PegBio Co., Ltd. - Proxy Solicitation & Information Statement 2007

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, other licensed corporation, 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 and the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer, other licensed corporation, 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)
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(Stock Code: 1141)

PLACING OF CONVERTIBLE NOTES AND CONNECTED TRANSACTION

Financial adviser to Xin Corporation Limited

Independent financial adviser to Independent Board Committee and Independent Shareholders

A letter from the board of directors of the Company is set out on pages 5 to 17 of this circular. A letter from the independent board committee of the Company containing its recommendation to the independent shareholders of the Company in connection with the Option Agreement (as defined herein) is set out on page 18 of this circular. A letter from Taifook Capital Limited, the independent financial adviser to the independent board committee and the independent shareholders of the Company, containing its advice in connection with the Option Agreement (as defined herein), is set out on pages 19 to 35 of this circular.

A notice convening a special general meeting of the Company to be held at Bauhinia Room 3, 3rd Floor, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong on Monday, 6 August 2007 at 10:00 a.m., is set out on pages 41 to 42 of this circular. If you are not able to attend the meeting of the Company, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the principal place of business of the Company at Room 2107, 21st Floor, Nan Fung Tower, 173 Des Voeux Road Central, Hong Kong as soon as possible and in any event not later than forty-eight (48) hours before the time appointed for holding the meeting of the Company. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting of the Company or any adjournment thereof if you so wish.

* For identification only

19 July 2007

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
The Placing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Principal terms of the Convertible Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
The Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Principal terms of the New Vision Century Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Reasons for the Placing Agreement and the Option Agreement and use of proceeds . . . . . .	12
Shareholding structure of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Dilution effect on Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Fund raising activities in the past twelve months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Listing Rules implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Procedures for demanding a poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Independent financial adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Letter from Taifook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Appendix – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
Notice of Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41

DEFINITIONS

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

“Announcement”

the announcement of the Company dated 28 June 2007 in relation to the Placing Agreement and the Option Agreement

“associates”

the meaning given to it under the Listing Rules

“Board” the board of Directors
“Call Option”
the option granted under the Option Agreement exercisable by Vision Century (but not an obligation of Vision Century) during the Option Period to subscribe and to require the Company to issue to Vision Century or its nominee the New Vision Century Notes
“Company” Xin Corporation Limited, a company incorporated in Bermuda with limited liability and the issued ordinary shares of which are listed on the main board of the Stock Exchange
“Convertible Notes” the zero coupon 2-year convertible notes with principal amount up to HK$100,000,000 proposed to be issued by the Company pursuant to the Placing
“Directors” the directors of the Company
“Discretionary Trust”
a discretionary trust of which Mr. Kan Ka Chong, Frederick is the trustee, Mr. Ng (Huang) Cheow Leng is the settlor and Mr. Ng (Huang) Cheow Leng and his family members and unspecified charities are the discretionary beneficiaries
“Existing Vision Century Note” the 1% convertible note of the Company in the principal amount of HK$17,000,000, which is presently outstanding. This amount is repayable in March 2009 or convertible into new Shares at a conversion price of HK$0.141 per Share, subject to adjustments
“Group”

the Company and its subsidiaries

“Huang Group”

Huang Group (BVI) Limited, a company incorporated in the British Virgin Islands and held by Mr. Kan Ka Chong, Frederick in the capacity as trustee of the Discretionary Trust

“Independent Board Committee”

the independent board committee of the Company constituted by three independent non-executive Directors, Mr. Wong Kwok Tai, Mr. Lau Pok Lam and Mr. Ko Kwok Woon, Ivan

DEFINITIONS

“Independent Shareholders” Shareholders other than Vision Century and its associates
“Independent Third Party(ies)” third parties who are independent of the Company and its connected person(s)
“Initial Conversion Price” the initial conversion price of the Convertible Notes and the New Vision Century Notes of HK$0.28 (subject to adjustments)
“Latest Practicable Date” 17 July 2007, 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
“Maturity Date” the day preceding the second anniversary of the date of issue of the Convertible Notes or the New Vision Century Notes
“New Vision Century Notes” the zero coupon 2-year convertible notes of up to the aggregate principal amount of HK$100,000,000 which may be issued in tranches of which the principal amount of the New Vision Century Notes comprised in each tranche shall not be less than HK$20,000,000
“Noteholders” holders of the Convertible Notes or the New Vision Century Notes (as the case may be)
“Open Offer” a three for one open offer involving the issue of 248,112,042 new Shares at a price of HK$0.12 per Share completed in October 2006, details of which were set out in the announcement of the Company dated 17 August 2006, the circular of the Company dated 8 September 2006 and the prospectus of the Company dated 26 September 2006
“Option Agreement” the conditional call option agreement dated 20 June 2007 (as supplemented on 28 June 2007) entered into between the Company and Vision Century pursuant to which the Company has agreed to grant to Vision Century the Call Option to subscribe for the New Vision Century Notes in the aggregate principal amount of up to HK$100,000,000
“Option Conversion Shares”
new Shares to be issued upon conversion of the New Vision Century Notes in an aggregate principal amount of up to HK$100,000,000 at the Initial Conversion Price

DEFINITIONS

“Option Period” the period between the date immediately following the date of satisfaction of the conditions precedent to the Option Agreement and three months following such date, both dates inclusive

“Placing” the offer by way of private placement of the Convertible Notes by the Placing Agent on a best effort basis on the terms and conditions set out in the Placing Agreement
“Placing Agent” Interchina Securities Limited, a corporation licensed to carry on type 1 regulated activity (dealing in securities) under the SFO
“Placing Agreement” the conditional placing agreement dated 20 June 2007 (as supplemented on 28 June 2007) entered into between the Company and the Placing Agent in relation to the Placing
“Placing Conversion Shares” new Shares to be issued upon conversion of the Convertible Notes in an aggregate principal amount of up to HK$100,000,000 at the Initial Conversion Price
“Placing Period” the period between the date immediately following the date of satisfaction of the conditions precedent of the Placing Agreement described in the paragraph headed “Conditions of the Placing Agreement” in this circular and three months following such date, both dates inclusive
“SFO” the Securities and Futures Ordinance (Chapter 571 of the laws Hong Kong)
“Share(s)” the ordinary share(s) of HK$0.01 each in the share capital of the Company
“Shareholder(s)” holder(s) of the Share(s)
“Special General Meeting”
the special general meeting of the Company to be held at Bauhinia Room 3, 3rd Floor, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong on Monday, 6 August 2007 at 10:00 a.m. for the purposing of considering, and if thought fit, approving the Placing Agreement and the Option Agreement
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Subscribers”
the subscribers of the Convertible Notes to be procured by the Placing Agent under the Placing

DEFINITIONS

“Taifook”	Taifook Capital Limited, a licensed corporation under the SFO to
	carry on type 6 (advising on corporate finance) regulated activity,
	and which is the independent financial adviser to advise the
	Independent Board Committee and the Independent Shareholders
	in respect of the Option Agreement (including the issue of the
	New Vision Century Notes and the Option Conversion Shares)
“Tranche”	up to five tranches of not less than HK$20,000,000 each of the
	Convertible Notes or the New Vision Century Notes to be issued
	by the Company
“Vision Century”	Vision Century Group Limited, a company incorporated in the
	British Virgin Islands, the controlling shareholder of the Company
	and a wholly-owned subsidiary of Huang Group
“HK$”	Hong Kong dollars

LETTER FROM THE BOARD

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

19 July 2007

To Shareholders

Dear Sir or Madam,

PLACING OF CONVERTIBLE NOTES AND CONNECTED TRANSACTION

INTRODUCTION

On 28 June 2007, the Company announced that it had entered into (i) the Placing Agreement with the Placing Agent in relation to the placing by the Placing Agent, on a best effort basis, of the Convertible Notes in aggregate principal amount up to HK$100,000,000. The Convertible Notes will be issued in up to five Tranches during the Placing Period. The Convertible Notes are convertible into new Shares at the initial conversion price of HK$0.28 each (subject to adjustments). Upon exercise in full of the Convertible Notes in aggregate principal amount of HK$100,000,000 at the Initial Conversion Price, a total of 357,142,857 Placing Conversion Shares will fall to be issued, representing approximately 68.6% of the existing issued share capital of the Company as at the date of the Placing Agreement and approximately 40.7% of the issued share capital as enlarged by the issue of the Placing Conversion Shares; and (ii) the Option Agreement with Vision Century, pursuant to which the Company has conditionally agreed to grant to Vision Century an option exercisable during the Option Period to subscribe for the New Vision Century Notes and to require the Company to issue the New Vision Century Notes to Vision Century or its nominee at the principal amount of the New Vision Century Notes of up to HK$100,000,000 in aggregate.

* For identification only

LETTER FROM THE BOARD

Vision Century, the controlling Shareholder, was interested in approximately 53.3% of the issued share capital of the Company as at the Latest Practicable Date, and is therefore a connected person of the Company. Accordingly, the transactions contemplated under the Option Agreement, including the issue of the Option Conversion Shares upon exercise of the conversion rights attached to the New Vision Century Notes, will constitute a connected transaction of the Company under Chapter 14A of the Listing Rules.

A special general meeting will be convened by the Company at which two separate resolutions will be proposed to seek approval of (i) the Placing Agreement and the issue of the Convertible Notes and the Placing Conversion Shares; and (ii) the Option Agreement and the issue of the New Vision Century Notes and the Option Conversion Shares. Vision Century and its associates will abstain from voting on both resolutions.

The purpose of this circular is to provide you with, among other things, (i) details of the Placing Agreement and the Convertible Notes; (ii) details of the Option Agreement and the New Vision Century Notes; (iii) the recommendation from the Independent Board Committee to the Independent Shareholders; (iv) a letter of advice from Taifook to the Independent Board Committee and the Independent Shareholders; and (v) notice of the Special General Meeting.

THE PLACING AGREEMENT

Date

20 June 2007 (as supplemented on 28 June 2007)

Parties to the Placing Agreement

Issuer: the Company Placing Agent: Interchina Securities Limited

To the best of the knowledge, information and belief of the Directors and having made all reasonable enquiries, the Placing Agent and its ultimate beneficial owner are Independent Third Parties.

