Greenheart Group Limited - Proxy Solicitation & Information Statement 2004

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of 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 renren Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

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**renren Holdings Limited 人人控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

PROPOSED RIGHTS ISSUE

OF NOT LESS THAN 5,227,260,944 RIGHTS SHARES AND NOT MORE THAN 5,426,868,984 RIGHTS SHARES AT HK$0.010 PER RIGHTS SHARE PAYABLE IN FULL ON ACCEPTANCE (ON THE BASIS OF FOUR RIGHTS SHARES FOR EVERY SHARE HELD) AND GENERAL MANDATE TO ISSUE SHARES

Financial adviser and Manager

TIS Securities (HK) Limited

Joint Independent Financial Advisers to the Independent Board Committee

Menlo Capital Limited

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Underwriters

TIS Securities (HK) Limited

Upbest Securities Company Limited Alpha Alliance Securities Company Limited Emperor Securities Limited Great China Brokerage Limited

Lei Shing Hong Securities Limited

It should be noted that the Underwriting Agreement (as defined herein) contains provisions granting TIS (as defined herein) (on behalf of the Underwriters (as defined herein)) the right, to terminate the Underwriting Agreement, which may be exercised at any time prior to 5:00 p.m. on the business day immediately prior to 26th February, 2004, the intended date of despatch of certificates of the Rights Shares (as defined herein), to those entitled thereto: (a) there develops, occurs or comes into force:– (i) any new law or government regulation or other occurrence of any nature whatsoever which in the absolute opinion of TIS (for and on behalf of the Underwriters) adversely affects or may adversely affect the business of the Group or any part thereof to a material extent or is materially adverse in the context of the Rights Issue (as defined herein); or (ii) any change in local, national, international, financial, political or economic conditions which in the absolute opinion of TIS (for and on behalf of the Underwriters) is materially adverse in the context of the Rights Issue; or (iii) any adverse change in market conditions which in the absolute opinion of TIS (for and on behalf of the Underwriters) materially prejudicially affects the Rights Issue and makes it inadvisable or inexpedient to proceed therewith, or (b) there comes to the notice of any of the Underwriters any matter or event showing any of the representations and warranties referred in the Underwriting Agreement to be untrue or inaccurate in any respect which TIS (for and on behalf of the Underwriters) considers to be material, then and in any such case TIS (for and on behalf of the Underwriters) may (after such consultation with the Company and/or its adviser as the circumstances shall admit) by notice in writing given to the Company on or before 5:00 p.m. on the business day immediately prior to the intended date of despatch of certificates of the Rights Shares rescind the Underwriting Agreement and thereupon all obligations of the Underwriters thereunder will cease and determine. If TIS (for and on behalf of the Underwriters) terminates the Underwriting Agreement, then the Rights Issue will not proceed.

Existing Shares will be dealt with on an ex-rights basis from 29th January, 2004. Rights Shares will be dealt with in their nil-paid form from 10th February, 2004 to 18th February, 2004 (both dates inclusive). If TIS, on behalf of the Underwriters, terminates the Underwriting Agreement or the conditions of the Rights Issue are not fulfilled, the Rights Issue will not proceed.

Any dealing in Shares from 29th January, 2004 to the date on which all conditions of the Underwriting Agreement are fulfilled or Rights Shares in their nil-paid form between 10th February, 2004 to 18th February, 2004, is accordingly at the investors’ own risk.

If in any doubt, investors should consider obtaining professional advice.

Notice of a special general meeting of renren Holdings Limited to be held at the Park Lane Room, 27th Floor, Park Lane Hotel, 310 Gloucester Road, Causeway Bay, Hong Kong at 9:30 a.m. on Friday, 6th February, 2004 is set out on pages 44 to 45 of this circular.

Whether or not you are able to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the principal office of renren Holdings Limited, Room 704, 1 Lyndhurst Tower, 1 Lyndhurst Terrace, Central, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof. Completion and return of the accompanying form of proxy will not preclude you from attending and voting in person at the meeting or any adjourned meeting should you so wish.

A letter of advice from the Joint Independent Financial Advisers (as defined herein) to the Independent Board Committee (as defined herein) is set out on pages 21 to 35 of this circular.

19th January, 2004

* For identification purpose only

EXPECTED TIMETABLE

2004 Last day of dealings in Shares on a cum-rights basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28th January Commencement of dealings in Shares on an ex-rights basis . . . . . . . . . . . . . . . . . . . . . . . . . . . 29th January Latest time for lodging transfer of Shares in order to qualify for the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on 30th January Register of member closes to determine the eligibility of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2nd February to 6th February Latest time for lodging proxy forms for the SGM . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on 4th February SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on 6th February Record Date for the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6th February Despatch of Rights Issue prospectuses, provisional allotment letters & forms of application for excess Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6th February Register of members re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9th February First day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10th February Latest time for splitting nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on 13th February Last day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18th February Latest time for payment and acceptance of Rights Shares . . . . . . . . . . . . . . . . 4:00 p.m. on 23rd February Latest time for the Rights Issue to become unconditional . . . . . . . . . . . . . . . . 5:00 p.m. on 25th February Announcement of results of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25th February Despatch of refund cheques in respect of unsuccessful or partially unsuccessful applications for excess Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . 26th February Despatch of certificates for fully paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26th February Dealing of fully paid Rights Shares commence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1st March

	Pages
Responsibility Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Termination of the Underwriting Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Proposed Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Issue statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Qualifying Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Terms of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Subscription Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Warning of the risks in trading of Shares and Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Shareholding Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Status of the Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Certificates of the Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Rights of Overseas Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Application for excess Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Listing and dealings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
The Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Irrevocable undertakings from Rich Delta and its associates . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Termination of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Conditions of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Reasons for the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Adjustment to the subscription price of the Options and conversion
price of the Convertible Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
The New Issue Mandate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Financial positions and operations of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Previous fund raising exercises of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
The SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Letter from the Joint Independent Financial Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Appendix – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	44

ii -

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular, and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

TERMINATION OF THE UNDERWRITING AGREEMENT

It should be noted that the Underwriting Agreement contains provisions granting TIS (on behalf of the Underwriters) the right, to terminate the Underwriting Agreement, which may be exercised at any time prior to 5:00 p.m. on the Business Day immediately prior to 26th February, 2004, the intended date of despatch of certificates of the Rights Shares, to those entitled thereto:

(a) there develops, occurs or comes into force:–
(i) any new law or government regulation or other occurrence of any nature whatsoever which in the absolute opinion of TIS (for and on behalf of the Underwriters) adversely affects or may adversely affect the business of the Group or any part thereof to a material extent or is materially adverse in the context of the Rights Issue; or
(ii) any change in local, national, international, financial, political or economic conditions which in the absolute opinion of TIS (for and on behalf of the Underwriters) is materially adverse in the context of the Rights Issue; or
(iii) any adverse change in market conditions which in the absolute opinion of TIS (for and on behalf of the Underwriters) materially prejudicially affects the Rights Issue and makes it inadvisable or inexpedient to proceed therewith,

or

(b) there comes to the notice of any of the Underwriters any matter or event showing any of the representations and warranties referred in the Underwriting Agreement to be untrue or inaccurate in any respect which TIS (for and on behalf of the Underwriters) considers to be material,

then and in any such case TIS (for and on behalf of the Underwriters) may (after such consultation with the Company and/or its adviser as the circumstances shall admit) by notice in writing given to the Company on or before 5:00 p.m. on the Business Day immediately prior to the intended date of despatch of certificates of the Rights Shares rescind the Underwriting Agreement and thereupon all obligations of the Underwriters thereunder will cease and determine. If TIS (for and on behalf of the Underwriters) terminates the Underwriting Agreement, then the Rights Issue will not proceed.

DEFINITIONS

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

“Announcement”

the announcement of the Company dated 12th December, 2003 in relation to the Rights Issue

“Board” the board of Directors “Business Day” any day (other than a Saturday) on which licensed banks in Hong Kong are generally open for business throughout their normal business hours

“CCASS”

the Central Clearing and Settlement System established and operated by HKSCC

renren Holdings Limited, an exempted company incorporated in Bermuda with limited liability, the issued Shares are listed on the Stock Exchange

“Company” renren Holdings Limited, an exempted company incorporated in Bermuda with limited liability, the issued Shares are listed on the Stock Exchange
“Convertible Bonds” a series of 12% bearer redeemable convertible bonds issued by the Company in the aggregate principal amount of HK$3 million

“Directors” directors of the Company “Group” the Company and its subsidiaries “HKSCC” Hong Kong Securities Clearing Company Limited “Hong Kong” the Hong Kong Special Administrative Region of the PRC

“Independent Board Committee” the independent board committee of the Company formed by the independent non-executive Directors to recommend the Independent Shareholders on the Rights Issue “Independent Shareholders” Shareholders other than Rich Delta and its associates (as defined in the Listing Rules)

“Joint Independent Menlo and Wallbanck Financial Advisers” “Latest Practicable Date” 15th January, 2004, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein “Listing Committee” has the same meaning ascribed thereto in the Listing Rules

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

DEFINITIONS

“Menlo”	Menlo Capital Limited, a licensed corporation within the meaning
	of the SFO to perform type 6 regulated activities (advising on
	corporate finance) under the SFO and the joint independent
	financial adviser to the Independent Board Committee in respect
	of, among others, the Rights Issue
“Mr. Mak”	Mr. Mak Chi Yeung, a Director and the beneficial owner of
	632,184,558 Shares which represented approximately 48.38% of
	the issued share capital of the Company as at the Latest Practicable
	Date
“New Issue Mandate”	the general mandate to the Directors to issue and allot shares of
	the Company up to 20% of the share capital in issue and to be
	issued pursuant to the Rights Issue
“Options”	options to subscribe for Shares granted under the share option
	scheme adopted by the Company on 26th June, 2000
“Overseas Shareholders”	Shareholders whose names appear on the register of members of
	the Company as at the close of the business on the Record Date
	and whose addresses as shown on such register are outside Hong
	Kong
“PRC”	the People’s Republic of China which for the purpose of this
	circular, excludes Hong Kong
“Prospectus Documents”	the Rights Issue prospectuses, the provisional allotment letters
	and the forms of application for excess Rights Shares
“Qualifying Shareholders”	Shareholders other than the Overseas Shareholders whose names
	appear on the register of members of the Company as at the close
	of the business on the Record Date
“Record Date”	6th February, 2004, the record date by reference to which
	entitlements to the Rights Issue will be determined
“Rich Delta”	Rich Delta Development Ltd., a company incorporated in the
	British Virgin Islands with limited liability, the beneficial owner
	of 632,184,558 Shares which represented approximately 48.38%
	of the issued share capital of the Company as at the Latest
	Practicable Date and a wholly owned subsidiary of Sky Concord
“Rights Issue”	the proposed issue of not less than 5,227,260,944 Rights Shares
	and not more than 5,426,868,984 Rights Shares at a price of
	HK$0.01 per Rights Share on the basis of 4 Rights Shares for
	every Share held on the Record Date
“Rights Share(s)”	new Shares to be allotted and issued in respect of the Rights Issue
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
	- 4 -

	DEFINITIONS
“SGM”	the special general meeting of the Company to be held on 6th
	February, 2004
“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of the Shares
“Sky Concord”	Sky Concord Development Ltd., a company incorporated in the
	British Virgin Islands which is beneficially owned by Mr. Mak
	and is the beneficial owner of the entire issued share capital of
	Rich Delta
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription Price”	HK$0.01 per Rights Share
“TIS”	TIS Securities (HK) Limited, a licensed corporation within the
	meaning of the SFO to perform types 1, 4, 6, 7 and 9 regulated
	activities (dealing in securities, advising on securities, advising
	on corporate finance, providing automated trading services and
	asset management respectively) under the SFO and the financial
	adviser and manager to the Rights Issue
“Underwriters”	TIS Securities (HK) Limited,
	Upbest Securities Company Limited,
	Alpha Alliance Securities Company Limited,
	Emperor Securities Limited,
	Great China Brokerage Limited and
	Lei Shing Hong Securities Limited
“Underwriting Agreement”	the underwriting agreement dated 3rd December, 2003
	(supplemented on 15th January, 2004) in relation to the Rights
	Issue entered into between the Company, the executive Directors,
	Rich Delta, Sky Concord and the Underwriters
“Wallbanck”	Wallbanck Brothers Securities (Hong Kong) Limited, a licensed
	corporation within the meaning of the SFO under transitional
	arrangement to carry on regulated activities of types 4, 6 and 9
	(advising on securities, advising on corporate finance and asset
	management respectively) under the SFO and the joint independent
	financial adviser to the Independent Board Committee in respect
	of, among others, the Rights Issue
“HK$”	Hong Kong dollars
“%”	per cent.

