Grand Pharmaceutical Group Limited — Proxy Solicitation & Information Statement 2003

Nov 25, 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect about this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Maxx Bioscience Holdings Limited , you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

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MAXX BIOSCIENCE HOLDINGS LIMITED (曼盛生物科技集團有限公司)[*] (Incorporated in Bermuda with limited liability)

DISCLOSEABLE AND CONNECTED TRANSACTION INCREASE IN AUTHORISED SHARE CAPITAL GRANT OF GENERAL MANDATE

and GRANT OF REPURCHASE MANDATE

Financial adviser to the independent board committee of the Company

First Securities (HK) Limited

A letter from the independent board committee of Maxx Bioscience Holdings Limited is set out on page 16. A letter from First Securities (HK) Limited containing its advice to the independent board committee of Maxx Bioscience Holdings Limited is set out on pages 17 to 31.

A notice convening an extraordinary general meeting of Maxx Bioscience Holdings Limited to be held at 12:00 p.m. on Tuesday, 9th December, 2003 at Charter Room 1, Basement 3, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong are set out on pages 45 to 48 of this circular. Whether or not they are able to attend the meeting, shareholders are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible to the Company Secretary, Mr. Rico Chow, at Room 3802, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong no less than 48 hours before the time for holding the meeting or any adjourned meeting (as the case may be). Completion and return of the proxy form will not preclude shareholders from attending and voting in person at the meeting or any adjourned meeting should they so wish.

22nd November, 2003

* For identification purpose only

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
The Agreement (as amended by the Supplemental Agreement) . . . . . . . . . . . . . . . . . . . . . . . .	5
Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Shareholding of the Company before and after full conversion . . . . . . . . . . . . . . . . . . . . . . . .	8
Conditions and Completion (as amended by the Supplemental Agreement) . . . . . . . . . . . . . .	9
Information on New Wealth and Maxx Immunotech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Reasons for the Entering into the Agreement and the Supplemental Agreement . . . . . . . . . .	10
Summary of Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Increase in Authorised Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Grant of General Mandate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Grant of Repurchase Mandate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Discloseable and Connected Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Advice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Appendix I – Letter from First Securities (HK) Limited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Appendix II – Summary of the terms of the Convertible Note and
the Promissory Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Appendix III – Explanatory Statement on Share Repurchase Mandate . . . . . . . . . . . . . . . . . . .	34
Appendix IV – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
Notice of EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	45

• i -

DEFINITIONS

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

• “Acquisition”

the proposed acquisition by the Company (or its nominee) of an 86% equity interest in New Wealth and a 30% equity interest in Maxx Immunotech and the acceptance of the assignment of the entire Loan from the Vendor for the Consideration, pursuant to the Agreement (as amended by the Supplemental Agreement)

• “Agreement”

an agreement dated 8th October, 2003 between the Vendor and the Company in relation to the Acquisition

• “Announcement”

the announcement dated 15th October, 2003 made by the Company in relation to the Acquisition and the Increase in Authorised Share Capital

• “associates”

as defined under the Listing Rules

• “Board”

the board of Directors

• “Company”

MAXX Bioscience Holdings Limited, a company incorporated in Bermuda with limited liability and whose shares are listed on the main board of the Stock Exchange

• “Completion” completion of the Agreement

• “Consideration”

• HK$78 million, being the total consideration for the Acquisition pursuant to the Agreement (as amended by the Supplemental Agreement)

• “Convertible Note”

• the Convertible Note in the aggregate principal amount of HK$50 million to be issued by the Company to the Vendor (or its nominee) as part of the Consideration pursuant to the Agreement (as amended by the Supplemental Agreement)

• “Director(s)” director(s) of the Company

• “EGM”

the extraordinary general meeting of the Shareholders to be held at 12:00 p.m. on Tuesday, 9th December, 2003 at Charter Room 1, Basement 3, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong, notice of which is set out on pages 45 to 48 of this circular

• “First Securities”

First Securities (HK) Limited, a deemed licensed corporation to carry on a business in type 6 registered activity (advising on corporate finance) under the SFO

• “Group” the Company and its subsidiaries

• “General Mandate”

the general mandate to the Directors to issue Shares to be proposed to the Shareholders at the EGM

• 1 -

DEFINITIONS

“Hong Kong”

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

• “Increase in Authorised Share Capital”

• the increase the authorised share capital of the Company from HK$160,000,000 comprising 1,600,000,000 Shares to HK$1,000,000,000 comprising 10,000,000,000 Shares by the creation of an additional 8,400,000,000 Shares so as to provide for sufficient unissued share capital available for issue of the conversion shares on exercise of the conversion rights under the Convertible Note to be proposed to the Shareholders for approval at the EGM

• “Independent Board Committee”

• an independent committee of the Board comprising Mr. Ho Kwok Wah, George and Mr. Yuen Kin, who are the independent nonexecutive Directors

• “Independent Shareholders”

Shareholders other than Ms. Lo and her associates

• “Latest Practicable Date”

• 20th November, 2003, being the latest practicable date before printing of this circular for ascertaining certain information contained in this circular

• “Listing Rules”

the Rules Governing the Listing of Securities on the Stock Exchange

• “Loan”

• the interest bearing shareholders loan given by the Vendor to New Wealth of HK$4,210,558.16, the principal amount of which is HK$4,029,514.40 and interest of HK$181,043.76, interest accruing on the principal amount at the rate of two per. cent. above the prime lending rate as quoted by the Hongkong and Shanghai Banking Corporation Limited

• “Maxx Genetech”

• Maxx Genetech Co. Ltd., a company incorporated in Hong Kong with limited liability and is indirectly owned as to 30% (represented by 60,000 ordinary shares) by Ying Qin Zang, the spouse of Professor Zang Jingwu, a director of the Company and as to 70% (represented by 140,000 preferred shares) by Ms. Lo

• “Maxx Immunotech”

• Maxx Immunotech Ltd., a company incorporated in Hong Kong with limited liability and is owned as to 30% by the Vendor (represented by 60,000 ordinary shares) and as to 70% by New Wealth (represented by 140,000 preferred shares)

• “Ms. Lo” Ms. Lo Yuk Yee, the chairman, an executive Director and the controlling shareholder of the Company, holding approximately 30.06% of the issued share capital of the Company

• “New Wealth”

New Wealth Assets Ltd., a company incorporated in British Virgin Islands with limited liability and is owned as to 86% by the Vendor and 14% by Genesis Amber Limited, a company held by an independent third party not connected with any substantial shareholder, director or chief executive of the Company or its subsidiaries or any of their respective associates

• 2 -

DEFINITIONS

“PCR”	Polymerase Chain Reaction
“Promissory Note”	the Promissory Note in the aggregate principal amount of HK$28
	million proposed to be issued by the Company to the Vendor (or its
	nominee) as part of the Consideration pursuant to the Agreement (as
	amended by the Supplemental Agreement)
“QuProbe”	the trademark as registered under the Hong Kong Trademark
	Registration in class 10 under No. B15443, which is licensed by
	Maxx Genetech to Maxx Immunotech.
“Repurchase Mandate”	the share repurchase mandate to the Directors to repurchase Shares
	to be proposed to the Shareholders at the EGM
“SFC”	Securities and Futures Commission
“SFO”	The Securities and Future Ordinance (Chapter 351 of the Laws of
	Hong Kong)
“Share(s)”	share(s) of HK$0.10 each in the share capital of the Company
“Shareholders”	the shareholders of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Supplemental Agreement”	the supplemental agreement to the Agreement dated 14th October,
	2003 and entered into between the Company and the Vendor in relation
	to the Acquisition
“Takeover Code”	The Hong Kong Code on Takeovers and Mergers
“Valuer”	Ernst and Young Transaction Advisory Services Limited, an
	independent valuer
“Vendor”	Payton Place Limited, a company beneficially owned by Ms. Lo
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“US$”	United States dollars, the lawful currency of the United States

For the purpose of this circular, unless otherwise specified, the translation of United States dollars into Hong Kong dollars is based on the exchange rate of US$1.00: HK$7.70.

• 3 -

LETTER FROM THE CHAIRMAN

MAXX BIOSCIENCE HOLDINGS LIMITED (曼盛生物科技集團有限公司)[*]

(Incorporated in Bermuda with limited liability)

Executive Directors: Ms. Lo Yuk Yee (Chairman) Ms. He Jin Hong (Deputy Chairman) Prof. Zang Jing-Wu Dr. Cao Wu Mr. Siu Siu-ling, Robert

Independent non-executive Directors: Mr. Ho Kwok Wah, George Mr. Yuen Kin

Registered Office: Clarendon House Church Street Hamilton HM11 Bermuda

Principal Place of Business in Hong Kong: Room 3802 Wu Chung House 213 Queen’s Road East Wanchai Hong Kong 22nd November, 2003

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION INCREASE IN AUTHORISED SHARE CAPITAL GRANT OF GENERAL MANDATE

and

GRANT OF REPURCHASE MANDATE

INTRODUCTION

It was announced on 15th October, 2003 that the Company had entered into the Agreement dated 8th October, 2003 and the Supplemental Agreement dated 14th October, 2003 pursuant to which the Company has conditionally agreed to purchase and the Vendor has conditionally agreed to sell 86% equity interest in New Wealth and 30% equity interest in Maxx Immunotech and the Loan for a total consideration of HK$78 million which will be satisfied by the Company through the issue and the allotment of the Convertible Note and the Promissory Note to the Vendor (or its nominee).

The Acquisition constitutes a discloseable and connected transaction under the Listing Rules. The Agreement, the Supplemental Agreement and the transactions contemplated thereby are subject to disclosure and Independent Shareholders’ approval requirements under the Listing Rules. The Company also proposes to increase its authorised share capital so as to provide for sufficient unissued share capital available for the issue of the conversion shares which fall to be issued on exercise of the conversion rights under the

* For identification purpose only

• 4 -

LETTER FROM THE CHAIRMAN

Convertible Note and this is also subject to the approval of the Shareholders and conditional upon the resolution of the Independent Shareholders approving the entering into of the Agreement and the Supplemental Agreement by the Company. The Company further proposes to grant a general mandate to the Directors to issue new Shares and a share repurchase mandate to the Directors to repurchase issued Shares on the Stock Exchange, which are also subject to the approval of the Shareholders.

The purpose of this circular is to provide you with details of the Agreement and the Supplemental Agreement, to set out the recommendation of the Independent Board Committee, the advice from First Securities (HK) Limited in relation to the Acquisition to the Independent Board Committee, a summary of the Valuer’s valuation report on QuProbe prepared by the Board, and to give you notice of the EGM at which resolutions will be proposed to approve the Agreement, the Supplemental Agreement, the Increase in Authorised Share Capital, the Grant of the General Mandate and the Grant of the Repurchase Mandate.

THE AGREEMENT (AS AMENDED BY THE SUPPLEMENTAL AGREEMENT)

Date 8th October, 2003 (the Agreement) and 14th October, 2003 (the Supplemental Agreement)

• Parties The Company, as purchaser

Payton Place Limited, a company incorporated in British Virgin Islands and the entire issued share capital of which is beneficially owned by Ms. Lo, as vendor

Assets to be acquired

• (1) 860 ordinary shares of US$1.00 each in New Wealth, representing 86% equity interest in New Wealth;

• (2) all rights, title, benefit and interest of and in the Loan; and

• (3) 60,000 ordinary shares of HK$1.00 each in Maxx Immunotech, representing 30% equity interest in New Wealth.

Particulars of the Agreement (as amended by the Supplemental Agreement)

Pursuant to the Agreement (as amended by the Supplemental Agreement), the Vendor conditionally agreed to sell 860 ordinary shares of US$1.00 each in New Wealth, representing 86% of the entire issued share capital of New Wealth, and 60,000 ordinary shares of HK$1.00 each in Maxx Immunotech, representing 30% of the entire issued share capital of Maxx Immunotech, to the Company (or its nominee). The Vendor also conditionally agreed to assign the entire Loan owed by New Wealth to the Vendor to the Company (or its nominee). As at the Latest Practicable Date, the total outstanding amount of the Loan was approximately HK$4,251,836.89 million.

The total consideration for the Acquisition is HK$78 million, made up as follows:–

• (1) face value of the Loan (with interest accrued on the Loan up to the date of completion of the Acquisition);

• 5 -

LETTER FROM THE CHAIRMAN

• (2) HK$78 million less the face value of the Loan referred to in paragraph (1) above, attributed between the 60.2% indirect equity interest in Maxx Immunotech and 30% direct equity interest in Maxx Immunotech on a pro-rata basis, given the 70% direct equity interest in Maxx Immunotech is held by New Wealth and 86% of the equity interest in New Wealth is proposed to be acquired by the Company or its nominee under the Agreement (as amended by the Supplemental Agreement).

