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

If you have sold or transferred all your shares in Hybrid Kinetic Group Limited , you should at once hand this circular and the accompanying form of proxy to the purchaser(s) or the transferee(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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

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HYBRID KINETIC GROUP LIMITED 正道集團有限公司

(incorporated in Bermuda with limited liability)

(Stock code: 1188)

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF NON-WHOLLY OWNED SUBSIDIARY AND NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

==> picture [104 x 62] intentionally omitted <==

A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 14 to 15 of this circular. A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 16 to 37 of this circular.

A notice convening the Special General Meeting to be held on Friday, 16 March 2012 at 10:00 a.m. at Suites 14078, 14th Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong is set out on pages N-1 to N-2 of this circular.

Whether or not you are able to attend the Special General Meeting, please complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for the holding of the Special General Meeting or any adjourned meeting thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the Special General Meeting or any adjourned meeting thereof should you so wish.

28 February 2012

		Page
Definitions.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board
–	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
–	The Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
–	Information on the Disposal Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
–	Information on the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
–	Reasons for and benefits from the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
–	Opinion of the Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
–	Expected Gain from the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
–	Financial effect of the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
–	Use of proceeds from the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
–	Implication of the Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
–	Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
–	Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
–	Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Letter from	the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Letter from	Donvex Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Appendix I	– Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . .	I – 1
Appendix II	– General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II – 1
Notice of Special General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		N – 1

– i –

DEFINITIONS

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

“Agreement” the conditional share transfer agreement dated 22 December 2011 entered into between the Vendor and the Purchaser in relation to the Disposal “Announcement” the announcement dated 22 December 2011 made by the Company in relation to the Disposal

“associate(s)” has the meaning ascribed to it under the Listing Rules

“Beijing Century” 北京世紀萬業源生物工程技術有限公司 (Beijing Century Wanyeyuan Bio-Engineering Co., Ltd.*) , a limited liability company established in the PRC and a 65% owned subsidiary of the Company as at the Latest Practicable Date

“Board” the board of Directors “Company” Hybrid Kinetic Group Limited（正道集團有限公司）, an exempted company incorporated in Bermuda with limited liability, the Shares of which are listed on the main board of the Stock Exchange

“Conditions Precedent” the conditions precedent to completion of the Disposal as set out in the Agreement and summarised in the paragraph headed “The Agreement” in this circular
“connected person” has the same meaning ascribed to it under the Listing Rules “Director(s)” director(s) of the Company “Disposal” the disposal by the Vendor to the Purchaser of the entire 65% equity interest held by the Vendor in Beijing Century subject to and upon the terms and conditions of the Agreement
“Disposal Group” Beijing Century and its subsidiary(ies)

– 1 –

DEFINITIONS

“Donvex Capital”	Donvex Capital Limited, a corporation licensed under the
	SFO to conduct type 6 (advising on corporate finance)
	regulated activity and the independent financial adviser
	to the Independent Board Committee and the Independent
	Shareholders with regard to the Disposal as contemplated
	under the Agreement
“Group”	the Company and its subsidiaries, and immediately
	following completion of the Disposal, the Company and its
	subsidiaries (excluding the Disposal Group)
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”	an independent committee of the Board (which comprises
	Mr He Bangjie, Mr Wong Lee Hing, Dr Song Jian
	and Ms Chan Fung Yi, being all the independent non-
	executive Directors) established to advise the Independent
	Shareholders with regard to the Disposal as contemplated
	under the Agreement
“Independent Financial Adviser”	Donvex Capital
“Independent Shareholders”	the Shareholders who do not have any material interest in
	the Disposal as contemplated under the Agreement
“Latest Practicable Date”	23 February 2012, being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information included in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Percentage Ratios”	the applicable percentage ratios under Rule 14.07 of the
	Listing Rules
“PRC”	The People’s Republic of China, excluding Hong Kong,
	the Macau Special Administrative Region of the PRC and
	Taiwan
“Purchaser”	王穎(Wang Ying*), the purchaser under the Agreement

– 2 –

DEFINITIONS

“RMB”	Renminbi Yuan, the lawful currency of the PRC
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
“Special General Meeting”	the special general meeting of the Company to be convened
	and held to consider and, if thought fit, approve the
	Disposal as contemplated under the Agreement
“Share(s)”	ordinary share(s) of nominal value of HK$0.10 each in the
	capital of the Company
“Shareholder(s)”	holder(s) of Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Vendor”	Far East Golden Resources Investment Limited（遠東金源
	投資有限公司）, a company incorporated in Hong Kong
	with limited liability and a wholly-owned subsidiary of the
	Company
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.

For the purpose of this circular, amounts in RMB have been translated into Hong Kong dollars at HK$1 equal to RMB0.813. No representation is made that any amounts in RMB or Hong Kong dollars have been or could be converted at the above rates or at any other rates or at all.

For identification purpose only

– 3 –

LETTER FROM THE BOARD

==> picture [54 x 55] intentionally omitted <==

HYBRID KINETIC GROUP LIMITED 正道集團有限公司

(incorporated in Bermuda with limited liability)

(Stock code: 1188)

Executive Directors:

Dr Yeung Yung (Chairman) Dr Huang Chunhua (Deputy Chairman) Dr Wang Chuantao (Chief Executive Officer) Mr Liu Stephen Quan Mr Hui Wing Sang, Wilson Dr Zhu Shengliang Dr Zhang Zhenwei Mr Xu Jianguo Mr Li Zhengshan

Non-executive Directors: Dr Xia Tingkang, Tim Dr Zhu Guobin

Registered office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Head office and principal place of business in Hong Kong: Suites 1407-8, 14th Floor Great Eagle Centre 23 Harbour Road Wanchai, Hong Kong

Independent non-executive Directors: Mr He Bangjie Mr Wong Lee Hing Dr Song Jian Ms Chan Fung Yi

28 February 2012

To the Shareholders

Dear Sir or Madam

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF NON-WHOLLY OWNED SUBSIDIARY

INTRODUCTION

Reference is made to the Announcement regarding the Disposal contemplated under the Agreement.

– 4 –

LETTER FROM THE BOARD

The Disposal constitutes a major and connected transaction of the Company under the Listing Rules and is subject to the approval of the Independent Shareholders.

The purpose of this circular is to:

(i) provide the Shareholders with information relating to the Disposal and other information required by the Listing Rules;
(ii) set out the letter of advice from the Independent Financial Adviser to the Independent Board Committee after having considered the advice of the Independent Financial Adviser in relation to the Disposal; and
(iii) give you notice of the Special General Meeting to consider and, if thought fit, approve the Disposal.

THE AGREEMENT

Date

22 December 2011

Parties

Vendor : Far East Golden Resources Investment Limited（遠東金源投資有限公司）, a wholly-owned subsidiary of the Company

The Vendor is a company incorporated in Hong Kong with limited liability and an investment holding company

Purchaser : 王穎 (Wang Ying*)

The Purchaser is a director of, and a shareholder holding approximately 10.4% of the equity interest in, Beijing Century.

Assets to be disposed of

The entire 65% equity interest in Beijing Century held by the Vendor.

– 5 –

LETTER FROM THE BOARD

Consideration for the Disposal

The consideration for the Disposal is RMB41 million (equivalent to approximately HK$50,431,000), which shall be paid by the Purchaser to the Vendor in cash in the following manner:

(a) a sum of RMB21 million (equivalent to approximately HK$25,830,000) shall be paid after the approval of the Disposal from 中華人民共和國北京市商務局 (The Beijing Ministry of Commerce of the PRC*) has been obtained; and
(b) the remaining sum of RMB20 million (equivalent to approximately HK$24,601,000) shall be paid within three days after the approval of the Disposal from 中華人民共和國北京市工商行政管理局 (The Beijing Administration for Industry and Commerce*) has been obtained.

Basis of the Disposal Consideration

The consideration for the Disposal was determined between the Vendor and the Purchaser after arm’s length negotiations with reference to (i) the net asset value of the Disposal Group; (ii) the historical operating conditions and financial performance of the business carried on by the Disposal Group; and (iii) the uncertain business prospect of the Disposal Group caused by the global financial and economic crisis and a limited access to credit which have dampened shortterm prospects of the bio-organic fertilizer industry. Farmers either deferred their purchase of bioorganic fertilizer (which is relatively more expensive than traditional fertilizer) or chose to reduce application rates, which actions have weakened the short-term growth in bio-organic fertilizer demand. The uncertain economic outlook does not generally leave much room for manoeuvre when it comes to negotiations for better deal on price.

Conditions Precedent to the completion of the Disposal

Completion of the Disposal is conditional upon fulfilment of the following Conditions Precedent by 30 June 2012 (or such other date as the parties to the Agreement may agree):

(1) the Disposal contemplated under the Agreement having been approved by the Shareholders at the Special General Meeting;
(2) all consents, authorisations, approvals, certificates and registration that are necessary for the implementation of the Disposal having been obtained from the competent authorities in the PRC; and

– 6 –

LETTER FROM THE BOARD

(3) the consideration for the Disposal having been paid in full by the Purchaser to the Vendor in accordance with the Agreement.

The Agreement does not provide that any of the Conditions Precedent can be waived by either the Vendor or the Purchaser.

Completion of the Disposal

Completion of the Disposal shall take place on the day on which the last unfulfilled Conditions Precedent is satisfied.

INFORMATION ON THE DISPOSAL GROUP

Beijing Century is a limited liability company established in the PRC and a non-wholly owned subsidiary of the Company. As at the Latest Practicable Date, Beijing Century had a paidup registered capital of RMB60 million, of which 65% was contributed and held by the Vendor, approximately 10.4% was held by the Purchaser and the remaining approximately 24.6% was held by other individual or corporate PRC shareholders in Beijing Century.

The Disposal Group (comprising Beijing Century and its subsidiaries) is principally engaged in the research and development in the field of bio-organic fertilizer for use in organic agriculture and the environmental products and related business.