Securities to be placed

Subject to fulfilment of the conditions to the Placing Agreement, the Placing Agent has agreed to procure the Subscribers, during the Placing Period, on a best effort basis to subscribe up to HK$100,000,000 principal amount of the Convertible Notes. The Placing Agent will use all reasonable endeavours, exercise due care and make reasonable enquiries to ensure that the Subscribers and their ultimate beneficial owners are Independent Third Parties.

The Placing Agent may, during the Placing Period, require that the Convertible Notes to be issued by the Company to the Subscribers in up to five Tranches in such amounts as notified by the Placing Agent in writing to the Company, provided the principal amount of the Convertible Notes comprised in each Tranche shall not be less than HK$20,000,000 and the aggregate principal amount of the Convertible Notes for all Tranches shall not exceed HK$100,000,000.

LETTER FROM THE BOARD

Placing commission

2.5% of the aggregate principal amount of the Convertible Notes for which the Placing Agent has procured the Subscribers to subscribe in each Tranche.

Conditions of the Placing Agreement

Completion of the Placing Agreement is conditional upon:

(i) the passing by the Independent Shareholders of two separate resolutions to approve the Placing Agreement, the Option Agreement, the issue of the Convertible Notes and the New Vision Century Notes and any conversion shares falling to be issued on exercise of the conversion rights under the Convertible Notes and the New Vision Century Notes at a special general meeting of the Company in accordance with the Listing Rules; and
(ii) the conditions under the Option Agreement having been fulfilled (except for the condition which requires the fulfilment of all conditions under the Placing Agreement).

If the above conditions are not fulfilled on or before 30 September 2007 (or such later date as may be agreed by the parties to the Placing Agreement), the Placing Agreement shall lapse and become null and void and the parties to the Placing Agreement shall be released from all obligations thereunder, save for any liability arising out of any antecedent breaches.

Conditions for each Tranche and completion

In addition to the fulfilment of the conditions described above, completion of each Tranche of the Convertible Notes is conditional upon:

(i) the Listing Committee of the Stock Exchange having granted (either unconditionally or subject only to conditions to which the Company does not reasonably object) listing of, and permission to deal in, the Placing Conversion Shares in respect of such Tranche of the Convertible Notes; and
(ii) the Company not having received any objection from the Stock Exchange to the issue of such Tranche of the Convertible Notes.

If the above conditions for a Tranche of the Convertible Notes are not fulfilled within 14 days from the date of notification of the Placing Agent to the Company (or such later date as may be agreed between the Company and the Placing Agent), the obligation of the parties in respect of the issue of such Tranche of the Convertible Notes shall lapse.

Completion of each Tranche of the Convertible Notes shall take place on the third business day after the date of fulfilment of the conditions for such Tranche of the Convertible Notes above. Further announcement will be made upon completion of each Tranche of the Convertible Notes.

LETTER FROM THE BOARD

PRINCIPAL TERMS OF THE CONVERTIBLE NOTES

The terms of the Convertible Notes are the same as the New Vision Century Notes. Any reference to the Convertible Notes in this section includes the New Vision Century Notes.

Aggregate principal amount: up to HK$100,000,000

Maturity:

The day preceding the second anniversary from the date of issue of each Tranche of the Convertible Notes.

Interest rate: Nil Initial Conversion Price:

HK$0.28 per Share, subject to usual anti-dilution adjustments in certain events such as share consolidation, share subdivision, capitalisation issue, capital distribution, rights issue and other equity or equity derivatives issues.

The Initial Conversion Price represents:

a discount of approximately 12.5% to the closing price of HK$0.32 per Share as quoted on the Stock Exchange on 20 June 2007, being the last trading day immediately before trading in the Shares was suspended pending the release of the Announcement;
a discount of approximately 12.5% to the average closing price of approximately HK$0.32 per Share as quoted on the Stock Exchange for the last 10 trading days up to and including 20 June 2007;
a premium of approximately 27.3% over the average closing price of approximately HK$0.22 per Share as quoted on the Stock Exchange for the last 180 trading days up to and including 20 June 2007;
a discount of approximately 73.8% to the closing price of HK$1.07 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
a premium of approximately 273.3% over the net assets value per Share as at 30 September 2006, adjusted for the Open Offer, of approximately HK$0.075.

LETTER FROM THE BOARD

The Initial Conversion Price was determined after arm’s length negotiations between the Company and the Placing Agent with reference to the market price of the Shares. The Board has noted the recent volatility on the price of the Shares. The Directors consider that it is more appropriate to determine the Initial Conversion Price with reference to the trading performance of the Shares with a longer historical time frame, and that the Initial Conversion Price, which represents a premium of 273.3% over the net assets value per Share, is fair and reasonable to the Shareholders.

Redemption:
Conversion period:
Conversion shares:

Ranking:

Unless previously converted or lapsed or redeemed by the Company, the Company may at any time prior to the Maturity Date, by giving not less than 5 business days’ prior notice to the Noteholders, repay the whole or part(s) only (in an amount or integral multiple of HK$5,000,000) of the principal outstanding amount of the Convertible Notes.

Provided that (i) no obligation will arise on the relevant Noteholders to make a general offer to the Shareholders for all securities of the Company under Rule 26 of the Hong Kong Code and Takeovers and Mergers upon exercising of conversion rights attached to the Convertible Notes; and (ii) the minimum public float requirements of the Company under the Listing Rules will not be breached as a result of an exercise of such conversion rights, the Noteholders shall have the right to convert, on any business day prior to the earlier of the redemption date or 5 business days prior to the Maturity Date, the whole or any part (in an amount or integral multiple of HK$5,000,000) of the principal amount of the Convertible Notes into the Shares at the then prevailing conversion price.
Upon full conversion of the Convertible Notes at the Initial Conversion Price, an aggregate of 357,142,857 Placing Conversion Shares will be issued by the Company, representing approximately 68.6% of the existing issued share capital of the Company and approximately 40.7% of the issued share capital of the Company as enlarged by the issue of the Placing Conversion Shares.

The Convertible Notes will rank pari passu with all other present and future unsecured and unsubordinated obligations of the Company.

LETTER FROM THE BOARD

The Placing Conversion Shares to be issued as a result of the exercise of the conversion rights attached to the Convertible Notes will rank pari passu in all respects with all other Shares in issue at the date on which the conversion rights attached to the Convertible Notes are exercised.

Transferability:

The Convertible Notes may be assigned or transferred in respect of the whole or any part (in an amount or integral multiple of HK$5,000,000) subject to compliance of the conditions, approvals, requirements and any other provisions of or under (i) the Stock Exchange or the Listing Rules; (ii) the approval for listing in respect of the Placing Conversion Shares; and (iii) all applicable laws and regulations.

Voting:

A Noteholder will not be entitled to receive notice of, attend or vote at any general meetings of the Company by reason only of it being a Noteholder.

Listing:

No application will be made for the listing of the Convertible Notes on the Stock Exchange or any other stock exchange. An application will be made by the Company for the listing of, and permission to deal in, the Placing Conversion Shares to be issued as a result of the exercise of the conversion rights attached to the Convertible Notes.

THE OPTION AGREEMENT

Date

20 June 2007 (as supplemented on 28 June 2007)

Parties to the Option Agreement

Grantor: the Company Grantee: Vision Century

LETTER FROM THE BOARD

Call Option

In consideration of HK$10, the Company has conditionally agreed to grant to Vision Century an option exercisable during the Option Period to subscribe for the New Vision Century Notes and to require the Company to issue the New Vision Century Notes to Vision Century or its nominee in the principal amount up to HK$100,000,000 of the New Vision Century Notes.

Vision Century may exercise the Call Option to subscribe for the New Vision Century Notes up to five calls in integral multiples of HK$5,000,000 as may be notified by Vision Century in writing to the Company provided that the principal amount of the New Vision Century Notes comprised in each call shall not be less than HK$20,000,000 and the aggregate principal amount of the New Vision Century Notes in all calls shall not exceed the lower of (i) the principal amount of all subscription of the Convertible Notes; or (ii) HK$100,000,000.

Conditions of the Option Agreement

Completion of the Option Agreement is conditional upon:

(i) passing by the Independent Shareholders of two separate resolutions to approve the Placing Agreement, the Option Agreement, the issue of the Convertible Notes and the New Vision Century Notes and any conversion shares falling to be issued on exercise of the conversion rights of the Convertible Notes and the New Vision Century Notes at a special general meeting of the Company in accordance with the Listing Rules; and
(ii) all conditions under the Placing Agreement having been fulfilled (except for the condition which requires the fulfilment of all conditions of the Option Agreement).

If the above conditions are not fulfilled on or before 30 September 2007 (or such later date as may be agreed between the Company and Vision Century), the Option Agreement shall thereupon lapse and become null and void and the parties to the Option Agreement will be released from all obligations hereunder, save for any liability arising out of any antecedent breaches.

Conditions for each Tranche and completion

In addition to the fulfilment of the conditions described above, completion of each Tranche of the New Vision Century Notes is conditional upon:

(i) the Listing Committee of the Stock Exchange having granted (either unconditionally or subject only to conditions to which the Company does not reasonably object) listing of, and permission to deal in, the Option Conversion Shares in respect of such Tranche of the New Vision Century Notes; and
(ii) the Company not having received any objection from the Stock Exchange to the issue of such Tranche of the New Vision Century Notes.

LETTER FROM THE BOARD

If the above conditions for a Tranche of the New Vision Century Notes are not fulfilled within 14 days from the date of option notice to exercise the Call Option given by Vision Century (or such later date as may be agreed between the Company and Vision Century), then the obligation of the parties in respect of the issue of such Tranche of the New Vision Century Notes shall lapse.

Completion of each Tranche of the New Vision Century Notes shall take place on the third business day after the date of fulfilment of the conditions for such Tranche of the New Vision Century Notes above. Further announcement will be made upon completion of each Tranche of the New Vision Century Notes.

PRINCIPAL TERMS OF THE NEW VISION CENTURY NOTES

The terms of the New Vision Century Notes are identical to those of the Convertible Notes. Details are set out in the section headed “Principal terms of the Convertible Notes” above.

