G-Resources Group Limited — Capital/Financing Update 2008

Mar 5, 2008

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.

This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities.

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(Incorporated in Bermuda with limited liability) (Stock Code: 1051)

MAJOR TRANSACTION: ACQUISITION OF 51% OF THE ISSUED SHARE CAPITAL IN MONGOL OIL AND RESUMPTION OF TRADING

On 26 February 2008, GRIL, a wholly-owned subsidiary of the Company, has entered into the Sale and Purchase Agreement with CSIL, pursuant to which CSIL has conditionally agreed to transfer or procure the transfer, and GRIL has conditionally agreed to acquire from CSIL the Sale Interest (representing 51% of the issued share capital of Mongol Oil) at the Consideration in the sum of US$45,000,000.00 (equivalent to approximately HK$351,000,000.00).

The Consideration of the Sale Interest is to be satisfied (i) as to US$30,000,000.00 (equivalent to approximately HK$234,000,000.00), in cash; and (ii) as to US$15,000,000.00 (equivalent to approximately HK$117,000,000.00), by the issue of the Convertible Notes by the Company to CSIL or its nominee. The Convertible Notes shall be due on the third anniversary of the date of issue and are convertible into Conversion Shares at the Conversion Price of HK$0.228 per Conversion Share, subject to adjustments, pursuant to and subject to the terms and conditions thereof, upon exercise of the conversion rights attached to the Convertible Notes. The holder of the Convertible Notes may convert the whole or any part of the outstanding principal amount at any time and from time to time following the date of issue of the Convertible Notes.

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.

Mongol Oil is a company incorporated in Mongolia and its principal scope of business includes the exploration, exploitation, extraction, production, refining, processing, sale and export of natural resources/minerals of whatever kind. As at the date of this announcement, Mongol Oil has obtained the Mining Licence and the Exploration Licences.

Based on the relevant percentage ratios, the Acquisition constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is therefore required to be made conditional on Shareholders’ approval pursuant to Rule 14.40 of the Listing Rules.

* For identification purpose only

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A circular containing, among other things, further details of the Acquisition and the notice of the SGM will be dispatched to the Shareholders as soon as practicable.

The Board would like to emphasise that the Acquisition is conditional upon various conditions precedent being met. Accordingly, completion of the Acquisition may or may not proceed and Shareholders and potential investors are therefore advised to exercise caution when dealing in the Shares.

At the request of the Company, trading in the Shares on the Stock Exchange has been suspended from 9:30 a.m. on 27 February 2008 pending the issue of this announcement. An application has been made by the Company to the Stock Exchange for the resumption of trading in the Shares on the Stock Exchange with effect from 9:30 a.m. on 6 March 2008.

THE SALE AND PURCHASE AGREEMENT

On 26 February 2008, GRIL, a wholly-owned subsidiary of the Company, has entered into the Sale and Purchase Agreement with CSIL, pursuant to which CSIL has conditionally agreed to transfer or procure the transfer, and GRIL has conditionally agreed to acquire from CSIL the Sale Interest (representing 51% of the issued share capital of Mongol Oil), at the Consideration in the sum of US$45,000,000.00 (equivalent to approximately HK$351,000,000.00). Major terms of the Sale and Purchase Agreement are summarised as follow:

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Date:

26 February 2008

Parties:

Purchaser: GRIL, a wholly-owned subsidiary of the Company

Vendor: CSIL, a company incorporated in the British Virgin Islands with limited liability, and is an investment holding company

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Subject matter

The Sale Interest, representing 51% of the issued share capital of Mongol Oil.

Pursuant to an agreement entered into between CSIL and Mr. Batsambuu and Ms. Otgonchimeg, CSIL is acquiring 51% of the issued share capital of Mongol Oil from Mr. Batsambuu and Ms. Otgonchimeg.

Upon Completion, Mongol Oil will be owned by GRIL, Mr. Batsambuu and Ms. Otgonchimeg as to 51%, approximately 26.95% and approximately 22.05%, respectively, and will become a non-wholly owned subsidiary of the Company. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, CSIL and its ultimate beneficial owners, are Independent Third Parties.

Consideration

The Consideration for the Sale Interest in the aggregate amount of US$45,000,000.00 (equivalent to approximately HK$351,000,000.00) is to be satisfied (i) as to US$30,000,000.00 (equivalent to approximately HK$234,000,000.00) in cash; and (ii) as to US$15,000,000.00 (equivalent to approximately HK$117,000,000.00), by the issue of the Convertible Notes by the Company to CSIL or its nominee at Completion.

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The Consideration has been arrived after arm’s length negotiations between GRIL and CSIL with reference to an internal assessment of the fair value of the exploration and mining rights on the Mine by reference to a proven coal reserve of the Mine of not less than 800 million tons, the unit price of coal used in recent similar market transactions, the present market price of coal of approximately US$80 (equivalent to approximately HK$624) per ton and the risk of doing business in Mongolia. As set out in the section headed “Conditions” in this announcement, one of the conditions to completion of the transactions contemplated under the Sale and Purchase Agreement is the receipt of a report on the valuation of the Mining Project of not less than US$100 million (equivalent to approximately HK$780 million).

