Persistence Gold Group Ltd — Capital/Financing Update 2007

Apr 16, 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 a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your securities in APAC Resources Limited, you should at once hand this circular to the purchaser or transferee, or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

APAC RESOURCES LIMITED

*

(Incorporated in Bermuda with limited liability)

(Stock code: 1104)

DISCLOSEABLE TRANSACTION RELATING TO

SUBSCRIPTION OF 28,000,000 ORDINARY SHARES AND 14,000,000 OPTIONS IN AUSTRALASIAN RESOURCES LTD

* For identification purpose only

12 April 2007

CONTENTS

		Page
Definitions . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
The Conditional Subscription	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Information on ARH . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Information on the Company	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Reasons for and Benefits of the Conditional Subscription . . . . . . . . . . . . . . . . . . . . . . . .		9
Effect of the Conditional Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		11
Listing Rules Implications . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Additional Information . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Appendix — General Information	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12

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DEFINITIONS

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

“A$”	Australian dollars, the lawful currency of Australia
“ARH”	Australasian Resources Limited (A.C.N. 008 942 809), a
	company incorporated under the laws of Australia with
	limited liability, the shares of which are listed on the
	Australian Stock Exchange and having 383,838,092 ordinary
	fully paid shares in issue as at 22 March 2007
“ARH Option(s)”	the options granted by ARH to the Company under the
	Conditional Subscription Agreement
“ARH Share(s)”	the ordinary shares in the issued share capital of ARH
“associates”	having the meaning ascribed to it in the Listing Rules
“Australian Stock Exchange”	The Australian Stock Exchange Limited
“Business Day”	A day on which banks are generally open for business in
	Perth, Western Australia
“Company”	APAC Resources Limited, a company incorporated in
	Bermuda with limited liability, with its securities listed on the
	Stock Exchange
“Completion”	the completion of the Conditional Subscription Agreement
	pursuant to the terms and conditions stipulated thereunder
“Conditional Subscription”	the conditional subscription of 28,000,000 ARH Shares and
	14,000,000 ARH Options by the Company pursuant to the
	terms and conditions of the Conditional Subscription
	Agreement
“Conditional Subscription	the conditional share and option subscription agreement dated
Agreement”	20 March 2007 entered into between the Company and ARH
	relating to the subscription of 28,000,000 ARH Shares and
	14,000,000 ARH Options
“Directors”	the directors of the Company
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the People’s
	Republic of China
“HKAS”	Hong Kong Accounting Standards issued by the HKICPA

— 1 —

DEFINITIONS

“HKICPA”	Hong Kong Institute of Certified Public Accountants
“International Minerals”	International Minerals Pty Limited (A.C.N 058 341 638), a
	company incorporated under the laws of Australia with
	limited liability and a wholly-owned subsidiary of ARH
“Listing Rules”	Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited
“Latest Practicable Date”	10 April 2007, being the latest practicable date prior to
	printing of this circular for the purpose of ascertaining certain
	information contained in the circular
“Mr. Yue”	Mr. Yue Jialin, the chairman and executive director of the
	Company, is the sole shareholder of Profit Harbour and
	therefore deemed to be interested in 1,312,739,562 Shares
	held by it, representing approximately 39.56% of the existing
	issued share capital of the Company as at the Latest
	Practicable Date, pursuant to Divisions 2 and 3 of part XV of
	the SFO
“Previous Circular”	the circular dated 19 March 2007 of the Company in respect
	of, amongst other things, a major transaction and a very
	substantial acquisition and connected transaction for the
	Company relating to the acquisition of shares in Mount
	Gibson Iron Limited
“Profit Harbour”	Profit Harbour Investments Limited, a company incorporated
	in the British Virgin Islands with limited liability and is
	wholly and beneficially owned by Mr. Yue. As at the Latest
	Practicable Date, Profit Harbour was interested in
	1,312,739,562 Shares, representing approximately 39.56% of
	the existing issued share capital of the Company, pursuant to
	Divisions 2 and 3 of Part XV of the SFO
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Shareholders”	shareholders of the Company
“Share(s)”	ordinary share(s) of HK$0.10 each in the issued share capital
	of the Company
“Shougang”	Shougang Holding (Hong Kong) Limited, a private company
	incorporated with limited liability in Hong Kong. As at the
	Latest Practicable Date, Shougang was deemed to be
	interested in 660,000,000 Shares, representing approximately
	19.89% of the existing issued share capital of the Company,
	pursuant to Divisions 2 and 3 of Part XV of the SFO
“Stock Exchange”	The Stock Exchange of Hong Kong Limited

