Persistence Gold Group Ltd — Proxy Solicitation & Information Statement 2007

Apr 30, 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your securities in APAC Resources Limited, you should at once hand this circular with the accompanying form of proxy and the Annual Report 2006 to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

APAC RESOURCES LIMITED

• (Incorporated in Bermuda with limited liability) (Stock code: 1104)

PROPOSALS FOR RE-ELECTION OF DIRECTORS AND GENERAL MANDATES TO ISSUE SECURITIES AND REPURCHASE SHARES AND REFRESHMENT OF 10% GENERAL LIMIT ON GRANT OF OPTIONS UNDER THE SHARE OPTION SCHEME

The notice convening an annual general meeting of APAC Resources Limited to be held at 7th Floor, Board Room, The Dynasty Club, South West Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong on Friday, 25 May 2007 at 4:00 p.m. is set out on pages 68 to 70 of the Annual Report 2006 of the Company which is enclosed to this circular. If you are not able to attend the annual general meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrars of the Company in Hong Kong, Secretaries Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the annual general meeting or any adjournment thereof. Completion and return of the form of proxy will not prevent shareholders of the Company from attending and voting in person at the annual general meeting or any adjourned meeting if they so wish.

* For identification purpose only

27 April 2007

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Re-election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
General Mandates to issue securities and repurchase Shares . . . . . . . . . . . . . . . . . . . . . .	4
Refreshment of the Scheme Mandate Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
AGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
APPENDIX I — DETAILS OF DIRECTORS PROPOSED TO BE
RE-ELECTED AT THE AGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
APPENDIX II — EXPLANATORY STATEMENT AS TO
REPURCHASES OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10

— i —

DEFINITIONS

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

“AGM”	the annual general meeting of the Company to be held at 7th
	Floor, Board Room, The Dynasty Club, South West Tower,
	Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong on
	Friday, 25 May 2007 at 4:00 p.m.
“AGM Notice”	the notice convening the AGM as set out on pages 68 to 70 of
	the Annual Report 2006 of the Company, a copy of which is
	despatched together with this circular
“Annual Report 2006”	annual report of the Company for the year of 2006
“Board”	the board of Directors
“Bye-laws”	the bye-laws of the Company
“Company”	APAC Resources Limited, a company incorporated in
	Bermuda with limited liability, the shares of which are listed
	on the main board of the Stock Exchange (Stock Code: 1104)
“Director(s)”	the director(s) of the Company
“Hong Kong”	the Hong Kong Special Administrative Region of the People’s
	Republic of China
“Latest Practicable Date”	25 April 2007, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information in
	this circular
“Listing Rules”	the Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited
“Repurchase Code”	Hong Kong Code on Share Repurchases
“Scheme Mandate Limit”	the maximum number of Shares which may be issued upon
	exercise of all options to be granted under the Share Option
	Scheme and any other share option scheme(s) of the
	Company, which shall not in aggregate exceed 10% of the
	Shares in issue as at the date of approval of the Share Option
	Scheme or of the renewal of such limit
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Share(s)”	ordinary share(s) of HK$0.10 each in the share capital of the
	Company

— 1 —

DEFINITIONS

“Shareholder(s)”	registered holder(s) of the Share(s)
“Share Option Scheme”	the share option scheme adopted by the Company on 22
	September 2004 for an option period of ten years from its date
	of adoption, summary of its principal terms were set out in
	Appendix II of the circular of the Company dated 26 August
	2004
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Takeovers Code”	Hong Kong Code on Takeovers and Mergers
“Warrant(s)”	251,516,032 warrants of the Company listed on the Stock
	Exchange
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.

— 2 —

LETTER FROM THE BOARD

APAC RESOURCES LIMITED

(Incorporated in Bermuda with limited liability) (Stock code: 1104)

Executive Directors:

Mr. Yue Jialin (Chairman)

Mr. Lau Yau Cheung (Chief Executive Officer)

Mr. Cao Zhong Mr. Michael Joseph Bogue

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Independent Non-Executive Directors:

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

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

27 April 2007

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

Dear Sir or Madam,

PROPOSALS FOR RE-ELECTION OF DIRECTORS

AND

GENERAL MANDATES TO ISSUE SECURITIES

AND REPURCHASE SHARES

AND

REFRESHMENT OF 10% GENERAL LIMIT ON GRANT OF OPTIONS UNDER THE SHARE OPTION SCHEME

INTRODUCTION

The purpose of this circular is to provide you with information regarding resolutions to be proposed at the AGM relating to (i) re-election of Directors; (ii) the granting to the Directors of

* For identification purpose only

— 3 —

LETTER FROM THE BOARD

general mandates for the issue of securities and the repurchase of Shares up to 20% and 10% respectively of the aggregate nominal amount of the Company’s issued share capital as at the date of the passing of the resolutions; and (iii) the refreshment of the Scheme Mandate Limit.