PROPOSED RIGHTS ISSUE

ISSUE STATISTICS (as at the Latest Practicable Date)

Basis of the Rights Issue:

four Rights Shares for every Share held on the Record Date

Number of Shares in issue:

1,306,815,236 Shares

Number of Rights Shares:

not less than 5,227,260,944 Rights Shares and not more than 5,426,868,984 Rights Shares (Note 1)

Subscription Price: Outstanding Options granted:

HK$0.01 per Rights Share, payable in full upon acceptance

Options entitling the holders thereof to subscribe for an aggregate of 761,600 Shares (Note 2)

Outstanding Convertible Bonds:

HK$1.5 million principal amount of the Convertible Bonds, carrying rights to convert the principal amount and accrued interest thereon into Shares at the price of HK$0.032 per Share, subject to adjustment

Notes:

1. The minimum number of Rights Shares was arrived at on the basis of 1,306,815,236 Shares in issue as at the Latest Practicable Date. The maximum number of Rights Shares is arrived at on the basis that all the conversion/ subscription rights under the outstanding Convertible Bonds and Options are exercised on or before 30th January, 2004. The maximum number of the Rights Shares was increased to 5,426,868,984 Rights Shares (instead of 5,425,885,040 Rights Shares as originally described in the Announcement) as a result of the extension of the latest date for exercising the conversion rights under the outstanding Convertible Bonds in order to qualify for the Rights Issue from 13th January, 2004 to 30th January, 2004.

2. Amongst these Options, Options to subscribe for 576,000 Shares were granted to Mr. Mak and the remaining Options to subscribe for 185,600 Shares were granted to employees of the Group.

LETTER FROM THE BOARD

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**renren Holdings Limited 人人控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

Executive Directors: Mak Chi Yeung (Chairman) Cheng Wai Keung

Independent non-executive Directors: Lo Chi Man, Joseph Wong Kwong Lung, Terence

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

Head office and principal place of business in Hong Kong: Room 704, Lyndhurst Tower 1 Lyndhurst Terrace, Central Hong Kong

19th January, 2004

To the Shareholders

PROPOSED RIGHTS ISSUE OF NOT LESS THAN 5,227,260,944 RIGHTS SHARES AND NOT MORE THAN 5,426,868,984 RIGHTS SHARES AT HK$0.010 PER RIGHTS SHARE PAYABLE IN FULL ON ACCEPTANCE (ON THE BASIS OF FOUR RIGHTS SHARES FOR EVERY SHARE HELD) AND GENERAL MANDATE TO ISSUE SHARES

Dear Sir or Madam,

INTRODUCTION

The Directors announced on 12th December, 2003 that the Company proposed to effect the Rights Issue. The purpose of this circular is to give you further information on the Rights Issue and to set out the advice of the Joint Independent Financial Advisers to the Independent Board Committee and the recommendation of the Independent Board Committee in respect of the Rights Issue and to give you notice of the SGM at which the necessary resolutions will be proposed to consider and, if thought fit, approve the Rights Issue and the New Issue Mandate.

* For identification purpose only

LETTER FROM THE BOARD

ISSUE STATISTICS (as at the Latest Practicable Date)

Basis of the Rights Issue: four Rights Shares for every Share held on the Record Date Number of Shares in issue: 1,306,815,236 Shares Number of Rights Shares: not less than 5,227,260,944 Rights Shares and not more than 5,426,868,984 Rights Shares (Note1) Subscription Price: HK$0.01 per Rights Share, payable in full upon acceptance Outstanding Options granted: Options entitling the holders thereof to subscribe for an aggregate of 761,600 Shares (Note 2) Outstanding Convertible Bonds: HK$1.5 million principal amount of the Convertible Bonds, carrying rights to convert the principal amount and accrued interest thereon into Shares at the price of HK$0.032 per Share, subject to adjustment

Notes:

2. Amongst these Options, Options to subscribe for 576,000 Shares were granted to Mr. Mak and the remaining Options to subscribe for 185,600 Shares were granted to employees of the Group.

QUALIFYING SHAREHOLDERS

The Company will send copies of the Prospectus Documents to Qualifying Shareholders only.

A Qualifying Shareholder must:

be registered as a member of the Company on the Record Date; and
have an address in Hong Kong which appears on the register of members of the Company on the Record Date.

In order to be registered as members of the Company on the Record Date and to qualify for the Rights Issue, Shareholders must lodge all transfers of Shares (together with the relevant share certificates) with the Company’s branch share registrar in Hong Kong by 4:00 p.m. on 30th January, 2004.

LETTER FROM THE BOARD

The branch share registrar of the Company in Hong Kong is:

Abacus Share Registrars Limited G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong

The register of members of the Company will be closed from 2nd February, 2004 to 6th February, 2004 (both dates inclusive). No transfer of Shares will be registered during this period.

TERMS OF THE RIGHTS ISSUE

The Company will provisionally allot four Rights Shares, in nil-paid form, for every Share held by the Qualifying Shareholders on the Record Date. Based on the 1,306,815,236 Shares in issue as at the Latest Practicable Date, 5,227,260,944 Rights Shares will be issued under the Rights Issue. Assuming the outstanding Convertible Bonds and Options are exercised in full on or before 30th January, 2004, the total Shares will become 1,356,717,246 Shares and a maximum number of 5,426,868,984 Rights Shares will be issued under the Rights Issue. The terms of the Rights Issue have been agreed upon after arm’s length negotiation between the Company and the Underwriters.

SUBSCRIPTION PRICE

HK$0.010 per Rights Share, payable in full upon acceptance.

The Subscription Price represented:

a discount of approximately 86% to the closing price of HK$0.073 per Share as quoted on the Stock Exchange on 2nd December, 2003, being the last trading day prior to the suspension of Shares on 3rd December, 2003;
a discount of approximately 85% to the average closing price of approximately HK$0.067 per Share as quoted on the Stock Exchange for the last 10 trading days up to and including 2nd December, 2003, being the last trading day prior to the suspension of Shares on 3rd December, 2003;
a discount of approximately 56% to the theoretical ex-rights price of HK$0.023 per Share based on the closing price as quoted on the Stock Exchange on 2nd December, 2003; and
a premium of approximately 135% to the net tangible asset value per share of approximately HK$0.00426 (based on the Group’s unaudited consolidated net tangible asset value of approximately HK$5,573,000 as at 30th June, 2003 divided by the number of Shares in issue as at the Latest Practicable Date of 1,306,815,236 Shares).

The Subscription Price has been agreed upon after arm’s length negotiation between the Company and the Underwriters. The Directors, when determining the Subscription Price for the Rights Issue, took into account the difficulties in securing underwriting interests for the Rights Shares owing to the start of

LETTER FROM THE BOARD

recovery economic environment with uncertain future and thin trading volume of the Shares. Accordingly, the Directors consider that it would be difficult to raise funding in the equity market through the Rights Issue without offering discounts of subscription price so as to attract more participation from the Qualifying Shareholders in the Rights Issue. The Directors also view that the Subscription Price, which represents a premium to the net tangible asset value per share of approximately HK$0.00426 (based on the Group’s unaudited consolidated net tangible asset value of approximately HK$5,573,000 as at 30th June, 2003 divided by 1,306,815,236 Shares being the number of Shares in issue as at the Latest Practicable Date), is fair and reasonable on the equity ground to the Qualifying Shareholders. As the Shares have been trading below HK$0.045 for more than nine months since the beginning of 2003, the Directors do not believe securing underwriting at the existing scale is possible at a higher subscription price. The Directors, having considered the benefits through conducting the Rights Issue brought to the Company and basis of the provisional entitlement to the Qualifying Shareholders, opine that the Subscription Price is fair and reasonable to the Shareholders.

WARNING OF THE RISKS IN TRADING OF SHARES AND RIGHTS SHARES

Shares will be dealt with on an ex-rights basis from 29th January, 2004. Rights Shares will be dealt with in their nil-paid form from 10th February, 2004 to 18th February, 2004 (both dates inclusive). If TIS, on behalf of the Underwriters, terminates the Underwriting Agreement (see the paragraph headed “Termination of the Underwriting Agreement” below) or the conditions of the Rights Issue (see the paragraph headed “Conditions of the Rights Issue” below) are not fulfilled, the Rights Issue will not proceed.

If in any doubt, investors should consider obtaining professional advice.

SHAREHOLDING STRUCTURE

Assuming that no further Shares will be issued from the Latest Practicable Date up to and including the Record Date, the shareholding structure of the Company before and after the Rights Issue is as follows:

	Before the	Rights Issue	After the Rights	Issue
	No. of Shares	%	No. of Shares	%
Rich Delta	632,184,558	48.38	3,160,922,790	48.38
Sky Concord_(Note)_	632,184,558	48.38	3,160,922,790	48.38
Mr. Mak_(Note)_	632,184,558	48.38	3,160,922,790	48.38
Public	674,630,678	51.62	3,373,153,390	51.62
Total issued Shares	1,306,815,236	100.00	6,534,076,180	100.00

Note: These 632,184,558 Shares are beneficially owned by Rich Delta, which is a wholly owned subsidiary of Sky Concord which is in turn beneficially owned by Mr. Mak.

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LETTER FROM THE BOARD

STATUS OF THE RIGHTS SHARES

The Rights Shares (when allotted, issued and fully paid) will rank pari passu in all respects with the Shares in issue on the date of allotment and issue of the Rights Shares. Holders of the Rights Shares (when allotted, issued and fully paid) will be entitled to receive all future dividends and distributions which are declared, made or paid on or after the date of allotment and issue of the Rights Shares.

CERTIFICATES OF THE RIGHTS SHARES

Subject to the conditions of the Rights Issue being fulfilled, certificates for all fully paid Rights Shares are expected to be posted by 26th February, 2004 to those Shareholders who have accepted the provisional allotment of the Rights Shares or applied for and been allotted the excess Rights Shares, and paid for the Rights Shares. The dealings of the fully paid Rights Shares are expected to commence on or about 1st March, 2004.

RIGHTS OF OVERSEAS SHAREHOLDERS

The Prospectus Documents will not be registered or filed under the applicable securities legislation of any jurisdictions other than Hong Kong and Bermuda. Having reviewed the register of members of the Company, the Directors have exercised the discretion given to them under the bye-laws of the Company, among other things, not to offer the Rights Shares to persons in territories where in their opinion the Rights Issue would or might, in the absence of compliance with registration or other special formalities in such territories, be unlawful or impracticable. Accordingly, no provisional allotment of Rights Shares will be made to Overseas Shareholders. The Company will send a Rights Issue prospectus to each of the Overseas Shareholders for their information only. The Company will not send provisional allotment letters or forms of application for excess Rights Shares to Overseas Shareholders.

If a premium (net of expenses) can be obtained, the Company will sell the Rights Shares which would otherwise have been provisionally allotted to the Overseas Shareholder once dealings in the nilpaid Rights Shares commence. The proceeds of each sale, less expenses, which amount to HK$100 or more will be paid by cheque to the relevant Overseas Shareholder in Hong Kong dollars as soon as practicable. The Company will retain individual amount of less than HK$100 for its own benefit.

