Pacific Online Limited — Proxy Solicitation & Information Statement 2006

May 25, 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Prosperity Investment Holdings Limited , you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee

The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited takes no responsibility for the contents of this circular, makes 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.

PROSPERITY INVESTMENT HOLDINGS LIMITED 嘉進投資國際有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 310)

PROPOSED ADJUSTMENT OF THE NOMINAL VALUE OF THE SHARES BY WAY OF CAPITAL REDUCTION

A notice convening a special general meeting of the Company to be held at World Trade Centre Club Hong Kong at 38th Floor, World Trade Centre, 280 Gloucester Road, Causeway Bay, Hong Kong on 20 June 2006 at 10:45 a.m. is set out on page 8 to 9 of this circular. Whether or not you are able to attend the meeting in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed therein to the share registrar of the Company, Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wan Chai, Hong Kong as soon as practicable but in any event not later than 48 hours before the time appointed for the holding of the meeting or the adjourned meeting (as the case may be). Completion and return of the form of proxy will not prelude you from attending and voting at the meeting or any adjourned meeting thereof (as the case may be) should you so desire.

Hong Kong, 24 May 2006

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
EXPECTED TIMETABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
LETTER FROM THE BOARD
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Proposed Capital Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4-5
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
NOTICE OF SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8-9

— i —

DEFINITIONS

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

“Board”	the board of Directors of the Company;
“Capital Reduction”	the proposal for the reduction of the nominal value of the
	Shares by canceling the paid up capital to the extent of HK$0.09
	on each of the issued Shares and by reducing the nominal
	value of all issued and unissued Shares from HK$0.10 to
	HK$0.01 per Share;
“CCASS”	the Central Clearing and Settlement System established and
	operated by HKSCC;
“Company”	Prosperity Investment Holdings Limited, a company
	incorporated in Bermuda with limited liability and the issued
	Shares of which are listed on the Stock Exchange;
“Directors”	the directors of the Company;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;
“HKSCC”	Hong Kong Securities Clearing Company Limited;
“Hong Kong”	The Hong Kong and Special Administrative Region of the
	People’s Republic of China;
“Latest Practicable Date”	23 May 2006, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	referred to in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited
“New Share(s)”	Share(s) of HK$0.01 each in the share capital of the Company
	upon the Capital Reduction becoming effective;
“SGM”	the special general meeting of the Company to be held on 20
	June 2006 to approve the Capital Reduction;
“Share(s)”	Share(s) of HK$0.10 each in the existing share capital of the
	Company prior to the Capital Reduction becoming effective;
“Shareholders”	holder of Shares or New Shares (as applicable); and
“Stock Exchange”	The Stock Exchange of Hong Kong Limited

— 1 —

EXPECTED TIMETABLE

Latest time for the Shareholders to

lodge the forms of proxy for the SGM . . . . . . . . . . . . . 10:45 a.m. on Sunday, 18 June 2006

SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:45 a.m. on Tuesday, 20 June 2006

Effective date of the Capital Reduction . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 21 June 2006

Announcement of the result of the SGM

and the Effective date of the Capital Reduction . . . . . . . . . . . . . . . Wednesday, 21 June 2006

Commencement of trading in the New Shares . . . . . 10:00 a.m. on Wednesday, 21 June 2006 First day of free exchange of certificates for Shares

into new certificates for New Shares . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 21 June 2006

Last day of free exchange of certificates for Shares

into new certificates for New Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 21 July 2006

— 2 —

LETTER FROM THE BOARD

PROSPERITY INVESTMENT HOLDINGS LIMITED 嘉進投資國際有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 310)

Executive Directors:

WONG Kwok Bui, George (Chairman) CHEUK Yuk Lung

Independent Non-Executive Directors:

CHAN Siu Wing, Raymond YAN Mou Keung, Ronald CHAN Fai Yue, Leo

Registered Office:

Clarendon House 2 Church Street Hamilton HM11 Bermuda

Head Office and Principal Place of Business in Hong Kong:

Room A, 11th Floor Fortune House 61 Connaught Road Central Central Hong Kong

24 May 2006

To the Shareholders

Dear Sir or Madam,

PROPOSED ADJUSTMENT OF THE NOMINAL VALUE OF THE SHARES BY WAY OF CAPITAL REDUCTION

INTRODUCTION

On 17 May 2006, the Board announced that the Company intended to put forward a proposal to the Shareholders to effect the Capital Reduction which will involve: (i) the reduction of the nominal value of each Share in issue from HK$0.10 to HK$0.01 by cancelling paid up capital to the extent of HK$0.09 on each issued Share of the Company on the date which the Capital Reduction becoming effective such that the issued share capital of the Company shall be reduced by the sum of HK$38,875,680 from HK$43,195,200 to HK$4,319,520 and (ii) the authorised but unissued share capital of the Company be reduced from HK$300,000,000 to HK$30,000,000 by way of reducing the nominal value of each unissued share from HK$0.10 to HK$0.01.

— 3 —

LETTER FROM THE BOARD

CAPITAL REDUCTION

As at the date of this circular, the authorized share capital of the Company is HK$300,000,000 divided into 3,000,000,000 Shares of HK$0.10 each, of which 431,952,000 Shares have been issued and are fully paid. The Capital Reduction will involve (i) the reduction of the nominal value of each Share from HK$0.10 to HK$0.01 by cancelling the paid up capital to the extent of HK$0.09 on each of the 431,952,000 Shares in issue as at the date of this circular such that the issued share capital of the Company shall be reduced by the sum of HK$38,875,680 from HK$43,195,200 to HK$4,319,520 and (ii) the authorised but unissued share capital of the Company shall be reduced from HK$300,000,000 to HK$30,000,000 by way of reducing the nominal value of each unissued share from HK$0.10 to HK$0.01, on the date upon which the Capital Reduction becoming effective. On the assumption that no further Shares will be issued after this circular, a credit of HK$38,875,680 will arise as a result of the Capital Reduction. The credit will be set off against the accumulated losses of the Company, and any remaining credit will be transferred to the contributed surplus account of the Company.

REASONS FOR THE CAPITAL REDUCTION

The Company recorded accumulated losses of HK$25,244,873 as at 31 December 2005 as set out in the latest annual report and accounts of the Company for the year ended 31 December 2005. The Board considers that it would be in the interests of the Company for it to conduct equity fund-raising exercise in future when suitable market opportunities arise. In addition, the Board believes that in the light of such accumulated losses, the Company’s capital represented by its share capital had been lost, it would be in the Company’s interests to reduce its capital in order to eliminate such accumulated losses, as this would be likely to improve the prospects of raising funds and to declare dividend in the future. At present, the Board has no arrangement for the issue of any New Shares has been entered into by the Company with any party nor is any such arrangement proposed. The closing price of the Shares on the Stock Exchange on 17 May 2006 was HK$0.123 per Share. Under the Companies Ordinance of Hong Kong, a company may not issue shares at a discount to the nominal value of such shares unless, among other things, the issue is authorized by a resolution of the Shareholders. The Board considers that such an exercise will be costly and time consuming, and that it would therefore be desirable in any event to reduce the nominal value of the Shares so as to avoid the necessity for such an exercise to be undertaken each time the Company wishes to raise funds. The Board therefore believes that the Capital Reduction will give greater flexibility to the Company to raise funds through the issue of new shares in the future.

— 4 —

LETTER FROM THE BOARD

EFFECT OF THE CAPITAL REDUCTION

Upon the Capital Reduction becoming effective, and assuming no further Shares are issued in the meantime, the authorized share capital of the Company will be HK$30,000,000 divided into 3,000,000,000 New Shares, of which 431,952,000 New Share of nominal value being HK$0.01 each will be in issue and credited as fully paid up, and the issued share capital of the Company of HK$43,195,200 shall be reduced by HK$38,875,680 to HK$4,319,520 whereas the authorized share capital shall be reduced from HK$300,000,000 to HK$30,000,000.