RE-ELECTION OF DIRECTORS

The Board currently consists of seven Directors, namely Mr. Yue Jialin, Mr. Lau Yau Cheung, Mr. Cao Zhong, Mr. Michael Joseph Bogue, Mr. Wong Wing Kuen, Albert, Mr. Tsui Robert Che Kwong and Mr. Yang Weiming.

Pursuant to Bye-laws 87(1) and (2) of the existing Bye-laws, at each annual general meeting, one-third of the Directors for the time being (or, if their number is not a multiple of three, the number nearest to but not less than one-third) shall retire from office by rotation that Director shall be eligible for re-election. The Directors to retire by rotation shall include (so far as necessary to ascertain the number of Directors to retire by rotation) any Director who wishes to retire and not to offer himself for re-election. Any further Directors so to retire shall be those of the other Directors subject to retirement by rotation who have been longest in office since their last re-election or appointment and so that as between persons who became or were last re-elected Directors on the same day those to retire shall (unless they otherwise agree between themselves) be determined by lot.

Pursuant to Bye-law 86(2) of the existing Bye-laws, the Directors shall have power from time to time and at any time to appoint any person as a Director either to fill a casual vacancy on the Board or, subject to authorisation by the Shareholders in general meeting, as an addition to the existing Board but so that the number of Directors so appointed shall not exceed any maximum number determined from time to time by the Shareholders in general meeting. Any Director so appointed by the Board shall hold office only until the next following general meeting of the Company (in the case of filling a casual vacancy) or until the next following annual general meeting of the Company (in the case of an addition to the Board) and shall then be eligible for re-election at that meeting. Pursuant to Bye-law 87(2) of the existing Bye-laws, any Director appointed pursuant to Bye-law 86(2) shall not be taken into account in determining which particular Directors or the number of Directors who are to retire by rotation. A retiring Director shall be eligible for re-election.

Pursuant to Bye-laws 86 and 87 of the existing Bye-laws, Mr. Yue Jialin, Mr. Michael Joseph Bogue and Mr. Yang Weiming shall retire at the AGM. All the retiring Directors are eligible for re-election.

Pursuant to Rule 13.74 of the Listing Rules, a listed issuer shall disclose the details required under Rule 13.51(2) of the Listing Rules of any directors proposed to be re-elected or proposed new director in the notice or accompanying circular to its shareholders of the relevant general meeting, if such re-election or appointment is subject to shareholders’ approval at that relevant general meeting. A brief biographical details of the retiring Directors are set out in Appendix I of this circular.

GENERAL MANDATES TO ISSUE SECURITIES AND REPURCHASE SHARES

At the special general meeting of the Company held on 4th January 2007, ordinary resolutions were passed for the granting of general mandates to the Directors, inter alia, (i) to allot, issue or

— 4 —

LETTER FROM THE BOARD

otherwise deal with Shares not exceeding 20% of the aggregate nominal amount of the issued share capital of the Company as at that date (the “Existing Issue Mandate”) and (ii) to repurchase Shares representing up to a maximum of 10% of the aggregate nominal amount of the issued share capital of the Company as at that date (the “Existing Repurchase Mandate”).

The Existing Issue Mandate and the Existing Repurchase Mandate will lapse upon the conclusion of the AGM. The Directors consider that the Existing Issue Mandate and the Existing Repurchase Mandate increase the flexibility in the Company’s affairs and are in the interests of the Shareholders, and that the same should continue to be adopted by the Company.

New general mandates to allot, issue or otherwise deal with securities of the Company up to 20% and to repurchase Shares up to 10% of the aggregate nominal amount of the issued share capital of the Company as at the date of passing the resolutions (the “Share Repurchase Mandate”) as set out in Resolution Nos. 4 and 5 respectively of the AGM Notice will be proposed at the AGM. Resolution authorising the extension of the general mandate to the Directors to issue Shares to include the aggregate nominal amount of such Shares repurchased (if any) under the Share Repurchase Mandate is to be proposed as Resolution No. 6 of the AGM Notice at the AGM.