REASONS FOR THE PLACING AGREEMENT AND THE OPTION AGREEMENT AND USE OF PROCEEDS

The principal activities of the Group are in the supply and procurement business in the Asia Pacific Region including but not limited to the supply of office equipment and office supplies, machinery, machinery parts, lubricating oil and bunkerage for vessels.

The estimated net proceeds from the issue of the Convertible Notes of approximately HK$97 million are intended to be applied for general working capital of the Group. In the event that Vision Century exercises the Call Option to subscribe for the New Vision Century Notes, the Company will receive further net proceeds of approximately HK$100 million. The Company intends to apply the aforesaid additional net proceeds for general working capital of the Group. The Group may consider to apply the proceeds to invest in any appropriate targets if opportunities arise. However, the Group has not identified any appropriate investment targets as at the Latest Practicable Date.

Upon exercise of conversion rights attaching to the Convertible Notes and the New Vision Century Notes, the interests of existing Shareholders in the Company will be diluted. However, the Directors consider that the Placing and the grant of the Call Option to Vision Century will strengthen the financial position of the Group and equip the Company with readily available funds to take up investment opportunities as and when they arise. The Directors also consider that the issue of the Convertible Notes and the New Vision Century Notes provides a less costly way of financing for the Company.

Based on the above, the Directors consider that the Placing and the grant of the Call Option to Vision Century are in the interests of the Company and its Shareholders as a whole and the terms of the Placing Agreement and the Option Agreement are fair and reasonable as far as the Shareholders are concerned.

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

Set out below is the shareholding structure of the Company (i) as at the Latest Practicable Date and immediately upon completion of the Placing; (ii) upon conversion in full of the Existing Vision Century Note; (iii) upon conversion in full of the Convertible Notes; (iv) upon conversion in full of the Convertible Notes and the New Vision Century Notes; and (v) upon conversion in full of the Existing Vision Century Note, the Convertible Notes and the New Vision Century Notes (assuming no issue of new Shares and no change in shareholding of Vision Century after the Latest Practicable Date).

												Upon	full
												conversion of
												the Existing
												Vision Century
	As at the Latest									Upon full conversion		Note,	the
	Practicable	Date								of the Convertible		Convertible
	and immediately				Upon full conversion			Upon full		Notes and	the	Notes	and
	upon completion		of		of the Existing			conversion of the		New Vision		the New	Vision
Shareholders	the Placing				Vision Century Note			Convertible Notes		Century Notes		Century	Notes
	Number				Number			Number		Number		Number
	of Shares			%	of Shares		%	of Shares	%	of Shares	%	of Shares		%
Vision Century_(Note 1)_	277,392,754		53.3		397,960,129	62.1		277,392,754	31.6	634,535,611	51.4	755,102,986	55.7
Huang & Co (Singapore)
Pte. Ltd.(Note 2)	41,920,941			8.0	41,920,941		6.5	41,920,941	4.8	41,920,941	3.4	41,920,941		3.1
Mr. Wilson Ng_(Note 3)_	2,024,000			0.4	2,024,000		0.3	2,024,000	0.2	2,024,000	0.2	2,024,000		0.1
Mr. Ng Wee Keat_(Note 3)_	1,024,000			0.2	1,024,000		0.2	1,024,000	0.1	1,024,000	0.1	1,024,000		0.1
Ms. Lilian Ng_(Note 4)_	2,600,000			0.5	2,600,000		0.4	2,600,000	0.4	2,600,000	0.2	2,600,000		0.2
Other Directors	3,072,000			0.6	3,072,000		0.5	3,072,000	0.3	3,072,000	0.2	3,072,000		0.2
Public Shareholders
– Subscribers_(Note 5)_	–			–	–		–	357,142,857	40.7	357,142,857	28.9	357,142,857	26.4
– Other public
Shareholders	192,691,272		37.0		192,691,272	30.0		192,691,272	21.9	192,691,272	15.6	192,691,272	14.2
Sub-total	192,691,272		37.0		192,691,272	30.0		549,834,129	62.6	549,834,129	44.5	549,834,129	40.6
Total	520,724,967	100.00			641,292,342	100.00		877,867,824	100.00	1,235,010,681	100.00	1,355,578,056	100.00

LETTER FROM THE BOARD

Notes:

Vision Century is a wholly-owned subsidiary of Huang Group of which is held by Mr. Kan Ka Chong, Frederick in the capacity as the trustee of the Discretionary Trust.
Huang & Co (Singapore) Pte. Ltd. is wholly owned by New Century International Pte. Ltd., a company incorporated in the Republic of Singapore with limited liability. New Century International Pte. Ltd. is wholly owned by the parents of Mr. Wilson Ng and Mr. Ng Wee Keat.
Mr. Wilson Ng and Mr. Ng Wee Keat are executive Directors and discretionary beneficiaries of the Discretionary Trust.
Ms. Lilian Ng is a discretionary beneficiary of the Discretionary Trust.
Assuming none of the Subscribers will hold more than 10% of the issued share capital of the Company which would otherwise result in them not being counted as public Shareholders. It is expected that no Subscriber will become substantial shareholders of the Company upon conversion of the Convertible Notes.

DILUTION EFFECT ON SHAREHOLDERS

In view of the potential dilution effect on existing Shareholders on exercise of conversion rights attaching to the Convertible Notes and the New Vision Century Notes, for so long as any of the Convertible Notes or the New Vision Century Notes are outstanding the Company will keep Shareholders informed of the level of dilution and details of conversion as follows:

(i) the Company will make a monthly announcement (the “Monthly Announcement”) on the Company’s website and the website of the Stock Exchange after the first issue of the Convertible Notes or the New Vision Century Notes. Such announcement will be made on or before the fifth business day following the end of each calendar month and will include the following details in a table form:
(a) whether there was any conversion of the Convertible Notes or the New Vision Century Notes during the relevant month. If yes, details of the conversion(s), including the conversion date, number of new Shares issued, conversion price for each conversion. If there was no conversion during the relevant month, a negative statement to that effect;
(b) the outstanding principal amount of the Convertible Notes and the New Vision Century Notes after the conversion, if any;
(c) the total number of new Shares issued pursuant to other transactions during the relevant month, including new Shares issued pursuant to exercise of options under any share option scheme(s) of the Company;
(d) the total issued share capital of the Company as at the commencement and the last day of the relevant month; and

LETTER FROM THE BOARD

(ii) in addition to the Monthly Announcement, if the cumulative amount of new Shares issued pursuant to the conversion of the Convertible Notes and the New Vision Century Notes reaches 5% of the issued share capital of the Company as disclosed in the last Monthly Announcement or any subsequent announcement made by the Company in respect of the Convertible Notes and the New Vision Century Notes (as the case may be) (and thereafter in a multiple of such 5% threshold), the Company will as soon as practicable but in any event no later than the fifth business day thereafter make an announcement on the Company’s website and the website of the Stock Exchange including details as stated in (i) above for the period commencing from the date of the last Monthly Announcement or any subsequent announcement made by the Company in respect of the Convertible Notes and the New Vision Century Notes (as the case may be), up to the date on which the total amount of Shares issued pursuant to the conversion amounts to 5% of the issued share capital of the Company as disclosed in the last Monthly Announcement or any subsequent announcement made by the Company in respect of the Convertible Notes and the New Vision Century Notes (as the case may be).

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

In October 2006, the Company completed a three for one open offer which involved the issue of 248,112,042 new Shares at a price of HK$0.12 per Share. Details of the Open Offer were set out in the announcement of the Company dated 17 August 2006, the circular of the Company dated 8 September 2006 and the prospectus of the Company dated 26 September 2006. Net proceeds of the Open Offer of approximately HK$28.0 million are intended to be applied as to approximately HK$18.5 million for repayment of the Group’s liabilities and as to the remainder of approximately HK$9.5 million for general working capital of the Group. As at the Latest Practicable Date, approximately HK$7.4 million has been utilized for repayment of the Group’s liabilities while approximately HK$5.1 million has been utilized for general working capital of the Group.

Save for the above, the Company has not conducted any other fund raising activities in the last twelve months before the date of the Announcement.

LISTING RULES IMPLICATIONS

Vision Century is an investment holding company and is the controlling Shareholder. Vision Century was interested in approximately 53.3% of the issued share capital of the Company as at the Latest Practicable Date and is therefore a connected person of the Company. Accordingly, the transactions contemplated under the Option Agreement, including the issue of the Option Conversion Shares upon exercise of the conversion rights attached to the New Vision Century Notes, will constitute a connected transaction of the Company under Chapter 14A of the Listing Rules.

The Option Agreement and the transactions contemplated thereunder, including the issue of the New Vision Century Notes and the issue of the Option Conversion Shares upon exercise of the conversion rights attached to the New Vision Century Notes, are subject to, among others, the approval of the Independent Shareholders by way of a poll at a special general meeting of the Company where Vision Century and its associates will be required to abstain from voting. The Placing Agreement (including the issue of the Convertible Notes and the Placing Conversion Shares) will be put forward to Independent Shareholders for their votes in a separate resolution from which Vision Century and its associates will also be required to abstain from voting.

LETTER FROM THE BOARD

SPECIAL GENERAL MEETING

A notice convening the Special General Meeting, at which ordinary resolutions will be proposed to consider and, if thought fit, to approve, among other things (i) the Placing Agreement (including the issue of the Convertible Notes and the Placing Conversion Shares); and (ii) the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares) is set out on pages 41 to 42 of this circular. At the Special General Meeting, the votes will be taken by polls on which Vision Century and its associates will abstain from voting.

A form of proxy for use at the Special General Meeting is accompanied with this circular. If you are not able to attend the Special General Meeting, you are requested to complete the accompanied form of proxy in accordance with the instructions printed thereon and return it to the Company’s principal place of business in Hong Kong at Room 2107, 21st Floor, Nan Fung Tower, 173 Des Voeux Road Central, Hong Kong as soon as possible and in any event not later than forty-eight (48) hours before the time appointed for holding the Special General Meeting. 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 adjournment thereof if you so wish.

An announcement will be made by the Company following the conclusion of the Special General Meeting to inform you of the results thereof.