The net asset values of the Disposal Group after deducting the non-controlling interests as at 31 December 2010 and 30 June 2011 amounted to HK$42,970,000 (audited) and HK$45,195,000 (unaudited) respectively.

The major assets of the Disposal Group as at 30 June 2011 comprised of cash and cash equivalents of HK$39,015,000, trade receivable of HK$5,853,000, inventories of HK$8,712,000, fixed assets of HK$7,143,000 and intangible assets of HK$10,875,000. As at 31 December 2010, the major assets of the Disposal Group comprised of cash and cash equivalents of HK$37,751,000, trade receivable of HK$5,834,000, inventories of HK$2,939,000, fixed assets of HK$7,399,000 and intangible assets of HK$11,619,000.

The revenue of the Disposal Group for the years ended 31 December 2010 and 2009 were amounted to HK$14,641,000 and HK$10,393,000 respectively.

– 7 –

LETTER FROM THE BOARD

The audited loss of the Disposal Group for each of the two financial years ended 31 December 2009 and 2010 are set out below:

	For the financial
	year ended
	31 December
	2009
	Equivalent to
	approximately
	HK$
Net loss before taxation and extraordinary items (audited)	(3,101,000)
Net loss after taxation and extraordinary items (audited)	(3,101,000)
	For the financial
	year ended
	31 December
	2010
	Equivalent to
	approximately
	HK$
Net loss before taxation and extraordinary items (audited)	(1,106,000)
Net loss after taxation and extraordinary items (audited)	(1,122,000)

– 8 –

LETTER FROM THE BOARD

INFORMATION ON THE GROUP

The Company is an investment holding company. As at the Latest Practicable Date, the principal businesses of the Group included the environmental automobile and related business, the environmental products and related business carried on by the Disposal Group and the natural resources business.

Corporate structure of the Group immediately prior to and after completion of the Disposal

Immediately before completion of the Disposal

==> picture [348 x 264] intentionally omitted <==

----- Start of picture text -----

Group of companies carried on
the environmental automobile and
related business
Group of companies carried on
the natural resources business
The Company
Group of companies carried on the
environmental products and related business
(being the business carried on by
the Disposal Group)
Other subsidiaries of the Company, each of
which is either established as an investment
holding company or has no operation as at the
Latest Practicable Date
----- End of picture text -----

– 9 –

LETTER FROM THE BOARD

Immediately after completion of the Disposal

==> picture [372 x 206] intentionally omitted <==

----- Start of picture text -----

Group of companies carried on
the environmental automobile and
related business
Group of companies carried on
The Company
the natural resources business
Other subsidiaries of the Company, each of
which is either established as an investment
holding company or has no operation as at the
Latest Practicable Date
----- End of picture text -----

REASONS FOR AND BENEFITS FROM THE DISPOSAL

The pervasive and persistent economic slowdown has been affecting the growth in every sector of business everywhere. Many expectations for the future have become uncertain. To meet the tough challenges ahead and preserve the Group’s future while navigate the Group through the economic downturn, prudence dictates the Company to take steps to re-examine its business strategies which include downsizing or discontinuing the relatively less promising business and re-deploying more resources and efforts towards the remaining businesses of the Group. These business strategies are to achieve the main goals of reducing operating costs, positioning the Group well for growth as markets improved and integrating more fully sustainability into the remaining businesses of the Group.

Competition in the bio-organic fertilizer and environmental products business has been intense in the PRC market. The Board has re-evaluated the latest development of this sector of business and the overall business environment and concluded that it is in the interests of the Company to discontinue the environmental products and related business carried on by the Disposal Group.

– 10 –

LETTER FROM THE BOARD

OPINION OF THE DIRECTORS

The Directors (including the independent non-executive Directors) consider that the terms of the Disposal contemplated under the Agreement, which are determined after arm’s length negotiations between the parties to the Agreement, are on normal commercial terms, fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

None of the Directors has any interest in the Disposal and, accordingly, was not prohibited from voting or being counted in the quorum on the resolutions of the Board approving the Disposal contemplated under the Agreement.

EXPECTED GAIN FROM THE DISPOSAL

Based on the unaudited financial statements of the Disposal Group as at 30 June 2011, the excess of the consideration from the Disposal over the unaudited net asset values of the Disposal Group is amounted to approximately HK$5,236,000. For illustration purpose, the estimated unaudited gain (being the amount by which the consideration for the Disposal exceeds (i) the aggregate of the estimated transaction costs and (ii) the unaudited net asset values of the Disposal Group after deducting the non-controlling interests as at 30 June 2011) of approximately HK$3,605,000 is expected to arise from the Disposal. The actual result from the Disposal will be calculated on the date of completion of the Disposal.

FINANCIAL EFFECT OF THE DISPOSAL

Before completion of the Disposal, the results of the Disposal Group have been consolidated into the results of the Group.

Based on the unaudited financial statements of the Disposal Group as at 30 June 2011, the Disposal is not expected to have any adverse impact on the future earnings of the Group. As mentioned in the preceding paragraphs, the estimated unaudited gain from the Disposal, which will decrease the loss of the Group, is approximately HK$3,605,000. In addition, based on the unaudited financial statements of the Disposal Group as at 30 June 2011, the Disposal will lead to a decrease of approximately HK$31,178,000 in the consolidated total assets of the Group after receipt of the net cash proceeds from the Disposal, and a decrease of approximately HK$8,836,000 in the consolidated total liabilities of the Group.

Immediately after the Disposal, Beijing Century will cease to be a subsidiary of the Company. The Company will cease to have any interest in the Disposal Group and will discontinue its operations in the businesses being carried on by the Disposal Group.

– 11 –

LETTER FROM THE BOARD

USE OF PROCEEDS FROM THE DISPOSAL

After deducting expenses relating to the Disposal, the net proceeds to be received by the Group is approximately RMB39,674,400 (equivalent to approximately HK$48,800,000) which will be used as its general working capital.

IMPLICATION OF THE LISTING RULES

As the Purchaser is a director of, and a shareholder holding approximately 10.4% of the equity interest in, Beijing Century, the Purchaser is a connected person of the Company for the purposes of Chapter 14A of the Listing Rules and the Disposal between the Vendor and the Purchaser constitutes a connected transaction of the Company.

Given that the applicable Percentage Ratios in respect of the Disposal is 25% or more but less than 75%, the Disposal also constitutes a major transaction of the Company under Chapter 14 of the Listing Rules.

Accordingly, the Disposal contemplated under the Agreement is subject to the approval of the Independent Shareholders in general meeting pursuant to the Listing Rules.

RECOMMENDATION

The Independent Board Committee, being independent of the parties to the Disposal, is required under the Listing Rules to advise the Independent Shareholders in relation to the Disposal. Donvex Capital has been appointed as the independent financial adviser to the Independent Board Committee in this regard.

Accordingly, your attention is drawn to the letter from the Independent Board Committee set out on pages 14 to 15 of this circular, which contains its recommendation to the Independent Shareholders in relation to the Disposal, and the letter from Donvex Capital set out on pages 16 to 37 of this circular, which contains its advice to the Independent Board Committee in relation to the Disposal.

– 12 –

LETTER FROM THE BOARD

SPECIAL GENERAL MEETING

Set out on pages N-1 to N-2 of this circular is a notice convening the Special General Meeting to be held at Suites 1407-8, 14th Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong on Friday, 16 March 2012 at 10:00 a.m. at which an ordinary resolution to consider and, if thought fit, approve the Disposal will be proposed to the Shareholders.

In accordance with the Listing Rules, any connected person with a material interest in the Disposal and any Shareholder and his/her/its associate(s) with a material interest in the Disposal must abstain from voting on the ordinary resolution in respect of the Disposal at the Special General Meeting.

To the best of the Directors’ knowledge, information and belief after having made all reasonable enquiries, none of the controlling Shareholders, the Directors and the chief executives of the Company and their respective associates had any interest in the Disposal as at the Latest Practicable Date. Accordingly, none of the Shareholders is required to abstain from voting at the Special General Meeting to approve the Disposal contemplated under the Agreement.

A form of proxy for use at the Special General Meeting is enclosed with this circular. Whether or not you are able to attend the Special General Meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the Special General Meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending the Special General Meeting or any adjournment thereof and voting in person should you so wish.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Yours faithfully, By order of the Board Hybrid Kinetic Group Limited Yeung Yung

Chairman

– 13 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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HYBRID KINETIC GROUP LIMITED 正道集團有限公司

(incorporated in Bermuda with limited liability)

(Stock code: 1188)

28 February 2012

To the Independent Shareholders

Dear Sir or Madam

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF NON-WHOLLY OWNED SUBSIDIARY

We refer to the circular dated 28 February 2012 of the Company (the “ Circular ”) of which this letter forms part.

Terms defined in the Circular bear the same meanings herein unless the context otherwise requires.

We have been appointed to form the Independent Board Committee to consider the terms of the Disposal contemplated under the Agreement and to advise the Independent Shareholders as to whether, in our opinion, such terms are fair and reasonable so far as the Independent Shareholders are concerned.

Donvex Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Disposal contemplated under the Agreement.

We wish to draw your attention to the letter from the Board set out on pages 4 to 13 of the Circular which contains, among others, information on the Disposal contemplated under the Agreement as well as the letter from the Independent Financial Adviser set out on pages 16 to 37 of the Circular which contains its advice in respect of the terms of the Disposal contemplated under the Agreement.

– 14 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the advice of the Independent Financial Adviser, we consider that the terms of the Disposal contemplated under the Agreement are on normal commercial terms, fair and reasonable so far as the Company and the Independent Shareholders are concerned, and that the Disposal is in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the Special General Meeting in relation to the Disposal contemplated under the Agreement.

