PegBio Co., Ltd. — Capital/Financing Update 2005

Jan 14, 2005

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.

==> picture [6 x 6] intentionally omitted <==

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


----- End of picture text -----*

(Incorporated in Bermuda with limited liability) (Stock Code: 1141)

PROPOSED OPEN OFFER OF NEW SHARES ON THE BASIS OF ONE OFFER SHARE FOR EVERY TWO SHARES HELD

UNDERWRITER

KINGSTON SECURITIES LIMITED

The Company proposes to raise approximately HK$22.1 million before expenses by issuing not less than 551,360,095 and not more than 555,814,582 Offer Shares at a price of HK$0.04 per Offer Share by way of the Open Offer, payable in full on application on the basis referred to below. Qualifying Shareholders will be offered one Offer Share for every two Shares held on the Record Date. The Open Offer will not be available to the Excluded Shareholders.

Net proceeds from the Open Offer of approximately HK$21.0 million are expected to be applied as to approximately HK$16.0 million for the repayment of liabilities outstanding (including the Convertible Bonds and other liabilities of the Group) and as to the remainder of approximately HK$5.0 million for general working capital of the Group.

The Open Offer is conditional and is fully underwritten. In particular, it is subject to the Underwriter not terminating the Underwriting Agreement in accordance with its terms (see “Termination of the Underwriting Agreement” below). If the conditions cannot be fulfilled, the Open Of fer will not proceed.

Existing Shares will be dealt with on an ex-entitlements basis from Friday, 28th January, 2005. To qualify for the Open Offer, all transfers of Shares must be lodged for registration with the Registrar by 4:00 p.m. on Monday, 31st January, 2005.

Shar eholders should note that the Shares will be dealt with on an ex-entitlements basis commencing from Friday, 28th January, 2005 and that dealings in such Shares will take place whilst the conditions to which the Underwriting Agreement is subject remain unfulfilled. Any Shareholder or other person dealing in such Shares up to the date on which all conditions to which the Open Offer is subject are fulfilled will accordingly bear the risk that the Open Offer cannot become unconditional and may not proceed. Any Shareholders or other persons contemplating selling or purchasing Shares who is in any doubt about his/her position is recommended to consult his/her own professional adviser.

At the request of the Company, trading in Shares on the Stock Exchange was suspended from 9:30 a.m. on Friday, 14th January, 2005 pending the release of this announcement. Application has been made by the Company for the resumption of trading in Shares with effect from 9:30 a.m. on Monday, 17th January, 2005.

OPEN OFFER

Basis of the Open Offer : one Offer Share for every two Shares held on the Record Date Number of existing Shares in issue : 1,102,720,190 Shares Minimum number of Offer Shares : 551,360,095 Offer Shares Outstanding Convertible Bonds : existing outstanding Convertible Bonds which are in aggregate convertible into 8,908,975 Shares at a conversion price of HK$0.2432 per Share, subject to adjustment Maximum number of Offer Shares : assuming full conversion of the Convertible Bonds on or before the Record Date, a total of 8,908,975 new Shares may fall to be issued and thus an additional 4,454,487 Offer Shares would be issued. As such, the maximum number of Offer Shares that may be issued by the Company are 555,814,582 Offer Shares

– 1 –

Enlarged issued share capital upon : 1,654,080,285 Shares completion of the Open Offer assuming no conversion of the Convertible Bonds Enlarged issued share capital upon : 1,667,443,747 Shares completion of the Open Offer assuming full conversion of the Convertible Bonds

Save for the Convertible Bonds, the Company has no other outstanding convertible securities, options or warrants in issue which confer any right to subscribe for Shares as at the date of this announcement.

Qualifying Shareholders:

The Company will send the Application Forms and the Excess Application Forms to the Qualifying Shareholders only.

