Planetree International Development Limited — Proxy Solicitation & Information Statement 2006

Mar 17, 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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.

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 accountants or other independent professional adviser.

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

YUGANG INTERNATIONAL LIMITED （渝港國際有限公司） [*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 613)

CONTINUING CONNECTED TRANSACTIONS

Independent financial adviser to the Independent Board Committee and the Shareholders

A notice convening a special general meeting of the Company to be convened and held at Rooms 3301-3307, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong on Monday, 3 April 2006 at 9:30 a.m., is set out on pages 28 to 29 of this circular. Whether or not you intend to attend the meeting, you are requested to complete the enclosed proxy form in accordance with the instructions printed thereon and return the same to the principal place of business of the Company in Hong Kong in Rooms 3301-3307, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong as soon as possible, but in any event not less than 48 hours before the time appointed for holding of the meeting or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting at the meeting or any adjourned meeting should you so wish.

* For identification purposes only

17 March 2006

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
2. The Sales Transactions and the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
3. Reasons for and benefits of the Sales Transactions . . . . . . . . . . . . . . . . . . . .	5
4. Principal activities of the Group and Thomas Wagner Group . . . . . . . . . . .	5
5. Continuing connected transactions and the SGM . . . . . . . . . . . . . . . . . . . . . .	6
6. Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
7. Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Letter from Dao Heng Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Appendix — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Notice of Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28

— i —

DEFINITIONS

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

“Agreement”	the agreement dated 22 February 2006 between Hoi Tin and
	Thomas Wagner relating to the Sales Transactions
“Board”	the board of Directors
“Company”	Yugang International Limited, a company incorporated in
	Bermuda with limited liability, the shares of which are listed
	on the main board of the Stock Exchange
“Dao Heng Securities”	Dao Heng Securities Limited, a corporation licensed under the
	SFO to conduct type 1 (dealing in securities), 4 (advising on
	securities) and 6 (advising on corporate finance) regulated
	activities, and the independent financial adviser to the
	Independent Board Committee and the Shareholders
“Directors”	the directors of the Company
“Group”	the Company and its subsidiaries, including the Qualipak Group
“HK$”	Hong Kong dollars
“Hoi Tin”	Hoi Tin Universal Limited, a company incorporated in Hong
	Kong and a non wholly-owned subsidiary of both the Company
	and Qualipak
“Hoi Tin Acquisition”	acquisition of 60% interest in Hoi Tin by Qualipak which was
	completed in July 2005
“Hoi Tin Group”	Hoi Tin and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Latest Practicable Date”	14 March 2006, being the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining certain
	information contained in this circular
“Listing Rules”	Rules Governing the Listing of Securities on the Stock
	Exchange

— 1 —

DEFINITIONS

“PRC”	The People’s Republic of China, which for the purpose of this
	circular excludes Hong Kong, Macao Special Administrative
	Region of the PRC and Taiwan
“Products”	products manufactured by Hoi Tin Group, which are principally
	soft luggage, travel bags, backpacks and brief cases
“Qualipak”	Qualipak International Holdings Limited, a company
	incorporated in Bermuda with limited liability, the shares of
	which are listed on the main board of the Stock Exchange
“Qualipak Group”	Qualipak and its subsidiaries
“RMB”	Renminbi
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Sales Transactions”	transactions relating to sale of the Products by Hoi Tin Group
	to Thomas Wagner Group
“SGM”	the special general meeting of the Company to be convened
	and held at Rooms 3301-3307, China Resources Building, 26
	Harbour Road, Wanchai, Hong Kong on Monday, 3 April 2006
	at 9:30 a.m. to approve by way of poll, if thought fit, the Sales
	Transactions and the proposed annual caps
“Share(s)”	share(s) of HK$0.01 each in the share capital of the Company
“Shareholder(s)”	holder(s) of Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Thomas Wagner”	Thomas Wagner GmbH, which currently holds 25%
	shareholding interest in a subsidiary of Qualipak
“Thomas Wagner Group”	Thomas Wagner and its subsidiaries
“%”	per cent.

— 2 —

LETTER FROM THE BOARD

YUGANG INTERNATIONAL LIMITED （渝港國際有限公司） [*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 613)

Executive Directors:

Mr. Cheung Chung Kiu (Chairman) Mr. Yuen Wing Shing (Managing Director) Mr. Zhang Qing Xin Mr. Lam Hiu Lo Mr. Liang Kang

Non-executive Director:

Mr. Carmelo Lee Ka Sze

Independent non-executive Directors: Mr. Wong Wai Kwong, David Mr. Wong Yat Fai Mr. Ng Kwok Fu

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

Principal place of business in Hong Kong: Rooms 3301- 3307 China Resources Building 26 Harbour Road Wanchai Hong Kong

17 March 2006

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

1. INTRODUCTION

The Company and Qualipak jointly announced on 23 February 2006 that Hoi Tin and Thomas Wagner had entered into the Agreement pursuant to which the parties agreed to, and to procure their respective subsidiaries to, enter into the Sales Transactions within a period up to 31 December 2008.

The Sales Transactions constitute and will constitute continuing connected transactions of the Company under the Listing Rules. The main purpose of this circular is to provide you with details of the Sales Transactions together with a notice of the SGM.

* For identification purposes only

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LETTER FROM THE BOARD

2. THE SALES TRANSACTIONS AND THE AGREEMENT

On 22 February 2006, Hoi Tin and Thomas Wagner entered into the Agreement pursuant to which the parties agreed to, and to procure their respective subsidiaries to, enter into the Sales Transactions within a period up to 31 December 2008. After completion of the Hoi Tin Acquisition, Hoi Tin has become a 60% indirectly owned subsidiary of the Company through Qualipak, and Thomas Wagner has become a 25% shareholder of a subsidiary of Hoi Tin and therefore Thomas Wagner and its subsidiaries are connected persons of the Company within the meaning of the Listing Rules. Hence the Sales Transactions which had taken place or will take place pursuant to the Agreement after completion of the Hoi Tin Acquisition constitute and will constitute continuing connected transactions of the Company within the meaning of the Listing Rules.