— 2 —

	DEFINITIONS
“US$”	United States dollars, the lawful currency of the United States
	of America
“Warrant(s)”	251,757,032 warrants of the Company listed on the Stock
	Exchange
“%”	per cent.

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LETTER FROM THE BOARD

APAC RESOURCES LIMITED

---

(Incorporated in Bermuda with limited liability)

(Stock code: 1104)

Executive Directors:

Mr. Yue Jialin (Chairman) Mr. Lau Yau Cheung (Chief Executive Officer) Mr. Michael Joseph Bogue

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Independent Non-Executive Directors:

Mr. Wong Wing Kuen, Albert Mr. Tsui Robert Che Kwong Mr. Yang Weiming

Head office and principal place of business in Hong Kong: Rooms 2808-10 28/F., Wing On House 71 Des Voeux Road Central Hong Kong

12 April 2007

To the Shareholders and, for information only, the Warrant holders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION RELATING TO SUBSCRIPTION OF 28,000,000 ORDINARY SHARES AND 14,000,000 OPTIONS IN AUSTRALASIAN RESOURCES LTD

INTRODUCTION

On 22 March 2007, the Directors announced that, on 20 March 2007, the Company and ARH entered into the Conditional Subscription Agreement in respect of (i) the subscription of 28,000,000 ARH Shares at A$1.00 per ARH Share, at an aggregate consideration of A$28,000,000 and (ii) the grant of 14,000,000 ARH Options exercisable over the same number of 14,000,000 ARH Shares at nil consideration at an exercise price of A$1.50 per ARH Share for each ARH Option within a period of three years after the date of Completion. The Completion of the Conditional Subscription Agreement is conditional upon the fulfillment of a condition precedent.

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LETTER FROM THE BOARD

Under Chapter 14 of the Listing Rules, the Conditional Subscription constitutes a discloseable transaction for the Company under the Listing Rules on the basis that the calculation of the consideration ratio for the Company is within the range of 5% and 25%. The taking of the 14,000,000 ARH Options does not constitute a transaction for the Company under the Listing Rules, and is therefore not subject to the requirements thereunder. The Company will comply with the relevant requirements of the Listing Rules upon the exercise, transfer or expiry of the ARH Options.

The purpose of this circular is to provide the Shareholders with further information in relation to the Conditional Subscription and other information in accordance with the requirements of the Listing Rules.

THE CONDITIONAL SUBSCRIPTION

On 20 March 2007, the Company and ARH entered into the Conditional Subscription Agreement in respect of (i) the subscription of 28,000,000 ARH Shares at A$1.00 per ARH Share, at an aggregate consideration of A$28,000,000 and (ii) the grant of 14,000,000 ARH Options exercisable over the same number of 14,000,000 ARH Shares at nil consideration at an exercise price of A$1.50 per ARH Share for each ARH Option within a period of three years after the date of Completion. The Completion of the Conditional Subscription Agreement is conditional upon the fulfillment of a condition precedent.

Date

20 March 2007.

Parties

• (1) Australasian Resources Limited.

• (2) The Company as subscriber.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, ARH and its ultimate owners are independent third parties not connected with the Company, any of its subsidiaries or any of their respective associates, or any of the connected persons of the Company, any of its subsidiaries or any of their respective associates.