To qualify for the Open Offer, Shareholders must at the close of business on the Record Date be registered on the register of members of the Company. Shareholders having addresses outside Hong Kong on the register of members of the Company at the close of business on the Record Date are qualified for the Open Offer only if the Board, after making relevant enquiry as required under the Listing Rules, considers that the offer to these Shareholders would not contravene any legal restriction under the laws of the relevant place or any requirement of the relevant regulatory body or stock exchange in that place.

In order to be registered as members of the Company on the Record Date, Shareholders must lodge any transfers of Shares (with the relevant share certificates) with the Company’s branch share registrar in Hong Kong, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Hong Kong by 4:00 p.m. on Monday, 31st January, 2005.

The invitation to apply for Offer Shares will not be transferable and there will be no trading in nil-paid entitlements on the Stock Exchange.

Closure of register of members:

The register of members of the Company will be closed from Tuesday, 1st February, 2005 to Friday, 4th February, 2005, both days inclusive. No transfer of Shares will be registered during this period.

Fractions of Offer Shares:

There will be no provisional allotment of fractions of Offer Shares on an assured basis and the fractions of Offer Shares which would otherwise form part of the provisional allotments (if any) will be taken up by the Underwriter.

Subscription Price:

HK$0.04 per Offer Share, payable in full on application. The Subscription Price represents:

• (i) a discount of approximately 25.9% to the closing price of HK$0.054 per Share as quoted on the Stock Exchange on 13th January, 2005 (being the last trading day before the date of this announcement);

• (ii) a discount of approximately 18.9% to the theoretical ex-entitlement price of HK$0.0493 per Share based on the aforesaid closing price per Share;

• (iii) a discount of approximately 32.1% to the average of the closing prices of Shares for the 10 trading days ended on 13th January, 2005 of approximately HK$0.0589 per Share; and

• (iv) a premium of approximately 6,051.9% to the unaudited consolidated net asset value per Share of the Group as at 30th September, 2004 .

The Subscription Price for Offer Shares has been determined based on arm’s length negotiations between the Company and the Underwriter with reference to prevailing market prices of Shares. The Directors consider that the terms of the Underwriting Agreement are fair and reasonable and the discount of the Subscription Price as compared to the recent market prices would encourage Shareholders to participate in the Open Offer and the future growth of the Company.

Status of the Offer Shares:

When allotted and issued fully paid, Offer Shares will rank pari passu in all respects with the existing Shares. Holders of Offer Shares will be entitled to receive all dividends and distributions which are declared, made or paid on or after the date of issue of Offer Shares.

Share certificates:

Subject to fulfillment of the conditions of the Open Offer, share certificates for fully-paid Offer Shares are expected to be posted at the risk of Shareholders on or before Thursday, 24th February, 2005.

Rights of the Overseas Shareholders:

If at the close of business on the Record Date a Shareholder’s address on the Company’s register of members is in a place outside Hong Kong, that Shareholder may not be eligible to take part in the Open Offer as documents to be issued in connection with the Open Offer will not be registered and/or filed under the applicable securities legislation of any jurisdiction other than Hong Kong and Bermuda. The Board will make enquiries as required under the Listing Rules as to whether the issue

– 2 –

of Offer Shares to any Overseas Shareholder may contravene the applicable securities legislation of the place of residence of that Overseas Shareholder or the regulations of the relevant regulatory body or stock exchange in that place. If, after making such enquiry, the Board is of the opinion that it would be necessary or expedient, on account either of the legal restrictions under the laws of the relevant place or any requirement of the relevant regulatory body or stock exchange in that place, not to offer Offer Shares to such Overseas Shareholders, no provisional allotment of Offer Shares will be made to such Overseas Shareholders. Accordingly, the Open Offer will not be extended to the Excluded Shareholders. The Company will send the Open Offer prospectus to the Excluded Shareholders for their information only but will not send the Application Forms and the Excess Application Forms to the Excluded Shareholders.

