PegBio Co., Ltd. — Capital/Financing Update 2002

May 17, 2002

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

HUNG FUNG GROUP HOLDINGS LIMITED

(incorporated in Bermuda with limited liability)

COMPLETION OF COMPROMISE AGREEMENT,

SUBSCRIPTION AGREEMENT AND

A SHARE SETTLEMENT AGREEMENT

The Directors are pleased to announce that completion of the Compromise Agreement and the Subscription Agreement have taken place today. In addition, 520,000,000 New Shares were issued to a creditor of the Company as settlement of debts owed to him pursuant to one of the Share Settlement Agreements.

The Company was informed by the legal adviser of E-Bigger that Baxter had defaulted in payment of the outstanding debt and E-Bigger has enforced the security and disposed of the Charged Shares on 14th May, 2002.

Reference is made to the press announcements of Hung Fung Group Holdings Limited (the "Company") dated 22nd February, 2002, 14th March, 2002, 2nd April, 2002, 12th April, 2002, 25th April, 2002 and 13th May, 2002 in relation to (i) the proposed debt restructuring of the Company involving (a) compromise of certain bank debts of the Group; (b) a subscription of new Shares by the Investor; (c) an Open Offer with assured allotments of three Offer Shares for every two Shares held; (d) application for the Whitewash Waiver waiving the obligation of the Investor and parties acting in concert with it to make a general offer for the existing issued Shares which may otherwise arise as a result of the completion of the Subscription and the Open Offer; (e) increase in the authorised share capital of the Company; and (ii) the Settlements. On 26th April, 2002, a circular (the "Circular") containing details regarding the Restructuring Proposal and the Settlements was despatched to the Shareholders. Capitalised terms used herein have the same meanings as defined in the Circular unless otherwise stated.

COMPLETION OF COMPROMISE AGREEMENT, SUBSCRIPTION AGREEMENT AND A SHARE SETTLEMENT AGREEMENT

The Directors are pleased to announce that completion of the Compromise Agreement and the Subscription Agreement have taken place today. In addition, 520,000,000 New Shares were issued to a creditor of the Company (the "Creditor") as settlement of debts owed to him pursuant to one of the Share Settlement Agreements.

SHAREHOLDING OF THE COMPANY

On 24th November, 2000, Baxter Resources S.A. ("Baxter") pledged 1,565,140,000 Shares ("Charged Shares") to E-Bigger Investments Limited ("E-Bigger") to secure loan facilities granted by E-Bigger to Baxter. The Company was informed by the legal adviser of E-Bigger today that Baxter had defaulted in payment of the outstanding debt and E-Bigger has enforced the security and disposed of the Charged Shares on 14th May, 2002. As a result, Baxter is no longer the legal or beneficial owner of the Charged Shares.

On 6th May, 2002, the Existing Convertible Note was converted into 200 million Shares at a conversion price of HK$0.015 per Share. Based on information available to the Directors and after making reasonable enquiries with due care, the following table sets out the shareholding structure of the Company as at the date of this announcement.

Shares (million) %

The Investor and its concert parties 3,000.0 48.3

Public (including the Creditor) 3,203.9 51.7

6,203.9 100.0

By Order of the Board

Lo Ming Chi, Charles

Chairman

Hong Kong, 16th May, 2002

The directors of the Company jointly and severally accept full responsibility for the accuracy of the information contained in this announcement and confirm, having made all reasonable enquiries, that to the best of their knowledge, the opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.

"Please also refer to the published version of this announcement in the Hong Kong i-mail"