Persistence Gold Group Ltd — Proxy Solicitation & Information Statement 2002

Feb 22, 2002

THIS DOCUMENT 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 stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Ying Wing Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

This circular is addressed to the shareholders of Ying Wing Holdings Limited for the purposes of providing information in connection with the Disposal Agreement and the SGM. It does not constitute an invitation or offer to acquire, purchase or subscribe for shares of Ying Wing Holdings Limited.

The Stock Exchange of Hong Kong Limited and the Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim 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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YING WING HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF THE ENTIRE INTEREST IN THE SNACK FOOD BUSINESS COMPANIES AND SPECIAL DEAL UNDER RULE 25 OF THE TAKEOVERS CODE

Joint financial advisers to Ying Wing Holdings Limited

KIM ENG C A P I T A L

Boomwell Investments Limited

Kim Eng Capital (Hong Kong) Limited

Joint independent financial advisers to the Independent Board Committee

AMS Corporate Finance Limited Hantec Capital Limited

A letter from the Board is set out on pages 5 to 15 and a letter from the Independent Board Committee is set out on page 16 of this circular. A letter from AMS Corporate Finance Limited and Hantec Capital Limited containing their advice and recommendation to the Independent Board Committee is set out on pages 17 to 28 of this circular.

A notice convening a special general meeting of Ying Wing Holdings Limited to be held at Shanghai Room II, 3rd Floor, South Pacific Hotel, 23 Morrison Hill Road, Wanchai, Hong Kong at 10:30 a.m. on 11th March, 2002 is set out on pages 48 and 49 of this circular. A form of proxy for use at the meeting is enclosed. Whether or not you intend to attend the meeting, you are requested to complete the accompanying form of proxy and return it in accordance with the instructions printed thereon as soon as possible to Ying Wing Holdings Limited’s branch share registrar in Hong Kong, Secretaries Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong and in any event not less than 48 hours before the time appointed for the holding of the meeting or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjourned meeting should you so wish.

22nd February, 2002

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Letter of advice from AMS and Hantec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Appendix I – Unaudited financial statements of the Group
for the 11 months ended 30th November, 2001 . . . . . . . . . . . . . . .	29
Appendix II – Property valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
Appendix III – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	44
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	48

– i –

DEFINITIONS

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

“AMS” AMS Corporate Finance Limited, an investment adviser registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong) and one of the joint independent financial advisers to the Independent Board Committee

“Angel Field”	Angel Field Limited, a company incorporated in the BVI
	with limited liability on 16th August, 2001, which is
	wholly and beneficially owned by Mr. Chau Ching Ngai
“Announcement”	the joint announcement dated 25th January, 2002 made
	by the Company and Angel Field in respect of, amongst
	other things, the Offer and the Disposal
“associate(s)”	having the same meaning as defined in the Listing Rules
“Board”	the board of Directors
“Boomwell”	Boomwell Investments Limited, an investment adviser
	registered under the Securities Ordinance (Chapter 333
	of the Laws of Hong Kong) and one of the joint financial
	advisers to the Company
“Business Day”	a day (other than a Saturday) on which banks are open
	for business in Hong Kong
“BVI”	British Virgin Islands
“Company”	Ying Wing Holdings Limited, a company incorporated in
	Bermuda with limited liability, the shares of which are
	listed on the Stock Exchange
“Director(s)”	the director(s) of the Company
“Disposal”	the disposal of the Snack Food Business Companies by
	Park Well to Feng Lin pursuant to the Disposal Agreement
“Disposal Agreement”	the disposal agreement dated 22nd January, 2002 entered
	into between Feng Lin and Park Well relating to the
	disposal by Park Well of its entire interest in the Snack
	Food Business Companies to Feng Lin

– 1 –

DEFINITIONS

“Executive”	the Executive Director of the Corporate Finance Division
	of the SFC or any delegate of the Executive Director
“Fabric Group”	the Group excluding the Snack Food Business Companies
“Feng Lin”	Feng Lin Holdings Ltd., a company incorporated in the
	BVI with limited liability and which holds the Sale
	Shares, the entire issued share capital of which is
	beneficially owned as to 80%, 5%, 5%, 5% and 5%
	respectively by Mr. Tsoi Hon Chung (the Company’s
	chairman), Mr. Tsoi Chun Bun (a Director), Mr. Tsoi
	Chun Hung (a Director), Ms. Lin Feng Qing (the spouse
	of Mr. Tsoi Hon Chung) and Mr. Tsoi Chun Yau
“Group”	the Company and its subsidiaries
“Hantec”	Hantec Capital Limited, an investment adviser and a
	dealer registered under the Securities Ordinance (Chapter
	333 of the Laws of Hong Kong) and one of the joint
	independent financial advisers to the Independent Board
	Committee
“Hong Kong”	The Hong Kong Special Administrative Region of the
	PRC
“Independent Board Committee”	the independent board committee of the Company
	comprising Messrs. Wong Wing Hon, Clint and Wong
	Yiu Kwong, Eric, independent non-executive Directors,
	duly appointed by the Board for the purpose of advising
	the Independent Shareholders in respect of the Disposal
“Independent Shareholders”	Shareholders who are not involved in, or interested in,
	the Sale and Purchase Agreement and the Disposal
	Agreement, being Shareholders other than Feng Lin and
	its associates and parties acting in concert with any of
	them
“Kim Eng”	Kim Eng Capital (Hong Kong) Limited, an investment
	adviser registered under the Securities Ordinance (Chapter
	333 of the Laws of Hong Kong) and one of the joint
	financial advisers to the Company

– 2 –

DEFINITIONS

“Kingsway Securities”	Kingsway SW Securities Limited, a dealer registered
	under the Securities Ordinance (Chapter 333 of the Laws
	of Hong Kong)
“Latest Practicable Date”	20th February, 2002, being the latest practicable date
	prior to the printing of this circular for ascertaining
	certain information referred to in this circular
“Listing Rules”	The Rules Governing the Listing of Securities on the
	Stock Exchange
“Offer”	the possible unconditional cash offer to be made by
	Kingsway Securities, on behalf of Angel Field, to acquire
	all the issued Shares not already agreed to be acquired by
	Angel Field or parties acting in concert with it
“Offer Share(s)”	all the issued Share(s) (other than the Sale Shares)
“Park Well”	Park Well International Group Ltd, a company
	incorporated in the BVI with limited liability, a wholly-
	owned subsidiary of the Company and the holding
	company of the Snack Food Business Companies
“PRC”	the People’s Republic of China and for the purpose of
	this circular, excluding Hong Kong, Macau Special
	Administrative Region of the People’s Republic of China
“Sale and Purchase Agreement”	the sale and purchase agreement dated 22nd January,
	2002 entered into between, among others, Feng Lin and
	Angel Field, relating to the sale and purchase of the Sale
	Shares
“Sale Shares”	a total of 148,000,000 Shares, representing 74.00% of
	the existing issued share capital of the Company, to be
	sold to Angel Field pursuant to the Sale and Purchase
	Agreement
“SDI Ordinance”	Securities (Disclosure of Interests) Ordinance (Chapter
	396 of the Laws of Hong Kong)
“SFC”	the Securities and Futures Commission of Hong Kong

– 3 –

DEFINITIONS

“SGM”	a special general meeting of the Company to be convened
	at Shanghai Room II, 3rd Floor, South Pacific Hotel, 23
	Morrison Hill Road, Wanchai, Hong Kong on 11th
	March, 2002 at 10:30 a.m., notice of which is set out on
	pages 48 and 49 of this circular, to consider the Disposal
	Agreement
“Share(s)”	share(s) of HK$0.10 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of Share(s)
“Snack Food Business Companies”	Cai Yi Feng Trading Limited, Hanover VCL Trading
	Limited, Transfit Garments Limited, Vastco (H.K.)
	Limited, VCL Business Development (USA) Inc. and
	Vastco (Shantou F.T.Z.) Industrial Limited, all of which
	are indirect subsidiaries of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Takeovers Code”	the Hong Kong Code on Takeovers and Mergers
“HK$” or “cents”	Hong Kong dollars or cents respectively, the lawful
	currency of Hong Kong
“%”	per cent.

– 4 –

LETTER FROM THE BOARD

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YING WING HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

Directors: Tsoi Hon Chung Cai Han Peng Tsoi Chun Bun Tsoi Chun Hung Cheung Chun Ying Wong Wing Hon, Clint Wong Yiu Kwong, Eric

* Independent non-executive Director

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Head Office and Principal place of business in Hong Kong: Room 3101 31st Floor Top Glory Tower 262 Gloucester Road Causeway Bay Hong Kong

22nd February, 2002

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF THE ENTIRE INTEREST IN THE SNACK FOOD BUSINESS COMPANIES AND

SPECIAL DEAL UNDER RULE 25 OF THE TAKEOVERS CODE

INTRODUCTION

On 25th January, 2002, the Company and Angel Field jointly announced that:

1. the Disposal Agreement was entered into between Park Well and Feng Lin on 22nd January, 2002 whereby Feng Lin has conditionally agreed to purchase and Park Well has conditionally agreed to sell its entire interest in the Snack Food Business Companies for a consideration of HK$24,600,000;

– 5 –

LETTER FROM THE BOARD

1. the Sale and Purchase Agreement was entered into between, amongst others, Angel Field and Feng Lin on 22nd January, 2002, pursuant to which Angel Field will purchase the Sale Shares, represent 74.00% of the issued share capital of the Company, from Feng Lin at a consideration of HK$61,800,000, equivalent to approximately HK$0.418 per Sale Share; and

2. the Offer will be made by Kingsway Securities on behalf of Angel Field for all the Shares not already agreed to be acquired by Angel Field or parties acting in concert with it upon completion of the Sale and Purchase Agreement.

The completion of the Sale and Purchase Agreement is conditional upon, among other things, the completion of the Disposal Agreement, and vice versa. The completion of the Disposal Agreement is also conditional upon the approval of the Independent Shareholders at the SGM voting by way of a poll and the consent from the Executive to the Disposal as the Disposal constitutes a discloseable and connected transaction for the Company under the Listing Rules and a special deal under Rule 25 of the Takeovers Code.

The Independent Board Committee comprising of Messrs. Wong Wing Hon, Clint and Wong Yiu Kwong, Eric, being all the independent non-executive Directors, has been established for the purpose of advising the Independent Shareholders on the terms of the Disposal. Messrs. Tsoi Hon Chung, Tsoi Chun Bun and Tsoi Chun Hung, are executive Directors and are also the ultimate beneficial owners of Feng Lin, the existing controlling shareholder of the Company and the purchaser of the Snack Food Business Companies. Mr. Cai Han Peng, the brother of Mr. Tsoi Hon Chung, and Mr. Cheung Chun Ying, both of whom are salaried employees of the Company and executive Directors, are nominated to the Board by Feng Lin and their decisions in the Board may be influenced by Feng Lin. As such, they are presumed to have indirect interest in the Disposal. In view of the respective interests of the said Directors in the proposed Disposal and/or the Company, none of them is considered to be independent for the purpose of giving recommendations to the Independent Shareholders regarding the Disposal. AMS and Hantec have been appointed to advise the Independent Board Committee as to whether the terms of the Disposal are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Independent Shareholders as a whole.