Application for excess Offer Shares:

The Qualifying Shareholders may apply for any unsold entitlements of the Excluded Shareholders and any Offer Shares provisionally allotted but not accepted by the Qualifying Shareholders. Application can be made by completing the Excess Application Forms and lodging the same with remittance of the aggregate Subscription Price payable for the excess Offer Shares. The Directors will allocate the excess Offer Shares at their discretion and on a fair and equitable basis and will give preference to topping up odd lots to whole board lots.

Application for listing:

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Offer Shares. Dealings in Offer Shares on the Hong Kong branch register of members will be subject to the payment of stamp duty in Hong Kong.

UNDERTAKING OF THE CONTROLLING SHAREHOLDER

As at the date of this announcement, Vision Century, the controlling shareholder of the Company, is interested in 682,095,950 Shares representing approximately 61.9% of the existing issued share capital of the Company. Vision Century has irrevocably undertaken to the Company and the Underwriter that it will subscribe for the 341,047,975 Offer Shares that it will be entitled to apply for on an assured basis under the Open Offer. As at the date of this announcement, Vision Century has yet to decide whether it would apply for any excess Offer Shares.

UNDERWRITING AGREEMENT DATED 13TH JANUARY, 2005

Pursuant to the Underwriting Agreement, the Underwriter has agreed to fully underwrite the Offer Shares not taken up by Vision Century, which will amount to a minimum of 210,312,120 Offer Shares and a maximum of 214,766,607 Offer Shares.

The Underwriter is independent of, and not connected with the Company and its connected persons (as defined under the Listing Rules).

Commission and other payment:

The Company will pay to the Underwriter an underwriting commission at 2.5% of the aggregate Subscription Price of the number of Offer Shares not taken up by Vision Century. The underwriting commission will range from approximately HK$210,312 to approximately HK$214,767.

Termination of the Underwriting Agreement:

The Underwriter may terminate the arrangements set out in the Underwriting Agreement by notice in writing to the Company at any time up to 4:00 p.m. on the Settlement Date, if at any time prior to 4:00 p.m. on the Settlement Date:

• (a) there develops, occurs, exists or comes into force any events whereby in the reasonable opinion of the Underwriter, the success of the Open Offer or the business or financial condition or prospects of the Group would, might be or is likely to be adversely affected or which makes it inadvisable or inexpedient to proceed with the Open Offer, including:

• (i) the introduction of any new law or regulation or any change in existing laws or regulations (or any change in the judicial interpretation thereof) whether in Hong Kong or elsewhere; or

• (ii) any change or deterioration (whether or not permanent) in local, national or international, economic, financial, political or military conditions or any event beyond the control of the Company (including, without limitation, acts of government, strikes, wars, acts of violence, acts of terrorism, sabotage, raids, attacks, explosion, flooding, civil commotion, terrorist attack, acts of God or accident); or

• (iii) any change or deterioration (whether or not permanent) in local, national or international securities market conditions; or

• (iv) without prejudice to sub-paragraphs (ii) and (iii) above, the imposition of any moratorium, suspension or material restriction on trading in securities generally on the Stock Exchange due to exceptional financial or political circumstances or otherwise; or

• (v) any local, national or international outbreak or escalation of hostilities, insurrection or armed conflict; or

– 3 –

• (vi) any suspension in the trading of Shares on the Stock Exchange for a continuous period of five business days (save and except for any temporary suspension of dealing for a period not exceeding ten consecutive business days pending this announcement or any other public announcement by the Company as may be required by the Stock Exchange and/ or the Securities and Futures Commission); or

• (vii) a change or development involving a prospective change in taxation or exchange control in Hong Kong or elsewhere which will or may materially and adversely affect the Group or the present or prospective shareholders of the Company in their capacity as such; or

• (b) there comes to the notice of the Underwriter or the Underwriter shall have reasonable cause to believe that any of the undertakings or other obligations expressed to be assumed by or imposed on the Company under the Underwriting Agreement have not been complied with in any respect; or

• (c) there comes to the notice of the Underwriter or the Underwriter shall have reasonable cause to believe that any of the representations or warranties given by the Company under the Underwriting Agreement was untrue or inaccurate in any respect which adversely affect the success of the Open Offer.