The Company intends to raise additional capital by way of equity fund raising to satisfy the cash portion of the Consideration, further details of which shall be announced by the Company pursuant to the Listing Rules as and when appropriate.

Convertible Notes

The Conversion Price in the amount of HK$0.228 per Conversion Share represents:

• (i) a premium of approximately 12.32% to the closing price of the Shares of HK$0.203 on 26 February 2008, being the last trading day immediately prior to the publication of this announcement;

• (ii) a premium of approximately 9.62% to the 5-day average closing price of the Shares of approximately HK$0.208 taking into account the trading days immediately before the publication of this announcement;

• (iii) a premium of approximately 16.33% to the 10-day average closing price of the Shares of approximately HK$0.196 taking into account the trading days immediately before the publication of this announcement; and

• (iv) a premium of approximately 3.17% to the 30-day average price of the Shares of approximately HK$0.221 taking into account the trading days immediately before the publication of this announcement.

The Conversion Price of HK$0.228 per Conversion Share was determined after arm’s length negotiations between the parties with reference to the closing price of the Shares on 26 February 2008 and the 5-day average closing price of the Shares of approximately HK$0.208. On this basis, the Directors are of the view that the Conversion Price is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

In the event that the conversion rights attached to the Convertible Notes are fully exercised by CSIL, the Conversion Shares will represent approximately 13.72% of the existing issued share capital of the Company and approximately 12.06% of the then issued share capital of the Company as enlarged by the issue of the Conversion Shares. The issue of the Convertible Notes and the allotment and issue of the Conversion Shares are subject to the approval of Shareholders at the SGM. The Conversion Shares, when converted, will rank pari passu in all respects with the existing Shares in issue.

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.

Pursuant to the Sale and Purchase Agreement, CSIL shall procure such persons as may be required by GRIL to be resigned as chairman, executive director(s), other director(s) and/or other senior officer(s) of Mongol Oil and shall procure such persons as may be required by GRIL to be appointed as chairman, executive director(s), other director(s) and/or other senior officer(s) of Mongol Oil.

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Conditions

Completion of the Sale and Purchase Agreement shall be conditional upon the fulfilment of the following conditions precedent set out as below:

• (a) each of the Mining Licence, the Exploration Licences and such other licence, permits, approvals and consents validly issued by the proper Mongolia government authorities in favour of Mongol Oil necessary for and which entitles Mongol Oil to explore, exploit and extract natural resources/minerals of whatever kind (including coal) located on or below the surface of and within the vicinity of the Mine, being valid, subsisting and in full force and not having been or be capable of being modified, revoked or suspended whether as a result of the entering into the Sale and Purchase Agreement and the transactions contemplated hereunder or otherwise;

• (b) the receipt by GRIL of a legal opinion in form and substance acceptable to GRIL issued in favour of GRIL by a Mongolia law firm acceptable to GRIL covering, inter alia, such matters relating to: (i) the due incorporation, shareholders, shareholders’ and other loans (if any) and scope of permitted business activities of Mongol Oil covering a scope not less than the Business of Mongol Oil; (ii) each of the Mining Licence and the Exploration Licences has been duly and validly issued by the proper Mongolia government authority which entitles the Company to explore, exploit and extract natural resources/minerals of whatever kind (including coal) located on or below the surface of and within the vicinity of the Mine, and is in full force and effect; (iii) the exclusive use/possession of the Mine free from any Encumbrance for the purpose of carrying on the Business by Mongol Oil; and (iv) such other matters as may be required by GRIL, in form and substance acceptable to GRIL;

• (c) the receipt by GRIL of a report issued to the Company from a qualified technical expert acceptable to GRIL relating to the state and condition of the Mine, and confirming that the proven exploitable and extractable reserves of coal within the Mine of not less than 800 million tonnes, the quality of such reserve and covering such matters as may be required by GRIL and pursuant to Chapter 18 of the Listing Rules, in form and substance acceptable to GRIL;

• (d) the receipt of the audited accounts of Mongol Oil for the three financial years ended on 31 December 2007 prepared in accordance with IFRS by an accounting firm acceptable to GRIL and in form and substance acceptable to GRIL;

• (e) the receipt of a valuation report in the form and substance acceptable to GRIL from an independent valuer of international standing appointed by GRIL and showing the value of the Mining Project of not less than US$100 million (equivalent to approximately HK$780 million);

• (f) GRIL having notified CSIL that it is satisfied with results of the Due Diligence;

• (g) GRIL, the Company and CSIL having agreed to the form of the Convertible Notes within 21 days from the date of the Sale and Purchase Agreement (or such later date as may be between the GRIL and the CSIL in writing);

• (h) GRIL and CSIL having agreed to the form of the Option Agreement within 21 days from the date of the Sale and Purchase Agreement;

• (i) GRIL and CSIL having agreed to the form of the Deed of Undertaking and Indemnity within 21 days from the date of the Sale and Purchase Agreement (or such later date as may be between GRIL and CSIL in writing);

