Dufu Liquor Group Limited — Proxy Solicitation & Information Statement 2012

Sep 6, 2012

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 a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in China Environmental Energy Investment Limited, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or transferee or to the bank, a licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

This circular appears for information purpose only and does not constitute an invitation or offer to acquire, purchase, or subscribe for any securities of China Environmental Energy Investment Limited.

China Environmental Energy Investment Limited

(Incorporated in Bermuda with limited liability) (Stock Code: 986)

PROPOSED ISSUANCE OF CONVERTIBLE NOTES UNDER SPECIFIC MANDATE AND NOTICE OF SPECIAL GENERAL MEETING

Terms used in this cover page have the same meanings as defined in this circular.

A notice convening the SGM to be held at Falcon Room II, Gloucester Luk Kwok Hong Kong, 72 Gloucester Road, Wanchai, Hong Kong on Wednesday, 26 September 2012 at 10:00 a.m. is set out on pages 27 to 29 of this circular. Whether or not you are able to attend the SGM, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon and deposit at the branch share registrar of the Company in Hong Kong, Tricor Tengis Limited, at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM or any adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting at the SGM or any adjourned meeting (as the case may be) should you so wish and, in such event, the relevant form of proxy shall be deemed to be revoked.

7 September 2012

• For identification purposes only

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
NOTICE OF SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27

– i –

DEFINITIONS

In this circular, the capitalized terms and expressions shall have the following meanings unless the context otherwise requires:

“Acquisition” the acquisition of 80% equity interests in Ideal Market Holdings Limited which is engaged in the waste paper recycling business, details of which have been disclosed in the Acquisition Circular

• “Acquisition Circular” the circular issued by the Company on 23 September 2011 in respect of the Acquisition

• “Acquisition CN ” the redeemable convertible notes in the principal amount of HK$290 million issued by the Company to the vendors (or their nominee(s)) in accordance with the terms and conditions of the sale and purchase agreement dated 9 May 2011 and the supplemental agreement dated 14 September 2011, details of which have been disclosed in the Acquisition Circular

• “Acquisition CN Holder” the holder of the Acquisition CN

• “acting in concert” has the meaning ascribed thereto in the Takeovers Code

• “associate” has the meaning ascribed to it in the Listing Rules unless otherwise specified

• “Board” the board of the Directors

• “Business Day” a day (excluding Saturday, Sunday and public holiday) on which licensed banks in Hong Kong are generally open for business in Hong Kong

– 1 –

DEFINITIONS

“Capital Reorganization”

the proposed capital reorganization of the Company comprising (i) the share consolidation of every fifty (50) existing shares of HK$0.01 each in the issued share capital of the Company into one (1) consolidated share of HK$0.5 each in the issued share capital of the Company; and (ii) forthwith the share consolidation taking effect, the capital reduction (1) by eliminating any fraction of a consolidated share in the issued share capital of the Company following the share consolidation in order to round down the total number of consolidated shares to a whole number; and (2) by cancelling the paid-up capital of the Company to the extent of HK$0.49 on each issued consolidated share so that the nominal value of each issued consolidated share will be reduced from HK$0.5 to HK$0.01, details of which have been disclosed in the Company’s circular dated 15 August 2012

• “Company”

China Environmental Energy Investment Limited（中國 環保能源投資有限公司* ）, a company incorporated in Bermuda with limited liability and the Shares of which are listed on the main board of the Stock Exchange

• “Completion” completion of the Subscription pursuant to the Subscription Agreement

• “Completion Date” the third Business Day from the date when the Subscriber gives a notice in writing to the Company, or on such other date as the Subscriber and the Company may agree in writing

• “connected person(s)” has the same meaning ascribed to it in the Listing Rules

• “connected person(s)” “Conversion Price”

the conversion price shall be the average closing price of the Shares for the five (5) consecutive trading days prior to the Completion Date, provided that the conversion price shall not in any event be more than HK$0.11 (equivalent to HK$5.5 per Conversion Share after the Capital Reorganization becoming effective) or less than HK$0.01 (equivalent to the par value of the Share) per Conversion Share, subject to the adjustments in accordance with the terms of the Convertible Notes

• For identification purposes only

– 2 –

DEFINITIONS

“Conversion Share(s)”	any Share(s) to be issued by the Company upon the
	holder(s) of the Convertible Notes exercising its/their
	conversion right(s) under and in accordance with the terms
	and conditions of the Convertible Notes
“Convertible Notes”	the 18 months to maturity, 8% coupon convertible notes
	in the aggregate principal amount and initial Conversion
	Price per Conversion Share described in the section headed
	‘‘Principal terms of the Convertible Notes” of this circular
	to be issued by the Company on the Completion Date to the
	Subscriber pursuant to the terms and conditions as set out
	in the Subscription Agreement
“Director(s)”	the director(s) of the Company from time to time
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the
	People’s Republic of China
“Last Trading Date”	26 June 2012, being the last trading date of the Shares on
	the Stock Exchange
“Latest Practicable Date”	5 September 2012, being the latest practicable date prior to
	the despatch of this circular for the purpose of ascertaining
	certain information for inclusion in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange as amended, supplemented or otherwise modified
	from time to time
“Placing CN”	the redeemable convertible notes in the aggregate principal
	amount of up to HK$110 million to be issued by the
	Company in accordance with the terms of the placing
	agreement dated 7 October 2011, details of which have
	been disclosed in the Placing CN Circular. As at the Latest
	Practicable Date, Placing CN in the principle amount of
	HK$77 million have been issued and converted in full.

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DEFINITIONS

“Placing CN Circular”	the circular issued by the Company on 5 November 2011
	in respect of the placing of convertible notes with an
	aggregate principal amount of up to HK$110 million
“SGM”	the special general meeting of the Company to be convened
	for the Shareholders to consider, and if thought fit, to
	approve the Subscription Agreement and the transactions
	contemplated thereunder
“Share(s)”	the ordinary share(s) of HK$0.01 each in the share capital
	of the Company before and after the Capital Reorganization
	becoming effective
“Shareholder(s)”	holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscriber”	Pacific Plywood Holdings Limited（太平洋實業控股有限
	公司*）, a company incorporated in Bermuda with limited
	liability and the shares of which are listed on the main
	board of the Stock Exchange
“Subscription”	the subscription of the Convertible Notes by the Subscriber
	pursuant to the Subscription Agreement
“Subscription Agreement”	the subscription agreement dated 26 June 2012 entered into
	between the Company and the Subscriber in relation to the
	subscription of the Convertible Notes by the Subscriber, as
	varied and supplemented by the Supplemental Agreement
“Supplemental Agreement”	the supplemental agreement dated 4 September 2012
	entered into between the Company and the Subscriber to
	confirm the adjustment to the Conversion Price (if any)
“Takeovers Code”	the Hong Kong Code on Takeovers and Mergers
“%”	per cent

