required by the Rules Governing the Listing of Securities on the GEM of the Stock Exchange and by the Hong Kong Companies Ordinance.

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of investments which are carried at their fair values.

The preparation of financial statements in conformity with HKFRSs requires the use of certain key assumptions and estimates. It also requires management to exercise its judgements in the process of applying the accounting policies. The areas involving critical judgements and areas where assumptions and estimates are significant to these financial statements, are disclosed in note 4 to the financial statements.

The significant accounting policies applied in the preparation of these financial statements are set out below.

(a) Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to 30 June. Subsidiaries are entities over which the Group has control. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has control.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date the control ceases.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

The gain or loss on the disposal of a subsidiary represents the difference between the proceeds of the sale and the Group’s share of its net assets together with any goodwill relating to the subsidiary which was not previously charged or recognised in the consolidated income statement and also any related accumulated foreign currency translation reserve.

Inter-company transactions, balances and unrealised profits on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(b) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Hong Kong dollars, which is the Company’s functional and presentation currency.

(ii) Transactions and balances in each entity’s financial statements

Transactions in foreign currencies are translated into the functional currency using the exchange rates prevailing on the transaction dates. Monetary assets and liabilities in foreign currencies are translated at the rates ruling on the balance sheet date. Profits and losses resulting from this translation policy are included in the income statement.

Translation differences on non-monetary items, such as equity instruments classified as financial assets at fair value through profit or loss, are reported as part of the fair value gain or loss.

(c) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are expensed in the income statement during the period in which they are incurred.

Depreciation of property, plant and equipment is calculated at rates sufficient to write off their cost less their residual values over the estimated useful lives on a straight-line basis. The principal useful lives are as follows:

Laboratory equipment 5 years Leasehold improvements 5 years Office equipment, furniture and fixtures 2[1] /2 – 5 years Motor vehicles 5 years

The residual values, useful lives and depreciation method are reviewed and adjusted, if appropriate, at each balance sheet date.

Construction in progress represents buildings under construction and plant and machinery pending installation, and is stated at cost less impairment losses. Depreciation begins when the relevant assets are available for use.

The gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the income statement.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(d) Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease payments (net of any incentives received from the lessor) are expensed in the income statement on a straight-line basis over the lease term.

(e) Intangible assets

(i) Research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally generated intangible asset is recognised only if all of the following conditions are met:

An asset is created that can be identified;
It is probable that the asset created will generate future economic benefit; and

The development cost of the asset can be measured reliably.

Internally generated intangible assets are measured initially at cost and are amortised on a straight-line basis over their estimated useful lives which generally do not exceed twenty years. Where no internally generated intangible asset can be recognised, development expenditure is charged to the income statement in the period in which it is incurred.

(ii) Patents and licences

Patents and licences are measured initially at purchase cost and are amortised on a straight-line basis over their estimated useful lives of the relevant testing services of 7 to 15 years.

(f) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

In previous years, cost of inventories was determined using first-in, first-out basis. With the new operation of the Group’s retail business on 1 December 2006, cost of inventories is to be determined using weighted average method. Such change in accounting policy had no material effect on how the results for the current or prior accounting periods have been prepared and presented.

(g) Financial as sets at fair value through profit or loss

Financial assets at fair value through profit or loss are either investments held for trading or designated as at fair value through profit or loss upon initial recognition. These investments are subsequently measured at fair value. Gains or losses arising from changes in fair value of these investments are recognised in the income statement.

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APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(h) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment. An allowance for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the allowance is the difference between the receivables’ carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate computed at initial recognition. The amount of the allowance is recognised in the income statement.

Impairment losses are reversed in subsequent periods and recognised in the income statement when an increase in the receivables’ recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the receivables at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.

(i) Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents represent cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term highly liquid investments which are readily convertible into known amounts of cash and subject to an insignificant risk of change in value.

(j) Trade and other payables

Trade and other payables are stated initially at their fair value and subsequently measured at amortised cost using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

(k) Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

(l) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably.

Revenue from the sales of diagnostic testing services is recognised when the services are rendered.

Revenue from the sales of diagnostic testing products is recognised on the transfer of risks and rewards of ownership which generally coincide with the time when goods are delivered and title has passed.

Sales of health food and pharmaceutical products are recognised when goods are delivered and title has passed.

Dividend income from investments is recognised when the Group’s right to receive payment has been established.

Interest income is recognised as it accrues using the effective interest method.

– 59 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(m) Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the balance sheet date.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Pension obligations

The Group contributes to defined contribution retirement schemes which are available to all employees. Contributions to the schemes by the Group and employees are calculated as a percentage of employees’ basic salaries. The retirement benefit scheme cost charged to the income statement represents contributions payable by the Group to the funds.

(n)

Share-based payments

The Group issues equity-settled share-based payments to certain grantees. Equity-settled share-based payments are measured at fair value (excluding the effect of non marketbased vesting conditions) of the equity instruments at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.

(o) Taxation

Income tax represents the sum of the current tax and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences, unused tax losses or unused tax credits can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

– 60 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(p)

Related parties

A party is related to the Group if:

(i) directly or indirectly through one or more intermediaries, the party controls, is controlled by, or is under common control with, the Group; has an interest in the Group that gives it significant influence over the Group; or has joint control over the Group;
(ii) the party is an associate;
(iii) the party is a joint venture;
(iv) the party is a member of the key management personnel of the Company or its parent;
(v) the party is a close member of the family of any individual referred to in (i) or (iv);
(vi) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or
(vii) the party is a post-employment benefit plan for the benefit of employees of the Group, or of any entity that is a related party of the Group.

(q) Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing products and services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

In accordance with the Group’s internal financial reporting, the Group has determined that business segments be presented as the primary reporting format and geographical as the secondary reporting format.

Segment revenue, expenses, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to the segment. Unallocated costs mainly represent corporate expenses. Segment assets consist primarily of property, plant and equipment, intangible assets, inventories and trade receivables. Segment liabilities comprise operating liabilities and exclude items such as tax liabilities.

Segment revenue, expenses, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between Group enterprises within a single segment.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets (both tangible and intangible) that are expected to be used for more than one period.

(r) Impairment of assets

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets, except investments, inventories and receivables, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.

– 61 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(s) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a present legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow is remote.

(t) Events after the balance sheet date

Events after the balance sheet date that provide additional information about the Group’s position at the balance sheet date or those that indicate the going concern assumption is not appropriate are adjusting events and are reflected in the financial statements. Events after the balance sheet date that are not adjusting events are disclosed in the notes to the financial statements when material.

4. CRITICAL JUDGEMENTS AND KEY ESTIMATES

In the process of applying the Group’s accounting policies described in note 3 to the financial statements, management has made estimates and assumptions concerning the future. The estimates and assumptions that have significant impact on changes in value of carrying amounts of the most significant amounts of assets/liabilities are discussed below:

(a) Licences, patents and development costs

Determining whether licences and patents and development costs are impaired requires an estimation of the recoverable amount through future commercial activity which requires the Group to estimate the future cash flows expected to arise from the developed services and products. Impairment losses may arise when actual cash flows are less than expected.

Impairment losses of licences and patents and development costs amounted to HK$1,156,672 and HK$2,001,725 respectively have been charged to the consolidated income statement for the year ended 30 June 2006.

– 62 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(b) Share-based payment expenses

The fair value of the share options granted to the directors, employees and other eligible participants determined at the date of grant of the respective share options is expensed over the vesting period, with a corresponding adjustment to the Group’s share-based payment reserve. In assessing the fair value of the share options, the Black-Scholes option pricing model (the “Black-Scholes Model”) was used. The Black-Scholes Model is one of the generally accepted methodologies used to calculate the fair value of the share options. The Black-Scholes Model requires the input of subjective assumptions, including the expected dividend yield and expected life of options. Any changes in these assumptions can significantly affect the estimate of the fair value of the share options.

5. FINANCIAL RISK MANAGEMENT

The Group’s activities expose itself to different kinds of financial risk. The management has been monitoring these risk exposures to ensure appropriate measures are implemented on a timely and effective manner so as to mitigate or reduce such risks.

(a) Currency risk

The Group has certain assets, liabilities and transactions denominated in foreign currency and is exposed to foreign currency risk. The Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

(b) Interest rate risk

The Group’s exposure to change in interest rates is mainly attributable to its bank balances. Bank balances expose the Group to cash flow interest-rate risk. The Group currently does not have an interest rate hedging policy. However, management monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arise.

(c) Credit risk

The Group’s maximum exposure to credit risk in the event of counterparties failure to perform their obligations as at 30 June 2007 in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated balance sheet. The Group has no significant concentration of credit risk, with exposure spread over a number of counterparties and customers.

(d) Price risk

The Group’s financial assets at fair value through profit or loss are measured at fair value at each balance sheet date. Therefore, the Group is exposed to debt security price risk. The management manages this exposure by maintaining a portfolio of investments with different risk profiles.

(e) Fair values

The carrying amounts of the Group’s financial assets as reflected in the consolidated balance sheet approximate their respective fair values.

(f) Liquidity risk

The Group’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

– 63 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

6. TURNOVER

The Group’s turnover represents turnover arising on sales of diagnostic testing services and products, and sales of health food and pharmaceutical products. An analysis of the Group’s turnover for the year is as follows:

Sales of diagnostic testing services and products Sales of health food and pharmaceutical products	2007 HK$ 1,148,009 149,930 1,297,939	2006 HK$ 1,368,404 –
		1,368,404

7. OTHER INCOME

Interest income Dividend income from listed investments Fair value gain on financial assets at fair value through profit or loss Gain on disposal of financial assets at fair value through profit or loss Gain on disposal of property, plant and equipment Handling charges received Sundry income	2007 HK$ 677,887 85,383 4,236,610 11,362,631 – 3,990 50,658 16,417,159	2006 HK$ 1,061,081 – – – 108,000 12,650 643
		1,182,374

8. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business Segments

For management purposes, the Group is currently organised into three operating segments:

Sales of diagnostic testing services
The use of blood test and Fibroscan test in the diagnosis of cancerous and certain liver and other diseases.
Sales of health food and pharmaceutical products
Retail business on sales of health food and pharmaceutical products was commenced in December 2006. Accordingly no information about this business segment was presented for the year ended 30 June 2006.
Research and development
Research and development relating to diagnosis of cancer and certain other illnesses.