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• (j) the passing of the resolution(s) by shareholders of the Company in the SGM approving the Sale and Purchase Agreement and the transactions contemplated thereunder including the issue of the Convertible Notes and the allotment and issue of the Conversion Shares in accordance with the requirements of the Listing Rules, the memorandum of association and bye-laws of the Company and as required by law (where applicable);

• (k) (if required) GRIL being satisfied that all requisite waivers, consents and approvals from any relevant governments or regulatory authorities or other relevant third parties in connection with the transactions contemplated under the Sale and Purchase Agreement having been obtained;

• (l) other than annual licence fees and renewal fees in relation to the Exploration Licences and Mining Licence which are payable to the Mongolia government authorities in the future as may be required and calculated in accordance with the Minerals Laws of Mongolia, all premiums, fees and other amounts required to be paid by Mongol Oil to the Mongolia governmental authorities or any other person in respect of exploration, exploitation, extraction, mining, owning and operating the Mine, the Exploration Licences and the Mining Licence having been fully paid;

• (m) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in the Conversion Shares;

• (n) (where required) the Bermuda Monetary Authority granting its permission in respect of the allotment and issue of the Conversion Shares;

• (o) GRIL being satisfied that there being no event existing or having occurred and no condition being in existence which would constitute a breach of CSIL’s Warranties by CSIL; and

• (p) GRIL being satisfied that all requisite consents, approvals, filing and registrations (including the registration of the transfer of the Sale Interest pursuant to the terms of this Agreement and the registration of Mongol Oil as a Business Entity with Foreign Investment with the Foreign Investment and Foreign Trade Agency of Mongolia) have been and/or can be duly obtained to transfer the Sale Interest in favour of GRIL or its nominee.

Save and except for the conditions set out in (a), (c), (d), (g), (j), (k), (m), (n) and (p), GRIL may waive any of the Conditions at its absolute discretion at any time by notice in writing to CSIL.

Option Agreement

According to the Sale and Purchase Agreement, if required by Mr. Batsambuu and Ms. Otgonchimeg, GRIL will enter into the Option Agreement with Mr. Batsambuu and Ms. Otgonchimeg at Completion, pursuant to which an option will be granted by GRIL to Mr. Batsambuu and Ms. Otgonchimeg to require GRIL to sell to Mr. Batsambuu and Ms. Otgonchimeg a total of 630 Mongol Oil Shares, representing 1% of the issued share capital of Mongol Oil as at the date of this announcement, which option shall be exercisable from a date not earlier than 5 years from the Completion Date.

The Company is aware that, pursuant to an agreement entered into between CSIL and Mr. Batsambuu and Ms. Otgonchimeg, CSIL has granted an option to Mr. Batsambuu and Ms. Otgonchimeg to require CSIL to sell to Mr. Batsambuu and Ms. Otgonchimeg 630 Mongol Oil Shares, representing 1% of the issued share capital of Mongol Oil as at the date of this announcement, which option shall be exercisable from a date not earlier than 5 years from the date of completion thereof, at the market price. As GRIL has agreed to acquire the Sale Interest from CSIL, and as requested by CSIL, GRIL has agreed to take up CSIL’s obligation of entering into the Option Agreement with Mr. Batsambuu and Ms. Otgonchimeg at Completion (if required by Mr. Batsambuu and Ms. Otgonchimeg).

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As set out in the section headed “Conditions” of this announcement, one of the conditions precedent to the Sale and Purchase Agreement is that GRIL and CSIL having agreed to the form of the Option Agreement within 21 days from the date of the Sale and Purchase Agreement.

In the event that the form of the Option Agreement has been agreed between GRIL and CSIL within 21 days from the date of the Sale and Purchase Agreement, further announcement on details of the Option Agreement will be made in compliance with the Listing Rules, with the details to be incorporated in the circular to be despatched to the shareholders of the Company.

In the event that the form of the Option Agreement cannot be agreed between GRIL and CSIL within 21 days from the date of the Sale and Purchase Agreement, unless otherwise waived in accordance with the Sale and Purchase Agreement, the Sale and Purchase Agreement and everything therein contained shall be null and void and of no further effect and no party to the Sale and Purchase Agreement shall have any further liability to any other parties under or in connection with the Sale and Purchase Agreement without prejudice to the rights of any such parties in respect of any antecedent breaches.