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

• For identification purposes only

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LETTER FROM THE BOARD

China Environmental Energy Investment Limited

(Incorporated in Bermuda with limited liability)

(Stock Code: 986)

Executive Directors: Ms. Chen Tong (Chairman) Ms. Deng Hong Mei Ms. Chan Ching Ho, Kitty Mr. Xiang Liang

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Non-executive Directors: Ms. Yao Zhengwei Mr. Wang Zhenghua

Independent non-executive Directors:

Head office and principal place of business:

Room 2211, 22/F., Tower Two, Lippo Centre, 89 Queensway Hong Kong

Mr. Chan Ying Kay Mr. Tse Kwong Chan Ms. Zhou Jue

7 September 2012

To the Shareholders

Dear Sir or Madam,

PROPOSED ISSUANCE OF CONVERTIBLE NOTES UNDER SPECIFIC MANDATE

INTRODUCTION

References are made to the joint announcements of the Company and the Subscriber dated 26 June 2012 and 4 September 2012, the Company’s announcements dated 30 July 2012 and 30 August 2012.

• For identification purposes only

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LETTER FROM THE BOARD

On 26 June 2012, the Company entered into the Subscription Agreement with the Subscriber pursuant to which the Company has conditionally agreed to issue, and the Subscriber has conditionally agreed to subscribe for the Convertible Notes in the aggregate principal amount of HK$95 million in cash.

As the Company announced on 3 August 2012 to reorganize the share capital of the Company under the Capital Reorganization, the Company and the Subscriber entered in to the Supplemental Agreement on 4 September 2012 to confirm that the maximum Conversion Price shall be adjusted from HK$0.11 per Conversion Share to HK$5.5 per Conversion Share upon the Capital Reorganization becoming effective and the minimum Conversion Price shall remain equivalent to the par value of the Share. In the event that the Capital Reorganization dose not become effective, there will be no adjustment to the Conversion Price.

The purpose of this circular is to provide you with, among other things, further details of the Subscription and a notice of the SGM.

THE SUBSCRIPTION AGREEMENT

On 26 June 2012, the Company and the Subscriber entered into the Subscription Agreement for the Subscription and on 4 September 2012, the Company and the Subscriber entered into the Supplemental Agreement to confirm the adjustment to the Conversion Price (if any). Principal terms of the Subscription Agreement are as follows:

Date: 26 June 2012 Parties: The Company; and The Subscriber

The Subscriber is a company incorporated in Bermuda with limited liability and the shares of which are listed on the main board of the Stock Exchange. The Subscriber and its subsidiaries are principally engaged in the money lending and provision of credit business, provision of corporate secretarial and consultancy services, and securities investments.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, as at the Latest Practicable Date, the Subscriber and its ultimate beneficial owner(s) are third parties independent of and not connected with the Company and are not connected persons of the Company.

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LETTER FROM THE BOARD

Conditions of

Completion of the Subscription is conditional upon:

the Subscription:

• (i) the Stock Exchange having granted the listing of, and permission to deal in, the Conversion Shares which fall to be issued upon the exercise of conversion rights attaching to the Convertible Notes;

• (ii) the Company having committed no default or breach of any of the warranties given by the Company in the Subscription Agreement, or its obligations under the Subscription Agreement;

• (iii) there shall not have been any circumstance or occurrence that has had, or would reasonably have a material adverse change with respect of the Group;

• (iv) there has not occurred or arisen any change of business nature of any member of the Group since the date of the Subscription Agreement;

• (v) the current listing of the Shares not having been withdrawn, the Shares continuing to be traded on the Stock Exchange prior to the Completion (save for any temporary suspension for no longer 7 trading days or such other period as the Subscriber may agree in writing, or any temporary suspension in connection with transactions contemplated under the Subscription Agreement);

• (vi) no statute, regulation or decision which would prohibit or restrict or materially affect the operation of the Group having been proposed, enacted or taken by any governmental or official authority;

• (vii) the Subscriber being satisfied with the results of the due diligence review on the Group, in particular, the annual results for the financial year ended 31 March 2012;

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LETTER FROM THE BOARD

• (viii) the passing by the Shareholders at the SGM of all necessary resolutions to approve the Subscription Agreement and the transactions contemplated thereunder in accordance with the Listing Rules;

• (ix) all necessary consents, licenses and approvals from the Shareholders, bankers, financial institutions and regulators required to be obtained in respect of the Subscription Agreement and the transactions contemplated thereby having been obtained and remain in full force and effect by the Company;

• (x) the passing by the shareholders of the Subscriber at the special general meeting of the Subscriber of all necessary resolutions to approve the Subscription Agreement and the transactions contemplated thereunder in accordance with the Listing Rules; and

• (xi) all necessary consents, licenses and approvals from the shareholders of the Subscriber, bankers, financial institutions and regulators required to be obtained in respect of the Subscription Agreement and the transactions contemplated thereby having been obtained and remain in full force and effect by the Subscriber.

Save for conditions (i), (viii), (ix), (x) and (xi) above, the Subscriber may waive any of the above conditions at any time by notice in writing to the Company.

Save for conditions (i), (viii), (ix), (x) and (xi) above, the Company may waive any of the above conditions at any time by notice in writing to the Subscriber.

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LETTER FROM THE BOARD

If the conditions above are not fulfilled (or waived as the case may be) at or before 5:00 p.m. on the date no later than 90 days after the date of the SGM, or such later date as may be agreed between the Subscriber and the Company in writing, the Subscription Agreement will lapse and become null and void and the parties under the Subscription Agreement shall be released from all obligations thereunder, save and except for the liabilities for any antecedent breaches thereof.

As at the Latest Practicable Date, none of the above condition has been waived or fulfilled either by the Company or the Subscriber.

Completion of the Subscription:

• Subject to the conditions of the Subscription having been fulfilled, the Completion will take place at such time and on such Business Day as the Subscriber shall specify by giving not less than three (3) Business Days’ notice in writing to the Company, or on such other date as the Subscriber and the Company may agree in writing.