Whilst the occurrence of the Sales Transactions will depend on the business requirements of the respective parties, it is anticipated that Hoi Tin Group will continue to enter into the Sales Transactions with Thomas Wagner Group in its usual course of business. The Sales Transactions are and will be effected and governed by the purchase orders entered or to be entered into between relevant members of Hoi Tin Group and relevant members of Thomas Wagner Group. Each purchase order is expected to be delivered within a period of six months. The terms of the Sales Transactions (including the amount of consideration payable by Thomas Wagner Group and the payment terms) are and shall be on normal commercial terms which are in accordance with the usual practice adopted in the industry, on an arm’s length basis and be on the same basis as Hoi Tin Group accepts business from other independent third parties.

Historical amount

Following completion of the Hoi Tin Acquisition, Hoi Tin Group and Thomas Wagner Group had entered into the Sales Transactions since October 2005. The accumulated turnover received by Hoi Tin Group from the Sales Transactions after completion of the Hoi Tin Acquisition up to 31 December 2005 was approximately HK$5.4 million and the accumulated turnover received by Hoi Tin Group from the Sales Transactions during the period from 1 January 2006 to 15 February 2006 was approximately HK$2.6 million.

The proposed annual caps and the basis of the cap

It is expected that the amount of the aggregate turnover receivable by Hoi Tin Group under the Sales Transactions for the three financial years ending 31 December 2006, 2007 and 2008 will not exceed HK$55 million, HK$60.5 million and HK$66.55 million respectively. The expected annual turnover of the Sales Transactions for the year ending 31 December 2006 is determined by reference to (i) actual shipment to date amounted to approximately HK$3.7 million; (ii) orders under negotiation and pending confirmation amounted to approximately HK$8 million; (iii) indication by Thomas Wagner Group

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LETTER FROM THE BOARD

that they may negotiate further orders of up to approximately HK$26 million in the second half of 2006 and (iv) the expected growth of the size of approximately HK$17 million of the Sales Transactions based on the current trend of orders placed by Thomas Wagner Group for the year ending 31 December 2006 and the expected annual turnover of the Sales Transactions for the years ending 31 December 2007 and 2008 is determined by a growth in the size of the Sales Transactions by 10% from the previous financial years.

3. REASONS FOR AND BENEFITS OF THE SALES TRANSACTIONS

Hoi Tin Group is currently principally engaged in the design, manufacture and sale of soft luggage, travel bags, backpacks and brief cases, and the Sales Transactions are transactions in ordinary course of business of Hoi Tin Group and would enhance the revenue base and market share in soft luggage, travel bags, backpacks and brief cases of Hoi Tin Group and, in turn, of both Qualipak and the Company. Hence the Sales Transactions would be of benefit to the respective shareholders of Qualipak and the Company as a whole.

The directors of Qualipak consider that the Sales Transactions are and will be conducted in the ordinary and usual course of business of the Qualipak Group and on an arm’s length basis, on normal commercial terms or on terms no less favourable than those available to independent third parties, and both the Sales Transactions and the proposed annual caps are fair and reasonable and in the interest of Qualipak and its shareholders as a whole.

The Directors agree with the views of the directors of Qualipak regarding the Sales Transactions and the proposed annual cap as stated above and therefore are also of the view that the Sales Transactions are and will be conducted in the ordinary and usual course of business of the Group and on an arm’s length basis, on normal commercial terms or on terms no less favourable than those available to independent third parties, and both the Sales Transactions and the proposed annual caps are fair and reasonable and in the interests of the Group and the Shareholders as a whole.

4. PRINCIPAL ACTIVITIES OF THE GROUP AND THOMAS WAGNER GROUP

The principal activities of the Group are the trading of automobile parts, manufacturing of packaging products, treasury investments and property and other investments. In so far as the Directors are aware, the principal activities of Thomas Wagner Group include sale of soft luggage, travel bags, backpacks and brief cases.

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LETTER FROM THE BOARD

5. CONTINUING CONNECTED TRANSACTIONS AND THE SGM

After completion of the Hoi Tin Acquisition, Thomas Wagner has become a 25% shareholder of a subsidiary of Qualipak, and Qualipak is, in turn, a subsidiary of the Company and therefore Thomas Wagner and its subsidiaries are connected persons of the Company within the meaning of the Listing Rules. Hence the Sales Transactions which had taken place or will take place pursuant to the Agreement after completion of the Hoi Tin Acquisition constitute and will constitute continuing connected transactions of the Company.

Since the annual consideration for the Sales Transactions under the Agreement is expected to exceed HK$10,000,000 and the applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules based on the annual caps of HK$55 million, HK$60.5 million and HK$66.55 million for the three financial years ending 31 December 2006, 2007 and 2008 respectively will be more than 2.5%, the Sales Transactions under the Agreement constitute continuing connected transactions of the Company which are subject to the reporting and announcement requirements and the independent shareholders’ approval requirements under the Listing Rules.

Set out on pages 28 to 29 of this circular is a notice convening the SGM at Rooms 3301-3307, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong on Monday, 3 April 2006 at 9:30 a.m. at which an ordinary resolution will be proposed to consider and, if thought fit, approve by way of poll the Sales Transactions and the proposed annual caps. To the best knowledge, information and belief of the Directors, after making all reasonable enquiries, no Shareholder is required to abstain from voting in respect of the ordinary resolution to be proposed at the SGM.

The Independent Board Committee was appointed to advise the Shareholders on whether the terms of the Sales Transactions and the proposed annual caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Dao Heng Securities was also appointed as the independent financial adviser to advise the Independent Board Committee and the Shareholders on the Sales Transactions and the proposed annual caps.

Enclosed is a proxy form for use at the SGM. Whether or not you intend to attend and vote at the SGM in person, you are requested to complete the enclosed proxy form in accordance with the instructions printed thereon and return it to the principal place of business of the Company in Hong Kong in Rooms 3301-3307, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong as soon as possible, but in any event, not less than 48 hours before the time appointed for holding the SGM or any adjourned meeting. Completion and return of the proxy form will not preclude you from attending and voting at the SGM or any adjourned meeting should you so wish.