If the Option Agreement is entered into by GRIL and Mr. Batsambuu and Ms. Otgonchimeg at Completion, Mongol Oil shall cease to be a subsidiary of the Company upon exercise of the option granted under the Option Agreement by Mr. Batsambuu and Ms. Otgonchimeg, whereupon Mongol Oil shall be held by Mr. Batsambuu and Ms. Otgonchimeg as to 50% in aggregate, and as to GRIL as to 50% (assuming that the proposed shareholding structure of Mongol Oil remains unchanged after Completion). The Directors are of the view that, taken into consideration of the fact that CSIL may not be in a position to enter into the Sale and Purchase Agreement with GRIL in the event that GRIL is not willing to grant the option under the Option Agreement, and the reasons as set out in the section headed “Reasons for the Acquisition” in this announcement, the possible giving away of control in Mongol Oil pursuant to the granting of the option under the Option Agreement is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Completion

Completion will take place on the third Business Day immediately after the conditions of the Sale and Purchase Agreement as set out in the section headed “Conditions” of this announcement have been fulfilled or otherwise waived (as the case may be), or such other date as the parties shall agree in writing. In the event that the conditions are not fulfilled (or waived in accordance therewith) by 31 October 2008 (or such later date as the parties hereto may agree in writing) or the condition set out in (p) above is not be fulfilled at the time when all other conditions have been fulfilled, whereupon the Sale and Purchase Agreement and everything therein contained shall be null and void and of no further effect and no party to the Sale and Purchase Agreement shall have any further liability to any other parties under or in connection with the Sale and Purchase Agreement without prejudice to the rights of any such parties in respect of any antecedent breaches. In the event that Completion has not taken place by 31 October 2008 (or such other date to be agreed between the parties), further announcement will be made by the Company as and when appropriate.

Major terms and conditions of the Convertible Notes

The major terms and	conditions of the Convertible Notes are as follow:
Principal amount:	Convertible Notes in the aggregate amount of HK$117 million in aggregate.
Interest:	1% per annum, payable semi-annually on 30 June and 31 December.
Maturity Date:	The Business Day falling on the day being the third anniversary from the issue
	date thereof.
Form and	The Convertible Notes will be issued in registered form and in the
denomination:	denomination of HK$6,500,000.00 each.

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Conversion Price: HK$0.228 per Conversion Share, which is subject to adjustment for, among other matters, sub-division or consolidation of new Shares, bonus issues, rights issues and other dilutive events. Conversion: The holders thereof may convert the whole or any part of the principal amount of the relevant Convertible Notes outstanding held by such holder into Conversion Shares at the price of HK$0.228 per Conversion Share provided that an integral multiple of HK$6,500,000.00 be converted. Conversion period: The holders thereof shall have the rights at any time and from time to time, following the date of issue thereof, to convert the whole or any part of the outstanding principal amount into Shares.

Ranking: The Conversion Shares to be issued pursuant to the exercise of the conversion rights attached to the Convertible Notes or any part thereof will rank pari passu in all respects among themselves and with all other Shares in issue on the date of such issue.

Redemption: The principal amount of any of the Convertible Notes which remains outstanding on or before 4:00 p.m. (Hong Kong time) on its maturity date shall be immediately repaid in full. Transferability: The Convertible Notes are freely transferable, provided that a holder of the Convertible Notes shall comply with the Listing Rules and Takeovers Code as applicable to such holder. Listing: The Convertible Notes will not be listed on the Stock Exchange or any other stock exchange, but the Conversion Shares to be issued pursuant to the exercise of the conversion rights attached to the Convertible Notes or any part thereof will be listed on the Stock Exchange. Early redemption: The Company will be entitled, by giving prior written notice of not less than 7 days to the holder of the Convertible Notes, to redeem (in amounts of not less than a whole multiple of HK$6,500,000.00) the whole or part of the outstanding principal amount of the Convertible Notes by paying to the holder of the Convertible Notes an amount equal to the outstanding principal amount of the Convertible Notes to be redeemed. All interest accrued and unpaid on the amount to be redeemed up to the date of redemption will also be paid to the holder of the Convertible Notes upon such redemption.

The holder of the Convertible Notes has no right of early redemption.

• Other terms: 1. The holder of the Convertible Notes may not exercise the conversion rights attached to the Convertible Notes if, following the exercise of the conversion rights attached to the Convertible Notes:

  • (a) the minimum public float requirement of the Company as required under the Listing Rules cannot be satisfied; or

  • (b) the general offer obligation as required under the Takeovers Code is triggered.

• Such additions, modifications or amendments as may be required by the Stock Exchange or applicable regulatory authorities applicable to the Company.

• Other terms as may be agreed between CSIL and GRIL.

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EFFECT ON SHAREHOLDING STRUCTURE

The shareholding structure of the Company immediately before and after the holder(s) having exercised the conversion rights attached to the Convertible Notes in full are set out as follows:

	As at the date of this	As at the date of this	Immediately after the exercise of the	Immediately after the exercise of the
	announcement		conversion rights attached to the
			Convertible Notes in full
	Number of Shares	%	Number of Shares	%
Directors
Wong Kam Fu and its
associates_(Note)_	598,351,089	16.00%	598,351,089	14.07%
Billy, Tam Wai Keung	24,833,333	0.66%	24,833,333	0.58%
Lew Mon Hung	29,452,666	0.79%	29,452,666	0.69%
Wong Hong Loong	3,000,000	0.08%	3,000,000	0.07%
Tang King Fai	600,000	0.02%	600,000	0.01%
Eddy, Wong Che Man	200,000	0.01%	200,000	0.01%
CSIL and its associates	-	-	513,157,894	12.06%
Existing Public
Shareholders	3,084,406,693	82.44%	3,084,406,693	72.51%
Total	3,740,843,781	100.00%	4,254,001,675	100.00%

Note: Mr. Wong Kam Fu, a Director, is the ultimate beneficial owner of Sheung Hai Developments Limited and Alpha Logistics Group Limited. Under Part XV of the SFO, Mr. Wong Kam Fu is deemed to be interested in the 372,404,423 Shares held by Sheung Hai Developments Limited and 110,625,000 Shares held by Alpha Logistics Group Limited.