Principal terms of the Convertible Notes

The following is a summary of the principal terms of the Convertible Notes:

Aggregate principal amount: HK$95 million

Subscription Price:

100% of the principal amount of the Convertible Notes

Initial Conversion Price: The initial Conversion Price shall be the average closing price of the Shares for the five (5) consecutive trading days prior to the Completion Date, provided that the initial Conversion Price shall not in any event be more than HK$0.11 per Conversion Share (equivalent to HK$5.5 per Conversion Share after the Capital Reorganization becoming effective) or less than HK$0.01 per Conversion Share (equivalent to the par value of the Share).

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LETTER FROM THE BOARD

The minimum Conversion Price of HK$0.01 per Conversion Share represents:

• (i) a discount of approximately 67.74% to the closing price of HK$0.031 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (ii) a discount of approximately 67.11% to the closing price of HK$0.0304 per Share as quoted on the Stock Exchange for the five (5) consecutive trading days up to and including the Last Trading Day;

• (iii) a discount of approximately 52.38% to the closing price of HK$0.021 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

• (iv) a discount of approximately 96.09% to the audited net asset value of HK$0.2558 per Share of the Company as at 31 March 2012, which is based on the net assets of the Group of approximately HK$521.089 million as at 31 March 2012 and the number of Shares of 2,036,735,473 in issue as at the Latest Practicable Date.

The maximum Conversion Price of HK$0.11 per Conversion Share (equivalent to HK$5.5 per Conversion Share after the Capital Reorganization becoming effective) represents:

• (i) a premium of approximate 254.84% over the closing price of HK$0.031 per Share as quoted on the Stock Exchange on the Last Trading Day;

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LETTER FROM THE BOARD

• (ii) a premium of approximately 261.84% over the average of the closing price of HK$0.0304 per Share as quoted on the Stock Exchange for the five (5) consecutive trading days up to and including the Last Trading Day;

• (iii) a premium of approximate 423.81% over the closing price of HK$0.021 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

• (iv) a discount of approximately 57.00% to the audited net asset value of HK$0.2558 per Share of the Company as at 31 March 2012, which is based on the net assets of the Group of approximately HK$521.089 million as at 31 March 2012 and the number of Shares of 2,036,735,473 in issue as at the Latest Practicable Date.

The initial Conversion Price mentioned above was agreed after arm’s length negotiations between the Subscriber and the Company, with reference to, among other things, the recent trading price of the Shares on the Stock Exchange and the market sentiment of the global stock markets. The maximum Conversion Price of HK$0.11 per Conversion Share (equivalent to HK$5.5 per Conversion Share after the Capital Reorganization becoming effective) was determined with reference to the conversion price of the Placing CN, while the minimum Conversion Price of HK$0.01 per Conversion Share was determined based on the par value and trading liquidities of the Shares. In addition, the Directors considered that the net assets of the Group as at 31 March 2012 did not fully reflect the actual situation of the Group as the Group recorded net current liabilities of approximately HK$228.31 million as at 31 March 2012 and thus the Company is in urgent need for capital to address the going concern problem encountered by the Company.

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LETTER FROM THE BOARD

Having considered all the foregoing, the Directors consider that the Conversion Price is fair and reasonable and is in the interests of the Company and the Shareholders as a whole.

The initial Conversion Price mentioned above is subject to adjustments upon the occurrence of, among other matters, subdivision or consolidation of Shares, capitalization issues, rights issues and other dilutive events, including but not limited to bonus issue and open offer. Such adjustments shall be certified either (at the option of the Company) by the auditors of the Company for the time being or by an approved merchant bank in accordance with the terms and conditions of the Convertible Notes.

Maturity:

18 months from the date of issue of the Convertible Notes. To the extent not previously converted, purchased, redeemed or cancelled, the Company shall, on the maturity date of the Convertible Notes, redeem the Convertible Notes at 100% of the outstanding principal amount.

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LETTER FROM THE BOARD

Conversion period: Provided that the exercise of the conversion rights attaching to the Convertible Notes (i) by the holder thereof and its respective parties acting in concert dose not trigger a mandatory offer under Rule 26 of the Takeovers Code on the part of the holder thereof and its parties acting in concert; and (ii) by the holder thereof and its associates will not render the Shares held in public hands being less than the minimum public float of the Shares required under the Listing Rule (i.e. 25% of the issued shares capital of the Company), holder of the Convertible Notes shall have the rights to convert, at any time during the period commencing from the date of issue of the Convertible Notes until the fifth Business Day before the maturity date of the Convertible Notes, the whole or part in an integral multiple of HK$1,000,000 of the outstanding principal amount of the Convertible Notes. Interest: 8% per annum, which is payable semi-annually Ranking of Conversion Shares: The Conversion Shares, when allotted and issue, will rank pari passu in all respects with all other Shares in issue as at the date of conversion on which a notice is given for the exercise of conversion rights and be entitled to all dividends and other distributions the record date of which falls on a date on or after the notice of the exercise of conversion rights is given. Voting: The holder(s) of the Convertible Notes will not be entitled to attend or vote at any meetings of the Company by reason only of it/they being the holder(s) of the Convertible Notes.

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LETTER FROM THE BOARD

Transferability:

The Convertible Notes may be freely transferred or assigned to any third party. Any transfer of the Convertible Notes shall be in respect of the whole or part only in an integral multiple of HK$1,000,000 of the outstanding principal amount of the Convertible Notes.

No transfer shall be made to any connected persons of the Company or parties acting in concert with the holder(s) of the Convertible Notes unless compliance of the Listing Rules and the Takeovers Code has been made.

Early redemption: The Conversion Notes may be redeemed at 100% of the outstanding principal amount of the Convertible Notes (in whole or in part) at any time and from time to time at the option of the Company prior to the maturity date of the Convertible Notes.

Listing: No application will be made for the listing of, or permission to deal in, the Convertible Notes on the Stock Exchange or any other stock exchange. An application will be made to the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares.

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LETTER FROM THE BOARD

Conversion Shares:

The Conversion Shares will rank pari passu in all respects with the Shares in issue on the date of allotment and issue of such Shares. Assuming the issue of the Convertible Notes is completed and (i) based on the maximum Conversion Price of HK$0.11 per Conversion Share (equivalent to HK$5.5 per Conversion Share after the Capital Reorganization becoming effective), a minimum number of 863,636,363 Conversion Shares (equivalent to 17,272,727 Conversion Shares of the Company with par value of HK$0.01 each after Capital Reorganization becoming effective) will be allotted and issued if the conversion rights attaching to the Convertible Notes are exercised in full, representing approximately 42.40% of the issued share capital of the Company as at the Latest Practicable Date and approximately 29.78% if the Company’s issued share capital as enlarged by the allotment and issue of the Conversion Shares in full; and (ii) based on the minimum Conversion Price of HK$0.01 (equivalent to the par value of the Share) per Conversion Share, a maximum number of 9,500,000,000 Conversion Shares will be allotted and issued if the conversion rights attaching to the Convertible Notes are exercised in full, representing approximately 23,321.63% of the issued share capital of the Company as at the Latest Practicable Date (assuming the Capital Reorganization becoming effective) and approximately 99.57% of the Company’s issued share capital as enlarged by the allotment and issue of the Conversion Shares in full (assuming the Capital Reorganization becoming effective).