The purpose of this circular is to give you further information on the Disposal Agreement, to set out the recommendation made by the Independent Board Committee, to set out the letter of advice from AMS and Hantec to the Independent Board Committee, and to give notice of the SGM to consider and, if thought fit, to approve the Disposal.

In respect of the Offer, an offer document setting out, among other things, the terms of the Offer together with the acceptance and transfer form should be despatched to the Shareholders within 21 days from the date of the Announcement in accordance with Rule 8.2 of the

– 6 –

LETTER FROM THE BOARD

Takeovers Code. However, with the Executive’s consent under such rule, the posting of the offer document has been extended to within seven days of the fulfillment of the conditions precedent, i.e. expected to be on or before 22nd March, 2002. In addition, under Rule 8.4 of Takeovers Code, an offeree document containing, among other things, the opinions of the Independent Board Committee and the advice from AMS and Hantec in relation to the Offer must be sent to you within 14 days from the date of the offer document unless the Company obtains consent from Angel Field to extend the first closing date of the Offer and approval from the Executive in relation to the delay in despatch of the offeree document. You should exercise caution when buying or selling Shares prior to receipt of the offeree document and are strongly advised to wait for receipt of the offeree document and read the contents thereof before deciding whether or not to accept the Offer.

THE DISPOSAL AGREEMENT

Major Terms

Date : 22nd January, 2002 Vendor : Park Well Purchaser : Feng Lin Assets sold : The entire interest of Park Well in the Snack Food Business Companies

Consideration : HK$24,600,000

• Payment : Feng Lin will assume and repay the following liabilities and obligations for settlement of the consideration:

• (i) trade payable of the Fabric Group of approximately HK$13.0 million;

• (ii) accrued charges of the Fabric Group of approximately HK$5.6 million; and

• (iii) short term bank loans of the Fabric Group of approximately HK6.0 million.

In order for the completion of the Disposal Agreement to take place, Feng Lin should have paid Park Well for the settlement of the above short term bank loans, and Feng Lin should also present to Park Well the relevant confirmations or receipts from the relevant creditors of the Fabric Group that the aforesmentioned trade payable and accrued charges have been fully repaid.

– 7 –

LETTER FROM THE BOARD

• Conditions : The completion of the Disposal Agreement is conditional upon the precedent following:

• (i) the passing of the necessary resolutions by the Independent Shareholders approving the terms and conditions of the Sale and Purchase Agreement and the Disposal Agreement and the transactions contemplated under the Disposal Agreement at the SGM on vote by way of a poll; and

• (ii) all the conditions precedent, to which the completion of the Sale and Purchase Agreement is subject being fulfilled, satisfied or waived by Angel Field. Details of such conditions are set out as follows:

  • (a) the approval of the Disposal Agreement and the transactions contemplated thereunder by Independent Shareholders by way of a poll;

  • (b) the consent from the Executive to the Disposal which transaction constitutes a special deal under Rule 25 of the Takeovers Code;

  • (c) no material breach of representations, warranties and guarantees under the Sale and Purchase Agreement in respect of the Company and the Group;

  • (d) the Shares remaining listed and traded on the Stock Exchange at all times from the date of the Sale and Purchase Agreement to the completion of the Sale and Purchase Agreement save and except for any temporary suspension as a result of the SFC and/or the Stock Exchange approving the Sale and Purchase Agreement and/ or the Disposal Agreement and that the SFC or the Stock Exchange not making any indication that the listing of the Shares on the Stock Exchange will or may be withdrawn or objected to;

  • (e) the obtaining of a PRC legal opinion confirming that Chaoyang Hua Long Textiles and Dyeing Ltd., a wholly-owned subsidiary of the Company, has legally obtained the relevant land use rights and property title certificate for its factory in the PRC and that all necessary procedures have been completed and the relevant payments have been made; and

  • (f) neither the SFC nor the Executive at any time before the completion of the Sale and Purchase Agreement has raised as an issue with Angel Field that the price for each Offer Share will have to be higher than HK$0.418.

– 8 –

LETTER FROM THE BOARD

Under the Sale and Purchase Agreement, all the above conditions can be waived by Angel Field.

In the event of the conditions referred to above not having been fulfilled by 15th March, 2002 or such later date may be agreed between Feng Lin and Park Well in writing, all rights and obligations of the parties hereunder in relation to the Disposal Agreement shall cease and terminate and none of the parties shall have any claim against any other in respect of the Disposal Agreement, save for any antecedent breaches of the Disposal Agreement.

Unless agreed by Feng Lin, if the Sale and Purchase Agreement cannot be completed in accordance with the terms thereof, the Disposal Agreement shall lapse and neither Park Well nor Feng Lin shall have any claim against each other (save in respect of antecedent breaches).

Completion of : The completion of the Disposal Agreement shall take place on the 5th the Disposal Business Day falling on the date when all conditions mentioned above are Agreement fulfilled.

Basis of consideration

The consideration as set out in the Disposal Agreement was arrived at through arm’s length negotiation between Feng Lin and Park Well with reference to the pro forma unaudited combined net tangible asset value of the Snack Food Business Companies of approximately HK$24,600,000 as at 30th November, 2001.

INFORMATION ON THE SNACK FOOD BUSINESS COMPANIES

The Snack Food Business Companies, including Cai Yi Feng Trading Limited, Hanover VCL Trading Limited, Transfit Garments Limited, Vastco (H.K.) Limited, VCL Business Development (USA) Inc. and Vastco (Shantou F.T.Z.) Industrial Ltd., are principally engaged in the manufacturing and sale of stackable fabricated potato chips in the PRC market. Commercial production of the stackable fabricated potato chips, which are packed in paper tubes under the name of “Kolorful”, commenced in November 2000. Details of the principal activities of each member of the Snack Food Business Companies at present are set out as below:

• (i) Cai Yi Feng Trading Limited is inactive;

• (ii) Hanover VCL Trading Limited is principally engaged in trading of potato chips;

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LETTER FROM THE BOARD

(iii) Transfit Garments Limited is dormant;

• (iv) Vastco (H.K.) Limited is an investment holding company, holding the entire interest of VCL Business Development (USA) Inc. and 75% interest in Vastco (Shantou F.T.Z.) Industrial Ltd.;

• (v) VCL Business Development (USA) Inc. is engaged in holding of trademarks and 5% interest in Vastco (Shantou F.T.Z.) Industrial Ltd.; and

• (vi) Vastco (Shantou F.T.Z.) Industrial Ltd. is principally engaged in manufacture and sale of potato chips in the PRC.

The pro forma turnover for the snack food business for the year ended 31st December, 2000 and the six months ended 30th June, 2001 were approximately HK$1,006,000 and HK$10,354,000 respectively. The pro forma net loss before taxation and minority interests for the snack food business were approximately HK$8,088,000 and HK$2,224,000 respectively for the year ended 31st December, 2000 and the six months ended 30th June, 2001.

REASON FOR THE DISPOSAL

It should be noted that Angel Field was not prepared to acquire a controlling interest in the Company if it retains the Snack Food Business Companies which Angel Field is not interested in as the snack food business is not considered as the core business of the Group and has been incurring substantial losses. As a result, the Disposal Agreement was entered into between Park Well and Feng Lin simultaneously with the entering into of the Sale & Purchase Agreement between Angel Field and Feng Lin.

– 10 –

LETTER FROM THE BOARD

EFFECTS OF THE DISPOSAL

1. Shareholding and group structure immediately before and after the completion of the Disposal Agreement and the Sale and Purchase Agreement

The following charts set out the shareholding and group structure of the Group immediately before and after the completion of the Disposal Agreement and the Sale and Purchase Agreement (assuming Feng Lin has not disposed of its remaining 964,000 Shares) respectively:

Immediately before the completion of the Disposal Agreement and the Sale and Purchase Agreement

==> picture [413 x 314] intentionally omitted <==

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

Feng Ling Public
74.48% 25.52%
The Company
100%
Park Well
100% 100% 100% 100% 100% 100%
Transfit
Hua Loong Ying Wing Hanover VCL Cai Yi Feng
Vastco (H.K.) Garments
Textiles (HK) Trading Trading
Limited Limited
Limited Limited Limited Limited
(Dormant)
100%
100% 100% VCL Business 汕頭保稅區藍力有限公司
Hua Loong Development (USA) Inc. (Lanli (Shantou F.T.Z.) Ltd.)
Chaoyang
Textiles
Hua Long 75% 5% 20%
Trading
Textiles and
(Korea)
Dyeing Limited Vastco (Shantou F.T.Z.) Industrial Ltd.
Co. Ltd.
----- End of picture text -----*

• 汕頭保稅區藍力有限公司 (Lanli (Shantou F.T.Z.) Ltd.) is a party not connected nor acting in concert with the Directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or an associate of any of them.

– 11 –

LETTER FROM THE BOARD

Immediately after the completion of the Disposal Agreement and the Sale and Purchase Agreement

==> picture [313 x 257] intentionally omitted <==

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

Angel Field Feng Ling Public
74.00% 0.48% 25.52%
The Company
100%
Park Well
100% 100%
Ying Wing (HK) Limited Hua Loong Textiles Limited
100% 100%
Chaoyang Hua Long Hua Loong Textiles Trading
Textiles and Dyeing Limited (Korea) Co. Ltd.
----- End of picture text -----

2. Business of the Group before and after the Disposal

As at the Latest Practicable Date, the principal activities of the Group are the processing of raw fabric, trading of fabric and the manufacturing and sale of stackable fabricated potato chips in the PRC market. Upon completion of the Disposal, the Group will continue to be engaged in the processing of raw fabric and the trading of fabric.