The following charts provide an illustration of the shareholding structure of Mongol Oil immediately before and after Completion.

Shareholding structure of Mongol Oil immediately before Completion:

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Mr. Batsambuu Ms. Otgonchimeg
55% 45%
Mongol Oil
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Shareholding structure of Mongol Oil immediately after Completion:

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The Company
100%
Mr. Batsambuu Ms. Otgonchimeg GRIL
26.95% 22.05% 51%
Mongol Oil
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INFORMATION ON MONGOL OIL AND THE MINE

Mongol Oil is a company incorporated in Mongolia and is owned as to 55% by Mr. Batsambuu and 45% by Ms. Otgonchimeg as at the date of this announcement. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Mr. Batsambuu and Ms. Otgonchimeg are Independent Third Parties. The principal scope of business of Mongol Oil includes exploration, exploitation, extraction, production, refining, processing, sale and export of natural resources/minerals of whatever kind. The issued share capital of Mongol Oil is MNT63,000,000.00 (equivalent to approximately HK$417,000).

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Pursuant to an agreement entered into between CSIL and Mr. Batsambuu and Ms. Otgonchimeg, CSIL is acquiring 51% of the issued share capital of Mongol Oil from Mr. Batsambuu and Ms. Otgonchimeg. On such basis, GRIL has entered into the Sale and Purchase Agreement with CSIL pursuant to which CSIL shall transfer or procure the transfer of, and GRIL shall acquire from CSIL, the Sale Interest. GRIL would not have the opportunity to acquire the Sale Interest under the Acquisition should CSIL has not entered into an agreement with Mr. Batsambuu and Ms. Otgonchimeg to acquire 51% of the issued share capital of Mongol Oil in the first place.

The Mine is located in Bayan Soum, the Tuv Province, Mongolia and is very close to Ulaanbaatar. It is situated at approximately 115 kilometers southeast to Ulaanbaatar, approximately 4 kilometers to the Ulaanbaatar-Baganuur railway line and approximately 30 kilometers to the Ulaanbaatar-Beijing railway line. The Mine has an estimated total land area of 96 square kilometres. As at the date of this announcement, Mongol Oil has already obtained the Mining Licence and the Exploration Licences.

As advised by the Mongolia legal advisers to the Company, pursuant to the Minerals Laws of Mongolia, the initial term of a mining licence is 30 years and can be extended for two additional terms of 20 years, with a total term of 70 years; while the initial term of an exploration licence is 3 years, and can be extended for two additional terms of 3 years, with a total term of 9 years. As the Exploration Licences as held by Mongol Oil were issued on 1 November 2004, and has been extended upon the expiry of their respective three year term on 31 October 2007, Mongol Oil will be eligible for further extension of the term of the Exploration Licences on 1 November 2010 for another 3 years. As advised by the Mongolia legal advisers to the Company, Mongol Oil will be entitled to renew the Exploration Licences pursuant to the Mineral Laws of Mongolia subject to the payment of annual licence fees and renewal fees to the government authorities as may be required and calculated in accordance with the Mongolia Minerals Laws of Mongolia and compliance with other requirements of the Minerals Laws of Mongolia, including the submission to and acceptance by the Mongolia government authorities of (a) annual reports of the nature and scope of exploration activities conducted in the preceding year; and (b) confirmation that specified minimum required expenditures in this regard have been timely made.

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The unaudited financial information of Mongol Oil for the two financial years ended 31 December 2006 and for the six months ended 30 June 2007 is set out as follows:

	As at	As at	As at
	31 December 2005	31 December 2006	30 June 2007
	MNT	MNT	MNT
	(approximate in HK$)	(approximate in HK$)	(approximate in HK$)
Total assets	67,382,000	84,324,000	83,829,000
	(446,000)	(558,000)	(555,000)
Total liabilities	5,013,000	23,003,000	23,000,000
	(33,000)	(152,000)	(152,000)
Total equity	62,369,000	61,321,000	60,829,000
	(413,000)	(406,000)	(403,000)
	For the year ended	For the year ended	For the 6 months
	31 December	31 December	period ended 30 June
	2005	2006	2007
Turnover	-	-	-
Net loss before and	1,089,000	1,047,000	493,000
after taxation	(7,000)	(7,000)	(3,000)

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INFORMATION ON MONGOLIA, DEMAND FOR COAL AND RECENT COAL PRICE TREND

Mongolia

Mongolia is an independent country in East Central Asia. It is a democratic country. Mongolia is located between Russia and China. The capital city of Mongolia is Ulaanbaatar. At 1,564,116 square kilometers, Mongolia is the nineteenth largest, and the least densely populated independent country in the world with a population of around 2.9 million people. About 60% of the population of Mongolia is living in or around Ulaanbaatar.