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LETTER FROM THE BOARD

6. RECOMMENDATION

Your attention is drawn to (a) the letter from the Independent Board Committee set out on page 8 to 9 of this circular which contains the recommendation of the Independent Board Committee to the Shareholders regarding the Sales Transactions and the proposed annual caps and (b) the letter from Dao Heng Securities set out on pages 10 to 19 of this circular which contains its recommendation to the Independent Board Committee and the Shareholders in relation to the Sales Transactions and the proposed annual caps, the principal factors and reasons considered by Dao Heng Securities in arriving at its recommendation.

The Independent Board Committee, having taken into account the advice of Dao Heng Securities, considers that the terms of the Sales Transactions and the proposed annual caps thereunder are in the interests of the Group and the Shareholders as a whole and are fair and reasonable so far as the Shareholders generally are concerned, and therefore recommends the Shareholders to vote in favour of the ordinary resolution to approve the Sales Transactions and the proposed annual caps.

7. ADDITIONAL INFORMATION

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

Yours faithfully, By order of the Board Yugang International Limited Yuen Wing Shing Managing Director

— 7 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

YUGANG INTERNATIONAL LIMITED （渝港國際有限公司） [*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 613)

Members of the Independent Board Committee: Mr. Wong Wai Kwong, David Mr. Wong Yat Fai Mr. Ng Kwok Fu

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

Principal place of business in Hong Kong: Rooms 3301-3307 China Resources Building 26 Harbour Road Wanchai Hong Kong

17 March 2006

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We have been appointed to advise you in respect of the Sales Transactions and the proposed annual caps. We refer to the circular of which this letter forms part. Terms defined in the circular shall have the same meanings when used in this letter, unless the context otherwise requires.

We wish to draw your attention to the letter from the Board as set out on pages 3 to 7 of the circular which sets out, among other things, information relating to the Sales Transactions and the letter from Dao Heng Securities as set out on pages 10 to 19 of the circular which contains its advice to us and to you in relation to the Sales Transactions and the proposed annual caps.

* For identification purposes only

— 8 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the terms of the Sales Transactions and the advice of Dao Heng Securities, we consider that the terms of the Sales Transactions and the proposed annual caps thereunder are in the interests of the Group and the Shareholders as a whole and are fair and reasonable so far as the Shareholders generally are concerned. Accordingly, we recommend the Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Sales Transactions and the proposed annual caps.

Yours faithfully,

The Independent Board Committee Wong Wai Kwong, David Wong Yat Fai Ng Kwok Fu

— 9 —

LETTER FROM DAO HENG SECURITIES

The following is the text of the letter of advice to the Independent Board Committee and the Shareholders from Dao Heng Securities in connection with the terms of the Agreement, the Sales Transactions and the proposed annual caps, which has been prepared for the purpose of inclusion in this circular.

==> picture [146 x 47] intentionally omitted <==

17 March 2006

To the Independent Board Committee and the Shareholders

Yugang International Limited Rooms 3301-3307 China Resources Building 26 Harbour Road, Wanchai Hong Kong

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our engagement by the Company as an independent financial adviser to advise the Independent Board Committee and the Shareholders in respect of the terms of the Agreement, the Sales Transactions and the proposed annual caps. Details of the principal terms of the Agreement and the Sales Transactions are contained in the letter from the Board in the circular dated 17 March 2006 to the Shareholders (the “Circular”), of which this letter forms part. Terms defined in the Circular bear the same meanings herein unless the context otherwise requires.

On 22 February 2006, Hoi Tin, a subsidiary of Qualipak, which in turn, is a subsidiary of the Company, and Thomas Wagner entered into the Agreement pursuant to which the parties agreed to, and to procure their respective subsidiaries to, enter into the Sales Transactions within a period up to 31 December 2008. Thomas Wagner, being a 25% shareholder of a subsidiary of Hoi Tin, and its subsidiaries are connected persons of the Company within the meaning of the Listing Rules. Since the annual consideration for the Sales Transactions under the Agreement is expected to exceed HK$10,000,000 and the applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules will be more than 2.5%, the Sales Transactions under the Agreement constitute continuing connected transactions of the Company which are subject to the reporting and announcement requirements and the independent

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LETTER FROM DAO HENG SECURITIES

shareholders’ approval requirements under the Listing Rules. To the best knowledge, information and belief of the Directors, after making all reasonable enquiries, no Shareholder is required to abstain from voting on the relevant resolution to approve the Sales Transactions and the proposed annual caps at the SGM. The independent non-executive Directors, including Mr. Wong Wai Kwong David, Mr. Wong Yat Fai and Mr. Ng Kwok Fu have been appointed as members of the Independent Board Committee to advise the Shareholders in respect of the Sales Transactions and the proposed annual caps.

In formulating our recommendations, we have relied on the accuracy of the information and representations contained in the Circular, which have been provided by the management of the Group and the Directors and have assumed that all information and representations made or referred to in the Circular are true and accurate in all material respects. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the management of the Group and the Directors and have been advised by the management of the Group and the Directors that no material facts have been omitted from the information provided and referred to in the Circular. We consider that we have reviewed sufficient information to reach an informed view and to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice. We have not, however, conducted any independent investigation into the business and affairs or the future prospects of the Group, the Hoi Tin Group and the Thomas Wagner Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In giving our opinion as to the fairness and reasonableness of the terms of the Agreement, the Sales Transactions and the proposed annual caps to the Independent Board Committee and the Shareholders, we have taken into account the following factors and reasons:

A. Background and reasons for the entering into of the Agreement

The principal activities of the Group are the trading of automobile parts, manufacturing of packaging products, treasury investments and property and other investments. In July 2005, the Group completed the acquisition of 60% interest in Hoi Tin, which, together with its subsidiaries, are engaged in the design, manufacture and sale of soft luggage, travel bags, backpacks and briefcases. As stated in the letter from the Board contained in the Company’s circular dated 30 April 2005 (“2005 Circular”) in relation to the Hoi Tin Acquisition, the Directors believed that the Hoi Tin Group was a successful entity in the production of soft luggage, travel bags, backpacks, and briefcases with wellestablished manufacturing facilities in the PRC to capitalise on the cheaper labour and land costs. It is stated in the 2005 Circular that the Hoi Tin Group recorded turnover of approximately HK$100.5 million, HK$178.2 million and HK$168.9 million respectively for the three years ended 31 May 2004 and approximately HK$70.9 million for the five months ended 31 October 2004. The Directors considered that the Hoi Tin Acquisition

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LETTER FROM DAO HENG SECURITIES

would be a step in diversification of the Group’s products and a key development in the Group’s business strategy for its packaging business segment. The Directors also considered that the Hoi Tin Acquisition would bring additional earnings and long-term value to the Group. As a long-term investment, the Directors were of the view that the Hoi Tin Acquisition would contribute positively to the Group’s future development and growth through broadening base of business opportunities.

Upon completion of the Hoi Tin Acquisition in July 2005, Hoi Tin became a nonwholly owned subsidiary of Qualipak, and Qualipak is in turn, a subsidiary of the Company. Thomas Wagner has become a 25% shareholder of a subsidiary of Hoi Tin. As a result of the Hoi Tin Acquisition, Thomas Wagner and its subsidiaries have become connected persons of the Company within the meaning of the Listing Rules and therefore, the Sales Transactions which had taken place or will take place pursuant to the Agreement after the completion of the Hoi Tin Acquisition constitute continuing connected transactions of the Company.

As advised by the management of the Group, before the Hoi Tin Acquisition was completed in July 2005, the Hoi Tin Group had been supplying the Products to the Thomas Wagner Group since 1997 and these transactions did not constitute continuing connected transactions of the Company until the completion of the Hoi Tin Acquisition. The accumulated turnover received by the Hoi Tin Group from the Sales Transactions after the completion of the Hoi Tin Acquisition up to 31 December 2005 was approximately HK$5.4 million and the accumulated turnover received by the Hoi Tin Group from the Sales Transactions during the period from 1 January 2006 to 15 February 2006 was approximately HK$2.6 million. As stated in the letter from the Board, the Sales Transactions were transactions that were in the ordinary course of business of the Hoi Tin Group and would enhance the revenue base and market share in soft luggage, travel bags, backpacks and briefcases of the Hoi Tin Group and, in turn of both Qualipak and the Company.

In view of (i) the past business relationship between the Hoi Tin Group and the Thomas Wagner Group; (ii) the historical revenue generating ability of the Hoi Tin Group; and (iii) that the entering into of the Agreement enables the Hoi Tin Group to continue the existing business relationship with the Thomas Wagner Group, we concur with the Directors’ view that the entering into of the Agreement with the Thomas Wagner Group for the Sales Transactions is in the interests of the Group and the Shareholders as a whole.

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LETTER FROM DAO HENG SECURITIES

B. Principal terms of the Sales Transactions

Pursuant to the Agreement, Hoi Tin and Thomas Wagner agree to procure their respective subsidiaries to, enter into the Sales Transactions, pursuant to which, the Hoi Tin Group sells soft luggage, travel bags, backpacks, and briefcases to the Thomas Wagner Group. The terms of each Sales Transaction (including the amount of consideration payable by the Thomas Wagner Group and the payment terms) are and shall be on normal commercial terms which are in accordance with the usual practice adopted in the industry, on an arm’s length basis and be on the same basis as the Hoi Tin Group accepts business from other independent third parties. The Agreement shall continue until 31 December 2008 unless terminated or extended by agreement signed by the parties to the Agreement. The Sales Transactions and the proposed annual caps are subject to the approval of the Shareholders.

As stated in the letter from the Board, the directors of Qualipak consider that the terms of the Sales Transactions are and will be conducted in the ordinary and usual course of business of the Group and on an arm’s length basis, on normal commercial terms or on terms no less favourable than those available to independent third parties, and both the Sales Transactions and the proposed annual caps are fair and reasonable and in the interests of Qualipak and its shareholders as a whole. The Directors agree with the views of the directors of Qualipak regarding the Sales Transactions and the proposed annual caps as stated in the letter from the Board and therefore are also of the view that the Sales Transactions are and will be conducted in the ordinary and usual course of business of the Group and on an arm’s length basis, on normal commercial terms or on terms no less favourable than those available to independent third parties, and both the Sales Transactions and the proposed annual caps are fair and reasonable and in the interests of the Group and the Shareholders as a whole. We have obtained from the management of the Group and reviewed the invoices issued by the Hoi Tin Group for certain past transactions of the Products to both the independent third party customer and the Thomas Wagner Group during the period from October 2005 to February 2006, and found that the comparable past Sales Transactions between the Hoi Tin Group and the Thomas Wagner Group were on normal commercial terms and on terms no less favourable to the Group than terms available to the other independent third party customer.

Given that the Sales Transactions will be entered into in the usual and ordinary course of business of the Group and either (a) on normal commercial terms; or (b) on terms no less favourable than terms available to independent third parties, we consider that the interests of the Group and the Shareholders have been properly safeguarded and, accordingly, the determination mechanism of the pricing of the Products and the payment terms of the Sales Transactions are fair and reasonable and in the interests of the Group and its Shareholders as a whole.

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LETTER FROM DAO HENG SECURITIES

Besides, given that the Agreement may be extended by both parties thereto in writing upon its expiry on 31 December 2008, we consider that the term of the Agreement, which is not more than three years, is in compliance with the requirements under the Listing Rules, on normal commercial terms and fair and reasonable and in the interests of the Group and the Shareholders as a whole.