The Conversion Shares will be allotted and issued under the specific mandate of the Company. The Directors proposed to seek approval from the Shareholders at the SGM to issue the Conversion Shares.

Shareholding structure of the Company in respect of the Subscription

I. At the initial maximum Conversion Price of HK$0.11 and minimum Conversion Price of HK$0.01 per Conversion Share

For illustrative purpose only, set out below is a summary of the shareholdings in the Company (i) as at the Latest Practicable Date; (ii) after allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the initial maximum Conversion Price of HK$0.11; (iii) after allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the initial maximum Conversion Price of HK$0.11, assuming all the outstanding Acquisition CN are converted in full at the conversion price of HK0.227; (iv) after allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the minimum Conversion Price of HK$0.01; (v) after allotment and issue of the number of Conversion Shares upon full

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LETTER FROM THE BOARD

conversion of the Convertible Notes at the minimum Conversion Price of HK$0.01, assuming all the outstanding Acquisition CN are converted in full at the conversion price of HK0.227; (vi) after allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the minimum Conversion Price of HK$0.01, while the holder(s) of the Convertible Notes do not hold more than 29.9% of the issued share capital of the Company; and (vii) after allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the minimum Conversion Price of HK$0.01, while the holder(s) of the Convertible Notes do not hold more than 29.9% of the issued share capital of the Company, assuming all the outstanding Acquisition CN are converted in full at the conversion price of HK0.227. The aforementioned scenarios (ii) to (vii) are set forth below for illustrative purpose only and will unlikely occur.

Shareholders Lucky Start Holdings Limited (Note 1) Jia Hong Xing Subscriber Acquisition CN Holder (Note 2) Public Shareholders Total	As the Latest Pra Number of shares 220,264,317 493,570,000 – – 1,322,901,156 2,036,735,473	at cticable Date 10.81% 24.24% 0.00% 0.00% 64.95% 100.00%	After allotmen the num Conversio upon full co the Conver at the initia Conversion Pri Number of shares 220,264,317 493,570,000 863,636,363 – 1,322,901,156 2,900,371,836	t and issue of ber of n Shares nversion of tible Notes l maximum ce of HK$0.11 7.59% 17.02% 29.78% 0.00% 45.61% 100.00%	After allotment number of Con upon full conv Convertible Not maximum Con of HK$0.11, as outstanding A are conver at the co price of Number of shares 220,264,317 493,570,000 863,636,363 255,506,607 1,322,901,156 3,155,878,443	and issue of the version Shares ersion of the es at the initial version Price suming all the cquisition CN ted in full nversion HK0.227 6.98% 15.63% 27.37% 8.10% 41.92% 100.00%	After allotmen the num Conversio upon full co the Conver at the m Conversion Pri Number of shares 220,264,317 493,570,000 9,500,000,000 – 1,322,901,156 11,536,735,473	t and issue of ber of n Shares nversion of tible Notes inimum ce of HK$0.01 1.90% 4.28% 82.35% 0.00% 11.47% 100.00%	After allotmen the number o Shares upon ful the Convertibl minimum Con of HK$0.01, as outstanding A are conver at the co price of Number of shares 220,264,317 493,570,000 9,500,000,000 255,506,607 1,322,901,156 11,792,242,080	t and issue of f Conversion l conversion of e Notes at the version Price suming all the cquisition CN ted in full nversion HK0.227 1.87% 4.19% 80.56% 2.17% 11.21% 100.00%	After allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the minimum Conversion Price of HK$0.01, while the holder(s) of the Convertible Notes do not hold more than 29.9% of the issued share capital of the Company Number of shares 220,264,317 7.58% 493,570,000 16.99% 868,735,957 29.90% – 0.00% 1,322,901,156 45.53% 2,905,471,430 100.00%	After allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the minimum Conversion Price of HK$0.01, while the holder(s) of the Convertible Notes do not hold more than 29.9% of the issued share capital of the Company, assuming all the outstanding Acquisition CN are converted in full at the conversion price of HK0.227 Number of shares 220,264,317 6.74% 493,570,000 15.09% 977,718,091 29.90% 255,506,607 7.81% 1,322,901,156 40.46% 3,269,960,171 100.00%	After allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the minimum Conversion Price of HK$0.01, while the holder(s) of the Convertible Notes do not hold more than 29.9% of the issued share capital of the Company, assuming all the outstanding Acquisition CN are converted in full at the conversion price of HK0.227 Number of shares 220,264,317 6.74% 493,570,000 15.09% 977,718,091 29.90% 255,506,607 7.81% 1,322,901,156 40.46% 3,269,960,171 100.00%
													100.00%

II. At the adjusted maximum Conversion Price of HK$5.5 and minimum Conversion Price of HK$0.01 per Conversion Share assuming the Capital Reorganization becoming effective

For illustrative purpose only, set out below is a summary of the shareholdings in the Company (i) as at the Latest Practicable Date, assuming the Capital Reorganization becoming effective; (ii) after allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the adjusted maximum Conversion Price of HK$5.5; (iii) after allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the adjusted maximum Conversion Price of HK$5.5, assuming all the outstanding Acquisition CN are converted in full at the adjusted conversion price of HK11.35; (iv) after allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the adjusted minimum Conversion

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LETTER FROM THE BOARD

Price of HK$0.01; (v) after allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the adjusted minimum Conversion Price of HK$0.01, assuming all the outstanding Acquisition CN are converted in full at the adjusted conversion price of HK$11.35; (vi) after allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the minimum Conversion Price of HK$0.01, while the holder(s) of the Convertible Notes do not hold more than 29.9% of the issued share capital of the Company; and (vii) after allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the minimum Conversion Price of HK$0.01, while the holder(s) of the Convertible Notes do not hold more than 29.9% of the issued share capital of the Company, assuming all the outstanding Acquisition CN are converted in full at the adjusted minimum conversion price of HK$11.35. The aforementioned scenarios (ii) to (vii) are set forth below for illustrative purpose only and will unlikely occur.