The main driving industries of the economy of Mongolia are mining and agriculture. Mongolia has rich mineral resources. Copper, coal, molybdenum, tin, tungsten, and gold account for a large part of its industrial production. Some of the larger deposits of copper and coal in the world are found in Mongolia.

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In November, 2006, during talks between the then Prime Minister of Mongolia, Mr. Miegombyn Enkhbold and the Chinese Premier, Mr. Wen Jiabao in Beijing, China and Mongolia have reached a five point consensus covering political, economic, humanitarian and cultural fields. The consensus included the promotion of economic and trade cooperation in key areas of infrastructure and energy exploration, with cooperation on the construction of power stations, roads and railways in Mongolia, and the formulation of medium and long term plans for economic and trade relations.

Demand for Coal and Recent Coal Price Trend

Although China is the world’s biggest coal producer, it is becoming a net importing country of coal. With the rapid expansion of its economy, China has a strong demand for electricity and other natural resources. Such demand has driven up the price of oil, coal and other mineral resources.

With crude oil price standing at about US$100 (equivalent to approximately HK$780) per barrel, Coal has becoming increasingly important as a fuel for power stations and an “oil-alternative”. China is building the world largest coal gasification plant to turn coal into gas and petroleum. During the visits of the management of the Company to Mongolia, the officials of the Government of Mongolia also mentioned that Mongolia wants to build its own coal gasification plant and is planning to build more power stations to cope with the demand from its expanding economy.

Qinhuangdao FOB prices (the “Q price”) are referenced as domestic prices of coal in China. In 2007, the Q price for 5,500 kilocalories per kilogram coal has gone up for approximately 16% from about RMB430 (equivalent to approximately HK$473) per ton to about RMB500 (equivalent to approximately HK$550) per ton. Regionally, the Australian Newcastle FOB price for coal (the “A price”) has even gone up about 70% in 2007. The A price has increased from about US$50 (equivalent to approximately HK$390) per ton to approximately US$90 (equivalent to approximately HK$702) per ton in 2007.

In the recent snow storm in China, it can be seen that the important role played by coal as a fuel for power stations in China and the importance of keeping a consistent supply of coal in China in order to continue its robust economy growth. Apart from China, Japan and Korea are also large coal importing countries in the region.

REASONS FOR THE ACQUISITION

The Company is an investment holding company and its subsidiaries are principally engaged in the provision of credit card security services and provision of financial information through internet and mobile phones and IT related businesses. In addition, the Company has diversified its business scope into natural resources exploitation industry by investing in Madasgacar Petroleum International Limited since early 2006.

As stated in the 2007 annual report of the Company, the Company has entered into agreements to purchase potential oil and gas projects and that the Company plans to continue to search for other energy projects which may create value for the Shareholders.

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The Directors consider that the location of the Mine is conveniently located in Bayan Soum, the Tuv Province, Mongolia, being situated at approximately 115 kilometers southeast to Ulaanbaatar, approximately 4 kilometers to the Ulaanbaatar-Baganuur railway line and approximately 30 kilometers to the Ulaanbaatar-Beijing railway line. In addition, with approximately 60% of the population of Mongolia living in or around Ulaanbaatar, Mongolia, the Directors consider that the start-up costs and hiring costs of workforce for commercial exploitation and production in the Mine could be lowered. In view of the above, and coupled with the strong demand for natural resources due to the robust economy growth in China, and the increase in coal price during 2007, the Directors are of the view that there are many benefits for the Acquisition.

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Although the term of each of the Exploration Licences will be expiring on 1 November 2010, based on legal advice obtained from the Mongolia legal advisers to the Company, the Directors consider that the application for further extension of the term of the Exploration Licences until November 2013 would be a procedural matter, given that Mongol Oil would be entitled to renew the Exploration Licences for a total term of 9 years from the date on which they were first issued pursuant to the Mineral Laws of Mongolia subject to the payment of annual licence fees and renewal fees to the Mongolia government authorities as may be required and calculated in accordance with the Minerals Laws of Mongolia and compliance with other requirements of the Mineral Laws of Mongolia to the satisfaction of the Mongolia government authorities. The Directors having considered the residual of the extended term of the Exploration Licences, are of the view that Mongol Oil should have sufficient time during the remaining 5 year period to carry out the necessary additional exploration work within the concession area of the Mine, so that the mining activities can be carried out in the Mine during the term of the mining licence granted or to be granted to Mongol Oil.

After Completion, Mongol Oil will become a non-wholly owned subsidiary of the Company. Taking into account that the Acquisition can be translated to an acquisition unit price of approximately HK$0.90 per ton of coal, the Directors are of the view that the Acquisition represents a good investment opportunity for the Company. The Directors believe that, if the operation of Mongol Oil is smooth and successful upon completion of the Acquisition, the Acquisition will enhance performance and returns to the Shareholders.