The total Consideration will be satisfied by the issue of the Convertible Note and the Promissory Note to the Vendor (or its nominee). The principal asset of New Wealth is its 70% equity interest in the issued share capital of Maxx Immunotech, a company incorporated in Hong Kong on 9th August 2000 with limited liability. The remaining 30% equity interest in Maxx Immunotech is held by the Vendor and which is proposed to be transferred to the Company (or its nominee) as part of the Acquisition. The Vendor is a company beneficially owned by Ms. Lo.

Under the Supplemental Agreement, the Company has granted to the Vendor a right of first offer to acquire the equity interest in New Wealth and Maxx Immunotech and the Loan proposed to be acquired by the Company under the Acquisition without time limit but so long as the Company (or its nominee, which would include its subsidiaries) is the owner of such equity interest and the Loan. In consideration of this grant of the right of first offer by the Company to the Vendor, the Vendor agreed to a downward revision of the consideration for the Acquisition from HK$83 million (as provided in the Agreement) to HK$78 million (as provided in the Supplemental Agreement).

In the event the Company (or its nominee) wishes to sell any equity interest in New Wealth or Maxx Immunotech, it shall by written notice (the “Offer Notice” ) inform the Vendor of its intention, together with the material terms of the offer for sale of equity interest in New Wealth and/or Maxx Immunotech, including but not limited to the type and amount of equity interest offered to be sold (the “Preemptive Securities” ) and the price for the sale. Within thirty days after receipt of the Offer Notice, the Vendor may by notice in writing to the Company elect to purchase the Preemptive Securities from the Company (or its nominee) on the terms set out in Offer Notice to be completed within ninety days after receipt of the Offer Notice. If the Vendor does not exercise this right of first offer within the said period of thirty days or complete the purchase of the Preemptive Securities within one hundred and twenty days after receipt of the Offer Notice (as the case may be), the Company may offer to sell the Preemptive Securities to third parties on the terms and conditions no more favourable than the terms and conditions set out in the Offer Notice for a period of ninety days. If the Company (or its nominee) does not enter into any binding agreement for the sale of the Preemptive Securities with third parties within the period of ninety days or the sale of the Preemptive Securities is not completed within the period of one hundred and eighty days after receipt of the Offer Notice by the Vendor, this right of first offer shall re-commence from the beginning, irrespective of whether the third party have since then proposed revised terms for purchase of the Preemptive Securities or continue the purchase on the terms set out in the Offer Notice.

CONSIDERATION

The consideration for the Acquisition is HK$78 million, based on preliminary indications from the Valuer of their estimated range of values for QuProbe (ranging from US$6.9 million to US$12.4 million (equivalent to approximately HK$53.13 million and approximately HK$95.48 million respectively)) based on the discounted cash flow methodology and mutual negotiations between the Company and the Vendor, agreeing on a value within the range of values as indicated by the Valuer.

• 6 -

LETTER FROM THE CHAIRMAN

The Consideration will be satisfied by the Company issuing and allotting the Convertible Note and the Promissory Note to the Vendor (or its nominee). No application will be made to the Stock Exchange for the listing of, and permission to deal in, the Convertible Note and/or the Promissory Note. The principal terms of the Convertible Note and the Promissory Note have been summarized in Appendix II of this circular.

Assuming that the entire principal amount of the Convertible Notes is converted at the conversion price of HK$0.10, a total of approximately 500 million Shares will be issued which will represent approximately 36.19% of the existing issued share capital of the Company and approximately 26.58% of the issued share capital of the Company as enlarged by the issue of new Shares to be issued upon full conversion of the Convertible Notes. The Directors have carefully considered the implication of dilution effect by full conversion of Convertible Notes. The Directors are, however, of the view that the benefits of diversification of business would out-weight the detrimental effect of dilution inherent in the transaction.

The Consideration is negotiated between the Vendor and the Company on an arm’s length basis after taking into account the business development potential of New Wealth and its subsidiary, Maxx Immunotech, and is with reference to a valuation to be conducted by the Valuer, Ernst and Young Transaction Advisory Services Limited, an independent valuer, as at 31st August, 2003 in relation to the value of the intellectual property associated with QuProbe, and an indication of the value of QuProbe is that it would be in the range of US$6.9 million to US$12.4 million (equivalent to approximately HK$53.13 million and approximately HK$95.48 million respectively).

The Consideration, after excluding the Loan of approximately HK$4.21 million as at the date of the Agreement, represents a discount of approximately 14.43% to the 90.2% of the valuation in respect of in the intellectual property associated with QuProbe held by Maxx Immunotech. The Directors consider that the acquisition of 86% equity interest in New Wealth and 30% equity interest in Maxx Immunotech will give the Company an opportunity to enter into the clinical testing and diagnostic businesses.

• 7 -

LETTER FROM THE CHAIRMAN

SHAREHOLDING OF THE COMPANY BEFORE AND AFTER FULL CONVERSION

	As at 1/11/2003	As at 1/11/2003
	prior to
	full conversion of the		Immediately after the
	Convertible Notes		issue of Shares for		Immediately after		full
	and the issue of Shares		acquisition as disclosed		conversion of the
	for acquisition as		in the announcement		Convertible Note and the
	disclosed in the		dated 31/10/03 and		acquisition as disclosed
Name of	announcement dated		prior to full conversion		in the announcement
Shareholders	31/10/03		of the Convertible Note		dated 31/10/03
	Number of		Number of		Number of
	issued Shares	%	issued Shares	%	issued Shares		%
Ms Lo Yuk Yee	415,230,000	31.91	415,230,000	30.06	915,230,000		48.65
(chairman of the
Board and chief
executive officer)
Mr. Lok Fai	185,000,000	14.22	185,000,000	13.39	185,000,000		9.83
(resigned as
director on
21/6/2002)
Pro-Tex	0	0	80,000,000	5.79	80,000,000		4.25
International
Group Limited
Public	701,200,000	53.87	701,200,000	50.76	701,200,000		37.27
Total	1,301,430,000	100.00	1,381,430,000	100.00	1,881,430,000	100.00

Upon full conversion of the Convertible Note by the Vendor, Ms. Lo and her associates will be interested in an aggregate of 915,230,000 Shares, representing approximately 48.65% of the issued share capital of the Company as enlarged by the issue of new Shares as a result of full conversion of the Convertible Notes and the issue of new Shares for the acquisition as disclosed in the announcement of the Company dated 31st October, 2003. As at the Latest Practicable Date, the Company issued 80,000,000 Shares to Pro-Tex International Group Limited.

Under the Takeover Code, Ms. Lo and such person(s) who is or are “acting in concert” (as such term is defined under the takeover Code) with Ms. Lo, would be obliged to make a mandatory general cash offer to acquire all the issued Shares other than those already owned or agreed to be acquired by them immediately upon full conversion of the Convertible Note.

• 8 -

LETTER FROM THE CHAIRMAN

CONDITIONS AND COMPLETION (AS AMENDED BY THE SUPPLEMENTAL AGREEMENT)

Completion of the Agreement (as amended by the Supplemental Agreement) is conditional upon, amongst others:–

• (1) the Acquisition contemplated under the Agreement (as amended by the Supplemental Agreement) having been approved by the Independent Shareholders and the Increase in Authorised Share Capital having been approved by the Shareholders at a special general meeting of the Company;

• (2) if required, the approval from the Bermuda Monetary Authority for the Increase in Authorised Share Capital and the issue of the Convertible Note and the Convertible Shares;

• (3) the Listing Committee of the Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, the conversion shares to be issued upon the exercise of conversion right under the Convertible Note on the Stock Exchange of Hong Kong Limited;

• (4) termination of all existing agreements between New Wealth and Maxx Immunotech with the Vendor and/or its associates (as defined in the Listing Rules) without penalty or compensation to any party to such agreements, including but not limited to the Vendor or its associates (as defined in the Listing Rules), such existing agreements include, but not limited to shareholders’ agreement between, amongst others, New Wealth and the Vendor, and service agreement between the Vendor and Maxx Immunotech;

• (5) the product of 90.2% and the highest value within the range of values for QuProbe based on the valuation of QuProbe conducted by the Valuer, an independent valuer appointed by the Company, being not less than the Consideration, the valuation report of which was issued by the Valuer on 30th October, 2003 and a summary of which is set out in the section entitled “Summary of Valuation Report” in this circular; and

• (6) the Purchaser being reasonably satisfied with the results of the due diligence review on the Company and Maxx Immunotech.

Completion will take place on the third business day after satisfaction of the above condition. If the above condition is not fulfilled or waived by the Company on or before 7th December, 2003 or such other date as the Parties may subsequently agree in writing, the Agreement (as amended by the Supplemental Agreement) will cease to be of any effect (save for any antecedent breach thereof).

As at the Latest Practicable Date, the conditions precedent set out in paragraphs (2), (4), (5) and (6) above have been fulfilled.

INFORMATION ON NEW WEALTH AND MAXX IMMUNOTECH

New Wealth Assets Ltd. is a company incorporated in the British Virgin Islands with limited liability on 12th February 2002. Its 86% equity interest is owned by the Vendor which in turn is beneficially owned by Ms. Lo. The remaining 14% equity interest is held by Genesis Amber Limited, a company held by an independent third party not connected with any substantial shareholder, director or chief executive of the Company or its subsidiaries or any of their respective associates. The principal asset of New Wealth is its holding of the entire issued preferred share capital of 140,000 preferred shares of HK$1.00 each in Maxx Immunotech, representing 70% equity interest in Maxx Immunotech.

• 9 -

LETTER FROM THE CHAIRMAN

Maxx Immunotech is a company incorporated in Hong Kong with limited liability on 9th August 2000, 70% of its entire equity interest (being its entire issued preferred share capital) are held by New Wealth. The remaining 30% equity interest in Maxx Immunotech, represented by 60,000 ordinary shares of HK$1.00 each (being the entire issued ordinary share capital) in Maxx Immunotech, is held by the Vendor and which is proposed to be acquired by the Company (or its nominee) from the Vendor as part of the Acquisition. The principal business of Maxx Immunotech is principally engaged in the research and development of innovative genomic based research and diagnostic products, QuProbe, being developed to enable samples, including research and clinical samples, to be tested for the presence and absence of specific genes based on gene array and PCR technologies. The preferred shares rank the same in all respects with the ordinary shares except interest will accrue on any arrears of dividends declared and there will be a priority on a return of assets on winding up in respect of the preferred shares.

The unaudited consolidated net loss before and after taxation of New Wealth since 12th February, 2002, being its date of incorporation, up to and including 30th September, 2003 were both approximately HK$(2.88) million. No audited accounts for New Wealth have been prepared since its incorporation. The unaudited consolidated net deficit of New Wealth as at 30th September, 2003 was approximately HK$(2.88) million.

BUSINESS OF THE COMPANY

The Company is an investment holding company. Its subsidiaries are principally engaged in the business of development, manufacture and sale of tonic and health drink products, pharmaceutical products and pyruvat calcium series products in the People’s Republic of China, and the research and development of embryonic technology and related technical know-how in the PRC and in Northern America.

REASONS FOR ENTERING INTO THE AGREEMENT AND THE SUPPLEMENTAL AGREEMENT

The genomic diagnostic tools, QuProbe, will enable physicians to diagnose diseases more quickly and accurately, and to monitor disease progression during therapy. The intellectual property rights of QuProbe, consisting of International Patent Application in relation to method of detecting T cell proliferation for diagnosis of diseases by gene array and US Patent Application in relation to method of detecting over-expression of T cell receptor genes by real-time PCR, was licensed by MAXX Genetech, as registered owner of the patent rights relating to QuProbe, to Maxx Immunotech on 27th November 2002 to the date of expiry of the last of the two patents licensed, that is 7th January 2022 and 7th January 2023 respectively. The licensor’s consent is not required for the manufacture, marketing and sales of products and/or services derived from the licensed patents. The licensor may only terminate the licence agreement if Maxx Immunotech is involved in upon the winding up dissolution, bankruptcy or receivership proceedings, or Maxx Immunotech has appointed receiver or trustee or had made an assignment of all or substantially all of its assets for the benefit of creditors.