Yours faithfully

The Independent Board Committee

Mr He Bangjie Mr Wong Lee Hing Dr Song Jian Ms Chan Fung Yi Independent Non-executive Directors

– 15 –

LETTER FROM DONVEX CAPITAL

The following is the full text of the letter from Donvex Capital Limited setting out their advice to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

==> picture [103 x 62] intentionally omitted <==

Unit 1305, 13th Floor, Carpo Commercial Building 18-20 Lyndhurst Terrace Central Hong Kong

28 February 2012

The Independent Board Committee and the Independent Shareholders of Hybrid Kinetic Group Limited

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF NON-WHOLLY OWNED SUBSIDIARY

I. INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders with respect to the terms of the Disposal, details of which are set out in the letter from the Board contained in the circular dated 28 February 2012 to the Shareholders (the “ Circular ”), of which this letter forms part. Terms used in this letter have the same meanings as defined elsewhere in the Circular unless the context requires otherwise.

On 22 December 2011, the Vendor, a wholly owned subsidiary of the Company, entered into the Agreement with the Purchaser pursuant to which the Vendor agreed to sell the entire 65% equity interest held by it in Beijing Century to the Purchaser at the consideration of RMB41 million (equivalent to approximately HK$50,431,000).

As the Purchaser is a director of, and a shareholder holding approximately 10.4% of the equity interest in Beijing Century, the Purchaser is a connected person of the Company for the purpose of Chapter 14A of the Listing Rules and the Disposal contemplated under the Agreement constitutes a connected transaction for the Company which is subject to the reporting, announcement and Independent Shareholders’ approval requirements under the Listing Rules.

– 16 –

LETTER FROM DONVEX CAPITAL

II. THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. He Bangjie, Mr. Wong Lee Hing, Dr. Song Jian and Ms. Chan Fung Yi, has been established to advise the Independent Shareholders on the Disposal. We, Donvex Capital Limited, have been appointed to advise the Independent Board Committee and the Independent Shareholders in connection with the Disposal, in particular as to whether the terms of the Disposal are fair and reasonable and on normal commercial terms so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

III. BASIS OF OUR OPINION

In formulating our opinion and recommendations, we have relied on the information and representations supplied, and the opinion expressed, by the Directors and management of the Company and have assumed that such information and statements, and representations made to us or referred to in the Circular are true, accurate and complete in all material respects as at the Latest Practicable Date and will continue as such at the date of the Special General Meeting. The Directors have collectively and individually accepted full responsibility for the Circular, including particulars given in compliance with the Listing Rules for the purpose of the giving of information with regard to the Group and having made all reasonable enquiries have confirmed that, to the best of their knowledge and belief, the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in the Circular misleading.

We consider that we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our recommendation. We have no reasons to suspect that any material information has been withheld by the Directors or management of the Company, or is misleading, untrue or inaccurate, and consider that they may be relied upon in formulating our opinion. We have not, however, for the purpose of this exercise, conducted any independent detailed investigation or audit into the businesses or affairs or future prospects of the Group and the related subject of, and parties to, the Agreement. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change this opinion and that we do not have any obligation to update, revise or reaffirm this opinion.

– 17 –

LETTER FROM DONVEX CAPITAL

IV. PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion regarding the Disposal, we have considered the following principal factors and reasons:

1. Information of the Group

The Company is an investment holding company. The principal businesses of the Group include the environmental automobile and related business, the environmental products and related business being carried on by the Disposal Group and the natural resources business.

The consolidated financial information of the Group for the two years ended 31 December 2010 and the six months ended 30 June 2011, which were extracted from the 2010 annual report and the 2011 interim report of the Company respectively, are summarized as follows:

	For the	For the
	six months	six months	For the	For the
	ended	ended	year ended	year ended
	30 June	30 June	31 December	31 December
	2011	2010	2010	2009
	HK$’000	HK$’000	HK$’000	HK$’000
	unaudited	unaudited	audited	audited
Revenue
Environmental products and
related business
(the business carried on by
the Disposal Group)	8,143	6,988	14,461	10,393
Natural resource business	0	0	0	0
Environmental automobile and
related business	24,103	0	13,967	0
Loss for the period	86,866	52,617	253,611	126,250

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LETTER FROM DONVEX CAPITAL

2. Information on the Disposal Group

Beijing Century is a limited liability company established in the PRC and a nonwholly owned subsidiary of the Company. As at the Latest Practicable Date, Beijing Century had a paid-up registered capital of RMB60 million, of which 65% was contributed and held by the Vendor, approximately 10.4% was held by the Purchaser and the remaining approximately 24.6% was held by 10 several individual or corporate PRC shareholders in Beijing Century.

The loss of the Disposal Group for each of the two financial years ended 31 December 2009 and 2010 and for the period ended 30 June 2011 are set out below:

	For the financial year ended
	31 December 2009
	Equivalent to
	approximately HK$
Net loss before taxation and extraordinary items
(audited)	(3,101,000)
Net loss after taxation and extraordinary items
(audited)	(3,101,000)
	For the financial year ended
	31 December 2010
	Equivalent to
	approximately HK$
Net loss before taxation and extraordinary items
(audited)	(1,106,000)
Net loss after taxation and extraordinary items
(audited)	(1,122,000)
	For the period ended
	30 June 2011
	Equivalent to
	approximately HK$
Net profit before taxation and extraordinary items
(unaudited)	998,000
Net profit after taxation and extraordinary items
(unaudited)	998,000

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LETTER FROM DONVEX CAPITAL

3. Consideration

The consideration for the Disposal is RMB41 million (equivalent to approximately HK$50,431,000), which shall be paid by the Purchaser to the Vendor in cash in the following manner:

(a) a sum of RMB21 million (equivalent to approximately HK$25,830,000) shall be paid after the approval of the Disposal from 中華人民共和國北京市商務局 (The Beijing Ministry of Commerce of the PRC*) has been obtained; and
(b) the remaining sum of RMB20 million (equivalent to approximately HK$24,061,000) shall be paid within three days after the approval of the Disposal from 中華人民共和國北京市工商行政管理局 (The Beijing Administration for Industry and Commerce*) has been obtained.

We are of the view that the consideration for the Disposal Group is fair and reasonable so far as the Independent Shareholders are concerned and it is on normal commercial terms upon taking into consideration the following:

(i) the Disposal Group was suffering from limited development for the two years ended 31 December 2009 and 2010 and for the period ended 30 June 2011, which was mainly attributed to (a) the market for bio-fertilizer is fragmented; (b) the entry barrier for new entrants is relatively easy which resulted in the increasing competition to the industry; and (c) substantial investment is necessary for research and development of bio-fertilizer products with higher profit margin in order to diversify the products base and expand the market. As a result of the unsatisfactory financial performance of the Disposal Group for the two years ended 31 December 2009 and 2010, the Disposal Group was not capable to invest capital for any material research and development activities or acquire comprehensive equipment and machinery over the years without the support of the Company. All these factors constituted the limited development to the Disposal Group;

for identification only

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LETTER FROM DONVEX CAPITAL

(ii) the Consideration is at approximately 17.4% premium as compared to the net asset value of the Disposal Group as at 31 December 2010;
(iii) Upon (a) discussing with the management of the Company in respect of the intensive competition in the bio-fertilizer industry in the PRC market; (b) performing market research of the bio-fertilizer industry in the PRC market as stated below; and (c) reviewing the balance sheet of the Disposal Group for the years ended 31 December 2009 and 2010 and for the six months ended 30 June 2011, in which its major assets, mainly comprising cash and bank balances, trade and other receivables and inventories, and accounting for approximately 74% of the total assets over the years, are in liquid form, the major assets of the Disposal Group should be approximated that of the net book value and therefore it is reasonable to compare the Consideration to that of the net asset value of the Disposal Group and we are of the view that the Consideration is fair and reasonable; and
(iv) to assess the fairness and reasonableness of the Consideration to the net asset value of the Disposal Group, we have based on the publicly available information of the companies listed in Hong Kong Stock Exchange and selected the comparable transactions by reference to the announcements made by the listed companies which falling within the period from October 2011 to the Latest Practicable Date (the “Period”). We have selected the comparable transactions of which the relevant announcements were made during the Period due to the reason that (i) the Disposal was announced in December 2011, falling into the Period, which experienced an upward trend from approximately 16,000 to 20,000 despite the fluctuation during the Period and the market atmosphere during the Period was likely improved; (ii) the month of October 2011 should be treated as a turnaround point for Heng Seng Index as the nine months prior to October 2011 were generally encountered a downward cycle with Hang Seng Index from approximately 23,000 to 18,000; and (iii) it will be inappropriate and less objective by selecting the comparable transactions which announced during the nine months prior to October 2011 in light of the downward cycle of Hang Seng Index and the relatively pessimistic market atmosphere which may influence the business disposal decisions made by the issuer companies to a certain extent as the disposal may be mainly attributable to the shrinking economy, other than common business factors such as the historical financial or operating performance of the target to be disposed of, which shall be taken into consideration.

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LETTER FROM DONVEX CAPITAL

We have also, to the best of our knowledge, identified 48 companies in total currently listing in Hong Kong, PRC and Taiwan stock exchange respectively, of which the entire or part of the businesses are related to manufacture and/or sale of fertilizers or bio-organic fertilizers.

Region	Number of companies identified
Hong Kong	(6)
PRC	(41)
Taiwan	(1)

To the best of our knowledge and based on our research, there was only one company listed in the PRC stock exchange had made disposal transactions during the Period and the businesses conducted by the disposal target of that disposal transaction are related to real estate and dairy industry and therefore it is treated as incomparable to the Disposal Group as it is currently engaged in the manufacture and sale of bio-organic fertilizer.

Based on our research setout above, as there were no comparable disposal transactions made by the listed companies currently engaged in fertilizer or bio-fertilizer industry, as such, instead of comparing with similar listed companies in fertilizer industry in Hong Kong Stock Exchange, to the best of our knowledge, we have identified the representative transactions (the “ Representative Transactions ”) in 15 disposal transactions (the “ Comparables ”) in other industries of which the issuer companies are listing in Hong Kong Stock Exchange which announced their respective details during the Period, upon taking into account the below factors:

(i) the terms (including the basis of consideration) of the Representative Transactions are determined under similar market conditions and sentiments as the Disposal, as the disposal transactions announcements were made by the respective listed companies during the Period;

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LETTER FROM DONVEX CAPITAL

(ii) the subject to be disposed of under the Representative Transactions including and/or entirely relating to equity interest;
(iii) the disposal target of the Representative Transactions had sustained a loss position for previous or current financial periods as disclosed under the respective announcements; and
(iv) the basis of consideration for the disposal target of the Representative Transactions is solely or partly with reference to the net asset value or net liabilities of the respective target to be disposed of.