Taking into consideration of the above, the Directors are of the opinion that the terms of the Sale and Purchase Agreement (including the Consideration) are fair and reasonable and on normal commercial terms and that the entering into of the Sale and Purchase Agreement is in the interests of the Group and the Shareholders as a whole.

As Mongolia is rich in natural resources, the Directors consider that the Acquisition represents the first step in the Group’s investment in Mongolia and will further explore other investment opportunities in Mongolia.

GENERAL

Based on the relevant percentage ratios, the Acquisition constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is therefore required to be made conditional on Shareholders’ approval pursuant to Rule 14.40 of the Listing Rules.

To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, CSIL, its beneficial owners and their respective associates, do not hold any Shares as at the date of this announcement and no Shareholder has a material interest in the Acquisition and therefore no Shareholder is required to abstain from voting on the proposed resolution to approve the Acquisition at the SGM.

The Company will engage an independent mining consultant to perform a technical review on the Mine which includes, among other things, the assessment of mining tenement, geology and mineral resources and ore reserves, exploration potential. Pursuant to Rule 18.09 of the Listing Rules, the technical report will be included in the circular to be dispatched to the Shareholders.

A circular containing, among other things, further details of the Acquisition and the notice of the SGM will be dispatched to the Shareholders as soon as practicable.

The Board would like to emphasise that the Acquisition is conditional upon various conditions precedent being met. Accordingly, completion of the Acquisition may or may not proceed and Shareholders and potential investors are therefore advised to exercise caution when dealing in the Shares.

RESUMPTION OF TRADING

At the request of the Company, trading in the Shares has been suspended from 9:30 a.m. on 27 February 2008 pending the issue of this announcement. An application has been made by the Company to the Stock Exchange for the resumption of trading in the Shares with effect from 9:30 a.m. on 6 March 2008.

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DEFINITIONS

“Acquisition” the acquisition of the Sale Interest by GRIL from CSIL in accordance with the terms and conditions of the Sale and Purchase Agreement

• “Board” the board of Directors, including independent non-executive Directors

• “Business” exploration, exploitation, extraction, mining, production, refining, processing, sale and export of natural resources/minerals of whatever kind

• “Business Day” a day (other than a Saturday or Sunday) on which banks in Hong Kong are generally open for business

• “Company” Smart Rich Energy Finance (Holdings) Limited, a company incorporated in Bermuda whose shares are listed on the Main Board of the Stock Exchange

• “Completion” completion of the Acquisition in accordance with the terms and conditions of the Sale and Purchase Agreement

• “Completion Date” the third Business Day immediately after fulfillment (or waiver in accordance with the Sale and Purchase Agreement) of the conditions as set out in the section headed “Conditions” of this announcement, or such other date as the parties may agree in writing, on which Completion shall take place in accordance with the terms thereof

• “Consideration” US$45,000,000.00 being the aggregate consideration payable to CSIL for the Sale Interest

• “Convertible Notes” the HK$117 million 1% convertible notes to be issued by the Company, which shall be due on the third anniversary of the date of the issue and convertible into Conversion Shares at the Conversion Price of HK$0.228 per Conversion Share (subject to adjustments), pursuant to and subject to the terms and conditions thereof, in registered form and to be in the agreed form between the Company, GRIL and CSIL

• “Conversion Price” HK$0.228 per Conversion Share, which is subject to adjustment for, among other matters, sub-division or consolidation of new Shares, bonus issues, rights issues and other dilutive events

• “Conversion Shares” 513,157,894 Shares, subject to adjustments, which may be issued by the Company upon exercise by the holder(s) of the Convertible Notes of the conversion rights attached to the Convertible Notes

• “CSIL”

• Clear Smooth Investments Limited, a company incorporated in the British Virgin Islands

• “CSIL’s Warranties” the representations, warranties, undertakings or indemnities made or given by CSIL to GRIL under the Sale and Purchase Agreement

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• “Deed of Undertaking and Indemnity”

• a deed of undertaking and indemnity to be governed under the laws of Mongolia and executed as a deed by Mr. Batsambuu and Ms. Otgonchimeg in favour of GRIL pursuant to which Mr. Batsambuu and Ms. Otgonchimeg shall jointly and severally represent, warrant and undertake certain matters as set out in the Sale and Purchase Agreement are true and accurate in all respects at Completion and that Mr. Batsambuu and Ms. Otgonchimeg shall jointly and severally indemnify GRIL against all damage, claim, loss and liability which GRIL may suffer and incur as a result of the breach of such representations, warranties and undertakings, in such form and substance acceptable to GRIL

• “Directors” directors of the Company

• “Due Diligence”

• due diligence review and investigation of the financial, legal, commercial, operational and taxation aspects of Mongol Oil, its title to its assets and its rights and interests in the Mine, the Mining Licence and the Exploration Licences

• “Encumbrance” any option, right to acquire, right of pre-emption, mortgage, charge, pledge, claim, lien, hypothecation, title creation, right of set-off, right of third party, counterclaim, trust arrangement or other security or any equity or restriction (including any relevant restriction imposed under the relevant law)