With reference to the proposed new general mandates, the Directors, as at the date hereof, wish to state that they have no immediate plans to issue any new securities or repurchase any Shares pursuant to the relevant mandates.

An explanatory statement containing the particulars required by the Listing Rules to enable the Shareholders to make an informed view on whether to vote for or against Resolution No. 5 to be proposed at the AGM in relation to the proposed Share Repurchase Mandate are set out in Appendix II to this circular.

REFRESHMENT OF THE SCHEME MANDATE LIMIT

Under the Share Option Scheme and the applicable Listing Rules, the Board has the right to grant to the eligible participants options to subscribe for up to a maximum of 41,300,000 Shares, being 10% of the Shares in issue as at the date of adoption of the Share Option Scheme by Shareholders at the annual general meeting of the Company on 22 September 2004 and representing approximately 1.24% of the issued share capital of the Company as at the Latest Practicable Date.

As at the Latest Practicable Date, the Company has not granted any share options carrying right to subscribe for Shares under the Share Option Scheme since it was adopted by the Company on 22 September 2004. The Directors may consider to grant options under the Share Option Scheme to qualified participants thereunder to provide more incentives to, and recognise the contributions of, the employees of the Company and of its subsidiaries, the Directors consider that the Company should refresh the Scheme Mandate Limit in accordance with the Share Option Scheme so that the Company has greater flexibility in so doing.

The proposed refreshment of the Scheme Mandate Limit will be conditional upon:

(a) the approval of the Shareholders at the AGM ; and

— 5 —

LETTER FROM THE BOARD

• (b) the Stock Exchange granting the listing of, and the permission to deal in, such number of Shares representing 10% of the Shares in issue as at the date of passing of the relevant resolution at the AGM, which may fall to be allotted and issued pursuant to the exercise of options granted under the renewed Scheme Mandate Limit.

On the basis of 3,318,283,968 Shares in issue as at the Latest Practicable Date and assuming that no Shares are issued or repurchased by the Company prior to the date of the AGM, the Company will be entitled to grant options under the Share Option Scheme and other share option schemes of the Company carrying rights to subscribe for up to 331,828,396 Shares.

An ordinary resolution will therefore be proposed to the Shareholders at the AGM to refresh the Scheme Mandate Limit so as to allow the Directors to grant share options entitling holders thereof to subscribe for up to 10% of the issued share capital of the Company as at the date of passing of the relevant resolution at the AGM.

The number of Shares to be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and other share option schemes of the Company must not, in aggregate, exceed 30% of the issued share capital of the Company from time to time. The Board considers that the refreshment of the Scheme Mandate Limit is in the interests of the Company and the Shareholders as a whole.

Application has been made to the Listing Committee of the Stock Exchange for the approval of the listing of, and permission to deal in, the Shares, which may be issued upon the exercise of the options to be granted under the aforesaid refreshed limit of the Share Option Scheme.

AGM

The AGM Notice is set out on pages 68 to 70 of the Annual Report 2006 of the Company. Ordinary resolutions in respect of the re-election of the Directors, the general mandates to issue securities and repurchase Shares as referred to above and the refreshment of the Scheme Mandate Limit will be proposed at the AGM.

A form of proxy for the AGM is enclosed with this circular. If you are not able to attend the AGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Secretaries Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for holding the AGM or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the AGM or any adjourned meeting thereof should you so desire.

Pursuant to the Bye-law 66 of the existing Bye-laws, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded (i) by the Chairman of the meeting; or (ii) by at least three Shareholders present in person (or in the case of a Shareholder being a corporation by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting; or (iii) by a Shareholder or Shareholders present in person

— 6 —

LETTER FROM THE BOARD

(or in the case of a Shareholder being a corporation by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all Shareholders having the right to vote at the meeting; or (iv) by a Shareholder or Shareholders present in person (or in the case of a Shareholder being a corporation by its duly authorised representative) or by proxy and holding Shares conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all Shares conferring that right.

RECOMMENDATION

The Directors consider that the proposed ordinary resolutions for approval of the re-election of the retiring Directors, the grant of general mandates to issue securities and to repurchase Shares, to add the aggregate nominal amount of Shares that may be repurchased to the aggregate nominal amount of the share capital of the Company that may be allotted pursuant to the general mandate to issue securities and the refreshment of the Scheme Mandate Limit are each in the best interests of the Company and the Shareholders as a whole, and accordingly, recommend all Shareholders to vote in favour of all the resolutions to be proposed at the AGM.