The 28,000,000 ARH Shares to be subscribed

Pursuant to the Conditional Subscription Agreement, the Company or its wholly-owned subsidiary as nominee shall subscribe and ARH shall allot and issue 28,000,000 ARH Shares at A$1.00 per ARH Share, at an aggregate consideration of A$28,000,000 (equivalent to approximately HK$174,846,000 at an exchange rate of approximately A$1.00 to HK$6.2445), representing approximately 7.29% interest in the existing issued share capital of ARH as at 22 March 2007 and

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LETTER FROM THE BOARD

approximately 6.80% interest in the issued share capital of ARH as enlarged by the issuance of the 28,000,000 ARH Shares but before the issuance of any ARH Shares which fall to be issued upon exercise of any ARH Options. Upon the Completion, the Company has the right to nominate and appoint a director of ARH.

The 14,000,000 ARH Options to be subscribed

Pursuant to the Conditional Subscription Agreement, ARH shall grant 14,000,000 ARH Options to the Company at nil consideration exercisable over the same number of 14,000,000 ARH Shares, representing approximately 3.65% interest in the existing issued share capital of ARH as at 22 March 2007 when all the 14,000,000 ARH Options are exercised in full for the 14,000,000 ARH Shares and approximately 3.29% interest in the issued share capital of ARH as enlarged by the issuance of the 28,000,000 ARH Shares and 14,000,000 ARH Shares which fall to be issued when all the ARH Options are exercised in full.

Entitlement

Each ARH Option entitles the Company to subscribe for one fully paid ARH Share.

Issue Price

No amount is payable on each ARH Option.

Exercise Price

The exercise price of each ARH Option is A$1.50 per ARH Share.

ARH Option Period

The 14,000,000 ARH Options are exercisable (in whole or in part by multiples of 500 ARH Options) at any time at the discretion of the Company within three years after the date of the issue of the ARH Options, i.e. the date of Completion, failing which, the outstanding ARH Options over the ARH Shares will lapse.

Transferability of the ARH Option

The ARH Option may be transferred by an instrument of transfer acceptable to ARH to a related body corporate of the Company but otherwise may not be sold, assigned, transferred or otherwise dealt with in any way.

Consideration

The aggregate consideration payable by the Company for the Conditional Subscription of 28,000,000 ARH Shares shall be A$28,000,000 (equivalent to approximately HK$174,846,000 at an exchange rate of approximately A$1.00 to HK$6.2445), i.e. A$1.00 per ARH Share.

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LETTER FROM THE BOARD

The Company has paid the consideration in cash to a deposit account held by ARH. Pending the Completion, ARH shall hold the consideration as stakeholder. If the Conditional Acquisition Agreement is terminated for any reason and the Completion does not occur, the consideration together with interest accrued shall be refunded to the Company.

The consideration is arrived at after arm’s length negotiation between the Company and ARH and with reference to the price of ARH Shares (i.e. A$0.115 per ARH Share) on the last trading day (i.e. 14 December 2006) traded on the Australian Stock Exchange and the theoretical price of ARH Shares at A$1.15 per ARH Share as a result of every ten ARH Shares for one ARH Share consolidation having taken effect on 19 December 2006.

The consideration of the 28,000,000 ARH Shares at A$1.00 per ARH Share represents:

• (i) a discount of approximately 4.40% to the average closing price of the ARH Share (i.e. A$1.046 per ARH Share after share consolidation adjustment) quoted on the Australian Stock Exchange on the last 5 full trading days up to and including 14 December 2006; and

• (ii) a discount of approximately 13.04% to the closing price of the ARH Share (i.e. A$1.15 per ARH Share after share consolidation adjustment) quoted on the Australian Stock Exchange on 14 December 2006.

The exercise price for each of the 14,000,000 ARH Options at A$1.50 per ARH Share represents:

• (i) a premium of approximately 43.40% over the average closing price of the ARH Share (i.e. A$1.046 per ARH Share after share consolidation adjustment) quoted on the Australian Stock Exchange on the last 5 full trading days up to and including 14 December 2006; and

• (ii) a premium of approximately 30.43% over the closing price of the ARH Share (i.e. A$1.15 per ARH Share after share consolidation adjustment) quoted on the Australian Stock Exchange on 14 December 2006.