Of the Comparables, we have adopted five transactions of which the details are depicted below as the Representative Transactions that are comparable to the Disposal, due to the factors as described above. To the best of our knowledge, the Representative Transactions represented an exhaustive list.

The terms used herein should have the same meanings as defined in the respective announcements and/or circulars of the issuer companies.

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LETTER FROM DONVEX CAPITAL

	Profit/	(loss) after	taxation of	the disposal	target	(HK$1,120,000)	(audited) for the	year ended 31	December 2010							(HK$805,000)	(audited) for the	year ended 31	December 2010
Premium/	(discount)	to the net	asset value	of the disposal	target	Approximately	17.4%									N/A	(Note 1)
			Net asset value/	(net liabilities) of	the disposal target	HK$42,970,000 (audited) as	at 30 June 2011									Audited net liabilities of	OGIT of approximately	HK$7,100,000 as at 31	December 2010
				Basis of consideration of	the transactions	(i) The audited net asset value of the	Disposal Group;		(ii) The historical operating	conditions and financial	performance of the business	carried on by the Disposal	Group; and	(iii)the uncertain business of	the Disposal Group.	(i) the audited net liabilities	of OGIT of approximately	HK$7,100,000 as at 31	December 2010	and (ii) the face value of the OGIT	Sale Loan of approximately	HK$5,900,000 as at 15	December 2011
				Consideration	for the disposal	Approximately	HK$50,431,000									Approximately	HK$5,900,000
				Types of	transactions	Major disposal	and connected	Transaction								Major disposal	transaction
				Date of	announcement	22 December 2011										28 December 2011
				Company Name	(Stock Code)	Hybrid Kinetic	Group Limited	(Stock Code: 1188)								China Energy	Development	Holdings Limited	(Stock Code: 228)
						The	Disposal									1.

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LETTER FROM DONVEX CAPITAL

	Profit/	(loss) after	taxation of	the disposal	target	(HK$56,233,000)	for the six	months ended	30 June 2011			(HK$6.5 million)	(unaudited) for	the year ended	31 December	2010
Premium/	(discount)	to the net	asset value	of the disposal	target	N/A	(Note 1)					Approximately	24.2%
			Net asset value/	(net liabilities) of	the disposal target	Approximately	(HK$409.3 million)					Approximately	HK$22.1 million (which	represented the Adjusted	Net Assets attributable to	the Company as at 30 June	2011)
				Basis of consideration of	the transactions	(i) the historical performance of the	Disposal Group		(ii) the unaudited consolidated	net asset value of the Disposal	Group	(i) the adjusted net asset value	of SyncMOS Technologies	approximately HK$40.1 million	after taking into account the	effect of Capital Reduction		(ii) the price of NT$11.43 per	share used in the disposition	of equity interest of SyncMos	Technologies by Mou Fu to the	Purchaser	(iii) the scale and size of integrated	circuits and semiconductor parts	in Taiwan	(iv) the historical performance of	SyncMos Technologies	(v) the industry
				Consideration	for the disposal	HK$100,000						NT$106,870,500	(equivalent to	approximately	HK$27,402,692)
				Types of	transactions	Very Substantial	Disposal					Very Substantial	Disposal and	Connected	Transaction
				Date of	announcement	23 November 2011						2 December 2011
				Company Name	(Stock Code)	China New Energy	Power Group Limited	(Stock Code: 1041)				Pacmos Technologies	Holdings Limited	(Stock Code: 1010)

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LETTER FROM DONVEX CAPITAL

	Profit/	(loss) after	taxation of	the disposal	target	(HK$860,000) for	the year ended	31 December	2010						(HK$37,001,000)	(unaudited) for	the year ended	31 December	2010
Premium/	(discount)	to the net	asset value	of the disposal	target	N/A	(Note 1)								N/A	(Note 1)
			Net asset value/	(net liabilities) of	the disposal target	Approximately	(HK$13,898,000) as at	30 September 2011							Approximately	(HK$9.58 million)	(unaudited) as at	30 June 2011
				Basis of consideration of	the transactions	(i) the face value of the Sale Loan;	and		(ii) the net liability of Glorious	Bright Group as at 30	September 2011 and after the	Share Capital Increase and the	Vendor’s Loan retained by the	Group	(i) the unaudited net liabilities of	the Disposal Group and its inter	Company balances due to the	Company as at 30 June 2011, of	approximately HK$9.58 million	HK$84.96 respectively; and	(ii) the exchange reserve of	approximately HK$21.64	million to be released upon	completion of the Disposal
				Consideration	for the disposal	HK$10 million									HK$45,000,000
				Types of	transactions	Major disposal	transaction								Major disposal	transaction
				Date of	announcement	27 October 2011									20 October 2011
				Company Name	(Stock Code)	Prosperity Investment	Holdings Limited	(Stock Code:310)							Beijing Properties	(Holdings) Limited	(Stock Code: 925)

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LETTER FROM DONVEX CAPITAL

			Profit/(loss) after	taxation of the	disposal/	Acquisition target	(HK$2.3 million)		HK$803 million	including the	gain of the fair	value of the	biological assets	of HK$772	million
Premium/	(discount) to	the net asset	value of	the disposal/	Acquisition	target	N/A (Note 1)		89%
			Net asset value/	Consideration for (net liabilities) of	Company Name Date of Types of the disposal/ Basis of consideration of the disposal/	(Stock Code) announcement transactions Acquisition the transactions Acquisition target	South China (China) 11 January 2011 Connected HK$24.1 million Net asset value and Shareholder’s (HK$1.6 million)	Limited (413) Transaction Loan	China Agrotech Holdings 27 July 2010 Very Substantial HK$1,000 million Net asset value, preliminary valuation HK$1,118 million	Limited (1073) Acquisition report, consideration adjustment and	Transaction target group potential development					Note 1: The premium/(discount) to the net asset value was N/A since the net asset value of the respective disposal target was a negative amount.

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LETTER FROM DONVEX CAPITAL

There is no other companies in the agricultural industry listed in Hong Kong Stock Exchange could be identified during the Extended Period save for the above and the limited comparison should not be used to draw the conclusion as to whether it is a common practice of using net asset value as the basis of the consideration when making disposal. However, using other alternatives are not appropriate having considered that using price-earning ratio and/or business valuation as the basis of the Consideration is not appropriate in our case as Beijing Century has incurred operating loss for the last two financial years and minimal profit for the interim period ended 30 June 2011. Under such circumstances, (i) using net asset/liabilities as the basis of the consideration in other types of industry seems to be the common practice which is reflected by the consideration of the Representative Transactions during the Period; and (ii) no other alternative could be used as the basis of the Consideration save for using net asset value as the basis of the Consideration, we are of the view that using net asset value as the basis of the Consideration in the Disposal is fair and reasonable.

In respect of the term as to whether 17.4% premium of the consideration of the Disposal is fair and reasonable, we are of the view that the 17.4% premium of the consideration of the Disposal over the net asset value of the Disposal Group is fair and reasonable due to the fact that (i) the unsatisfactory historical performance of the Disposal Group; (ii) the keen competition of the bioorganic fertilizer industry operating by the Disposal Group as detailed below; (iii) the substantial investment in the research and development of the Disposal Group in future stated below; (iv) the benefit for the Shareholders as a result of the cash to be received from the Disposal upon Completion, which could be used for the development of the remaining business of the Group; and (v) Beijing Century being disposed at the premium is merely a commercial decision between the Company and the Purchaser.

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LETTER FROM DONVEX CAPITAL

4. Reasons for entering into the Agreement

The persistent economic downturn in the second half of 2011 has been affecting the growth in every sector of business everywhere. Many expectations for the future have become uncertain. To meet the tough challenges ahead and preserve the Group’s future while navigate the Group through the economic downturn, prudence dictates the Company to take steps to re-examine its business strategies which include downsizing or discontinuing the relatively less promising business, such as the bio-organic fertilizer and environmental products business, and re-deploying more resources and efforts towards the remaining businesses of the Group. These business strategies are to achieve the main goals of reducing operating costs, positioning the Group well for growth as markets improved and integrating more fully sustainability into the remaining businesses of the Group. The overview of bioorganic industry is analyzed with the following perspectives.

Size of competitors amongst the industry

Competition in the bio-organic fertilizer and environmental products business has been intense in the PRC market. The bio-fertilizer industry is quite fragmented in the PRC market. The existing production capacity of the Disposal Group is approximately 2,000 tons per annum as compared to one of the largest market participants located at Shandong province in China which has 250,000 tons per annum. Based on an article of 中國有機肥產業化趨勢分析 (Analysis on bio-fertilizer industry in China*) in mid of 2009 contained in 艾凱數據研究中心 (www.icandata.com), which is a professional research channel specialized in providing research, analyses, consultation on various industries and issued more than 25,000 research reports for 30 different areas, it stated that the size of organic fertilizer manufacturers in China, in terms of their production capacity, are mainly small market players. Manufacturers with production capacity of less than 20,000 tons accounted for approximately 66% of the total manufacturers, while manufacturers with production capacity of 20,000 to 30,000 tons accounted for approximately 24% and manufacturers with production capacity of more than 50,000 tons only accounted for approximately 10%.

Based on the above, the current production capacity of the Disposal Group is approximately 2,000 tons, which falls into the sector with the participation of most of the market players. As such, it is estimated that the competition facing by the Disposal Group in the segment is intense and fierce.