APPLICATION FOR EXCESS RIGHTS SHARES

Qualifying Shareholders may apply (using forms of application for excess Rights Shares) for any unsold entitlement of the Overseas Shareholders, any unsold Rights Shares created by adding together fractions of Rights Shares and any Rights Shares provisionally allotted but not accepted.

The Company will allocate excess Rights Shares at its sole discretion, on a fair and equitable basis.

LISTING AND DEALINGS

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Rights Shares in both nil-paid and fully-paid forms.

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LETTER FROM THE BOARD

Subject to the granting of the listing of, and permission to deal in, the Rights Shares in their nilpaid and fully-paid forms by the Stock Exchange, the Rights Shares in their nil-paid and fully-paid forms will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the respective commencement dates of dealings in the Rights Shares in their nil-paid and fully-paid forms on the Stock Exchange or such other dates as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Provisional allotments of the Rights Shares made to Qualifying Shareholders will be transferable and the existing Shares will be dealt with on an ex-rights basis with effect from 29th January, 2004 and that the Rights Shares will be dealt with in their nil-paid form from 10th February, 2004 to 18th February, 2004 (both dates inclusive). Such dealings will take place whilst the conditions to which the Rights Issue is subject remain unfulfilled. Any persons dealing in the Shares from 29th January, 2004 to the date on which all conditions to which the Rights Issue is subject are fulfilled (which is expected to be prior to 5:00 p.m. on 25th February, 2004) and any persons dealing in nil-paid Rights Shares from 10th February, 2004 to 18th February, 2004 (being the first and last dates of dealings in the nil-paid Rights Shares, respectively), will accordingly bear the risk that the Rights Issue may not become unconditional. Any investor who is in any doubt about his position is advised to consult his own professional adviser.

Dealing in the Rights Shares (in both nil-paid and fully-paid forms) will be in board lots of 8,000 Shares and be subject to the payment of stamp duty in Hong Kong.

THE UNDERWRITING AGREEMENT

Underwriters: TIS Securities (HK) Limited, Upbest Securities Company Limited, Alpha Alliance Securities Company Limited, Emperor Securities Limited, Great China Brokerage Limited and Lei Shing Hong Securities Limited

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

Number of Rights Shares Not less than 2,698,522,712 Rights Shares and not more underwritten: than 2,898,130,752 Rights Shares (Note) Commission: 2.5% of the Subscription Price of the Rights Shares underwritten by the Underwriters.

Note: Excluding the 2,528,738,232 Rights Shares provisionally allotted to Rich Delta pursuant to Rich Delta’s undertaking to the Company and the Underwriters in the Underwriting Agreement.

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LETTER FROM THE BOARD

Save as TIS will become substantial shareholder of the Company immediately after the completion of the Rights Issue in case its underwriting commitment be fully taken up, none of other Underwriters will become substantial shareholders (as defined in the Listing Rules) of the Company immediately after the completion of the Rights Issue.

By a supplemental agreement dated 15th January, 2004 to the underwriting agreement dated 3rd December, 2003, the maximum number of the Rights Shares was increased to 5,426,868,984 Rights Shares as a result of the extension of the latest date for exercising the conversion rights under the outstanding Convertible Bonds in order to qualify for the Rights Issue to 30th January, 2004 and accordingly, a maximum number of 2,898,130,752 Rights Shares will be fully underwritten by the Underwriters.

IRREVOCABLE UNDERTAKINGS FROM RICH DELTA AND ITS ASSOCIATES

As at the Latest Practicable Date, Rich Delta is the beneficial owner of 632,184,558 Shares which represented approximately 48.38% of the issued share capital of the Company. Rich Delta is a wholly owned subsidiary of Sky Concord which is in turn beneficially owned by Mr. Mak. Rich Delta has given an irrevocable undertaking in the Underwriting Agreement in favour of the Company and the Underwriters to accept or procure acceptance in full of the 2,528,738,232 Rights Shares which will be provisionally allotted to Rich Delta pursuant to the Rights Issue. Each of Sky Concord and Mr. Mak has given an irrevocable undertaking in the Underwriting Agreement to the Company and the Underwriters to procure Rich Delta to fully perform its obligations under the Underwriting Agreement. Neither Mr. Mak, Rich Delta nor Sky Concord has decided whether to apply for excess Rights Shares as at the Latest Practicable Date. The minimum amount and maximum amount of remaining balance of 2,698,522,712 and 2,898,130,752 Rights Shares respectively will be fully underwritten by the Underwriters.

TERMINATION OF THE UNDERWRITING AGREEMENT

(a) there develops, occurs or comes into force:–
(i) any new law or government regulation or other occurrence of any nature whatsoever which in the absolute opinion of TIS (for and on behalf of the Underwriters) adversely affects or may adversely affect the business of the Group or any part thereof to a material extent or is materially adverse in the context of the Rights Issue; or
(ii) any change in local, national, international, financial, political or economic conditions which in the absolute opinion of TIS (for and on behalf of the Underwriters) is materially adverse in the context of the Rights Issue; or
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LETTER FROM THE BOARD

(iii) any adverse change in market conditions which in the absolute opinion of TIS (for and on behalf of the Underwriters) materially prejudicially affects the Rights Issue and makes it inadvisable or inexpedient to proceed therewith,

(b) there comes to the notice of any of the Underwriters any matter or event showing any of the representations and warranties referred in the Underwriting Agreement to be untrue or inaccurate in any respect which TIS (for and on behalf of the Underwriters) considers to be material,

CONDITIONS OF THE RIGHTS ISSUE

The Rights Issue is conditional upon the following conditions being fulfilled:

the passing at the SGM of necessary resolution by Independent Shareholders to implement the Rights Issue;
the signing by or on behalf of two Directors of 3 copies of the Prospectus Documents;
the registration of one such copy signed by or on behalf of two Directors of the Prospectus Documents (and all documents required to be attached thereto) by the Registrar of Companies in Hong Kong and the filing of one such copy of the Prospectus Documents signed by any one Director by the Registrar of Companies in Bermuda;
the posting of the Rights Issue prospectus to the Qualifying Shareholders and the posting of the provisional allotment letters and the excess application forms to the Qualifying Shareholders (other than the Overseas Shareholders);
the performance in full by Rich Delta and its associates of their undertakings in respect of Rich Delta’s taking up its rights entitlements in full referred in the Underwriting Agreement; and
the Listing Committee of the Stock Exchange granting or agreeing to grant (subject only to allotment) listings of and permission to deal in the Rights Shares, in nil-paid and fully paid forms,

by 5:00 p.m. on the Business Day immediately prior to the intended date of despatch of certificates of the Rights Shares (or such later date or dates as TIS (for and on behalf of the Underwriters) may agree). Under the Underwriting Agreement, none of the above conditions can be waived.

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LETTER FROM THE BOARD

USE OF PROCEEDS

The estimated net proceeds of the Rights Issue are not less than approximately HK$49 million and not more than approximately HK$51 million of which approximately HK$5 million will be applied to repay a loan from a third party, a Director’s loan and other payables of the Group, approximately HK$25 million will be applied to the future investment of the Group and the balance of not more than HK$21 million will be used for general working capital of the Group. Any such use of the proceeds will be in line with the principal business of the Group. The Directors regularly search for suitable investment projects to expand the investment portfolio of the Group.

The Directors estimate that approximately HK$25 million of the net proceeds of the Rights Issue will be used in future investment for forming a joint venture between the Group and Guangzhou Sunroom Information Industry Company Limited, an independent third party in the PRC, for investing in internet and retail music industries in the PRC. Details of the joint venture investment can be referred in the announcement made by the Company dated 3rd November, 2003. However, the Directors wish to state that the negotiation of this potential investment project is in a preliminary stage and the Company is still conducting feasibilities studies. If the Group finally does not invest in this potential project, the Directors currently consider that this approximately HK$25 million of the net proceeds of the Rights Issue will also be used for investing in any project with good prospect in the future. The Directors envisage that the balance of not more than approximately HK$21 million of the net proceeds of the Rights Issue will be used for general working capital of the Group to support the day-to-day operation of the Group’s business, of which approximately HK$9 million will be used for general office administrative expenses, approximately HK$4 million will be used to pay legal and professional fees and approximately HK$8 million will be used to support sales and marketing activities and for general miscellaneous working capital.

The Directors believe that it is in the best interests of the Company and its Shareholders to enlarge the capital base of the Company through the Rights Issue, as the enlarged capital base will support the continuing development of the Group’s existing business activities. The Rights Issue will allow the Qualifying Shareholders to participate in the growth of the Group as the Company will utilise the raised fund for maintaining the operation of the business of the Group, enhancing the financial positions of the Group and providing capital for the Group to invest in any project with good prospect should there arise of any opportunity in the future.

REASONS FOR THE RIGHTS ISSUE

The Company is an investment holding company, its subsidiaries are principally engaged in the media and telecom business in the operation of “renren.com”, the provision of Internet products and services and information technology business in Hong Kong and the PRC. The Directors consider that the Rights Issue is in the interest of the Company as the Rights Issue will improve the financial positions of the Group and facilitate the Group’s future investment should there arise of any good investment opportunity. The Directors are of the view that without new funding to the Group, the financial positions of the Group will not be able to be substantially improved. The proceeds raised from the Rights Issue will reduce the current liabilities of the Group as at 28th November, 2003 to nil and strengthen the assets of the Group substantially.

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LETTER FROM THE BOARD

ADJUSTMENT TO THE SUBSCRIPTION PRICE OF THE OPTIONS AND CONVERSION PRICE OF THE CONVERTIBLE BONDS

At the Latest Practicable Date, none of Mr. Mak, Rich Delta and Sky Concord and their associates held any Convertible Bonds, and Mr. Mak had not exercised any of the Options granted to him on 23rd July, 2001 to subscribe for 576,000 Shares. Subject to the Rights Issue becomes unconditional, the subscription price payable upon exercise of the subscription rights attaching to the Options and conversion price for the Shares upon exercise of the Convertible Bonds will be adjusted in accordance with the share option scheme of the Company and the instrument constituting the Convertible Bonds. Further announcement regarding the details of the adjustment will be made when appropriate.

THE NEW ISSUE MANDATE

In connection with the enlarged share capital as a result of the Rights Issue, the Directors will also seek the approval of Shareholders for the grant of a general mandate to issue further shares not exceeding 20% of the issued share capital of the Company as enlarged by the Rights Issue in the SGM.

FINANCIAL POSITIONS AND OPERATIONS OF THE GROUP

According to the latest unaudited management accounts of the Group, as at 30th November, 2003, the Group had outstanding Convertible Bonds of total amount of HK$3,000,000, a Director’s loan of HK$2,070,000, a loan from a third party of HK$530,000 and other payables of HK$2,314,000 and had cash and bank balance of approximately HK$200,000 and listed securities investment of approximately HK$3,395,000 at the prevailing market price. As at 30th November, 2003, the Group’s unaudited consolidated net tangible asset value was approximately HK$8,849,000 (approximately HK$1,989,000 as at 31st December, 2002 in accordance with the consolidated audited accounts; approximately HK$5,573,000 as at 30th June, 2003 in accordance with the consolidated unaudited accounts). The Directors consider that though the Group faces a difficult environment, the current liabilities of the Group have been improved from HK$12.49 million as at 30th June, 2003 to approximately HK$4.9 million as at 30th November, 2003. For the eleven months ended November 2003, the turnover of the Group was approximately HK$2.8 million based on the latest unaudited management accounts of the Group, as at 30th November, 2003. The amount of approximately HK$0.9 million in difference in turnover, as previously described in the Announcement, is due to the recognition of additional transactions after the Announcement relating to the disposals of invested securities. The inclusion of such amounts in the management accounts have been overlooked at the stage of the preparations of the Announcement due to the heavy work load of the Company.