• If the Underwriter terminates the Underwriting Agreement, the Open Offer will not proceed.

CONDITIONS OF THE UNDERWRITING AGREEMENT

The Underwriting Agreement is conditional, among other things, on the following conditions being fulfilled:

• (i) the Prospectus Documents being duly approved by the Directors, the signing by or on behalf of all of the Directors on or before the Posting Date of two copies of each of the Prospectus Documents and the certification by two Directors of two copies of each of the Prospectus Documents and the delivery on or before the Posting Date of one such signed copy of each of the Prospectus Documents to the Underwriter;

• (ii) the delivery to the Stock Exchange and registration with the Registrar of Companies in Hong Kong respectively on or before the Posting Date of one copy of each of the Prospectus Documents each duly certified in compliance with section 342C of the Companies Ordinance (and all other documents required to be attached thereto) and the filing and registration with the Registrar of Companies in Bermuda on or before the Posting Date of one copy of each of the Prospectus Documents each duly signed by or on behalf of the Directors as required by the Companies Act and otherwise complying with the requirements of the Companies Ordinance, the Companies Act and the Listing Rules;

• (iii) if required, the Bermuda Monetary Authority granting its consent to the issue of Offer Shares on or before the Posting Date;

• (iv) the posting on the Posting Date of copies of the Prospectus Documents to the Qualifying Shareholders; and

• (v) the Listing Committee of the Stock Exchange agreeing to grant listings of, and permission to deal in, the Offer Shares either unconditionally or subject to such conditions which the Company accepts and the satisfaction of such conditions (if any) by no later than the Posting Date and not having withdrawn or revoked such listings and permission on or before 4:00 p.m. on the Settlement Date.

If the conditions to the Underwriting Agreement are not fulfilled or waived on the dates as specified in the Underwriting Agreement (or such later date or dates as the Underwriter may agree with the Company in accordance with its terms), or if the Underwriting shall be terminated as described above, the obligations and liabilities of the parties shall cease and determine. Conditions (i) to (iv) above are capable of being waived. However, the Underwriter has stated that it does not intend to waive any of the above conditions. The Open Offer is subject to the Underwriting Agreement becoming unconditional and not being terminated in accordance with its terms.

WARNING OF THE RISKS OF DEALING IN SHARES

Existing Shares will be dealt with on an ex-entitlements basis from Friday, 28th January, 2005. If the Underwriter terminates the Underwriting Agreement, or the conditions of the Underwriting Agreement are not fulfilled or waived, the Open Offer will not proceed.

Shareholders should note that the Shares will be dealt with on an ex-entitlements basis commencing from Friday, 28th January, 2005 and that dealings in such Shares will take place whilst the conditions to which the Underwriting Agreement is subject remain unfulfilled. Any Shareholder or other person dealing in such Shares up to the date on which all conditions to which the Open Offer is subject are fulfilled will accordingly bear the risk that the Open Offer cannot become unconditional and may not proceed. Any Shareholders or other persons contemplating selling or purchasing Shares who is in any doubt about his/her position is recommended to consult his/her own professional adviser.

– 4 –

Expected timetable:

2005

Last day of dealings in Shares cum-entitlements to the Open Offer

Thursday, 27th January Friday, 28th January 4:00 p.m. on Monday, 31st January Tuesday, 1st February to Friday, 4th February Friday, 4th February

Commencement of dealings in Shares ex-entitlements to the Open Offer Latest time for lodging transfers of Shares in order to be entitled to the Open Offer

Book closure period

Record Date

Prospectus for the Open Offer, Application Forms and Excess Application Forms to be posted

Excess Application Forms to be posted Friday, 4th February Register of members to be reopened Monday, 7th February Latest time for application for Offer Shares and payment 4:00 p.m. on Friday, 18th February Open Offer becomes unconditional Wednesday, 23rd February Announcement of the results of the Open Offer to be published Thursday, 24th February Refund cheques for wholly and partially unsuccessful excess applications to be posted Thursday, 24th February Share certificates for Offer Shares to be posted Thursday, 24th February

Dates of deadlines stated in this announcement for events in the timetable for (or otherwise in relation to) the Open Offer are indicative only and may be extended or varied by agreement between the Company and the Underwriter. Any changes to the anticipated timetable for the Open Offer will be announced as appropriate.