– 64 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Year ended 30 June 2007 TURNOVER RESULTS Segment results Other income Unallocated corporate expenses Profit before tax Income tax expense Profit for the year As at 30 June 2007 ASSETS Segment assets Unallocated assets Total assets LIABILITIES Segment liabilities Unallocated liabilities Total liabilities OTHER INFORMATION Capital expenditure Depreciation of property, plant and equipment Write-off of inventories Loss on disposal of property, plant and equipment	Sales of Sales of health diagnosis food and Research testing pharmaceutical and services products development HK$ HK$ HK$ 1,148,009 149,930 – (2,698,802) (322,796) (808,685) 23,021,812 392,216 1,359 1,077,669 51,200 16,021 1,214,889 207,560 – 286,980 30,709 – 70,878 6,450 – 270,717 – –	Total HK$ 1,297,939 (3,830,283) 16,373,215 (2,755,546) 9,787,386 (1,391,000) 8,396,386 23,415,387 17,378,156 40,793,543 1,144,890 1,593,275 2,738,165 1,422,449 317,689 77,328 270,717

– 65 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Sales of diagnosis testing services HK$ Year ended 30 June 2006 TURNOVER 1,368,404 RESULTS Segment results (5,914,161) Other income Unallocated corporate expenses Loss for the year As at 30 June 2006 ASSETS Segment assets 20,834,321 Unallocated assets Total assets LIABILITIES Segment liabilities 633,695 OTHER INFORMATION Capital expenditure 2,655,016 Depreciation and amortisation 1,138,839 Impairment losses of intangible assets – Fair value loss of financial assets at fair value through profit or loss –	Research and development HK$ – (4,384,921) 283,880 19,240 86,507 – 3,158,397 –	Total HK$ 1,368,404 (10,299,082) 1,061,081 (332,459) (9,570,460) 21,118,201 7,398,530 28,516,731 652,935 2,741,523 1,138,839 3,158,397 332,459

Geographical segments

The revenue and results, assets and liabilities of the Group for the years ended 30 June 2006 and 2007 are derived wholly from customers located in one geographical market, namely Hong Kong.

– 66 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

9. INCOME TAX EXPENSE

		2007	2006
		HK$	HK$
Current tax – Hong	Kong Profits Tax	1,391,000	–

Hong Kong Profits Tax has been provided at a rate of 17.5% on the estimated assessable profit for the year ended 30 June 2007. No provision for Hong Kong Profits Tax has been made for the year ended 30 June 2006 as the Group did not generate any assessable profits arising in Hong Kong during that year.

The income tax expense can be reconciled to the profit/(loss) before tax per the consolidated income statement as follows:

Profit/(Loss) before tax Tax calculated at the tax rate of 17.5% (2006: 17.5%) Tax effect of expenses not deductible in determining taxable profits Tax effect of income not taxable in determining taxable profits Tax effect of temporary differences not recognised Tax effect of utilisation of tax losses not previously recognised Tax effect of loss not recognised Underprovision in current year Income tax expense	2007 HK$ 9,787,386 1,712,790 176,434 (129,989) (105,184) (65,718) 102,667 (300,000) 1,391,000	2006 HK$ (9,570,460
		(1,674,830 483,784 (185,690 438,906 – 937,830 –
		–

– 67 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

10. PROFIT/(LOSS) BEFORE TAX

Profit/(Loss) before tax has been arrived at after charging/(crediting):

Amortisation of intangible assets Less: Amounts capitalised as development costs Amortisation included in other operating expenses Auditor’s remuneration Cost of inventories sold Depreciation Exchange losses Fair value (gain)/loss of financial assets at fair value through profit or loss Gain on disposal of financial assets at fair value through profit or loss Impairment losses of intangible assets included in other operating expenses Operating leases in respect of Office premises Retail shop Directors’ quarters Research and development expenditure other than amortisation, staff costs and share-based payment expenses Staff costs Directors’ emoluments including directors’ quarters_(note 11)_ Other staff’s retirement scheme contributions Other staff’s salaries and wages Other staff’s share-based payments expenses Other welfares Share-based payment expenses not included in staff costs Loss on disposal of property, plant and equipment Write-off of inventories included in cost of inventories sold Write-off of property, plant and equipment included in other operating expenses	2007 HK$	2006 HK$
	– –	773,845 (314,088)
		459,757 175,000 108,372 679,082 8,171 332,459 – 3,158,397 183,300 – 816,000 52,444
	2,341,084 57,584 1,353,355 – 21,146	1,607,805 60,440 1,330,746 795,099 18,277
	3,773,169 785,296 270,717 77,328 –	3,812,367 734,076 – – 133,127

– 68 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

11. DIRECTORS’ EMOLUMENTS

During the year ended 30 June 2007 and 2006, no emoluments were paid by the Group to the directors as an inducement to join or upon joining the Group or as compensation for loss of office. None of the directors has waived any emoluments during the years.

Details of emoluments of individual executive, non-executive and independent non-executive directors are set out below:

For the year ended 30 June 2007 Executive directors Mr. Lui Chi Wah, Johnny_(a) Mr. Wu Kai(b) Dr. Yeung Wah Hin, Alex(c) Mr. Cheng Yan Tak, Angus Ronald(d) Mr. Cho Kam Luk(c) Ms. Yeung Tsui Mai Ling, Margaret(c) Non-executive directors Mr. Lau Kam Shan Independent non-executive directors Mr. Chan Po Kwong Mr. Kwok Shun Tim(h) Mr. Lam Yan Wing(i) Mr. Chan Siu Wing, Raymond(d) Mr. Wong Kin Fung(g)_	Directors’ fees HK$ – 120,000 – – – – 120,000 – – – – 25,500 – 25,500 145,500	Salaries, allowances and other benefits HK$ 1,971,371 – 194,000 – – – 2,165,371 – – – – – – – 2,165,371	Retirement scheme contributions HK$ 27,500 – 2,000 – – – 29,500 – – – – 713 – 713 30,213	2007 Total HK$ 1,998,871 120,000 196,000 – – –
				2,314,871
				–
				– – – 26,213 –
				26,213
				2,341,084

– 69 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Directors’ fees HK$ For the year ended 30 June 2006 Executive directors Dr. Yeung Wah Hin, Alex_(c) – Mr. Cheng Yan Tak, Angus Ronald(d) – Mr. Cho Kam Luk(c) – Ms. Yeung Tsui Mai Ling, Margaret(c) – – Non-executive directors Mr. Lau Kam Shan – Independent non-executive directors Dr. Ngan Man Wong, Matthew(e) – Dr. Loh Kai Tsu, Kevin(f) – Mr. Chan Siu Wing, Raymond(d) 28,242 Mr. Chan Po Kwong – Mr. Wong Kin Fung(g)_ – 28,242 28,242	Salaries, allowances Retirement and other scheme benefits contributions HK$ HK$ 1,176,000 12,000 – – – – – – 1,176,000 12,000 – – – – – – – 1,412 – – – – – 1,412 1,176,000 13,412	Share-based payments HK$ 66,453 33,226 33,226 33,226 166,131 33,226 43,355 – 57,129 90,310 – 190,794 390,151	2006 Total HK$ 1,254,453 33,226 33,226 33,226
			1,354,131
			33,226
			43,355 – 86,783 90,310 –
			220,448
			1,607,805

Notes:

(a) Appointed on 2 August 2006 (b) Appointed on 22 August 2006
(c) Resigned on 2 August 2006
(d) Resigned on 22 August 2006
(e) Resigned on 22 March 2006
(f) Resigned on 24 October 2005
(g) Retired on 2 November 2006
(h) Appointed on 13 September 2006
(i) Appointed on 30 January 2007

– 70 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

12. EMPLOYEES’ EMOLUMENTS

The five highest paid individuals in the Group included two (2006: one) executive directors of the Company, whose emoluments are included in note 11 above. The emoluments of the remaining three (2006: four) individuals are as follows:

Salaries and allowances Retirement scheme contributions Share-based payments	2007 HK$ 645,122 26,900 – 672,022	2006 HK$ 978,983 43,725 287,385
		1,310,093

The emoluments of the remaining three (2006: four) highest paid individuals were within the following band:

HK$Nil – HK$1,000,000	Number of individuals 2007 2006 3 4

During the year, no emoluments were paid by the Group to the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.

13. DIVIDENDS

No dividend has been paid or declared by the Company for the year (2006: Nil).

14. EARNINGS/(LOSS) PER SHARE

The calculation of the basic earnings/(loss) per share is based on the profit for the year attributable to the equity holders of the Company of HK$8,396,386 (2006: loss of HK$9,570,460) and on the weighted average number of ordinary shares of 375,883,507 (2006: 375,982,170) in issue during the year.

The calculation of the diluted earnings per share for the year ended 30 June 2007 is based on the profit attributable to equity holders of the Company of HK$8,396,386 and the weighted average number of 379,036,662 shares, being the weighted average number of ordinary shares outstanding during the year, adjusted for the effects on assumed exercise of share options.

The computation of diluted loss per share for the year ended 30 June 2006 has not been presented because the assumed exercises of share options, which were outstanding during the year, had anti-dilutive effects on the basic loss per share.

– 71 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

15. INTANGIBLE ASSETS

The Group carried out reviews of the recoverable amount of its intangible assets in 2006 and 2007, having regard to the market conditions of the Group’s services. These assets were used in the Group’s research and development segment. The review led to the recognition of impairment losses of HK$2,001,725 for development costs and HK$1,156,672 for licences and patents, which had been recognised in the prior year income statement. The recoverable amount had been determined on the basis of their value in use. In the opinion of the management, no future cash inflow would be generated from the relevant assets. Impairment losses had been fully provided for the year ended 30 June 2006.