At the Latest Practicable Date, the Group maintained 8 employees in Hong Kong. The principal activities of the Group comprise telecom products retail, information technology project investment, securities investment, project advisory and loan and financing advisory. Although the telecom product retail have been substantially reduced due to the poor local economic prospective in the first half year of 2003, the Group is interested in other information technology projects which are mainly domiciled in the PRC which have a different economic perspective as compared to Hong Kong. As stated in paragraph headed “Use of Proceeds” above, the Group is negotiating with Guangzhou Sunroom Information Industry Company Limited, an independent third party in the PRC, to form a joint venture for investing in internet and retail music industries in the PRC. Details of the joint venture investment can be referred in the announcement made by the Company dated 3rd November, 2003. The Group also engaged in project

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LETTER FROM THE BOARD

advisory on various real estate property investments in the PRC and Hong Kong as well as loan and financing advisory though it is still at the beginning stage and did not generate any income from this business before the Latest Practicable Date. The Directors are optimistic about the future of the Company. In view of the above, the Directors confirm the Company can fulfill the requirements under paragraph 38 of Listing Agreement entered into between the Company and the Stock Exchange, of which the contents are prescribed in the Appendix 7b of Listing Rules.

PREVIOUS FUND RAISING EXERCISES OF THE COMPANY

The following table is the summary of fund raising exercises of the Company including the intended and actual use of proceeds and the representations from the Directors to explain the deviations between the intended and actual usages within the past 24 months from the date of the Announcement:-

							Reasons for deviation
Date of	Fund raising	Net proceeds	Details of		Intended usage	Actual Usage	between intended
announcement	exercise	(in HK$ million)	usage	(in HK$ million)		(in HK$ million)	and actual usages
December 2001	Rights issue	109	– to finance the acquisition		36	36	–
			of Grandmax International
			Limited
			– to finance the acquisition of		54	54	–
			Magna Steels Co., Limited
			– as general working capital		13	13	–
November 2002	Placing &	8.6	– to settle promissory notes		4.5	7.8	– To decrease the
	subscription						interest expenses
							born by the Group
			– as general working capital		4.1	0.3	– To further repay
							the promissory
							notes
			– to repay a financial loan		0	0.5	– To decrease the
							interest expenses
							born by the Group
March 2003	Rights issue	11	– to repay GE Capital		2	2.5	– (Note)
			(Hong Kong) Limited (“GE”)
			– to repay the Group’s borrowing,		3	1.2	– (Note)
			payables or debts due
			– to continue and develop the		3	3	–
			Group’s business
			– as general working capital		3	4.3	– To delay the
							repayment of
							the Group’s
							borrowing,
							payables and
							debts due
August 2003	Convertible bond	2.7	– as general working capital		2.7	1.5	– Enough liquidity
							to repay the
							promissory notes
			– to repay the Group’s borrowing,		0	1.2	– To repay the
			payables or debts due				promissory notes
							and to decrease
							the interest
							expenses born
							by the Group

Note: The proceeds of HK$3 million which were intended for payment of the Group’s debt may be used to pay off the remaining settlement payments to GE as mentioned in the paragraph headed “Use of proceeds” in the announcement made by the Company dated 3rd March, 2003.

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LETTER FROM THE BOARD

THE SGM

There is set out on pages 44 to 45 in this circular a notice convening the SGM to be held on Friday, 6th February, 2004 at 9:30 a.m. at the Park Lane Room, 27th Floor, Park Lane Hotel, 310 Gloucester Road, Causeway Bay, Hong Kong, at which resolution no. 1 will be proposed as an ordinary resolution to consider and, if thought fit, to approve the Rights Issue and resolution no. 2 will be proposed as an ordinary resolution to consider and, if thought fit, to approve the grant of the New Issue Mandate.

In accordance with the Listing Rules, Rich Delta and its associates (as defined in the Listing Rules) will abstain from voting on resolution no. 1 in respect of the Rights Issue at the SGM.

You will find enclosed a form of proxy for use at the SGM. Whether or not you are able to attend the SGM in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the principal office of the Company at Room 704, Lyndhurst Tower, 1 Lyndhurst Terrace, Central, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM. Completion and return of the accompanying form of proxy will not preclude you from attending and voting in person at the SGM should you so desire.

RECOMMENDATION

The Joint Independent Financial Advisers have been appointed to advise the Independent Board Committee with regard to the terms and conditions of the Rights Issue. The Joint Independent Financial Advisers consider that the terms and conditions of the Rights Issue are fair and reasonable so far as the interests of the Independent Shareholders are concerned. The text of the letter of advice from the Joint Independent Financial Advisers containing their recommendation and the principal factors they have taken into account in arriving at their recommendation are set out on pages 21 to 35 of this circular.

The Independent Board Committee, having taken into account the advice of the Joint Independent Financial Advisers, consider the terms, conditions and the reasons for the Rights Issue are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the resolution approving the Rights Issue. The full text of the letter from the Independent Board Committee is set out on page 20 of this circular.

The Directors are of the opinion that the granting of the New Issue Mandate is in the best interests of the Company and the Shareholders. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolution to be proposed at the SGM to approve the grant of the New Issue Mandate.

FURTHER INFORMATION

Subject to the necessary resolution approving the Rights Issue being passed at the SGM, it is expected that the Prospectus Documents will be despatched to the Qualifying Shareholders on or about 6th February, 2004.

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LETTER FROM THE BOARD

Your attention is also drawn to the letter of advice from the Joint Independent Financial Advisers, which contains their advice and recommendation to the Independent Board Committee in connection with the Rights Issue, the letter from the Independent Board Committee which sets out their recommendation to the Independent Shareholders in relation to the Rights Issue and to the additional information set out in the Appendix to this circular.

By Order of the Board renren Holdings Limited Mak Chi Yeung Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [66 x 42] intentionally omitted <==

**renren Holdings Limited 人人控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

19th January, 2004

To the Independent Shareholders

Dear Sir or Madam,

Pursuant to Rule 7.19(6) of the Listing Rules, the proposed Rights Issue is required to be approved by the Independent Shareholders at a general meeting of the Company as the Rights Issue involves an increase in the issued share capital of the Company by more than 50%.

We have been appointed to consider the terms, conditions and the reasons for the Rights Issue and to advise the Independent Shareholders in relation to them. Details of the Rights Issue are set out in the letter from the Board on pages 7 to 19 of this circular (the “Circular”), of which this letter forms a part. Terms defined in the Circular shall have the same meanings in this letter.

We wish to draw your attention to the letter from the Board set out on pages 7 to 19 of the Circular, and the letter of advice from the Joint Independent Financial Advisers set out on pages 21 to 35 of the Circular. Having considered the terms and conditions of the Rights Issue, the principal factors and reasons regarding the Rights Issue and the advice given by the Joint Independent Financial Advisers, we consider the terms and conditions of the Rights Issue and the reasons for the Rights Issue to be fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution numbered 1 as set out in the notice convening the SGM to approve the Rights Issue at the SGM.

Yours faithfully,

Independent Board Committee

Lo Chi Man, Joseph Wong Kwong Lung, Terence Independent non-executive Directors

* For identification purpose only

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LETTER FROM THE JOINT INDEPENDENT FINANCIAL ADVISERS

The following is the text of a letter from Menlo and Wallbanck in connection with the Rights Issue which has been prepared for the purpose of inclusion in this circular:

==> picture [59 x 59] intentionally omitted <==

Menlo Capital Limited

Room 505, Nan Fung Tower 173 Des Voeux Road Central Hong Kong

==> picture [103 x 84] intentionally omitted <==

1401B, Tower Two, Admiralty Centre 18 Harcourt Road, Admiralty Hong Kong

19 January 2004

To the Independent Board Committee of renren Holdings Limited

Dear Sirs,

PROPOSED RIGHTS ISSUE

We refer to our appointment to advise the Independent Board Committee in respect of the Rights Issue, details of which are set out in the letter from the Board (the “Board Letter”) contained in the circular of the Company dated 19 January 2004 (the “Circular”) of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context of this letter otherwise requires.

Given that the Rights Issue will increase the issued share capital of the Company by more than 50%, pursuant to rule 7.19(6) of the Listing Rules, the Rights Issue is therefore subject to the approval of the Independent Shareholders at the SGM at which Rich Delta and its associates (as defined in the Listing Rules) shall abstain from voting in respect of the Rights Issue.

In formulating our opinion, we have relied on the statements, information, opinions and representations contained in the Circular and the information 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 despatch of the Circular.

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LETTER FROM THE JOINT INDEPENDENT FINANCIAL ADVISERS

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 circumstance 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 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.

In formulating our opinion, we have not considered the taxation implications on Shareholders in relation to the Rights Issue for, holding or disposal of the Rights Shares, since these are particular to their individual circumstances. It is emphasised that we will not accept responsibility for any tax effects on, or liabilities of any person resulting from the Rights Issue for, holding or disposal of the Rights Shares. In particular, Shareholders subject to overseas taxation or Hong Kong taxation on securities dealings should consider their own tax position and, if in any doubt, should consult their own professional advisers.

In formulating our opinion on whether the Directors’ view that the Company can fulfill the requirements under paragraph 38 of Listing Agreement concerning the sufficiency of operation is fair and reasonable, any part of our scope of work shall not be construed as constituting as or amounting to an audit, valuation, investigation and verification on the information provided to us by the Company. We have relied on the information provided by the Company, particularly, on the accuracy and reliability of financial statements and other financial data of the Company. We have not audited, compiled nor reviewed the said financial statements and financial data. We shall not express any opinion or any form of assurance on them. We have had no reason to doubt the truth and accuracy of the information provided to us by the Company. The Directors have also advised us that no material facts have been omitted from the information to reach an informed view, and we have no reason to suspect that any material information has been withheld. We have not carried out any feasibility study on any project, joint venture and investment opportunity undertaken or to be undertaken by the Company. Our opinion have been formed on the assumption that the projections, analysis, estimations, forecasts, anticipations, conditions and assumptions provided by the Company are valid and sustainable. Our opinion shall not be construed as to give any indication to the validity, sustainability and feasibility of any project or business undertaken or to be undertaken by the Company. Information referred herein shall include all information provided to us by the Company, including all representations made by the Directors.

Our opinions contemplated events, facts and conditions existing as of the Latest Practicable Date. Events, facts and conditions occurring after the Latest Practicable Date have not been considered, and we have no obligations to update our opinions for such events, facts and conditions.

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LETTER FROM THE JOINT INDEPENDENT FINANCIAL ADVISERS

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

As stated in the Board Letter, the Company proposes to raise not less than approximately HK$52 million and not more than approximately HK$54 million before expenses by issuing not less than 5,227,260,944 Rights Shares and not more than 5,426,868,984 Rights Shares at a price of HK$0.01 per Rights Share on the basis of four Rights Shares for every one Share held by the Qualifying Shareholders on the Record Date.

In arriving at our advice to the Independent Board Committee in respect of the Rights Issue, we have taken the following principal factors and reasons into consideration:

I. Background and Reasons for the Rights Issue

The Company is an investment holding company and its subsidiaries are principally engaged in the media and telecommunication business, in the operation of “renren.com”, the provision of Internet products and services and information technology business in Hong Kong and the PRC. At the Latest Practicable Date, the Group maintained 8 employees in Hong Kong. The principal activities of the Group comprise telecom products retail, information technology project investment, securities investment, project advisory and loan and financing advisory.

The estimated net proceeds of the Rights Issue will be approximately not less than HK$49 million and not more than HK$51 million of which approximately HK$5 million will be applied to repay a loan from a third party, a Director’s loan and other payables of the Group, approximately HK$25 million will be applied to future investment of the Group and the balance of not more than HK$21 million will be used for general working capital of the Group.