– 12 –

LETTER FROM THE BOARD

3. Pro forma unaudited adjusted consolidated net tangible asset value of the Group

The following statement of the pro forma unaudited adjusted consolidated net tangible asset value of the Group upon completion of the Disposal Agreement is prepared based on the audited consolidated net asset value of the Group as at 31st December, 2000:

HK$’000 Audited consolidated net asset value of the Group as at 31st December, 2000 Surplus arising from the revaluation of the Fabric Group’s land and buildings as at 30th November 2001_(Note 1) Unaudited consolidated net loss attributable to Shareholders of the Group for the 11 months ended 30th November, 2001 Pro forma unaudited adjusted consolidated net asset value of the Group before the Disposal Consideration for the Disposal to be satisfied by repayment of certain liabilities of the Fabric Group Pro forma unaudited combined net asset value of the Snack Food Business Companies as at 31st December, 2000 (75,730) Dividend paid by one of the Snack Food Business Companies to its immediate holding company 28,500 Pro forma unaudited combined net loss of the Snack Food Business Companies for the 11 months ended 30th November, 2001(Note 2) 22,630 Pro forma unaudited combined net tangible asset value of the Snack Food Business Companies as at 30th November, 2001 Profit / Loss on the Disposal Pro forma unaudited adjusted consolidated net tangible asset value of the Group upon completion of the Disposal Pro forma unaudited adjusted consolidated net tangible asset value per Share of the Group upon completion of the Disposal(Note 3)_	HK$’000 24,600 (24,600)	HK$’000 111,073 436 (45,399) 66,110 – 66,110 HK$0.331

– 13 –

LETTER FROM THE BOARD

Notes:

1. Based on the valuation of the Fabric Group’s land and buildings by an independent valuer, Castores Magi Surveyors Limited, the report of which is set out in appendix II to this circular, a surplus amounting to approximately HK$436,000 has arisen on the revaluation of the Fabric Group’s land and buildings as at 30th November, 2001. The Directors have confirmed that such surplus will not be incorporated into the Group’s financial statements for the year ended 31st December, 2001.

2. The pro forma unaudited combined net loss of the Snack Food Business Companies for the 11 months ended 30th November, 2001 includes the written off of intangible assets of the Snack Food Business Companies of approximately HK$1,583,000.

3. The calculation of pro forma unaudited adjusted consolidated net tangible asset value per Share is based on 200,000,000 Shares in issue as at the Latest Practicable Date.

4. Effect on the income statement of the Group

As the consideration under the Disposal Agreement of HK$24,600,000 is substantially equal to and was arrived at with reference to the pro forma unaudited combined net tangible asset value of the Snack Food Business Companies of approximately HK$24,600,000 as at 30th November, 2001 and the Disposal Agreement is expected to be completed on or before 15th March, 2002, the Group will not record any material gain or loss on the Disposal in its financial statements provided that the combined net tangible asset value of the Snack Food business Companies do not change substantially during the period from 30th November, 2001 to the date of completion of the Disposal.

COMPLIANCE REQUIREMENTS

Pursuant to the Listing Rules, the Disposal constitutes a discloseable transaction of the Company. As Feng Lin is the controlling Shareholder of the Company and also its ultimate beneficial owners, Messrs. Tsoi Hon Chung, Tsoi Chun Bun and Tsoi Chun Hung, are the Directors, the Disposal also constitutes a connected transaction of the Company under the Listing Rules and is subject to, among other things, the approval of the Independent Shareholders at the SGM.

As the terms of the Disposal Agreement will not be extended to all Shareholders, the Disposal constitutes a special deal under Note 4 to Rule 25 of the Takeovers Code and hence requires consent of the Executive. The Executive has indicated that such consent will be granted subject to AMS and Hantec opining that the terms of the Disposal Agreement are fair and reasonable and the approval of the Disposal Agreement by Independent Shareholders at the SGM on vote by way of a poll. Feng Lin and its associates and concert parties, including Tsoi Hon Chung, Tsoi Chun Bun, Tsoi Chun Hung and Lin Feng Qing, will abstain from voting in respect of the Disposal at the SGM.

– 14 –

LETTER FROM THE BOARD

SGM

Set out on pages 48 and 49 of this circular is a notice convening the SGM to be held at Shanghai Room II, 3rd Floor, South Pacific Hotel, 23 Morrison Hill Road, Wanchai, Hong Kong at 10:30 a.m. on 11th March, 2002 at which an ordinary resolution will be proposed and, if thought fit, passed by poll to approve the Disposal Agreement and the transactions contemplated thereunder.

A form of proxy for use at the SGM is enclosed. Whether or not you intend to attend such meeting, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding such meeting or any adjournment meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting at the meeting or any adjourned meeting (as the case may be) should you so desire.

Feng Lin and its associates and parties acting in concert with any of them will abstain from voting in respect of the ordinary resolution relating to the approval of the Disposal Agreement to be proposed at the SGM in view of their interests in the Disposal Agreement.

ADDITIONAL INFORMATION

Your attention is also drawn to the letter from the Independent Board Committee, the letter from AMS and Hantec, which sets out their advice to the Independent board Committee, and the unaudited financial statements of the Group for the 11 months ended 30th November, 2001, the property valuation report and other general information set out in appendices I to III to this circular respectively.

Yours faithfully,

For and on behalf of the Board of Ying Wing Holdings Limited Tsoi Hon Chung

Chairman

– 15 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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YING WING HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

22nd February, 2002

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF THE ENTIRE INTEREST IN THE SNACK FOOD BUSINESS COMPANIES AND

SPECIAL DEAL UNDER RULE 25 OF THE TAKEOVERS CODE

We refer to the circular dated 22nd February, 2002 issued by the Company (the “Circular”) of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed by the Board as the Independent Board Committee to consider the terms of the Disposal. AMS and Hantec have been appointed by the Independent Board Committee as the joint independent financial advisers to advise us in this respect. Details of their recommendation and principal factors taken into consideration in arriving at their recommendation are set out in the letter of advice from AMS and Hantec on pages 17 to 28 of the Circular.

Your attention is drawn to the letter from the Board as set out on pages 5 to 15 of the circular and the additional information set out in the appendices to the Circular.

RECOMMENDATION

Having taken into account the terms of the Disposal and the advice from AMS and Hantec, we consider that the terms of the Disposal are fair and reasonable so far as the Independent Shareholders as a whole are concerned. Accordingly, we recommend the Independent Shareholders to vote at the SGM in favour of the ordinary resolution set out in the notice of the SGM included in the Circular to approve the Disposal.

Yours faithfully,

Wong Wing Hon, Clint Wong Yiu Kwong, Eric

Independent Board Committee

– 16 –

LETTER OF ADVICE FROM AMS AND HANTEC

The following is the full text of the letter from AMS and Hantec dated 22nd February, 2002 setting out their advice to the Independent Board Committee:

AMS Corporate Finance Limited

20th Floor, Hong Kong Diamond Exchange Building, 8-10 Duddell Street, Central, Hong Kong Tel: 2230 0722 Fax : 2230 0733

Hantec Capital Limited

45th Floor, COSCO Tower

183 Queen’s Road Central, Hong Kong Tel: 2235 7888 Fax: 2973 0382

22nd February, 2002

To the Independent Board Committee of Ying Wing Holdings Limited

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF SNACK FOOD BUSINESS COMPANIES AND SPECIAL DEAL UNDER RULE 25 OF THE TAKEOVERS CODE

INTRODUCTION

We refer to our appointment as the joint financial advisers to advise the Independent Board Committee in respect of the terms of the Disposal Agreement, details of which are set out in the letter from the Board (the “Letter”) contained in this circular (the “Circular”) dated 22nd February, 2002 issued by the Company to the Shareholders, of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 25th January, 2002, it was announced by the Company that, among other things, the Disposal Agreement was entered into between Park Well and Feng Lin in relation to the disposal of the Snack Food Business Companies on 22nd January, 2002. As the joint financial advisers to the Independent Board Committee, our role is to give an independent opinion to the Independent Board Committee as to whether or not the Disposal Agreement is in the interest of the Company and the Independent Shareholders as a whole and the terms of the Disposal Agreement are fair and reasonable so far as the Independent Shareholders are concerned.

BASIS OF OUR OPINION

In formulating our opinion, we have relied on the information and representations contained or referred to in the Circular and the information and representations provided to us by the Company and the Directors. We have assumed that all information and representations

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LETTER OF ADVICE FROM AMS AND HANTEC

contained or referred to in the Circular and all information and representations which have been provided by the Company and the Directors, for which they are solely and wholly responsible, were true and accurate at the time when they were made and continue to be so at the date hereof. The Directors have confirmed, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts or representations the omission of which would make any statement in the Circular, including this letter, misleading. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any facts or circumstances which would render the information provided and the representations made to us untrue, inaccurate or misleading. We consider that we have been provided with sufficient information to reach an informed view. We have not, however, conducted any form of in-depth investigation into the business and affairs of the Group.

BACKGROUND

Under the terms of the Disposal Agreement, Park Well has conditionally agreed to sell and Feng Lin has conditionally agreed to purchase the entire interest of Park Well in the Snack Food Business Companies for a consideration of HK$24.6 million which will be satisfied by Feng Lin’s undertaking to assume and repay (i) trade payables of the Fabric Group of approximately HK$13.0 million, (ii) accrued charges of the Fabric Group of approximately HK$5.6 million and (iii) short term bank loans of the Fabric Group of approximately HK$6.0 million.

Under the Listing Rules, the Disposal is a discloseable transaction of the Company. Since Feng Lin is the controlling shareholder (as defined in the Listing Rules) of the Company, the Disposal also constitutes a connected transaction of the Company.

Under the Sale and Purchase Agreement, Angel Field will purchase the Sale Shares from Feng Lin at a consideration of HK$61.8 million which is equivalent to approximately HK$0.418 per Sale Share. Upon the completion of the Sale and Purchase Agreement, Angel Field will hold 74.00% of the total issued Shares and will therefore be obliged under Rule 26 of the Takeovers Code to make a mandatory unconditional cash offer for all the issued Shares other than those Shares already owned by Angel Field.

As completion of the Disposal Agreement is a condition precedent to the completion of the Sale and Purchase Agreement, which will trigger the Offer, the Disposal constitutes a special deal under Rule 25 of the Takeovers Code which requires the consent of the Executive under Note 4 to Rule 25 of the Takeovers Code. The Executive will normally give its consent to the Disposal, provided that the independent advisers to the Company publicly states that in their opinion the terms of the Disposal Agreement are fair and reasonable and the Disposal is approved at a general meeting of the Company by Independent Shareholders by way of poll. For details of the general meeting to be held for considering, among other things, the Disposal, Independent Shareholders should refer to the Notice of SGM contained in the Circular.