C. Basis of the annual caps

The Sales Transactions are subject to the annual caps for the financial years ending 31 December 2006 (“FY2006”), 31 December 2007 (“FY2007”) and 31 December 2008 (“FY2008”) of HK$55 million, HK$60.5 million and HK$66.55 million respectively. As stated in the letter from the Board, the expected annual turnover of the Sales Transactions for FY2006 is determined by reference to the followings:

Basis for determining the proposed cap for FY2006 (i) the amount of actual shipment to the Thomas Wagner Group up to 23 February 2006 (ii) the orders under negotiation and pending confirmation with the Thomas Wagner Group (iii) as indicated by the Thomas Wagner Group, further orders that may be negotiated in the second half of FY2006 (iv) the expected growth in the size of the Sales Transactions based on the current trend of orders placed by the Thomas Wagner Group in FY2006 Total Proposed annual caps FY2006 FY2007, being 10% growth on that of FY2006 FY2008, being 10% growth on that of FY2007	HK$ million 3.70 8.00 26.00 17.00
	54.70
	HK$ million 55.00 60.50 66.55

Proposed cap for FY2006

In this respect, we have obtained from the Group and reviewed the invoices issued by the Hoi Tin Group to the Thomas Wagner Group for the Products during the period from 1 January 2006 up to 23 February 2006 (as referred to item (i) in the table above)

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LETTER FROM DAO HENG SECURITIES

and noted that the total invoiced sum of which amounted to approximately HK$3.70 million. In respect of the orders under negotiation and pending confirmation by both parties (as referred to item (ii) in the table above), we obtained from the management of the Group and reviewed the purchase orders from the Thomas Wagner Group and the related pro forma invoices issued by the Hoi Tin Group up to the date of the Agreement and noted that the total invoiced sum of which amounted to approximately HK$8.00 million. The management of the Group advised that it is expected that the firmed orders and orders under negotiation as referred to (i) and (ii) in the table above will be delivered before end of April 2006.

As regards item (iii) in the table above, we are advised by the management of the Group that the Thomas Wagner Group has entered into frame contracts with the Hoi Tin Group in respect of two existing product series in October 2005. Such frame contracts outlined the approximate number of containers of the Products which were expected to be delivered to the Thomas Wagner Group during the period from November 2005 to December 2006. Since, as advised by the management of the Group, the orders under the frame contracts during the period from November 2005 to March 2006 have been and will be substantially completed on schedule, the shipment from April 2006 to December 2006 as outlined in the frame contracts represents expected additional orders for such two existing product series to be placed by the Thomas Wagner Group. We obtained from the Group and reviewed the frame contracts and noted that, based on the approximate selling price of the Products, the total amount for the shipment during the period from April 2006 to December 2006 is estimated to be approximately HK$25.3 million, which approximates to further orders of HK$26 million as indicated by the Thomas Wagner Group as detailed in item (iii) of the table above.

We have discussed with the management of the Group in respect of the expected growth in the size of the Sales Transactions (as referred to item (iv) in the table above) and were advised that,

• (a) the Group has conducted sales meetings with the Thomas Wagner Group for discussion of the future cooperation between the two groups. During a recent sales meeting, Thomas Wagner indicated that it might also place additional orders with the Hoi Tin Group for its customers on top of those covered by the frame contracts. Products will be delivered directly to these customers as directed by the Thomas Wagner Group. Based on the orders under negotiation in the past few months, the Group estimates that the orders in respect of Thomas Wagner’s customers will amount to approximately HK$7.4 million for FY2006. We obtained from the Group and reviewed the relevant correspondences between the Hoi Tin Group and the Thomas Wagner Group and certain related pro forma invoices, and based on which, the estimated turnover from Thomas Wagner’s customers will be approximately HK$7.4 million; and

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LETTER FROM DAO HENG SECURITIES

• (b) apart from the two product series covered by the frame contracts mentioned above, the Thomas Wagner Group has been negotiating orders with the Hoi Tin Group for two other existing series of Thomas Wagner’s products. In addition, as the Group understood from Thomas Wagner during the recent sales meeting, one new product series under development by Thomas Wagner is expected to be launched in the second half of 2006 and therefore, additional orders are expected to be placed by the Thomas Wagner Group on top of the existing series and those under the two frame contracts. Having taken into account the substantial sales growth in the fourth quarter of 2005 (representing a positive growth of approximately 40% in sales as compared to the first quarter of 2005) in which orders were received from the Thomas Wagner Group, together with the orders expected to be received in respect of the new series and the two existing series of Thomas Wagner’s products (other than those under the frame contracts), the directors of Qualipak estimated the turnover in respect of Thomas Wagner’s such two existing series of products and one newly developed product series in FY2006 to be approximately HK$10 million.

Having considered (i) the invoices issued by the Hoi Tin Group to the Thomas Wagner Group amounted to approximately HK$3.70 million during the period from 1 January 2006 to 23 February 2006; (ii) the pro forma invoices issued by the Hoi Tin Group to the Thomas Wagner Group amounted to approximately HK$8.0 million up to the date of the Agreement; (iii) orders under the frame contracts (entered into between the Hoi Tin Group and the Thomas Wagner Group in October 2005) during the period from April 2006 to December 2006 are estimated to be approximately HK$25.3 million; (iv) orders from Thomas Wagner on behalf of its customers estimated to be approximately HK$7.4 million for FY2006; (v) the substantial sales growth of approximately 40% in the fourth quarter of 2005 as compared to the first quarter of 2005 in which orders were received from the Thomas Wagner Group; and (vi) additional orders (apart from (i), (ii), (iii) and (iv)) from the Thomas Wagner Group are anticipated in respect of its two existing series of products and one newly developed product line for FY2006, we consider that the proposed cap for FY2006, where flexibility has been provided to the Group for accepting additional orders from the Thomas Wagner Group, is fair and reasonable and in the interests of the Group and the Shareholders as a whole.

Proposed caps for FY2007 and FY2008

As advised by the management of the Group, based on the existing and expected trend of orders placing by the Thomas Wagner Group in FY2006 and the discussion during the sales meeting with the Thomas Wagner Group, it is expected that the Thomas Wagner Group will continue placing orders with the Hoi Tin Group in the similar

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LETTER FROM DAO HENG SECURITIES

manner as that in FY2006 in the future. The Directors also believe that the luggage industry will ride on a continuous expansion of global tourism industry which has shown a significant growth in 2004. Having considered the above, the Directors proposed to set the annual cap for FY2007 and FY2008 at a growth of 10% over the cap for FY2006 and FY2007 respectively.