Details of the intangible assets of the Group at the balance sheet date are set out below:

Development costs HK$ 3,612,637 314,088 3,926,725 1,505,000	Licences and patents HK$ 2,490,731 113,443 2,604,174 1,093,657	Total HK$ 6,103,368 427,531
		6,530,899
		2,598,657
420,000 –	39,757 314,088	459,757 314,088
420,000 2,001,725 3,926,725 –	353,845 1,156,672 2,604,174 –	773,845 3,158,397
		6,530,899
		–

– 72 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

16. PROPERTY, PLANT AND EQUIPMENT

Construction in progress HK$ Cost At 1 July 2005 – Additions 1,500,000 Disposals/Write-off – At 30 June 2006 and 1 July 2006 1,500,000 Additions – Disposals/Write-off – At 30 June 2007 1,500,000 Accumulated depreciation and impairment At 1 July 2005 – Charge for the year – Disposals/Write-off – At 30 June 2006 and 1 July 2006 – Charge for the year – Disposals/Write-off – At 30 June 2007 – Carrying amount At 30 June 2007 1,500,000 At 30 June 2006 1,500,000	Office equipment, Laboratory Leasehold furniture equipment improvements and fixtures HK$ HK$ HK$ 1,041,434 269,492 659,660 670,400 – 18,680 – (269,492) (385,897) 1,711,834 – 292,443 1,021,886 337,580 62,983 – – – 2,733,720 337,580 355,426 742,000 127,384 495,093 400,674 53,898 136,710 – (181,282) (340,980) 1,142,674 – 290,823 191,136 41,550 4,520 – – – 1,333,810 41,550 295,343 1,399,910 296,030 60,083 569,160 – 1,620	Motor vehicles HK$ 94,206 439,000 (94,206) 439,000 – (439,000) – 94,206 87,800 (94,206) 87,800 80,483 (168,283) – – 351,200	Total HK$ 2,064,792 2,628,080 (749,595) 3,943,277 1,422,449 (439,000) 4,926,726 1,458,683 679,082 (616,468) 1,521,297 317,689 (168,283) 1,670,703 3,256,023 2,421,980

Construction in progress represents work in progress of designs and renovation in respect of a molecular testing laboratory workshop in a body-check centre which is still under construction.

– 73 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

17. INVENTORIES

Pharmaceutical supplies Health food and pharmaceutical products TRADE AND OTHER RECEIVABLES Trade receivables Payment for shares of initial public offering application Receivable arising from dealing in listed securities Deposits Prepayments Other receivables	2007 HK$ – 100,527 100,527 2007 HK$ 160,678 7,267,395 10,329,660 141,858 130,938 21,436 18,051,965	2006 HK$ 44,846 –
		44,846

		2006 HK$ 144,829 – – 330,335 115,695 21,709
		612,568

18. TRADE AND OTHER RECEIVABLES

The Group allows its customers with an average credit period of 30 days. The aging analysis of trade receivables at the balance sheet date based on the invoice date is as follows:

0 – 30 days 31 – 60 days 61 – 90 days > 90 days	2007 HK$ 78,805 18,870 19,100 43,903 160,678	2006 HK$ 104,883 29,935 9,281 730
		144,829

19. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Held for trading and at fair value Listed equity securities in Hong Kong Unlisted debt securities_(note)_	2007 HK$ 15,262,864 – 15,262,864	2006 HK$ – 7,398,530
		7,398,530

Note: The above unlisted debt securities represented five-year treasury notes of the United States with interest rate of 4% per annum. Their fair values were determined based on the market price provided by the relevant financial institution. The Group had disposed of the treasury notes in the current year.

20. CASH AND BANK BALANCES

Cash and bank balances comprises cash held by the Group and bank balances that bear interest at prevailing market rates of 2.75% (2006: 4.98%) per annum and have original maturity of one month or less (2006: one month or less).

– 74 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

21. TRADE AND OTHER PAYABLES

2007 HK$ Trade payables 13,703 Other payables and accrued charges 1,333,462 Amount due to a related company_(see note 28d) – 1,347,165 The following is an aged analysis of trade payables at the balance sheet date: 2007 _HK$ 0 – 30 days 9,087 31 – 60 days 2,051 61 – 90 days 386 > 90 days 2,179 13,703	2006 HK$ – 652,709 226
	652,935

	2006 HK$ – – – –
	–

22. DEFERRED TAXATION

At the balance sheet date, the major components of the unprovided deferred taxation of the Group are as follows:

Accelerated depreciation allowance Future benefits of tax losses	2007 HK$ (180,108) 4,610,587 4,430,479	2006 HK$ (74,924) 4,083,602
		4,008,678

No deferred tax assets has been recognised as the generation of future taxable profits against which the assets can be utilised is uncertain. The tax losses can be carried forward indefinitely.

23. SHARE CAPITAL

Ordinary shares of HK$0.01 each Authorised At 1 July 2005, 30 June 2006 and 2007 Issued and fully paid At 1 July 2005 Shares repurchase_(note a) At 30 June 2006 and 1 July 2006 Exercise of share options(note b)_ At 30 June 2007	Number of shares 1,000,000,000 383,076,000 (9,484,000) 373,592,000 9,000,000 382,592,000	Nominal value HK$ 10,000,000

		3,830,760 (94,840)
		3,735,920 90,000
		3,825,920

– 75 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Notes:

(a) During the year ended 30 June 2006, the Company repurchased its own shares on GEM as follows:

Month of repurchase July 2005 November 2005 Total	Number of Aggregate shares Price per share consideration repurchased Highest Lowest paid HK$ HK$ HK$ 3,500,000 0.207 0.178 655,796 5,984,000 0.145 0.126 822,610 9,484,000 1,478,406

The above shares were cancelled upon repurchases and accordingly the issued share capital of the Company was reduced by the par value of these shares which amounted to HK$94,840. An aggregate amount of HK$1,383,566 representing the premium portion and brokerage expenses payable on the repurchases was charged against the share premium account.

(b) During the year ended 30 June 2007, the Company had issued a total of 9,000,000 ordinary shares of HK$0.01 each upon the exercise of share options as follows:

Exercise price per share HK$0.105 HK$0.116	Number of shares issued upon exercise 3,100,000 5,900,000 9,000,000	Amounts of share exercised HK$ 325,500 684,400 1,009,900	Share capital increased upon exercise HK$ 31,000 59,000 90,000	Share premium increased upon exercise HK$ 294,500 625,400
				919,900

24. SHARE OPTIONS

(a) A share option scheme (the “Share Option Scheme”) was adopted by the shareholders of the Company on 20 April 2004 for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations.

The board of Directors (the “Board”) may, at its discretion, invite any employees, Directors, advisors, consultants, licensors, distributors, suppliers, agents, customers, joint venture partners, strategic partners and services providers of and/or to any member of the Group whom the Board considers in its sole discretion, to have contributed to the Group from time to time (together “Participants”) to take up options to subscribe for shares of the Company (“Options”).

Options granted should be accepted within 14 days from the date of grant. Upon acceptance of the Options, the eligible person shall pay HK$1 to the Company by way of consideration for the grant. The Options may be exercised in accordance with the terms of the Share Option Scheme at any time during the option period after the Options has been granted by the Board. An option period is a period to be determined by the Board in its absolute discretion and notified by the Board to each eligible person as being the period during which any Options may be exercised, such period to expire not later than 10 years after the date of grant of the Options.

– 76 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

The subscription price will be determined by the Board of the Company at its absolute discretion and shall be no less than the highest of: (a) the closing price of the shares as stated in the daily quotations sheet issued by the Stock Exchange on the date of grant which must be a business day; and (b) the average closing price of the shares as stated in the daily quotations sheets issued by the Stock Exchange for the five business days immediately preceding the date of grant; and (c) the nominal value of a share.

The total number of shares which may be issued upon exercise of all outstanding options granted or to be granted under the Share Option Scheme is 10% of the issued share capital of the Company as at the listing date of the Company on GEM (the “Scheme Mandate Limit”). The Company may renew the Scheme Mandate Limit at any time subject to prior shareholders of the Company’s approval.

No Participants shall be granted an option which, if exercised in full, would result in such Participants becoming entitled to subscribe for such number of shares as, when aggregated with the total number of shares already issued under all the options previously granted to him or her which have been exercised, and, issuable under all the outstanding options previously granted to him or her which are for the time being subsisting and unexercised, would exceed 1% of the total number of shares in issue in any 12-month period up to the date of grant of the Options.

Unless early terminated in accordance with the terms therein, the Share Option Scheme will remain valid and effective for a period of 10 years commencing on 18 June 2004.

Share options do not confer rights on the holder to dividends or to vote at the shareholders’ meeting.

Details of the movements in share options granted under the Share Option Scheme during the year ended 30 June 2007 are set out as follows:

			Number of underlying shares in respect of which	Number of underlying shares in respect of which	Number of underlying shares in respect of which	Number of underlying shares in respect of which
				share options	were granted
		Exercise	Outstanding		Exercised/	Outstanding
		price	at		Cancelled/	at
Date of grant	Exercisable period	per share	01/07/2006	Granted	Lapsed	30/06/2007
		HK$
Directors
20/06/2005	20/06/2005 – 19/06/2008	0.225	6,225,266	–	5,114,155	1,111,111
20/06/2005	20/06/2005 – 19/06/2015	0.225	3,999,999	–	3,999,999	–
19/06/2006	19/06/2006 – 18/06/2009	0.105	3,000,000	–	2,500,000	500,000
19/06/2006	19/06/2006 – 18/06/2016	0.105	2,003,835	–	1,055,342	948,493
Employees
26/06/2006	26/06/2006 – 25/06/2016	0.116	4,700,000	–	4,100,000	600,000
Other eligible participants
26/06/2006	26/06/2006 – 25/06/2016	0.116	3,600,000	–	3,600,000	–
Total			23,529,100	–	20,369,496	3,159,604

Weighted average
exercise price (HK$)			0.1610	–	0.1629	0.1493

– 77 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Details of the movements in share options granted under the Share Option Scheme during the year ended 30 June 2006 are set out as follows:

			Number of underlying shares in respect of which	Number of underlying shares in respect of which	Number of underlying shares in respect of which	Number of underlying shares in respect of which
				share options	were granted
		Exercise	Outstanding		Exercised/	Outstanding
		price	at		Cancelled/	at
Date of grant	Exercisable period	per share	01/07/2005	Granted	Lapsed	30/06/2006
		HK$
Directors
20/06/2005	20/06/2005 – 19/06/2008	0.225	6,225,266	–	–	6,225,266
20/06/2005	20/06/2005 – 19/06/2015	0.225	3,999,999	–	–	3,999,999
19/06/2006	19/06/2006 – 18/06/2009	0.105	–	3,000,000	–	3,000,000
19/06/2006	19/06/2006 – 18/06/2016	0.105	–	2,003,835	–	2,003,835
Employees
26/06/2006	26/06/2006 – 25/06/2016	0.116	–	4,700,000	–	4,700,000
Other eligible participants
26/06/2006	26/06/2006 – 25/06/2016	0.116	–	3,600,000	–	3,600,000
Total			10,225,265	13,303,835	–	23,529,100

Weighted average
exercise price (HK$)			0.2250	0.1120	–	0.1610

The options outstanding at the end of the year have a weighted average remaining contractual life of approximately 6.16 years (2006: approximately 6.82 years).