GENERAL INFORMATION

Your attention is drawn to the additional information set out in the Appendices to this circular. The English text of this circular shall prevail over the Chinese text.

Yours faithfully, By Order of the Board APAC Resources Limited Yue Jialin Chairman

— 7 —

DETAILS OF DIRECTORS PROPOSED TO BE RE-ELECTED AT THE AGM

APPENDIX I

LIST OF DIRECTORS FOR RE-ELECTION

The biographical details of the Directors eligible for re-election, at the AGM are set out below.

Mr. Yue Jialin , aged 39, appointed on 26 April 2004, is the Chairman and Executive Director of the Company. Mr. Yue is responsible for the strategic planning and corporate development of the Group. Mr. Yue has established in-depth knowledge of the PRC economic development and policies through his previous role as a judge in the Economic Court of People’s Court in Luowu District, Shenzhen, the People’s Republic of China (the “PRC”) during 1989 to 1992. Mr. Yue also sits on the school of business administration of Changhun Industrial University as visiting professor. Mr. Yue has engaged in legal consultation in respect of the acquisition of state owned assets and foreign investments in the PRC. Mr. Yue is also the sole director and beneficial owner of Profit Harbour Investments Limited, the substantial shareholder of the Company. Save as disclosed above, Mr. Yue did not hold any other directorships in listed public companies during the past three years.

Mr. Yue has been appointed for a specific term on 6 November 2006 which shall continue until 30 October 2007, but subject to the relevant provisions of retirement and re-election at the annual general meetings of the Company in accordance with the Company’s Bye-laws. Mr. Yue is entitled to receive a Director’s fee of HK$10,000 per month which was determined with reference to his duties and responsibilities with the Company, the Company’s current standards for emoluments and market conditions.

Save as disclosed above, Mr. Yue did not have any relationship with any other Director, senior management, substantial or controlling shareholder of the Company and he had no interests in the Shares within the meaning of Part XV of the SFO. Mr. Yue was also not aware of any matters that are required to be disclosed pursuant to Rules 13.51(2)(h) to 13.51(2)(v) of the Listing Rules of any other matters that need to be brought to the attention of the Shareholders.

Mr. Michael Joseph Bogue , aged 36, appointed on 25 September 2006 as an Independent Non-Executive Director and was redesignated as Executive Director of the Company with effect from 10 January 2007. Mr. Bogue holds a Bachelor of Commerce degree from the University of Western Australia and has a diverse and successful background in senior executive roles related to the global resources sector. Over the last 14 years he has undertaken numerous mergers and acquisitions, equity and debt capital market issuances and derivatives transactions across the global resources sector. He is the current Managing Director and Chief Executive Officer of RIMCapital Limited (“RIMCapital”), a resources focused investment company listed on the Australian Stock Exchange of which, one of the substantial shareholders of the Company held substantial interest. Previous executive positions have included roles within a global investment Bank as Co-Head of Mining & Metals for Asia Pacific, a senior Business Development & Finance role within a top tier Australian resources house and as principal of a boutique investment and advisory firm specializing in the resources sector. Save as disclosed above. Mr. Bogue did not hold any other directorships in listed companies during the past three years.

— 8 —

DETAILS OF DIRECTORS PROPOSED TO BE RE-ELECTED AT THE AGM

APPENDIX I

Mr. Bogue has been appointed for a specific term commenced from 10 January 2007 which shall continue until 30 June 2008, but subject to the relevant provisions of retirement and re-election at the annual general meetings of the Company in accordance with the Company’s Bye-laws. Mr. Bogue is entitled to receive a Director’s fee of A$100,000 per annum which was determined with reference to his duties and responsibilities with the Company, the Company’s current standards for emoluments and market conditions.

Save as disclosed above as, at the Latest Practicable Date, Mr. Bogue did not have any relationship with any other Director, senior management, substantial or controlling shareholder of the Company and he had no interests in the Shares within the meaning of Part XV of the SFO. Mr. Bogue was also not aware of any matters that are required to be disclosed pursuant to Rules 13.51(2)(h) to 13.51(2)(v) of the Listing Rules of any other matters that need to be brought to the attention of the Shareholders.

Mr. Yang Weiming , aged 47, appointed on 8 August 2006, is an Independent Non-Executive Director of the Company. Mr. Yang is graduated with a bachelor’s degree from the correspondence school of Guangdong Provincial Committee Party School of CPC in 2003. He had worked at the Centre for Development and Leasing of Housing, Shenzhen Housing Bureau from 1997 to 2004, specializing in the development of properties in China. Presently, Mr. Yang is also a director of New Gold International Limited which is a private limited company incorporated in Hong Kong.