According to the profile of Hong Kong’s travel goods and handbags industry provided by Hong Kong Trade Development Council, the Hong Kong’s total exports of travel goods and handbags increased by 12% in the first nine months of 2004. We have also looked into the trend of the international tourist arrivals to assess the possible demand for travel goods in the coming years. According to the “Tourism Highlights — 2005 Edition” published by the World Tourism Organisation, the world international tourist arrivals increased by approximately 10.7% as compared with that of 2003 to approximately 763.3 million in 2004. Given the recent growth in the Hong Kong’s total exports of travel goods and handbags of 12% and the expansion of the global tourism industry in 2004, we concur with the optimistic view of the Directors over the travel goods market and therefore, consider that it is reasonable for the Directors to anticipate an annual growth of 10% for determination of the annual caps for FY2007 and FY2008 respectively to allow flexibility for the Group to cope with the expansion of the travel goods market and the possible additional orders of the Products from the Thomas Wagner Group.

Based on the above, we concur with the Directors’ view that the basis of reaching the annual caps for FY2007 and FY2008 and the annual caps for FY2007 and FY2008 are fair and reasonable and in the interests of the Group and the Shareholders as a whole.

D. Conditions of the Sales Transactions

In respect of the Sales Transactions for FY2006, FY2007 and FY2008, the Company will have to comply with the reporting disclosure and the Shareholders’ approval requirements under Rules 14A.45 to 14A.48 of the Listing Rules as well as the following conditions in accordance with Rule 14A.36 to 14A.41 of the Listing Rules:

• (i) the Sales Transactions shall be entered into:

• (a) in the ordinary and usual business of the Group;

• (b) either on normal commercial terms or, if there are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Group than terms available to or from (as appropriate) independent third parties; and

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LETTER FROM DAO HENG SECURITIES

• (c) in accordance with the terms of the Agreement governing the Sales Transactions;

• (ii) the independent non-executive Directors shall review the Sales Transactions and confirm, in the Company’s next and successive annual reports, that the Sales Transactions are conducted in the manner as stated in paragraphs (i) above;

• (iii) the Company’s auditor shall review the Sales Transactions annually and confirm in a letter to the Directors confirming that the Sales Transactions:

• (a) have received the approval of the board of Directors;

• (b) have been entered into in accordance with the pricing policies of the Group;

• (c) have been entered into in accordance with the terms of the Agreement governing the Sales Transactions; and

• (d) have not exceeded the proposed annual caps disclosed in the letter from the Board in the Circular;

• (iv) the Company shall allow, and shall procure that the Thomas Wagner Group shall allow the Company’s auditors sufficient access to their records for the purpose of reporting on the Sales Transactions as set out in paragraph (iii) above. The Board must state in the Company’s annual report whether its auditors have confirmed the matters set out in paragraph (iii) above;

• (v) the Company shall promptly notify the Stock Exchange and publish an announcement in the newspapers if it knows or has reason to believe that the independent non-executive Directors and/or its auditors will not be able to confirm the conditions set out in paragraph (i) and/or (iii) above;

• (vi) if (a) any variation of the terms or renewal of the Agreement; or (b) the Company enters into any new agreements involving continuing transactions and such transactions subsequently become continuing connected transactions with any connected parties, the Company must comply in full with all applicable reporting, disclosure and independent shareholders’ approval requirements under the Listing Rules; and

• (vii) the Company must re-comply with Rules 14A.35(3) and 14A.35(4) if the respective annual caps for the Sales Transactions are exceeded or when the Agreement is renewed or there is a material change to the terms of the Agreement.

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LETTER FROM DAO HENG SECURITIES

Having considered the requirements of compliance to the relevant provisions under the Listing Rules in respect of the Sales Transactions, in particular (i) the restriction of the annual aggregate amount of the Sales Transactions by way of the annual caps; and (ii) the on-going review by the independent non-executive Directors and the Company’s auditors in respect of the terms of the Sales Transactions, we are of the view that the Company has taken appropriate measures governing itself to carry out the Sales Transactions, thereby safeguarding the interests of the Shareholders.

RECOMMENDATION

Having considered that:

• (1) the background and reasons for the entering into of the Agreement;

• (2) the comparable past Sales Transactions between the Hoi Tin Group and the Thomas Wagner Group that we have reviewed were on normal commercial terms and on terms no less favourable to the Thomas Wagner Group than terms available to the other independent third party customer;

• (3) pursuant to the Agreement, the terms of the Sales Transactions shall be on normal commercial terms and on terms no less favourable to the Thomas Wagner Group than those available to the independent third parties; and

• (4) the basis in reaching the proposed annual caps,

we consider that the Sales Transactions are in the ordinary and usual course of business of the Group and the terms of the Sales Transactions are on normal commercial terms. We also consider that the terms of the Sales Transactions and the proposed annual caps thereunder are in the interests of the Group and the Shareholders as a whole and are fair and reasonable so far as the Shareholders generally are concerned. Accordingly, we advise the Independent Board Committee to recommend the Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Sales Transactions and the proposed annual caps.