Condition precedent

Completion of the Conditional Subscription Agreement is conditional upon the satisfaction of the Australian Stock Exchange notifying ARH in writing that the ARH Shares will be re-instated to official quotation on the Australian Stock Exchange subject only to the Completion occurring.

Completion

Subject to the satisfaction of the condition precedent as aforesaid, the Completion shall take place on the 5th Business Day before the ARH Shares are reinstated to official quotation on the Australian Stock Exchange. On the Completion, ARH shall allot and issue the 28,000,000 ARH Shares and grant the 14,000,000 ARH Options to the Company.

According to the Conditional Subscription Agreement, if the above condition is not satisfied or waived by the Company on or before 30 June 2007 (or such later date as may be agreed between the parties in writing), all rights and obligations under the Conditional Subscription Agreement shall be terminated. The Company will not waive the above condition.

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LETTER FROM THE BOARD

After the Completion, the Company shall hold:

• (i) 28,000,000 ARH Shares representing approximately 6.80% interest in the issued share capital of ARH as enlarged by the issuance of the 28,000,000 ARH Shares but before the issuance of any ARH Shares which fall to be issued upon exercise of any ARH Options; and

• (ii) 14,000,000 ARH Options, representing approximately 3.29% interest in the issued share capital of ARH as enlarged by the issuance of the 28,000,000 ARH Shares and 14,000,000 ARH Shares which fall to be issued when all the 14,000,000 ARH Options are exercised in full.

After the Completion where the Company has subscribed for the 28,000,000 ARH Shares and assuming the Company exercises in full all the 14,000,000 ARH Options for 14,000,000 ARH Shares, the Company shall hold approximately 9.86% interest in the issued share capital of ARH as enlarged by the issuance of the 28,000,000 ARH Shares and 14,000,000 ARH Shares which fall to be issued when all the 14,000,000 ARH Options are exercised in full.

All the ARH Shares shall be held by the Group for strategic investment purpose and will be classified in the accounts as Available for Sale Financial Assets as defined under HKAS39 issued by the HKICPA.

Source of funding

The payment of the consideration for the Conditional Subscription was financed by short-term borrowings from a stock-broking firm in Hong Kong.

INFORMATION ON ARH

ARH is a company incorporated in Australia with limited liability whose shares are listed on the Australian Stock Exchange since 7 June 1984.

The principal activity of ARH is mineral exploration. According to the directors’ report of ARH as contained in its annual report 2006, ARH pursued major energy and iron ore projects which have the potential to capitalise on opportunities from the developing economies of China, India and other emerging Asian nations. With reference to the information posted on the website of ARH, the recent development of ARH includes (i) the Balmoral South Iron Ore Project in respect of acquiring the right to mine 1,000,000,000 (1 billion) tonnes of magnetite ore from part of the Balmoral South Project, situated in the Pilbara region of Western Australia; and (ii) the Sherlock Bay Nickel Project, situated in the West Pilbara region of Western Australia, in respect of exploiting the nickel sulphide deposit contained in that project area.

On 14 December 2006, ARH requested and the Australian Stock Exchange granted a trading halt and on 15 December 2006, ARH Shares were suspended from quotation. ARH requested the trading halt pending the outcome of the ARH annual general meeting (the “Meeting”) which was held on 15 December 2006. The Meeting was convened to consider the resolutions and explanatory materials contained in the respective notice of the Meeting (the “Notice”). The shareholders of ARH resolved

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LETTER FROM THE BOARD

in the Meeting, amongst other things, the acquisition of International Minerals. The Notice explained that the acquisition of International Minerals would result in a change in the nature and scale of activities of ARH and that ARH was exploring several funding alternatives in this regard. To be re-quoted (i.e. resume trading on the Australian Stock Exchange), ARH needs to demonstrate that it has the capital to fund the change in the nature and scale of its activities. The Company’s investments by the Conditional Subscription contribute towards the funding of ARH.