• “Exploration Licences” the exploration licence dated 1 November 2004 issued by Cadastral Registration Centre of the Mineral Resources and Petroleum Authority pursuant to the Minerals Laws of Mongolia to Mongol Oil (certificate number: 8653X) which is valid until 1 November 2010 and the exploration licence dated 1 November 2004 issued by Cadastral Registration Centre of the Mineral Resources and Petroleum Authority pursuant to the Minerals Laws of Mongolia to Mongol Oil (certificate number: 8654X) which is valid until 1 November 2010

• “GRIL” Greatest Rise Investments Limited, a wholly-owned subsidiary of the Company

• “Group” the Company and its subsidiaries

• “Hong Kong” the Hong Kong Special Administrative Region of the PRC “HK$” Hong Kong dollar(s), the lawful currency of Hong Kong

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“IFRS” the International Financial Reporting Standards, which include standards and interpretations approved by the International Accounting Standards Board, and the International Accounting Standards and interpretations issued by the International Accounting Standards Committee “Independent Third Party(ies)” persons who are independent of the Company and its connected persons (as defined under the Listing Rules) “Listing Rules” Rules Governing the Listing of Securities on the Stock Exchange “Mine” the mine comprising land and having an estimated total land area of 96 square kilometres situated in Bayan Soum of the Tuv Province “Mining Licence” the mining licence dated 22 October 2003 issued by Cadastral Registration Centre of the Mineral Resources and Petroleum Authority pursuant to the Minerals Laws of Mongolia to Mongol Oil (certificate number: 6453A) which is valid until 21 October 2033 “Mining Project” the project relating to a coal mine to be operated on the Mine “MNT” Mongolia togrogs, the lawful currency of Mongolia “Mongol Oil” MOH�O� O�� ���� XX� (translated as Mongol Oil Shale LLC), a company incorporated as a limited liability company under the Company Law of Mongolia “Mongol Oil Share(s)” share(s) of MNT1,000 each in the capital of Mongol Oil “Mr. Batsambuu” Mr. Shinensambuu Batsambuu, being the legal and beneficial owner of 34,650 Mongol Oil Shares representing 55% of the issued share capital of Mongol Oil as at the date of the Sale and Purchase Agreement “Ms. Otgonchimeg” Ms. Shagdar Otgonchimeg, being the legal and beneficial owner of 28,350 Mongol Oil Shares representing 45% of the issued share capital of Mongol Oil as at the date of the Sale and Purchase Agreement “Option Agreement” an option agreement to be governed under the laws of Mongolia and to be entered into between Mr. Batsambuu, Ms. Otgonchimeg and GRIL at Completion (if required by Mr. Batsambuu and Ms. Otgonchimeg for GRIL to enter into) in relation to the granting of an option to Mr. Batsambuu and Ms. Otgonchimeg by GRIL to require GRIL to sell to Mr. Batsambuu and Ms. Otgonchimeg a total of up to 630 Mongol Oil Shares (representing 1% of the issued share capital of Mongol Oil as at the date of Sale and Purchase Agreement) on a date not earlier than 5 years from the Completion Date, to be in the agreed form between CSIL and GRIL

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• “PRC” the People's Republic of China which excludes Hong Kong, Macau Special Administrative Region and Taiwan

• “RMB” Renminbi, the lawful currency of the People’s Republic of China “Sale Interest” 32,130 Mongol Oil Shares, representing 51% of the issued share capital of Mongol Oil

• “SGM” special general meeting of the Company to be held to approve, amongst other things, the Sale and Purchase Agreement and the transactions contemplated thereunder including the issue of the Convertible Notes and the allotment and issue of the Conversion Shares

• “Sale and Purchase Agreement” the sale and purchase agreement dated 26 February 2008 entered into between, among other persons, GRIL and CSIL in relation to the Acquisition

• “Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company

• “Shareholder(s)” holder(s) of Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” Hong Kong Code on Takeovers and Mergers “US$” United States dollars, the lawful currency of the United States of America

• “%” per cent.

By order of the Board Smart Rich Energy Finance (Holdings) Limited Tam Wai Keung, Billy Vice President

Hong Kong, 5 March 2008

For information purpose only, translation of (a) MNT into HK$ is based on the exchange rate of MNT151.13 to HK$1.00; (b) US$ into HK$ is based on the exchange rate of US$1 to HK$7.80; and (c) RMB into HK$ is based on the exchange rate of RMB1 to HK$1.10.

The above translations should not be construed as a representation that the relevant amounts have been, could have been, or could be converted at that or any other rate or at all.

As at the date of this announcement, the Board of the Company comprises Mr. Wong Kam Fu, Mr. Tam Wai Keung, Billy, Dr. Lew Mon Hung, Mr. Wong Hong Loong and Mr. Sin Chi Keung, Mega as executive Directors and Mr. Wong Che Man, Eddy, Mr. Tang King Fai and Mr. Dai Zhongcheng as independent non-executive Directors.

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