Yours faithfully, For and on behalf of

Dao Heng Securities Limited

Venus Choi Jenny Leung Executive Director Director, Corporate Finance

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF DIRECTORS’ INTERESTS

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to the provisions of Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO) or were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules, to be notified to the Company and the Stock Exchange, were as follows:

(i) Long positions in the Shares:

Director Type of interests Cheung Chung Kiu Corporate_(Note 1)_ Personal Total Zhang Qing Xin Personal Lam Hiu Lo Personal Liang Kang Personal	Number of Shares held 3,465,434,684 53,320,000 3,518,754,684 13,600,000 41,800,000 30,000,000	Approximate percentage 39.72 0.61
		40.33 0.16 0.48 0.34

• (ii) Long positions in the Company’s convertible notes:

		Number of
	Convertible	underlying	Type of	Approximate
Director	notes held	Shares	interest	percentage
	(HK$)
Cheung	49,675,000	605,792,682	Corporate	6.94
Chung Kiu			(Note 2)

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GENERAL INFORMATION

APPENDIX

(iii) Long positions in Qualipak:

		Number of	Approximate
Director	Type of interests	Shares held	percentage
Cheung Chung Kiu	Corporate_(Note 3)_	2,542,396,360	64.54
Lee Ka Sze, Carmelo	Family	1,000,000	0.025
Ng Kwok Fu	Personal	120,000	0.003

• (iv) Long positions in Y.T. Realty Group Limited, an associate of the Company, the shares of which are listed on the Stock Exchange:

		Number of	Approximate
Director	Type of interests	Shares held	percentage
Cheung Chung Kiu	Corporate_(Note 4)_	273,000,000	34.14
Ng Kwok Fu	Personal and Family	90,000	0.01

Notes:

• (1) The voting rights of these Shares are held by Chongqing Industrial Limited (“Chongqing”) as to 3,194,434,684 Shares and Timmex Investment Limited (“Timmex”) as to 271,000,000 Shares. Mr. Cheung Chung Kiu, Peking Palace Limited, Miraculous Services Limited and Prize Winner Limited have a 35%, 30%, 5% and 30% equity interest in Chongqing respectively.

Peking Palace Limited and Miraculous Services Limited are beneficially owned by Palin Discretionary Trust, a family discretionary trust, the objects of which include Mr. Cheung Chung Kiu and his family.

Prize Winner Limited is beneficially owned by Mr. Cheung Chung Kiu and his associates.

Timmex is 100% beneficially owned by Mr. Cheung Chung Kiu.

• (2) The convertible note in the principal amount of HK$70,000,000 was issued by the Company to Timmex (the “Convertible Note”). The Convertible Note has a maturity date on 31 July 2007, and can be converted into the Shares at a conversion price of HK$0.075 per Share during the period from 31 July 2004 to 31 July 2005 (“First Year”), HK$0.082 per Share for the period from 1 August 2005 to 31 July 2006 (“Second Year”) and HK$0.089 per Share for the period from 1 August 2006 to 31 July 2007 (“Third Year”), subject to adjustment. As at the Latest Practicable Date, Timmex has exercised the conversion right attached to the Convertible Note in respect of the amount of HK$20,325,000 and a total number of 271,000,000 Shares was issued to Timmex. Such Shares are part of the Shares interested by Mr. Cheung Chung Kiu as disclosed under paragraph (i) “Long positions in the Shares” above.

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GENERAL INFORMATION

APPENDIX

• (3) Such Shares are held by Regulator Holdings Limited (“Regulator”). Regulator is indirectly controlled by Palin Holdings Limited as trustee for the Palin Discretionary Trust, a family discretionary trust, the objects of which include Mr. Cheung Chung Kiu and his family.

• (4) The 273,000,000 shares are held by Funrise Limited (“Funrise”). Funrise is indirectly controlled by Palin Holdings Limited as trustee for the Palin Discretionary Trust, a family discretionary trust, the objects of which include Mr. Cheung Chung Kiu and his family.

In addition to the above, certain Directors have non-beneficial personal interests in certain subsidiaries held for the benefit of the Company solely for the purpose of complying with the minimum company membership requirements.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company held any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporation(s) (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to the provisions of Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO) or were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers of the Listing Rules, to be notified to the Company and the Stock Exchange.

As at the Latest Practicable Date, none of the Directors or proposed Director had any direct or indirect interests in any assets which have since 31 December 2004 (being the date to which the latest published audited accounts of the Group were made up) been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

None of the Directors is materially interested in any contracts or arrangements subsisting at the date of this circular which is significant in relation to the business of the Group. However, Mr. Lee Ka Sze, Carmelo, the non-executive Director, is a partner of Woo, Kwan, Lee & Lo, a solicitors firm which provided professional services to the Group (including those in relation to the Sales Transactions) and charged usual professional fees in respect thereof.

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GENERAL INFORMATION

APPENDIX

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as was known to the Directors and chief executive of the Company, the following parties (other than a Director or chief executive of the Company) had an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

		Capacity and
		nature of	Number of Shares or	Approximate
Name	Notes	interests	underlying Shares held	percentage
Timmex	1, 4	Corporate	271,000,000	3.1
	1	Corporate	605,792,682	6.94
Chongqing	2, 4	Corporate	3,194,434,684	36.62
Palin Holdings	3, 4	Trustee of a	3,194,434,684	36.62
Limited (“Palin”)		family trust

Notes:

• (1) The 271,000,000 Shares held by Timmex are the Shares issued upon the exercise of the conversion right attaching to the Convertible Note, and such Shares are part of the Shares interested by Mr. Cheung Chung Kiu as disclosed under paragraph (i) “Long positions in the Shares” of the section headed “Disclosure of Directors’ Interests” above. As at the Latest Practicable Date, the outstanding principal amount of the Convertible Note was HK$49,675,000 and the 605,792,682 underlying Shares are the outstanding Shares issuable upon exercise of the conversion right attaching to the Convertible Note.

• (2) The voting rights of these Shares are exercisable by Chongqing which is controlled by Mr. Cheung Chung Kiu.

• (3) Palin is the trustee for Palin Discretionary Trust, a family discretionary trust, the objects of which include Mr. Cheung Chung Kiu and his family.

• (4) Mr. Cheung Chung Kiu is a director of Timmex, Chongqing and Palin. Mr. Zhang Qing Xin is a director of Chongqing.