PROCEDURES FOR DEMANDING A POLL

Pursuant to Bye-law 66 of the Bye-laws of the Company, a resolution put to the vote of a general meeting shall be decided on a show of hands unless voting by way of a poll is required by the rules of the designated Stock Exchange or (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded:

(i) by the chairman of such meeting; or
(ii) by at least three members present in person (or in the case of a member being a corporation by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or
(iii) by a member or members present in person (or in the case of a member being a corporation by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all members having the right to vote at the meeting; or
(iv) by a member or members present in person (or in the case of a member being a corporation by its duly authorised representative) or by proxy and holding Shares in the Company conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all Shares conferring that right; or
(v) if required by the rules of the designated Stock Exchange, by any Director or Directors who, individually or collectively, hold proxies in respect of Shares representing five per cent. (5%) or more of the total voting rights at such meeting.

LETTER FROM THE BOARD

A demand by a person as proxy for a member or in the case of a member being a corporation by its duly authorised representative shall be deemed to be the same as a demand by a member.

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, comprising Mr. Wong Kwok Tai, Mr. Lau Pok Lam and Mr. Ko Kwong Woon, Ivan has been appointed to give recommendation to the Independent Shareholders in respect of the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares). Your attention is drawn to the recommendation of the Independent Board Committee set out in its letter on page 18 of this circular.

INDEPENDENT FINANCIAL ADVISER

Taifook has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders regarding the terms of the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares). Your attention is drawn to its letter to the Independent Board Committee and the Independent Shareholders set out on pages 19 to 35 of this circular.

RECOMMENDATION

The Directors consider that the terms of the Placing Agreement and the Option Agreement are fair and reasonable and are in the interests of the Company and the Independent Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders to vote in favour of the resolutions to be proposed at the Special General Meeting to approve the Placing Agreement (including the issue of Convertible Notes and the Placing Conversion Shares and the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares).

GENERAL

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

Yours faithfully, For and on behalf of the Board Lo Ming Chi, Charles Chairman

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

(Incorporated in Bermuda with limited liability)

(Stock Code: 1141)

19 July 2007

To the Independent Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION

We refer to the circular of the Company dated 19 July 2007 (the “Circular”), of which this letter forms part. Terms used herein have the same meanings as those defined in the Circular unless the context otherwise requires.

We have been appointed as the Independent Board Committee in respect of the terms of the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares), and to advise you as to whether, in our opinion, such terms are fair and reasonable so far as the Company and the Independent Shareholders are concerned and whether the entering into of the Option Agreement is in the interest of the Company and the Shareholders as a whole.

Taifook has been appointed as the independent financial adviser to advise us and you regarding the terms of the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares). Details of its advice, together with the principal factors and reasons it has taken into consideration in giving its advice, are set out in its letter on pages 19 to 35 of the Circular. Your attention is also drawn to the letter from the Board and the additional information set out in the appendix to the Circular.

Taking into account the independent advice of Taifook, we consider that the terms of the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares) are fair and reasonable so far as the Company and the Independent Shareholders are concerned, and that the entering into of the Option Agreement is in the interests of the Company and the Shareholders as a whole. On this basis, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the Special General Meeting to approve the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares).

Yours faithfully, Independent Board Committee Wong Kwok Tai Lau Pok Lam Ko Kwong Woon, Ivan

* For identification only

LETTER FROM TAIFOOK

The following is the text of a letter from Taifook to the Independent Board Committee and the Independent Shareholders regarding the terms of the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares), which is prepared for inclusion in this circular.

25th Floor New World Tower 16-18 Queen’s Road Central Hong Kong

19 July 2007

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

CONNECTED TRANSACTION

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders with respect to the terms of the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares), details of which are set out in the letter from the Board (the “Letter”) contained in the circular of the Company dated 19 July 2007 (the “Circular”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

As referred to in the Letter, on 20 June 2007 (as supplemented on 28 June 2007), the Company entered into the Placing Agreement with the Placing Agent in relation to the placing by the Placing Agent, on a best effort basis, of the Convertible Notes with principal amount up to HK$100,000,000. Moreover, on 20 June 2007 (as supplemented on 28 June 2007), the Company entered into the Option Agreement with Vision Century, pursuant to which, the Company has conditionally agreed to grant to Vision Century an option exercisable during the Option Period to subscribe for the New Vision Century Notes and to require the Company to issue the New Vision Century Notes to Vision Century or its nominee in the principal amount of the New Vision Century Notes of not exceeding the lower of (i) the principal amount of all subscription of the Convertible Notes; or (ii) HK$100,000,000. The terms of the New Vision Century Notes are in all material aspects the same as the Convertible Notes. Completion of the Placing Agreement is conditional upon fulfillment of the conditions under the Option Agreement (except for the condition which requires the fulfillment of all conditions under the Placing Agreement) and completion of the Option Agreement is conditional upon all conditions under the Placing Agreement having been fulfilled (except for the condition which requires the fulfillment of all conditions of the Option Agreement).

LETTER FROM TAIFOOK

As Vision Century is the controlling Shareholder of the Company holding approximately 53.3% of the total issued share capital of the Company as at the Latest Practicable Date, it is a connected person of the Company under the Listing Rules. Accordingly, the transactions contemplated under the Option Agreement, including the issue of the New Vision Century Notes and the Option Conversion Shares upon exercise of the conversion rights attached to the New Vision Century Notes, will constitute a connected transaction of the Company under Chapter 14A of the Listing Rules.

The Option Agreement is therefore subject to the approval of the Independent Shareholders at a special general meeting of the Company on which voting will be taken by poll. Vision Century and its associates will abstain from voting on the resolution at the special general meeting in relation to the Option Agreement.

In our capacity as the independent financial adviser to the Independent Board Committee and the Independent Shareholders, our role is to provide the Independent Board Committee and the Independent Shareholders with an independent opinion and recommendation as to whether the terms of the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares) are fair and reasonable so far as the Independent Shareholders are concerned and the entering into of the Option Agreement is in the interest of the Company and the Independent Shareholders as a whole.

BASIS OF OUR OPINION

In formulating our recommendation, we have relied on the information, financial information and facts supplied to us and representations expressed by the Directors and/or the management of the Company and have assumed that all such information, financial information and facts and any representations made to us, or referred to in the Circular, in all material aspects, are true, accurate and complete as at the time they were made and as at the date of the Circular, has been properly extracted from the relevant underlying accounting records (in the case of financial information) and made after due and careful inquiry by the Company and/or the management of the Company. The Directors and/or the management of the Company have confirmed that, having made all reasonable enquiries and to the best of their knowledge and belief, all relevant information has been supplied to us and that no material facts have been omitted from the information supplied and representations expressed to us. We have also relied on certain information available to the public and have assumed such information to be accurate and reliable. We have no reason to doubt the completeness, truth or accuracy of the information and facts provided and we are not aware of any facts or circumstances which would render such information provided and representations made to us untrue, inaccurate or misleading.

We considered we have reviewed sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent verification of the information nor have we conducted any form of in-depth investigation into the businesses, affairs, financial position or prospects of the Group.

LETTER FROM TAIFOOK

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our recommendation in relation to the terms of the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares), we have considered the following principal factors and reasons:

Information and background of the Group and reasons for the issue of the New Vision Century Notes

The Group is principally engaged in the supply and procurement business in the Asia Pacific Region, including but not limited to, the supply of office equipment and office supplies, machinery, machinery parts, lubricating oil and bunkerage for vessels.

As stated in the Company’s unaudited interim report for the six months ended 30 September 2006, the Group’s turnover was approximately HK$93.2 million which was approximately 11.1% greater than that of the corresponding period in 2005. Since August 2005, the Group has been concentrating on the profit-making supply and procurement business and its performance was satisfactory. This segment contributed a turnover of approximately HK$93.2 million and a profit of approximately HK$10.5 million, representing an increase of approximately 27.8% and 46.2% respectively as compared to those of the same period last year. Loss attributable to equity holders of the Company for the period was approximately HK$2.2 million, recording an improvement of approximately 65.2% over the same period in last year of approximately HK$6.3 million. The Group’s consolidated net assets also improved from approximately HK$7.5 million as at 30 September 2005 to approximately HK$11.2 million as at 30 September 2006.

It is noted from the Company’s annual report for the year ended 31 March 2006 that the Group recorded a turnover of approximately HK$155.6 million, representing an increase of approximately 7.5% as compared to that of last year, and loss attributable to equity holders of the Company of approximately HK$16.0 million, representing an improvement of approximately 33.3% over last year, whereas the consolidated net assets of the Group improved from approximately HK$5.4 million as at 31 March 2005 to approximately HK$7.5 million as at 31 March 2006. As stated in the report of the auditors in the Company’s annual report for the year ended 31 March 2006, the financial statements for the year ended 31 March 2006 were prepared on a going concern basis, the validity of which depends upon the ongoing support by the Group’s holding companies, bankers and other creditors, the availability of additional external funding and the attainment of profitable and positive cash flow operations to meet the Group’s future working capital and financial requirements. As further stated in the notes to the financial statements for the year ended 31 March 2006, in order to strengthen the capital base of the Group and to improve the Group’s financial position, immediate liquidity and cash flow, and otherwise to sustain the Group as a going concern, the management of the Company has adopted certain measures, including but not limited to:

(i) Huang Worldwide Holding Limited, the immediate holding company of Vision Century, has undertaken to the Company, during the period up to 31 October 2007, to provide continuing financial support to the Group so as to enable the Group to continue its day-to-day operations as a viable going concern notwithstanding any present or future financial difficulties experienced by the Group; and

LETTER FROM TAIFOOK

(ii) Vision Century has granted a credit facility of HK$50 million to the Company since 2 July 2003. On 15 February 2006, the Company entered into the subscription agreement with Vision Century to issue a convertible note in the principal amount of HK$37 million as part of the consideration for the release and discharge of the Group from all of its obligations and liabilities in respect of the loan from Vision Century. The convertible note is repayable on 29 March 2009 while the credit facility of HK$50 million granted by Vision Century is still valid and should be expired on 31 October 2007.

We are advised by the Company that subsequent to the year ended 31 March 2006, Huang Worldwide Holding Limited has further committed to the Company that it will continue to provide financial support to the Group after 31 October 2007. In fact, since Vision Century became the holding company of the Company in May 2002, it has been giving its support to a number of fund raising exercises carried out by the Company through open offers. In each of the open offers by the Company that took place in 2003, 2005 and 2006 respectively, Vision Century took up its full entitlement to it, which open offers allowed the Company to raise funds for repayment of its liabilities and general working capital of the Group.