Mr. Yang has been appointed for a specific term on 8 August 2006 which shall continue until 30 June 2007, but subject to the relevant provisions of retirement and re-election at the annual general meetings of the Company in accordance with the Company’s Bye-laws. Mr. Yang is entitled to receive a Director’s fee of HK$40,000 per annum which was determined with reference to his duties and responsibilities with the Company, the Company’s current standards for emoluments and market conditions.

Mr. Yang did not have any relationship with any other Director, senior management, substantial or controlling shareholder of the Company and he had no interests in the Shares within the meaning of Part XV of the SFO. Mr. Yang was also not aware of any matters that are required to be disclosed pursuant to Rules 13.51(2)(h) to 13.51(2)(v) of the Listing Rules of any other matters that need to be brought to the attention of the Shareholders.

— 9 —

EXPLANATORY STATEMENT AS TO REPURCHASE OF SHARES

APPENDIX II

This appendix serves as explanatory statement, as required by the Listing Rules, to provide information to the Shareholders regarding the general mandate to repurchase the Shares as referred to in paragraph headed of general mandates to Issue Shares and Repurchase Shares in the “Letter from the Board” in this circular. For the purpose of this appendix, the term “Shares” (unless otherwise stated) shall be as defined in the Code on Share Repurchases which means shares of all classes and securities which carry a right to subscribe for or purchase shares.

1. LISITNG RULES FOR REPURCHASE OF SECURITIES

The Listing Rules permit companies whose primary listings are on the Stock Exchange to repurchase their securities (which shall include, where the context permits, shares of all classes and securities which carry a right to subscribe or purchase shares) on the Stock Exchange subject to certain restrictions amongst which the Listing Rules provide that the shares proposed to be repurchased by a company must be fully-paid up and all repurchases of shares by a company with a primary listing on the Stock Exchange must be approved in advance by an ordinary resolution of shareholders either by way of general mandate to the Directors to make such repurchases or by specific approval of a particular transaction.

2. SHARE CAPTIAL

As at the Latest Practicable Date, the issued share capital of the Company was HK$331,828,396.8 comprising 3,318,283,968 Shares. Subject to the passing of the relevant ordinary resolution(s) as set out in the notice of the AGM granting the Share Repurchase Mandate and on the basis that no Shares are allotted and issued or repurchased by the Company prior to the AGM, the Company would be allowed under the Share Repurchase Mandate to repurchase such number of Shares as representing 10% of the issued share capital of the Company as at the date of the AGM (the maximum possible number of Shares which may be repurchased will be 331,828,396 Shares.)

3. REASONS FOR THE REPURCHASES

The Directors believe that the ability to repurchase Shares is in the best interests of the Company and the Shareholders. Repurchases may, depending on the market conditions and funding arrangements of the Company at the time, result in an increase in earnings per share. The Directors are seeking a general mandate to repurchase Shares so as to give the Company flexibility to do so if and when appropriate. The number of Shares to be purchased on occasion and the price and other terms upon which the same are repurchased will be decided by the Directors at the relevant time having regard to the circumstances then pertaining.

— 10 —

EXPLANATORY STATEMENT AS TO REPURCHASE OF SHARES

APPENDIX II

Whilst it is not possible to anticipate in advance any specific circumstance in which the Directors might think it appropriate to repurchase shares, a repurchase would be effected where the resulting reduction in the issued capital of the Company was considered beneficial. The Directors believe that an ability to repurchase shares gives the Company additional flexibility that would be beneficial. Shareholders can be assured that the Directors would only make such repurchases in circumstances where they consider them to be in the interests of the Company because they consider the Shares can be purchased on favourable terms.

4. FUNDING OF REPURCHASES

In repurchasing the Shares, the Company must fund the repurchase entirely from the Company’s available cash flow or working capital facilities legally available for such purpose in accordance with its memorandum of association and Bye-laws, the Listing Rules and the laws of Bermuda.

The Companies Act 1981 of Bermuda (as amended) provides that the amount of capital paid in connection with a share repurchase may only be paid out of the capital paid up on the relevant shares, or out of funds of the Company which would otherwise be available for dividend or distribution or from the proceeds of a fresh issue of shares made for the purpose. The Companies Act 1981 of Bermuda (as amended) further provides that the amount of premium payable on repurchase may only be paid out of either the funds that would otherwise be available for distribution or dividend or out of the share premium account of the Company. The shares repurchased will be treated as cancelled and the amount of the Company’s issued share capital will be diminished by the nominal value of such shares, but the aggregate amount of the Company’s authorized share capital will not be thereby reduced.