Total consideration received during the year ended 30 June 2006 from directors, employees and other eligible participants for accepting the options granted amounted to HK$17.

(b) Under an agreement entered into between the Chinese University and the Company on 8 August, 2002 relating to the grant of a right of first refusal to the Company by the Chinese University in respect of certain technology and inventions, as amended and supplemented by agreements dated 31 October, 2003 and 16 April, 2004 (the “Right of First Refusal Agreement”), the Company will be offered a right of first refusal for the grant by the Chinese University of a royalty-bearing exclusive licence to use and commercially develop certain technologies and inventions and other non-invasive diagnostic technologies for detecting cancer and foetal diseases developed by Professor Lo Yuk Ming, Dennis in future.

In return, the Company agreed to grant to the Chinese University or such person as the Chinese University may direct (including trustees of any funds) options to subscribe for shares or to pay cash up to a maximum amount of HK$4,600,000 over the period of the term of such agreement of four years commencing from 18 June, 2004. Such grant of options will be granted to the Chinese University at intervals of twelve months. Such options are not intended to be granted under the share option scheme adopted by the Company on 20 April 2004.

– 78 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Details of the movements in share options granted to Chinese University during the year ended 30 June 2007 are set out as follows:

			Number of underlying shares in respect of which	Number of underlying shares in respect of which	Number of underlying shares in respect of which
			share options were granted
		Exercise	Outstanding	Exercised/	Outstanding
		price	at	Cancelled/	at
Date of grant	Exercisable period	per share	01/07/2006 Granted	Lapsed	30/06/2007
		HK$
28/06/2005	28/12/2005 – 27/06/2010	0.223	4,484,305 –	–	4,484,305
26/06/2006	26/12/2006 – 25/06/2011	0.116	9,482,758 –	–	9,482,758
22/06/2007	22/12/2007 – 21/06/2012	0.295	– 4,067,796	–	4,067,796
Total			13,967,063 4,067,796	–	18,034,859

Weighted average
exercise price (HK$)			0.1504 0.2950	–	0.1830

Details of the movements in share options granted to Chinese University during the year ended 30 June 2006 are set out as follows:

			Number of underlying shares in respect of which	Number of underlying shares in respect of which	Number of underlying shares in respect of which
			share options were granted
		Exercise	Outstanding	Exercised/	Outstanding
		price	at	Cancelled/	at
Date of grant	Exercisable period	per share	01/07/2005 Granted	Lapsed	30/06/2006
		HK$
28/06/2005	28/12/2005 – 27/06/2010	0.223	4,484,305 –	–	4,484,305
26/06/2006	26/12/2006 – 25/06/2011	0.116	– 9,482,758	–	9,482,758
Total			4,484,305 9,482,758	–	13,967,063

Weighted average
exercise price (HK$)			0.223 0.116	–	0.1504

The options outstanding at the end of the year have a weighted average remaining contractual life of approximately 3.97 years (2006: approximately 4.18 years).

For share options granted and vested before 1 July 2005 did not result in a charge to the income statement. When the grantees chose to exercise the options, the nominal amounts of share capital and share premium were credited only to the extent of the option’s exercise price receivable.

The fair value of share option of the 4,067,796 shares granted to Chinese University during the year ended 30 June 2007 amounted to approximately HK$785,296 which was credited to share option reserves.

– 79 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

(c) The fair values of share option granted were determined using the Black-Scholes valuation model. The significant inputs into the model were as follows:

		Share options grant date
	22/06/2007	19/06/2006	26/06/2006
Share price at the grant date	0.295	0.105	0.115
Exercise price (HK$)	0.295	0.105	0.116
Expected volatility based on historical
volatility of share prices (%)	76.88	98.41	98.41
Expected annual dividend yield,
based on historical dividend (%)	0	0	0
Expected life of option (years)	5	5.8	5.5
Hong Kong Exchange Fund Notes rate
for corresponding estimated expected
life indicated at the date of grant (%)	4.665	4.81 – 4.92	4.62– 4.83

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous 1,267 days. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations.

25. RETIREMENT SCHEME

The Group operates a Mandatory Provident Fund Scheme for all qualifying employees in Hong Kong. The assets of the scheme are held separately from those of the Group, in funds under the control of trustees. The Group contributes 5% or relevant payroll costs to the scheme, which contribution is matched by employees.

The total cost charged to consolidated income statement of HK$87,797 (2006: HK$73,853) represents contributions payable to the scheme by the Group during the year.

26. OPERATING LEASES COMMITMENTS

At the balance sheet dates, the Group had commitments for future minimum leases payment under non-cancellable operating leases which fall due as follows:

Within one year In the second to fifth years inclusive	2007 HK$ 519,600 437,600 957,200	2006 HK$ 252,600 –
		252,600

Operating lease payments represent rentals payable by the Group for its office premises, retail shop and director’s quarter. Leases are negotiated and rentals are fixed for a term ranging from two to three years.

27. CAPITAL COMMITMENTS

As at 30 June 2007, the Group had no significant capital commitment. (2006: nil)

– 80 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

28. RELATED PARTY TRANSACTIONS AND BALANCES

(a) The Group had no significant transactions with related parties during the year or significant balances with them at the end of the year.
(b) The compensation to the Group’s key management personnel is disclosed in note 11 to the financial statements.
(c) In prior year sales of diagnostic testing services amounted to HK$12,185 were made to Spring Biotech Limited, a shareholder of the Company. The Group had no trade receivables due from Spring Biotech Limited as at 30 June 2006. Mr. Cho Kam Luk, an executive Director (resigned on 2 August 2006), was interested in the transactions as a beneficial shareholder of Spring Biotech Limited. The maximum outstanding balance for the year ended 30 June 2006 was HK$2,765.
(d) Pursuant to sub-lease agreements dated 29 August 2003 and 26 July 2004, the Group subleased part of its office premises to Wellchamp Capital Limited (“Wellchamp”) for the period from 26 May 2003 to 12 February 2005 at a monthly rental of HK$25,000. A renewal agreement was entered into by the Company with Wellchamp on 25 April 2005 to extend sub-leasing period to 12 February 2007 at a monthly rental of HK$29,500 (other terms remained the same). A net amount of HK$365,685 was paid by Wellchamp to the Group as rental and utility charges during the year ended 30 June 2006. Mr. Cheng Yan Tak, Angus Ronald, an executive Director (resigned on 22 August 2006), was interested in the transactions as a shareholder of Wellchamp. The Group had other payable of HK$226 due to Wellchamp as at 30 June 2006 which was unsecured, interest free and repayable on demand. The above sub-lease agreement was early terminated in February 2007.

29. EVENTS AFTER BALANCE SHEET DATE

On 12 June 2007, the Company entered into two conditional placing agreements with an independent placing agent for the placing of up to 304,388,000 new shares to the independent subscribers at the placing price of HK$0.17 per placing share. The two placements were completed on 11 July 2007 and 6 September 2007 respectively.

Details of these two placements are disclosed in announcements of the Company dated 12 June 2007, 18 July 2007 and 7 September 2007.

– 81 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

30. BALANCE SHEET OF THE COMPANY

Non-current assets Investments in subsidiaries Current assets Amounts due from subsidiaries Financial assets at fair value through profit or loss Other receivables and prepayments Cash and bank balances Current liabilities Amounts due to subsidiaries Other payables and accrued charges Net current assets Net assets Capital and reserves Share capital Reserves_(note)_ Total equity	2007 HK$ 795,107 27,647,749 7,268 50,000 493,088 28,198,105 1,527,018 363,708 1,890,726 26,307,379 27,102,486 3,825,920 23,276,566 27,102,486	2006 HK$ 795,107
		48,747 7,398,530 387,988 17,670,533
		25,505,798
		– 241,045
		241,045
		25,264,753
		26,059,860

		3,735,920 22,323,940
		26,059,860

– 82 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Note:

Reserve

Balance at 1 July 2005 Shares repurchase Recognition of share-based payments Loss for the year Balance at 30 June 2006 and 1 July 2006 Issue of shares upon exercise of share options Transfer of reserve upon exercise of share options Transfer of reserve upon lapse of share options Recognition of share-based payments Loss for the year Balance at 30 June 2007	Share Share options Accumulated premium reserve losses HK$ HK$ HK$ 46,628,204 – (1,893,729) (1,383,566) – – – 1,919,326 – – – (22,946,295) 45,244,638 1,919,326 (24,840,024) 919,900 – – 788,450 (788,450) – – (215,786) 215,786 – 785,296 – – – (752,570) 46,952,988 1,700,386 (25,376,808)	Total HK$ 44,734,475 (1,383,566) 1,919,326 (22,946,295) 22,323,940 919,900 – – 785,296 (752,570) 23,276,566

– 83 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

31. PRINCIPAL SUBSIDIARIES

Particulars of the Company’s principal subsidiaries as at 30 June 2007 are as follows:

	Place of incorporation
	and operation and	Issued and fully	Attributable
Company	kind of legal entity	paid share capital	equity	interest	Principal activities
			Direct	Indirect
China Universal	Hong Kong, Limited	Ordinary shares	–	100%	Investment in
Limited	liability company	HK$1			listed securities
Core Healthcare	Hong Kong, Limited	Ordinary shares	–	100%	Sales of health
Products Limited	liability company	HK$2			food and
					pharmaceutical
					products
Core Medical Technology	Hong Kong, Limited	Ordinary shares	–	100%	Diagnostic
Limited (formerly known	liability company	HK$12,000,000			testing services
as Plasmagene Limited)					and products,
					and related
					research and
					development
Hong Kong Hepatitis	Hong Kong, Limited	Ordinary shares	–	100%	Diagnostic
Diagnostic Centre	liability company	HK$100			testing services
Limited					relating to certain
					liver diseases

The above table lists the subsidiaries of the Group which, in the opinion of the directors, principally affected the results or assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, results in particulars of excessive length.

None of the subsidiaries had issued any debt securities at the end of the year.

32. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of Directors on 13 September 2007.

– 84 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2007

The following is the unaudited financial statements of the Group for the three months ended 30 September 2007 as extracted from the first quarterly report of the Company for the three months ended 30 September 2007.