In the event that Vision Century exercises the Call Option to subscribe for the New Vision Century Notes in full, the Company will receive net proceeds of approximately HK$100 million. As stated in the Letter, the Company intends to apply the aforesaid net proceeds for general working capital of the Group and may consider to apply the proceeds to invest in any appropriate targets if opportunities arise. However, the Group has not identified any appropriate investment targets as at the Latest Practicable Date.

As further advised by the Directors, in view of the buoyant stock market and the abundance of investment opportunities in the Asia Pacific Region for the Group’s supply and procurement businesses, Vision Century, as the controlling shareholder of the Company, supports the decision of the Directors that the Company should take advantage of the favorable market sentiment and raise additional new capital for its future developments, with a view to diversifying its business activities and to broaden its earnings base. The issue of the New Vision Century Notes will enable the Company to obtain additional funding on top of the Placing and allow the Company to negotiate for better and more attractive investment terms that may be taken up by the Company in the future.

Apart from the aforesaid and in view of Vision Century’s past contribution and support to the Group, we consider that the granting of the Call Option to Vision Century which may enable Vision Century to secure its majority control over the Group after the completion of the Placing is, and we concur with the Directors’ view that there is a strong commercial rationale to enter into the Option Agreement and the entering into of the Option Agreement is, in the interests of the Company and the Independent Shareholders as a whole.

LETTER FROM TAIFOOK

Alternative financing methods

In order to obtain funds for the Group to strengthen the financial position of the Group and equip the Company with readily available funds to take up investment opportunities as and when they arise as detailed in the paragraph headed “Information and background of the Group and reasons for the issue of the New Vision Century Notes” above, the Directors have considered various alternative means of financing.

Debt financing from bank borrowings

Based on the published unaudited consolidated balance sheet of the Group as at 30 September 2006, the Group had a gearing ratio of approximately 360.7% (being the Group’s total bank borrowing and liability component of convertible note of approximately HK$40.4 million divided by the Group’s consolidated net assets of approximately HK$11.2 million), which demonstrates that the Group’s gearing ratio stood at a relatively high level and that the Group might not easily further borrow significant funds from banks. Moreover, the New Vision Century Notes bear no interest whereas the effective interest rate of the Group’s bank borrowing is approximately 6.1% per annum as disclosed in the interim report of the Company for the six months ended 30 September 2006. Accordingly, as compared to the issue of the New Vision Century Notes, the Directors consider that the interest expenses which might have to be incurred from bank borrowings may create greater pressure on the cashflow of the Group in the short run and also result in less favourable financial and debt positions. Based on the above, we concur with the view of the Directors that bank borrowings are not appropriate for or beneficial to the Group and the issue of the New Vision Century Notes provides a relatively less costly way of financing the Company.

Other equity financing

The Directors have considered other equity financing as follows:

A placing of new shares will have an immediate dilution effect on the shareholding interest of existing shareholders whereas, in normal circumstances, an issue of convertible notes does not create an immediate dilution effect on the existing shareholders unless and until the conversion rights under the convertible notes are exercised. However, in view of the current market sentiment and share price performance of the Company, in the event that the New Vision Century Notes are converted in full, the dilution effect as a result of the conversion in full would be the same as in a placing of new Shares. Nevertheless, we note that in a placing of new shares, the placing price of which is usually set at a discount to market price. Since the New Vision Century Notes do not bear any interest and will be redeemed at the principal amount without any premium, we are of the view that the discount represented by the Initial Conversion Price to the market price of the Shares as at the Last Trading Day (as defined below) is acceptable; and

LETTER FROM TAIFOOK

The average daily trading volume of the Shares for the trading days during the past 12 months ended on 20 June 2007, being the last trading day prior to the suspension of trading in the Shares pending release of the Announcement (the “Last Trading Day”) is approximately 2,709,344 Shares per trading day, representing merely approximately 0.52% of the total number of the Shares in issue and approximately 1.41% of the number of the Shares in public hands as at the Latest Practicable Date. Due to the fact that the trading volume of the Shares is relatively thin, the Directors consider that if the Company raises the necessary funds by way of a rights issue or an open offer instead of the issue of the New Vision Century Notes, it might have to be set at a high offer ratio and the subscription price for which would have to be set at significant discounts to the prevailing market price of the Shares and the underlying net assets value so as to attract subscription by the Shareholders. In addition, underwriting uncertainty and market risk associated with a rights issue or an open offer is normally higher as it would take a longer time to complete a rights issue or an open offer and any arm’s length underwriting is normally subject to standard force majeure clause in favour of the underwriter. In light of the fact that a significant discount rate to the prevailing market price of the Shares might have to be offered in order for a rights issue or an open offer to be fully underwritten by independent underwriter(s) and a longer period of completion time will be required by a rights issue or an open offer, we consider that a rights issue or an open offer is a less appropriate means of financing than the issue of the New Vision Century Notes.

Accordingly, as compared to debt financing from bank borrowings and other equity financing, we consider that the issue of the New Vision Century Notes is an appropriate financing method under the current circumstances.

Principal terms of the Option Agreement and the New Vision Century Notes

Pursuant to the Option Agreement, in consideration of HK$10, the Company has conditionally agreed to grant to Vision Century an option exercisable during the Option Period to subscribe for the New Vision Century Notes and to require the Company to issue the New Vision Century Notes to Vision Century or its nominee in the principal amount of not exceeding the lower of (i) the principal amount of all subscription of the Convertible Notes; or (ii) HK$100,000,000.

LETTER FROM TAIFOOK

The exercise of the Call Option will result in the issue of the New Vision Century Notes. In view of the rationale for the entering into of the Option Agreement and the potential benefits which would be enjoyed by the Group as described in the paragraph headed “Information and background of the Group and reasons for the issue of the New Vision Century Notes” above, we consider that it is not unusual for granting the Call Option at a nominal consideration and it is in the interest of the Company and the Independent Shareholders as a whole.

As stated in the Letter, each of the Noteholders shall have the right to convert, on any business day prior to the earlier of the redemption date or 5 business days prior to the Maturity Date, the whole or any part (in an amount or integral multiple of HK$5,000,000) of the principal amount of the New Vision Century Notes into Shares at the then prevailing conversion price, provided that (i) no obligation will arise on the relevant Noteholders to make a general offer to the Shareholders for all securities of the Company under Rule 26 of the Hong Kong Code on Takeovers and Mergers upon exercising on conversion rights attached to the New Vision Century Notes; and (ii) the minimum public float requirements of the Company under the Listing Rules will not be breached as a result of an exercise of such conversion rights.

(a) Conversion price

The Initial Conversion Price of HK$0.28 per Share, subject to usual anti-dilution adjustments in certain events such as share consolidation, share subdivision, capitalisation issue, capital distribution, rights issue and other equity or equity derivatives issues by the Company, was determined after arm’s length negotiations with reference to the prevailing market prices of the Shares. The Board has noted the recent volatility on the price of the Shares and therefore considered that determining the Initial Conversion Price by reference to the trading performance of the Shares with a longer historical time frame would be more appropriate.

The Initial Conversion Price of HK$0.28 per Share represents:

		Price/value	Premium/
		per Share	(discount)
		approximately	approximately
		HK$	%
(i)	Closing price as quoted on the Stock
	Exchange as at the Last Trading Day	0.3200	(12.50)
(ii)	Average closing price per Share as quoted on
	the Stock Exchange for the last 10 trading days
	up to and including the Last Trading Day	0.3195	(12.36)
(iii)	Average closing price per Share as quoted on
	the Stock Exchange for the last 180 trading days
	up to and including the Last Trading Day	0.2192	27.74

LETTER FROM TAIFOOK

		Price/value	Premium/
		per Share	(discount)
		approximately	approximately
		HK$	%
(iv)	The unaudited consolidated net assets value of the
	Group per Share as at 30 September 2006
	(based on the unaudited consolidated net assets value
	of the Group as at 30 September 2006 of approximately
	HK$11.2 million divided by 82,704,014 issued
	Shares as at 30 September 2006)	0.1354	106.79
(v)	The adjusted consolidated net assets value of the
	Group per Share
	(based on the unaudited consolidated net assets value
	of the Group as at 30 September 2006 of approximately
	HK$11.2 million adjusted by the net proceeds of
	approximately HK$28.0 million from the Open Offer
	in October 2006 divided by 520,724,967 issued
	Shares as at the Latest Practicable Date)	0.0753	271.85

LETTER FROM TAIFOOK

(1) Share price performance

Set out below are the month/period end closing prices and average daily closing prices of the Shares for each month during the period from 1 June 2006 to the Latest Practicable Date:

		Month/	Average
	period end		daily
	closing price		closing price
	approximately		approximately
		HK$	HK$
2006
June (*)		0.189	0.2157
July (*)		0.149	0.1495
August (*)		0.133	0.1391
September (*)		0.141	0.1440
October		0.138	0.1368
November		0.152	0.1558
December		0.142	0.1421
2007
January		0.164	0.1457
February		0.215	0.1836
March		0.300	0.2670
April		0.355	0.3378
May		0.330	0.3307
June		0.355	0.3246
July (up to the Latest Practicable Date)		1.070	0.9009

(*) The share prices of the Company for the period from 1 June 2006 to 19 September 2006 have been adjusted to account for the effect of the Open Offer.

Source: Blooomberg and the website of the Stock Exchange

The average daily closing prices of the Shares had been in a range of approximately HK$0.1368 to approximately HK$0.9009 during the period from 1 June 2006 to the Latest Practicable Date. The closing price of the Shares hit a high of HK$1.200 on 11 July 2007 and a low of HK$0.125 on 17 October 2006.

LETTER FROM TAIFOOK

Based on the above, the closing price of the Shares rose to over the Initial Conversion Price since March 2007. The Initial Conversion Price represents premium of approximately 27.74% over the average closing price of approximately HK$0.2192 per Share as quoted on the Stock Exchange for the last 180 trading days up to and including the Last Trading Day, a premium of approximately 106.79% and 271.85% over the unaudited consolidated net assets value of the Group per Share as at 30 September 2006 of approximately HK$0.1354 and the adjusted consolidated net assets value per Share of approximately HK$0.0753 respectively.