On the basis of the consolidated financial position of the Company for the year ended 31 December 2006 (being the date to which the latest published audited financial statements of the Company have been made up) and in particular the working capital position of the Group at that time and the number of shares of the Company in issue as at the Latest Practicable Date, the Directors consider that there would be a material adverse impact on the working capital position and that there would be a material adverse impact on the gearing position of the Group in the event that repurchases of all the Shares were to be carried out in full during the proposed mandate period. However, no repurchase would be made in circumstances that would have a material adverse impact on the working capital or gearing position of the Group (as compared with the financial position disclosed in its latest published audited financial statements) unless the Directors consider that such repurchases are in the best interest of the Company.

5. CONNECTED PERSONS

No connected persons (as defined in the Listing Rules) of the Company have notified the Company that they have a present intention to sell any Shares held by them to the Company and no such persons have undertaken not to sell any Shares held by them to the Company, in the event that the Share Repurchase Mandate is granted by the Shareholders at the SGM.

— 11 —

EXPLANATORY STATEMENT AS TO REPURCHASE OF SHARES

APPENDIX II

6. DIRECTORS INTERESTS

There are no Directors or (to the best of the knowledge of the Directors, having made all reasonable enquiries) any associates (as defined in the Listing Rules) of the Directors who have a present intention, in the event that the Share Repurchase Mandate is granted by the Shareholders, to sell any Shares held by them to the Company.

7. DIRECTORS’ UNDERTAKING

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the power of the Company to make repurchases of the Shares pursuant to the Share Repurchase Mandate in accordance with the Listing Rules and the applicable laws of Bermuda and regulations set out in the memorandum of association and Bye-laws of the Company.

8. EFFECT OF THE TAKEOVERS CODE

If, on the exercise of the power to repurchase the Shares pursuant to the Share Repurchase Mandate, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purpose of Rule 32 of the Takeovers Code. As a result, a Shareholder or a group of Shareholders acting in concert (as defined in the Code), depending on the level of such increase, could obtain or consolidate control of the Company and may become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code.

As at the Latest Practicable Date, according to the register kept by the Company pursuant to Section 336(1) of the SFO, to the best of the knowledge and belief of the Directors, Profit Harbour, a substantial Shareholder together with its concert parties, held 712,739,562 Shares (which represents an interest in 593,399,602 Shares and an interest in 119,339,960 units of Warrants giving rise to an interest in 119,339,960 underlying Shares), representing approximately 21.48% of the issued share capital of the Company.

On the basis of 3,318,283,968 Shares in issue as at the Latest Practicable Date and assuming no further issue or repurchase of Shares prior to the date of the AGM, if the Repurchase Mandate were exercised in full the shareholding percentage of Profit Harbour and its concert parties in the Company would increase to approximately 23.87%. Such increase will not give rise to an obligation on the part of Profit Harbour and its concert parties to make a mandatory offer under Rule 26 of the Takeovers Code.

Save as aforesaid, the Directors are not aware of any consequences which will arise under the Takeovers Code as a result of any repurchases to be made under the Share Repurchase Mandate.

The Directors have no present intention to exercise the power to repurchase the Shares to the extent that the aggregate amount of the share capital of the Company in public hands would be reduced to less than 25% of the issued share capital of the Company.

— 12 —

EXPLANATORY STATEMENT AS TO REPURCHASE OF SHARES

APPENDIX II

9. SHARE PRICES

The highest and lowest prices at which the Shares were traded on the Stock Exchange in each of the last twelve months immediately prior to the Latest Practicable Date were as follows:

Month	Highest	Lowest
	HK$	HK$
2006
April	suspended	suspended
May	suspended	suspended
June	suspended	suspended
July	0.226	0.206
August	0.214	0.200
September	0.300	0.202
October	0.360	0.290
November	0.353	0.310
December	0.325	0.295
2007
January	0.530	0.300
February	0.590	0.420
March	0.900	0.480

Source: The Stock Exchange of Hong Kong Limited

10. SECURITIES REPURCHASES MADE BY THE COMPANY

During the six months preceding the Latest Practicable Date, the Company had not repurchased any of its Shares (whether on the Stock Exchange or otherwise).

— 13 —