The trading of the ARH Shares on the Australian Stock Exchange has been suspended since 14 December 2006. The price of each ARH Share on the last trading day (i.e. 14 December 2006) traded on the Australian Stock Exchange was A$0.115 per ARH Share. After a share consolidation of ARH for every ten ARH Shares for one ARH Share being taken place on 19 December 2006, the theoretical price of each ARH Share was A$1.15 per ARH Share.

The audited financial information of ARH for the two years ended 30 June 2006 and 2005 are as follows:

		Year ended	Year ended
		30 June 2006	30 June 2005
		Audited	Audited
		A$	A$
Net	assets value	18,266,665	3,074,479
Net	loss before taxation and minority interest	(11,598,978)	(4,431,521)
Net	loss after taxation and minority interest	(11,598,978)	(4,431,521)

The Company confirmed that no dividends had been paid or declared and no recommendation had been made as to dividends for the past two years for ARH.

INFORMATION ON THE COMPANY

The Company is incorporated as an exempted company with limited liability in Bermuda under the Companies Act 1981 of Bermuda (as amended). Its securities are listed on the Stock Exchange.

The Group is principally engaged in (i) trading in base metals and commodities trading portfolio primarily focused on natural resources and related sectors; and (ii) trading in fabric products and other merchandises, investment in the resources and related industries, and listed securities as trading portfolio.

REASONS FOR AND BENEFITS OF THE CONDITIONAL SUBSCRIPTION

The Company sought (as disclosed in the Previous Circular) and will continue to seek to become a significant natural resources trading and investment company through the identification, evaluation and acquisition of strategic interests in quality natural resources assets (either indirectly through investment in, and support of, resource corporations or by direct investment in mineral projects) as a means to build an extensive portfolio of long term cash generating investments so as to enhance the

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LETTER FROM THE BOARD

Company’s value in the context of natural resources industry consolidation and rationalization where it believes value can be maximized for all concerned stakeholders. The Company has still been (as disclosed in the Previous Circular) on the lookout for good investment opportunities to maximize return for the Shareholders. It has always been the intention of the Company to seek to lock in the supply of iron ore materials and to trade in such materials for higher profit.

The Conditional Subscription is consistent with the Company’s strategy of exploring geographic regions and commodity markets which it believes present attractive opportunities and where rationalization and consolidation is likely to occur. The Conditional Subscription is anticipated to produce higher return on asset with increase in profit and value of the Company to the benefit of the Shareholders as a whole.

In view of current market conditions, the Directors consider that the Conditional Subscription represents a good opportunity for the Company to further increase its investment in the Australian resources sector upon which to build a significant investment and commodities trading company primarily focused on the natural resources and related sectors.

The Company, International Minerals and ARH have entered into a commission agreement on 20 March 2007 which set out the intention of the parties for the Company to procure the relevant buyer(s) the signing of certain offtake agreements for the sale of iron ore products (including iron ore concentrate, iron ore pellets and hot briquetted iron) produced by International Minerals in return for a commission of US$1.00 per dry tonne of iron ore products to the Company.

The Company has been advised by ARH of its right to mine 1 billion tonnes of magnetite iron ore from Susan Palmer deposit within the larger Balmoral deposits in Pilbara region of Western Australia. ARH has announced a 346 million tonnes ore reserve estimate in accordance with JORC guidelines. The actual output remains uncertain at the moment, but the current proposed development plan of ARH involves the production and export as final products of 5 million tonnes of iron ore concentrate, 5 million tonnes of iron ore pellets and approximately 1.5 million tonnes of hot briquetted iron. The implementation of the detailed arrangements under the commission agreement depends therefore on the development plan of ARH, which may or may not materialise. In the event such development plan of ARH materialises, the Company may receive commission only on the basis that it successfully procures the relevant buyer(s) the signing of the relevant offtake agreement(s).