(2) Comparables

In order to assess the fairness and reasonableness of the terms of the New Vision Century Notes, we consider that it would be more appropriate to look into the issue of convertible notes with principal amount of less than HK$1,000 million to independent third parties by companies listed on the Main Board of the Stock Exchange which were announced for the period from 20 April 2007 to 19 June 2007, being the two-month period immediately before the date of the Option Agreement (i.e. 20 June 2007). The key terms of these market comparables are set out in the following table:

						Premium/	Premium/
						(discount) of
						conversion	price
						over/to
					Redemption	last	10-day
Date of					price at	trading	average
Announcement	Company	Principal	Interest	Maturity	maturity	price	price
		million	%	Years	%	%	%
2 May 2007	New Focus Auto Tech	US$12	5.20	3	100.00	(7.59)	(12.70)
	Holdings Limited
9 May 2007	Wing Hing International	HK$15	1.00	2	105.00	6.38	(1.12)
	(Holdings) Limited
9 May 2007	Henry Group	HK$129.11	1.68	5	100.00	(2.97)	10.11
	Holdings Limited
14 May 2007	Midas International	HK$49.5	1.50	4	100.00	12.50	17.20
	Holdings Limited
17 May 2007	First Shanghai	HK$31.86	1.00	2	100.00	(0.75)	18.39
	Investments Limited
17 May 2007	Mae Holdings Limited	HK$51.6	5.00	5	100.00	(90.00)	(86.00)

LETTER FROM TAIFOOK

						Premium/	Premium/
						(discount) of
						conversion	price
						over/to
					Redemption	last	10-day
Date of					price at	trading	average
Announcement	Company	Principal	Interest	Maturity	maturity	price	price
		million	%	Years	%	%	%
18 May 2007	Lijun International	RMB160	5.00	3	121.15	2.98	13.26
	Pharmaceutical
	(Holding) Company
	Limited
22 May 2007	Hong Kong	HK$100	1.00	5	100.00	(85.29)	(81.79)
	Pharmaceutical
	Holdings Limited
29 May 2007	Wing Shing International	HK$200	0.50	5	128.33	12.47	32.54
	Holdings Limited
7 June 2007	Capital Strategic	HK$390	2.00	5	119.38	29.11	30.94
	Investment Limited
11 June 2007	Tak Shun Tech	HK$929.69	1.00	2	100.00	(46.63)	(35.34)
	Group Limited
12 June 2007	Wai Yuen Tong	HK$250	1.00	2	100.00	3.57	51.04
	Medicine Holdings
	Limited
High			5.20	5	128.33	29.11	51.04
Low			0.50	2	100.00	(46.63)	(35.34)
Average			1.99	3.3	107.39	0.91	12.43
The Company			0.0	2	100.0	(12.50)	(12.36)

Source: the website of the Stock Exchange

LETTER FROM TAIFOOK

Given that the discount represented by the conversion prices of the convertible notes issued by Mae Holdings Limited and Hong Kong Pharmaceutical Holdings Limited respectively were significantly different from those issued during the two-month period immediately before the date of the Option Agreement as listed above, we have chosen not to include them as part of the market comparables (the “Comparables) in the calculation of the high, low and average figures of the Comparables and in the following analysis.

As indicated above, the conversion prices of the Comparables ranged from (a) a discount of approximately 46.63% to a premium of approximately 29.11% to the closing price of the last trading day immediately prior to the respective date of announcement; and (b) from a discount of approximately 35.34% to a premium of approximately 51.04% to the average closing price for the last 10 trading days up to and including the last trading day immediately prior to the respective date of announcement. The discount of the Initial Conversion Price of the New Vision Century Notes to the closing price on the Last Trading Day of approximately 12.50% and to the average closing price for the last 10 trading days up to and including the Last Trading Day of approximately 12.36% are within the range of the Comparables respectively. In addition, in light of the fact that the New Vision Century Notes bear no interest and will be redeemed at 100% of the principal outstanding amount, we are of the view that the slight discount represented by the Initial Conversion Price to the closing price on the Last Trading Day and the average closing price for the last 10 trading days up to and including the Last Trading Day is acceptable.

(b) Interest rate

The New Vision Century Notes carry no interest which is of better term than the Comparables’ convertible notes which carry interest rates ranging from 0.50% to 5.20%.

(c) Redemption

Unless previously converted or lapsed or redeemed by the Company, the Company may at any time prior to the Maturity Date, by giving not less than 5 business days’ prior notice to the Noteholders, repay the whole or part only (in an amount or integral multiple of HK$5,000,000) of the principal outstanding amount of the New Vision Century Notes.

The New Vision Century Notes will be redeemed at maturity at 100.0% of the principal amount without any premium whereas the Comparables are redeemable at maturity at an average premium of 107.39%. Thus, we are of the view that the redemption at 100% of the principal amount of the New Vision Century Notes is favorable to the Company.

LETTER FROM TAIFOOK

(d) Maturity, transferability, voting and ranking

The New Vision Century Notes have a maturity period of two years from the date of issue of each Tranche of the New Vision Century Notes and they may be assigned or transferred in respect of the whole or any part (in an amount or integral multiple of HK$5,000,000) subject to compliance of the conditions, approvals, requirements and any other provisions of or under (i) the Stock Exchange or the Listing Rules; (ii) the approval for listing in respect of the Option Conversion Shares; and (iii) all applicable laws and regulations.

A Noteholder will not be entitled to receive notice of, attend or vote at any general meetings of the Company by reason only of it being a Noteholder.

The New Vision Century Notes will rank pari passu with all other present and future unsecured and un-subordinated obligations of the Company. The Option Conversion Shares to be issued as a result of the exercise of the conversion rights attached to the New Vision Century Notes will rank pari passu in all respects with all other Shares in issue at the date on which the conversion rights attached to the New Vision Century Notes are exercised.

We consider that the terms of the Option Agreement in relation to the maturity (i.e. within the range of the maturity period from 2 to 5 years of the Comparables as shown above), transferability, voting and ranking are normal for debt securities of similar kind.

(e) Issue in tranches

Pursuant to the Option Agreement, Vision Century may exercise the Call Option to subscribe for the New Vision Century Notes up to five calls in integral multiples of HK$5,000,000 as may be notified by Vision Century in writing to the Company provided that the principal amount of the New Vision Century Notes comprised in each call shall not be less than HK$20,000,000. We concur with the view of the Directors that given the substantial size of the New Vision Century Notes (approximately 60.1% of the market capitalisation of the Company as at the date of the Option Agreement assuming all New Vision Century Notes of an aggregate principal amount of HK$100 million were issued), such an arrangement provides flexibility to Vision Century to subscribe for the New Vision Century Notes in separate tranches during the Option Period depending on the prevailing market conditions so that Company can receive proceeds from the issue of the New Vision Century Notes throughout the Option Period.

LETTER FROM TAIFOOK

Having considered: (i) the background to and reasons for the granting of the Call Option and the entering into of the Option Agreement as described in the paragraph headed “Information and background of the Group and reasons for the issue of the New Vision Century Notes” above; (ii) the nominal consideration of the Call Option of HK$10 is not unusual and is in the interest of the Company and the Independent Shareholders as a whole; (iii) it is more appropriate to determine the Initial Conversion Price with reference to the trading performance of the Shares with a longer historical time frame given the recent volatility on the prices of the Shares; (iv) the Initial Conversion Price represents premium over the average closing price as quoted on the Stock Exchange for the last 180 trading days up to and including the Last Trading Day, a premium over the unaudited consolidated net assets value of the Group per Share as at 30 September 2006 and the adjusted consolidated net assets value per Share; (v) the discount of the Initial Conversion Price of New Vision Century Notes under the Option Agreement to the closing price on the Last Trading Day and the average closing price for the last 10 trading days up to and including the Last Trading Day are within the range of the Comparables respectively and is considered acceptable in light of the fact that the New Vision Century Notes bear no interest and will be redeemed at 100% of the principal outstanding amount without any premium; (vi) the New Vision Century Notes bear no interest whereas the Comparables bear interest of at least 0.50%; (vii) the redemption at maturity of the New Vision Century Notes is lower than the average of those of the Comparables; (viii) the terms in relation to the maturity (within the range of the maturity period from 2 to 5 years of the Comparables), transferability, voting and ranking are normal for debt securities of similar kind; (ix) the issue of the New Vision Century Notes in tranches provides flexibility to Vision Century to subscribe for the New Vision Century Notes in separate tranches during the Option Period depending on the prevailing market conditions so that Company can receive proceeds from the issue of the New Vision Century Notes throughout the Option Period, we are of the view that the terms of the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares) are fair and reasonable and the entering into of the Option Agreement as a whole benefits the Company and is in the interests of the Company and the Independent Shareholders as a whole.

Possible financial effects

The following analysis on the effect on the working capital, net assets value and gearing position of the Group as a result of the issue of the New Vision Century Notes and its subsequent conversion into Option Conversion Shares is for illustration purpose only assuming that there will not be any changes to the issued share capital of the Company as at the Latest Practicable Date other than, having regard to the fact that in substance, the completion of the Placing Agreement and the Option Agreement are inter-conditional on each other, (i) the issue of the Conversion Placing Shares upon full conversion of the Convertible Notes at the Initial Conversion Price and the Convertible Notes with an aggregate amount of HK$100 million are successfully placed under the Placing; and (ii) the issue of the Option Conversion Shares upon full conversion of the New Vision Century Notes at the Initial Conversion Price and the New Vision Century Notes with an aggregate principal amount of HK$100 million are issued.

LETTER FROM TAIFOOK

Working capital

Based on the unaudited financial statements of the Group for the six months ended 30 September 2006, the Group had a negative working capital of approximately HK$12.4 million, comprising current assets of approximately HK$73.3 million, including cash and bank balances of approximately HK$5.2 million, and current liabilities of approximately HK$85.7 million. Assuming the factors which may affect working capital position remain unchanged, the Group’s working capital will be enhanced as a result of the increase in its cash and bank balances of approximately HK$197 million received from the net proceeds of the completion of the Placing and the subscription of the New Vision Century Notes. Therefore, we are of the view that the issue of the New Vision Century Notes is favourable to the working capital position of the Group.