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LETTER FROM DONVEX CAPITAL

Over Supply of bio-organic fertilizers

The entry barrier of this industry in China is comparatively lower to new entrants, as the entrants could easily compete with existing market stakeholders by manufacturing bio-organic fertilizers with lower qualities and lower prices for expanding their market share. Pursuant to the historical information in respect of the demand and supply of fertilizer industry, including bio-organic fertilizer industry, as detailed below, it is foreseeable that there will have over supply of bio-organic products in the PRC. All these factors constituted a fierce and increasing competition in this industry and have adverse impact on the operation of Beijing Century which suffered a loss position of approximately HK$3.1 million and HK$1.1 million respectively for the two years ended 31 December 2010. Though Beijing Century recorded a profit of approximately HK$1.4 million for the six months ended 30 June 2011, the foreseeable increasing competition in bio-organic fertilizer industry will have a negative impact on the profit of Beijing Century since the entry barrier to new entrants are relatively easy.

Set out below are the statistics of the supply of the fertilizer industry and bioorganic fertilizer including the change of proportion of bio-organic fertilizer which indicates that the issue of over-supply of products in the fertilizer industry and the bio-organic fertilizer industry.

(a) Fertilizer Industry

Based on the article of 2011年中國化肥產量統計分析 (2011 chemical fertilizer production output in China*) dated January 2012, contained in 中國化肥網 (www.fert.cn), a well-known and leading fertilizer industry website, which covers from electronic business, information service to product promotion and activities, which had more than 50,000 registered users with approximately 100,000 views daily and the information from 中華人民共和國農業部 (Ministry of Agriculture of the People’s Republic of China), the total production output of fertilizer industry for 2010 and 2011 was approximately 66.2 million tons and 60.2 million tons respectively while the total usage of fertilizer of the same period only amounted to approximately 55.6 million tons and 55.0 million tons respectively. The over-supply of fertilizer for 2010 and 2011 amounted to approximately 10.6 million tons and 5.2 million tons respectively, which represented approximately 19% and 9.5% of the total usage of fertilizer for the same period. The over-supply of fertilizer over the years indicated the continuous and keen competition of the industry, of which the bio-organic fertilizer forms one of the segments.

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LETTER FROM DONVEX CAPITAL

(b) Bio-organic fertilizer

Based on a research report issued by a research agency in January 2012, the total production output of bio-organic fertilizer had been increased from approximately 4.3 million tons in 2007 to approximately 6.1 million tons in end of 2011 while the market demand had just increased from approximately 4.0 million tons in 2007 to 5.5 million tons in end of 2011. As such, there was an over-supply of bioorganic fertilizer of approximately 11% in 2011.

The proportion of bio-organic fertilizer to bio-inorganic compounded fertilizer had also been decreased from 19.4% to 80.6% in 2007 to 15.0% to 85.0% in 2011, the decrease in proportion of bio-organic fertilizer also indicated that there are new products and new competitors entering the industry and the competitiveness is likely to be increased.

Analysis of the market demand for bio-fertilizer products

Despite the fact that the market demand for bio-fertilizer products has increased from 19 million tons in 2010 to 21 million tons in 2011 and it is expected that such demand will increase to 23 million tons in 2012 which is quoted by a news dated 6 December 2011 under the website of www.cpcif.org.cn（國家石油和化工網）which was established and organized by 中國石油和化學工業協會 (China petroleum and chemical industry association*), an official association established in 2001 and currently has more than 200 member units, which mainly act as a major intermediary in providing comprehensive information and organize activities in relation to petroleum and chemical industries in China, competition in the bio-fertilizer industry is becoming more and more intensive in view of the increase in the number of biofertilizer manufacturers in China. According to the statistics issued by the 中華人民共和國國家統計局 (National Bureau of Statistics of China), the number of bioorganic fertilizer manufacturers had been increased from approximately 190 in 2007 to approximately 450 in 2010, represented an increase of approximately 145% and the number of industry related personnel had been increased from approximately 13,900 in 2007 to approximately 33,700 in 2010, both represented an increase of more than 140% over the years. The number of bio-organic fertilizer manufacturers and the industry related personnel for the first quarter of 2011 was approximately 320 and 27,900 respectively, which accounted for approximately 70.7% and 82.8% of the total number respectively in 2010. As such, the increase in the market demand for biofertilizer products is less in proportion to the increase in the number of bio-fertilizer manufacturers. Therefore, we are of the view that the stakeholders and competition of the industry will be persisted.

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LETTER FROM DONVEX CAPITAL

Change of market price of fertilizer products

Given that there are various types and categories of fertilizer products (e.g. organic fertilizer, chemical fertilizer, compounded fertilizer, etc) available in the market and the market prices in different cities or counties are varied with relatively large extent, as such, in order to reasonably assess the historical change of market price of bio-organic fertilizer, we have adopted the change of market price of 氮肥 (nitrogen fertilizer), which accounted for more than 40% of the total usage volume of fertilizer in China, according to the statistics issued by the National Bureau of Statistics of China（中華人民共和國國家統計局）although the major products manufactured by the Disposal Group are bio-fertilizers including but not limited to bacterial manure, which is one of the sub-categories of fertilizer industry. However, the demand and usage of bio-fertilizer products only represented a minimal portion among the entire fertilizer industry. In this respect, we have adopted the price trend of nitrogen fertilizer, one of the major and representative products in fertilizer industry, for analyzing the industry with a more objective manner. Given the representativeness of nitrogen fertilizer amongst the fertilizer industry, the price trend of nitrogen fertilizer should treat as a general and reasonable indicator for the price trend of fertilizer industry. Since the fertilizer industry, including the bio-organic fertilizer encountered the issue of over-supply over the years as explained below, the price trend of bio-organic fertilizer is expected to share the similar cycle as nitrogen fertilizer given both of them are under the same market condition in China and we are of the view that the change of market price of bio-organic fertilizer will share the same trend as nitrogen fertilizer under the same market condition and time frame.

According to the statistics in February 2012 provided by 中國神農網 (www.sn110.com), which was established by 湖北神農資訊科技有限公司 (Hubei Shennong Information Technology Company Limited) (“ HSITL ”), a company focus on providing the market information (including but not limited to suppliers, price) in respect of agricultural-related products and had been awarded as 國家資訊化試點工程 (National Information Pilot Project) by 中華人民共和國國家和發展改革委員會 (National Development and Reform Commission) (the “ NDRC ”), the price of nitrogen fertilizer (of which the well-known product in fertilizer industry) had been decreased from approximately RMB2,000 per ton in early 2009 to approximately RMB1,600 per ton in mid of 2010 and increased to more than RMB2,200 per ton in mid of 2011 but dropped to RMB2,100 per ton in end of 2011. The rapid fluctuating price change of nitrogen fertilizer indicated that though the demand of fertilizer products had been increased over the years, the industry is also characterized with increased supply and intensive competition. In light of the fluctuation on the market price of nitrogen fertilizer, it is expected that the market price of bio-organic fertilizer may share the same fluctuation cycle over the future years as nitrogen fertilizer considering there is a trend of over supply of bio-organic fertilizers as stated below.

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LETTER FROM DONVEX CAPITAL

Though as advised by the management of the Company, the market price of the major products (including but not limited to bacterial manure manufactured and sold by the Disposal Group remained relatively stable with increasing trend for the two years ended 31 December 2010, we expect that the price of its products may subject to fluctuation as nitrogen fertilizer and even likely to be decreased since (i) there is both over-supply in the industry of bio-fertilizer and fertilizer industry as set out below, which indicated that the demand of bio-fertilizers increased in a less extent compared to the increase in supply of the same; (ii) the Disposal Group falls into the sector with the participation of the most market players, which indicated the severe competition facing by the Disposal Group; and (iii) the competitors entering the bio-fertilizer industry had been increased over the years. All these factors constitute a potential adverse impact to the market price of products manufactured and sold by the Disposal Group.

Negative impact on the operation of Beijing Century

Upon discussion with the management of the Company and as set out above, the market of bio-organic fertilizer is characterized with (i) numerous small stakeholders with relatively lower capital investment; (ii) manufacturing products with lower prices and compromising qualities; (iii) over supply of the fertilizer products in the market; and (iv) lower growth in the market demand as compared to the increase in the supply of the fertilizer products. In order to compete with the small stakeholders, the Disposal Group did not increase the average selling price of its major products for the year ended 31 December 2010 and for the period ended 30 June 2011 despite the fact that the cost of material and production has been increased for the same period in China. The gross profit margin for the Disposal Group for the year ended 31 December 2010 decreased from approximately 73% to 64% for the period ended 30 June 2011 despite the fact that the Disposal Group has recorded a profit after tax of approximately HK$1.0 million for the same period. Though the Disposal Group had reported a revenue of approximately HK$1 million for the six months ended 30 June 2011, it is inevitable for the Disposal Group to increase the resources and investments for diversifying the product portfolio and even adjusting the prices in order to retain and/or expand its market share as the Disposal Group falls into the sector with the participation of most of the market players in the organic fertilizer industry as abovementioned. There is however uncertainty regarding the successfulness in the event of over-supply of products in the industry and further investments is against the objective of the Group which is to focus on the business of environmental automobile and related businesses with higher potential and prospects.

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On the other hand, the Directors also consider that it may not be in the interests of the Company and the shareholders concerned to inject huge amount of capital investment in products research and development as well as products promotion, which are necessary for the Disposal Group to gain market share and establish brand image for its products, under the current unsatisfactory financial performance. Besides, it will take time to see the results and there is uncertainty whether the venture will be successful due to the ever-changing business environment.

The Board has re-evaluated the latest development of this sector of business, including the overall business environment and policies for the development of agricultural industry in PRC. Despite the fact that farmland reserves at 1.818 billion mu will be maintained from 2011 and 2015 in accordance with the 12th Five Year Plan implemented in 2011, which is a favourable policies towards the development of the agricultural industry, including the fertilizer industry as farmland will need fertilizer products for its plantation, the Board concluded that Beijing Century will not contribute any substantial growth in turnover and profit in the forthcoming year as a result of the consideration of (i) the intensive competition in bio-fertilizer industry stated above; (ii) lower growth in the market demand as compared to the increase in the supply of the fertilizer products; and (iii) Beijing Century falling into the level of production capacity which most of the market participants have. As such, we are of the view that it is in the interests of the Company to discontinue the environmental products and related business carried on by the Disposal Group.

