G-Resources Group Limited — Capital/Financing Update 2001

Jul 5, 2001

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, 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 announcement.

Star Bio-Tech (Holdings) Limited

(Incorporated in Bermuda with limited liability)

PROPOSED ISSUE OF CONVERTIBLE BONDS

The Company has entered into the Agreement “A” with Gain Master and the Agreement “B” with Directgain Profits (together known as the “Subscribers”) on 4th July 2001 respectively (together known as the “Agreements”) under which the Company has agreed to issue the Bonds in an aggregate principal amount of HK$13,800,000 to Gain Master and an aggregate principal amount of HK$6,800,000 to Directgain Profits respectively. The Bonds are convertible into Shares at Conversion Prices as mentioned in the following paragraph known as “The Conversion Prices”.

Assuming that the Bonds are converted in full and the Conversion Price equals the nominal value of HK$0.01 of each Share, a maximum of 2,060,000,000 Shares will fall to be issued which represent approximately 10.59% of the existing issued share capital of the Company and approximately 9.57% of such issued share capital as enlarged by the issue of these Shares. The Conversion Shares will be issued under the general mandate to issue Shares granted to the Directors at the special general meeting of the Company held on 25 April 2001.

The Subscribers and their ultimate beneficial owners are independent of, and not connected with, any of the directors, chief executive and substantial shareholders of the Company or its subsidiaries, or any of their respective associates (as defined in the Listing Rules).

THE AGREEMENTS

Date and parties

The Directors announce that Agreements have been entered into between the Company and the Subscribers respectively on 4th July 2001 pursuant to which Gain Master will subscribe for the Bonds in an aggregate principal amount of HK$13,800,000 and Directgain will subscribe for the Bonds in an aggregate principal amount of HK$6,800,000 upon completion of the Agreements.

Issuer:	The Company
Subscribers:

Agreement “A”

Gain Master, a company incorporated in the British Virgin Islands with limited liability. Gain Master and its ultimate beneficial owner is independent of, and not connected with, any of the directors, chief executive and substantial shareholders of the Company or its subsidiaries or their respective associates (as defined in the Listing Rules); and

Agreement “B”

Directgain Profits, a company incorporated in the British Virgin Islands with limited liability. Directgain Profits and its ultimate beneficial owner is independent of, and not connected with, any of the directors, chief executive and substantial shareholders of the Company or its subsidiaries or their respective associates (as defined in the Listing Rules.

Payment terms

The aggregate principal amount of the Bonds are to be paid by the Subscribers to the Company in cash in the following manner:

(a) 10% of the aggregate principal amounts of the Bonds has been paid as deposits upon the signing of the Agreements; and

(b) the balance of 90% of the principal amounts of the Bonds will be paid on completion of the Agreements.

If completion does not occur by reason of a non-fulfilment of the conditions described below or by reason of the Subscribers rescinding the Agreements due to a breach of warranties by the Company, the deposits (including all interests accrued) will be refunded by the Company to the Subscribers without any claim for damages.

Conditions

Completion of the Agreements are conditional on the following conditions being satisfied:

(a) the Bermuda Monetary Authority having granted its permission for the issue of the Bonds and the free transferability of the Conversion Shares which may fall to be issued on conversion in full of the Bonds, if necessary; and

(b) the granting by the Stock Exchange of the listing of and permission to deal in the Conversion Shares which may fall to be issued on conversion in full of the Bonds.

If any of the conditions is not satisfied on or before 31 July 2001 (or such other date as the Company and the Subscribers may agree in writing), the Agreements will lapse.

Completion

Completion of the Agreements will take place on the second Banking Day after satisfaction of all conditions set out above.

PRINCIPAL TERMS OF THE BONDS

The principal terms of the Bonds are summarized below:

Principal amount

HK$20,600,000.

Interest

The Bonds will bear interest on the outstanding principal from the date of issue at a rate per annum equal to the higher of (i) the difference between the prime lending rate of the Banking Day immediately before any date of interest payment quoted by The Hongkong and Shanghai Banking Corporation Limited and 3%; and (ii) 2%. Interests will be payable quarterly in arrears commencing 3 months after the date of issue of the Bonds.

Maturity Date

The Company will repay the outstanding principal amount of the Bonds on the third anniversary of the date of issue of the Bonds, unless previously converted into Shares.

Conversion rights

The Bondholders will have the right, on any Banking Day after the date of issue of the Bonds but prior to the maturity date, to convert the whole or any part of principal amount of the Bonds into Shares at the Conversion Price provided that no fraction of a Conversion Share will be issued.

The Conversion Prices

For Agreement “A”:

The Conversion Price for Agreement A will be equal to the lower of (i) 80% of the average closing prices of one Share on the Stock Exchange for each of the ten trading days up to the day immediately preceding the Conversion Date, but in any event the Conversion Price will not less than the nominal value per Share or (ii) HK$0.01 per Share that represents a 20% discount to the average closing price per Share on the Stock Exchange for the last ten trading days up to the date of this announcement and a 16.7% discount to the closing price of HK$0.012 per Share on the Stock Exchange of the date of this announcement.