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LETTER OF ADVICE FROM AMS AND HANTEC

The principal activities of the Group have been traditionally the processing of raw fabric and trading of fabric. In 2000, the Group began diversifying its business activities into the manufacture and sale of snack food in the PRC through the Snack Food Business Companies. Commercial production of the stackable fabricated potato chips, which are packed in paper tubes under the brand name of “Kolorful”, commenced in November 2000. As advised by the Directors, other than the stackable fabricated potato chips, the Snack Food Business Companies have not engaged in the manufacture and sale of other snack food. Particulars of the Snack Food Business Companies are as follows:

				Proportion of
				nominal value of
		Place of		issued capital/
	Name of the Snack Food	incorporation/	registered capital held
	Business Company	establishment		by the Company	Principal activities
(i)	Cai Yi Feng Trading Limited	Hong Kong		100%	Inactive
(ii)	Hanover VCL Trading Limited	British Virgin Islands		100%	Sale of snack food
					in the PRC_(Note 1)_
(iii)	Transfit Garments Limited	British Virgin Islands		100%	Dormant
(iv)	Vastco (H.K.) Limited	Hong Kong		100%	Investment holding
(v)	VCL Business Development	United States		100%	Holding of trademarks
	(USA) Inc.	of America
(vi)	Vastco (Shantou F.T.Z.)	PRC		80%(Note 2)	Manufacture and
	Industrial Limited				sale of snack food
					in the PRC

Notes:

1. Hanover VCL Trading Limited was engaged in the selling of finished fabric in the PRC up to 30th June, 2001. Since 1st July, 2001, the principal activities of Hanover VCL Trading Limited have become the sale of snack food in the PRC.

2. The remaining 20% is held by 汕頭保稅區藍力有限公司 (Lanli (Shantou F.T.Z.) Ltd), an independent third party not connected with the Directors, chief executive or substantial shareholders of the Company or its subsidiaries or any of their respective associates.

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LETTER OF ADVICE FROM AMS AND HANTEC

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion regarding the terms of the Disposal Agreement, we have taken into consideration the following principal factors and reasons:

Financial performance of the Group’s snack food business

The results of the Group’s snack food business during the relevant periods are summarized as follows:

		Six months	Eleven months
	Year ended	ended	ended
	31st December,	30th June,	30th November,
	2000,	2001,	2001,
	audited	unaudited	unaudited
	(in HK$’ million)	(in HK$’ million)	(in HK$’ million)
Turnover	1.0	10.4	18.9
Loss before taxation and
minority interests	8.1	2.2	21.5

As shown in the Group’s annual report for the year ended 31st December, 2000 (the “Annual Report”) and the Group’s interim report (the “Interim Report”) for the six months ended 30th June, 2001, the Group recorded a turnover with respect to the manufacture and sale of snack food of approximately HK$1.0 million and HK$10.4 million for the year ended 31st December, 2000 and the six months ended 30th June, 2001 respectively. Over the same period, contribution to loss before taxation by the manufacture and sale of snack food was approximately HK$8.1 million and HK$2.2 million respectively. The loss for the six months ended 30th June, 2001 is significantly less than that for the year ended 31st December, 2000. This is due to the fact that the Group’s snack food business commenced commercial production in November 2000, so the results of year 2000 only accounted for about two months of sale of approximately HK$1.0 million but all the start-up costs incurred during that year of approximately HK$6.1 million. On the other hand, as disclosed in the Interim Report, the loss for the six months ended 30th June, 2001 was mainly due to the Group not yet having achieved the economy of scale since its establishment in November 2000 and the substantial costs of approximately HK$2.9 million incurred for product promotion and development of brand image for the PRC markets.

However, as indicated in the pro forma unaudited adjusted consolidated net tangible asset value of the Group included under the Letter, the pro forma unaudited combined net loss of the Snack Food Business Companies for the eleven months ended 30th November, 2001 was approximately HK$22.6 million, of which approximately HK$19.9 million was attributable to

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LETTER OF ADVICE FROM AMS AND HANTEC

the manufacture and sale of snack food and the balance of approximately HK$2.7 million was attributable to the selling of finished fabric. The loss of approximately HK$2.7 million in relation to the selling of finished fabric was accounted for by a member of the Snack Food Business Companies, namely Hanover VCL Trading Limited (“Hanover VCL”). Hanover VCL was engaged in the selling of finished fabric in the PRC until 30th June, 2001. Following the Group’s decision to streamline such business, Hanover VCL has ceased selling of finished fabric and began to engage in the sale of snack food in the PRC since 1st July, 2001. Accordingly, the pro forma unaudited combined net loss of the Snack Food Business Companies for the eleven months ended 30th November, 2001 included such loss of approximately HK$2.7 million which was unrelated to the Group’s snack food business.

Taking into account of the loss attributable to the minority interests of approximately HK$1.6 million, the loss before taxation and minority interests on the Group’s snack food business was approximately HK$21.5 million for the eleven months ended 30th November, 2001. The Directors explained that the loss for the eleven months ended 30th November, 2001 was mainly due to the promotion and marketing expenses of approximately HK$6.5 million, provision for doubtful debts of approximately HK$4.0 million and written off of certain obsolete inventories of approximately HK$4.5 million during the period. In addition, as advised by the Directors, due to the local press in the PRC reporting that the Group’s potato chips failed to meet the hygiene standard required by the local authorities during their regular inspection tests, the Group has temporarily suspended its production of potato chips since October, 2001. The Directors have confirmed that, as at the Latest Practicable Date, the activities of the Snack Food Business Companies were mainly related to product testing and improvement. The Directors expect that, in view of the current progress on the product improvement, the production of fabricated potato chips may resume in the second quarter of this year.

Therefore, the Directors are of the opinion that, in order for the Group’s snack food product to be competitive, additional working capital, the amount of which cannot be estimated by the Directors at this moment, would be required for strengthening the quality control, marketing development and setting up of distribution network in various cities in the PRC. Accordingly, the Directors do not expect that the snack food business is likely to have satisfactory returns in the short term.

In view of the current financial performance of the Group’s snack food business and the possible adverse impact on the image of the Group’s products as a result of the unfavorable press report mentioned above, we consider that, in the short term, the outlook on the performance of the Group’s snack food business is not optimistic. We are also of the opinion that the Disposal provides an opportunity for the Group to realize its investment in the snack food business for the avoidance of incurring further losses that could possibly be resulted in the near future.

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LETTER OF ADVICE FROM AMS AND HANTEC

Consideration

The consideration of the Snack Food Business Companies under the Disposal Agreement is HK$24.6 million (the “Consideration”) which was arrived at through arm’s length negotiations between Feng Lin and Park Well and is in substance equal to the pro forma unaudited combined net tangible asset value of the Snack Food Business Companies as at 30th November, 2001, calculation of which is shown under the paragraph headed “Pro forma unaudited adjusted consolidated net tangible asset value of the Group” contained in the Letter. The pro forma unaudited combined net tangible asset value of the Snack Food Business Companies as at 30th November, 2001 comprised mainly property, plant and equipment of approximately HK$38.6 million, net current liabilities of approximately HK$8.6 million and minority interests of approximately HK$5.4 million.

We have sought to assess the value of the Snack Food Business Companies by other valuation methods such as price/earnings multiple based on historic earnings; however, because the Group’s snack food business has recorded losses since its establishment, the use of price/ earnings multiple as reference to assess the value of the Snack Food Business Companies would not be applicable. We have also attempted to assess the value of the Snack Food Business Companies with reference to other companies in the market which have similar products and markets and comparable operating characteristics. In this case, however, given the fact that the Snack Food Business Companies are engaged in the manufacture and sale of only one product, namely fabricated potato chips, we were unable to find any company in the market that would provide an appropriate and relevant comparison. Nevertheless, we consider that the valuation method of the Snack Food Business Companies based on their net asset value is reasonable for the following reasons:

• the Group’s snack food business has incurred significant losses since its establishment (i.e. price/earning multiple is not applicable);

• the brand name of the snack food product (i.e. “Kolorful”) was developed internally by the Group and the Directors do not consider the brand name, so far, to be wellrecognized in the PRC markets, so it is unlikely for the brand name to have any hidden intrinsic value;

• the Snack Food Business Companies are not in possession of any trade mark or patent that, to the Directors’ best knowledge and belief, are of significant value (i.e. no hidden intangible assets); and

• based on the management accounts of the Snack Food Business Companies, approximately 78% (i.e. approximately HK$38.6 million) of their assets as at 30th November, 2001 was fixed assets, which comprised mainly property, plant and equipment.

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LETTER OF ADVICE FROM AMS AND HANTEC

The settlement of the Consideration will be satisfied by Feng Lin’s undertaking to the Company for the assuming and repayment of (i) trade payables of the Fabric Group of approximately HK$13.0 million, (ii) accrued charges of the Fabric Group of approximately HK$5.6 million and (iii) short term bank loans of the Fabric Group of approximately HK$6.0 million, all of which have been based on the management accounts of the Fabric Group and represent the book costs of such liabilities as at 30th November, 2001. The Directors have confirmed that all of these liabilities arose from the normal course of business of the Fabric Group and were due to independent third parties. In addition, the Directors expect that there would not be material change in the Group’s current liability position at completion of the Disposal from that as at 30th November, 2001. Assuming that the outstanding balances of the Fabric Group’s trade payables, accrued charges and short term bank loans immediately before the completion of the Disposal remain relatively unchanged as their positions as at 30th November, 2001, they will be substantially settled in full as a result of the Disposal.

Although the Consideration is not in the form of cash payment, the settlement in an equivalent amount of the Fabric Group’s trade payables, accrued charges and short term bank loans which are part of the Group’s total current liabilities will increase the Group’s net current assets by HK$24.6 million, the effect of which on the Group’s position in terms of net current assets would be essentially the same as if the Consideration was to be received by the Group in cash.

Given the fact that (i) the Group’s snack food business has been incurring substantial losses since its establishment; (ii) the Consideration was arrived at through arm’s length negotiation and is equal to the pro forma unaudited combined net tangible asset value of the Snack Food Business Companies as at 30th November, 2001 and (iii) the settlement method of the Consideration will have the same financial effect on the Group’s net-current-assets position as cash consideration, we are of the view that the Consideration is fair and reasonable and the settlement arrangement for the Consideration is acceptable.

Financial effect of the Disposal on the Group

Income effect

As the Consideration is substantially equal to the pro forma unaudited combined net tangible asset value of the Snack Food Business Companies as at 30th November, 2001 and the Disposal Agreement is expected to be completed on or before 15th March, 2002, the Group will not record any material gain or loss on the Disposal in its financial statements provided that the combined net tangible asset value of the Snack Food Business Companies do not change substantially during the period from 30th November, 2001 to the date of completion of the Disposal. As mentioned in the paragraph headed “Financial performance of the Group’s snack food business” above, the Group has temporarily suspended its production of potato chips since October, 2001 due to hygiene problems. Based on this, we are of the view that subsequent change of the combined net tangible asset value of the Snack Food Business

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LETTER OF ADVICE FROM AMS AND HANTEC

Companies after 30th November, 2001, if any, will only be of depletion. Accordingly, we consider that the Disposal will not have adverse effect on the Group’s income statement for the year ending 31st December, 2002.