Analysis of the remaining segment of the Group

We have also assessed the financial performance and prospect of the remaining Group which relating to environmental automobile and related business. As set out in the Company’s audited report for the year ended 31 December 2010 and the unaudited interim report for the six months ended 30 June 2011, the revenue generated by the remaining Group was approximately HK$13.9 million and HK$24.1 million respectively, which represented an increase of 73.3%, whereas the revenue reported by the Disposal Group decreased by approximately HK$14.6 million for the year ended 31 December 2010 to approximately HK$8.1 million for the six months ended 30 June 2011.

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For the prospect of the environmental automobile and related business, on 31 December 2009, the NDRC had issued the 國家重點節能技術推廣目錄（第二批）(Catalogue of Key Promotions for National Energy Conservation Technologies (Second Batch)*), pursuant to which the PRC government will invest a total of RMB300 billion in hybrid and electric vehicle technology. According to NDRC, the number of hybrid electric vehicles and electric vehicles in the PRC are estimated to be 3 million and 1.5 million, respectively in 2015. In addition, since the adoption of Eleventh Five Year Plan in 2006, the PRC government has made “independent innovation” the cornerstone of domestic industrial policy. Aimed at pulling PRC up the value-added ladder, this policy encompasses a number of initiatives to promote investments in research and development across several strategic sectors, including the automobile industry. Developing a homegrown electric vehicle industry in the PRC could help PRC wean from the reliance on foreign powertrain technology. Based on the article “Electric Car: Highly Charged” by The Economist in June 2011, it stated that the Chinese government wants to have 500,000 electric cars, lorries and buses on the country’s roads by 2015 and 5 million by 2020.

The Directors are of the views that the terms and conditions of the Disposal, which are determined after arm’s length negotiations between the parties to the Agreement, are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

As set out above, we are of the view that the Group’s automobile and related business will be benefited from the government’s favorable policies and therefore we consider that it is in the interests of the Group and independent Shareholders as concerned for the Company to focus on its environmental automobile and related business in forthcoming years.

5. Financial Effects of the Disposal

Earnings

Upon Completion, the Disposal Group will cease to be the subsidiary of the Company and the results of the Disposal Group will no longer be consolidated into the financial statements of the Company. Given the continuous loss of the Disposal Group, the Group’s earnings may improve as a result of the Disposal.

– 35 –

LETTER FROM DONVEX CAPITAL

Net asset value

As gains are expected from the Disposal, the net asset value of the Disposal Group shall not be materially affected upon the completion of the Disposal. Given the continuous loss of the Disposal Group in the past, the Group’s net asset value may continue to be adversely affected after the Disposal even under proportionate consolidation method or equity method if the business of the Disposal Group could not be turned around.

Cash flow

The Group will receive, after deducting all relevant expenses, net proceeds of approximately RMB39,674,400 (equivalent to approximately HK$48,800,000) from the Disposal which will be used as its general working capital. The Disposal will bring a net cash inflow of approximately HK$9.8 million to the Group, which was calculated by the net proceeds of approximately HK$48.8 million, deducting by the cash and bank balances of approximately HK$39 million of the Disposal Group to be disposed of by the Company. According to the unaudited financial information of the Remaining Group provided by the management of the Company, the cash and bank balance as at 30 June 2011 will be increased from approximately HK$84.7 million to approximately HK$94.5 million as a result of the Disposal, upon taking into account (i) the net proceeds of approximately HK$48,800,000 to be received from the Disposal; and (ii) the cash and bank balances of the Disposal Group of HK$39 million to be disposed by the Company, which will improve the liquidity of the Group ultimately.

Gearing and working capital

The Disposal would improve the gearing of the Group (as expressed as total liabilities over total assets) as the gearing ratio of the Group slightly improved from approximately 16.3% to approximately 15.4% upon the Disposal. It is mainly due to the reason that the change in assets is relatively similar to the change in liabilities as a result of the Disposal. On the other hand, the Company intends to use the net proceeds from the Disposal as general working capital of the Group. Hence, the working capital of the Group would be enhanced.

– 36 –

LETTER FROM DONVEX CAPITAL

In conclusion, the Disposal will have a positive effect on the Group’s earnings, cash position, gearing ratio and working capital and have no material immediate effect on the Group’s net assets value. Having considered the aforementioned overall benefits which the Disposal would bring to the Group, we consider that the insignificant adverse impact on the Group’s net assets value due to the Disposal is justifiable.

RECOMMENDATION

Having considered the principal factors and reasons stated above including (i) the consideration is approximately 17.4% premium compared to the net asset value of the Disposal Group; (ii) the Disposal Group incurred a loss for the years ended 31 December 2009 and 2010; (iii) the existing fierce competition in bio-organic fertilizer industry; (iv) we are of the view that the financial performance and prospect of the remaining Group should be keep growing and it is in the interests of the Company to focus on the business of the remaining Group; and (v) the financial position of the Group will be improved as a result of the Disposal, we are in the opinion that terms of the Agreement are (i) on normal commercial terms; (ii) in ordinary and usual course of business of the Group; and (iii) fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. As such, we recommend the Independent Board Committee to advise the Independent Shareholders, and recommend the Independent Shareholders to vote in favor of the resolution to be proposed at the EGM to approve the Agreement and the transactions contemplated thereunder.

Yours faithfully,

For and on behalf of Donvex Capital Limited Doris Sy Director

– 37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

I. CONSOLIDATED FINANCIAL STATEMENTS

The Company is required to set out in this circular the information for the last three financial years with respect to the profits and losses, financial record and position, set out as a comparative table and the latest published audited balance sheet together with the notes on the annual accounts for the last financial year for the Group.

The audited consolidated financial statements of the Group (i) for the year ended 31 December 2010 is disclosed on pages 43 to 130 of the 2010 annual report of the Company published on 18 April 2011; (ii) for the year ended 31 December 2009 is disclosed on pages 45 to 132 of the 2009 annual report of the Company published on 29 April 2010; and (iii) for the year ended 31 December 2008 is disclosed on pages 38 to 132 of the 2008 annual report of the Company published on 29 April 2009.

All of the above financial information of the Group are published and can be viewed on the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company (http://hk1188. etnet.com.hk).

II. INDEBTEDNESS

Borrowings

At the close of business on 31 December 2011, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had outstanding borrowings of approximately HK$3,985,000. The borrowings comprised other loans of approximately HK$3,262,000 and amounts due to directors of approximately HK$723,000. The other loans are unguaranteed, unsecured and repayable within one year. Amounts due to directors are unsecured, interest-free and have no fixed repayment terms.

Contingent liabilities

At the close of business on 31 December 2011, the Group had total contingent liabilities of approximately HK$6,765,000, representing maximum amount of the Group’s guarantees given to a bank for the bank loans granted to a company owned by a director of a subsidiary of the Company.

Save as disclosed above and apart from intra-group liabilities, the Group did not have any outstanding mortgages, charges, debentures, loan capital and overdrafts or other similar indebtedness, finance leases or hire purchase commitment, liabilities under acceptances (other than normal trade bills), or acceptance credits, or any guarantees or other material contingent liabilities at the close of business on 31 December 2011.

I – 1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the purpose of the above indebtedness statement, foreign currency amounts have been translated into Hong Kong dollars at the applicable rates of exchange at the close of business on 30 November 2011.

The Directors were not aware of any material change in respect of the indebtedness or other contingent liabilities of the Group since 30 November 2011.

III. WORKING CAPITAL

The Directors are of the opinion that in the absence of unforeseen circumstances and after taking into account the financial resources available to the Group and also taking into account the effect of the Disposal, the Group will have sufficient working capital for the next 12 months following the date of this circular.

IV. FINANCIAL AND TRADING PROSPECTS

It is the current plan of the Company to focus on the environmental automobile and related business and the development of next generation energy-saving automobiles. Growth will depend on the global business environment (in particular, the markets in the US and the PRC) and the governmental incentives offered to stimulate the automobile industry. Given that the business environment worldwide is expected to be uncertain and unstable in the near future, the Group will consolidate the existing resources and take necessary steps to minimize the operating risk. The Group may slow down the research and development activities and explore the possibility of developing this sector of business through various means such as business co-operation.

As regards the natural resources business of the Group, the Directors believe that this sector possesses long-term global demand strength as the earth’s natural resources are finite. The Directors will remain open-minded and stay flexible in their approach to this line of business. The Directors will continue examine the business strategies for the development of this business which include but not limited to exploring the possibility of investing in natural resources companies that have a reserve base, but require a resource boost in technical expertise, capital investment or both or investing in assets that have inherent geographic advantages or companies that generate positive cash flow or scale down the operation if it is considered by the Directors to be more worthwhile to shift more resources to the existing or other new line(s) of business pursued by the Group.

The Directors will continue to monitor closely the performance of its businesses and evaluate, rationalize and adapt the business strategies of the Group from time to time with a view to maintaining the competitiveness of the Group. The Company will remain cautious and prudent in managing the remaining businesses of the Group and will continue to explore investment opportunities with promising prospects in an effort to maximize returns for the Group and create long-term value to the Shareholders.

I – 2

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

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

2. SHARE CAPITAL

(a) Share capital

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

Authorised share capital: 800,000,000,000 Shares Issued and fully paid share capital: 8,772,159,756 Shares	HK$ 80,000,000,000

	HK$ 877,215,975.60

All the existing Shares rank pari passu in all respects with each other including rights to dividends, voting and return of capital.

(a) Share options

Save for the options carrying the rights to subscribe for up to a total of 1,181,992,000 Shares at the exercise prices ranging from HK$0.102 to HK$0.368 granted under the share option scheme adopted by the Company on 12 June 2003, there were no outstanding options of the Company as at the Latest Practicable Date.