The consideration for the grant of the licence was a payment of US$10.00 by Maxx Immunotech and assumption of the repayment obligations of an interest bearing loan due from MAXX Genetech to the Vendor which is now the Loan due and outstanding from Maxx Immunotech to the Vendor. No further payments are due from Maxx Immunotech to MAXX Genetech under this license arrangement.

The Directors consider that the Company’s investment in QuProbe may further improve the diversity of its business focus and generate new source of income to the Company in near future. The Directors believe that the Acquisition enable the Company to take advantage of such growth opportunities in genomic based research and clinical diagnostics market, in which it is the future of the market for testing

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LETTER FROM THE CHAIRMAN

and monitoring autoimmune diseases. The QuProbe project is still in its and testing stage and products and/or services derived therefrom is expected to be marketed in two to three years time in future. Before such product and/or services is marketable, it is estimated that the Company will have to incur expenditure of at least US$1 million (equivalent to approximately HK$7.7 million). Maxx Immunotech has an inhouse Research and Development team of four persons, three of whom hold Doctorate degrees and one Professor. They are based in Hong Kong and Houston in the United States of America. Parts of the research have been contracted out to a medical university in Shanghai which provides a research team of over 10 researchers. The outsourced research and development works include patient tissue sample collection and preparation (e.g. tissue and fluid separation, RNA extraction, etc.) in Shanghai. Tissue sample analysis and all proprietary works will be carried out in Houston under the supervision of Prof. Jingwu Zang and Dr. Ying Zang. All technology know-how and IP are confidential and would not be outsourced.

It is expected that the products will be marketed to two different types of customers, for clinicians and for researchers. Marketing plans for the first two years is to capture the market of researchers. Such marketing and sales would not require any regulatory approval. Before the products are marketed to clinicians, the approval from the Food and Drug Administration of the Untied States of America and other regulatory approval will have to be obtained. In the meantime, the Company will negotiate with pharmaceutical companies starting with its current network of pharmaceutical companies for distribution of such products and services in worldwide market.

Accordingly, the Directors believe that the Acquisition will contribute positively to the future development and growth of the Group through the strengthening of the Group’s scientific bases. The Directors, including the independent non-executive directors, consider that the terms of the Agreement and the Supplemental Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

SUMMARY OF VALUATION REPORT

A valuation report on QuProbe was prepared by the Valuer, a summary of which is set out below. For this section entitled “Summary of Valuation Report” in this circular, reference to “ management ” means the management of Maxx Immunotech Limited (“ MIL ”) unless the context specifies otherwise.

Valuer: Ernst & Young Transaction Advisory Services Limited in Australia Date of Engagement: 12 September 2003 Date of Valuation: 31 August 2003 Date of Report: 30th October 2003 Purpose of Report: The report is prepared for the use of the directors and management of the Company for the purpose of acquiring the intellectual property associated with QuProbe. It will be made available to the Independent Financial Advisor of the Company and used by such advisor as one of the sources of information for formulating its advice to the independent directors and shareholders of the Company.

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LETTER FROM THE CHAIRMAN

Scope of Work:

In preparing the report, the Valuer has made inquiries with the management as to the process used in preparing the projections and have discussed with the management the data supporting the assumptions and information provided by the management. The assumptions adopted reflect managements’ judgment of their ability to develop the existing science to a commercially viable state and undertake the commercialization of the resulting products. Through the use of their technical expert, the Valuer has also reviewed the project to determine whether the project plan, and the activities required to be undertaken to meet that plan, is appropriate. The Valuer considers that management’s projections are reflective of currently available information and, following an adjustment for risk, provide a reasonable basis for valuation.

Background of QuProbe:

Most T cell related malignancies and autoimmune diseases, such as multiple sclerosis, rheumatoid arthritis, lymphocytic leukemia and lymphoma are associated with alterations in T cell gene expression patterns or sequences. Thus, detection of these pathogenic T cell populations by identifying the T cell receptor gene expression characteristic of pathogenic T cells is of particular importance in research, clinical diagnosis, prognosis and treatment monitoring. MIL’s genomic platform technology, QuProbe, which is a genomic testing platform based on given array & PCR technology, aims to provide a rapid and cost-effective method for the detection of pathogenic T cells through T cell gene expression and sequence analysis.

QuProbe has an array setting where approximately 30 disease related genes are spotted on the array. Therefore, this will offer a simple and easy method for diagnosis and research application.

Valuation Methodologies: Given the nature of information available and the key assumptions adopted by Management, the Valuer has selected the discounted cash flow methodology as the most appropriate method to derive the valuation of the intellectual property in the absence of any market information regarding transfer of similar technology and products appraised and the limitation of real options approach that is practical difficulty in assigning robust probabilities to individual outcomes.

Assumptions: Management of MIL have prepared the cashflow projections which have been exclusively adopted as the basis of the valuation and are responsible for the assumptions upon which the projections are based. In deriving projected net cash flows, it has been assumed that:

• research and development costs will be paid during years of 2003 to 2005;

• QuProbe receives approval from the relevant authorities, including the SFDA in China by August 2005 and the FDA in the United States and in Europe by October 2005 for the purpose of testing autoimmune diseases;

• MIL will apply for and receive government grants from the Hong Kong government for research purposes in 2004.

• Sales of QuProbe to research institutions will occur in month 14 in China and month 15 in the US and Europe; sales of QuProbe for monitoring and testing of autoimmune diseases and cancers will occur in month 24 in China and month 27 in the US and Europe;

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LETTER FROM THE CHAIRMAN

• no material capital expenditure is required other than that incorporated in research and development costs;

• general and administration costs, including salaries and wages for the Chief Scientific Officer and CEO, was included.

• the cash flow projections are in constant 2003 dollars and no consideration has been allowed for inflation in either the revenue or cost assumptions; and

• there is no allowance for a terminal value at the end of the projection period of 10 years although the Patent right is secured to last for 20 years.

The projected net cash flows are real and before both interest and tax.

The assumptions adopted reflect managements’ judgment of their ability to develop the existing science to a commercially viable state and undertake the commercialization of the resulting products.

Given the current stage of development of QuProbe, E&Y believes that it is more appropriate to consider the required rate of return of an investor in the project than to use a discount rate based on formulae considered more appropriate for more established investment opportunities.

Considering the current level of biotechnology activity in Hong Kong and after making the appropriate adjustment to convert nominal rates of return to real rates of return, E&Y believes that an investor based in Hong Kong investing in the project in its current form, would be seeking a real before tax rate of return in the order of 100%.

E&Y is of the opinion that investors based in markets with access to a larger number of biotechnology investments (e.g. UK and US) investing in the project in its current form may be seeking a return inclusive of a premium to compensate for the perceived characteristics of the Hong Kong market in the order of 80%.

Accordingly, E&Y has concluded that it is appropriate to apply a pre-tax discount rate range of 80% to 100% to the projected net cash flows before tax.

Assessment of Value

Based on the projected net cash flows for the ten year period ending 31 August 2013, and the range of discount rates, the Valuer considers that the value of the intellectual property of QuProbe as at the date of this report is between US$6.9 million and US$12.4 million. As the Vendor holds a 90% share of the intellectual property of QuProbe, the Valuer values its share at between US$6.2 million and US$11.2 million.

The Valuer has provided a range of values for QuProbe in respect of the returns required by investors based in Hong Kong, and in United Kingdom and the United States, the Valuer considers that the value of the intellectual property of QuProbe is within a range of US$6.9 million and US$12.4 million. In the event that a single value was required, no one value within the range is any more appropriate than another and, as such, the Valuer would recommend adoption of the mid-point discount rate of 90%, which gives a value of $8.3 million for the Vendor’s 90% share of the intellectual property of QuProbe.

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LETTER FROM THE CHAIRMAN

INCREASE IN AUTHORISED SHARE CAPITAL

As at the Latest Practicable Date, the authorised share capital of the Company is HK$160,000,000 divided into 1,600,000,000 Shares, of which 1,381,430,000 Shares were issued.

The Company will propose an resolution at the forthcoming extraordinary general meeting of the Shareholders where the Acquisition will also be considered to consider, and if thought fit, to pass an ordinary resolution to increase the authorised share capital of the Company from HK$160,000,000 comprising 1,600,000,000 Shares to HK$1,000,000,000 comprising 10,000,000,000 Shares by creation of an additional 8,400,000,000 Shares so as to provide for sufficient unissued share capital available for issue of the conversion shares on exercise of the conversion rights under the Convertible Note. This Increase in Authorised Share Capital will require the approval of the Shareholders and is subject to the passing of the resolution of the Independent Shareholders approving the Agreement and the Supplemental Agreement.

GRANT OF GENERAL MANDATE

An ordinary resolution will be put to the Shareholders at the EGM to approve the granting of a general mandate to the Directors to issue Shares up to maximum of 20% of the aggregate nominal amount of the issued Shares at the time of passing the resolution as enlarged by the aggregate nominal value of Shares which fall to be issued on the exercise of conversion rights attached to the Convertible Note and the aggregate amount of Shares which may be repurchased by the Company under the Repurchase Mandate (provided that such amount shall not exceed 10% of the aggregate nominal amount of the share capital in issue at the time of passing of the resolution of the Repurchase Mandate). It is believed that this will assist in the future expansion of the Company as the Directors consider appropriate.

GRANT OF REPURCHASE MANDATE

An ordinary resolution will also be put to the Shareholders at the EGM to approve the granting of a general mandate to the Directors to repurchase on the Stock Exchange of up to 10% of the aggregate nominal amount of the issued Shares at the time of passing the resolution. The Repurchase Mandate will remain effective until the conclusion of the Company’s next annual general meeting, the expiration of the period within which the next annual general meeting of the Company is required by the Company’s byelaws or any applicable laws to be held or until revoked or varied by an ordinary resolution of the Shareholders, whichever occurs earlier.

An explanatory statement as required by the Listing Rules concerning the regulation of repurchases by companies of their own securities on the Stock Exchange is set out in Appendix III of this circular.

DISCLOSEABLE AND CONNECTED TRANSACTION

The Acquisition constitutes a discloseable and connected transaction of the Company pursuant to the Listing Rules by virtue of the fact that the total consideration for the Acquisition to be paid by the Company will be HK$78 million and the Vendor is an associate of Ms. Lo, who is the chairman, an executive Director and a controlling shareholder of the Company. The Acquisition is therefore subject to the approval of the Independent Shareholders. Ms. Lo and her respective associates will abstain from voting for the resolution approving the Agreement and the Supplemental Agreement.

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LETTER FROM THE CHAIRMAN

EGM

A notice convening the EGM to be held 12:00 p.m. on Tuesday, 9th December, 2003 at Charter Room 1, Basement 3, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong is set out on pages 45 to 48 of this circular at which ordinary resolution will be proposed to the Shareholders to approve:

• (i) the Agreement;

• (ii) the Supplemental Agreement;

• (iii) the Increase in Authorised Share Capital;

• (iv) the granting of the General Mandate; and

• (v) the granting of the Repurchase Mandate.

A form of proxy for use at the EGM is enclosed. Whether or not they are able to attend the EGM in person, Shareholders are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the Company Secretary, Rico Chow, at Room 3802, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time for the holding of the EGM. Completion and the return of the form of proxy will not preclude Shareholders from attending and voting in person at the EGM should they so wish.

ADVICE

The Directors consider that the Acquisition, the Increase in Authorised Share Capital, the granting of the General Mandate and the granting of the Repurchase Mandate are in the interest of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the ordinary resolutions relating to the Acquisition, the Increase in Authorised Share Capital, the granting of the General Mandate and the granting of the Repurchase Mandate to be proposed at the EGM.

The Independent Board Committee, comprising Mr. Ho Kwok Wah, George and Mr. Yuen Kin, has been established to advise the Independent Shareholders in connection with the Acquisition. Your attention is also drawn to the letter from the Independent Board Committee containing its recommendation regarding the Agreement and the Supplemental Agreement, as set out on page 16 of this circular.

ADDITIONAL INFORMATION

Application has been made to the Stock Exchange for the listing of, and permission to deal in, the conversion shares that fall to be issued upon exercise of the conversion right under the Convertible Note

Your attention is drawn to the additional information set out in the appendices to this circular and the notice of the EGM.

Yours faithfully, Lo Yuk Yee Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

MAXX BIOSCIENCE HOLDINGS LIMITED (曼盛生物科技集團有限公司)[*]

(Incorporated in Bermuda with limited liability)

22nd November, 2003

To the Independent Shareholders

Dear Sir or Madam,

As the Independent Board Committee, we have been appointed to advise you in connection with the Acquisition, details of which are set out in the letter from the Chairman, to which this letter follows.

