PegBio Co., Ltd. — Proxy Solicitation & Information Statement 2005

Sep 22, 2005

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

If you have sold or transferred all your shares in Xin Corporation Limited (the “Company”), you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer 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 takes no responsibility for the contents of this circular, 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 circular.

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

DISPOSAL OF GADGETS YARD LIMITED

* For identification only

22nd September, 2005

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
The Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Use of proceeds and financial effect of the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Reasons for the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Appendix – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7

DEFINITIONS

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

“Agreement”

the sale and purchase agreement dated 31st August, 2005 between the Vendor and the Purchaser in relation to the sale and purchase of the Sale Shares and the Loan

“Board” board of Directors

“Company” Xin Corporation Limited, a company incorporated in Bermuda with limited liability whose issued shares are listed on the Main Board of the Stock Exchange

“Directors” directors of the Company

“Disposal”

the disposal by the Vendor of the Sale Shares and the benefit of and interest in the Loan pursuant to the Agreement

• “Group” the Company and its subsidiaries

“GYL”

Gadgets Yard Limited, a company incorporated in Hong Kong which was held as to 51% by the Vendor and 49% by a third party independent of the Company and its connected persons (as defined in the Listing Rules) before completion of the Agreement

“GYL Group”

GYL and its subsidiary

• “HK$” Hong Kong dollars “Latest Practicable Date” 20th September, 2005, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

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

“Loan” HK$6,120,000 outstanding and owing from GYL to the Vendor as at the date of the Agreement

“Purchaser” Trimanage Limited

• “Sale Shares”

• 5,100 issued ordinary shares of HK$1.00 each in the capital of GYL, representing 51% of the issued share capital of GYL as at the date of the Agreement

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DEFINITIONS

“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “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 “Vendor” Able Market Profits Limited, a wholly-owned subsidiary of the Company “Xin Toys” Xin Toys International Limited, a wholly-owned subsidiary of the Company which has become dormant since February 2004

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LETTER FROM THE BOARD

(Incorporated in Bermuda with limited liability)

(Stock Code: 1141)

Executive Directors:

Mr. Lo Ming Chi, Charles (Chairman) Mr. Yu Wai Man Mr. Wilson Ng Mr. Ng Wee Keat Mr. Ng Eng Leng

Independent Non-executive Directors:

Mr. Wong Kwok Tai Mr. Lau Pok Lam Mr. Ko Kwong Woon, Ivan

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

Head Office and Principal Place of Business in Hong Kong:

Room 2107, 21st Floor Nan Fung Tower 173 Des Voeux Road Central Hong Kong

22nd September, 2005

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION

DISPOSAL OF GADGETS YARD LIMITED

INTRODUCTION

On 31st August, 2005, the Vendor, a wholly-owned subsidiary of the Company, entered into the Agreement with the Purchaser pursuant to which the Vendor agreed to sell, and the Purchaser agreed to purchase (i) the Sale Shares; and (ii) the benefit of and the interest in the Loan. The consideration for the Sale Shares and the Loan, being HK$5,100 and HK$4,461,460 respectively, was paid by the Purchaser in cash upon signing of the Agreement and the Disposal was completed thereupon.

The Disposal constitutes a discloseable transaction to the Company under the Listing Rules.

* For identification only

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LETTER FROM THE BOARD

THE AGREEMENT

Parties:

Vendor : Able Market Profits Limited, a wholly-owned subsidiary of the Company Purchaser : Trimanage Limited

As far as the Directors are aware, the Purchaser is principally engaged in investment holdings in property investment and manufacturing business. To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the Purchaser and its ultimate beneficial owner are third parties independent of the Company and its connected persons (as defined in the Listing Rules).

Assets disposed:

On 31st August, 2005, the Vendor, a wholly-owned subsidiary of the Company, entered into the Agreement with the Purchaser pursuant to which the Vendor agreed to sell, and the Purchaser agreed to purchase (i) the Sale Shares; and (ii) the benefit of and the interest in the Loan.