The commission agreement is consistent with the Company’s strategy of exploring geographic regions and commodity markets, and the procurement of signing the offtake agreements, if successfully implemented, will enable the Company to generate income and cash flow from the Company’s investment and trading activities in the resources sector in the near future.

Having regard to the nature of and the benefits resulting from the Conditional Subscription and the commission agreement, the Directors believe that the Conditional Subscription is fair and reasonable and in the interests of the Shareholders taken as a whole.

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LETTER FROM THE BOARD

EFFECT OF THE CONDITIONAL SUBSCRIPTION

After the Completion of the Conditional Subscription, there will be a positive impact with an increase on the non-current asset value and a negative impact with an increase on the current liabilities of the Group but there will be no overall effect on the net asset value. It is not expected to have any immediate material effect on the Group’s earnings until there is receipt of future dividends or distributions from ARH in respect of the Company’s investment.

LISTING RULES IMPLICATIONS

The Conditional Subscription constitutes a discloseable transaction for the Company under the Listing Rules on the basis that the calculation of the consideration ratio for the Company is within the range of 5% and 25%. The taking of the 14,000,000 ARH Options does not constitute a transaction for the Company under the Listing Rules, and is therefore not subject to the requirements thereunder. The Company will comply with the relevant requirements of the Listing Rules upon the exercise, transfer or expiry of the ARH Options.

ADDITIONAL INFORMATION

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

Yours faithfully, By Order of the Board APAC RESOURCES LIMITED Yue Jialin

Chairman

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group.

The Directors collectively and individually accept the responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their information, knowledge and belief, there are no other facts not contained in this circular, the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS BY DIRECTORS AND CHIEF EXECUTIVES

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executives 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 (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (iii) were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by the Directors of Listed Issuers contained in the Listing Rules, were as follows:

(a) Long position in Shares

		Number of	Approximate
Name of Director	Capacity and nature	ordinary shares	% holding
Mr. Yue	Interest of controlled corporation	1,312,739,562	39.56%
	(Note 1)	(Note 2)	(Note 3)

Notes:

1. These Shares are registered/will be registered (as the case may be) in the name of and beneficially owned by Profit Harbour.

2. This represented an interest in 1,193,399,602 Shares and an interest in 119,339,960 units of Warrants giving rise to an interest in 119,339,960 underlying Shares. The Warrants will entitle the holders to subscribe at any time during the period from 5 February 2007 to 4 February 2010 (both days inclusive) for fully paid Shares at an initial subscription price of HK$0.30 per share (subject to adjustments).

3. The percentage of shareholding is calculated on the basis of the Company’s issued share capital of 3,318,042,968 Shares as at the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the Shares, underlying shares or debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO) which (i) were required to be notified 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 they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (iii) were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules.

Save as disclosed above, none of the Directors or proposed directors of the Company (if any) had any interest or short position in Shares or underlying Shares of the Company which would fall to be disclosed pursuant to the provision of Divisions 2 and 3 of Part XV of the SFO.

(b) Interests in competing businesses

As at the Latest Practicable Date, none of the Directors nor their respective associates had any business which competes or is likely to compete, either directly or indirectly, with any businesses of the Group.

(c) Interests in assets

As at the Latest Practicable Date, save for the Deed of Assignment in respect of a debt which Mr. Yue Jialin (being the chairman and an executive director of the Company) was indirectly interested in as a result of his shareholding in Profit Harbour, none of the Directors had any direct or indirect interests in any assets which had been acquired or disposed of by, or leased to, or which were proposed to be acquired or disposed of by or leased to any members of the Group since 31 December 2005, being the date to which the latest published audited consolidated financial statements of the Company were made up.

(d) Interests in contracts

None of the Directors was materially interested in any contracts or arrangements entered into by any members of the Group and subsisting as at the Latest Practicable Date which were significant in relation to the business of the Group.