Liquidity and financial resources

Based on the unaudited consolidated balance sheet of the Group as at 30th November, 2001, the Group had current assets of approximately HK$25.4 million and current liabilities of approximately HK$54.3 million, representing approximately a net-current-liabilities position of HK$28.9 million and a current ratio at 0.47. In addition, the Group’s gearing ratio as at 30th November, 2001 was approximately 0.31, as represented by the Group’s total debts of approximately HK$20.1 million over its total equity of approximately HK$65.7 million. The current ratio which is less than one may indicate that there is uncertainty in relation to the sufficiency of the Group’s working capital. As mentioned in the paragraph headed “consideration” above, the Disposal will increase the Fabric Group’s net current assets by approximately HK$24.6 million. As indicated from the effect of the Disposal on the Group’s net asset value set out in paragraph headed “Net asset value” below, and assuming that the Group’s netcurrent-assets position as at the date of completion of the Disposal does not change materially from its position as at 30th November, 2001, the Group will have a net current assets of approximately HK$4.3 million and a current ratio at approximately 1.43 immediately following the completion of the Disposal. Furthermore, the Group’s gearing ratio will drop to zero from 0.31 as a result of the Disposal, provided that both the Group’s total borrowings and the shareholders’ fund do not change materially upon the completion of the Disposal. As the Directors expect that there would not be material change in the Group’s financial position at completion of the Disposal from that as at 30th November, 2001, we consider our assumptions mentioned above to be valid and reasonable. On this basis, we are of the view that the Disposal will result in an improvement in the Group’s financial position.

In addition, given the fact that the cash and bank balances of the Snack Food Business Companies as at 30th November, 2001 amounted to approximately HK$0.3 million (representing less than 1% of the Group’s net assets as at 30th November, 2001) and that the Consideration will not be made in cash, we do not consider that there will be any significant effect of the Disposal on the Group’s cash position.

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LETTER OF ADVICE FROM AMS AND HANTEC

Net asset value

The effect of the Disposal on the net asset value of the Group as at 30th November, 2001, based on the assumption that the Disposal was completed on 30th November, 2001, is set out below:

		Disposal based on the	Consideration as
		net asset value of the	reduction of Fabric
	The Group before	Snack Food Business	Group’s current	The Group after
	the Disposal	Companies	liabilities	the Disposal
	(in HK$’ million)	(in HK$’ million)	(in HK$’ million)	(in HK$’ million)
Non-current assets	100.0	(38.6)		61.4
Current assets	25.4	(11.0)		14.4
Current liabilities	(54.3)	19.6	24.6	(10.1)
Net current (liabilities)
assets	(28.9)			4.3
Minority interests	(5.4)	5.4		–
Net asset value	65.7	(24.6)	24.6	65.7

The net asset value of the Group as at 30th November, 2001 before the Disposal was approximately HK$65.7 million and the details of the Group’s assets as at 30th November, 2001 have been given under the unaudited consolidated balance sheet of the Group as at 30th November, 2001 in the appendix I to the Circular. As illustrated above, since the Consideration is equal to the net asset value of the Snack Food Business Companies as at 30th November, 2001, the net asset value of the Group immediately following the Disposal will remain unchanged. As mentioned in the paragraph headed “Financial performance of the Group’s snack food business” above, the Directors have confirmed, as at the Latest Practicable Date, that the activities of the Snack Food Business Companies were mainly related to product testing and improvement. Therefore, provided that the combined net tangible asset value of the Snack Food Business Companies do not change substantially during the period from 30th November, 2001 to the date of completion of the Disposal, we are of the view that the Disposal will not have any material effect on the net asset value of the Group.

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LETTER OF ADVICE FROM AMS AND HANTEC

Reason for the Disposal

As mentioned in the Letter, Angel Field was not prepared to acquire a controlling interest in the Company if the Company retains the Snack Food Business Companies, since Angel Field is not interested in the Group’s snack food business, which has incurred substantial losses, and considers it not to be the core business of the Group. The Board is of the opinion that the Disposal is in the interest of the Company as the Group’s snack food business has incurred substantial losses since its establishment.

In view of the unsatisfactory operating performance of the Snack Food Business Companies since its establishment and based on the positive financial effect of the Disposal on the Group mentioned above, we concur with the Directors’ view that the Disposal is in the interest of the Company.

However, Independent Shareholders should note that the remaining business operations of the Group after the Disposal will continue to be the processing of raw fabric and the trading of fabric. The principal processing services provided by the Group through its facilities in the PRC included bleaching, dyeing, printing, setting and finishing services. The major customers of the Group comprise manufacturers of garment products based mainly in the PRC. As disclosed in the Annual Report and the Interim Report, due to the severe market competition, the Group’s loss before taxation with respect to the processing of raw fabric and trading of fabric was approximately HK$8.2 million for the year ended 31st December, 2000 and HK$10.4 million for the six months ended 30th June, 2001 respectively. The Directors are also of the opinion that, given the environmental protection issue in the PRC, the operating costs for raw fabric processing may increase substantially as a result of additional and more stringent environmental protection laws and regulations in the PRC. As disclosed in the Interim Report, the Group did not have any trading of fabric during the six months period because of the very low gross profit margin and a relatively higher risk in collection of trade debts. In view of the current market conditions for the trading of fabric and the uncertainty faced by the business of processing raw fabric as a result of the environmental protection issue in the PRC, we are of the opinion that the prospects of the Group’s remaining business operations after the Disposal is not optimistic.

In addition, given the significant distinction between the business operations of snack food business and that of processing raw fabric, we consider that, other than the financial effect as stated in the relevant paragraphs above including the improvement of the Group’s financial ratios and the avoidance of incurring further losses in connection with the Snack Food Business Companies, the Disposal will not have any material effect on the operating aspect of the Group’s remaining business.

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LETTER OF ADVICE FROM AMS AND HANTEC

Solely for information purposes, we set out below the results of the Group and the pro forma results of the Group that were prepared as if the Group’s principal activities had not included any snack food business for the relevant periods:

• A. The results of the Group for the relevant periods

		Six months	Eleven months
	Year ended	ended	ended
	31st December,	30th June,	30th November,
	2000	2001	2001
	(in HK$’ million)	(in HK$’ million)	(in HK$’ million)
Turnover	124.7	16.5	38.6
Loss before taxation	14.5	12.5	46.9

• B. The pro forma results of the Group without the inclusion of any snack food business

		Six months	Eleven months
	Year ended	ended	ended
	31st December,	30th June,	30th November,
	2000	2001	2001
	(in HK$’ million)	(in HK$’ million)	(in HK$’ million)
Turnover	123.7	6.1	19.7
Loss before taxation	6.4	10.3	25.4

As clearly shown from the pro forma results of the Group without the inclusion of the Group’s snack food business, the Group still incurred losses for the year ended 31st December, 2000 and the eleven months ended 30th November, 2001 after taking out the effect of the losses in respect of the Group’s snack food business. Therefore, Independent Shareholders should be aware of the fact that there is no assurance that the Group will have favorable improvement in its operating results following the completion of the Disposal.

Possible Offer

As stated in the Letter, the Offer will be made by Kingsway Securities on behalf of Angel Field upon completion of the Sale and Purchase Agreement, which is subject to, among other things, completion of the Disposal.

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LETTER OF ADVICE FROM AMS AND HANTEC

Therefore, the Offer is a possibility only. Independent Shareholders should note that if the Disposal is not approved by the Independent Shareholders by way of poll at the SGM, the Offer will not be made.

Independent Shareholders should also note that even if the Disposal is approved by Independent Shareholders, the Offer will not be made if completion of the Sale and Purchase Agreement does not take place.

Immediately following the completion of the Sale and Purchase Agreement, an offer document containing, among other things, detailed terms of the Offer and procedures for acceptance of the Offer will be despatched to the Shareholders. In addition, an offeree document containing, among other things, the recommendation of the Independent Board Committee and the opinion of the independent financial advisers in respect of the Offer will be despatched to the Shareholders as soon as practicable after the despatch of the offer document.

RECOMMENDATION

Having considered the financial performance of the Group’s snack food business, the basis for determining the Consideration and the financial effect of the Disposal on the Group stated above, we are of the opinion that the Disposal is in the interest of the Company and the Independent Shareholders as a whole and the terms of the Disposal Agreement are fair and reasonable so far as the Independent Shareholders are concerned. Therefore, we would recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution to approve the Disposal contemplated thereunder at the SGM.

Yours faithfully,

For and on behalf of For and on behalf of AMS Corporate Finance Limited Hantec Capital Limited Jinny Mok Thomas Lai Director Director

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APPENDIX I UNAUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE 11 MONTHS ENDED 30TH NOVEMBER, 2001

A. UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE 11 MONTHS ENDED 30TH NOVEMBER, 2001

Notes Turnover 1 Cost of sales Gross loss Other revenue Distribution costs Administrative expenses Other operating expenses 2 Loss from operations Interest on bank borrowings wholly repayable within five years Loss before taxation Taxation 3 Loss before minority interests Minority interests Loss attributable to Shareholders 4 Notes: 1. Turnover Snack Food Business Companies Fabric Group 2. Other Operating expenses Loss on disposal of fixed assets Bad debt written off Provision for doubtful debts

HK$’000 38,557 (46,234) (7,677) 836 (7,121) (11,213) (20,629) (45,804) (1,132) (46,936) – (46,936) 1,537 (45,399) 25,017 13,540 38,557 11,654 4,975 4,000 20,629

3. Taxation

No provision for Hong Kong Profits Tax has been made as the Group had no assessable profits arising in Hong Kong during the 11 months ended 30th November, 2001.

No provision for the PRC enterprise income tax has been made as the Company’s PRC subsidiaries had no assessable profits for the 11 months ended 30th November, 2001.

The Group had no significant unprovided deferred taxation for the period or at the balance sheet date.

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APPENDIX I UNAUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE 11 MONTHS ENDED 30TH NOVEMBER, 2001

4. Loss attributable to Shareholders

Snack Food Business Companies Fabric Group	HK$’000 22,630 22,769
	45,399

5. Depreciation and amortisation

During the period, depreciation and amortisation of HK$8,978,000 was charged in respect of the Group’s property, plant and equipment and amortisation of HK$1,583,000 was charged in respect of the Group’s intangible assets.