As at the Latest Practicable Date, the Company has no outstanding options, warrants or similar rights to subscribe or purchase Shares. Implementation of the Capital Reduction will not, of itself, alter the underlying assets, business operations, management or financial position of the Company or the proportionate interests of the Shareholders, except for the payment of the related expenses. The Board believes that the Capital Reduction will not have any adverse effect on the financial position of the Company and its subsidiaries and the Board believes that on the date the Capital Reduction is to be effected, there are no reasonable grounds for believing that the Company is, or after the Capital Reduction would be, unable to pay its liabilities as they become due. No capital will be lost as a result of the Capital Reduction and, except for the expenses involved in relation to the Capital Reduction which are expected to be insignificant in the context of the net asset value of the Company, the net asset value of the Company will remain unchanged before and after the Capital Reduction becoming effective. The Capital Reduction does not involve any diminution of any liability in respect of any unpaid capital of the Company or the repayment to the Shareholders of any paid up capital of the Company. The Capital Reduction will not result in any change in the relative rights of the Shareholders.

CONDITIONS OF THE CAPITAL REDUCTION

The Capital Reduction is conditional on the fulfillment of the following:

1. the passing of a special resolution by the Shareholders to approve the Capital Reduction at the SGM to be convened by the Company;

2. the Listing Committee of the Stock Exchange granting the listing of and permission to deal in, the New Shares in issue arising from the Capital Reduction;

3. the publication of a notice in Bermuda for the reduction in share capital of the Company; and

4. compliance with all applicable laws.

Assuming the above conditions are fulfilled, it is expected that the Capital Reduction will become effective on the next business day following the date of passing the relevant resolution to approve the Capital Reduction, which is currently expected to be on or around 21 June 2006.

— 5 —

LETTER FROM THE BOARD

LISTING AND DEALINGS

Application will be made to the Stock Exchange for the granting of the listing of, and permission to deal in, the New Shares arising from the Capital Reduction.

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

FREE EXCHANGE OF CERTIFICATES FOR NEW SHARES

Shareholders may submit existing certificates for the Shares (in red color) to the registrar of the Company in Hong Kong Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wan Chai, Hong Kong for exchange, at the expense of the Company for a one month period from the effective date to 21 July 2006, for certificates for the New Shares (in blue color). Details of such free exchange of share certificates will be announced as soon as the effective date of the Capital Reduction is ascertainable. Thereafter, certificates for the Shares will be accepted for exchange only on payment of a fee of HK$2.5 (or such higher amount as may from time to time be allowed by the Stock Exchange) for each share certificate for the Shares cancelled or each new share certificate issued for the New Shares, whichever number of certificates cancelled/issued is higher. Nevertheless, certificates for the Shares will continue to be good evidence of legal title and may be exchanged for certificates for the New Shares at any time.

GENERAL

To the best knowledge, information and belief of the Directors, none of the Shareholders or their associates has any interest in the Capital Reduction which is different from that of any other Shareholders. Accordingly, none of the Shareholders is required to abstain from voting at the SGM.

SPECIAL GENERAL MEETING

Set out on page 8 to 9 of this circular is the SGM notice convening the SGM, at which a special resolution will be proposed to approve the Capital Reduction. A form of proxy for use at the SGM is enclosed.

— 6 —

LETTER FROM THE BOARD

Whether or not you intend to attend the SGM, you are requested to complete form of proxy in accordance with the instructions printed thereon and deposit it with the Company’s share registrar, Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wan Chai, Hong Kong, as soon as possible and in any event so as to arrive not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of a form of proxy will not preclude you from attending and voting in person at the SGM (or any adjournment thereof) should you so wish.