Due to the adverse impacts brought by the SARS outbreak and intense competition on the telecom products retail business, the turnover of the Group has decreased significantly for the 6 months period ended 30 June 2003. The Group has adopted the strategy of downsizing the said business operation for the purpose of cut loss and survive. Further, in order to avoid over reliance on a single business, the Group also adopts the strategy of business diversification and restructuring by considering to invest in projects or joint ventures concerning media and infotainment businesses and other new business opportunities, which shall increase both the turnover and business operation of the Group.

The Directors consider that the Rights Issue is in the interest of the Company as the Rights Issue will improve the financial positions of the Group, and enable the Group to implement the said strategy of business diversification and restructuring effectively; and also facilitate the Group’s future investment should there arise of any good investment opportunity. The Directors are of the view that without new funding to the Group, the financial position and business operation of the Group will not be able to be substantially improved. The proceeds raised from the Rights Issue will reduce the current liabilities of the Group as at 28 November 2003 to nil and strengthen the assets of the Group substantially.

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II. Terms of the Rights Issue

The Rights Issue is on the basis of four Rights Shares for every one Share at a Subscription Price of HK$0.01 per Rights Share. The Subscription Price represents:

a discount of approximately 86.30% to the closing price of HK$0.073 per Share as quoted on the Stock Exchange on 2 December 2003, being the last trading day prior to the suspension of the Shares on 3 December 2003;
a discount of approximately 85.07% to the average closing price of approximately HK$0.067 per Share as quoted on the Stock Exchange for the last 10 trading days up to and including 2 December 2003, being the last trading day prior to the suspension of Shares on 3 December 2003;
a discount of approximately 55.75% to the theoretical ex-rights price of HK$0.0226 per Share based on the closing price as quoted on the Stock Exchange on 2 December 2003;
a discount of about 79.6% to the closing price of HK$0.049 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
a premium of approximately 135% to the net tangible asset value per share of approximately HK$0.00426 (based on the Group’s unaudited consolidated net tangible asset value of approximately HK$5,573,000 as at 30 June 2003);
a discount of about 79.4% to the average closing price of approximately HK$0.0486 per Share as quoted on the Stock Exchange for the last 10 trading days up to and including the Latest Practicable Date; and
a discount of about 43.8% to the theoretical ex-rights price of approximately HK$0.0178 per Share based on the closing price as quoted on the Stock Exchange on the Latest Practicable Date.

The Subscription Price was agreed after arm’s length negotiation among the Company and the Underwriters. The Directors, when determining the Subscription Price for the Rights Issue, took into account the difficulties in securing underwriting interests for the Rights Shares owing to the start of recovery economic environment with uncertainty future and thin trading volume of the Shares. Other means of fund raising where a given amount of funding is required, includes private placement of securities or debt financing. However, a placement of shares or warrants would have required an issue of new shares at significant discounts to the market price of the Shares, and at the same time, would result in significant dilution of existing Shareholders’ interests. Alternatively, debt financing through the issue of convertible bonds will increase the finance costs and dampen indebtedness of the Group which may not in the interest of the Group. Accordingly, we share the same view of the Directors that it would be difficult to raise funding in the equity market through the Rights Issue without offering discounts of subscription price so as to attract more participation from the Qualifying Shareholders in the Rights Issue.

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LETTER FROM THE JOINT INDEPENDENT FINANCIAL ADVISERS

We have reviewed the terms of a total of 8 rights issues completed by listed issuers on main board of the Stock Exchange in the last 12 months (the “Recent Rights Issues”) and which involved heavy calls (on the basis of one or more rights shares for every share held) on shareholders which are summarized as follows:

		Basis of
		provisional	Discount to
		allotment	closing price	Discount to
	Date of	for the	on last	the theoretical
Company name	Announcement	rights issue	trading day	ex-rights price
Enerchina Holdings Limited	19-12-2002	3 for 2	60.00%	37.50%
Hon Kwok Land Inv. Co., Limited	12-02-2003	3 for 2	32.43%	16.11%
The Company	03-03-2003	1 for 1	43.75%	28.00%
Capital Estate Limited	05-05-2003	2 for 1	71.43%	45.36%
Foundation Group Limited	28-05-2003	1 for 1	53.13%	36.17%
Matsunichi Communication
Holdings Limited	01-08-2003	2 for 1	33.33%	14.31%
Fortuna International Holdings	29-10-2003	1 for 1	28.57%	16.67%
Enerchina Holdings Limited	31-10-2003	9 for 5	45.21%	23.08%
		Mean	45.98%	27.15%
		Median	44.48%	25.54%
The Company	12-12-2003	The Rights Issue	86.30%	55.75%

The discounts to the closing prices on the last trading days prior to the dates of the announcements in relation to the Recent Rights Issues ranged from approximately 28.57% to 71.43% with the mean and median of approximately 45.98% and 44.48% respectively. The discounts to the theoretical ex-rights prices per share based on the last trading days prior to the dates of the announcements in relation to the Recent Rights Issues ranged from approximately 14.31% to 45.36% with the mean and median of approximately 27.15% and 25.54% respectively. All the Recent Rights Issues offered discounts to the closing prices on the last trading days prior to the dates of the announcements.

The discount rate of the Subscription Price to the closing price (based on the closing price of the Shares on 2 December 2003) of 86.30% exceeds the above range of the Recent Rights Issues while the discount rate to the theoretical ex-rights price per Share of 55.75% (based on the closing price of the Shares on 2 December 2003) exceeds the above range of the Recent Rights Issues. The Directors have started negotiations with potential underwriters and the Underwriters since early November 2003 and confirmed that the Subscription Price is the highest price among all the subscription prices proposed by the potential underwriters and the Underwriters. We are of the view that the Rights Shares will, when allotted, issued and fully paid, rank pari passu in all respects with the Shares then in issue and holders of such Rights Shares will receive all future dividends and distribution which are declared, made or paid after the date of allotment of the

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Rights Shares. Independent Shareholders are thus not disadvantaged by subscribing to the Rights Shares. Taking into consideration the foregoing, we consider that the Rights Issue is an equitable method for all Qualifying Shareholders as a whole to raise new equity capital for the Company as Qualifying Shareholders can choose to participate in the Rights Issue or, if they are unwilling or unable to do so, to dispose of their entitlements nil-paid in the market at a premium if one can be obtained. However, in view of the substantial discount of the Rights Issue, it may not be the interest of the Independent Shareholders if they do not subscribe the Rights Shares and do not dispose their entitlements nil-paid in the market at a premium.

We have also reviewed the terms of a total of 6 open offers completed by listed issuers on main board of the Stock Exchange in the last 12 months (the “Recent Open Offers”) and which involved heavy calls (on the basis of one or more open offer shares for every share held) on shareholders which are summarized as follows:

		Basis of
		provisional	Discount
		allotment	to closing	Discount to
	Date of	for the	price on last	the theoretical
Company name	Announcement	Open offers	trading day	ex-rights price
Ezcom Holdings Limited	29-01-2003	5 for 1	96.15%	80.66%
GR investment International Limited	06-05-2003	3 for 1	62.96%	29.82%
Xin Corporation Limited	15-07-2003	4 for 1	62.03%	24.62%
Swank Int’l Manufacturing Co.	09-09-2003	13 for 1	93.50%	50.00%
Goldbond Group Holdings Limited	22-10-2003	4 for 1	67.21%	29.08%
FT Holdings International Limited	23-10-2003	5 for 1	37.50%	9.09%
		Mean	69.89%	37.21%
		Median	65.09%	29.45%
The Company	12-12-2003 The Rights Issue		86.30%	55.75%

The discounts to the closing prices on the last trading days prior to the dates of the announcements in relation to the Recent Open Offers ranged from approximately 37.50% to 96.15% with the mean and median of approximately 69.89% and 65.09% respectively. The discounts to the theoretical ex-rights prices per share based on the last trading days prior to the dates of the announcements in relation to the Recent Open Offers ranged from approximately 9.09% to 80.66% with the mean and median of approximately 37.21% and 29.45% respectively. All the Recent Open Offers offered discounts to the closing prices on the last trading days prior to the dates of the announcements.

The discount rate of the Subscription Price to the closing price (based on the closing price of the Shares on 2 December 2003) of 86.30% falls within the above range of the Recent Open Offers but higher than the mean and median. While the theoretical ex-rights price per Share of 55.75% (based on the closing price of the Shares on 2 December 2003) also falls within the above range but also higher than the mean and median of the Recent Open Offer.

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LETTER FROM THE JOINT INDEPENDENT FINANCIAL ADVISERS

The comparables of the Recent Open Offers only provide a reference to the Independent Shareholder. All the shareholders have the right to subscribe the new shares on the basis of allotment ratio in both open offers and right issues. The subscribed shares when allotted, issued and fully paid, rank pari passu in all respects with the shares then in issue and holders of such open offered or rights issued shares will receive all future dividends and distribution which are declared, made or paid. In case of open offer, if the shareholders are unwilling or unable to subscribe, they are unable to dispose of their entitlements in the market at a premium. In case of substantial discount of the Recent Open Offers, it may not be the interest of the independent shareholders if they do not subscribe the shares under the Recent Open Offers. After viewing the Recent Open Offers, we are of the view that the discount rate of the Rights Issue is fair and reasonable since it is providing the Independent Shareholders the opportunity of disposing the entitlement at a premium while the Recent Open Offers are not providing and the discount of the Rights Issue is well within the range.

The Directors also view that the Subscription Price which represents a premium to the net tangible asset value per Share of approximately HK$0.00426 (based on the Group’s unaudited consolidated net tangible asset value of approximately HK$5,573,000 as at 30 June 2003) is fair and reasonable on the equity ground to the Qualifying Shareholders. As the Shares have been trading below HK$0.045 for the first nine months since the beginning of 2003, the Directors do not believe securing underwriting at the existing scale is possible at a higher subscription price. The Directors consider the benefits through conducting the Rights Issue brought to the Company and basis of the provisional entitlement to the Qualifying Shareholders, opine that the Subscription Price is fair and reasonable to the Shareholders. In view of the above factors, including the premium to the net tangible asset value per Share and the option of disposing the their entitlements nil-paid in the market at a premium, we considered that the Rights Issue is fair and reasonable to the Shareholders.

III. Dilution of percentage shareholding

We consider that the Rights Issue is providing a equal chance to the Qualifying Shareholders to maintain their percentage of shareholding that they may subscribe 100% of their entitled Rights Shares as well as all the Rights Shares will rank pari passu in all respects with the Shares then in issue and holders of such Rights Shares will receive all future dividends and distribution which are declared, made or paid after the date of allotment of the Rights Shares. For those Independent Shareholders who take up in full their entitlements under the Rights Issue, their attributable interests in the Company will not be diluted after completion of the Rights Issue.

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For those Independent Shareholders who do not take up in full their entitlements under the Rights Issue, depending on the extent to which they take up the Rights Shares, their attributable interests in the Company will be diluted after completion of the Rights Issue. The maximum dilution in shareholding for those Independent Shareholders who do not take up any of their entitlements under the Rights Issue is 80% after the issue of the Rights Shares. We consider that the dilution is not prejudicial on the grounds that all Qualifying Shareholders are entitled to subscribe for their entitlements under the terms of the Rights Issue. As the nil-paid Rights Shares will be traded on the Stock Exchange, Qualifying Shareholders who do not take up their entitlements in full will have the opportunity to realise their nil-paid Rights Shares on the market, subject to market conditions.

Other means of fund raising where a given amount of funding is required, includes private placement of securities or debt financing. However, a placement of shares or warrants would have required an issue of new shares at significant discounts to the market price of the Shares, and at the same time, would result in significant dilution of existing Shareholders’ interests. Alternatively, debt financing through the issue of convertible bonds will increase the finance costs and dampen indebtedness of the Group which may not in the interest of the Group.