B. UNAUDITED CONSOLIDATED BALANCE SHEET OF THE GROUP AS 30TH NOVEMBER, 2001

Notes Non-current assets Property, plant and equipment Current assets Inventories Trade and other receivables 2 Bank balances and cash Current liabilities Trade and other payables 3 Amount due to a director Taxation payable Bank borrowings – due within one year 4 Net current liabilities Total assets less current liabilities Minority interests Capital and reserves Share capital Share premium 5 Special reserve 5 Accumulated profits 5	HK$’000 99,961
	4,317 20,782 341
	25,440
	21,569 48 12,656 20,057
	54,330
	(28,890
	71,071 5,397
	65,674
	20,000 37,164 (14,980 23,490
	65,674

– 30 –

UNAUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE 11 MONTHS ENDED 30TH NOVEMBER, 2001

APPENDIX I

Notes:

1. Principal accounting policies and basis of preparation

The accounting policies adopted in the preparation of this unaudited balance sheet are consistent with those followed in the Group’s audited annual financial statements for the year ended 31st December, 2000.

2. Trade and other receivables

During the period, the Group allows an average credit period of 90 days to its trade customers.

The following is an aged analysis of trade receivables at the balance sheet date:

Trade receivables 0 to 30 days 31 to 60 days Over 60 days Other receivables 3. Trade and other payables The following is an aged analysis of trade payables at the balance sheet date: Trade payables 0 to 30 days 31 to 60 days Over 60 days Other payables 4. Bank borrowings Bank borrowings comprise: Trust receipt loans Bank loans Bank overdrafts	HK$’000 13,540 6,036 –
	19,576 1,206
	20,782
	HK$’000 13,005 1,059 –
	14,064 7,505
	21,569
	HK$’000 2,951 17,094 12
	20,057

– 31 –

UNAUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE 11 MONTHS ENDED 30TH NOVEMBER, 2001

APPENDIX I

All the bank borrowings are repayable within one year.

Bank loans of Renminbi 9 million, equivalent to approximately HK$9.6 million, were secured by the Group’s land and buildings in the PRC.

5. Reserves

At 1st January, 2001 Loss attributable to shareholders At 30th November, 2001	Share premium account HK$’000 37,164 – 37,164	Special Accumulated reserve profits HK$’000 HK$’000 (14,980) 68,889 – (45,399) (14,980) 23,490

– 32 –

APPENDIX I UNAUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE 11 MONTHS ENDED 30TH NOVEMBER, 2001

• C. COMFORT LETTERS FROM DELOITTE TOUCHE TOHMATSU, KIM ENG AND BOOMWELL

(1) Deloitte Touche Tohmatsu

==> picture [178 x 53] intentionally omitted <==

==> picture [71 x 48] intentionally omitted <==

22nd February, 2002

The Directors

Ying Wing Holdings Limited Kim Eng Capital (Hong Kong) Limited Boomwell Investments Limited

Dear Sirs,

We have reviewed the unaudited results of Ying Wing Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) for the 11 months ended 30th November, 2001 for which the directors of the Company are solely responsible. The unaudited results are set out in the section headed “Unaudited consolidated income statement for the 11 months ended 30th November, 2001” in appendix I to the Company’s circular dated 22nd February, 2002 (the “Circular”).

Our review of the unaudited results was conducted in accordance with the International Standard on Auditing applicable to review engagements and consisted of applying analytical procedures to the underlying financial data, assessing whether accounting policies have been consistently applied and making inquiries of management. Our review was substantially less in scope than an audit performed in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants, and, accordingly, we express no opinion as to whether the unaudited results give a true and fair view of the state of affairs of the Group as at 30th November, 2001 and of the results of the Group for the period then ended.

– 33 –

APPENDIX I UNAUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE 11 MONTHS ENDED 30TH NOVEMBER, 2001

Based on our review:

• so far as the accounting policies and arithmetic calculation are concerned, the unaudited results for the 11 months ended 30th November, 2001 have been prepared on a basis consistent in all material respects with the accounting policies normally adopted by the Group; and

• we are not aware of any material modifications that are required to be made to the unaudited results as presented in the Circular.

Yours faithfully, Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong

– 34 –

APPENDIX I UNAUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE 11 MONTHS ENDED 30TH NOVEMBER, 2001

(2) Kim Eng and Boomwell

KIM ENG

Boomwell Investments Limited

C A P I T A L

Kim Eng Capital (Hong Kong) Limited

8th Floor, Alexandra House 16-20 Chater Road, Central, Hong Kong

18th Floor, Wilson House 19-27 Wyndham Street, Central, Hong Kong

22nd February, 2002

The Directors Ying Wing Holdings Limited Room 3101, 31st Floor Top Glory Tower 262 Gloucester Road Causeway Bay Hong Kong

Dear Sirs,

We refer to the unaudited consolidated income statement of the Group for the period from 1st January, 2001 to 30th November, 2001 (the “Unaudited Consolidated Income Statement”) as set out in the section headed “Unaudited consolidated income statement for the 11 months ended 30th November, 2001” in appendix I to the circular dated 22nd February, 2002 issued by the Company in connection with the Disposal (the “Circular”). Terms used in this letter shall have the same meanings as terms defined in the Circular unless otherwise stated.

We have reviewed the Unaudited Consolidated Income Statement and have also considered the letter dated 22nd February, 2002 addressed to yourselves from Deloitte Touche Tohmatsu, the auditors of the Group, regarding the review preformed by them in respect of the accounting policies and calculations adopted by the Directors in preparation of the Unaudited Consolidated Income Statement. The preparation of the Unaudited Consolidated Income Statement is the sole responsibility of and has been approved by the Directors.

Based on the above, we are satisfied that the Unaudited Consolidated Income Statement have been prepared by the Directors after due care and consideration.

Yours faithfully,	Yours faithfully,
For and on behalf of	For and on behalf of
Kim Eng Capital (Hong Kong) Limited	Boomwell Investments Limited
Michael Chum	Raymond Sun
Director	Director

– 35 –

PROPERTY VALUATION

APPENDIX II

==> picture [251 x 51] intentionally omitted <==

==> picture [51 x 47] intentionally omitted <==

Suites 402-3 Unicorn Trade Centre 131 Des Voeux Road Central Hong Kong

22nd February, 2002

The Directors Ying Wing Holdings Limited Room 3101, 31st Floor Top Glory Tower 262 Gloucester Road Causeway Bay Hong Kong Dear Sirs,

In accordance with your instruction to value the properties in which Ying Wing Holdings Limited (the “Company”) and its subsidiaries (together the “Group”) have interests, we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the value of the relevant properties as at 30th November, 2001 (“date of valuation”).

Our valuations of the properties in Group I and II are on the basis of depreciated replacement cost which is used for the valuation of specialised properties. It is a method of using net current replacement costs to arrive at the value to the undertaking in occupation of the properties as existing at the valuation date.

In accordance with the Practice Statement of the RICS Appraisal and Valuation Manual issued by the Royal Institution of Chartered Surveyors (the “RICS”) and Standard 2 of the International Valuation Standards issued by The International Assets Valuation Standards Committee, the properties in Groups I and II belong to the category of specialised, special purpose or specially designed property which, due to its specialised nature, has a utility restricted to particular uses or users, and is rarely, if ever, sold on the open market, except as part of a sale of the business in occupation.

– 36 –

PROPERTY VALUATION

APPENDIX II

As there are no readily identifiable market sales comparables, and the buildings cannot be valued on the basis of open market value. They have therefore been valued on the basis of its depreciated replacement cost. The depreciated replacement cost approach considers the cost to reproduce or replace in new condition the property appraised in accordance with current construction costs for similar property in the locality, with allowance for accrued depreciation as evidenced by observed condition or obsolescence present, whether arising from physical, functional or economic causes. The depreciated replacement cost approach generally furnishes the most reliable indication of value for property in the absence of a known market based on comparable sales.

In valuing the properties, we have complied with all the requirements contained in the Practice Note No. 12 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The current status of the properties regarding major approvals, consents and licences required in the People’s Republic of China is as follows:–

Document/Approval	Property 1	Property 1
	in Group I	in Group II
State-owned Land Use Rights Grant Contract	Nil	Yes
State-owned Land Use Rights Certificate	Yes	Nil
Realty Title Certificate	Yes	Yes
Business Licence	Yes	Yes

We have relied to a considerable extent on the information provided by the Group and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, occupation, lettings, rental, site and floor areas and all other relevant matters.

We have not carried out detailed site measurements to verify the correctness of the site area in respect of the properties but have assumed that the site areas shown on the documents and official site plans handed to us are correct. Based on our valuation experience of similar properties in the PRC, we consider the assumptions so made to be reasonable. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurements have been taken.

We have inspected the exterior and, where possible, the interior of the properties, in respect of which we have been provided with such information as we have required for the purpose of our valuations. However, no structural survey, investigation or examination have been made, but in the course of our inspection we did not note any serious defects. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests were carried out to any of the services.

– 37 –

PROPERTY VALUATION

APPENDIX II

No allowance has been made in our report for any charges, mortgages or amounts owing on the properties nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions, and outgoings of an onerous nature which could affect their values.

We have been shown copies of various documents relating to the properties. However, we have not searched the original documents to verify any amendments which may not appear on the copies handed to us. Due to defects of the land registration system in the PRC, we are unable to search the original documents to verify the existing title of the properties or any material encumbrances that might be attached to the properties. We are not in a position to advise on the title of the properties. However, we have made reference to the opinion given by the Company’s legal advisers on PRC laws in respect to the Group’s title to the properties.

We have had no reason to doubt the authenticity and accuracy of the information provided to us by the Group. We have also sought and received confirmation from the Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld.

Unless otherwise stated, all monetary amounts stated are in Hong Kong Dollars. The exchange rate adopted in our valuation of the property interest is the exchange rate prevailing as at 30th November, 2001 being HK$1 = RMB1.06 and there has been no significant fluctuation in the exchange rate between the date of valuation and the date of this letter.

Our valuations are summarized below and the valuation certificate is attached.

Yours faithfully, For and on behalf of Castores Magi Surveyors Limited Deret Au Chi Chung

B.Sc. MRICS AHKIS RPS MCIArb AHKIArb Director

Note: Deret Au Chi Chung is a Registered Professional Surveyor who has over 9 years of experience in valuing properties in Hong Kong and properties of private and state-owned enterprises in over 60 towns and cities in the PRC. He also possesses over 4 years of experience in valuing properties in the Asia-Pacific region.