SHAREHOLDING IN THE COMPANY

The following is a summary of the shareholding of the Company before and after the completion of the Open Offer (assuming no change in shareholding since then):

Shareholders Vision Century Directors of the subsidiaries of the Company The Underwriter and/or the subscribers procured by it Independent Shareholders Total	As at the date of this announcement and prior to the Open Offer 682,095,950 61.9% 16,000 0.0% 0 0.0% 420,608,240 38.1% 1,102,720,190 100.0%	Upon completion of the Open Offer Assuming no conversion of Assuming full conversion of the Convertible Bonds the Convertible Bonds 1,023,143,925 61.9% 1,023,143,925 61.9% 1,023,143,925 61.4% 1,023,143,925 24,000 0.0% 16,000 0.0% 24,000 0.0% 16,000 0 0.0% 210,312,120 12.7% 0 0.0% 214,766,607 630,912,360 38.1% 420,608,240 25.4% 644,275,822 38.6% 429,517,215 1,654,080,285 100.0% 1,654,080,285 100.0% 1,667,443,747 100.0% 1,667,443,747 (Note a) (Note b) (Note a) (Note b)	61.4% 0.0% 12.9% 25.7%
			100.0%

Notes:

• (a) Assuming that all Independent Shareholders and the directors of certain subsidiaries of the Company take up their assured entitlements under the Open Offer.

• (b) Assuming neither Independent Shareholders nor the directors of certain subsidiaries of the Company take up their assured entitlements under the Open Offer and all the underwritten Offer Shares taken up by the Underwriter or the subscribers procured by it.

It is stated in the Underwriting Agreement that any subscribers procured by the Underwriter will be independent of, and not connected with the Company and its connected persons (as defined under the Listing Rules).

REASONS FOR THE OPEN OFFER AND USE OF PROCEEDS

The principal activities of the Group are (i) the provision of supply and procurement business; and (ii) the design, manufacture and sale of a wide range of toys. For the year ended 31st March, 2004, the Group recorded an audited consolidated net loss of approximately HK$30.9 million. For the six months ended 30th September, 2004, the Group recorded an unaudited net loss of approximately HK$9.2 million. The Directors are of the view that with the recent improving equity market conditions,

– 5 –

it is in the interest of the Company to raise equity capital to strengthen the Group’s financial position and enlarge its capital base.

Net proceeds of the Open Offer of approximately HK$21.0 million are intended to be applied as to approximately HK$16.0 million for the repayment of the liabilities outstanding (including the Convertible Bonds and other liabilities of the Group) and as to the remainder of approximately HK$5.0 million for general working capital of the Group. The Directors believe that the Open Offer is in the interest of the Group and the Shareholders given that the Open Offer will increase the asset base of the Group and provide it with additional working capital.

The Company did not conduct any fund raising activities in the past 12 months.

ADJUSTMENT OF CONVERSION PRICE OF THE CONVERTIBLE BONDS

Subject to the Open Offer becoming unconditional, the conversion price of the Convertible Bonds may be required to be adjusted in accordance with their terms as a result of the Open Offer. Further announcement will be made by the Company relating to any required adjustment following the determination of the number of Offer Shares.

RESUMPTION OF TRADING IN SHARES

At the request of the Company, trading in Shares on the Stock Exchange was suspended from 9:30 a.m. on Friday, 14th January, 2005 pending the release of this announcement. Application has been made by the Company for the resumption of trading in Shares with effect from 9:30 a.m. on Monday, 17th January, 2005.