IV. Financial effects of the Rights Issue

According to the latest unaudited management accounts of the Group, as at 30 November 2003, the Group had outstanding Convertible Bonds of total amount of HK$3,000,000, a Director’s loan of HK$2,070,000, a loan from a third party of HK$530,000 and other payables of approximately HK$2,314,000 and had cash and bank balance of approximately HK$200,000 and listed securities investment of approximately HK$3,395,000 at the prevailing market price. As at 30 November 2003, the Group’s unaudited consolidated net tangible asset value was approximately HK$8,849,000 (approximately HK$1,989,000 as at 31 December 2002 in accordance with the consolidated audited accounts; approximately HK$5,573,000 as at 30 June 2003 in accordance with the consolidated unaudited accounts). The Directors consider that though the Group faces a difficult environment in 2003, the current liabilities of the Group have been improved from HK$12.49 million as at 30 June 2003 to approximately HK$4,914,000 as at 28 November 2003 which was mainly contributed by the issuance of a HK$3 million convertible bond in September 2003 and the write back of payables to approximately HK$4 million. For the eleven months ended November 2003, the turnover of the Group was approximately HK$2,803,000 million based on the latest unaudited management accounts of the Group, as at 30 November 2003.

(a) Net tangible assets

The following is a statement of pro forma consolidated net tangible assets of the Group based on the unaudited net tangible asset value of the Group as at 30 June 2003, of which was produced in the interim report of the Company dated 25 September 2003:

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(i)	In	the case of no further exercise of the outstanding Convertible Bonds or	the case of no further exercise of the outstanding Convertible Bonds or
	Options
			HK$’000
	Unaudited consolidated net tangible assets of
		the Group as at 30 June 2003	5,573
	Net proceeds from the partial conversion of
		the Convertible Bonds in December 2003	1,500
	Pro forma adjusted consolidated net tangible assets
		of the Group before the Rights Issue	7,073
	Estimated net proceeds of the Rights Issue
		(based on 5,227,260,944 Rights Shares to be issued)	49,000
	Pro forma adjusted consolidated net tangible assets
		after the Rights Issue	56,073

	Pro forma consolidated net tangible assets per Share:
	–	before the Rights Issue (based on 1,306,815,236
		Shares in issue)	HK$0.00541

	–	after the Rights Issue (based on total
		6,534,076,180 Shares as enlarged by
		5,227,260,944 Rights Shares to be issued)	HK$0.00858

(ii)	Assuming full exercise of the outstanding Convertible Bonds		and Options
	on or before 30 January 2004
	Unaudited consolidated net tangible assets of the Group
		as at 30 June 2003	5,573
	Net proceeds from the full conversion of the Convertible Bonds		3,000
	Net proceeds from the exercise of the Options		3,100
	Pro forma adjusted consolidated net tangible assets of
		the Group before the Rights Issue	11,673
	Estimated net proceeds of the Rights Issue
		(based on 6,783,586,230 Shares as enlarged by
		5,426,868,984 Rights Shares to be issued upon full
		exercise of the outstanding Convertible Bonds and Options
		on or before 30 January 2004)	51,000
	Pro forma adjusted consolidated net tangible assets after
		the Rights Issue	62,673

	Pro forma consolidated net tangible assets per Share:
	–	before the Rights Issue (assuming the full exercise
		of the outstanding Convertible Bonds and Options
		on or before 30 January 2004 based on
		1,356,717,246 Shares in issue)	HK$0.00860

	–	after the Rights Issue (assuming the full exercise
		of the outstanding Convertible Bonds and Options
		on or before 30 January 2004 based on
		5,426,868,984 Rights Shares to be issued)	HK$0.00924

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Based on the above table, the consolidated net tangible assets of the Group will be increased from approximately HK$7.07 million before the Rights Issue to approximately HK$56.07 million after the Rights Issue, in the case of no further exercise of the Convertible Bonds or Options. The consolidated net tangible asset value per Share will be increased by approximately HK$0.00317 from approximately HK$0.00541 before the Rights Issue to approximately HK$0.00858 after the Rights Issue, in the case of no further exercise of the outstanding Convertible Bonds and Options, representing an increase of approximately 59%.

The consolidated net tangible assets of the Group will be increased from approximately HK$7.07 million before the Rights Issue to approximately HK$62.67 million after the Rights Issue, assuming the full exercise of the outstanding Convertible Bonds and Options. The consolidated net tangible asset value per Share will be increased by approximately HK$0.00383 from approximately HK$0.00541 before the Rights Issue to approximately HK$0.00924 after the Rights Issue, assuming the full exercise of the Convertible Bonds and Options, representing an increase of approximately 71%. We consider that the increase in consolidated net tangible asset value per Share after the Rights Issue is to the interests of the Shareholders. We are of the view that the financial position in terms of net tangible assets of the Group will be significantly improved by 693% from HK$7.07 million before the Rights Issue to HK$56.07 million after the Rights Issue, in the case of no further exercise of the Convertible Bonds or Options, or improved by 786% from HK$7.07 million before the Rights Issue to HK$62.67 million after the Rights Issue, assuming full exercise of the Convertible Bonds and Options.

(b) Gearing ratio

As set out in the 2003 interim report of the Company, the outstanding debts for the Group as at 30 June 2003 was approximately HK$12.5 million. Based on pro forma consolidated net tangible assets of the Group as stated above, the gearing ratio of the Group would be improved from approximately 223% (calculated by about HK$12.5 million of debts divided by the pro forma consolidated net tangible assets before the Rights Issue of approximately HK$5.6 million) before the Rights Issue to approximately 22% (calculated by about HK$12.5 million of debts divided by the pro forma consolidated net assets after the Rights Issue of approximately HK$56.1 million) after the Rights Issue and partial conversion of the Convertible Bonds. We are of the view that the Rights Issue improving the gearing ratio from the highly geared 223% to much lower level is a positive effect to the Group in over reliance on debts in financing the business operation in 2003.

(c) Liquidity position

The balance of the net proceeds of the Rights Issue of not more than HK$49 million will increase the cash balance of the Group by the same amount. On the other hand, the proforma current ratio, based on the 30 June 2003 accounts, will be improved from that of 131% before the Rights Issue to that of 535% after the Rights Issue, excluding the proceeds from the full conversion of the Convertible Bonds.

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V. Existing Operations

As shown by the 2003 interim report of the Company, the turnover has decreased significantly from HK$15.3 million for the 6 months ended 30 June 2002 to HK$679,000 for the six months ended 30 June 2003. The Directors represent that apart from the intense competition of the business of telecom products retail, the significant decrease in turnover was also due to the substantial and detrimental impact from the SARS on the business and operation of the Company. In view of the difficult financial position of the Company, the Directors represent that for the purpose of counteracting the impact of SARS and in the interest of the Shareholders, the Company was required to adopt a strategy of downsizing the Company’s business operation, in order to survive and cut loss. In consideration of the uncertainty of the re-occurrence of SARS, the Company is required to maintain the said strategy for a period of time for prudent purpose, in order to be prepared to respond to any future adverse condition.

Simultaneously, the Directors also adopt strategies of business diversification and restructuring for avoiding over reliance on single business, and for expanding its business operation by entering into media and infotainment businesses; and are still looking for new business opportunities to provide added value for future business and diversification. The Directors believe the said strategies be essential to the Group’s development in the long run. Further, additional working capital raised from equity financing will facilitate the said strategies to be implemented effectively if new business opportunities arise.

As at the Latest Practicable Date, the Directors represent that the Group maintains 8 employees in Hong Kong and the principal activities of the Group comprise telecom products retail, information technology project investment, securities investment, project advisory and loan and financing advisory. For the six months ended 30 June 2003, the Group’s turnover amounted to HK$679,000 which derived from offline operations. For the eleven months ended 30 November 2003, the Group’s turnover amounted to approximately HK$2,803,000 based on the latest unaudited management accounts of the Group as at 30 November 2003. Due to the said adverse impacts brought by the SARS outbreak and intense competition, the Directors represent that the Group is in the process of preparing to cease the operation of telecom products retail business, as the turnover from the said business does not improve. Although the telecom product retail has been substantially reduced due to the poor local economic prospective in the first half year of 2003, the Group is interested in other information technology projects such as Internet and content provision projects. As stated in section “Use of Proceeds” in this Circular, the Group is negotiating with Guangzhou Sunroom Information Industry Company Limited, an independent third party in the PRC, to form a joint venture for investing in internet and retail music industries in the PRC. The Directors represent that negotiation in respect of the said joint venture is still ongoing and no terms has been finalized as at the Latest Practicable Date. Details of the joint venture investment can be referred in the announcement made by the Company dated 3 November 2003.

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The Group is also engaged in project advisory on various real estate property investments in the PRC and Hong Kong which involves the agency service of sales and marketing on realty as well as loan and financing advisory though it is still at the beginning stage and did not generate any income from this business before the Latest Practicable Date. The Directors are optimistic about the future of the Company.

Apart from the said joint venture to be formed, the Directors are in consideration of investing in certain potential information technology projects, which may increase the turnover of the Company if some of these projects is/are concluded. The Directors represent that the said projects under considerations are operating with certain level of sales turnover and profits.

The Directors also anticipate and consider that the completion of the Rights Issue shall expand and enhance the Group’s business operations due to (1) the relief of the liquidity problem that may enable the Group to divert more resources to its business operations and development; (2) the improvement on the financial position particularly on the significant reduction in the indebtedness of the Group and the increase in the cash balance; (3) the ability and the flexibility of the Group to raise new funding by means of debt or equity financing as a result of improvement on the Group’s financial position and; (4) the provision of sufficient fund for the acquisitions of certain projects which will generate both sales turnover and the profits to the Group, and for the effective implementation of the said strategy of business diversification and restructuring.

In consideration of the above and the net tangible asset value of the Company upon completion of the Rights Issue as stated in the statement of pro forma consolidated net tangible assets of the Group, the Directors hold the view that the Company can fulfill the requirements under paragraph 38 of the Listing Agreement.

By referring to the Directors’ representations and consideration stated above, in consideration of the financial position of the Company and business environment faced by the Company and the anticipated completion of the Rights Issue and of the potential investment in the said joint venture and projects, we hold the opinion that the Directors’ view that the Company can fulfill the requirements of sufficient operations under Paragraph 38 of the Listing Agreement is fair and reasonable.

VI. Use of proceeds

The estimated net proceeds of the Rights Issue will be approximately not less than HK$49 million and not more than approximately HK$51 million of which approximately HK$5 million will be applied to repay a loan from a third party, a Director’s loan and other payables of the Group, approximately HK$25 million will be applied to the future investment of the Group and the balance of not more than HK$21 million will be used for general working capital of the Group. Any such use of the proceeds will be in line with the principal business of the Group. The Directors regularly search for suitable investment projects to expand the investment portfolio of the Group.

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The Directors estimate that approximately HK$25 million of the net proceeds of the Rights Issue may be used in future investment for forming a joint venture between the Group and Guangzhou Sunroom Information Industry Company Limited, an independent third party in the PRC, for investing in internet and retail music industries in the PRC. Details of the joint venture investment can be referred in the announcement made by the Company dated 3 November 2003. However, the Directors wish to state that the negotiation of this potential investment project is in a preliminary stage and the Company is still conducting feasibilities studies while memoranda of understanding may be concluded in January 2004. If the Group finally does not invest in this potential project, the Directors currently consider that this approximately HK$25 million of the net proceeds of the Rights Issue will also be used for investing in any project, among the identified projects, with good prospect in the future. The business operations and the respective financial projects, as stated in the section “Sufficient Operation”, are under due diligence review of the Group. The Directors are of the view that the projects will generate profits to the Group if materialized. Accordingly, we are of the view that the investment in the projects with profit generation is in the interest of Group and the Shareholders as a whole. The Directors envisage that the balance of not more than approximately HK$21 million of the net proceeds of the Rights Issue will be used for general working capital of the Group to support the day-to-day operation of the Group’s business, of which approximately HK$9 million will be used for general office administrative expenses, approximately HK$4 million will be used to pay legal and professional fees and approximately HK$8 million will be used to support sales and marketing activities and for general miscellaneous working capital.