Shareholders Lucky Start Holdings Limited (Note 1) Jia Hong Xing Subscriber Acquisition CN Holder (Note 2) Public Shareholders Total	As at the Late Date, assumin Reorganization b Number of shares 4,405,286 9,871,400 – – 26,458,023 40,734,709	st Practicable g the Capital ecoming effective 10.81% 24.24% – – 64.95% 100.00%	After allotmen the number o Shares upon ful the Converti the adjusted Conversion Pr Number of shares 4,405,286 9,871,400 17,272,727 – 26,458,023 58,007,436	t and issue of f Conversion l conversion of ble Notes at maximum ice of HK$5.5 7.59% 17.02% 29.78% – 45.61% 100.00%	After allotmen the number o Shares upon ful the Converti the adjusted Conversion Pri assuming all th Acquisition CN in full at th conversion pric Number of shares 4,405,286 9,871,400 17,272,727 5,110,132 26,458,023 63,117,568	t and issue of f Conversion l conversion of ble Notes at maximum ce of HK$5.5, e outstanding are converted e adjusted e of HK$11.35 6.98% 15.63% 27.37% 8.10% 41.92% 100.00%	After allotmen the number o Shares upon ful the Converti the adjusted mini Price of Number of shares 4,405,286 9,871,400 9,500,000,000 – 26,458,023 9,540,734,709	t and issue of f Conversion l conversion of ble Notes at mum Conversion HK$0.01 0.05% 0.10% 99.57% – 0.28% 100.00%	After allotment and issue of the number of Conversion Shares upon full conversion of the Convertible Notes at the adjusted minimum Conversion Price of HK$0.01, assuming all the outstanding Acquisition CN are converted in full at the adjusted conversion price of HK$11.35 Number of shares 4,405,286 0.05% 9,871,400 0.10% 9,500,000,000 99.52% 5,110,132 0.05% 26,458,023 0.28% 9,545,844,841 100.00%	After allotmen the number o Shares upon ful the Conver at the m Conversion Pri while the h the Convertibl hold more th the issued sha the Co Number of shares 4,405,286 9,871,400 17,374,718 – 26,458,023 58,109,427	t and issue of f Conversion l conversion of tible Notes inimum ce of HK$0.01, older(s) of e Notes do not an 29.9% of re capital of mpany 7.58% 16.99% 29.90% – 45.53% 100.00%	After allotmen the number of Co upon full conv Convertib at the m Conversion Pri while the h the Convertibl hold more th the issued sha the Company, the outstanding are conver at the adjuste price of H Number of shares 4,405,286 9,871,400 19,554,361 5,110,132 26,458,023 65,399,202	t and issue of nversion Shares ersion of the le Notes inimum ce of HK$0.01, older(s) of e Notes do not an 29.9% of re capital of assuming all Acquisition CN ted in full d conversion K$11.35 6.74% 15.09% 29.90% 7.81% 40.46%
													100.00%

Note:

1. Lucky Start Holdings Limited is beneficially wholly owned by Zhao Zhenzhen.

2. As at the Latest Practicable Date, there is outstanding Acquisition CN of HK$58,000,000, which can be converted into 255,506,607 conversion shares (equivalent to 5,110,132 conversion shares assuming the Capital Reorganization becoming effective) at the conversion price of HK$0.227.

– 17 –

LETTER FROM THE BOARD

REASONS FOR THE SUBSCRIPTION AND THE USE OF PROCEEDS

The Group is principally engaged in the trading and manufacturing of printed circuit board and investment in electric vehicle battery business and the waste paper recycling business.

As disclosed in the Acquisition Circular, the Directors were of the opinion that, taking into account of its internal resources and the present available credit facilities of the enlarged Group upon the completion of the Acquisition, the enlarged Group will not have sufficient working capital for its present requirements, that is for at least the next twelve months from the date of the Acquisition Circular. In view of the foregoing, the Company would consider using appropriate equity financing methods to satisfy the consideration of the Acquisition in the future (i.e. repayment of the outstanding promissory notes and the Acquisition CN issued upon completion of the Acquisition) and develop the enlarged Group as well as to improve the financial position of the enlarged Group in the event that any suitable fund raising opportunities arise.

The Acquisition was completed on 4 November 2011. As disclosed in the Placing CN Circular, the Company proposed to place a series of convertible notes up to an aggregate principal amount of HK$110,000,000. As at the Latest Practicable Date, the said placing was completed and HK$77 million has been raised through the said placement.

The Company has entered into a placing agreement with FT Securities Limited on 1 June 2012 in respect of a placing of unconvertible bonds with principal amounts of up to HK$200 million on a best effort basis. On 31 August 2012, the Company and FT Securities Limited entered into a supplemental agreement to extend the expiry date of the placing period for the unconvertible bonds from 31 August 2012 to 28 February 2013. Up to the Latest Practicable Date, the Company has only issued the unconvertible bonds in the principal amount of HK$10,000,000 and the placing agent will continue to seek for suitable placee(s). Accordingly, the Directors decide to proceed with the Subscription simultaneously.

The Company has from time to time maintain regular dialogues with financial institutions for various fund raising proposals to raise additional capital to further enhance the capital base of the Company to resolve the net current liabilities of the Group matters. However, under the recent adverse market condition, the price of the Shares decreased substantially from HK$0.16 on 4 November 2011, being the completion date of the Acquisition, to HK$0.031 on the Last Trading Day, and the price of the Shares further decreased to HK$0.021 as at the Latest Practicable Date. Accordingly, all the financial institutions refuse to be appointed as the underwriter for any potential rights issue/open offer exercises of the Company.

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LETTER FROM THE BOARD

In view of the potential difficulties encountered by the Company in conducting fund raising exercises, the Directors are open to any forms of fund raising exercises (including but not limited to the further issue of convertible notes, warrants, new Shares under specific mandate and rights issue/ open offer exercises) when such opportunities arises. However, the Subscription and the placing of unconvertible bonds are the only fund raising opportunities identified by the Company and save for the aforesaid, the Company has no arrangement, intention, understanding or negotiation about any possible fund raising exercises (both debt and equity financing) as at the Latest Practicable Date. In case the Convertible Notes are not converted in full by the holder(s) of the Convertible Notes, the Company will continue to seek for other fund raising opportunities then available to the Company to fully settle all the outstanding debt obligations of the Group.