Consolidated Income Statement

For the three months ended 30 September 2007

Notes Turnover 3 Cost of sales Gross profit Other income Gain on fair value changes on held for trading investments Selling and distribution expenses Administration expenses Other operating expenses Profit/(Loss) before tax Income tax expense 4 Profit/(Loss) attributable to equity holders of the Company Earnings/(Loss) per share – basic 5 – diluted	Three months ended 30 September 2007 2006 HK$ HK$ 325,411 313,041 (255,357) (222,100) 70,054 90,941 246,539 450,858 12,363,800 – 12,680,393 541,799 (6,174) (34,528) (1,225,264) (878,000) (43,874) (125,762) 11,405,081 (496,491) – – 11,405,081 (496,491) 2.20 cents (0.13 cents) 2.17 cents N/A

– 85 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

Notes to the Financial Statements

For the three months ended 30 September 2007

1. GENERAL

The Company is incorporated as an exempted company with limited liability in the Cayman Islands and its shares are listed on the Growth Enterprise Market (“GEM”) of the Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company is an investment holding company. Its principal subsidiaries are principally engaged in the provision of diagnostic testing services and products and related research and development, investment holding, and sales of health food and pharmaceutical products.

2. BASIS OF PREPARATION

The unaudited consolidated results have been prepared in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the applicable disclosures required by the Rules Governing the Listing of Securities on the GEM of the Stock Exchange and by the Hong Kong Companies Ordinance.

The unaudited consolidated results have been prepared under the historical cost convention, as modified by the revaluation of investments which are carried at their fair values.

The accounting policies and method of computation used in the preparation of the unaudited consolidated results are consistent with those adopted in preparing the Group’s annual financial statements for the year ended 30 June 2007.

3. TURNOVER

The Group’s turnover represents turnover arising on sales of diagnostic testing services and products and sales of health food and pharmaceutical products. During the period, all of the Group’s businesses were carried out in Hong Kong. An analysis of the Group’s turnover for the period is as follows:

Sales of diagnostic testing services and products Sales of health food and pharmaceutical products	Three months ended 30 September 2007 2006 HK$ HK$ 277,622 313,041 47,789 – 325,411 313,041	Three months ended 30 September 2007 2006 HK$ HK$ 277,622 313,041 47,789 – 325,411 313,041
		313,041

4. INCOME TAX EXPENSE

No provision for Hong Kong Profits Tax has been made as the Group had no assessable profits for the three months ended 30 September 2007. (2006: Nil)

There was no material unprovided deferred taxation for the three months ended 30 September 2007 (2006: Nil).

– 86 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

5. EARNINGS/(LOSS) PER SHARE

The calculation of the basic earnings/(loss) per share is based on the unaudited profit for the three months ended 30 September 2007 attributable to the equity holders of the Company of HK$11,405,081 (2006: loss of HK$496,491) and the weighted average number of ordinary shares of 517,526,860 (2006: 373,592,000) in issue during the period.

The calculation of diluted earnings per share for the three months ended 30 September 2007 is based on the profit attributable to equity holder of the Company of HK$11,405,081 and the weighted average number of 525,655,351 shares, being the weighted average number of ordinary shares outstanding during the period, adjusted for the effects on assumed exercise of share options.

The computation of diluted loss per share for the three months ended 30 September 2006 has not been presented because the assumed exercises of share options, which were outstanding during the period, had anti-dilutive effects on the basic loss per share.

6. RESERVES

The movement in reserves for the three months ended 30 September 2007 is as follows:

Balance at 1 July 2007 Issue of shares upon placements Issue of shares upon exercise of share options Transfer of reserve upon exercise of share options Profit for the three months ended 30 September 2007 Balance at 30 September 2007	Share capital HK$ 3,825,920 3,043,880 105,828 – – 6,975,628	Share premium HK$ 46,952,988 47,158,231 1,116,272 824,779 – 96,052,270	Share option reserve HK$ 1,700,386 – – (824,779) – 875,607	Accumulated profit/(losses) HK$ (14,423,916) – – – 11,405,081	Total HK$ 38,055,378 50,202,111 1,222,100 – 11,405,081 100,884,670
				(3,018,835)

The movement in reserves for the three months ended 30 September 2006 is as follows:

Group Balance at 1 July 2006 Loss for the three months ended 30 September 2006 Balance at 30 September 2006	Share premium HK$ 45,244,638 – 45,244,638	Share option Accumulated reserve losses HK$ HK$ 1,919,326 (23,036,088) – (496,491) 1,919,326 (23,532,579)	Total HK$ 24,127,876 (496,491
			23,631,385

7. DIVIDEND

The Board does not recommend the payment of dividend for the three months ended 30 September 2007 (2006: Nil).

– 87 –

APPENDIX I

FINANCIAL INFORMATION ON THE GROUP

MATERIAL CHANGES

Save as (i) disclosed in the first quarterly report of the Company for the three months ended 30 September 2007, the gain on changes in fair value of the held-for-trading investments, which was mainly in listed securities, was approximately HK$12.4 million; and (ii) the receipt of an aggregate net proceeds of approximately HK$50.3 million arising from the Previous Placing, as at the Latest Practicable Date, the Directors are not aware of any material change in the financial or trading position or outlook of the Group since 30 June 2007, the date to which the latest published audited accounts of the Group were made up.

INDEBTEDNESS

At the close of business on 31 October 2007, being the latest practicable date for this statement of indebtedness prior to the printing of the circular, the Group did not have outstanding bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, finance lease commitments, guarantees or other material contingent liabilities.

The Directors confirmed that there is no material change in indebtedness and contingent liabilities since 31 October 2007 and up to the Latest Practicable Date.

– 88 –

APPENDIX II

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the GEM Listing Rules and the Takeovers Code for the purpose of giving information with regard to the Group. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this circular (other than those in relation to Town Health, HK Health Check, Precious Success and parties acting in concert with them) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular (other than those in relation to Town Health, HK Health Check, Precious Success and parties acting in concert with them) have been arrived at after due and careful consideration and there are no other facts not contained herein (other than those in relation to Town Health, HK Health Check, Precious Success and parties acting in concert with them), the omission of which would make any statement in this circular (other than those in relation to Town Health, HK Health Check, Precious Success and parties acting in concert with them) misleading.

The information in relation to Town Health, HK Health Check, Precious Success and parties acting in concert with them contained in this circular has been supplied by the Town Health Directors and HK Health Check Directors, who accept full responsibility for the accuracy of the information in this circular (other than those in relation to the Company) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular (other than those in relation to the Company) have been arrived at after due and careful consideration and there are no other facts not contained herein (other than those in relation to the Company) the omission of which would make any statement in this circular (other than those in relation to the Company) misleading.

2. SHARE CAPITAL AND SHARE OPTIONS

(i) Share Capital

The authorized and issued share capital of the Company as at the Latest Practicable Date were as follow:

As at the Latest Practicable Date

Authorized: HK$ 1,000,000,000 Shares 10,000,000 Issued and fully paid: 704,106,667 Shares 7,041,067

– 89 –

APPENDIX II

GENERAL INFORMATION

The authorized and issued share capital of the Company upon the increase in the authorized share capital of the Company and the issue and allotment of the Placing Shares and the Consideration Shares will be as follow:

Authorized: 5,000,000,000 Shares Issued and fully paid: 704,106,667 Shares 30,000,000 Placing Shares 300,000,000 Consideration Shares 1,034,106,667 Shares	HK$ 50,000,000

	7,041,067 300,000 3,000,000
	10,341,067

The authorized and issued share capital of the Company upon the increase in the authorized share capital of the Company and the issue and allotment of the Placing Shares, the Consideration Shares and the Conversion Shares upon conversion of the Convertible Bonds will be as follow:

Authorized: 5,000,000,000 Shares Issued and fully paid: 704,106,667 Shares 30,000,000 Placing Shares 300,000,000 Consideration Shares 789,473,684 Conversion Shares 1,823,580,351 Shares	HK$ 50,000,000

	7,041,067 300,000 3,000,000 7,894,737
	18,235,804

321,514,667 Shares have been issued since 30 June 2007 (i.e. the end of the last financial year of the Company) up to the Latest Practicable Date.

All the existing Shares in issue and (i) the Placing Shares; (ii) the Consideration Shares; and (iii) the Conversion Shares to be issued will rank pari passu in all respects with each other including as regards to rights to dividends, voting and return of capital.

– 90 –

APPENDIX II

GENERAL INFORMATION

(ii) Share options granted to Directors and employees of the Company

The Company adopted a share option scheme (the “ Share Option Scheme ”) on 20 April 2004. Pursuant to such scheme, the maximum number of Shares upon which options may be granted when aggregated with those granted under any other share option scheme of the Company in issue may not exceed 70,410,666 Shares, representing approximately 10% of the issued share capital of the Company on the date of the passing of the resolutions to refresh the mandate to issue Shares under the Share Option Scheme. As at the Latest Practicable Date, options to subscribe for an aggregate of 23,529,100 Shares have been granted under the Share Option Scheme.

(iii) Share options granted to The Chinese University of Hong Kong

Under an agreement entered into between The Chinese University of Hong Kong (the “ Chinese University ”) and the Company on 8 August 2002 relating to the grant of a right of first refusal to the Company by the Chinese University in respect of certain technology and inventions, as amended and supplemented by agreements dated 31 October 2003 and 16 April 2004 (the “ Right of First Refusal Agreement ”), the Company will be offered a right of first refusal in respect of any grant by the Chinese University of a royalty-bearing exclusive licence to use and commercially develop certain technologies and inventions and other non-invasive diagnostic technologies for detecting cancer and foetal diseases developed by Professor Lo Yuk Ming, Dennis in future.

In consideration of the right of first refusal granted, the Company agreed to grant to the Chinese University or such person as the Chinese University may direct (including trustees of any funds) options to subscribe for Shares or to a maximum amount of HK$4,600,000 payable over the period of the term of the Right of First Refusal Agreement, being four years commencing from 18 June 2004. Such grant of options will be granted to the Chinese University at intervals of twelve months. As at the Latest Practicable Date, options to subscribe for an aggregate of 18,034,859 Shares have been granted under the Share Option Scheme.

Save as disclosed above, there were no options, warrants or conversion rights affecting the Shares outstanding as at the Latest Practicable Date.