For Agreement “B”:

The Conversion Price for Agreement B will be (i) HK$0.01 per Share represents a 20% discount to the average closing price per Share on the Stock Exchange for the last ten trading days up to the date of this announcement and a 16.7% discount to the closing price of HK$0.012 per Share on the Stock Exchange of the date of this announcement; or (ii) 80% of the average closing prices of one Share on the Stock Exchange for each of the ten trading days up to the day immediately preceding the Conversion Date if the Equity Share Capital has undergone any sub-division, consolidation, or reclassification before any Conversion Date provided that there is less than 10 dealing days between the Conversion Date and the date of such sub-division, consolidation, or reclassification, then the applicable average closing price shall be the average closing prices of Share for these dealing dates between the Conversion Date and the effective date of any sub-division, consolidation or reclassification, subject to adjustment, but in any event the Conversion Price will not less than the nominal value per Share.

Conversion Shares

Assuming that the Bonds are converted in full and the Conversion Price equals the nominal value of HK$0.01 per Share, a maximum of 2,060,000,000 Shares will fall to be issued, representing approximately 10.59% of the existing issued share capital of the Company and approximately 9.57% of such issued share capital as enlarged by the issue of these Shares.

The Conversion Shares will be issued under the general mandate to issue Shares granted to the Directors at the special general meeting of the Company held on 25 April 2001. The Conversion Shares will rank pari passu in all respects with the Shares in issue as at the date of conversion.

Voting

The Bondholders will not be entitled to attend or vote at any meetings of the Company by reason only of they being Bondholders.

Transferability

Bondholders shall not, without the prior written consent of the Company and the Stock Exchange, transfer or assign the Bonds (whether in whole or in part(s)).

SHAREHOLDINGS IN THE COMPANY

Mr. Wong Kam Fu, the Chairman and controlling shareholder of the Company, through Sheung Hai Developments Limited and Super Biotech Enterprises Limited, companies wholly and beneficially owned by him, owns about 36.25% of the existing issued share capital of the Company. Assuming that the Bonds are converted in full at the Conversion Price of HK$0.01 per Share, a maximum of 2,060,000,000 Shares will fall to be issued and Mr. Wong's interest in the Company will be decreased to about 32.78% of the issued share capital of the Company as enlarged by the issue of the Conversion Shares.

INFORMATION ON THE COMPANY and USE OF PROCEEDS

The Company is an investment holding company the subsidiaries of which are principally engaged in the trading of electronic products and investment in high-tech and bio-technology related businesses. The net proceeds from the subscription of the Bond are estimated to be about HK$20,400,000 and are intended to be used as general working capital for the Group.

The Directors consider that the terms of the Agreements, which were arrived at after arm's length negotiations between the Company and the Subscribers, are fair and reasonable and are in the interests of the Company.

APPLICATION FOR LISTING

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

GENERAL

Any alterations of the terms of the Bonds after issue requires the approval by the Stock Exchange unless such alterations take effect automatically under the existing terms of the Bonds.

DEFINITIONS

In this announcement, unless the content otherwise requires, the following expressions have the following meanings:

“Agreements”	the Agreement “A” and the Agreement “B” in respect of the issue of the Bonds
“Agreement A”	a conditional agreement entered into between the Company and Gain Master dated 4th July 2001
“Agreement B”	a conditional agreement entered into between the Company and Directgain Profits dated 4th July 2001
“Banking Day”	a day (excluding Saturday) on which banks are open for business in Hong Kong
“Board”	The board of Directors
“Bonds”	convertible bond in an aggregate principal amount of HK$13,800,000 to be issued by the Company to Gain Master pursuant to the Agreement “A” and convertible bond in an aggregate principal amount of HK$6,800,000 to be issued by the Company to Directgain Profits pursuant to the Agreement “B”
“Bondholders”	The person who is for the time being the holder of the Bonds
“Company”	Star Bio-Tech (Holdings) Limited, a company incorporated in Bermuda with limited liability the shares of which are listed on the Stock Exchange
“Conversion Price(s)”	The price(s) at which Conversion Shares will be issued upon a conversion of all or part of the Bonds, subject to adjustment
“Conversion Shares”	A maximum of 2,060,000,000 Shares to be issued upon full conversion of the Bonds
“Directgain Profits”	Directgain Profits Limited, a company incorporated in the British Virgin Islands with limited liability, which is independent of and not connected with any substantial shareholder, chief executive and directors of the Company or any of its subsidiaries or their respective associates (as defined in the Listing Rules)
“Directors”	The directors of the Company
“Gain Master”	Gain Master Assets Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of Capital Strategic Investment Limited (whose shares are listed on the Stock Exchange), which is independent of and not connected with any substantial shareholder, chief executive and directors of the Company or any of its subsidiaries or their respective associates (as defined in the Listing Rules)
“Group”	The Company and its subsidiaries
“Listing Rules”	The Rules Governing the Listing of Securities on the Stock Exchange
“Share(s)”	Share(s) of a nominal value of HK$0.01 each in the capital of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscribers”	Gain Master and Directgain Profits
“HK$”	Hong Kong dollars

By Order of the Board
Wong Kam FuChairman
Hong Kong, 4th July 2001