– 38 –

PROPERTY VALUATION

APPENDIX II

SUMMARY OF VALUES

		Percentage
	100%	of interest	Capital value in
	Property	attributable	existing state as at
Property	interest	to the Group	30th November, 2001
	HK$		HK$

Group I – Property interest held and occupied by the Group in Shantou, the People’s Republic of China

1. A parcel of land and various buildings and structures erected thereon of Chaoyang Hua Long Plant located at Chendian Industrial City Road, Chedian Town, Chaoyang, Shantou, Guangdong Province, The People’s Republic of China. Sub-Total:	45,840,000 100% 45,840,000	45,840,000
		45,840,000

Group II – Property interest held by a joint-venture company of the Group in Shantou, the People’s Republic of China

1. A parcel of land and 7,920,000 80% a factory building erected thereon of Shantou Crisps Plant located at Lot A11-6, Shantou Free Trade Zone, Shantou, Guangdong Province, The People’s Republic of China. Sub-Total: 7,920,000 Grand Total: 53,760,000	6,336,000
	6,336,000 52,176,000

– 39 –

PROPERTY VALUATION

APPENDIX II

VALUATION CERTIFICATE

• Group I – Property interest held and occupied by the Group in Shantou, the People’s Republic of China

				Capital value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	30th November 2001
				HK$
1.	A parcel of land and	The property comprises 15	The property is	45,840,000
	various buildings	various buildings and	currently occupied
	and structures	structures erected on a	by the Group for
	erected thereon	parcel of land having a site	production, storage,
	of Chaoyang Hua	area of 24,346 sq. m.	office and dormitory
	Long Plant located at Chendian	The buildings were 1-5	purposes.
	Industrial City Road, Chedian Town, Chaoyang, Shantou, Guangdong	storey in height and were completed from 1995 to 1998. The buildings have a total gross floor area of approximately 27,991.96
	Province,	sq.m.
	The PRC.	The property is subject to a
		land use rights for a term of
		50 years commencing from
		20th June, 1998 to 19th
		June, 2048 for industrial
		purpose.

Notes:

1. According to a State-owned Land Use Rights Certificate - Chao Fu Guo Yong (1998) Zi Di Te No. 80 (國 有土地使用証－潮府國用 (1998)字第特 80號 ) dated July, 1998 which was issued by the People’s Government of Guangdong Province (廣東省人民政府 ), the land use rights of a parcel of land was granted to Chaoyang Hua Long Textiles and Dyeing Limited(潮陽市華龍紡織染整有限公司 ) (“Chaoyang Hua Long”), a wholly-owned subsidiary of the Company, for a term of 50 years commencing from 20th June, 1998 to 19th June, 2048 for industrial purpose. This parcel of land has a site area of 24,346 sq.m. The land premium for this parcel of land is RMB6,495,401.

2. According to 9 Realty Title Certificates - Yue Fang Di Zheng Zi Di Nos. 1302201-1302209 (房地產權証 －粵房地証字第 1302201-1302209號 ) all dated 10th July, 1998 and issued by the People’s Government of Chaoyang City (潮陽市人民政府 ), the realty titles of the buildings are vested in Chaoyang Hua Long.

3. According to the opinion provided by the Company’s legal advisers on PRC laws, the followings, inter alia, were noted:–

4. i. According to a State-owned Land Use Rights Certificate (國有土地使用証－潮府國用 (1998)字 第特 80號 ) dated 7th July, 1998, the land use rights of the property is vested in Chaoyang Hua Long for a term of 50 years commencing from 20th June, 1998 to 19th June, 2048 for industrial purpose. This parcel of land has a site area of 24,346 sq.m.;

– 40 –

PROPERTY VALUATION

APPENDIX II

• ii. According to 9 Realty Title Certificates (房地產權証－粵房地証字第 1302201-1302209號 ) , the realty title of the buildings, having a total gross floor area of 27,991.96 sq.m., is vested in Chaoyang Hua Long;

• iii. The property is subject to a business licence (中華人民共和國企業法人營業執照－企獨粵汕 總字第 006677號 ) dated 17th April, 2000 which was issued by Shantou City Industrial and Commercial Administration Bureau (汕頭市工商行政管理局 );

• iv. Chaoyang Hua Long is the sole legal user of the property;

• v. Chaoyang Hua Long can use, transfer, let, exchange and mortgage the property without obtaining the prior permission or consent of any government authorities or payment of any additional premium.

• The property is subject to a pledge in favour of Bank of China Shantou Branch to secure a short term loan of RMB4,000,000 granted to Chaoyang Hua Long.

– 41 –

PROPERTY VALUATION

APPENDIX II

Group II – Property interest held by a joint-venture company of the Group in Shantou, the People’s Republic of China

• Capital value in

• Particulars of existing state as at

• Property Description and tenure occupancy 30th November 2001 HK$

• 1. A parcel of land and The property comprises a The property is 7,920,000 of which a factory building 2-storey industrial building currently occupied 6,336,000 was erected thereon of erected on a parcel of land by the Group for attributable to the Shantou Crisps Plant having a site area of production, storage Group located at 5,822.8 sq. m. and office purposes. Lot A11-6, Shantou Free The building has a gross Trade Zone, floor area of 3,178.44 sq. Shantou, m. and was completed in Guangdong 2000. Province, The PRC. The property is subject to a land use rights for a term of 50 years commencing from 17th May, 2001 to 16th May, 2051 for industrial purpose.

Notes:

1. According to a State-owned Land Use Rights Grant Contract - Shan Di Rang (2001) No. 7-2 (國有土地 使用權出讓合同－汕地讓 (2001) 7-2號 ) dated 17th May, 2001 made between Shantou City State Land Realty Bureau (汕頭市國土房產局 ) (Party A) and Vastco (Shantou F.T.Z.) Industrial Limited (“Vastco FTZ”) (榮豪（汕頭保稅區）實業有限公司 ) (Party B) (an 80% owned indirect subsidiary of the Company (please see note 5 below)), the land use rights of a parcel of land (Lot A11-6) was granted by Party A to Party B. This parcel of land has a site area of 5,822.8 sq. m. and was designated for industrial purpose. The land use term is 50 years commencing from the delivery date of the land. The land premium for this parcel of land is RMB2,243,800.

2. According to a State-owned Land Use Rights Delivery Certificate (國有土地使用權移交書 ) dated 20th May, 2001, Lot A11-6 has a site area of 7,479.9 sq. m.

3. Pursuant to a Realty Title Certificate - Yue Fang Di Zheng Zi Di No. 0940702 (房地產權証－粵房地証 字第 0940702號 ) issued by the People’s Government of Guangdong Province (廣東省人民政府 ) dated 21st May, 2001, the realty title of the building is vested in Vastco FTZ.

4. The property is subject to 2 pledges in favour of Agricultural Bank of China (中國農業銀行 ) to secure a total short term loan of RMB5,000,000 granted to Vastco FTZ.

– 42 –

PROPERTY VALUATION

APPENDIX II

1. Vastco FTZ is a sino-foreign equity joint venture company established in January, 2000 with details set out as follows:–

2. i. Equity Ratio

Party

Equity Share (%)

汕頭保稅區藍力有限公司 20 榮豪（香港）有限公司 (Vastco (H.K.) Limited) 75 VCL Business Development (USA) Inc. 5 ii. Registered capital RMB42,000,000 iii. Total investment amount RMB70,000,000

1. According to the opinion provided by the Company’s legal advisers on PRC laws, the followings, inter alia, were noted:–

2. i. According to a State-owned Land Use Rights Grant Contract (國有土地使用權出讓合同－汕國 出讓 (2001)7-2號 ) dated 17th May, 2001, the land use rights of the property is vested in Vastco FTZ for a term of 50 years commencing from 17th May, 2001 to 16th May, 2051 for industrial purpose. This parcel of land has a site area of 7,479.9 sq.m.;

3. ii. According to a Realty Title Certificate (房地產權証－粵房地証字第 0940702號 ) dated 21st May, 2001, the realty title of the building, having a total gross floor area of 3,178.44 sq.m., is vested in Vastco FTZ;

4. iii. The property is subject to a business licence (企業法人營業執照－企合粵汕總字第 004375號 ) dated 11th May, 2001 which was issued by Shantou City Industrial and Commercial Administration Bureau (汕頭市工商行政管理局 );

5. iv. The actual site area for the parcel of land should be based on the figure as shown in the State-owned Land Use Rights Delivery Certificate (國有土地使用權移交書 ) and Vastco FTZ should proceed to the registration procedure for the difference in site areas;

6. v. Vastco FTZ is the sole legal user of the property;

7. vi. Vastco FTZ can use, transfer, let, exchange and mortgage the property without obtaining the prior permission or consent of any government authorities or payment of any additional premium.

– 43 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Takeovers Code and the Listing Rules for the purpose of giving information with regard to the Company.

The information contained in this circular (other than that relating to Angel Field and its directors) is supplied by the Company. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this circular (other than that relating to Angel Field and its directors) and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, their opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in the circular (other than that relating to Angel Field and its directors), the omission of which would make any statement in this circular misleading.

The information contained in this circular (other than that relating to the Group and the Directors) is supplied by Angel Field. The directors of Angel Field jointly and severally accept full responsibility for the accuracy of the information contained in this circular (other than that relating to the Group and the Directors) and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, their opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts directors not contained in the circular (other than that relating to the Group and the Directors), the omission of which would make any statement in this circular misleading.

2. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests of the Directors in the issued share capital of the Company and its associated corporations (within the meaning of the SDI Ordinance) which have to be notified to the Company and the Stock Exchange under Section 28 of the SDI Ordinance and including interests in which a Director has taken under Section 31 or Part I of the Schedule to the SDI Ordinance or required to be entered into the register under Section 29 of the SDI Ordinance or required pursuant to the Model Code for Securities Transaction by Directors of Listed Companies under the Listing Rules are as follow:

Name of Directors	Nature of interest	Number of Shares
Tsoi Hon Chung	Corporate_(Note)_	148,964,000
Tsoi Chun Bun	Other_(Note)_	148,964,000
Tsoi Chun Hung	Other_(Note)_	148,964,000

Note: Feng Lin held 148,964,000 Shares, representing approximately 74.48% of the issued share capital of the Company. The issue share capital of Feng Lin is beneficially owned as to 80%, 5% and 5% by Messrs. Tsoi Hon Chung, Tsoi Chun Bun and Tsoi Chun Hung respectively. In addition, Madam Lin Feng Qing, the spouse of Mr. Tsoi Hon Chung owns 5% of the issued share capital of Feng Lin.

– 44 –

GENERAL INFORMATION

APPENDIX III

Save as disclosed above, as at the Latest Practicable Date, none of the Directors has for the purposes of section 28 of SDI Ordinance, nor are they taken to or deemed to have under section 31 of, or Part 1 of the Schedule to, the SDI Ordinance, any interests in the equity or debt securities of the Company or any associated corporation within the meaning of the SDI Ordinance or any interests which are required to be entered in the register kept by the Company pursuant to section 29 of the SDI Ordinance or any interests which are required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transaction by Directors of Listed Companies under the Listing Rules.

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the register of substantial shareholders maintained by the Company pursuant to Section 16(1) of the SDI Ordinance showed that, other than the interests disclosed under the section headed “Disclosure of interests”, the Company had not been notified of any interests representing 10% or more in the issued share capital of the Company.