– 91 –

APPENDIX II

GENERAL INFORMATION

3. DISCLOSURE OF INTERESTS

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

Save as disclosed below, as at the Latest Practicable Date, none of the Directors nor chief executives had any interest or short position in any shares or underlying shares or debentures of the Company or 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 Part XV of the SFO, including interests and short positions which they were deemed or taken to have under such provisions of the SFO, or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules to be notified to the Company and the Stock Exchange were as follows:

		Number of shares	Shareholding
Name of Director	Capacity	in the Company	percentage
		Long Position	(%)
Shares
Mr. Lui Chi Wah, Johnny	Beneficial owner	18,716,000	2.66%
Mr. Lau Kam Shan	Beneficial owner	100,000	0.01%
Mr. Chan Po Kwong	Beneficial owner	200,000	0.03%

(b) Substantial Shareholders

Save as disclosed below, as at the Latest Practicable Date, the Directors were not aware of any other person (other than the Directors and the chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the Shares or underlying Shares (including any interests in options in respect of such capital), which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who

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GENERAL INFORMATION

was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

		Interest	Approximate
		in the Shares	percentage of the
		or underlying	Company’s issued
		Shares	share capital
		(including	as at the
		interest	Latest Practicable
Name of Shareholder	Nature of Interest	in options)	Date
Dr. Francis	Interest by attribution5	822,369,208	116.80%
Choi Chee Ming JP
Dr. Cho Kwai Chee	Interest by attribution5	822,369,208	116.80%
Broad Idea International	Interest by attribution4	822,369,208	116.80%
Limited
Town Health	Interest by attribution3	822,369,208	116.80%
Town Health Bio-Medical	Interest by attribution3	822,369,208	116.80%
Technology Limited
Spring Biotech	Interest by attribution3	822,369,208	116.80%
HK Health Check	Interest by attribution2	789,473,684	112.12%
Charm Advance Limited	Interest by attribution2	789,473,684	112.12%
Classictime Investments	Interest by attribution2	789,473,684	112.12%
Precious Success	Beneficial owner1	789,473,684	112.12%
U Man Iong	Beneficial owner6	300,000,000	42%

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APPENDIX II

GENERAL INFORMATION

Notes:

Pursuant to the CB Subscription Agreement, Precious Success has a long position in 789,473,684 shares of the Company to be allotted and issue upon the exercise in full of the Convertible Bonds to be issued pursuant to the CB Subscription Agreement (the “ Conversion Shares ”).
HK Health Check owns 100% of Classictime Investments through its wholly-owned subsidiary Charm Advance Limited. Classictime Investments owns 50% of Precious Success. Pursuant to the SFO, each of Classictime Investments, Charm Advance Limited and HK Health Check is deemed to have a long position in the Conversion Shares.
Spring Biotech owns 50% of Precious Success and is deemed under the SFO to have a long position over the Conversion Shares. Spring Biotech also owns 32,895,524 Shares.

Town Health owns 100% of Town Health Bio-Medical Technology Limited (“ Town Health Bio ”) which in turn owns 100% of Spring Biotech. Pursuant to the SFO, each of Town Health Bio and Town Health is deemed to have a long position over the Conversion Shares and an interest in the same block of 32,895,524 Shares held by Spring Biotech.

Broad Idea International Limited (“ Broad Idea ”) is interested in 47.05% of the issued share capital of Town Health and pursuant to the SFO, is deemed to have a long position in the Conversion Shares and an interest in the same block of 32,895,524 Shares Town Health is deemed to be interested in.
Dr. Cho Kwai Chee and Dr. Francis Choi Chee Ming, JP are interested in 50.1% and 49.9% of the issued share capital of Broad Idea respectively and each of them is deemed, pursuant to the SFO, to have a long position in the Conversion Shares and an interest in the same block of 32,895,524 Shares that Broad Idea is deemed to be interested in.
Mr. U Man Iong is deemed to have a long position over 300,000,000 shares of the Company which may be allotted and issue pursuant to the Referral Agreement.

4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any service contracts with the Company or any of its subsidiaries or associated companies in force which (i) (including both continuous and fixed terms contracts) were entered into or amended within six months before the date of the Announcement; (ii) were continuous contracts with a notice period of 12 months or more; or (iii) were fixed term contracts with more than 12 months to run irrespective of the notice period.

5. MATERIAL CONTRACTS

Save as disclosed below, the Group has not entered into any contracts (not being contracts entered into in the ordinary course of business carried on or intended to be carried on by the Group) after the date falling two years immediately preceding the date of the Announcement and up to the Latest Practicable Date which are or may be material:

the Placing Agreement;
the CB Subscription Agreement;

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GENERAL INFORMATION

the Referral Agreement;
the Service Agreements;
A conditional placing agreement dated 12 June 2007 with Kingston Securities Limited (“ Kingston Securities ”) pursuant to which Kingston Securities will, on a fully underwritten basis, procure purchasers to subscribe for 74,836,000 new Shares at the placing price of HK$0.17 per Share, which was completed on 11 July 2007; and
A conditional placing agreement dated 12 June 2007 with Kingston Securities pursuant to which Kingston Securities will, on a fully underwritten basis, procure purchasers to subscribe for 229,552,000 new Shares at the placing price of HK$0.17 per Share, which was completed on 6 September 2007.

6. SHAREHOLDINGS AND DEALINGS

(a) In relation to the issued share capital of Town Health, HK Health Check and Precious Success
- (i) As at the Latest Practicable Date, the Company did not own or control any shares, securities, convertible securities, warrants, options and derivatives (collectively, the “ Share Capital ”) of Town Health, HK Health Check and Precious Success.
- (ii) Save as disclose below, as at the Latest Practicable Date, none of the Directors has any interest in the Share Capital of Town Health, HK Health Check and Precious Success:

		Number of	Approximate
Director	Company	shares	percentage
Mr. Lui Chi Wah, Johnny	Town Health	46,108,000	0.275%
	HK Health Check	680,000	0.015%

(iii) During the period starting six months prior to 15 November 2007 (being the date of the Announcement) and ending on the Latest Practicable Date (the “ Relevant Period ”):
(1) the Company had not dealt for value in the interest in the Share Capital of Town Health, HK Health Check and Precious Success;
(2) save as disclosed below, no Directors had dealt for value in interest in the Share Capital of Town Health, HK Health Check and Precious Success:

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APPENDIX II

GENERAL INFORMATION

In respect of the ordinary shares of Town Health

		Type of	Number of	Price
Director	Date	transaction	shares interested	per share
				(HK$)
Mr. Lui Chi	15 June 2007	Long	1,400,000	0.73
Wah,	15 June 2007	Long	600,000	0.72
Johnny	15 June 2007	Short	2,000,000	0.74
	28 June 2007	Long	500,000	0.71
	28 June 2007	Short	500,000	0.76
	6 July 2007	Long	1,000,000	0.7
	6 July 2007	Long	500,000	0.71
	6 July 2007	Long	500,000	0.72
	6 July 2007	Long	1,000,000	0.71
	9 July 2007	Long	500,000	0.7
	9 July 2007	Short	500,000	0.71
	10 July 2007	Long	1,500,000	0.7
	10 July 2007	Short	1,000,000	0.71
	11 July 2007	Short	1,000,000	0.71
	11 July 2007	Long	500,000	0.7
	12 July 2007	Long	500,000	0.69
	12 July 2007	Short	500,000	0.7
	18 July 2007	Long	200,000	0.61
	18 July 2007	Long	100,000	0.6
	18 July 2007	Long	300,000	0.56
	18 July 2007	Short	500,000	0.63
	18 July 2007	Short	100,000	0.59
	31 July 2007	Short	13,000,000	0.25
	6 August 2007	Long	1,320,000	0.224
	9 August 2007	Short	1,000,000	0.233
	10 August 2007	Long	366,000	0.215
	13 August 2007	Short	360,000	0.221
	20 August 2007	Long	2,000,000	0.17
	14 September 2007	Long	700,000	0.14
	14 September 2007	Long	150,000	0.143
	14 September 2007	Long	400,000	0.145
	14 September 2007	Long	500,000	0.146
	14 September 2007	Long	500,000	0.147
	14 September 2007	Short	700,000	0.142
	14 September 2007	Short	10,000,000	0.143
	14 September 2007	Short	2,000,000	0.144
	14 September 2007	Short	6,000,000	0.141
	17 September 2007	Short	7,500,000	0.146
	17 September 2007	Short	1,000,000	0.149
	17 September 2007	Short	550,000	0.15
	19 September 2007	Short	1,000,000	0.151

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APPENDIX II

GENERAL INFORMATION

		Type of	Number of	Price
Director	Date	transaction	shares interested	per share
				(HK$)
	9 October 2007	Long	1,000,000	0.101
	9 October 2007	Short	1,000,000	0.102
	10 October 2007	Short	1,000,000	0.105
	11 October 2007	Long	3,000,000	0.115
	11 October 2007	Short	3,000,000	0.122

In respect of the ordinary shares of HK Health Check

		Type of	Number of	Price
Director	Date	transaction	shares interested	per share
				(HK$)
Mr. Lui Chi	29 May 2007	Long	300,000	0.42
Wah,	30 May 2007	Long	500,000	0.415
Johnny	14 June 2007	Long	500,000	0.47
	14 June 2007	Short	500,000	0.485
	18 June 2007	Long	300,000	0.34
	18 June 2007	Short	300,000	0.365
	10 July 2007	Long	1,500,000	0.365
	11 July 2007	Long	1,490,000	0.37
	16 July 2007	Short	3,000,000	0.4
	10 August 2007	Long	300,000	0.305
	12 October 2007	Long	110,000	0.204

(b) In relation to the issued share capital of the Company

(i) None of Town Health, HK Health Check, Precious Success and parties acting in concert with them or any of their respective directors owned or controlled any interest in the Share Capital of the Company as at the Latest Practicable Date, and none of them had dealt for value in any such interest during the Relevant Period.
(ii) Save as (i) disclosed in the section headed “Disclosure of Interests” in paragraph 3 of this Appendix; and (ii) disclosed below, none of the Directors had any interest in the Share Capital of the Company as at the Latest Practicable Date and none of them had dealt for value in any such interest during the Relevant Period:

		Type of		Number of	Price
Director	Date	transaction	Shares interested		per Share
					(HK$)
Mr. Chan Po Kwong	12 October 2007	Exercise of		948,493	0.105
		Share Options
	19 November 2007	Short		448,000	0.960
	20 November 2007	Short		300,000	1.000
	21 November 2007	Short		493	0.910

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APPENDIX II

GENERAL INFORMATION

		Type of		Number of	Price
Director	Date	transaction	Shares interested		per Share
					(HK$)
Mr. Lau Kam Shan	17 July 2007	Exercise of		500,000	0.105
		Share Options
	27 July 2007	Short		500,000	0.290
	4 October 2007	Exercise of		1,111,111	0.225
		Share Options
	16 October 2007	Short		100,000	0.560
	16 November 2007	Short		100,000	0.850
	16 November 2007	Short		100,000	0.860
	16 November 2007	Short		48,000	0.930
	19 November 2007	Short		48,000	0.960
	19 November 2007	Short		100,000	0.990
	19 November 2007	Short		103,111	1.000
	19 November 2007	Short		200,000	1.010
	19 November 2007	Short		100,000	1.020
	19 November 2007	Short		112,000	1.030

(iii) As at the Latest Practicable Date, no person who owned or controlled an interest in the Share Capital of the Company had irrevocably committed themselves to vote for or against the Whitewash Waiver.
(iv) As at the Latest Practicable Date, no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with Town Health, HK Health Check, Precious Success or parties acting in concert with any of them.
(v) As at the Latest Practicable Date, none of (i) the subsidiaries of the Company, (ii) the pension fund(s) of the Group; and (iii) the professional advisers named under the section headed “Experts and consent” in this Appendix and as specified in class (2) of the definition of “associate” under the Takeovers Code, owned or controlled any interest in the Share Capital of the Company None of the aforesaid persons had, during the period beginning from the date of the Announcement ending on the Latest Practicable Date, dealt for value in any interest in the Share Capital of the Company.
(vi) As at the Latest Practicable Date, no person who owned or controlled the shareholdings in the Company had an arrangement of the kind referred to in note 8 to Rule 22 of the Takeovers Code with the Company or with any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate.
(vii) As at the Latest Practicable Date, no shareholding in the Company was managed on a discretionary basis by fund manager (other than exempt fund managers) connected with the Company.