We wish to draw your attention to the letter of advice from First Securities (HK) Limited as set out in Appendix I to the circular and the further information as set out in the other appendices to this circular.

We have considered the factors and reasons considered by, and the opinion of First Securities (HK) Limited as stated in the aforementioned letter of advice and are of the opinion that the terms of the Acquisition are fair and reasonable so far as the interest of the Independent Shareholders taken as a whole. We therefore recommend that you vote in favour of the ordinary resolution to be proposed at the EGM to approve the Agreement.

Yours faithfully,

For and on behalf of the Independent Board Committee

Ho Kwok Wah, George Yuen Kin

Independent non-executive Director

Independent non-executive Director

* For identification purpose only

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LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

The following is the text of the letter from First Securities, prepared for the purpose of incorporation in this circular, in connection with its advice to the Independent Board Committee in relation to the Acquisition and the Notes Issue.

FIRST SECURITIES (HK) LIMITED

ROOM 2401, 24TH FLOOR, TOWER I, ADMIRALTY CENTRE, 18 HARCOURT ROAD, HONG KONG

22nd November, 2003

The Independent Board Committee MAXX Bioscience Holdings Limited Room 3802, Wu Chung Building, 213 Queen’s Road East, Wanchi, Hong Kong

Dear Sirs,

PROPOSED ACQUISITIONS DISCLOSEABLE AND CONNECTED TRANSACTION

We refer to our engagement as the independent financial adviser to the Independent Board Committee in relation to the Acquisition, and the issue of Convertible Notes and Promissory Note (“Notes Issue”), details of which are contained in the circular dated 22nd November, 2003 (“the Circular”), of which this letter forms part. Expressions used in this letter have the same meanings as defined in the Circular.

The Independent Board Committee, comprising the two independent non-executive Directors, namely Mr. Ho Kwok Wah and Mr. Yuen Kin, have been formed to consider the Acquisition and the issue of the Convertible Note and the Promissory Note, and to advise the Independent Shareholders.

The directors of the Company announced that the Company entered into the Agreement dated 8th October, 2003 and the Supplemental Agreement dated 14th October, 2003 pursuant to which the Company has conditionally agreed to purchase and the Vendor has conditionally agreed to sell 86% equity interest in New Wealth and 30% equity interest in Maxx Immunotech and the Loan for a total consideration of HK$78 million which will be satisfied by the Company issuing and allotting Convertible Note and the Promissory Note to the Vendor or its nominee.

The Consideration is by reference to the indications by the Valuer of their estimated range of value for QuProbe (ranging from US$6.9 million to US$12.4 million (equivalent to approximately HK$53.13 million and approximately HK$95.48 million respectively)) and based on arms-length negotiations between the Company and the Vendor, agreeing on a value within the range of values as indicated by the Valuer. Under the Supplemental Agreement, the Company has granted to the Vendor a right of first offer to acquire the equity interest in New Wealth and Maxx Immunotech and the Loan proposed to be acquired by the Company under the Acquisition in consideration for a downward revision of the consideration for the Acquisition from HK$83 million as provided in the Agreement to HK$78 million as provided in the Supplemental Agreement.

New Wealth is an investment holding company whose principal asset is the 70% equity interest in Maxx Immunotech which is principally engaged in the research and development of an innovative genomic based research and diagnostic platform, QuProbe, for clinical diagnostic and disease monitoring, based on PCR gene array technologies.

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LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

As the entire issued share capital of the Vendor is beneficially owned by Ms. Lo, the chairman and an executive Director and the controlling shareholder of the Company, the Acquisition to be settled by Convertible Note and the Promissory Note constitute a discloseable and connected transaction of the Company pursuant to the Listing Rules and is subject to the approval of the Independent Shareholders.

BASIS OF OUR OPINION

In formulating our opinion, we have relied on the statements, information, opinions and representations contained in the Circular and the information, including a valuation report from Ernst and Young Transaction Advisory Services Limited, and representations provided to us by the Directors and management of the Company. We have assumed that all information, representations and opinions contained or referred to in the Circular and all information, representations and opinions which have been provided by the Directors or management of the Company for which they are solely responsible, are true and accurate at the time they were made and will continue to be accurate at the date of the dispatch of the Circular.

We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstances which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading. Having made all reasonable enquiries, the Directors have further confirmed that, to the best of their knowledge, they believe that there are no other facts or representations the omission of which would make any statement in the Circular, including this letter, misleading. We have not, however, carried out any independent verification of the information provided by the Directors and management of the Company, nor have we conducted an independent investigation into the business and affairs of the Company.

Apart from normal professional fees for our services to the Company in respect of the engagement described above, no arrangement exists whereby First Securities will receive any fees or benefits from the Company and their respective Associates.

PRINCIPAL FACTORS

We have set out below the principal factors that we have taken into account in arriving at our advice to the Independent Board Committee.

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LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

Proposed Acquisition

Reasons for the Acquisition

We noted from the annual report 2001, 2002 and the interim report 2003 of the Company, the Group’s core business focus is on development, manufacture and sale of health products and pharmaceutical products in China and drug development. Having the experience gained from the past, we noted that the Group has the capacity to further explore and develop promising quality health and pharmaceutical projects. However, the table below shows the fall of revenue and persistent loss of the Company over the years.

Turnover/Loss
attributable to	Year ended		Year ended		Six months	ended
shareholders	31st December,	2001	31st December,	2002	30th June,	2003
	HK$’000	%	HK$’000	%	HK$’000	%
Health Products	109,523	86	70,197	87.2	35,170	90.1
Health Drinks	10,249	8.1	6,716	8.3	2,943	7.5
Pharmaceutical
Products	6,676	5.3	3,583	4.5	926	2.4
Others	704	0.6	–	–	–	–
Total Turnover	127,152	100	80,496	100	39,039	100
Loss attributable to
shareholders	155,739		30,147		16,107

Source: Annual audited and interim unaudited results of the Company

In 2002, the Group acquired the intellectual property rights relating to the technology on new chemical entities used as drugs for cardiovascular and cerebrovascular diseases. The potential drug candidate is in the stage of pre-clinical studies and the necessary application is expected to be filed with the FDA in the US. The drug development process has shown positive progress and the Group is well positioned to pursue the development and commercialization of the drugs for the treatment of cardiovascular and cerebrovascular diseases.

After the SARS outbreak in Hong Kong, the general public has been reminded of the importance of diagnostic products which can detect disease and monitor disease progress more quickly and accurately. The Group believes that the market for diagnostic products is opening up in Hong Kong and Mainland China. SARS was addressed the most difficult challenge to the PRC Government. The SARS outbreak has affirmed the need of rapid and early disease diagnosis technology. A genomic based tool designed for detecting various diseases not only limited to the T cell related diseases will address the need in time of urgency.

Many human diseases, including cancer, and autoimmune diseases, are related to genetic abnormalities. With the increasing understanding of human genetic mapping and the role of specific genes in diseases, genomic diagnostics are becoming a significant platform for the development of new genetic tests based on the correlation between genetic abnormalities and certain diseases. Genomic

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LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

diagnostic tests, by providing information not currently available through existing methods, enable physicians to diagnoste and monitor various diseases more quickly and accurately.

QuProbe, a genomic diagnostic tools based on gene array and PCR technologies, is dedicated to diagnose T cell related cancers and autoimmune diseases, including rheumatoid arthritis, multiple sclerosis and leukemia. Currently, rheumatoid factor is one of the commonly used markers for diagnosis of diseases such as rheumatoid arthritis. But it is not specific enough to provide the information for clinician to make the diagnosis. There are unmet market needs for specific and easy-to-use detection system to meet the research and clinical diagnostic needs to diagnose and to study the T cell related diseases.

QuProbe with gene array technology setting has the format as pre-spotted gene fragments encoding gene sequences corresponding to T cell related diseases. To detect the diseases related gene in a given sample, e.g. blood, tissue or body fluid, the genetic material is extracted from the sample and tagged with a radioactive or chemoluminescent label using ready-to use reagents provided in the detection kit. A simple hybridization of the labeled sample genetic materials with the gene fragment pre-spotted on the array surface will allow detecting the presence of disease genes and hence assist the physician to diagnose the disease among the patients.

Alternatively, QuProbe with PCR system is based on setting up a set of forward and reverse primers for amplifying specific gene fragment which involves T cell associated diseases gene fragment. After gene specific amplification, the patient genes can be easily detected. The presence of the disease genes in the patient samples will enable physicians to diagnosis the patients the as well as the detected level of the disease gene among the patient samples.

For disease monitoring and early stage diagnosis, genetic platform has advantage over existing technology base on the fact that the expression of genotype characteristics of a disease occurs much earlier than any syndrome that could be detected. It is fully accepted that genetic diagnostic platform such as QuProbe is an important diagnostic tool for T cell related disease diagnosis in many researches and experiments, it also enable physicians to diagnose diseases more quickly and accurately, enabling them to determine the most appropriate treatment and to monitor disease progression and/or recurrence during therapy. QuProbe will provide rapid and cost-effective method for the detection of the diseases.

In view of steadily fall of revenue and persistent financial loss in the last five years resulting in loss attributable to shareholders between about HK$24 million in 1999 to HK$156 million in 2001, the Directors consider that the Company’s investment in QuProbe may improve the diversity of its business focus and generate new source of income to the Company taking into account the substantial number of patients suffering from leukemia, lymphoma or multiple sclerosis and rheumatoid arthritis worldwide. The Directors believe that the Acquisition will enable the Company to take advantage of the growth potential in genomic based research and clinical diagnostics market.

Professor Jingwu Zang is a world-renowned expert in Neurology and Immunology. He is currently a Professor of Neurology and Immunology at Baylor College of Medicine and the Scientific Director of Baylor-Methodist Multiple Sclerosis Centre in Houston. In 1993, he and his colleagues published in Science the world first clinical study using T cells to treat multiple sclerosis and he has become a pioneer in the development of T cell vaccination therapy. Since 1996, Professor Zang assumed the position as Scientific Director and the co-founder of the Baylor-Methodist Multiple Sclerosis Centre to lead the research and clinical trials in MS. He has received many national and international awards and published over 75 scientific papers and books/chapters. Professor Zang is also the President of the Chinese Academy of Sciences – Health Science Centre. The T cell related experience and national status of Professor Zang will help to contribute the success of QuProbe and the benefits to the shareholders.

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LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

In addition, the Company acquired Richford in October 2003 to market and provide technical support for Digital Volumetric Imaging (the “DVI”) 3D Microimager Systems in Asian market. The proprietary visualization software transforms biological materials into high-fidelity three dimension digital data at microscopic resolutions.

In partnership with the QuProbe research program, the DVI system will create synergy with QuProbe to acquire and analyze 3D synovial tissue data sets for research and diagnostic purposes. The program will offer an extensive analysis and database of rheumatoid arthritis human tissues. Researchers can browse the full resolution 3D tissue database for analysis using their own computational resources. The combination of DVI system and QuProbe technologies can enable researchers to discover the relationship between cellular and genetic pathology of the disease with result as shown in the patient sample. This permutation of expertise in the area of Histopathology and Pathologensis can accelerate the drug discovery effort towards a variety of diseases. Technical challenges in establishing the tissue database will include mastering an array of complex chemical tissue treatments, methods for image capture, computational approaches for generating 3D data from samples, and managing the large quantity of information generated by the facility. The creation of the tissue database will provide a powerful enabling technology which will significantly increase the capacity of a rapidly growing, multibillion dollar segment of drug discovery business to enter new areas of development and improve the quality of existing products. Maxx Immunotech has an in-house Research and Development team of four persons, three of whom hold Doctorate degrees in chemistry and immunology and one Professor in Hong Kong University of Science and Technology, University of Limburg, Belgium and University of Brussels, Belgium respectively.

They are based in Hong Kong and Houston in the US. Part of the research have been contracted out to an medical university in Shanghai which provides a research team of over 10 researchers.

Prospect and risk associated with the Acquisition

It is expected that QuProbe will be marketed to two different types of customers, for clinicians and for researchers. Marketing plan for the first two years is to capture the market of researchers. Such marketing and sales would not require any regulatory approval from other countries. Before the products are marketed to clinicians, the approval from the FDA of the Untied States of America and other regulatory approval will have to be obtained. In the meantime, the Company will negotiate with pharmaceutical companies starting with its current network of pharmaceutical companies for distribution of QuProbe.