The Sale Shares, being 5,100 issued ordinary shares of HK$1.00 each in the capital of GYL, representing 51% of the issued share capital of GYL. The Sale Shares represented the entire interest held by the Vendor in GYL before completion of the Agreement. As at the date of the Agreement, the Loan owing from GYL to the Vendor amounted to HK$6,120,000. Upon completion of the Agreement, the Vendor no longer held any interest in GYL and GYL ceased to be a subsidiary of the Company.

The GYL Group is principally engaged in the design, manufacture and sale of a wide range of toys. The toys business operated by the GYL Group includes three segments including (i) the toddler cars segment which manufactures and trades children’s ride-on cars featuring working horns and turning wheels; (ii) the cycling segment which manufactures and trades children’s bicycles, tricycles and scooters; and (iii) the other toys segment which comprises the manufacture and the trading of pre-school toys, plastic utensils and other fashionable toys. Prior to commencement of operations of GYL in February 2004, the operation of toys business was carried out through a wholly-owned subsidiary of the Company namely Xin Toys. Since GYL commenced its operations, Xin Toys ceased its operation and became dormant. After the Disposal, the Group ceased to be engaged in the toys business.

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LETTER FROM THE BOARD

The following is the financial information of the GYL Group for the two years ended 31st March, 2004 and 2005 and the four-month period ended 31st July, 2005 extracted from its relevant audited accounts and unaudited management accounts:

Revenue Net loss before taxation & net loss after taxation	For the year ended 31st March, 2004 (audited) HK$’000 4,945 (1,071)	For the year For the four ended months ended 31st March, 31st July, 2005 2005 (audited) (unaudited) HK$’000 HK$’000 36,050 7,710 (1,369) (813)

As at 31st July, 2005, the unaudited consolidated net liabilities of the GYL Group were approximately HK$3.2 million.

Consideration:

The consideration for the Sale Shares and the Loan, being HK$5,100 and HK$4,461,460 respectively, was paid by the Purchaser in cash upon signing of the Agreement and the Disposal was completed thereupon.

The consideration for the Disposal was determined after arm’s length negotiations and having taken into account the aforesaid net book value of the GYL Group as at 31st July, 2005 and the outstanding amount of the Loan as at date of the Agreement.

USE OF PROCEEDS AND FINANCIAL EFFECT OF THE DISPOSAL

The net proceeds from the Disposal after deducting the related expenses are approximately HK$4.2 million. The Group intends to apply the net proceeds as its general working capital. The Disposal did not have any material impact on the net asset position of the Group. Based on the net book value of the GYL Group as at 31st July, 2005, no gain or loss was recognized by the Group as a result of the Disposal.

REASONS FOR THE DISPOSAL

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. Upon completion of the Disposal, the Group ceased its business in the design, manufacture and sale of a wide range of toys.

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LETTER FROM THE BOARD

For the past two financial years ended 31st March, 2004 and 2005, the Group recorded the audited net operating losses of approximately HK$27.3 million and HK$2.5 million respectively. Such losses were mainly attributable to the toys business of the Group. The losses made by the toys business of the Group were mainly due to the relatively high price of plastic materials as a result of the increase in the price of crude oil and production overheads. For the four months ended 31st July, 2005, the unaudited net operating loss for toys business was approximately HK$0.8 million due to the persistent high level of the price of crude oil. In April 2004, the Group’s supply and procurement business commenced, which has since then been providing the Group with a stable revenue and income source. The Group is being a supplier for the supply of equipment, goods and services, which include, but are not limited to, office equipment, office supplies, machinery, parts, lubricating oil and bunker for vessels. For the year ended 31st March, 2005, the Group’s supply and procurement business recorded an audited turnover of approximately HK$144.7 million representing over 3.9 times the revenue generated from its toys business, and a segmental profit of approximately HK$8.9 million contrasting with the segmental loss from its toys business of approximately HK$10.1 million.