As at the Latest Practicable Date, the Company have a promissory notes with principal amount of HK$216 million which will be due in November 2012 and in August 2012, the Company has entered into a non-binding memorandum of intent with the holder of the promissory notes with an aggregate principal amount of HK$156 million under which the said holder allows the Company for the settlement of the promissory notes within one year from the date of their maturity without penalty or additional fee. However, the said memorandum of intent is non-legally binding and the holder of the promissory notes had indicated that partially settlement is required before entering into a legally binding extension agreement. The other two holders of the promissory notes with an aggregate principal amount of HK$60 million have also requested partial repayment before entering into any formal discussions with the Company for any possible extension on the maturity date of their promissory notes. Accordingly, the Company intends to use the proceeds from the Subscription to settle the outstanding principals of the promissory notes and any remaining principals of the promissory notes will be extended for another twelve months. Further announcement will be made by the Company when the promissory notes is redeemed and extended as and when appropriate.

The gross proceeds raised from the Subscription will be approximately HK$95 million. The net proceeds from the Subscription will be approximately HK$94 million. The Company intends to use the proceeds from the Subscription as to (i) not more than 10% of the proceeds for general working capital of the Group, including but not limited to working capital for the Group; and (ii) not less than 90% of the proceeds for the repayment of the outstanding promissory notes in principal amounts of HK$216 million due in November 2012. If the holder(s) of such promissory notes agree to extend the maturity date of the promissory notes, the proceeds will be used to look for financing other investment opportunities to be identified by the Group. As at the Latest Practicable Date, the Company has not identified any investment opportunities.

The Directors consider that the Subscription Agreement has been entered into upon normal commercial terms following arm’s length negotiations between the Company and the Subscriber and the terms of the Subscription Agreement are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

FUND RAISING EXERCISE OF THE COMPANY

Save and except for the fund raising activities mentioned below, the Company has not carried out other fund raising activities during the 12 months immediately preceding the Latest Practicable Date.

Date of	Fund raising	Net proceeds	Intended use of	Actual use of
announcement	activity	actually raised	proceeds	proceeds raised
5 November 2011	Placing of convertible	HK$77 million	Not more than 40%	(i) HK$44 million has
	notes with an aggregate	has been raised	for the general	been utilized for the
	principal amount of up		working capital	repayment of promissory
	to HK$110 million		of the Group and	notes; and (ii) HK$38
			not less than 60%	million has been utilized
			for the repayment	for the repayment of
			of the promissory	trading finance and
			notes issued by	general working capital
			the Company after	of the Group
			completion of the
			Acquisition
1 June 2012	Placing of the	HK$10 million	Not more than 10%	(i) HK$5 million has
	unconvertible bonds		of the proceeds for	been utilized for the
			general working	repayment of promissory
			capital of the	notes; and (ii) HK$5
			Group, including	million has been utilized
			but not limited to	for the general working
			working capital for	capital of the Group.
			the Group after the
			completion of the
			Acquisition; and
			not less than 90%
			of the proceeds
			for the repayment
			of the outstanding
			promissory notes
			and the Acquisition
			CN issued by the
			Company upon
			completion of the
			Acquisition

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LETTER FROM THE BOARD

BUSINESS REVIEW AND PROSPECTS

Consolidated turnover of the Group for the year ended 31 March 2012 was HK$178,822,000, representing a 234.5% increase as compared with HK$53,455,000 of the previous year. Operating profit after tax of the Group was HK$8,891,000, which included a gain of HK$77,658,000 on valuation of convertible notes and impairment loss of HK$44,888,000 on investment in electric car battery business. Excluding the results of the above gain and loss, the Group experienced a loss of HK$23,879,000 as compared with HK$46,243,000 (excluding a gain of HK$49,800,000 on the disposal of land and buildings in the Suzhou subsidiary in Mainland China and loss of HK$7,001,000 on the disposal of sustained loss-incurring subsidiaries in the Group) of the previous year. The increase in turnover and improved results were attributable to the acquisition of the recycling business during the year.

Trading and manufacturing of printed circuit boards (“PCB”)

For the year ended 31 March 2012, the PCB division recorded a turnover of HK$42,253,000 (2011: HK$49,860,000), which accounted for approximately 23.6% of the Group’s total turnover and represented a decrease of 15.3% as compared with the previous year. Gross profit was HK$7,218,000 and gross margin was 17.1%. The decrease in turnover was attributable to lower market demand arising from the European debts crisis, in the PCB market.

Since April 2012, the market demand for the PCB remained weak and the PRC business operation was in a stagnant condition.

Trading and manufacturing of industrial laminates

During the year under review, the industrial laminate business achieved a turnover of HK$541,000 (2011: HK$4,692,000), representing approximately less than 1% of the Group’s total turnover and a decrease of 88.5% as compared with last year.

The industrial laminate division continued to sustain loss due to strong competition and weak market demand. Sales orders for the year persistently decreased.

The industrial laminate operation in Suzhou, Mainland China during the year remained idle.

Since April 2012, the business situation of the industrial laminate has not improved.

Investment in electric car battery business

The Company acquired 9.9% of the issued share capital of Swift Profit International Limited (“ Swift Profit ”) on 29 December 2010. Swift Profit has been granted an exclusive licence to apply the patent and the related technology for manufacturing electric car batteries.

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LETTER FROM THE BOARD

Due to the downturn in global investment market conditions, sales orders tumbled more than expected. The carrying value of the business was reduced by HK$44,888,000 by reference to a business valuation as valued by a professional valuer. In the first half of the year 2012, there have been battery faults discovered by an United States-based developer and manufacturer and electric car fire incidents in the PRC. The electric car battery business of the Company has been adversely affected by the said negative incidents. Furthermore, due to the inflation in the PRC, there has been an increase in costs of raw materials, labor and manufacturing overhead in the production of electric car battery. The Company forested that the demand for electric car batteries might not as robust as expected and the growth of the business might be restrained.

Recycling business

On 9 May 2011, the Company entered into a sale and purchase agreement, pursuant to which the Company, as the purchaser, conditionally agreed to acquire the sale shares and the sale loans at consideration of HK$850 million. The said sale shares represent 80% of the issued share capital of Ideal Market Holdings Limited. Ideal Market Holdings Limited indirectly holds Suzhou Baina Renewable Resources Co., Ltd (the “ Project Company ”), which is principally engaged in the recycling business of waste paper, scrap metal and consumable waste. The acquisition was completed on 4 November 2011.

The vendors of the Acquisition had provided the Company with the profit guarantee that the net profit after taxation of the Project Company for the period from 1 April 2011 to 31 March 2012, as shown in the accountants’ reports of the Project Company to be prepared by the auditors of the Company in accordance with Hong Kong Financial Reporting Standards, shall not be less than RMB55 million (the “ Profit Guarantee ”).