On the other hand, as mentioned in the 2003 interim report of the Company, in view of the weak market condition of the telecommunication business, the Directors planned to diversify its existing business into media and infotainment business and were looking for business opportunity that could provide added value for future business and diversification. The Directors believe such strategy is essential to the Group’s development in the long-term and additional working capital from equity financing will facilitate such business development when opportunities arises. At present, the Company is under negotiation of certain investment plans for its business and no concrete plan for any business investment. In light of this, we consider that the use of proceeds, for approximately HK$25 million to be applied to the future investment of the Group and the balance of not more than HK$21 million to be used for general working capital of the Group, is in line with the Group’s business strategies and that the general working capital can provide flexibility to the Group’s operations.

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VII. Underwriting arrangements

As at the Latest Practicable Date, Rich Delta is the beneficial owner of 632,184,558 Shares which represented approximately 48.38% of the issued share capital of the Company. Rich Delta is a wholly owned subsidiary of Sky Concord which is in turn wholly owned by Mr. Mak. Rich Delta has given an irrevocable undertaking in the Underwriting Agreement in favour of the Company and the Underwriters to accept or procure acceptance in full of the 2,528,738,232 Rights Shares which will be provisionally allotted to Rich Delta pursuant to the Rights Issue. Each of Sky Concord and Mr. Mak has given an irrevocable undertaking in the Underwriting Agreement to the Company and the Underwriters to procure Rich Delta to fully perform its obligations under the Underwriting Agreement. Neither Mr. Mak, Rich Delta nor Sky Concord has decided whether to apply for excess Rights Shares as at the Latest Practicable Date. The minimum amount and maximum amount of remaining balance of 2,698,522,712 and 2,898,130,752 Rights Shares respectively will be fully underwritten by the Underwriters. Shareholders should note that Rich Delta and its associates will abstain from voting in respect of the resolution approving the Rights Issue at the SGM.

Subject to the fulfillment of the conditions contained in the Underwriting Agreement, not less than 2,698,522,712 Rights Shares and not more than 2,898,130,752 Rights Shares (the Rights Shares other than those agreed to be taken up by the Rich Delta) will be underwritten by the Underwriters. It also should be noted that the Rights Issue will not proceed if TIS (for and on behalf of the Underwriters) exercises termination rights. Details of the provisions granting TIS (for and on behalf of the Underwriters) such termination rights are included in the Board Letter. TIS may terminate the Underwriting Agreement on behalf of the Underwriters, due to the appearing of (a)(i) any new law or government regulation or other occurrence of any nature whatsoever which in the absolute opinion of TIS (for and on behalf of the Underwriters) adversely affects or may adversely affect the business of the Group or any part thereof to a material extent or is materially adverse in the context of the Rights Issue; or (ii) any change in local, national, international, financial, political or economic conditions which in the absolute opinion of TIS (for and on behalf of the Underwriters) is materially adverse in the context of the Rights Issue; or (iii) any adverse change in market conditions which in the absolute opinion of TIS (for and on behalf of the Underwriters) materially prejudicially affects the Rights Issue and makes it inadvisable or inexpedient to proceed therewith, or (b) there comes to the notice of any of the Underwriters any matter or event showing any of the representations and warranties referred in the Underwriting Agreement to be untrue or inaccurate in any respect which TIS (for and on behalf of the Underwriters) considers to be material, then and in any such case TIS (for and on behalf of the Underwriters) may (after such consultation with the Company and/or its adviser as the circumstances shall admit) by notice in writing given to the Company on or before 5:00 p.m. on the business day immediately prior to the intended date of despatch of certificates of the Rights Shares rescind the Underwriting Agreement and thereupon all obligations of the Underwriters thereunder will cease and determine. In case TIS (for and on behalf of the Underwriters) terminates the Underwriting Agreement pursuant to the termination rights under the Underwriting Agreement, the Rights Issue will not proceed. We consider the rights of the Underwriters should also be protected in the Underwriting Agreement that provisions granting TIS (for and on behalf of the Underwriters) the rights to terminate the Underwriting Agreement and the conditions of the Rights Issue are fair and reasonable.

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As mentioned above, other means of fund raising where a given amount of funding is required, includes private placement of securities or debt financing, may not in the interest of the Group. Based on the recent financial performance of the Group as at 30 November 2003, the prevailing conservative manner of creditors and financial institutes, we are of the opinion that it is prudent for the Company to finance by way of equity. We also consider that the Rights Issue offers all the Qualifying Shareholders an equal opportunity to participate in the equity interest of the Company rather than a private placement, which would result in dilution of existing Shareholders’ interests in the Company. We also consider the enlarged capital base with enlarged net asset value will enhance the financial capability of the Group.

RECOMMENDATION

Taking into consideration of the above principal factors of consideration, we are of the view that the terms of the Rights Issue are fair and reasonable so far as the interests of the Shareholders are concerned. The Rights Issue will allow all Qualifying Shareholders to participate in the growth of the Group. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Rights Issue.

Yours faithfully, Yours faithfully, For and on behalf of For and on behalf of Menlo Capital Limited Wallbanck Brothers Michael Leung Securities (Hong Kong) Limited Director Phil Chan Chief Executive Officer

35 -

GENERAL INFORMATION

APPENDIX

1. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date were as follows:

Authorised:				HK$
	30,000,000,000	Shares as at the Latest Practicable Date		300,000,000.00

Issued and fully paid:
	1,306,815,236	Shares as at the Latest Practicable Date		13,068,152.36

not less than 5,227,260,944		Shares to be issued pursuant to
		the Rights Issue	not less than 52,272,609.44

not more than 5,426,868,984		Shares to be issued pursuant to
		the Rights Issue	not more than 54,268,689.84

not less than 6,534,076,180		Total of Shares after Rights Issue	not less than 65,340,761.80

not more than 6,733,684,220		Total of Shares after Rights Issue	not more than 67,336,842.20

No part of the share capital of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Shares to be listed or dealt in on any other stock exchange.

As at the Latest Practicable Date, save for the outstanding Convertible Bonds and the Options, there are no outstanding convertible debts, options or warrants of the Company.

2. DISCLOSURE OF INTERESTS

Interest of Directors

As at the Latest Practicable Date, the following Director had the following interests in the shares in or debentures of the Company or any of its associated corporations (as defined in the SFO) and had the following short position in the shares in the Company or any of its associated corporations (if any), which were notifiable to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests which they were taken or deemed to have under such provisions of the

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GENERAL INFORMATION

APPENDIX

SFO) or the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules or which were required pursuant to Section 352 of the SFO to be entered in the register referred to therein were as follows:

		Number of	Percentage of
Name	Nature of interest	Shares	Shareholding (%)
Mr. Mak	Corporate_(note)_	632,184,558	48.38

Note: These 632,184,558 Shares are beneficially owned by Rich Delta. Rich Delta is a wholly owned subsidiary of Sky Concord which in turn is beneficially owned by Mr. Mak.

As at the Latest Practicable Date, the following Director held the following Options:

	Number of	Date of grant	Exercise period	Exercise price
Name	Options	of Options	of Options	of Options
Mr. Mak	576,000	23rd July, 2001	23rd July, 2001 to	HK$4.05
			25th June, 2010	(note)

Note: The exercise price of the Options is subject to adjustment in the case of rights or bonus issues, or other similar changes in the Company’s share capital.

Interests of other persons in the share capital of the Company

As at the Latest Practicable Date, according to the register kept by the Company under Section 336 of the SFO and so far as is known to the Directors, the following persons (not being a Director or chief executive of the Company) who had, directly or indirectly, interested 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:

Name	Nature of interest	Number of Shares	Percentage of
			shareholding (%)
Rich Delta	Beneficial owner	632,184,558_(Note)_	48.38
Sky Concord	Interests of controlled	632,184,558_(Note)_	48.38
	corporation

Note: These 632,184,558 Shares are beneficially owned by Rich Delta. Rich Delta is a wholly-owned subsidiary of Sky Concord which in turn is beneficially owned by Mr. Mak.

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GENERAL INFORMATION

APPENDIX

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors has any existing or proposed service contract with the Company or any of its subsidiaries (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

4. DIRECTORS

Executive Directors

Mr. Mak Chi Yeung , aged 47, has been involved in property development and investment in Hong Kong and the PRC for 20 years. He has substantial experience in corporate planning and business administration in property investment. Mr. Mak was appointed as a Director on 2nd May, 2001 and was appointed as the chairman of the Board on 11th June, 2001.

Mr. Cheng Wai Keung , aged 38, was graduated from Hong Kong Baptist University. Mr. Cheng has over 9 years’ experience in corporate finance and management. Mr. Cheng was appointed as a Director on 2nd December, 2003.

Independent non-executive Directors

Mr. Lo Chi Man , Joseph , aged 54, was graduated from the University of Hong Kong. Mr. Lo has over 20 years’ experience in corporate management in private sector and local listed companies. Mr. Lo was appointed as an independent non-executive Director on 26th May, 2001.

Mr. Wong Kwong Lung , Terence , aged 41, has over 10 years’ experience in property development and investment in Hong Kong and the PRC. Mr. Wong was appointed as an independent non-executive Director on 20th June, 2001.

The business address of the Directors is at the head office and principal place of business of the Company in Hong Kong at Room 704, Lyndhurst Tower, 1 Lyndhurst Terrace, Central, Hong Kong.

5. CORPORATE INFORMATION

Registered Office

Clarendon House, 2 Church Street Hamilton HM 11, Bermuda

Resident Representative in Bermuda

Codan Services Limited Clarendon House, 2 Church Street Hamilton HM 11, Bermuda

Head Office and Principal Place of Business

Room 704, Lyndhurst Tower 1 Lyndhurst Terrace, Central Hong Kong

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GENERAL INFORMATION

APPENDIX

Principal Registrar and Transfer Office

The Bank of Bermuda Limited 6 Front Street Hamilton HM 11, Bermuda

Hong Kong Branch Registrar and Transfer Office

Abacus Share Registrars Limited G/F, Bank of East Asia Harbour View Centre 56 Gloucester Road Wanchai Hong Kong

Legal Advisers on Hong Kong Law

Jennifer Cheung & Co. Unit A, 19/F Two Chinachem Plaza 68 Connaught Road Central Hong Kong

Auditors

Albert Lam & Co. Certified Public Accountants Room 301-303, 3/F China Insurance Group Building 141 Des Voeux Road Central Hong Kong

Principal bankers

The Hongkong & Shanghai Banking Corporation Limited

Authorised Representatives

Mak Chi Yeung Cheng Wai Keung

6. MATERIAL CONTRACTS

The following contracts (other than contracts entered into in the ordinary course of business) had been entered into by the Company or its subsidiaries within the two years immediately preceding the date of this circular and are or may be material:

(a) the agreement dated 24th January, 2002 entered into between the Group, Financial Players Limited and Mr. Wong Kwok Ming, Mr. Kok Ping Kam, Sunny, Mr. Wong Sau Yuen and Mr. Leung Siu Pan, Benny in connection with the establishment of Imoeba Holdings Limited and acquisition of 27% equity interests in Imoeba Holdings Limited;
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GENERAL INFORMATION