The approval of the product license for QuProbe by the FDA requires a validation study to show the biocompatibility of the device. Technical review will be conducted base on standard statistical result. If QuProbe fails to obtain the product license, the FDA will request for more information on the validation study which may delay the time of product launch targeted at clinicians. Nevertheless, the Company is not prohibited to market QuProbe for research purpose without FDA’s approval.

QuProbe has not commenced operation and marketing. Being at an early stage of development and having no track record in respect of commercialization or earnings, QuProbe represents a higher risk venture for the Group.

QuProbe may subject to risks falling into the following categories:

Technical risk: The risk that current and/or future technical issues may prevent the technology from being completed satisfactorily.

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LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

Market risk: The risk that the technology will not ultimately be taken up by the target market to the extent that has been projected.

Liquidity risk: The risk associated with an investment that cannot readily be converted to cash.

The Company realizes that investment in biotechnology project which is still under research and development involves a higher level of risk as compared to the existing business focus on health products and health drinks. Independent Shareholders should carefully assess the level of risk associated with the Acquisition.

Taking into account the growth potential and uniqueness of QuProbe, we are of the view that the Acquisition is in line with the investment objective of the Company to diversify the revenue base of the Group against the persistent sizeable loss. However, this will have to be weighed against the risk of the Company failing to successfully commercialize QuProbe.

THE CONSIDERATION

The consideration for the Acquisition is HK$78 million, arrived at with reference to the final indications from the Valuer of their estimated range of value for QuProbe, which is from US$6.9 million to US$12.4 million (equivalent to HK$53.13 million and approximately HK$95.48 million respectively), based on the discounted cash methodology and based on arms-length negotiations between the Company and the Vendor, agreeing on a value within the range of values as indicated by the Valuer.

The Valuer gave an account on the range of discount. Relating to investors expectations both domestically and internationally, the current level of biotechnology activity in Hong Kong and after making the appropriate adjustment to convert nominal rates of return to real rates of return, the Valuer believes that an investor based in Hong Kong, investing in the project in its current form, would be seeking a real before tax rate of return in the order of 100%.

Investors based in the United Kingdom and the United States however, who have access to a larger number of biotechnology investments, may seek a lower return from an individual investment. However, they may factor in a premium over the return they would usually require when investing in their own market, to compensate for an investment based in Hong Kong, given the perceived market characteristics of the Hong Kong market. The Valuer is of the opinion that such an investor, investing in the project in its current form, may be seeking a return, inclusive of the abovementioned premium, in the order of 80%.

In order to derive a value of the intellectual property of QuProbe, the Valuer have concluded that it is appropriate to apply a pre-tax discount rate range of 80% to 100% to the projected net cash flows before tax. The Valuer viewed that the investors may factor in a premium over the return they would usually require when investing in their own market, to compensate for an investment based in Hong Kong, given the perceived market characteristics of the Hong Kong market.

The consideration was arrived at after arm’s length negotiations between the parties to the Acquisition Agreements. The aggregate consideration represents approximately 9.43% discount to the 90.2% attributable interest of the QuProbe which is based on the highest valuation, US$11.18 million or HK$86.12 million, approximately 16.38% premium on the average valuation, US$8.70 million or HK$67.02 million, and approximately 62.76% premium on the lowest valuation, US$6.22 million or HK$47.92 million. The aggregate book value of net asset and the shareholder’s loan under the Acquisition amounts to HK$3.14 million.

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LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

The Valuer provided a range of values for QuProbe from a pre-tax discount rate of 80% to 100% to the projected net cash flows and considers that the value is within that range. The Valuer further mentioned that in the event that a single value was required, no one value within the range is any more appropriate than another and, as such, the Valuer would recommend adoption of the mid-point discount rate of 90%, which gives a value of US$8.3 million for PPL’s 90% share of the intellectual property of QuProbe. Then, the aggregate consideration represents approximately 22.05% premium on such valuation, US$8.3 million.

In view of the premium arising from the Acquisition, we have made certain examinations. Firstly, QuProbe is an advancement and innovative in genomic diagnostic technology for T cell related diseases. Secondly, the aggregate consideration for the Acquisitions will be satisfied by allotment and the issue of the Convertible Notes and Promissory Notes to the Vendor. The Convertible Notes will be issued at a premium to the market share price of 20.5% on the date of the Announcement and of 63.93% on the Latest Practicable Date. The trading volume of the Company’s shares has been low over the period of last three months, less than about average 8.2 million shares in each trading day. Thirdly, the Company has suffered persistent sizeable financial loss since 1998. Lastly, from various studies, the validation of the QuProbe with the human patient samples from different geographic regions is crucial for the final setup of the diagnostic products. To obtain large amount of patient samples, the Company is required to build an extensive clinical and hospital network and obtain the relevant local regulatory approvals. To facilitate the development of the QuProbe, the Vendor will provide the Company with the right to access the patient samples which will be collected through its fellow subsidiary company. With the further support from Vendor, it is believed that timeline and the cost for developing of the QuProbe will be greatly reduced. Finally, the option of the Group conducting the Acquisition only after the successful launch of QuProbe to reduce the uncertainties and risks involved. However, in such an event the valuation of QuProbe would likely be significantly increased. Based on the above, we consider the Consideration to be fair and reasonable.

VALUATION

Methodology

We note that in determining the value of QuProbe, the Valuer has adopted the discounted cash flow approach which was considered to be the appropriate and reliable in arriving at its opinion of the fair market value of the QuProbe, in the absence of any market information regarding transfer of similar technology and products appraised.

Bases and assumptions

We noted from the report of Ernst & Young Transaction Advisory Services Limited that it has taken into consideration all relevant factors, including the extensive global research and diagnostic market size of genetic testing for autoimmune diseases, timeline and R&D costs to product release, pricing and margins of products for the United States, European and Chinese markets, and the professional experience and knowledge of senior management team of Maxx Immunotech.

We do not note any limitation of scope on the valuation report by the Valuer.

View

Having considered the above, we are not aware of any reasons to doubt the adoption of such methodologies and the fairness and appropriateness of the bases and assumptions adopted by the Valuer in arriving at the valuation. Given that the Acquisition principally involves the genomic testing based research and diagnostic platform including gene array and PCR technologies which are initially proposed

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LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

for use in diagnosing T cell related autoimmune diseases and malignancies, we consider that the valuation forms a fair and reasonable basis in determining the value of QuProbe and that the Consideration is also fair and reasonable so far as the Company and the Independent Shareholders are concerned.

Financial effects

Earnings

The QuProbe project is still in its testing stage and products and/or services derived therefrom is expected to be marketed in two to three years time in future. Before such product and/or services is marketable, it is estimated that the Company will have to incur expenditure of at least US$1 million (equivalent to approximately HK$7.7 million). Income to the Group does not arise unless QuProbe is successful in being approved or marketed.

The Directors believe that the Acquisition will afford the Group the opportunity to future development and growth through the strengthening of the Group’s scientific bases. Given this, we concur with the Directors’ view that the Acquisition represents unique opportunity with potential earnings to the Group in the medium and long term. The effects of interest expense are discussed below in the paragraph headed “Financial Effects of the Convertible Notes issue and Promissory Note”.

The consideration of HK$78 million will be funded partly by the net proceeds from the Convertible Note issue (approximately HK$50 million) and partly by the issue of the Promissory Note (approximately HK$28 million). There will be a maximum sum of interest expenses of HK$1.17 million each year after the Acquisition. The HK$1.17 million interest expense is calculated by 1.5% of interest rate per annum for the HK$50 million Convertible Note and HK$28 million Promissory Note which represents approximately 0.96% of the total expenses of the Group for the financial year of 2002.

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LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

Effect on net asset value

Net asset value

The following table illustrated the unaudited pro-forma adjusted consolidated net asset value of the Group before and after the Proposed Connected Transaction and excluding any subsequent share transactions of the Group after the Announcement Date:

ctions of the Group after the Announcement Date:
	Approximately
	HK$’000
Audited consolidated net asset value as at 31st December, 2002	186,195
Add: Effect of the placement of 60,000,000 new shares in January 2003	7,500
Add: Effect of the issue of consideration shares in February 2003	10,000
Add: Effect of the placement of 60,000,000 new shares in March 2003	6,600
Add: Effect of the placement of 120,000,000 new shares in September 2003	12,000
Less: Unaudited interim results for the six months ended 30th June 2003	(16,107)
Unaudited pro-forma adjusted consolidated net assets value
of the Group before the Proposed Connected Transaction	206,188
Effect of the Proposed Connected Transaction
(Assuming that the Convertible Notes are fully converted)	50,000
Unaudited pro-forma adjusted consolidated net assets value
of the Group after the Proposed Connected Transaction	256,188
Unaudited pro-forma adjusted consolidated net assets value
per Share before the Proposed Connected Transaction
(Based on 1,301,430,000 shares)	15.84 cents
Unaudited pro-forma adjusted consolidated net assets value
per Share after the Proposed Connected Transaction (Based
on 1,301,430,000 shares and the conversion of Convertible
Note 500,000,000 shares)	14.22 cents

Assuming that the Completion had been effected having taken into account the unaudited proforma adjusted consolidated net assets value, the Group’s unaudited pro-forma consolidated net assets value as at 30th September, 2003 would have increased by approximately HK$50 million to approximately HK$256.19 million following completion in assumption of the Convertible Notes are converted, representing a decrease of approximately 10.23% in the net asset value per Share as compared with the unaudited pro-forma adjusted consolidated net assets value per Share before the Acquisition.

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LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

There will be a dilutive effect to the asset backing of the Shares if the Convertible Notes are wholly converted. The unaudited pro forma adjusted consolidated net asset value per Share will be diluted from approximately HK¢15.84 to approximately HK¢14.22 following the completion of the Acquisition. In return for a unique opportunity that cannot be missed to diversify the revenue source and to reverse the loss condition, we consider the dilution in the net asset value to be fair and reasonable.

Gearing and Working capital

The debt/equity ratio, i.e. total liabilities over equity, of the Group after completion of the Acquisition will increase from approximately 70.50% to approximately 108.33% if the Convertible Note is not converted, and decrease from approximately 70.50% to approximately 67.67% if the Convertible Notes is fully converted. In both cases, any subsequent share transactions of the Group after the Announcement Date have not been taken into account.

Although there maybe a material increase in the debt/equity ratio of the Group, the working capital of the Group will not be adversely affected immediately since the Convertible Note and Promissory Note will mature in three years. Meanwhile, the Company will have sufficient internal resources generated from its existing operation to finance the future operation after the completion of the Acquisition.

The debt/total asset ratio, i.e. total liabilities over total assets, of the Group after the Acquisition will increase from approximately 39.67% to approximately 50.26% if the Convertible Note is not converted, and decrease from approximately 39.67% to approximately 39.01% if the Convertible Note is wholly converted.

There is certain immediate adverse impact in the short term of the Group for the notes interest. Payment HK$1.17 million per annum and the further development cost of approximately HK$7.7 million over the first 14 months before the first milestone of selling QuProbe to the research market.

According to the unaudited financial information provided by the Company, the Group had cash and bank balances of about HK$32.79 million as at 30 June 2003. As regard, The Group has sufficient internal resources spending in different stages for the cost of improvement. To the future milestone, the Company is able to support the development by way of internal cash inflow such as the partly sale of QuProbe to the research market, external funding and government grant in relation to the progress of QuProbe. There will be an immediate adverse effect on the financial position of the Company in the short term. But there will not be to the extent affecting the existing operation of the Group.

Funding for QuProbe

QuProbe has not yet commenced any formal marketing and sale and it has yet to generate any revenue. The operations of QuProbe, especially its research and development efforts, have been financed principally by shareholder loans from Ms. Lo, which are at interest-rate of two percent above the prime lending rate as quoted by the Hongkong and Shanghai Banking Corporation Limited and have no fixed term of repayment. As the Company will become the controlling and majority shareholder of QuProbe after the completion of the Acquisition, it is intended that the Company will finance the business development of QuProbe over the near term by providing at least US$1 million as research and development costs for QuProbe to achieve first milestone. The financing will be provided fully by the Company.

• 26 -

LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

We have discussed with the Directors the cash flow projection for 2004 to 2013 of QuProbe and agree with the Directors that, barring unforeseen circumstances, the expected cash flow to be generated from the QuProbe and the proceeds from the government grants and external fundings should be sufficient to meet the ongoing working capital requirements of QuProbe’s operation.