As the sale shares represent 80% of the issued share capital of Ideal Market Holdings Limited, the parties had agreed that the Acquisition CN in the principal amount of HK$52 million (the “ Contingency Note ”), equivalent to 80% of the Profit Guarantee based on the exchange rate of HK$1: RMB0.84, will be deposited with, and held in escrow by, an escrow agent appointed by the Company as security for the Profit Guarantee. The Contingency Note will only be released to the vendors of the Acquisition in the followings manner:

• (i) In the event that the actual amount of the net profit after taxation of the Project Company for the 12-month period ending 31 March 2012 as shown in the said accountants’ reports equals to or exceed the Profit Guarantee, the entire Contingency Note will be released to the vendors of the Acquisition; or

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LETTER FROM THE BOARD

• (ii) In the event that the actual amount of the net profit after taxation of the Project Company for the 12-month period ending 31 March 2012 as shown in the said accountants’ reports is less than the Profit Guarantee, the Company will be entitled to redeem or repurchase at HK$1 such part of the Contingency Note with a principal amount equivalent to the shortfall in the Profit Guarantee on a dollar to dollar basis and the balance of the Contingency Note will be released to the vendors of the Acquisition; or

• (iii) In the event that the Project Company records net losses after taxation for the 12-month period ending 31 March 2012 as shown in the said accountants’ reports, the Company will be entitled to redeem or repurchase at HK$1 the entire Contingency Note.

As at the Latest Practicable Date, the Acquisition CN has an outstanding amount of HK$58 million, among which HK$52 million is the Contingency Note.

Since its acquisition, the recycling business recorded a turnover of RMB110,592,000 (equivalent to HK$136,028,000), which accounted for approximately 76.1% of the Group’s total turnover. Gross profit was RMB15,471,000 (equivalent to HK$19,029,000) and gross margin came to 14.0%. Operating profit after tax was RMB4,264,000 (equivalent to HK$5,245,000). This became the main source of income of the Group.

The financial results of Ideal Market Holdings Limited incorporated into the annual results of the Company for the year ended 31 March 2012 which was published on 10 August 2012 are for the period from the completion date of the Acquisition, 4 November 2011 to 31 March 2012. As at the Latest Practicable Date, the Company is in the process of preparation of the financial statements of Ideal Market Holdings Limited and its subsidiaries for the year ended 31 March 2012 in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”). Based on the latest information, the Directors are of the view that the profits of the Project Company for the year ended 31 March 2012 is below the Profit Guarantee, giving rise to a gain on redemption or repurchase of the Contingency Note. However, the results of the Project Company prepared in accordance with HKFRSs cannot be ascertained with reasonable certainty at this stage, any gain on redemption or repurchase of the Contingency Notes has not been recognized in the consolidated financial statements of the Group for the current year. As soon as the results of the Project Company for the year ended 31 March 2012 prepared in accordance with HKFRSs are available, the adjustment to the consideration of the Acquisition can be confirmed. The Company will make an announcement to the Shareholders in this respect accordingly.

– 23 –

LETTER FROM THE BOARD

As the Contingency Note has been deposited with, and held in escrow by, an escrow agent appointed by the Company, the Directors are of the view that the consideration adjustment mechanism of the Acquisition has no effect on the Company’s liquidity position and financing plan. In the event that part of the Contingency Note is cancelled as a result of the said adjustment, the number of Shares to be converted under the Contingency Note will be decreased and the potential dilution impact to the existing Shareholders will be improved.

In 2012, the Company faces the fierce competition from the local waste paper suppliers. As such, the recycling business grows slowly and the sales volume per month fluctuated in the first half of the year, and the average selling price drops slightly as compared to the last year. Looking ahead, the Company will actively expand its sale networks to increase the sale volume and cope with possible decrease in profit margin.

Outlook

The European debt crisis and stagnant economic growth in the United States have severely reduced the market demand of consumers. The management anticipates that the trading environment would be worsened and there would be pressure on the Group’s costs and profit margin. The Company will closely monitor the business operations and continue to implement a more conservative approach in the procurement of resources to reduce operating costs. The acquisition of the waste paper recycling business during the year became a main source of income to the Group. We believe that the financial performance of the Group will improve.

LIQUIDITY AND FINANCIAL RESOURCES

In April 2011, the Company had implemented a rights issue of the new shares of the Company at the subscription price of HK$0.068 per rights share on the basis of twenty six (26) rights shares for every one (1) share held. The rights issue became unconditional on 18 April 2011 and 3,030,531,634 new shares of HK$0.001 each were issued by the Company pursuant to the terms of the rights issue, giving rise to gross proceeds of approximately HK$206.08 million (before expenses).

On 27 May 2011, the Company proposed to implement a share consolidation scheme on the basis that every ten (10) issued and unissued shares of HK$0.001 each in the share capital of the Company were consolidated into one (1) consolidated share of HK$0.01 each in the issued share capital of the Company. The share consolidation was effected on 30 June 2011.

– 24 –

LETTER FROM THE BOARD

As at 31 March 2012, the Group’s total cash and bank balances, cash deposit held by securities broker and pledged fixed deposits amounted to HK$94,830,000 (2011: HK$3,266,000). Total bank loans, other borrowings, convertible notes, financial liabilities designated at the far value through profit or loss and promissory note payable increased from HK$55,829,000 as at 31 March 2011 to HK$323,021,000 as at 31 March 2012. The Group’s gearing ratio, which is net debt divided by total shareholders’ equity plus net debt, increased from 0.25 as at 31 March 2011 to 0.40 as at 31 March 2012. Net debt included bank and other borrowings, trade and bills payable, other payables and accruals, promissory note payable, financial liabilities designated at fair value through profit or loss and obligation under finance leases less cash and bank balances, cash deposits and pledged bank deposits. As at 31 March 2012, the Group had a current ratio of 0.52 (2011: 1.77) and net current liabilities of HK$228,315,000 (2011: net current assets of HK$74,972,000).

On 7 October 2011, the Company had entered into an agreement with a placing agent under which the placing agent conditionally agreed to the procurement, on a best effort basis, of placement of convertible notes with an aggregate principal amount of HK$110 million to be issued by the Company for the estimated net proceeds of approximately HK$106 million. The placement of convertible notes was approved by the shareholders of the Company on 29 November 2011. As at 31 March 2012, the Company has issued convertible notes in principal value of HK$77 million.

On 1 June 2012, the Company has entered into a placing agreement with FT Securities Limited in respect of a placing of unconvertible bonds with principal amounts of up to HK$200 million on a best effort basis. On 31 August 2012, the Company and FT Securities Limited entered into a supplemental agreement to extend the expiry date of the placing period for the unconvertible bonds from 31 August 2012 to 28 February 2013. Up to the Latest Practicable Date, the Company has only issued the unconvertible bonds in the principal amount of HK$10,000,000.