The Board considers that the Disposal represents a good opportunity for the Group to exit the lossmaking toys business and focus on the profit-making supply and procurement business. With the proceeds received from the Disposal, the financial position of the Group has been strengthened. In light of the above reasons and benefits of the Disposal, the Directors consider that the terms of the Disposal are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

FURTHER INFORMATION

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

On behalf of the Board Lo Ming Chi, Charles Chairman

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests and short positions of the Directors in the equity and debt securities of the Company or its associated corporations (within the meaning of Part XV of the SFO) which require notification to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Director is deemed or taken to have under such provisions of the SFO) or which are required, pursuant to Section 352 of the SFO, to be entered into the register maintained by the Company or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, to be notified to the Company and the Stock Exchange were as follows:

		Number of Shares held	Number of Shares held
	Personal	Family	Corporate	Other
Name of Director	interest	interest	interest	interest
Mr. Lo Ming Chi, Charles	800,000	–	–	–
	(Note 2)
Mr. Yu Wai Man	800,000	–	–	–
	(Note 2)
Mr. Wilson Ng	800,000	–	–	51,157,196
	(Note 2)			(Note 3)
Mr. Ng Wee Keat	800,000	–	–	51,157,196
	(Note 2)			(Note 3)
Mr. Ng Eng Leng	800,000	–	–	–
	(Note 2)

Note:

1. All the interests disclosed above represents long positions in the Shares.

2. Each of the personal interests of Mr. Lo Ming Chi, Charles, Mr. Yu Wai Man, Mr. Wilson Ng, Mr. Ng Wee Keat and Mr. Ng Eng Leng is interest in 800,000 underlying Shares in respect of share options granted by the Company.

3. These Shares are held by Vision Century Group Limited, which is ultimately owned by a discretionary trust of which Mr. Wilson Ng and Mr. Ng Wee Keat are discretionary beneficiaries.

Save as disclosed above, as at the Latest Practicable Date, no Directors had interests or short positions in the equity or debt securities of the Company or its associated corporations (within the meaning of Part XV of the SFO) which require notification to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any

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GENERAL INFORMATION

APPENDIX

such Director is deemed or taken to have under such provisions of the SFO) or which are required to be entered into the register maintained by the Company, pursuant to Section 352 of the SFO, or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers, to be notified to the Company and the Stock Exchange. No Director is a director or an employee of a company which had an interest or short position in Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the following persons had an interest or a short position in Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group:

		Percentage of
	Number of	the Company’s
Name of substantial Shareholder	Shares held	issued share capital
Huang Group (BVI) Limited*	51,597,196	61.86%
Huang Worldwide Holding Limited*	51,597,196	61.86%
Vision Century Group Limited*	51,597,196	61.86%
Mr. Ng (Huang) Cheow Leng*	51,597,196	61.86%
Mr. Kan Ka Chong, Frederick*	51,597,196	61.86%

• Vision Century Group Limited is a wholly-owned subsidiary of Huang Worldwide Holding Limited, which is in turn wholly-owned by Huang Group (BVI) Limited. Huang Group (BVI) Limited is wholly-owned by a discretionary trust, of which Mr. Ng (Huang) Cheow Leng is the settlor and Mr. Kan Ka Chong, Frederick is the trustee. Mr. Ng (Huang) Cheow Leng, Mr. Wilson Ng and Mr. Ng Wee Keat are discretionary beneficiaries of the trust.

4. LITIGATION

There were claims for outstanding trade debts brought by several suppliers and other miscellaneous creditors against the Group in prior years in respect of goods supplied and services provided for, together with interests, costs and/or other relief, of approximately HK$392,000 in aggregate. A full provision thereof has been made.

Save as disclosed above, neither the Company nor any of its subsidiaries is engaged in litigation or arbitration of material importance and so far as the Directors are aware, no litigation or claims of material importance are pending or threatened by or against the Company or any of its subsidiaries.

5. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors nor their respective associates was considered to have an interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

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GENERAL INFORMATION

APPENDIX

6. MISCELLANEOUS

• (a) As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which does not expire or is not terminable by the Group within one year without payment of compensation (other than statutory compensation).

• (b) The secretary and qualified accountant of the Company is Mr. Yu Wai Man, who is a fellow member of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants.

• (c) The registered office of the Company is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

• (d) The head office and principal place of business of the Company in Hong Kong is located at Room 2107, 21st Floor, Nan Fung Tower, 173 Des Voeux Road Central, Hong Kong.

• (e) The branch share registrar of the Company in Hong Kong is Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (f) The English texts of this circular shall prevail over their respective Chinese texts.

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