As at 30 June 2003, the Company has cash balance of approximately HK$32.79 million. The current liabilities of the Company are mainly composed of provision for staff welfare of HK$60.43 million, trade and other payable of HK$36.5 million and short term loans of HK$41.96 million. Should the Company fail to obtain the renewal of such short term loan upon maturity, there will be serious effect to the funding for QuProbe. However, the management believes that the short term loans revolve without much difficulty on the basis that sufficient collaterals were pledged to bank. The financial commitment of the Company towards QuProbe for the near term would likely be over US$1 million as expenditure and under such circumstances, the working capital requirement of the existing businesses of the Company should not be affected by the Acquisition.

Based on our assessment of the nature of business of QuProbe, it is possible that QuProbe, on its own, would not be able to secure borrowings from financial institutions.

However, the Directors believe that QuProbe should be able to generate net profit to its shareholders in the long term. Therefore, it is reasonable for the Company to provide financial support to QuProbe for its business development.

On the basis above, we are of the view that QuProbe will obtain necessary funding to run the business.

Issue of Convertible Notes and Promissory Notes

Principal terms of the Convertible Notes

The principal terms of the Convertible Notes and the conditions of the Subscription Agreement are set out in the letter from the Board in this Circular. The terms of the Notes Issue were negotiated between the Company and the Vendor on an arm’s length basis and were based on their assessment of an appropriate conversion premium, interest rate and yield to redemption. The Convertible Notes are unsecured and are not guaranteed by the Company and will not be listed on any stock exchange. The aggregate principal amount of the 3 year Convertible Notes is HK$50 million to be issued at par and bearing interest at 1.5% per annum, payable semi-annually in arrears. The Convertible Notes may be converted in whole or in part into the Shares at any time within three years from the date of issue of the Convertible Notes in the principal amount of HK$1 million or an integral multiple thereof on each conversion. Full conversion of the Convertible Notes, at the initial Conversion Price, will result in the issue of 500,000,000 Shares, representing approximately 38.42% of the existing issued share capital of the Company and approximately 27.76% of the issued share capital of the Company as enlarged by the Shares to be issued under the Convertible Notes excluding the shares acquired by Pro-Tex International Group Ltd on the announcement dated 31st October, 2003. After one month from the Issue Date, the Company has the option to redeem, in whole or any part, the Convertible Notes in principal amount of HK$5 million.

The Company will issue such HK$50 million Convertible Notes in addition to the existing convertible debentures of HK$2.2 million as at 31st October, 2003.

• 27 -

LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

Comparable convertible notes issues

In order to assess the terms of the Convertible Notes, we have reviewed a number of convertible notes issued by other listed companies in Hong Kong within the past one year with term lengths similar to that of the Convertible Notes and which to our knowledge have been publicly announced.

				Premium/(Discount)
				between the
				conversion price and
				the closing price
	Date of	Principal	Coupon rate	per share before
Name of issuers	issue/Term	amount	per annum	announcement
Tack Fat Group Intl Ltd.	Dec 2002	Up to	2.50%	12.70%
	(3 years)	US$12 million
Poly Investment Holdings Ltd.	Oct 2003	HK$80 million	1.50%	186%
	(1 & 2.5 years)
Champion Technology	Sept 2003	US$8 million	1.50%	17.86%
Holdings Ltd.	(3 years)
Terabit Access Technology Intl Ltd.	Aug 2003	HK$16 million	8%	28.60%
	(1 year)
Gorient (Holdings) Ltd.	Sept 2003	HK$5 million	8%	(33.33%)
	(1 year)
China Silver Dragon Group Ltd.	Jul 2003	HK$7.5 million	6%	25%
	(2 years)
Maxx Bioscience Holdings Ltd.	Oct 2003	HK$50 million	1.50%	20.50%
	(3 years)

Source of Information: Bloomberg

Notes: The conversion price is equal to the nominal value of the share of the Company.

Market price

The initial conversion price of HK$0.1 per Share, being 18.2% over the average of the closing prices of the Shares on the Stock Exchange for the 10 trading days ended on, and including, the date of signing of the Subscription Agreement represents:

• a premium of about 20.5% over HK$0.083 per Share, being the closing price of Shares on the date immediately before the publication of the announcement;

• a premium of about 18.2% over HK$0.0846 per Share, being the average closing price of Shares for the ten trading days immediately preceding the date of the publication of the announcement;

• a premium of about 20.77% over HK$0.0828 per Share, being the average closing price of Shares for the three months preceding the date of the publication of the announcement;

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LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

• a premium of about 18.48% over HK$0.0844 per Share, being the average closing price of Shares for the one month preceding the date of the publication of the announcement; and

• a premium of about 63.93% over HK$0.06 per Share, being the closing price of Shares on the Latest Practicable Date.

In our opinion, the conversion price for the Convertible Note, when compared with convertible notes issues of similar size and the historic closing price of the Shares, as quoted on the Stock Exchange, representing a fair and reasonable premium to the price of the Shares.

In comparison to raising fund through bank loan financing or share placement, we consider the form of fund raising through issues of Conversion Note and Promissory Note for a substantial amount, i.e. HK$78 million, are the most appropriate in term of minimum costing and the shortest time duration as comparing with other fund raising exercise in the circumstances and that the issue terms of Convertible Note and Promissory Note are fair and reasonable so far as the Company and all the Shareholders are concerned.

Interest rate

The interest rate of the Convertible Notes is set at 1.5% per annum with interest payable semiannually. On the maturity date of the convertible notes, 100% of the then outstanding principal amount together with all interest accrued shall be payable by the Company to the holders of the Convertible Notes. As at the date of the announcement, the Company’s current cost of debt, consisting of convertible debentures, was approximately 3%, and the cost of the short term bank borrowing is approximately prime rate plus 1%, which, as at the Latest Practicable Date, was approximately 6%. Instead of the cost of the bank borrowing to be used to finance the Acquisition and without credit rating for the Company, we consider the interest rate of the Convertible Notes is fair and reasonable.

Dilution to Shareholders

The issue of Convertible Notes may result in a maximum dilution in the shareholding of existing shareholders of about 27.76%. We note that the public shareholder’s Shareholding would be diluted from approximately 53.87% to approximately 38.92% excluding the shares acquired by Pro-Tex International Group Ltd on the announcement dated 31 October 2003. Pro-Tex International Group Ltd is also regarded as a public shareholder.

Although there is a shareholding dilution, the dilution on net asset value is about 10.23%. Having considered the following factors, we are of the view that the issue of Convertible Note is not prejudice to the interest of the Independent Shareholders and thus the dilution effect mentioned above is acceptable:

• Given the low trading volume and persistent loss of the Company, it is rather difficult for the Company to secure for an sizeable fund raising exercise;

• The Company captures the unique opportunity to diversify the revenue base and to reverse the loss situation.

Therefore, we consider the shareholding dilution arising from the issue of the Convertible Note for the Acquisition to be fair and reasonable.

• 29 -

LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

Promissory Note

The Promissory Note of HK$28 million will bear interest on the outstanding principal from the date of issue at the rate of 1.5 per cent per annum. Interest is payable semi-annually in arrears. The interest rate was negotiated on an arm’s length basis between the Company and the Vendor with reference to prevailing borrowing interest rates for Hong Kong dollars deposit, approximately 6% which we consider to be fair and reasonable.

Use of Proceeds

The total net proceeds of the issue of the Convertible Notes and the Promissory Notes is estimated to amount to HK$78 million, the sole purpose of which is to finance the consideration for the Acquisition.

Financial effects of the Convertible Notes and Promissory Notes issue

As shown in the “Effect on net asset value” paragraph, there will be a dilutive effect to the asset backing of the Shares if the Convertible Notes are wholly converted. The unaudited pro forma adjusted consolidated net asset value per Share will be diluted from approximately HK¢15.84 to approximately HK¢14.22 following the completion of the Acquisition, i.e. a decrease of approximately 10.23%. We consider the dilution effect in the net asset value to be fair and reasonable.

As at 30th June, 2003, the Group had cash on hand of approximately HK$32.79 million and bank borrowings of approximately HK$42 million. The annual interest expense payable by the Company to service the Convertible Note and the Promissory Note issue will be approximately HK$750,000 and HK$420,000 respectively. After the completion of the Acquisition and the Notes Issue, the Group will carry a total non-current liabilities of approximately HK$82.94 million and the total annual interest expense payable by the Group will be approximately HK$1.17 million. The Group will, on the basis of cash balances held on 30th June, 2003, still have cash balances in excess of 0.146 times the total liabilities of HK$223.36 million upon completion of the Acquisition and Notes Issue.

The Independent Shareholders should note that the Acquisition is not conditional upon the completion of the Notes Issue whereas the Notes Issue is conditional upon the completion of the Acquisition. In the event that the Notes Issue does not proceed to completion the shortfall will instead be financed by a combination of additional bank borrowings and the Group’s internal resources. This will further reduce the working capital liquidity of the Group.

We consider that the issue of the Convertible Note and Promissory Note to be an appropriate method to finance the Acquisition.

OPINION AND RECOMMENDATION

In arriving at our conclusion that the terms of the Acquisition and the Notes are in themselves fair and reasonable, we have considered the principal factors set out in detail above, in particular:

• (i) the consideration of the Acquisition will be made at a premium and in view of such a premium, particular attention was paid to the valuation methodology, assumptions and the projections used to arrive at the valuation. The Company made the Acquisition at this early stage, i.e. before the operation and commercialization due to purchase price reason. Should the Acquisition be made at its of full operation, the consideration may be in multiple sum higher.

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LETTER FROM FIRST SECURITIES (HK) LIMITED

APPENDIX I

• (ii) the need for the Acquisition to capture the unique opportunity for business diversification;

• (iii) the future intention of the Company to gain competitive advantage in providing the services of genomic testing based research and diagnosing platform;

• (iv) the possible impact on the Group in event of failure of QuProbe;

• (v) the Acquisition will have certain short term impact on the financial position of the Group though there will not be material adverse impact on the existing business.

The Independent Board Committee is advised to ask the independent shareholders to carefully consider each of the above.

Having considered the above factors, we recommend that the Independent Board Committee advises the Independent Shareholders to vote in favor of the ordinary resolutions to be proposed at the EGM to approve the S&P Agreement and the issue of the Convertible Note and Promissory Note pursuant to the Subscription Agreement respectively.

Yours faithfully, For and on behalf of First Securities (Hong Kong) Limited Stanley Lai Sam Lum Executive Director Associate Director

• 31 -

APPENDIX II SUMMARY OF TERMS OF THE CONVERTIBLE NOTE AND THE PROMISSORY NOTE

The principal terms of the Convertible Note and the Promissory Note are summarized below:–

• (1) Principal amount HK$50 million (Convertible Note)

• HK$28 million (Promissory Note)

• (2) Interest

The Convertible Note and the Promissory Note will bear interest on the outstanding principal from the date of issue at the rate of 1.5 per cent per annum. Interest is payable semi-annually in arrears. The interest rate was negotiated on an arm’s length basis between the Company and the Vendor with reference to prevailing fixed deposit interest rates for Hong Kong dollars deposit

• (3) Maturity date

The Company shall repay the outstanding principal amount of the Convertible Note and the Promissory Note respectively upon expiry of thirty-six (36) months after the date of issue of the Convertible Note and the Promissory Note (as the case may be).

• (4) Redemption

The Company shall be entitled at any time and from time to time after one month from the date of the issue of the Convertible Note or the Promissory Note (as the case may be) until the day prior to the maturity date by giving written notice of not less than 7 banking days to the holders of the Convertible Note or the Promissory Note (as the case may be) to redeem (in amounts of not less than HK$5,000,000 and an integral multiple of HK$1,000,000) the whole or part of the outstanding principal amount of the Convertible Note or the Promissory Note (as the case may be).

• (5) Conversion (Convertible Note)

The holder of the Convertible Notes will have the right at any time and from time to time by giving written notice to convert the whole or part of the outstanding principal amount of the Convertible Notes into Shares at the Conversion Price (to be defined below) from the day immediately following the issue of the Convertible Notes up to 4:00 p.m. on the maturity date. The Promissory Notes will not have any conversion rights.