The Directors are aware of that the Group recorded audited net current liabilities of approximately HK$228.31 million as at 31 March 2012, among which, the promissory notes with principal amount of HK$216 million will be due in November 2012, and thus the Company is in urgent need for capital to address the going concern problem encountered by the Company. Compared to the net current liabilities the Group recorded, the proceeds raised by the Subscription is insufficient to the Group’s demand. Thus, the Company will maintain regular dialogues with financial institutions for various fund raising proposals to raise additional capital to further enhance the capital base of the Company. The Directors is open to any forms of fund raising exercises (including but not limited to the further issue of convertible notes, warrants, new Shares under specific mandate and rights issue/open offer exercises) when such opportunities arises.

– 25 –

LETTER FROM THE BOARD

SGM

A notice convening the SGM is set out on pages 27 to 29 of this circular.

A form of proxy for use at the SGM is enclosed. Whether or not you are able to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and deposit at the Company’s branch share registrar, Tricor Tengis Limited, at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding of the SGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting at the SGM or any adjournment thereof (as the case may be) should you so wish and, in such event, the relevant form of proxy shall be deemed to be revoked.

In compliance with the Listing Rules, the resolution will be taken by way of poll at the SGM. To the best knowledge of the Directors, none of the Shareholders had a material interest in the Subscription Agreement and the transactions contemplated thereunder as at the Latest Practicable Date. Accordingly, none of the Shareholders will be required to abstain from voting at the SGM in respect of the resolution relating to the Subscription.

RECOMMENDATION

The Directors believe that the terms of the Subscription Agreement are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolution at the SGM.

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

By order of the Board China Environmental Energy Investment Limited Chen Tong

Chairman

– 26 –

NOTICE OF SGM

China Environmental Energy Investment Limited

(Incorporated in Bermuda with limited liability)

(Stock Code: 986)

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) of the shareholders of China Environmental Energy Investment Limited (the “ Company ”) will be held at Falcon Room II, Gloucester Luk Kwok Hong Kong, 72 Gloucester Road, Wanchai, Hong Kong on Wednesday, 26 September 2012 at 10:00 a.m. for the purpose of considering and, if thought fit, passing, with or without amendments, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT

• (a) the subscription agreement dated 26 June 2012 (the “ Subscription Agreement ”) and the supplemental agreement dated 4 September 2012 (the “ Supplemental Agreement ”) entered into between the Company and Pacific Plywood Holdings Limited (the “ Subscriber ”), a copy of the Subscription Agreement and the Supplemental Agreement having been produced to the SGM marked “A” and signed by the chairman of the SGM for identification purpose, pursuant to which the Company has conditionally agreed to issue and the Subscriber has conditionally agreed to subscribe for the convertible notes in the aggregate principal amount of HK$95 million in cash (the “ Convertible Note(s) ”) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;

• (b) the execution, delivery and performance of the Subscription Agreement (as supplemented by the Supplemental Agreement) by the Company be and are hereby approved, confirmed and ratified;

• (c) the execution, delivery and performance of the instrument by the Company by way of deed poll to create the Convertible Note(s) (the “ Deed Poll ”) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;

• For identification purposes only

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NOTICE OF SGM

• (d) the issuance of the Convertible Note(s) by the Company subject to and upon the terms and conditions of the Subscription Agreement (as supplemented by the Supplemental Agreement) and all transactions contemplated under or incidental to the Subscription Agreement (as supplemented by the Supplemental Agreement) and all actions taken or to be taken by the Company pursuant to the Subscription Agreement (as supplemented by the Supplemental Agreement) be and are hereby approved, confirmed and ratified;

• (e) subject to the fulfillment or waiver of the conditions set out in the Subscription Agreement (as supplemented by the Supplemental Agreement), any director of the Company (the “ Director ”) be and is hereby authorised to issue the Convertible Note(s) in accordance with the terms and conditions of the Subscription Agreement (as supplemented by the Supplemental Agreement) and the Deed Poll;

• (f) any Director be and is hereby authorised to allot and issue new shares of the Company which may fall to be issued upon the exercise of the conversion rights attached to the Convertible Note(s) or part thereof to the relevant holder(s) of the Convertible Note(s); and

• (g) any Director be and is hereby authorised to do all such acts and things, including but without limitation to the execution of all such documents under seal where applicable, as he/she may in his/her discretion consider necessary, expedient or desirable for the purpose of or in connection with the implementation of or giving effect to the issuance of the Convertible Note(s), the Subscription Agreement (as supplemented by the Supplemental Agreement) and the transactions contemplated thereunder, including but without limitation, the exercise or enforcement of any of the Company’s rights under the Subscription Agreement (as supplemented by the Supplemental Agreement) and to make and agree to such amendments, modifications or variations of the terms of the Subscription Agreement (as supplemented by the Supplemental Agreement) as he/she may consider to be appropriate and in the interests of the Company.”

By order of the Board

China Environmental Energy Investment Limited Chen Tong Chairman

Hong Kong, 7 September 2012

Registered office: Head office and principal place of Clarendon House business: 2 Church Street Room 2211, 22/F., Tower Two, Hamilton HM 11 Lippo Centre, 89 Queensway Bermuda Hong Kong

– 28 –

NOTICE OF SGM

Notes:

• (1) Any shareholder of the Company (the “ Shareholder(s) ”) entitled to attend and vote at the SGM shall be entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a Shareholder. A Shareholder who is holding two or more shares of the Company is entitled to appoint more than one proxy to attend and vote in his stead. If more than one proxy is appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed.

• (2) The form of proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same.

• (3) Delivery of the form of proxy shall not preclude a Shareholder from attending and voting in person at the SGM and in such event, the form of proxy shall be deemed to be revoked.

• (4) Where there are joint Shareholders, any one of such joint Shareholder may vote, either in person or by proxy, in respect of such shares as if he were solely entitled thereto, but if more than one of such joint Shareholders are present at the SGM the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint Shareholders, and for this purpose seniority shall be determined by the order in which the names stand in the register of Shareholders of the Company in respect of the joint holding.

• (5) The form of proxy and (if required by the board of directors of the Company) the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority, shall be delivered to the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof at which the person named in the form of proxy proposes to vote or, in the case of a poll taken subsequently to the date of the SGM or any adjournment thereof, not less than 24 hours before the time appointed for the taking of the poll and in default the form of proxy shall not be treated as valid.

– 29 –