(e) Remuneration of the Directors

There will be no variation in relation to the remuneration payable to and benefits in kind receivable by the Directors in consequence of the Conditional Subscription.

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GENERAL INFORMATION

APPENDIX

3. DISCLOSURE OF INTERESTS BY SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as is known to the Directors and chief executive of the Company, the following persons (not being Directors or chief executives of the Company) had, or were deemed to have, interests or short positions in the Shares and underlying shares of the Company which would fall to be disclosed to the Company or the Stock Exchange under the provisions of Divisions 2 and 3 of part XV of the SFO or who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or had an option in respect of such capital:

Long position in Shares and underlying Shares

		Number of
		Shares and
		Underlying	Approximate
Name of Shareholders	Capacity and nature	Shares	% holding
			(Note 2)	Notes
Profit Harbour	Beneficial owner	1,312,739,562	39.56%	1,3
Benefit Rich Limited	Corporate Interests	660,000,000	19.89%	4
(“Benefit”)	(interest of controlled
	corporation)
Shougang	Beneficial owner	660,000,000	19.89%	5
Chong Sok Un	Beneficial owner	477,100,000	14.38%	6

Notes:

1. The entire issued share capital of Profit Harbour is owned by Mr. Yue.

2. The percentage of shareholding is calculated on the basis of the Company’s issued share capital of 3,318,042,968 Shares as at the Latest Practicable Date (before any exercise of the Warrants by the respective holders).

3. This represented an interest in 1,193,399,602 Shares and an interest in 119,339,960 units of Warrants giving rise to an interest in 119,339,960 underlying Shares. The Warrants entitle the holders to subscribe at any time during the period from 5 February 2007 to 4 February 2010 (both days inclusive) for fully paid Shares at an initial subscription price of HK$0.30 per share (subject to adjustments).

4. Benefit is interested in 660,000,000 Shares and is a wholly-owned subsidiary of Shougang as at the Latest Practicable Date. This represented an interest in 600,000,000 Shares and an interest in 60,000,000 units of Warrants giving rise to an interest in 60,000,000 underlying Shares. The Warrants entitle the holders to subscribe at any time during the period from 5 February 2007 to 4 February 2010 (both days inclusive) for fully paid Shares at an initial subscription price of HK$0.30 per share (subject to adjustments).

5. Benefit is a wholly-owned subsidiary of Shougang as at the Latest Practicable Date. As a result, Shougang is deemed to have the same long position as Benefit under the SFO for 660,000,000 Shares.

6. This represented an interest in 472,100,000 Shares and an interest in 5,000,000 units of warrants giving rise to an interest in 5,000,000 underlying Shares held by various holding companies, directly or indirectly owned by Chong Sok Un and her associate(s) as at the Latest Practicable Date. The Warrants entitle the holders to subscribe at any time during the period from 5 February 2007 to 4 February 2010 (both days inclusive) for fully paid Shares at an initial subscription price of HK$0.30 per share (subject to adjustments).

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GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, the Directors and chief executive of the Company were not aware of any other persons (other than Directors or chief executives of the Company) had, or were deemed to have, interests or short positions in the Shares and underlying shares (including any interests in options in respect of such capital), which would fall to be disclosed to the Company and the Stock Exchange 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 or had any option in respect of such capital.

4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any members of the Group excluding contracts expiring or determinable by the employer within one year without payment of compensations other than statutory compensation.

5. MATERIAL LITIGATIONS

As at the Latest Practicable Date, so far as the Directors are aware, the following are the only litigations or claims of material importance which have been pending or threatened against any members of the Group:

Reference is made to the disclosure of litigation and contingent liabilities in the annual reports 2004 and 2005 of the Company.