PROCEDURE FOR DEMANDING A POLL

Pursuant to the Bye-laws of the Company, at any general meeting of Shareholders, a resolution shall be decided on a show of hands unless a poll is demanded by any of the following persons before or on the declaration of the result of a show of hands:

• (1) the chairman of the meeting;

• (2) at least three Shareholders present in person or by proxy and entitled to vote;

• (3) one or more Shareholders in person (or in the case of corporation, by its duly authorised representatives) or by proxy and representing in aggregate not less than one-tenth of the total voting rights of all Shareholders having the right to attend and vote at the meeting; or

• (4) one or more Shareholders (or in the case of corporation, by its duly authorised representatives) or by proxy and holding Shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all Shares conferring that right.

RECOMMENDATION

The Board consider that the Capital Reduction is in the best interests of the Company and the Shareholders as a whole. The purpose of this circular is to give you further information regarding the Capital Reduction and to give you notice to convene the SGM to consider and, if thought fit, to approve the Capital Reduction. The Board recommends that the Shareholders vote in favour of the special resolution to be proposed at the SGM to approve the Capital Reduction.

By order of the Board

PROSPERITY INVESTMENT HOLDINGS LIMITED WONG Kwok Bui, George Chairman

— 7 —

NOTICE OF SGM

PROSPERITY INVESTMENT HOLDINGS LIMITED 嘉進投資國際有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 310)

NOTICE IS HEREBY GIVEN THAT a special general meeting (the “SGM”) of Prosperity Investment Holdings Limited (the “Company”) will be held on 20 June 2006 at 10:45 a.m., at 38th Floor, World Trade Centre, 280 Gloucester Road, Causeway Bay, Hong Kong for the purpose of considering and, if thought fit, passing the following resolution, with or without modifications, as an special resolution of the Company:

SPECIAL RESOLUTION

“THAT, conditional on (i) the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, the shares of HK$0.01 each in the capital of the Company following the Capital Reduction (as defined below) becoming effective; and (ii) compliance with applicable laws in Bermuda:

• (a) the issued share capital of the Company be reduced from the amount of HK$43,195,200 to HK$4,319,520 by HK$38,875,680 and the par value of each share in issue be reduced from HK$0.10 to HK$0.01 by cancelling the paid up capital to the extent of HK$0.09 on each share of HK$0.10 in issue in the issued share capital of the Company on 21 June 2006 (“Capital Reduction”);

• (b) subject to and forthwith upon the Capital Reduction taking effect, the authorized but unissued share capital be reduced from HK$300,000,000 to HK$30,000,000 by way of reducing the nominal value of each unissued share from HK$0.10 to HK$0.01;

• (c) subject to and forthwith upon the Capital Reduction taking effect, the credit arising from the cancellation of paid up capital be transferred to the contributed surplus account of the Company where it will be utilised in accordance with the bye-laws of the Company and all applicable laws including, but not limited to, applied towards setting off the accumulated losses of the Company; and

— 8 —

NOTICE OF SGM

• (d) any one of the directors of the Company be and is hereby authorised generally to do all such acts, deeds and things as he shall, in his absolute discretion, deem appropriate to effect and implement any of the foregoing.’’

By order of the Board PROSPERITY INVESTMENT HOLDINGS LIMITED WONG Kwok Bui, George Chairman

Hong Kong, 24 May 2006

Notes:

1. A form of proxy for use at the meeting is enclosed herewith.

2. A shareholder entitled to attend and vote at the special general meeting is entitled to appoint one or more proxies to attend and vote instead of him/her. A proxy need not be a shareholder of the Company.

3. To be valid, a form of proxy, together with the power of attorney (if any) or other authority (if any) under which it is signed or a notarially certified copy of the power of attorney or authority, must be completed, signed and deposited with the share registrars of the Company, Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wan Chai, Hong Kong as soon as practicable but in any event not later than 48 hours before the time appointed for the holding of the meeting or the adjourned meeting (as the case may be).

4. Delivery of an instrument appointing a proxy shall not preclude a shareholder from attending and voting in person at the meeting or at any adjourned meeting therefore (as the case may be) should you so wish, and in such event, the instrument appointing a proxy shall be deemed to be revoked.

— 9 —