APPENDIX

(b) the underwriting agreement dated 17th July, 2002 entered into between the Company, Mr. Mak and the underwriters named therein in relation to the rights issue of not less than 534,323,510 shares and not more than 649,731,635 shares of the Company;
(c) the sale and purchase agreement dated 5th November, 2002 entered into between Scopwick Resources Limited and the Group in relation to the acquisition of the entire issued share capital of Union Key Limited at a consideration of HK$9 million;
(d) the placement agreement dated 6th November, 2002 entered into between the Company and Ever-Long Securities Limited, South China Securities Limited, Taiwan Concord Capital Securities (Hong Kong) Limited in relation to the placement of 150,000,000 shares of the Company at a price of HK$0.031 per share;
(e) the subscription agreement dated 6th November, 2002 entered into between the Company and Rich Delta in relation to the subscription of 157,586,193 shares of the Company at HK$0.031 per share;
(f) the underwriting agreement dated 26th February, 2003 entered into between the Company, Mr. Mak and the underwriters named therein in relation to the rights issue of not less than 620,000,000 shares and not more than 674,929,113 shares of the Company;
(g) the supplemental agreement dated 4th April, 2003 entered into between the Company, Mr. Mak and the underwriters named therein in relation to the underwriting agreement referred to in paragraph (f) above;
(h) the subscription, placing and underwriting agreement dated 25th August, 2003 entered into between the Company, KCG Securities Asia Limited and the subscribers named therein in relation to the placing and subscription of the Convertible Bonds carrying the rights to convert the principal amount and accrued interest thereon into Shares at HK$0.032 per Share (subject to adjustment); and
(i) the Underwriting Agreement.
40 -

GENERAL INFORMATION

APPENDIX

7. LITIGATION

In October 2003, the Company received an originating summons for, inter alia, recovery of an aggregate sum of HK$720,000 together with the interest under convertible bonds issued by the Company in August 2001 (“CB August 2001”). On 14th August, 2002, the Company gave a written notice to the plaintiff (the “Written Notice”) exercising its option under the terms and conditions of the CB August 2001 to satisfy the outstanding principal amount of HK$720,000 due to the plaintiff under the CB August 2001 by allotment and issue of Shares to the plaintiff. After the allotment and issue of the Shares to the plaintiff, the plaintiff commenced a legal action against the Company and claimed that (1) the Written Notice was invalid, and (2) the plaintiff never agreed to the allotment and issue of the relevant shares. The Company opposed the plaintiff’s claims on the grounds that the Written Notice was validly served and the Company was entitled to allot and issue Shares to the plaintiff in satisfaction of the sum of HK$720,000.

As at the Latest Practicable Date, save as disclosed above, neither the Company nor any of its subsidiaries were engaged in any litigation or arbitration of material importance and no litigation or arbitration of material importance is known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

8. EXPERTS CONSENTS

The Joint Independent Financial Advisers have given and have not withdrawn their respective written consents to the issue of this circular with the inclusion of their joint letter and the references to their names in the form and context in which they respectively appear.

The qualification of the experts who have given advice or opinion which are contained in this circular:

Name Qualification Menlo a licensed corporation within the meaning of the SFO Wallbanck a licensed corporation within the meaning of the SFO

9. DISCLAIMER

(a) Save as disclosed herein and other than certain nominee shares in subsidiaries of the Company held by Directors in trust for the Company’s subsidiaries, as at the Latest Practicable Date, none of the Directors or any chief executive of the Company had an interest or short position in any shares, underlying shares or debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he was taken or deemed to have under such provisions of the SFO) or which was required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules to be notified to the Company and the Stock Exchange;
41 -

GENERAL INFORMATION

APPENDIX

(b) save as disclosed herein, as at the Latest Practicable Date, the Directors were not aware of any person (other than a Director or chief executive of the Company) who was interested, directly or indirectly, in 10 percent or more of the issued shares of any subsidiary of the Company or any options in respect of such capital;
(c) the Joint Independent Financial Advisers do not have any shareholding in any company in the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any company in the Group;
(d) there is no contract or agreement entered into by any member of the Group, subsisting at the Latest Practicable Date in which any of the Directors is materially interested and which is significant in relation to the business of the Group as a whole; and
(e) as at the Latest Practicable Date, none of the Directors or the experts named in the paragraph headed “Experts Consents” in this appendix had any interest, direct or indirect, in any assets which have been acquired or disposed of by or leased to any member of the Group or which are proposed to be acquired or disposed of by or leased to any member of the Group since 31st December, 2002, the date to which the latest published audited consolidated financial statements of the Group were made up.

10. COMPANY SECRETARY

The secretary of the Company is Ms. Jennifer Cheung Mei Ha. Ms. Cheung is a solicitor practicing in Hong Kong.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the head office and principal place of business of the Company in Hong Kong at Room 704, Lyndhurst Tower, 1 Lyndhurst Terrace, Central, Hong Kong up to and including 6th February, 2004.

(a) the memorandum of association and bye-laws of the Company;
(b) the annual reports of the Company for the two financial years ended 31st December, 2002;
(c) the letter from the Independent Board Committee, the text of which is set out on page 20 of this circular;
(d) the letter of advice from the Joint Independent Financial Advisers to the Independent Board Committee, the text of which is set out on pages 21 to 35 of this circular;
(e) the material contracts referred to in the paragraph headed “Material contracts” in this appendix;
42 -

GENERAL INFORMATION

APPENDIX

(f) the written consents referred to in the paragraph headed “Experts consents” in this appendix; and
(g) the circular of the Company dated 21st March, 2003.
43 -

NOTICE OF SGM

==> picture [66 x 42] intentionally omitted <==

**renren Holdings Limited 人人控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a special general meeting of the above mentioned company (the “Company”) will be held at the Park Lane Room, 27th Floor, Park Lane Hotel, 310 Gloucester Road, Causeway Bay, Hong Kong on Friday, 6th February, 2004 at 9:30 a.m. for the purpose of considering and, if thought fit, passing the following resolutions as ordinary resolutions:

ORDINARY RESOLUTIONS

“ THAT the issue by way of rights of such number of new shares of HK$0.01 each (“Shares”) equal to 400 per cent. of the number of Shares in issue as at 6th February, 2004 (“Rights Shares”) to shareholders on the register of members of the Company on 6th February, 2004 on the terms and conditions set out in a document to be sent to the shareholders of the Company on or about 6th February, 2004, a copy of which has been submitted to the meeting and signed by the Chairman for the purpose of identification, be and is hereby approved and the directors of the Company be and are hereby authorised to issue and allot such Rights Shares by way of rights and otherwise on the terms set out in such document.”
“ THAT :
(a) subject to paragraph (c) of this resolution, the exercise by the directors during the Relevant Period of all powers of the Company to allot shares and to make and grant offers, agreements and options which would or might require shares to be allotted be and is hereby generally and unconditionally approved;
(b) the approval in paragraph (a) shall authorise the directors during the Relevant Period to make and grant offers, agreements and options which would or might require shares to be allotted after the end of the Relevant Period;
(c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the directors pursuant to the approval in paragraph (a), otherwise than pursuant to shares issued as a result of a Rights Issue or a scrip dividend scheme or similar arrangement, or the exercise of the subscription rights under the convertible securities or the share option scheme of the Company, shall not exceed 20 per cent of the aggregate nominal amount of the issued share capital of the Company in issue and to be issued as mentioned in resolution no. 1 above, and the said approval shall be limited accordingly; and

* For identification purpose only

44 -

NOTICE OF SGM

(d) for the purpose of this resolution:

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

(i) the conclusion of the next annual general meeting of the Company;
(ii) 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 law to be held; or
(iii) the revocation or variation of this resolution by an ordinary resolution of the shareholders of the Company in general meeting; and

“Rights Issue” means an offer of shares open for a period fixed by the directors to holders of shares on the register on a fixed record date in proportion to their then holdings of such shares (subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to fractional entitlements or legal or practical problems under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory).”

By Order of the Board renren Holdings Limited Mak Chi Yeung Chairman

Hong Kong, 19th January, 2004

Principal office:

Room 704

1 Lyndhurst Tower

1 Lyndhurst Terrace

Central

Hong Kong

Notes:

A member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint proxies to attend and vote in his stead. A proxy need not be a member of the Company.
In order to be valid, a form of proxy must be deposited at the Company’s principal office together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power of attorney or authority, not less than 48 hours before the time for holding the meeting or adjourned meeting.
45 -

AI assistant

Greenheart Group Limited — Proxy Solicitation & Information Statement 2004

48939_rns_2004-01-19_7852b969-7acf-4f03-bc43-db1c59504f3f.pdf

renren Holdings Limited 人人控股有限公司[*]

PROPOSED RIGHTS ISSUE

OF NOT LESS THAN 5,227,260,944 RIGHTS SHARES AND NOT MORE THAN 5,426,868,984 RIGHTS SHARES AT HK$0.010 PER RIGHTS SHARE PAYABLE IN FULL ON ACCEPTANCE (ON THE BASIS OF FOUR RIGHTS SHARES FOR EVERY SHARE HELD) AND GENERAL MANDATE TO ISSUE SHARES

TIS Securities (HK) Limited

Menlo Capital Limited

EXPECTED TIMETABLE

CONTENTS

RESPONSIBILITY STATEMENT

or

DEFINITIONS

DEFINITIONS

PROPOSED RIGHTS ISSUE

renren Holdings Limited 人人控股有限公司[*]

INTRODUCTION

QUALIFYING SHAREHOLDERS

TERMS OF THE RIGHTS ISSUE

SUBSCRIPTION PRICE

LETTER FROM THE BOARD

WARNING OF THE RISKS IN TRADING OF SHARES AND RIGHTS SHARES

SHAREHOLDING STRUCTURE

STATUS OF THE RIGHTS SHARES

CERTIFICATES OF THE RIGHTS SHARES

RIGHTS OF OVERSEAS SHAREHOLDERS

APPLICATION FOR EXCESS RIGHTS SHARES

LISTING AND DEALINGS

LETTER FROM THE BOARD

THE UNDERWRITING AGREEMENT

LETTER FROM THE BOARD

IRREVOCABLE UNDERTAKINGS FROM RICH DELTA AND ITS ASSOCIATES

TERMINATION OF THE UNDERWRITING AGREEMENT

CONDITIONS OF THE RIGHTS ISSUE

USE OF PROCEEDS

REASONS FOR THE RIGHTS ISSUE

ADJUSTMENT TO THE SUBSCRIPTION PRICE OF THE OPTIONS AND CONVERSION PRICE OF THE CONVERTIBLE BONDS

THE NEW ISSUE MANDATE

FINANCIAL POSITIONS AND OPERATIONS OF THE GROUP

LETTER FROM THE BOARD

PREVIOUS FUND RAISING EXERCISES OF THE COMPANY

THE SGM

RECOMMENDATION

FURTHER INFORMATION

LETTER FROM THE BOARD

renren Holdings Limited 人人控股有限公司[*]

Dear Sir or Madam,

Yours faithfully,

Independent Board Committee

Menlo Capital Limited

PROPOSED RIGHTS ISSUE

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

I. Background and Reasons for the Rights Issue

II. Terms of the Rights Issue

III. Dilution of percentage shareholding

IV. Financial effects of the Rights Issue

(a) Net tangible assets

(b) Gearing ratio

(c) Liquidity position

V. Existing Operations

VI. Use of proceeds

VII. Underwriting arrangements

LETTER FROM THE JOINT INDEPENDENT FINANCIAL ADVISERS

RECOMMENDATION

1. SHARE CAPITAL

2. DISCLOSURE OF INTERESTS

Interest of Directors

Interests of other persons in the share capital of the Company

3. DIRECTORS’ SERVICE CONTRACTS

4. DIRECTORS

Executive Directors

Independent non-executive Directors

5. CORPORATE INFORMATION

Registered Office

Resident Representative in Bermuda

Head Office and Principal Place of Business

Principal Registrar and Transfer Office

Hong Kong Branch Registrar and Transfer Office

Legal Advisers on Hong Kong Law

Auditors

Greenheart Group Limited Proxy Solicitation & Information Statement 2004

**renren Holdings Limited 人人控股有限公司[*]**

**renren Holdings Limited 人人控股有限公司[*]**

**renren Holdings Limited 人人控股有限公司[*]**

**renren Holdings Limited 人人控股有限公司[*]**