• a) After taking legal advice, the receivers of the Company, Mr. Alan Chung Wah Tang and Ms. Alison Wong Lee Fung Ying, both from Grant Thornton, Certified Public Accountants (the “Receivers”), commenced legal proceedings on 2 July 2003 against Great Center Limited (“Great Center”) for the repayment of two sums totaling US$4.5 million (or approximately HK$35.1 million), remitted on or about 21 May 2003 with no apparent justification, from the bank of Merchants (Hong Kong) Limited, to a bank account maintained in the name of Great Center, and interest thereon, damages and costs of the legal proceedings (the “Great Center Action”).

• b) The writ of summons issued on 2 July 2003 in relation to the claim against Great Center for the repayment of US$4.5 million was amended on 10 July 2004 (the “Amended Writ”) to include the claims for (i) the repayment of HK$12.8 million remitted from a bank account of the Company to a bank account in the name of Great Center on or about 17 April 2003; and (ii) the repayment of HK$22.0 million remitted from a bank account of the Company to a bank account in the name of Modern Shine Enterprises Limited (“Modern Shine”), a company incorporated in the British Virgin Islands, on or about 22 April 2003, interest thereon, damages and costs of legal proceedings. The sum of claims under the Amended Writ amounts to approximately HK$69.9 million. At last, the court entered judgment against Modern Shine on 7 November 2005 for the sum of HK$22,000,000 plus interest and damages for conversion and interest thereon. Regarding the claim against Great Center, the Company has reached an amicable settlement with Great Center’s liquidators. The settlement was approved by the court on 6 November 2006. The Company received the

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GENERAL INFORMATION

APPENDIX

• settlement sum of US$2,637,000 plus interest in the sum of US$114,210.30 from Great Center’s liquidators on 20 November 2006. The Company has not obtained the judgment sum of HK$22,000,000. Since Modern Shine is a company incorporated in the British Virgin Islands, it makes the enforcement extremely costly. Further, the Company has no information on the financial status and asset position of Modern Shine. As advised by the legal advisers to the Company, the viable course of action includes the petitioning for winding up of Modern Shine, which is also a very costly process.

• c) On 23 August 2003, the Receivers commenced legal proceedings against Win Victory Holdings Limited (“Win Victory”), a company incorporated in Hong Kong, for the repayment of a sum of HK$37.0 million, together with interest thereon, damages and costs of the legal proceedings. Further, the Receivers, on behalf of the Company, petitioned for the winding-up of Win Victory on the grounds, inter alia, that Win Victory is unable to pay its debts and provisional liquidators were appointed. Due to the lack of funds in Win Victory, the provisional liquidators have not undertaken an extensive investigation and have recently made an application to the court for the discharge of their appointment and their application is fixed to be heard on 20 April 2006. The continuation of the winding-up petition was to enable a more thorough investigation of the flow of funds in and out of Win Victory. In view of the application by the provisional liquidators, the official receiver made an application to restore the winding-up petition, which has been adjourned to 24 April 2006 for hearing. The court had on the hearing of 24 April 2006 ordered that Win Victory be wound-up on the petition of the Company. The Company is making arrangement to prove its debts and to recover its costs of the winding up proceedings in the liquidation of Win Victory.

The Directors are of the opinion that the above litigations or claims would have no material impact on the operations of the Group.

As at the Latest Practicable Date and save for those disclosed above, no member of the Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against any members of the Group.

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GENERAL INFORMATION

APPENDIX

6. CORPORATE INFORMATION

Registered office

Registered office Clarendon House 2 Church Street Hamilton HM11 Bermuda Head office and principal place of Rooms 2808-10 business 28th Floor, Wing On House 71 Des Voeux Road Central Hong Kong Hong Kong branch share registrar Secretaries Limited and transfer office 26th Floor, Tesbury Centre 28 Queen’s Road East Wanchai, Hong Kong

7. GENERAL

• (a) The company secretary and the qualified accountant of the Company appointed pursuant to Rule 3.24 of the Listing Rules is Mr. To Yung Kan. Mr. To is a qualified accountant and member of the Hong Kong Institute of Certified Public Accountants.

• (b) The English text of this circular shall prevail over the Chinese text thereof.

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