Net assets value

Based on the number of Shares in issue as at the Latest Practicable Date of 520,724,967 Shares, and the Group’s consolidated net assets value of approximately HK$39.2 million (being the unaudited consolidated net assets value of approximately HK$11.20 million as at 30 September 2006 and adjusted by the net proceeds of approximately HK$28.0 million from the Open Offer in October 2006), the adjusted consolidated net assets value per Share is approximately HK$0.075.

Assuming the Convertible Notes and the New Vision Century Notes are converted in full at the Initial Conversion Price, a maximum of 714,285,714 Shares will fall to be issued and the total principal amount of HK$200 million (assuming all Convertible Notes of an aggregate principal amount of HK$100 million were successfully placed and all New Vision Century Notes of an aggregate principal amount of HK$100 million were subscribed for and issued) will be contributed to the total equity and the net assets value of the Group will be increased by the aggregate net proceeds from the placing of the Convertible Notes and the issue of the New Vision Century Notes of approximately HK$197 million. Therefore, both the consolidated net assets value of the Group and the consolidated net assets value per Share will be increased immediately upon full conversion of the Convertible Notes and the New Vision Century Notes at the Initial Conversion Price.

As the net assets value per Share will be enhanced upon full conversion of the Convertible Notes and the New Vision Century Notes, we are of the view that the issue of the New Vision Century Notes is favourable to the net assets value of the Group.

LETTER FROM TAIFOOK

Gearing position

Based on the unaudited consolidated balance sheet of the Group as at 30 September 2006, the Group had a gearing ratio of approximately 360.7% (being the Group’s total bank borrowing and liability component of convertible note of approximately HK$40.4 million divided by the Group’s consolidated net assets of approximately HK$11.2 million).

Due to the increase in the liability component of convertible notes of the Group and equity of the Group attributable to the Shareholders as a result of the issue of the Convertible Notes and the New Vision Century Notes, the gearing ratio of the Group upon completion of the Placing Agreement and the Option Agreement and before any conversion of the Convertible Notes and the New Vision Century Notes respectively would be increased. However, the gearing ratio of the Group will decrease gradually from time to time during the term of the Convertible Notes and the New Vision Century Notes upon conversion. Immediately upon full conversion of the Convertible Notes and the New Vision Century Notes, the total principal amount of the Convertible Notes and the New Vision Century Notes will be contributed to the equity of the Company and increase the total equity attributable to equity holders of the parent.

After considering the reasons for the entering into the Option Agreement and the granting of the Call Option as stated in the paragraph headed “Information and background of the Group and reasons for the issue of the New Vision Century Notes” above, the funds raised from the issue of the New Vision Century Notes will further strengthen the financial position of the Group and equip the Company with readily available funds to take up investment opportunities as and when they arise upon the exercise of the Call Option by Vision Century, and the New Vision Century Notes bear no interest and will be redeemed at maturity at principal amount without any premium, we consider that the increase in the gearing ratio of the Group upon completion of the Option Agreement as aforesaid is justifiable in so far as the Independent Shareholders are concerned.

Dilution in shareholding

Based on the shareholding structure of the Company as set out in the Letter, as at the Latest Practicable Date, 192,691,272 Shares were held by public Shareholders, representing approximately 37.0% of the issued share capital of the Company. Upon exercise of the conversion rights attaching to the New Vision Century Notes (assuming no conversion into the conversion Shares would take place by the holders of the Existing Vision Century Notes and the Convertible Notes), such corresponding shareholding will be diluted to approximately 21.9%. The Shareholders should note that dilution effect on earnings per Share and shareholding is inevitable for issue of the New Vision Century Notes. Shareholders would face a similar level of dilution if a placing as well as a rights issue or an open offer of the similar size of the New Vision Century Notes is proceeded instead of the issue of the New Vision Century Notes and they do not subscribe for the shares in full (under the rights issue or the open offer). Nevertheless, as discussed in the section headed “Alternative financing methods” above, a rights issue or an open offer is not an appropriate alternative to the Company at the prevailing time. Having considered that (i) the use of proceeds from the issue of the New Vision Century Notes as described in the paragraph headed “Information

LETTER FROM TAIFOOK

and background of the Group and reasons for the issue of the New Vision Century Notes” above; and (ii) the issue of the New Vision Century Notes is an appropriate means of financing compared with all other alternative means of financing as discussed in the paragraph headed “Alternative financing methods” above, we consider that the dilution effects on the shareholdings are inevitable for the issue of the New Vision Century Notes and therefore acceptable, though on its own is not favourable, so far as the Independent Shareholders are concerned after taking into account of the increase in net assets value per Share upon full conversion of the New Vision Century Notes.

RECOMMENDATION

Having considered (i) the above principal factors and reasons; and (ii) the terms of the Option Agreement (including the issue of the New Vision Century Notes and the Option Conversion Shares), we consider that the terms of the Option Agreement are fair and reasonable so far as the Company and the Independent Shareholders are concerned and the entering into of the Option Agreement is in the interests of the Company and the Independent Shareholders as a whole. We advise the Independent Board Committee and the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the special general meeting to approve the Option Agreement.

Yours faithfully, For and on behalf of Taifook Capital Limited

Derek C.O. Chan April Chan Managing Director Executive Director

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 Company. 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 OF DIRECTORS AND CHIEF EXECUTIVE

As at the Latest Practicable Date, the interests and short positions of each Director and chief executive of the Company in the Shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which required notification 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 he was deemed or taken to have under such provisions of the SFO) or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which 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 were as follows:

Nature of Name of Directors interests Mr. Lo Ming Chi, Personal interest Charles Mr. Yu Wai Man Personal interest Mr. Wilson Ng Personal interest Other interest Mr. Ng Wee Keat Personal interest Other interest Mr. Ng Eng Leng Personal interest	Approximate Number of Shares percentage of the Long Short existing issued position position share capital 1,024,000 – 0.20% 1,024,000 – 0.20% 2,024,000 – 0.39% 755,102,986 (Note) – 145.01% 757,126,986 145.40% 1,024,000 – 0.20% 755,102,986 (Note) – 145.01% 756,126,986 145.21% 1,024,000 – 0.20%	Approximate Number of Shares percentage of the Long Short existing issued position position share capital 1,024,000 – 0.20% 1,024,000 – 0.20% 2,024,000 – 0.39% 755,102,986 (Note) – 145.01% 757,126,986 145.40% 1,024,000 – 0.20% 755,102,986 (Note) – 145.01% 756,126,986 145.21% 1,024,000 – 0.20%
		145.40% 0.20% 145.01%
		145.21% 0.20%

Note: Vision Century is ultimately owned by the discretionary trust of which Mr. Wilson Ng and Mr. Ng Wee Keat are discretionary beneficiaries and thus was deemed to be interested in 755,102,986 Shares under the SFO. Details of such 755,102,986 Shares in which Vision Century is interested for the purposes of the SFO are set out in point 3 of this appendix under the heading “Substantial Shareholders”.

GENERAL INFORMATION

APPENDIX

Save as disclosed above, 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 of its associated corporations which required 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 he was deemed or taken to have under such provisions of the SFO) or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein or which 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; and none of the Directors was a director or employee of a company which had an interest or short position in the 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

So far as is known to any Director or chief executive of the Company, and as at the Latest Practicable Date the following persons, other than the Directors or chief executive of the Company as disclosed above, had interests or short positions in the Shares or 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, or who was, 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 and the amount of each such person’s interest in such securities, together with particulars of any options in respect of such capital:

				Approximate
		Number of Shares		percentage of the
	Long		Short	existing issued
Name of substantial Shareholders	position		position	share capital
Vision Century	755,102,986	(Note 1)	–	145.01%
Huang Worldwide Holding Limited	755,102,986	(Note 1)	–	145.01%
(“Huang Worldwide”)
Huang Group	755,102,986	(Notes 1 and 2)	–	145.01%
Mr. Kan Ka Chong, Frederick	755,102,986	(Notes 2 and 3)	–	145.01%
Huang & Co (Singapore) Pte. Ltd.	41,920,941	(Note 4)	–	8.05%
Mr. Ng (Huang) Cheow Leng	797,023,927	(Notes 2, 4 and 5)	–	153.06%
Ms. Pea Baby	41,920,941	(Note 4)	–	8.05%
Ms. Loong Swee Choo	41,920,941	(Note 4)	–	8.05%
New Century International	41,920,941	(Notes 4 and 5)	–	8.05%
Pte. Ltd.

GENERAL INFORMATION

APPENDIX

Notes:

Huang Group is the ultimate holding company of Huang Worldwide and Vision Century. Huang Worldwide is the immediate holding company of Vision Century. Huang Worldwide and Vision Century were deemed to be interested in 755,102,986 Shares representing 277,392,754 Shares held by Vision Century as at the Latest Practicable Date and a maximum of 120,567,375 conversion shares of the Existing Vision Century Note (subject to adjustments) to be issued to Vision Century upon conversion of the Existing Vision Century Note and a maximum of 357,142,857 Option Conversion Shares of the New Vision Century Notes (subject to adjustments) to be issued to Vision Century upon conversion of the New Vision Century Notes.
Huang Group is held by Mr. Kan Ka Chong, Frederick in the capacity of the trustee of the Discretionary Trust, the settlor of which is Mr. Ng (Huang) Cheow Leng.
Mr. Kan Ka Chong, Frederick was deemed to be interested in 755,102,986 Shares under the SFO since he is the trustee of the Discretionary Trust.
Huang & Co (Singapore) Pte. Ltd. is wholly owned by New Century International Pte. Ltd. and New Century International Pte. Ltd. is owned by Mr. Ng (Huang) Cheow Leng, Ms. Pea Baby and Ms. Loong Swee Choo respectively.
In capacity of the settlor of the Discretionary Trust and the shareholding in New Century International Pte. Ltd., Mr. Ng (Huang) Cheow Leng was deemed to be interested in 797,023,927 Shares under the SFO.