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GENERAL INFORMATION

7. ARRANGEMENT AFFECTING THE DIRECTORS

As at the Latest Practicable Date,

(i) no benefit (other than statutory compensation) had been or would be given to any Director as compensation for loss of office or otherwise in connection with the Whitewash Waiver;
(ii) no agreement or arrangement was entered into between any Director and any other person which was conditional on or dependent upon the outcome of the Whitewash Waiver or was otherwise connected with the Whitewash Waiver;
(iii) no material contract was entered into by Town Health, HK Health Check or Precious Success in which any Director had a material personal interest; and
(iv) given their roles as Directors, Mr. Lui Chi Wah, Johnny, Mr. Lau Kam Shan and Mr. Chan Po Kwong, in respect of their respective shareholding in the Company, intend to abstain from voting at the EGM on the resolution regarding the Whitewash Waiver.

8. MARKET PRICES

(a) The table below shows the closing prices of the Shares as quoted on the Stock Exchange on (i) the last trading day of each of the calendar months during the period immediately preceding 5 November 2007, being the last trading date immediately preceding suspension of trading in the Shares on the Stock Exchange pending the release of the Announcement and ending on the Latest Practicable Date; (ii) the Last Trading Day; and (iii) the Latest Practicable Date:

Date	Closing price
	(HK$)
31 May 2007	0.1920
29 June 2007	0.2700
31 July 2007	0.3000
31 August 2007	0.3450
28 September 2007	0.5700
31 October 2007	0.6000
5 November 2007 (being the Last Trading Day)	0.5800
30 November 2007	1.0200
Latest Practicable Date	0.9600

(b) The highest and lowest closing prices of the Shares recorded on the Stock Exchange during the period between 15 May 2007 (being the date six months prior to the date of the Announcement) and the Latest Practicable Date (both dates inclusive) were HK$1.09 on 26 November 2007 and HK$0.16 on 15 May 2007 respectively.

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GENERAL INFORMATION

9. LITIGATION

None of the members of the Group is engaged in any litigation or arbitration of material importance and there is no litigation or claim of material importance known to the Directors to be pending or threatened by or against any member of the Group.

10. INTERESTS IN ASSETS AND/OR CONTRACTS AND OTHER INTERESTS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any asset which had been, since 30 June 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 or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement which is significant in relation to the business of the Company.

11. EXPERTS AND CONSENT

Name Qualification Taifook Capital a corporation licensed to carry out type 6 (advising on corporate finance) regulated activity under the SFO

Taifook Capital has given, and has not withdrawn, its written consent to the issue of this circular with the inclusion herein of its letter and/or references to its name, in the form and context in which it appears.

As at the Latest Practicable Date, Taifook Capital was not interested in any Share or share in any member of the Group nor did it have any right or option (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for any Share or share in any member of the Group.

As at the Latest Practicable Date, Taifook Capital did not have any direct or indirect interest in any asset which had been, since 30 June 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 or are proposed to be acquired or disposed of by or leased to any member of the Group.

12. GENERAL

(a) So far as is known to the Directors, as at the Latest Practicable Date, there was (i) no voting trust or other agreement or arrangement or understanding entered into by or binding upon any Shareholders; and (ii) no obligation or entitlement of any Shareholders, whereby he/she/it has or may have temporarily or permanently passed control over the exercise of the voting rights in respect of his/her/its Shares to a third party, either generally or on a case by case basis.

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APPENDIX II

GENERAL INFORMATION

(b) So far as is known to the Directors, as at the Latest Practicable Date, there was no discrepancy between any Shareholder’s beneficial shareholding interest in the Company as disclosed in this circular and the number of Shares in respect of which it will control or will be entitled to exercise control over the voting rights at the EGM.
(c) The registered office of the Company is situated at Ugland House, PO Box 309GT, South Church Street, Grand Cayman, Cayman Islands. The head office and principal place of business of the Company in Hong Kong is situated at Room 609-610, 6/F Nan Fung Tower, 173 Des Voeux Road, Central, Hong Kong.
(d) The company secretary and qualified accountant of the Company is Ms. Leung Wai Man, an associate member of Hong Kong Institute of Certified Public Accountants and CPA Australia.
(e) The branch share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(f) As at the Latest Practicable Date, there is no ultimate controlling shareholder holding 30% or more of the issued share capital of HK Health Check.

The HK Health Check Board comprises seven executive HK Health Check Directors, namely Dr. Fung Yiu Tong, Bennet, Mr. Lee Chik Yuet, Dr. Cho Kwai Chee, Dr. Hui Ka Wah Ronnie, JP, Mr. Cho Kwai Yee, Kevin, Miss Choi Ka Yee, Crystal and Mr. Siu Kam Chau and three independent non-executive HK Health Check Directors namely Mr. Chan Chi Yuen, Mr. Lo Chun Nga and Mr. Chik Chi Man.

The registered office of HK Health Check is situated at Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda. The head office and principal place of business of HK Health Check in Hong Kong is situated at Shop 2B & 2C, Level 1, Hilton Plaza Commercial Centre, 3-9 Shatin Centre Street, Shatin, New Territories, Hong Kong.

(g) As at the Latest Practicable Date, the ultimate controlling shareholders of Town Health are Dr. Cho Kwai Chee (an executive Town Health Director) and Dr. Francis Choi Chee Ming JP (a non-executive Town Health Director), who collectively own approximately 47.05% of the issued share capital of Town Health.

The executive Town Health Directors are Miss Choi Ka Yee, Crystal, Dr. Cho Kwai Chee, Mr. Cho Kwai Yee, Kevin and Dr. Fung Yiu Tong, Bennet, Dr. Hui Ka Wah Ronnie, JP; the non-executive Town Health Director is Dr. Francis

– 101 –

APPENDIX II

GENERAL INFORMATION

Choi Chee Ming JP; and the independent non-executive Town Health Directors are Mr. Chan Kam Chiu, Mr. Wai Kwok Hung JP and Mr. Ho Kwok Wah, George.

The registered office of Town Health is situated at Ugland House, P.O. Box 309, George Town, Grand Cayman, Cayman Islands, British West Indies. The head office and principal place of business of Town Health in Hong Kong is situated at Shop 37, Level 3, Hilton Plaza Commercial Centre, 3-9 Shatin Centre Street, Shatin, New Territories, Hong Kong.

(h) As at the Latest Practicable Date, Precious Success is owned as to 50% by HK Health Check (via Classictime Investments) and as to 50% by Town Health (via Spring Biotech). The directors of Precious Success are Dr. Fung Yiu Tong, Bennet and Dr. Cho Kwai Chee. The registered office of Precious Success is situated at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The correspondence address of Precious Success in Hong Kong is at Shop 37, Level 3, Hilton Plaza Commercial Centre, 3–9 Shatin Centre Street, Shatin, New Territories, Hong Kong.
(i) As at the Latest Practicable Date, there was no agreement or arrangement existed between any Director and any other person which is conditional on or dependent upon the outcome of the Whitewash Waiver or otherwise connected therewith.
(j) As at the Latest Practicable Date, there was no agreement, arrangement or understanding (including any compensation arrangement) between Town Health, HK Health Check and Precious Success or any parties acting in concert with them and any of the Directors or recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Whitewash Waiver.
(k) It is the intention of Town Health, HK Health Check and Precious Success to continue to carry on the business of the Company and to continue the employment of the management and employees of the Group. Town Health, HK Health Check and Precious Success have no intention to redeploy the fixed assets of the Group. Town Health, HK Health Check and Precious Success do not intend to introduce any changes to the current business of the Group.
(l) The registered office of the independent financial adviser, Taifook Capital, is situated at 25th Floor, New World Tower, 16–18 Queen’s Road Central, Hong Kong.
(m) The registered office of the financial adviser, CIMB-GK Securities (HK) Limited, is situated at 25/F Central Tower, 28 Queen’s Road Central, Hong Kong.
(n) In the event of any inconsistency, the English language text of this circular shall prevail over the Chinese language text.

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APPENDIX II

GENERAL INFORMATION

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection at the office of the Company at Room 609-610, 6/F Nan Fung Tower, 173 Des Voeux Road, Central, Hong Kong during normal business hours from 9:00 a.m. to 6:00 p.m. from Monday to Friday (except for public holidays); and on the websites of the Company (www. corehealth.com.hk) and the SFC (www.sfc.hk) between the period from the date of this circular to 24 December 2007 (both days inclusive):

(a) the memorandum and articles of association of the Company;
(b) the material contracts referred to in the section headed “Material Contracts” in this appendix;
(c) the written consents referred to under the section headed “Experts and Consent” in this appendix;
(d) the annual reports of the Company for years ended 30 June 2006 and 30 June 2007, respectively, and the first quarterly report of the Company for the three months ended 30 September 2007;
(e) the letter of recommendation from the Independent Board Committee to the Independent Shareholders as set out in this circular; and
(f) the letter from Taifook Capital, the text of which is set out in this circular.