• (6) Conversion price (Convertible Note) The conversion price is initially HK$0.10 per Share which is subject to adjustment for certain dilutive events. The conversion price represent a premium of approximately 20.5% to the closing price of HK$0.083 per Share as quoted on the Stock Exchange on 7th October, 2003, being the last

• 32 -

SUMMARY OF TERMS OF THE CONVERTIBLE NOTE AND THE PROMISSORY NOTE

APPENDIX II

trading day of the Shares prior to the date of the Agreement, and represents a premium of approximately 18.2% to the average closing price of HK$0.0846 per Share as quoted on the Stock Exchange for the 10 consecutive trading days up to and including 7th October, 2003. The conversion price was agreed after arm’s length negotiations between the Company and the Vendor.

• (7) Shares to be issued upon conversion (Convertible Note)

• (8) Transferability

The Shares to be issued upon conversion of the Convertible Notes will rank pari passu in all respects with the Shares in issue on the date of the notice of conversion is given.

Each of the Convertible Note and the Promissory Note is not assignable or transferable by the holder of such note other than to its wholly owned subsidiaries, its holding company or wholly owned subsidiaries of its holding company or with the prior written consent of the Company, subject to conditions provided in the terms and conditions of the Convertible Note or Promissory Note (as the case may be). The Company undertakes to inform the Stock Exchange of any dealings by any connected persons (as defined in the Listing Rules) or their respective associates from time to time in the Convertible Note immediately upon the Company becoming aware of such dealing(s).

• 33 -

EXPLANATORY STATEMENT ON THE SHARE REPURCHASE MANDATE

APPENDIX III

SHARE REPURCHASE MANDATE

This Appendix III serves as an explanatory statement, as required by the Listing Rules, to provide information to the Shareholders regarding the Repurchase Mandate as referred to in the section headed “Repurchase Mandate” on page 14 of this circular. For the purpose of this Appendix III, the term “shares” (unless otherwise stated) shall be as defined in the Takeover Code on share repurchases which mean all classes which carry a right to subscribe for or purchase shares in the Company.

THE LISTING RULES

The Listing Rules permit companies whose primary listings are on the Stock Exchange and on which the shares of such companies may be listed and recognized for this purpose by the SFC and the Stock Exchange to repurchase their own shares subject to certain restrictions, the more important of which are summarized below:

(a) Shareholder’s approval

The Listing Rules provide that all on-market repurchases of shares by a company with a primary listing on the Stock Exchange must be approved in advance by an ordinary resolution of shareholders, either by way of general mandate to the directors of the company to make such repurchases or by specific approval of a particular transaction.

(b) Source of funds

Repurchases must be funded out of funds legally available for such purpose. Repurchases by the company must be made in accordance with the memorandum of association and the bye-laws of the company and the applicable laws of Bermuda. Under Bermuda law, any repurchases by the company may be made out of capital paid up on the shares to be repurchased or out of funds of the company otherwise available for dividend or distribution or out of the proceeds of a fresh issue of shares made for the purpose. Any premium payable on a purchase over the par value of the shares to be purchased must be provided out of funds of the company otherwise available for dividend or distribution or out of the company’s share premium account.

(c) Trading restrictions

The shares proposed to be repurchased by a company must be fully paid-up. A maximum of 10% of the existing issued share capital as at the date of the relevant resolution may be repurchased on the Stock Exchange. A company may not issue or announce an issue of shares for a period of 30 days immediately following a repurchase whether on the Stock Exchange or otherwise (other than an issue of securities pursuant to an exercise of warrants, share options or similar instruments requiring the company to issue securities which were outstanding prior to such repurchase) without the prior approval of the Stock Exchange. In addition, all repurchases of shares on the Stock Exchange in any calendar month are limited to a maximum of 25% of the trading volume of such class of shares which was traded on the Stock Exchange in the immediately preceding calendar month. The Listing Rules also prohibit a company from repurchasing its shares on the Stock Exchange if the repurchase would result in the number of listed

• 34 -

EXPLANATORY STATEMENT ON THE SHARE REPURCHASE MANDATE

APPENDIX III

securities which are in the hands of public falling below the relevant prescribed minimum percentage for that company required by the Stock Exchange. A company may not repurchase shares on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange. A company must procure that any broker appointed by the company to effect the repurchase of shares disclosed to the Stock Exchange such information with respect to the repurchases as the Stock Exchange may request.

(d) Status of repurchased shares

The Listing Rules provide that the listing of all repurchased shares is automatically cancelled and that the certificates for such repurchased shares must be cancelled and destroyed. Under Bermuda law, repurchased shares will be treated as cancelled.

(e) Suspension of repurchase

The Listing Rules prohibit any repurchase of shares on the Stock Exchange at any time after a price sensitive event has occurred or has been the subject of a decision until such time as the price sensitive information has been made publicly available. A company may not repurchase shares on the Stock Exchange during the period of one month immediately preceding either the preliminary announcement of the company’s annual results or the publication of the company’s interim report, unless the circumstances are exceptional. In addition, the Stock Exchange reserves the right to prohibit repurchase of shares on the Stock Exchange if the Stock Exchange considers that a company has breached the Listing Rules applicable to such company.

(f) Reporting requirements

Under the Listing Rules, a company which has made a purchase of its own shares must report to the Stock Exchange not later than 9.30 a.m. on the following business day, the total number of shares purchased, the purchase price per share or the highest and lowest prices paid for such shares. In addition, the company’s annual report is required to disclose a monthly breakdown of repurchases of shares made during the financial year including the number of shares repurchased each month, the purchase price per share or the highest and lowest price for all such purchases and the aggregate prices paid. The directors’ report must contain reference to the repurchases made during the year and the directors’ reasons for making such repurchases.

(g) Connected parties

The Listing Rules prohibit a company from knowingly repurchasing securities on the Stock Exchange from a connected person (as defined in the Listing Rules) and a connected person is prohibited from knowingly selling his securities to the company.

SHARE CAPITAL

As at the Latest Practicable Date, 1,381,430,000 Shares were in issue and exercise in full of the Repurchase Mandate would result 138,143,000 Shares being repurchased by the Company.

• 35 -

EXPLANATORY STATEMENT ON THE SHARE REPURCHASE MANDATE

APPENDIX III

REASONS FOR THE REPURCHASE

The Directors consider that it is in the interests of the Company and the Shareholders to have a general authority from the Shareholders to enable the Directors the flexibility to repurchase shares of the Company in the market when appropriate and beneficial to the Company. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net assets value of the Company and/or its earning per share and will only be made when the Directors believe that such repurchase will benefit the Company and the Shareholders.

FUNDING FOR REPURCHASE

Repurchase of the Shares will be funded entirely from the Company’s available cash flow or working capital facilities, which will be funds legally available for the repurchase in accordance with the memorandum of association and the bye-laws of the Company and the applicable laws of Bermuda.

The Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company. No material adverse effect on the working capital requirements or gearing levels of the Company (as compared with the position disclosed in the audited accounts contained in the annual financial statements for the twelve months ended 31st December, 2002) is anticipated in the even that the Repurchase Mandate is exercised in full at any time.

SHARE PRICES

The highest and lowest prices at which the Shares have been traded on the Stock Exchange in each of the twelve calendar months ended 31st October, 2003 were as follows:

	Highest	Lowest
	HK$	HK$
2002
November	0.185	0.157
December	0.164	0.138
2003
January	0.237	0.135
February	0.178	0.120
March	0.156	0.109
April	0.136	0.063
May	0.125	0.070
June	0.128	0.083
July	0.093	0.068
August	0.099	0.065
September	0.097	0.081
October	0.097	0.070

• 36 -

EXPLANATORY STATEMENT ON THE SHARE REPURCHASE MANDATE

APPENDIX III

GENERAL

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their Associates, has any present intention to sell any Shares to the Company or its subsidiaries, in the event that the Repurchase Mandate is approved by the Shareholders.

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will only exercise the Repurchase Mandate in accordance with the Listing Rules and the applicable laws of Bermuda.

If as a result of repurchase of Shares by the Company, a proportionate interest in the voting rights of the Company held by a Shareholder may increase, such increase will be treated as an acquisition for the purpose of the Takeover Code. Accordingly, a Shareholder or a group of Shareholders acting in concert, could obtain or consolidate control of the Company or become obliged to make a mandatory offer in accordance with Rule 26 of the Takeover Code. As at the Latest Practicable Date, Ms. Lo Yuk Yee, Vision Ocean Investments Limited and Sunny Fortune Limited were substantial Shareholders.

The Company has not been notified by any connected person (as defined in the Listing Rules) that such a person has a present intention to sell any Shares to the Company, or has undertaken not to do so, in the event that the Repurchase Mandate is approved by the Shareholders.

The Company has not purchased any Shares whether on the Stock Exchange or otherwise, in the six months preceding the Latest Practicable Date.

• 37 -

GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular concerning the Company & its subsidiaries and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts concerning the Company & its subsidiaries not contained herein the omission of which would make any statement herein concerning the Company & its subsidiaries misleading.

The information contained herein relating to New Wealth and Maxx Immunotech has been supplied by the directors of New Wealth and Maxx Immunotech respectively, who collectively and individually accept full responsibility for the accuracy of the information contained in this circular (other than those relating to the Company) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular the omission of which would make any statement contained herein misleading.

2. DISCLOSURE OF INTERESTS OR SHORT POSITIONS IN SHARES AND OPTIONS

As at the Latest Practicable Date, the interests or short positions of the directors and the chief executive of the Company in the shares and underlying shares of the Company or any of its associated corporations within the meaning of Part XV of the SFO which had been notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO or which were required to be entered in the register referred to therein pursuant to section 352 of the SFO or which were required to be notified to the Company or and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies were as follows:–

The Company

Long positions or short positions in the underlying shares of the Company

			Approximate
Name of	Nature of	Number of	percentage of interest
Director	Interest	ordinary shares held	in the Company
Ms. Lo Yuk Yee	Corporate	415,230,000	30.06%
(chairman of the	(Note 1)
Board and chief
executive officer)

Note 1: The 415,230,000 Shares will be held by Vision Ocean Investments Limited, a company incorporated in British Virgin Islands with limited liability and beneficially owned by Ms. Lo.

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GENERAL INFORMATION

APPENDIX IV

Long positions or short positions in equity derivatives in, or in respect of, underlying shares

				Approximate
	Number and	Number of		percentage of
Name of	description of	underlying	Nature of	interest in
Directors	equity derivatives	shares	interests	the Company
Ms. Lo Yuk Yee	conversion right	500,000,000	Corporate	26.58%
	attached to		(Note 2)
	convertible bonds
	for the principal
	amount of
	HK$50,000,000 at
	the conversion price
	of HK$0.10 per
	ordinary share
	8,150,000 options granted	8,150,000	Personal	0.59%
	under the Employee
	Share Option Scheme
	adopted by the
	Company on 17 May,
	2002 (the “Share Option
	Scheme”)at exercise price
	of HK$0.315 per share
	1,630,000 option granted	1,630,000	Personal	0.12%
	under the Share
	Option Scheme
	at the exercise price of
	HK$0.158 per share
Prof. ZANG	3,000,000 options granted	3,000,000	Personal	0.22%
Jing Wu	under the Share
	Option Scheme
	at the exercise price of
	HK$0.315 per share
	7,380,000 option granted	7,380,000	Personal	0.53%
	under the Share
	Option Scheme
	at the exercise price of
	HK$0.14 per share

• 39 -

GENERAL INFORMATION

APPENDIX IV

				Approximate
	Number and	Number of		percentage of
Name of	description of	underlying	Nature of	interest in
Directors	equity derivatives	shares	interests	he Company
Dr. Wu CAO	9,780,000 option granted	9,780,000	Personal	0.71%
	under the Share
	Option Scheme
	at the exercise price of
	HK$0.158 per share

• Note 2: The conversion right has been granted to Payton Place Limited, a company incorporated in British Virgin Islands with limited liability and beneficially owned by Ms. Lo.

Associated Corporations of the Company

Long positions or short positions in the shares of the Associated Corporation of the Company

				Approximate
		Number of		percentage of
	Name of	shares in the		interest in the
Name of	Associated	Associated	Nature of	Associated
Directors	Corporation	Corporation	interests	Corporation
N/A	N/A	N/A	N/A	N/A

Long positions in equity derivatives in, or in respect of, underlying shares of the Associated Corporation of the Company

					Approximate
		Number and	Number of		percentage of
	Name of	description	shares in the		interest in the
Name of	Associated	of equity	Associated	Nature of	Associated
Directors	Corporation	derivatives	Corporation	interests	Corporation
N/A	N/A	N/A	N/A	N/A	N/A

Save as disclosed above, as at the Latest Practicable Date:–

• (a) none of the directors or chief executives of the Company had any interests or short positions in the shares and underlying shares of the Company or any of its subsidiaries or its associated corporations within the meaning of Part XV of the SFO which are required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO or which are required to be entered in the register referred to therein pursuant to section 352 of the SFO or which are required to be notified to the Company or and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies;

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GENERAL INFORMATION

APPENDIX IV

• (b) none of the Directors and the chief executive of the Company has any direct or indirect interest in any assets acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by and leased to any member of the Group since 31st December 2002 (being the date to which the latest published audited accounts of the Company were made up); and

• (c) none of the Director and the chief executive of the Company is materially interested in any contract or arrangement subsisting at the date of this circular which is significant in relation to the business of the Company.