Save as disclosed above, so far is known to any Directors or Chief Executive of the Company, as at the Latest Practicable Date no other person had interests or short positions in the Shares or 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, or who was, 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 members of the Group, or in any options in respect of such capital.

4. EXPERT AND CONSENT

The following is the qualification of the expert who has given opinion or advice contained in this circular:

Name Qualification Taifook a licensed corporation under the SFO to carry on type 6 (advising on corporate finance) regulated activity

Taifook has given and has not withdrawn its written consents to the issue of this circular with the inclusion of its letter and opinion as set out in this circular and references to its name in the form and context in which they appear respectively.

As at the Latest Practicable Date, Taifook was not beneficially interested in the share capital of any member of the Group, nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, nor did they have any interest, either direct or indirect, in any assets which had been since 31 March 2006 (being the date to which the latest published audited financial statements of the Company were made up) acquired or disposed of by or leased to or were proposed to be acquired or disposed of by or leased to any member of the Group.

GENERAL INFORMATION

APPENDIX

5. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or 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 pursuant to Rule 8.10 of the Listing Rules.

6. LITIGATION

As at the Latest Practicable Date, no litigation or claim of material importance was known to the Directors to be pending or threatened against any members of the Group.

7. MATERIAL ADVERSE CHANGES

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March 2006, the date to which the latest audited financial statements of the Company were made up.

8. MISCELLANEOUS

(a) None of the Directors has any existing or proposed service contract with any member of the Group which does not expire or is not determinable by the Group within one year without payment of compensation (other than statutory compensation).
(b) As at the Latest Practicable Date, save for (i) a shareholders’ agreement dated 20 February 2004 entered into between Able Market Profits Limited (the “Purchaser”), Huang & Co (Singapore) Pte. Ltd. (the “Vendor”) and Xin Procurement & Trading Pte. Ltd. (“Xin Procurement); (ii) a supply agreement dated 20 February 2004 entered into between the Vendor and Xin Procurement; (iii) a loan facility agreement dated 2 July 2003 (as supplemented on 29 October 2004, 14 July 2006 and 10 July 2007) relating to a credit facility for the amount of HK$50.0 million granted to the Group by Vision Century; and (iv) a subscription agreement dated 15 February 2006 (as supplemented on 17 February 2006) entered into between the Company and Vision Century in relation to the Existing Vision Century Note, there was no contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date in which any Director was materially interested and which was significant in relation to the business of the Group.
(c) None of the Directors has any direct or indirect interest in any assets which had been acquired, disposed of or leased to, or which are proposed to be acquired, disposed of or leased to, the Company or any of its subsidiaries since 31 March 2006 (the date to which the latest published audited financial statements of the Company were made up).
(d) 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.
(e) The registered office of the Company is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

GENERAL INFORMATION

APPENDIX

(f) 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.
(g) The branch share registrar of the Company in Hong Kong is Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(h) The English texts of this circular and the accompanying form of proxy shall prevail over their respective Chinese texts.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours (Saturdays and public holidays excepted) at the head office and principal place of business of the Company in Hong Kong at Room 2107, 21st Floor, Nan Fung Tower, 173 Des Voeux Road Central, Hong Kong from the date of this circular up to and including 3 August 2007:

(a) the memorandum of association and Bye-laws of the Company;
(b) the annual reports of the Company for each of the two years ended 31 March 2005 and 2006 and the interim report of the Company for the six months ended 30 September 2006;
(c) the letter from the Independent Board Committee, the text of which is set out on page 18 of this circular;
(d) the letter from Taifook, the text of which is set out on pages 19 to 35 of this circular;
(e) the written consent referred to in the paragraph headed “Expert and consent” in this appendix;
(f) the Placing Agreement and its supplemental agreement dated 28 June 2007;
(g) the Option Agreement and its supplemental agreement dated 28 June 2007; and
(h) a copy of each circular issued by the Company pursuant to the requirements set out in Chapters 14 and/or 14A of the Listing Rules which has been issued since the date of the latest published audited accounts of the Company.

NOTICE OF SPECIAL GENERAL MEETING

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(Incorporated in Bermuda with limited liability)

(Stock Code: 1141)

NOTICE IS HEREBY GIVEN that a special general meeting of Xin Corporation Limited (the “Company”) will be held at Bauhinia Room 3, 3rd Floor, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong on Monday, 6 August 2007 at 10:00 a.m. for the purpose of considering and, if thought fit, passing the following resolutions, with or without amendments, as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT subject to and conditional upon the resolution numbered 2 in the notice of meeting of the Company dated 19 July 2007 being passed:
(a) the Conditional Call Option Agreement (the “Call Option Agreement”) relating to convertible notes to be issued by the Company dated 20 June 2007 entered into between (1) the Company and (2) Vision Century Group Limited and supplemental agreement dated 28 June 2007, copies of which have been produced to this meeting marked “A” and “B” and signed by the chairman of this meeting for the purpose of identification, be and are hereby approved, confirmed and ratified; and
(b) the convertible notes to be issued by the Company on exercise of the call option and on terms and conditions as set out in the Call Option Agreement, a draft of which has been produced to this meeting marked “C” and signed by the chairman of this meeting for the purpose of identification, and the issue of the shares of the Company upon exercise of the conversion rights attaching to those convertible notes be and are hereby approved.”
“ THAT subject to and conditional upon the resolution numbered 1 in the notice of meeting of the Company dated 19 July 2007 being passed:
(a) the Placing Agreement (the “Placing Agreement”) in respect of an issue of convertible notes to be issued by the Company dated 20 June 2007 entered into between (1) the Company and (2) Interchina Securities Limited and supplemental agreement dated 28 June 2007, copies of which have been produced to this meeting marked “D” and “E” and signed by the chairman of this meeting for the purpose of identification, be and are hereby approved, confirmed and ratified; and
(b) the convertible notes that may be issued by the Company under the Placing Agreement and on terms and conditions as set out in the Placing Agreement, a draft of which has been produced to this meeting marked “F” and signed by the chairman of this meeting

* For identification only

NOTICE OF SPECIAL GENERAL MEETING

for the purpose of identification, and the issue of the shares of the Company upon exercise of the conversion rights attaching to those convertible notes be and are hereby approved.”

By order of the Board Yu Wai Man Company Secretary

Hong Kong, 19 July 2007

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

Notes:

Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member of the Company who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of the Company. In addition, a proxy or proxies representing either a member of the Company who is an individual or a member of the Company which is a corporation is entitled to exercise the same powers on behalf of the member of the Company which he or they represent as such member of the Company could exercise.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same. In the case of an instrument of proxy purporting to be signed on behalf of a corporation by an officer thereof it shall be assumed, unless the contrary appears, that such officer was duly authorised to sign such instrument of proxy on behalf of the corporation without further evidence of the fact.
The instrument appointing a proxy and (if required by the board) the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority, shall be delivered to the principal place of business of the Company in Hong Kong at Room 2107, 21st Floor, Nan Fung Tower, 173 Des Voeux Road Central, Hong Kong not later than forty-eight (48) hours before the time appointed for holding the meeting at which the person named in the instrument proposes to vote and in default the instrument of proxy shall not be treated as valid.
Delivery of an instrument appointing a proxy shall not preclude a member from attending and voting in person at the meeting convened and in such event, the instrument appointing a proxy shall be deemed to be revoked.
Where there are joint holders of any share, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at any meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
The votes of members at the above meeting to approve the ordinary resolutions will be taken on a poll.

AI assistant

PegBio Co., Ltd. — Proxy Solicitation & Information Statement 2007

50676_rns_2007-07-18_9f88c60b-b57c-425d-9908-4e8bf1983a78.pdf

PLACING OF CONVERTIBLE NOTES AND CONNECTED TRANSACTION

Financial adviser to Xin Corporation Limited

Independent financial adviser to Independent Board Committee and Independent Shareholders

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

PLACING OF CONVERTIBLE NOTES AND CONNECTED TRANSACTION

INTRODUCTION

LETTER FROM THE BOARD

THE PLACING AGREEMENT

Date

Parties to the Placing Agreement

Securities to be placed

Placing commission

Conditions of the Placing Agreement

Conditions for each Tranche and completion

LETTER FROM THE BOARD

PRINCIPAL TERMS OF THE CONVERTIBLE NOTES

LETTER FROM THE BOARD

LETTER FROM THE BOARD

THE OPTION AGREEMENT

Date

Parties to the Option Agreement

Call Option

Conditions of the Option Agreement

Conditions for each Tranche and completion

LETTER FROM THE BOARD

PRINCIPAL TERMS OF THE NEW VISION CENTURY NOTES

REASONS FOR THE PLACING AGREEMENT AND THE OPTION AGREEMENT AND USE OF PROCEEDS

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

LETTER FROM THE BOARD

DILUTION EFFECT ON SHAREHOLDERS

LETTER FROM THE BOARD

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

LISTING RULES IMPLICATIONS

SPECIAL GENERAL MEETING

PROCEDURES FOR DEMANDING A POLL

INDEPENDENT BOARD COMMITTEE

INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

GENERAL

CONNECTED TRANSACTION

LETTER FROM TAIFOOK

CONNECTED TRANSACTION

INTRODUCTION

LETTER FROM TAIFOOK

BASIS OF OUR OPINION

LETTER FROM TAIFOOK

PRINCIPAL FACTORS AND REASONS CONSIDERED

Information and background of the Group and reasons for the issue of the New Vision Century Notes

LETTER FROM TAIFOOK

LETTER FROM TAIFOOK

Alternative financing methods

Debt financing from bank borrowings

Other equity financing

LETTER FROM TAIFOOK

Principal terms of the Option Agreement and the New Vision Century Notes

LETTER FROM TAIFOOK

(a) Conversion price

LETTER FROM TAIFOOK

LETTER FROM TAIFOOK

(1) Share price performance

LETTER FROM TAIFOOK

(2) Comparables

LETTER FROM TAIFOOK

LETTER FROM TAIFOOK

(b) Interest rate

(c) Redemption

LETTER FROM TAIFOOK

(d) Maturity, transferability, voting and ranking

(e) Issue in tranches

LETTER FROM TAIFOOK

Possible financial effects

LETTER FROM TAIFOOK

Working capital

PegBio Co., Ltd. Proxy Solicitation & Information Statement 2007