II – 1

GENERAL INFORMATION

APPENDIX II

(b) Convertible securities

As at the Latest Practicable Date, none of the members of the Group has granted any options, warrants or other rights to call for the issue of or agreed to issue any share or loan capital or any instrument convertible into or exchangeable for shares of such capital, and none of the members of the Group is a party to or otherwise bound by any agreement for the purchase or repurchase of shares of any member of the Group.

3. DISCLOSURE OF INTERESTS

(a) Directors and chief executive

Save as disclosed below, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any associated corporation (within the meaning of the SFO which (a) were required 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 they have taken or deemed to have taken under such provisions of the SFO); or (b) were required pursuant to section 352 of the SFO to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers to be notified to the Company and the Stock Exchange:

Interests in Shares

Name of Director Yeung Yung Liu Stephen Quan Zhu Shengliang Hui Wing Sang, Wilson Li Zhengshan	Number of Shares Capacity 2,213,268,989 (Note 2) Controlled Corporation 10,000,000 (Note 3) Beneficial owner 2,223,268,989 241,760,000 (Note 4) Family interest 40,000,000 Beneficial owner 281,760,000 5,333,883 Beneficial owner 2,904,000 Beneficial owner 8,700,000 Beneficial owner	Approximate percentage of shareholding (Note 1)
		25.34%
		3.21% 0.06% 0.03% 0.10%

II – 2

GENERAL INFORMATION

APPENDIX II

Notes:

(1) The percentage of shareholding is calculated on the basis of 8,772,159,756 Shares in issue as at the Latest Practicable Date and did not take into account any Shares which may fall to be allotted and issued upon exercise of any subscription rights attaching to any share options granted by the Company.
(2) These Shares are held by Sun East LLC. Sun East LLC is a limited liability company incorporated in California, the US, which is owned as to (i) 35% by Dr Yeung Yung (shared commonly with his spouse under the laws of California, the US) and 65% by Mr Ma Manwai (alias Ma Manwai, Philip) and Mr Jimmy Wang (alias Wang Jian) as co-trustees for certain trusts established for the benefit of the children of Dr Yeung Yung on 30 December 2002. Dr Yeung Yung (as well as his spouse) was deemed to be interested in the Shares held by Sun East LLC under Part XV of the SFO.
(3) The spouse of Dr Yeung Yung is deemed to be interested in the Shares directly and beneficially held by Dr Yeung Yung By virtue of Part XV of the SFO.
(4) These Shares are held by Fortune Venture Holdings Limited, a company incorporated in the British Virgin Islands whose entire issued share capital is solely and beneficially owned by Ms Li Xiaoqin (the spouse of Mr Liu Stephen Quan). Mr Liu Stephen Quan is deemed to be interested in the Shares held by his spouse through Fortune Venture Holdings Limited by virtue of Part XV of the SFO.

Interests in share options of the Company

Name of Director Date of grant Exercisable period Exercise price (HK$) Yeung Yung 9 August 2005 29 August 2005 to 8 August 2015 0.102 6 February 2008 6 February 2008 to 5 February 2018 0.114 24 June 2009 24 June 2009 to 11 June 2013 0.123 26 May 2011 26 May 2011 to 11 June 2013 0.1338	Number of underlying Shares subject to outstanding Options 11,140,000 27,000,000 40,000,000 35,000,000 113,140,000	Approximate percentage of shareholding (Note)
		1.29%

II – 3

APPENDIX II

GENERAL INFORMATION

Name of Director Date of grant Exercisable period Exercise price (HK$) Huang Chunhua 24 June 2009 24 June 2009 to 11 June 2013 0.123 17 November 2009 17 November 2009 to 11 June 2013 0.295 26 May 2011 26 May 2011 to 11 June 2013 0.1338 Wang Chuantao 24 June 2009 24 June 2009 to 11 June 2013 0.123 17 November 2009 17 November 2009 to 11 June 2013 0.295 26 May 2011 26 May 2011 to 11 June 2013 0.1338 Liu Stephen Quan 26 May 2011 26 May 2011 to 11 June 2013 0.1338 Hui Wing Sang, Wilson 6 February 2008 6 February 2008 to 5 February 2018 0.114 24 June 2009 24 June 2009 to 11 June 2013 0.123 26 May 2011 26 May 2011 to 11 June 2013 0.1338 Zhu Shengliang 9 August 2005 29 August 2005 to 8 August 2015 0.102 24 June 2009 24 June 2009 to 11 June 2013 0.123 10 July 2009 10 July 2009 to 11 June 2013 0.185 26 May 2011 26 May 2011 to 11 June 2013 0.1338	Number of underlying Shares subject to outstanding Options 20,000,000 10,000,000 35,000,000 65,000,000 15,000,000 10,000,000 20,000,000 45,000,000 10,000,000 27,000,000 21,000,000 35,000,000 83,000,000 16,710,000 1,290,000 10,000,000 10,000,000 38,000,000	Approximate percentage of shareholding (Note)
		0.74%
		0.51% 0.11%
		0.95%
		0.43%

II – 4

APPENDIX II

GENERAL INFORMATION

Name of Director Date of grant Exercisable period Exercise price (HK$) Zhang Zhenwei 24 June 2009 24 June 2009 to 11 June 2013 0.123 26 May 2011 26 May 2011 to 11 June 2013 0.1338 Xu Jianguo 15 April 2010 15 April 2010 to 11 June 2013 0.368 26 May 2011 26 May 2011 to 11 June 2013 0.1338 Li Zhengshan 9 August 2005 29 August 2005 to 8 August 2015 0.102 6 February 2008 6 February 2008 to 5 February 2018 0.114 24 June 2009 24 June 2009 to 11 June 2013 0.123 26 May 2011 26 May 2011 to 11 June 2013 0.1338 Xia Tingkang, Tim 26 May 2011 26 May 2011 to 11 June 2013 0.1338 Zhu Guobin 26 May 2011 26 May 2011 to 11 June 2013 0.1338 He Bangjie 6 February 2008 5 February 2008 to 5 February 2018 0.114 10 July 2009 10 July 2009 to 11 June 2013 0.185	Number of underlying Shares subject to outstanding Options 7,500,000 15,000,000 22,500,000 5,000,000 15,000,000 20,000,000 5,570,000 5,000,000 4,430,000 15,000,000 30,000,000 10,000,000 10,000,000 2,000,000 4,000,000 6,000,000	Approximate percentage of shareholding (Note)
		0.26%
		0.23%
		0.34% 0.11% 0.11%
		0.07%

Note:

The percentage of shareholding is calculated on the basis of 8,772,159,756 Shares in issue as at the Latest Practicable Date.

II – 5

GENERAL INFORMATION

APPENDIX II

(b) Substantial Shareholders

Save as disclosed below, the Directors and chief executive of the Company were not aware that there was any party who, as at the Latest Practicable Date, had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO:

Name of Shareholder Nature of interest Sun East LLC Beneficial owner (Note 3) Yeung Yung Interest of controlled corporation (Note 3) Beneficial owner (Note 4)	Number of Shares (L) 2,213,268,989 (L) 2,213,268,989 (L) 10,000,000 (L) 2,223,268,989 (L)	Approximate percentage of interest (Note 2) 25.23% 25.34%

(1) The letter “L” represents the entity’s interest in the Shares.
(2) The percentage of shareholding is calculated on the basis of 8,772,159,756 Shares in issue as at the Latest Practicable Date.
(3) Sun East LLC is owned as to 35% by Dr Yeung Yung (shared commonly with his spouse under the laws of California, the US) and 65% by Mr Ma Manwai (alias Ma Manwai, Philip) and Mr Jimmy Wang (alias Wang Jian) as co-trustees for certain trusts established for the benefit of the children of Dr Yeung Yung on 30 December 2002. Dr Yeung Yung (as well as his spouse) was deemed to be interested in these 2,213,268,989 Shares held by Sun East LLC under Part XV of the SFO. Sun East LLC has no directors but has two managers (namely, Dr Yeung Yung and his spouse). Dr Yeung Yung is an executive director of the Company.
(4) The spouse of Dr Yeung Yung is also deemed to be interested in the Shares directly and beneficially held by Dr Yeung Yung by virtue of Part XV of the SFO.

II – 6

GENERAL INFORMATION

APPENDIX II

4. DIRECTORS’ SERVICE CONTRACTS

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

5. DIRECTORS’ INTERESTS IN ASSETS AND CONTRACTS

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which have, since 31 December 2010, being the date of the latest published audited accounts of the Group, been acquired or disposed of by or leased to any member of the Group or were proposed to be acquired or disposed of by or leased to any member of the Group.

None of the Directors was materially interested in any contract which was subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group taken as a whole.

6. COMPETING INTEREST

As at the Latest Practicable Date, none of the Directors or any of their respective associates was considered to have interests in any business which competed or were likely to compete, either directly or indirectly, with the businesses of the Group.

7. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and, so far as the Directors are aware, no litigation or claims of material importance was pending or threatened against the Company or any of its subsidiaries.

8. MATERIAL ADVERSE CHANGE

The Directors confirm that, as at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2010, being the date to which the latest published audited consolidated accounts of the Company were made up.