– 103 –

NOTICE OF EGM

==> picture [69 x 52] intentionally omitted <==

CORE HEALTHCARE INVESTMENT HOLDINGS LIMITED 確思醫藥投資控股有限公司[*]

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8250)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Core Healthcare Investment Holdings Limited (the “Company”) will held at Shop No. 1A-C, Level 1, Hilton Plaza Commercial Centre, 3-9 Shatin Centre Street, Shatin, New Territories, Hong Kong on Monday, 24 December 2007 at 9:00 a.m. to consider and, if thought fit, pass with or without amendments, the following resolutions:

ORDINARY RESOLUTIONS

(1) “ THAT :
(a) the placing agreement entered into between the Company and Atlantis Investment Management Limited on 6 November 2007 (the “ Placing Agreement ”) in relation to the placing of 30,000,000 new shares (the “ Placing Shares ”) of HK$0.01 each of the Company (“ Share ”) at a placing price of HK$0.17 per Placing Share, a copy of which has been produced to this meeting and marked “A” and initialed by the chairman of this meeting for the purpose of identification, and the transactions contemplated thereby (including but not limited to the allotment and issue of the Placing Shares), be and are hereby approved, confirmed and ratified; and
(b) any one or more directors of the Company be and are hereby authorized to allot and issue and deal with the Placing Shares in accordance with the terms of the Placing Agreement and to do all such acts and things as they consider necessary or expedient for the purpose of giving effect to the Placing Agreement and the transactions contemplated thereby.”
for identification purpose only

– 104 –

NOTICE OF EGM

(2) “ THAT :

(a) the subscription agreement (the “ CB Subscription Agreement ”) entered into between the Company and Precious Success Group Limited 珍成集團有限公司 (“ Precious Success ”) dated 6 November 2007 in relation to the subscription by Precious Success of the 1% convertible bonds in an aggregate principal amount of HK$150 million (“ Convertible Bonds ”) which can be exercised and converted into 789,473,684 shares of HK$0.01 each of the Company (“ Conversion Shares ”) at an initial conversion price of HK$0.19 per Conversion Share, a copy of which has been produced to this meeting and marked “ B ” and initialed by the chairman of this meeting for the purpose of identification, and the transactions contemplated thereby (including but not limited to the issue of the Convertible Bonds and upon the conversion thereof, the issue and allotment of the Conversion Shares), be and are hereby approved, confirmed and ratified; and
(b) any one or more directors of the Company be and are hereby authorized to allot and issue and deal with the Convertible Bonds and upon the conversion thereof, to issue and allot the Conversion Shares in accordance with the terms of the CB Subscription Agreement and to do all such acts and things as they consider necessary or expedient for the purpose of giving effect to the CB Subscription Agreement and the transactions contemplated thereby.”
(3) “ THAT conditional upon the resolution set out as resolution numbered (2) in the notice convening this meeting being passed, the waiver granted or to be granted by the Executive Director of the Corporate Finance Division of the Securities and Futures Commission to Precious Success and any party acting in concert with it pursuant to Note 1 of the Notes on Dispensations from Rule 26 of the Code on Takeovers and Mergers of Hong Kong from an obligation to make a general offer for all the shares of the Company not already owned by them as a result of the subscription of the Conversion Shares (as defined in the resolution set out as resolution numbered (2) in the notice convening this meeting) upon the exercise of the Convertible Bonds (as defined in the said resolution) pursuant to the CB Subscription Agreement (also as defined in the said resolution) be and is hereby approved, confirmed and ratified.”
(4) “ THAT :
(a) conditional upon the resolutions set out as resolutions numbered (2) and (3) in the notice convening this meeting being passed, the referral agreement entered into between the Company and Mr. U Man Iong (the “ Referral Agent ”) on 6 November 2007 (the “ Referral Agreement ”) in relation the appointment of the Referral Agent to identify certain drugs and drugs distribution networks in the People’s Republic of China for potential acquisition by the Company in consideration for (i) a fee of HK$34,000,000, to be satisfied by way of the issue and allotment of 200,000,000 new shares of the Company of HK$0.01 each to the Referral Agent (which shall be issued and credited as fully paid up at the subscription price of HK$0.17 per share) (“ Consideration Shares A ”) upon completion of the acquisition by the Company or its subsidiaries of any relevant drugs identified by the Referral Agent; and (ii) a fee of HK$17,000,000, to be satisfied by way of the issue and allotment of 100,000,000 new shares of the Company of HK$0.01 to the Referral Agent

– 105 –

NOTICE OF EGM

(which shall be issued and credited as fully paid up at the subscription price of HK$0.17 per share) (“ Consideration Shares B ”) (Consideration Shares A and Consideration Shares B collectively, the “ Consideration Shares ”) upon completion of the acquisition by the Company or its subsidiaries of any relevant drugs distribution network identified by the Referral Agent, a copy of which has been produced to this meeting and marked “ C ” and initialed by the chairman of this meeting for the purpose of identification, and the transactions contemplated thereby (including but not limited to the issue and allotment of the Consideration Shares), be and are hereby approved, confirmed and ratified; and

(b) any one or more directors of the Company be and are hereby authorized to allot and issue and deal with the Consideration Shares in accordance with the terms of the Referral Agreement and to do all such acts and things as they consider necessary or expedient for the purpose of giving effect to the Referral Agreement and the transactions contemplated thereby.”
(5) “ THAT the authorized share capital of the Company be and is hereby increased from HK$10,000,000 comprising 1,000,000,000 shares of HK$0.01 each to HK$50,000,000 comprising 5,000,000,000 shares of HK$0.01 each by the creation of an additional 4,000,000,000 shares of HK$0.01 each and that each new share, upon issue, will rank pari passu in all respects with the existing shares of the Company.”

By order of the Board of

Core Healthcare Investment Holdings Limited Lui Chi Wah, Johnny Chairman

Hong Kong, 6 December 2007

Registered office:

Ugland House P.O. Box 309GT South Church Street Grand Cayman Cayman Islands

Principal Place of Business in Hong Kong: Room 609 – 610,

6/F, Nan Fung Tower 173 Des Voeux Road Central Hong Kong

– 106 –

NOTICE OF EGM

Notes:

A member of the Company entitled to attend and vote at the meeting convened by the above notice is entitled to appoint another person to attend and vote instead of him. A proxy need not be a shareholder of the Company.
To be valid, the form of proxy must be deposited together with a power of attorney or other authority, if any, under which it is signed or a certified copy of that power or authority, at the offices of the Company’s share registrar in Hong Kong, Computershare Hong Kong Investors Services Limited, at 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.
Delivery of an instrument appointing a proxy shall not preclude a shareholder of the Company from attending and voting in person at the meeting convened and in such event, the instrument appointing a proxy shall be deemed to be revoked.
As at the date of this notice, the executive Directors are Mr. Lui Chi Wah, Johnny and Mr. Wu Kai; the non-executive Director is Mr. Lau Kam Shan; and the independent non-executive Directors are Mr. Kwok Shun Tim, Mr. Chan Po Kwong and Mr. Lam Yan Wing.

– 107 –

AI assistant

Du Du Holdings Limited — Proxy Solicitation & Information Statement 2007

51353_rns_2007-12-05_513f0c9d-c326-4b6d-b15c-bf91e7444a71.pdf

CORE HEALTHCARE INVESTMENT HOLDINGS LIMITED 確思醫藥投資控股有限公司[*]

CONTENTS

DEFINITIONS

DEFINITIONS

CORE HEALTHCARE INVESTMENT HOLDINGS LIMITED 確思醫藥投資控股有限公司[*]

(I) PLACING OF NEW SHARES;

INTRODUCTION

The Placing Agreement

The Referral Agreement

The CB Subscription Agreement

The Service Agreements

THE PLACING AGREEMENT

Date

Issuer

Placee

Placing

THE CB SUBSCRIPTION AGREEMENT

Date

Issuer

Subscriber

CB Subscription and Whitewash Waiver

Principal Terms of the Convertible Bonds

Ranking of the Conversion Shares

Conditions of the CB Subscription

Use of Proceeds

Dilution Effect on Core Healthcare Shareholders

FUND RAISING ACTIVITIES OF THE COMPANY IN THE PAST 12 MONTHS

THE REFERRAL AGREEMENT

Date

Parties

Referral Services

Consideration

Conditions of the Referral Agreement

THE SERVICE AGREEMENTS

(A) The Town Health Service Agreement

Date

Parties

Consultancy Services

Conditions of the Town Health Service Agreement

(B) The HK Health Check Service Agreement

Date

Parties

Consultancy Services

Conditions of the HK Health Check Service Agreement

INCREASE IN AUTHORIZED SHARE CAPITAL

SHAREHOLDING STRUCTURE OF THE COMPANY

INFORMATION ON THE GROUP

REASONS FOR THE PLACING, THE CB SUBSCRIPTION, THE REFERRAL AGREEMENT AND THE SERVICE AGREEMENTS FOR THE COMPANY

INFORMATION ON TOWN HEALTH AND HK HEALTH CHECK

THE INTENTIONS OF TOWN HEALTH, HK HEALTH CHECK AND PRECIOUS SUCCESS

TAKEOVERS CODE AND LISTING RULES IMPLICATIONS ON THE COMPANY

INDEPENDENT BOARD COMMITTEE/INDEPENDENT FINANCIAL ADVISER

EGM

LETTER FROM THE BOARD

PROCEDURES FOR DEMANDING A POLL

GENERAL

ADDITIONAL INFORMATION

CORE HEALTHCARE INVESTMENT HOLDINGS LIMITED 確思醫藥投資控股有限公司[*]

(I) PLACING OF NEW SHARES;

(II) ISSUE OF CONVERTIBLE BONDS AND WHITEWASH WAIVER; (III) POSSIBLE ISSUE OF NEW SHARES UNDER THE REFERRAL AGREEMENT; AND (IV) INCREASE IN AUTHORIZED SHARE CAPITAL

WHITEWASH WAIVER

INTRODUCTION

LETTER FROM TAIFOOK CAPITAL

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1 The CB Subscription

1.2 Principal terms of the Convertible Bonds

1.2.1 Initial Conversion Price

Share price performance

1.2.2 Coupon rate

1.2.3 Other financing alternatives

1.2.4 Dilution of Independent Shareholders’ shareholdings

1.3.1 Reasons for the CB Subscription

1.3.2 Prospects of the Class 1 New Drugs in the PRC

Background information of the Class 1 New Drugs in the PRC

1.3.3 Technical Expertise from Town Health and HK Health Check

1.3.4 Our View

Du Du Holdings Limited Proxy Solicitation & Information Statement 2007