GENERAL

The Open Offer prospectus containing details of the Open Offer, financial and other information on the Group will be despatched to the Qualifying Shareholders and, for information only, to the Excluded Shareholders. The Application Forms and the Excess Application Forms will also be despatched to the Qualifying Shareholders.

TERMS USED IN THIS ANNOUNCEMENT

In this announcement, the following terms have the following meanings:

“Application Form(s)”	Application form(s) for the Offer Shares
“associate(s)”	has the meaning given to it in the Listing Rules
“Board”	board of Directors
“Companies Act”	the Companies Act 1981 of Bermuda
“Companies Ordinance”	the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)
“Company”	Xin Corporation Limited, a company incorporated in Bermuda with its
	shares listed on the Stock Exchange
“Convertible Bonds”	5% convertible bonds of the Company in an aggregate outstanding
	principal amount of HK$2,166,664, which are repayable in May 2005
	or convertible into Shares at a conversion price of HK$0.2432 per Share
	(subject to adjustment)
“Directors”	directors of the Company
“Excess Application	excess application form(s) for the Offer Shares
Form(s)”
“Excluded Shareholders”	those Overseas Shareholders whom the Directors, after making relevant
	enquiry as required under the Listing Rules, consider their exclusion
	from the Open Offer to be necessary or expedient on account either
	of the legal restrictions under the laws of the relevant place or the
	requirements of the relevant regulatory body or stock exchange in that
	place
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollars
“Independent Shareholders”	Shareholders other than Vision Century, directors of certain subsidiaries
	of the Company and their respective associates
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
“Offer Share(s)”	the new Share(s) proposed to be offered to the Qualifying Shareholders
	for subscription pursuant to the Open Offer
“Open Offer”	the proposed issue of the Offer Shares by way of open offer to the
	Qualifying Shareholders on the terms to be set out in the Prospectus
	Documents and summarised herein

– 6 –

• “Overseas Shareholders” Shareholders whose addresses on the register of members of the Company are outside Hong Kong on the Record Date

• “Posting Date” 4th February, 2005 or such other date as the Underwriter may agree in writing with the Company for the date of despatch of the Prospectus Documents

• “Prospectus Documents” the prospectus for the Open Offer, Application Form and the Excess Application Form

• “Qualifying Shareholders” Shareholders on the register of members of the Company on the Record Date other than the Excluded Shareholders

• “Record Date” 4th February, 2005, being the date by reference to which entitlements under the Open Offer will be determined

• “Registrar” Tengis Limited, the Company’s branch share registrar in Hong Kong “Settlement Date” the date being the third business day following the last date for application of and payment for Offer Shares

• “Shareholder(s)” holder(s) of Shares

• “Shares” shares of HK$0.01 each in the capital of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Subscription Price” the subscription price of HK$0.04 per Offer Share pursuant to the Open Offer

• “Underwriter” Kingston Securities Limited, a licensed corporation to carry on business in types 1, 4, 6, 7 and 9 regulated activities (dealing in securities, advising on securities and corporate finance, providing automated trading services and asset management) under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• “Underwriting Agreement” the underwriting agreement dated 13th January, 2005 entered into between the Underwriter and the Company in relation to the underwriting of the Open Offer

• “Vision Century” Vision Century Group Limited, a company incorporated in the British Virgin Islands, the controlling shareholder of the Company

On behalf of the Board Lo Ming Chi, Charles Chairman

Hong Kong, 14th January, 2005

As at the date of this announcement, the Board comprises Mr. Lo Ming Chi, Charles (Chairman), Mr. Yu Wai Man, Mr. Wilson Ng, Mr. Ng Wee Keat, Mr. Ng Teow Leng and Mr. Ng Eng Leng as executive directors and Mr. Wong Kwok Tai, Mr. Lau Pok Lam and Mr. Ko Kwong Woon, Ivan as independent non-executive directors.

* For identification only

Please also refer to the published version of this announcement in The Standard.

– 7 –