II – 7

GENERAL INFORMATION

APPENDIX II

9. MATERIAL CONTRACTS

The following material contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Group within two years immediately preceding the Latest Practicable Date:

(a) the placing agreement dated 25 March 2010 (as varied, modified and supplemented by a supplemental placing agreement dated 26 March 2010) entered into between the Company and Upbest Securities Company Limited (as placing agent) relating to the placing of 338,300,000 new Shares at HK$0.35 per Share;
(b) the placing agreement dated 5 May 2010 entered into between the Company and Upbest Securities Company Limited (as placing agent) relating to the placing of 460,000,000 new Shares at HK$0.375 per Share;
(c) the technology development agreement dated 23 July 2010 entered into between Hybrid Kinetic Power Battery Holdings Limited (“ HK-Power ”) and Zhejiang GBS Energy Co., Ltd. (“ GBS ”) pursuant to which HK-Power has agreed to engage GBS and GBS has agreed to undertake the research, development and testing of various specified models of lithium-ion power battery for the electric and hybrid vehicles to be manufactured by the Group under the “Hybrid Kinetic 正道” brand at the agreed fee at RMB15 million;
(d) the acquisition agreement dated 18 April 2010 (as varied, modified and supplemented by two several supplemental agreements dated 20 April 2010 and 6 June 2010 respectively) entered into between Headland Co., Limited, Ms Wenren Hongyan and Mr Wenren Hongquan (collectively, the “ GBS Vendors ”) and the Company relating to the acquisition by the Company of GBS from the GBS Vendors at the consideration of RMB180 million;
(e) the licence option agreement dated 8 December 2010 entered into between the Company and Nederlandse Organisatie Voor Toegepastnatuurwetenschappelijk Onderzoek TNO (Netherlands Organization for Applied Scientific Research, TNO) (“ TNO ”) relating to the grant of an option by TNO to the Company to acquire certain global exclusive licensing rights concerning electric variable transmissions for use in the vehicles designated and constructed for the carriage of passengers subject to the execution of a licence agreement;
(f) the Agreement; and

II – 8

GENERAL INFORMATION

APPENDIX II

(g) the five several subscription agreements all dated 27 January 2012 entered into by the Company with five several subscribers (namely Glory Wish Development Limited, Well Manage Resources Limited, King Apex Holdings Investment Limited, Le Hong Liang（樂宏亮）and Ouyang Rui（歐陽瑞）) in respect of the subscription of an aggregate of 1,460,000,000 new Shares at HK$0.10 per Share.

10. EXPERT AND CONSENT

(a) The following is the qualification of the expert who has been named in this circular or has given opinions and advice contained in this circular:

Name

Qualification

Donvex Capital

A licensed corporation registered under the SFO to conduct type 6 (advising on corporate finance) regulated activity under the SFO

(b) Donvex Capital has no shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.
(c) Donvex Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion of and references to its name, letter and/or report in the form and context in which they respectively appear.
(d) Donvex Capital has no direct or indirect interest in any asset which has been acquired, or disposed of by, or leased to any member of the Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Group since 31 December 2010, the date to which the latest published audited financial statements of the Group were made up.

II – 9

GENERAL INFORMATION

APPENDIX II

11. GENERAL

(a) The registered office of the Company is at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda.
(b) The secretary of the Company is Mr Hui Wing Sang, Wilson, who is an associate member of Hong Kong Institute of Chartered Secretaries (HKICS).
(c) The qualified accountant of the Company is Mr Hui Wing Sang, Wilson, who is an associate member of The Hong Kong Institute of Certified Public Accountants (HKICPA).
(d) The Company’s principal share registrar and transfer office in Bermuda is HSBC Securities Services (Bermuda) Limited at 6 Front Street, Hamilton HM 11, Bermuda.
(e) The head office and principal place of business of the Company in Hong Kong is situated at Suites 1407-8, 14th Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong.
(f) The Company’s branch share registrar and transfer office in Hong Kong is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(g) The English text of this circular prevails over the Chinese text in case of inconsistency.

II – 10

GENERAL INFORMATION

APPENDIX II

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the head office and principal place of business of the Company in Hong Kong at Suites 14078, 14th Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong from the date of this circular up to and including the date of the Special General Meeting:

(a) the memorandum of association and the bye-laws of the Company;
(b) the annual reports of the Company for each of the two financial years ended 31 December 2009 and 2010 and the interim report of the Company for the six months ended 30 June 2011;
(c) the letter from the Independent Board Committee, the text of which is set out on pages 14 to 15 of this circular;
(d) the letter from the Independent Financial Adviser, the extent of which is set out on pages 16 to 37 of this circular;
(e) the written consent from the expert referred to in the paragraph headed “Expert and Consent” in this Appendix;
(f) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix; and
(g) this circular.

II – 11

NOTICE OF SPECIAL GENERAL MEETING

==> picture [54 x 55] intentionally omitted <==

HYBRID KINETIC GROUP LIMITED 正道集團有限公司

(incorporated in Bermuda with limited liability)

(Stock code: 1188)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the “ Meeting ”) of Hybrid Kinetic Group Limited (the “ Company ”) will be held at Suites 1407-8, 14th Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong on Friday, 16 March 2012 at 10:00 a.m. for the purpose of considering and, if thought fit, passing with or without modifications, the following resolution as ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT :

(a) the conditional share transfer agreement dated 22 December 2011 (the “ Agreement ”) entered into between (i) Far East Golden Resources Investment Limited（遠東金源投資有限公司）(the “ Vendor ”) and (ii) 王穎 (Wang Ying) (the “ Purchaser ”) (a copy of which has been produced to the Meeting marked “A” and signed by the chairman of the Meeting for the purpose of identification) in relation to the disposal (the “ Disposal ”) by the Vendor to the Purchaser of the entire 65% equity interest in 北京世紀萬業源生物工程技術有限公司 (Beijing Century Wanyeyuan Bio-Engineering Co., Ltd.) held by the Vendor at the consideration and subject to and upon the terms and conditions contained in the Agreement be and is hereby generally and unconditionally approved, ratified and/or confirmed; and
(b) the authority to the directors of the Company to do all such further acts and things and execute such further documents and take all such steps which in their opinion may be necessary, desirable or expedient to implement and/or give effect to the terms of the Agreement and the Disposal contemplated thereunder be and is hereby approved.”

Yours faithfully,

By order of the Board Hybrid Kinetic Group Limited Yeung Yung Chairman

Hong Kong, 28 February 2012

N – 1

NOTICE OF SPECIAL GENERAL MEETING

Registered office: Principal place of business in Hong Kong: Canon’s Court Suites 1407-8, 14th Floor 22 Victoria Street Great Eagle Centre Hamilton HM 12 23 Harbour Road Bermuda Wanchai, Hong Kong

Notes:

Any member of the Company entitled to attend and vote at the Meeting convened by the above notice is entitled to appoint one or more separate proxy(ies) to attend and, subject to the provisions of the bye-laws of the Company, vote in his stead. A proxy need not be a member of the Company.
A form of proxy for use at the Meeting is enclosed with the circular of the Company dated 28 February 2012.
To be valid, a form of proxy in the prescribed form together with the power of attorney or other authority (if any) under which it is signed (or a notarially certified copy thereof) must be deposited with the Company’s share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the Meeting (or at any adjournment thereof). Completion and return of the form of proxy shall not preclude members from attending and voting in person at the Meeting or at any adjourned meeting (as the case may be) should they so wish.
Where there are joint registered holders of any share in the Company, any one of such persons may vote at the Meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders are present at the Meeting personally or by proxy, the joint member whose name stands first on the register of members of the Company in respect of such share, or his proxy, shall be alone entitled to vote and will be accepted to the exclusion of other joint registered holder(s) in respect thereof.
The votes at the Meeting will be taken by poll.

As at the date of this notice, the board of directors of the Company comprises nine executive Directors, namely Dr Yeung Yung (Chairman), Dr Huang Chunhua (Deputy Chairman), Dr Wang Chuantao (Chief Executive Officer), Mr Liu Stephen Quan, Mr Hui Wing Sang, Wilson, Dr Zhu Shengliang, Dr Zhang Zhenwei, Mr Xu Jianguo and Mr Li Zhengshan, two non-executive Directors, namely Dr Xia Tingkang, Tim and Dr Zhu Guobin and four independent non-executive Directors, namely Mr He Bangjie, Mr Wong Lee Hing, Dr Song Jian and Ms Chan Fung Yi.

For identification purpose only

N – 2

AI assistant

Hybrid Kinetic Group Limited — Proxy Solicitation & Information Statement 2012

49754_rns_2012-02-27_73046c5a-62cc-4c32-a82e-7d2a13244791.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

HYBRID KINETIC GROUP LIMITED 正道集團有限公司

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF NON-WHOLLY OWNED SUBSIDIARY AND NOTICE OF SPECIAL GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

HYBRID KINETIC GROUP LIMITED 正道集團有限公司

Executive Directors:

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF NON-WHOLLY OWNED SUBSIDIARY

INTRODUCTION

LETTER FROM THE BOARD

THE AGREEMENT

Date

Parties

Assets to be disposed of

LETTER FROM THE BOARD

Consideration for the Disposal

Basis of the Disposal Consideration

Conditions Precedent to the completion of the Disposal

LETTER FROM THE BOARD

Completion of the Disposal

INFORMATION ON THE DISPOSAL GROUP

LETTER FROM THE BOARD

LETTER FROM THE BOARD

INFORMATION ON THE GROUP

Corporate structure of the Group immediately prior to and after completion of the Disposal

Immediately before completion of the Disposal

LETTER FROM THE BOARD

Immediately after completion of the Disposal

REASONS FOR AND BENEFITS FROM THE DISPOSAL

LETTER FROM THE BOARD

OPINION OF THE DIRECTORS

EXPECTED GAIN FROM THE DISPOSAL

FINANCIAL EFFECT OF THE DISPOSAL

LETTER FROM THE BOARD

USE OF PROCEEDS FROM THE DISPOSAL

IMPLICATION OF THE LISTING RULES

RECOMMENDATION

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SPECIAL GENERAL MEETING

ADDITIONAL INFORMATION

HYBRID KINETIC GROUP LIMITED 正道集團有限公司

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF NON-WHOLLY OWNED SUBSIDIARY

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MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF NON-WHOLLY OWNED SUBSIDIARY

I. INTRODUCTION

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II. THE INDEPENDENT BOARD COMMITTEE

III. BASIS OF OUR OPINION

IV. PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Information of the Group

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2. Information on the Disposal Group

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3. Consideration

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4. Reasons for entering into the Agreement

Size of competitors amongst the industry

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Over Supply of bio-organic fertilizers

(a) Fertilizer Industry

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(b) Bio-organic fertilizer

Analysis of the market demand for bio-fertilizer products

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Change of market price of fertilizer products

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