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, according to the register kept by the Company pursuant to section 336 of the SFO and so far as is known to, or can be ascertained after reasonable enquiry by the Directors, the following persons had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

Long positions or short positions in the underlying shares of the Company

Name of	Nature		Approximate
shareholders	of interests	No. of share	percentage of interest
Vision Ocean	Corporate	415,230,000	30.06%
Investments Limited
Ms. Lo Yuk Yee	Personal	415,230,000	30.06%
	(Note 3)
Sunny Fortunes	Corporate	185,000,000	13.39%
Limited
Mr. Lok Fai	Personal	185,000,000	13.39%
	(Note 4)
Pro-Tex	Corporate	80,000,000	5.79%
International Group
Limited
Mr. Ip Hoi-Chuen	Personal	80,000,000	5.79%
Stephen	(Note 5)

Note 3: The 415,230,000 Shares are held by Vision Ocean Investments Limited, a company incorporated in the British Virgin Islands with limited liability, beneficially owned by Ms. Lo.

• Note 4: The 185,000,000 Shares are held by Sunny Fortunes Limited a company incorporated in British Virgin Islands with limited liability, beneficially owned by Mr. Lok Fai.

• Note 5: The 80,000,000 Shares are held by Pro-Tex International Group Limited a company incorporated in British Virgin Islands with limited liability, beneficially owned by Mr. Ip Hoi-Chuen, Stephen.

• 41 -

GENERAL INFORMATION

APPENDIX IV

Long positions or short positions in equity derivatives in, or in respect of, underlying shares

	Number and			Approximate
	description of	Number of		percentage of
Name of	equity	underlying	Nature of	interest in the
Directors	derivatives	shares	interests	Company
Payton Place	conversion right	500,000,000	Corporate	26.58%
Limited	attached to
	convertible bonds
	for the principal
	amount of
	HK$50,000,000 at
	the conversion price
	of HK$0.10 per
	ordinary share
Ms. Lo Yuk Yee	conversion right	500,000,000	Corporate	26.58%
	attached to		(Note 4)
	convertible bonds
	for the principal
	amount of
	HK$50,000,000 at
	the conversion price
	of HK$0.10 per
	ordinary share

Note 4: The conversion right has been granted to Payton Place Limited, a company incorporated in British Virgin Islands with limited liability and beneficially owned by Ms. Lo.

Save as disclosed above, so far as is known to the Directors, there is no other person who had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, had a direct or indirect interests amounting to 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any members of the Group.

4. MATERIAL CHANGES

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31st December 2002, the date to which its latest published audited financial statements were made up.

• 42 -

GENERAL INFORMATION

APPENDIX IV

5. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration proceedings of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Group.

6. DIRECTORS’ SERVICE CONTRACTS

Each of Ms. Lo Yuk Yee and Prof. Zang Jing Wu has entered into a service contract with the Company which are terminable by either the Company or the Director by giving not less than three months’ notice in writing. Dr. Cao Wu has also entered into a service contract with the Company which are terminable by either the Company or the Director by giving one months’ notice in writing. Except the foregoing, none of the Directors has an unexpired service contract with the Company which is not terminable by the Company within one year without payment of compensation (other than statutory compensation).

7. CONSENTS AND EXPERTS

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

Name	Qualification
First Securities (HK) Limited	Holder of Type 6 Licence under
	Part I of Schedule 5 of SFO
Ernst & Young Transaction	Valuer
Advisory Services Limited

Each of the experts above has given and has not withdrawn their respective written consents to the issue of this circular with inclusion of their letter and report (or extract thereof) dated 22nd November, 2003 and 30th October, 2003 respectively, which have been prepared for inclusion in this circular, and references to their names in the form and context in which they are included.

As at the Latest Practicable Date, none of the experts above has any shareholding interest in the Company or any of its subsidiaries or any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

8. MISCELLANEOUS

The registered office of the Company is Clarendon House, Church Street, Hamilton HM 11, Bermuda and the principal place of business of the Company in Hong Kong is Room 3802 Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong.

• 43 -

GENERAL INFORMATION

APPENDIX IV

The company secretary of the Company is Mr. Chow Wing Chau, Rico who is an associate member of Hong Kong Society of Accountants, and graduated from Macquarie University in Australia with a Bachelor of Economics Degree in Business Finance. He is a qualified accountant of CPA Australia and a senior associate member of the Australian Institute of Banking and Finance. Before joining the Group, he had over 10 years’ experience in accounting, financial management and corporate finance, and held management position with a listed company in Hong Kong.

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

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Room 3802, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong during normal business hours on any day up to and including the date of EGM:–

• (a) the memorandum of association and bye-laws of the Company;

• (b) the Agreement;

• (c) the Supplemental Agreement;

• (d) the annual reports of the Company for each of the three financial years ended 31st December 2001 and 2002, interim report of the Company as at 30th June, 2003;

• (e) the letter from First Securities (HK) Limited as set out in Appendix I to this circular; and

• (f) the valuation report by the Valuer.

• 44 -

NOTICE OF THE EGM

MAXX BIOSCIENCE HOLDINGS LIMITED (曼盛生物科技集團有限公司)[*]

(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Maxx Bioscience Holdings Limited (the “Company”) will be held at 12:00 p.m. on Tuesday, 9th December, 2003 at Charter Room 1, Basement 3, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong for the purpose of considering and, if thought fit, passing the following resolutions which will be purposed as ordinary resolutions:

• (1) “ THAT the conditional agreement dated 8th October, 2003 (the “Agreement”) and the supplemental agreement dated 14th October, 2003 (the “Supplemental Agreement”) entered into between the Company as the purchaser and Payton Place Limited as the Vendor (the “Vendor”) in relation to the purchase of 86% equity interest in New Wealth Assets Ltd., 30% equity interest in Maxx Immunotech Ltd. and the interest bearing shareholders loan given by the Vendor to New Wealth Assets Ltd., the principal amount of which is HK$4,029,514,40, together for a total consideration of HK$78.0 million, to be satisfied by the issue and allotment of convertible note for the principal amount of HK$50 million and promissory note for the principal amount of HK$28 million on the respective terms set out in the Agreement (as amended by the Supplemental Agreement) to the Vendor (or its nominee), be and are hereby approved and the directors of the Company be and are hereby authorized to implement and to take any and all steps and do and/or procure to be done any and all acts and things as they may in their absolute discretion consider to be necessary, desirable or expedient to implement and give effect to the Agreement and Supplemental Agreement.”

• (2) “ THAT conditional upon the passing of ordinary resolution numbered 1 above, the authorized share capital of the Company be increased from HK$160,000,000 comprising 1,600,000,000 shares to HK$1,000,000,000 by the creation of an additional 8,400,000,000 shares, such new shares to rank pari passu in all respects with the existing shares in the capital of the Company, and the directors of the Company be and are hereby authorized to implement and to take any and all steps and do and/or procure to be done any and all acts and things as they may in their absolute discretion consider to be necessary, desirable or expedient to implement and give effect to such increase of the authorized share capital of the Company.”

• (3) “ THAT

• (i) conditional upon the passing of ordinary resolution numbered 1 and 2 above and subject to sub-paragraph (iii) of this resolution, the exercise by the directors of the Company (the “Directors”) during the Relevant Period (as defined below) of all powers of the Company to allot, issue and deal with additional shares of the Company and to make or grant offers, agreements and options (including bonds, warrants, debentures notes or securities convertible into shares of the Company) which might require the exercise of such powers, be and is hereby generally and unconditionally approved in substitution for and to the exclusion of any existing authority previously granted;

* For identification purpose only

• 45 -

NOTICE OF THE EGM

• (ii) the approval in sub-paragraph (i) of this resolution shall authorize the Directors during the Relevant Period to make or grant offers, agreements or options which would or might require the exercise of such powers after the end of the Relevant Period;

• (iii) the aggregate nominal amount of the share capital of the Company allotted or agreed conditionally to be allotted (whether pursuant to an option or otherwise) by the Directors pursuant to the approval in sub-paragraph (i) of this resolution, otherwise than pursuant to (a) the exercise of the conversion rights attaching to any convertible securities issued by the Company, (b) a Rights Issue (as defined below), (c) the exercise of warrants to subscribe for shares of the Company or the exercise of options granted under any share option scheme adopted by the Company, or (d) an issue of shares of the Company in accordance with the bye-laws of the Company, shall not exceed 20% of the aggregate nominal amount of issued shares of the Company at the time of passing this resolution; and

• (iv) for the purpose of this resolution:

“Relevant Period” means the period from the passing of this resolution until whichever is the earliest of:

• (a) the conclusion of the next annual general meeting of the Company;

• (b) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company or any applicable laws to be held; or

• (c) the date on which the authority set out in this resolution is revoked or varied by an ordinary resolution in general meeting.

“Rights Issue” means an offer of shares of the Company open for the period fixed by the Directors to the holders of shares of the Company on the register of members on a fixed record date in proportion to their then holdings of such shares of the Company as at that date (subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to overseas shareholders or fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of, any recognized regulatory body or any stock exchange in any territory applicable to the Company).”

• (4) “ THAT

• (i) conditional upon the passing of resolution numbered 1 and 2 and subject to subparagraph (ii) below, the exercise by the directors of the Company (the “Directors”) during the Relevant Period (as defined below) of all powers of the Company to repurchase issued shares of the Company, subject to and in accordance with all applicable laws and the bye-laws of the Company, be and is hereby generally and unconditionally approved;

• 46 -

NOTICE OF THE EGM

• (ii) the aggregate nominal amount of the shares of the Company which the Company is authorized to repurchase pursuant to the approval in sub-paragraph (i) above shall not exceed 10% of the aggregate nominal amount of the issued shares of the Company at the time of passing this resolution; and

• (iii) for the purpose of this resolution:

  • “Relevant Period” means the period from the passing of this resolution until whichever is the earliest of:

  • (a) the conclusion of the next annual general meeting of the Company;

  • (b) the expiration of the period within which the next annual general meeting of the Company is required by the bye-laws of the Company or any applicable laws to be held; or

  • (c) the date on which the authority set out in this resolution is revoked or varied by an ordinary resolution in general meeting.”

• (5) “ THAT conditional upon the passing of ordinary resolutions numbered 3 and 4, the aggregate nominal amount of shares of the Company which are repurchased by the Company under the authority granted to the directors of the Company (the “Directors”) as mentioned in ordinary resolution numbered 4 be added to the aggregate nominal amount of share capital that may be allotted or agreed conditionally or unconditionally to be allotted by the Directors pursuant to ordinary resolution numbered 3 provided that such amount shall not exceed 10% of the aggregate nominal amount of the share capital in issue at the time of passing of this resolution.”

By Order of the Board Chow Wing Chau, Rico Company Secretary

Hong Kong, 22nd November, 2003

• 47 -

NOTICE OF THE EGM

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

Principal Place of Business in Hong Kong: Room 3802 Wu Chung House 213 Queen’s Road East Wanchai Hong Kong

Notes:–

1. A member of the Company entitled to attend and vote at the above meeting is entitled to appoint one or more proxies to attend and vote instead of him. A proxy need not be a member of the Company.

2. In order to be valid, a form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy thereof, must be returned to the Company Secretary, Rico Chow, at Room 3802, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong, in accordance with the instructions printed thereon as soon as possible but in any event not less than 48 hours before the time appointed for the meeting (or any adjourned meeting thereof).

3. Completion and return of the form of proxy shall not preclude a member of the Company from attending and voting in person at the meeting (or any adjourned meeting thereof) or on the poll concerned and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

4. Where there are joint holders of any share, any one such holders may votes at the meeting either personally or by proxy in respect of such share as if he was solely entitled thereto; but if more than one such joint holders be present at the meeting personally or by proxy, then the one of such holders whose name stands first on the register of members in respect of such share shall alone be entitled to vote in respect thereof.

5. 48 -