As at the Latest Practicable Date, so far as was known to the Directors and chief executive of the Company, the following parties (other than Directors or chief executive of the Company) were, directly or indirectly, interested in 10% or more of the nominal

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GENERAL INFORMATION

APPENDIX

value of any class of share capital (including any options in respect of such capital) carrying rights to vote in all circumstances at general meetings of any other member of the Group:

	Name of the	Approximate
Name of the member of the Group	shareholder	percentage
		(%)
Hoi Tin	Chau Tin Ping	12.8
Hoi Tin	Wong Kong	10
Young Comfort Development Limited	Thomas Wagner	25

Save as disclosed above, as at the Latest Practicable Date, according to the register of interests kept by the Company under section 336 of the SFO and so far as was known to the Directors and chief executive of the Company, no other person (other than Directors or chief executive of the Company) had any interests or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital (including any options in respect of such capital) carrying rights to vote in all circumstances at general meetings of any other member of the Group.

4. PROCEDURES FOR DEMANDING A POLL

Pursuant to the Bye-laws of the Company, a resolution put to the vote of a general meeting shall be decided on a show of hands unless (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:

• (a) by the chairman of the meeting; or

• (b) by at least three members present in person or in the case of a member being a corporation by its duly authorised representative or by proxy for the time being entitled to vote at the meeting; or

• (c) by a member or members present in person or in the case of a member being a corporation by its duly authorised representative or by proxy and representing not less than one-tenth of the total voting rights of all members having the right to vote at the meeting; or

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GENERAL INFORMATION

APPENDIX

• (d) by a member or members present in person or in the case of a member being a corporation by its duly authorised representative or by proxy and holding Shares 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 the Shares conferring that right.

If a poll is demanded, it shall (subject to any poll duly demanded on the election of a chairman of a meeting or on any question of adjournment which shall be taken at the meeting and without adjournment) be taken in such manner and either forthwith or at such time (being not later than 30 days after the date of demand) and place as the chairman directs. The result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. The demand for a poll may be withdrawn, with the consent of the chairman, at any time before the close of the meeting or the taking of the poll, whichever is the earlier.

5. QUALIFICATION AND CONSENT OF THE EXPERT

The following is the qualification of the expert who has been named in this circular or has given opinions or advice which are contained in this circular:

Name Qualification

Dao Heng Securities a corporation licensed under the SFO to conduct type 1 (dealing in securities), 4 (advising on securities) and 6 (advising on corporate finance) regulated activities

Dao Heng Securities has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its opinion and the reference to its name in the form and context in which they respectively appear.

Dao Heng Securities has no shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Dao Heng Securities has no direct or indirect interest in any assets which have since 31 December 2004 (being the date to which the latest published audited accounts of the Group were made up) been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

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GENERAL INFORMATION

APPENDIX

6. COMPETING INTEREST

As at the Latest Practicable Date, none of the Directors nor their respective associates had any interest in any business that compete or was likely to compete, either directly or indirectly, with the business of the Group.

7. SERVICE CONTRACTS

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

8. MATERIAL ADVERSE CHANGE

So far as the Directors are aware, as at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2004, being the date to which the latest published audited accounts of the Company were made up.

9. MISCELLANEOUS

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

• (b) The head office and principal place of business of the Company is at Rooms 3301-3307, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong.

• (c) The Hong Kong branch share registrar and transfer office of the Company is Tengis Limited situated at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• (d) The English text of this circular shall prevail over the Chinese text in case of inconsistency.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at Woo, Kwan, Lee & Lo at 27th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong up to and including 1 April 2006:

• (a) the Agreement;

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GENERAL INFORMATION

APPENDIX

• (b) the purchase orders in respect of the Sales Transactions entered into by Hoi Tin Group and Thomas Wagner Group since October 2005;

• (c) the letter from Dao Heng Securities as set out on pages 10 to 19 of this circular; and

• (d) the written consent of Dao Heng Securities referred to in this Appendix.

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NOTICE OF SPECIAL GENERAL MEETING

YUGANG INTERNATIONAL LIMITED （渝港國際有限公司） [*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 613)

NOTICE IS HEREBY GIVEN that a special general meeting of Yugang International Limited (the “ Company ”) will be held at Rooms 3301-3307, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong on Monday, 3 April 2006 at 9:30 a.m. for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT :

• (a) the transactions relating to sale of the products manufactured by Hoi Tin Universal Limited (“ Hoi Tin ”) and its subsidiaries to Thomas Wagner GmbH (“ Thomas Wagner ”) and its subsidiaries (the “ Sales Transactions ”) pursuant to an agreement dated 22 February 2006 entered into between Hoi Tin and Thomas Wagner (the “ Agreement ”, a copy of which is produced to the meeting and signed by the Chairman of the meeting for the purpose of identification) be and are hereby approved, ratified and/or confirmed subject to the Sales Transactions shall not exceed the relevant proposed annual caps set out below:

			Proposed
Financial year ending	31	December	annual cap
			(HK$)
2006			55.00 million
2007			60.50 million
2008			66.55 million

• (b) the entering into, execution, performance and implementation of the Sales Transactions by the Directors for and on behalf of the Company be and are hereby approved, confirmed and/or ratified; and

• (c) any one director of the Company, or any two directors of the Company if the affixation of the common seal is necessary, be and is/are hereby authorized to do all such acts and things, to sign and execute all such other documents, deeds, instruments and agreements

* For identification purposes only

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NOTICE OF SPECIAL GENERAL MEETING

and to take such steps as he/they may consider necessary, appropriate, desirable or expedient to give effect to or in connection with the Sales Transactions and any further agreement or document or any of the transactions contemplated therein and all other matters incidental thereto.”

By order of the Board Yuen Wing Shing Managing Director

Hong Kong, 17 March 2006

Registered office:

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Principal place of business in Hong Kong:

Rooms 3301-3307 China Resources Building 26 Harbour Road Wanchai, Hong Kong

Notes:

1. A proxy form for use at the meeting is enclosed.

2. Any member entitled to attend and vote at the meeting of the Company shall be entitled to appoint one or more proxies to attend and vote instead of him.

3. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorized in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorized to sign the same.

4. The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority, shall be delivered to the principal place of business of the Company in Hong Kong in Rooms 3301-3307, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote.

5. A proxy need not be a member. A member may appoint a proxy in respect of part only of his holding of shares in the Company.

6. In the case of joint holders of a share if more than one of such joint holders be present at any meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register in respect of the joint holding.

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