4. LITIGATION

Neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and there is no litigation or claim of material importance known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

5. SERVICE CONTRACTS

None of the Directors have any existing or proposed service contracts with the Company or any member of the Group (excluding contracts expiring or determinable by the Company within one year without payment of compensation other than statutory compensation).

6. MATERIAL CHANGE

The results of the Group since 31st December, 2000, the date to which its latest published audited accounts were made up, has been adversely affected by (i) the decline in sales of the Fabric Group as a result of keen competition in the PRC and the unfavourable economic condition in Asia; (ii) disposal of certain old and idle processing machinery of the Fabric Group; and (iii) provision for doubtful debts and written off of obsolete inventories in respect of the Snack Food Business Companies. The Group’s unaudited turnover and net loss attributable to Shareholders for the 11 months ended 30th November, 2001 were approximately HK$38,557,000 and HK$45,399,000 respectively.

Save as disclosed in the above, the Directors are not aware of any material change in the financial and trading position or prospects of the Group since 31st December, 2000, the date to which its latest published audited accounts were made up.

– 45 –

GENERAL INFORMATION

APPENDIX III

7. QUALIFICATION OF EXPERTS

The following are the qualification of the professional advisers whose opinions or advice are contained in this circular:

Name

Qualification

Kim Eng

an investment adviser registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

Boomwell an investment adviser registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

AMS

an investment adviser registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

Hantec an investment adviser and a dealer registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)

Deloitte Touche Tohmatsu Certified Public Accountants Castores Magi chartered surveyors Surveyors Limited

7. CONSENTS

Kim Eng, Boomwell, AMS, Hantec, Deloitte Touche Tohmatsu and Castores Magi Surveyors Limited have given and have not withdrawn their respective written consents to the issue of this circular with the inclusion of their respective letters and/or reports and/or references to their names, as the case may be, in the form and context in which they respectively appear.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the head office and principal place of business in Hong Kong of the Company at Room 3101, 31st Floor, Top Glory Tower, 262 Gloucester Road, Causeway Bay, Hong Kong up to and including 11th March, 2002:

• (a) the Disposal Agreement;

• (b) the letter from the Independent Board Committee dated 22nd February, 2002, the text of which is set out on page 16 to this circular;

– 46 –

GENERAL INFORMATION

APPENDIX III

• (c) the letter of advice from AMS and Hantec dated 22nd February, 2002, the text of which is set out on pages 17 to 28 this circular;

• (d) the valuation report dated 22nd February, 2002 from Castores Magi Surveyors Limited, the texts of which is set out in appendix II to this circular;

• (e) the written consents referred to in the section headed “Consents” in this appendix.

9. MISCELLANEOUS

• (a) The secretary of the Company is Mr. Cheung Chun Ying, who is a fellow member of the Hong Kong Society of Accountants and the Association of Chartered Certified Accountants.

• (b) The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and its head office and principal place of business in Hong Kong is at Room 3101, 31st Floor, Top Glory Tower, 262 Gloucester Road, Causeway Bay, Hong Kong.

• (c) The branch share registrar and transfer office of the Company in Hong Kong is Secretaries Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong.

• (d) The directors of Angel Field are Mr. Chau Ching Ngai and Ms. Mo Yu Ping.

• (e) Save as the Disposal, as at the Latest Practicable Date, none of the Directors nor the expert whose name is listed in the section headed “Qualification of Experts” in this appendix had any direct or indirect material interest in any assets acquired or disposed of by or leased to or by or proposed to be acquired or disposed of by or leased to or by any member of the Group since 31st December, 2000, being the date to which the latest published audited accounts of the Company were made up.

• (f) As at the Latest Practicable Date, none of the experts whose name are listed in the section headed “Qualification of Experts” in this appendix had any shareholding in any member of the Group or the right to subscribe for or to nominate persons to subscribe for shares in any member of the Group.

• (g) As at the Latest Practicable Date, none of the Directors was materially interested in any contracts or arrangements which were subsisting at the Latest Practicable Date and were significant in relation to the business of the Group.

• (h) The English language text of this circular shall prevail over the Chinese language text.

– 47 –

NOTICE OF SGM

==> picture [47 x 55] intentionally omitted <==

YING WING HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

NOTICE IS HEREBY GIVEN that a Special General Meeting of Ying Wing Holdings Limited (“ Company ”) will be held at Shanghai Room II, 3rd Floor, South Pacific Hotel, 23 Morrison Hill Road, Wanchai, Hong Kong on Monday, 11th March, 2002 at 10:30 a.m. for the purpose of considering and, if thought fit, passing, with or without amendments, the following resolution as ordinary resolution:

ORDINARY RESOLUTION

“ THAT the sale and purchase agreement dated 22nd January, 2002 (the “Agreement”) entered into between the Company’s wholly-owned subsidiary, Park Well International Group Ltd. as vendor and Feng Lin Holdings Ltd as purchaser for the sale and purchase of the entire issued share capital of a) Cai Yi Feng Trading Limited, b) Hanover VCL Trading Limited, c) Transfit Garments Limited and d) Vastco (H.K.) Limited respectively, a copy of which has been produced to the meeting marked “ A ” and has been signed by the chairman of the meeting for the purpose of identification, and all transactions contemplated therein be and are hereby approved and confirmed in all respects; and THAT any one director of the Company be and is hereby authorized on behalf of the Company:

• (a) to sign, seal, execute, perfect and deliver all such documents and do all such deeds, acts, matters and things as he/she may in his/her discretion consider necessary or desirable for the purpose of or in connection with the implementation of the Agreement;

• (b) to exercise or enforce all of the rights of Park Well International Group Ltd. or the Company under the Agreement; and

• (c) to complete the Agreement in accordance with their terms.”

By Order of the Board Ying Wing Holdings Limited Tsoi Hon Chung Chairman

Hong Kong, 22nd February, 2002

– 48 –

NOTICE OF SGM

Head office and principal place of business in Hong Kong:

Room 3101, 31st Floor, Top Glory Tower, 262 Gloucester Road, Causeway Bay Hong Kong

Notes:

• (1) A member of the Company entitled to attend and vote at the above meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy need not be a member of the Company. A form of proxy for use at the meeting is enclosed herewith.

• (2) To be valid, the form of proxy together with any power of attorney or other authority under which it is signed or a notarially certified copy of that power of attorney or authority must be deposited with the Hong Kong branch share registrars of the Company, Secretaries Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not later than 48 hours before the time fixed for holding the meeting or any adjournment thereof.

• (3) Completion and return of the form of proxy will not preclude members from attending and voting at the special general meeting.

• (4) The register of members of the Company will be closed from 7th March, 2002 to 11th March, 2002 (both dates inclusive) during which no transfer of shares will be registered. In order to qualify for voting at the special general meeting, members are reminded to ensure that all instruments of transfer of shares accompanied by the relevant share certificate(s), must be lodged with the Company’s branch share registrar in Hong Kong, Secretaries Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong for registration not later than 4:00 p.m. on 6th March, 2002.

– 49 –

==> picture [47 x 56] intentionally omitted <==

YING WING HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

Form of proxy for use by shareholders at the Special General Meeting (the “Meeting”) to be held at Shanghai Room II, 3rd Floor, South Pacific Hotel, 23 Morrison Hill Road, Wanchai, Hong Kong on Monday, 11th March, 2002 at 10:30 a.m.

I/We (Note 1)

of

being the registered holder(s) of

shares (Note 2) of HK$0.10

(“ Shares ”) each in the capital of Ying Wing Holdings Limited (the “ Company ”), HEREBY APPOINT THE CHAIRMAN OF THE MEETING (Note 3) or of

as my/our proxy to (a) attend and act for me/us at the Meeting (and at any adjournment thereof) of the Company to be held at Shanghai Room II, 3rd Floor, South Pacific Hotel, 23 Morrison Hill Road, Wanchai, Hong Kong on Monday, 11th March, 2002 at 10:30 a.m., for the purpose of considering and, if thought fit, passing the Ordinary Resolution set out in the notice convening the Meeting and (b) at such Meeting (and at any adjournment thereof) to vote for me/us and in my/our name(s) by way of poll in respect of the ordinary resolution as indicated below (Note 4) :–

ORDINARY RESOLUTION (Note 5) FOR AGAINST To approve, inter alia, the sale and purchase agreement dated 22nd January, 2002 entered into between the Company’s whollyowned subsidiary, Park Well International Group Ltd. as vendor and Feng Lin Holdings Ltd as purchaser for the sale and purchase of the entire issued share capital of a) Cai Yi Feng Trading Limited, b) Hanover VCL Trading Limited, c) Transfit Garments Limited and d) Vastco (H.K.) Limited respectively and to authorize directors of the Company to do such things and deeds as necessary for the purpose of or in connection with the implementation of the aforesaid agreement.

Dated this day of 2002. Signature (Note 6 and 7)

Notes:

1. Full name(s) and address(es) to be inserted in BLOCK LETTERS.

2. Please insert the number of shares registered in your name(s). If no number is inserted, this form of proxy will be deemed to relate to all the shares in the capital of the Company registered in your name(s).

3. If any proxy other than the Chairman is preferred, please strike out words “THE CHAIRMAN OF THE MEETING” and insert the name and address of the proxy desired in the space provided. ANY ALTERATION MADE TO THIS FORM OF PROXY MUST BE INITIALLED BY THE PERSON WHO SIGNS IT.

4. IMPORTANT: IF YOU WISH TO VOTE FOR A RESOLUTION, PLEASE TICK THE APPROPRIATE BOX MARKED “FOR”. IF YOU WISH TO VOTE AGAINST A RESOLUTION, PLEASE TICK THE APPROPRIATE BOX MARKED “AGAINST”. Failure to complete any of the boxes will entitle your proxy to cast his vote or abstain at his discretion. Your proxy will also be entitled to vote at his discretion on any resolution properly put to the meeting other than those referred to in the notice convening the Meeting.

5. The full text of each resolution referred to above appears in the notice of the Meeting dated 22nd February, 2002.

6. This form of proxy must be signed by you or your attorney duly authorized in writing or, in the case of a corporation, must be either executed under its common seal or under the hand of an officer or attorney duly authorized.

7. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holder(s), and for this purpose seniority will be determined by the order in which the names stand in the register of members of the Company.

8. To be valid, this form of proxy, together with the power of attorney (if any) or other authority (if any) under which it is signed or a notarially certified copy thereof, must be deposited with the branch share registrar of the Company in Hong Kong, Secretaries Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not less than 48 hours before the time appointed for the holding of the Meeting or any adjournment thereof.

9. The proxy need not be a member of the Company but must attend the Meeting in person to represent you.

10. Completion and delivery of the form of proxy will not preclude you from attending and voting at the Meeting if you so wish.