RemeGen Co., Ltd. — Capital/Financing Update 2007

Jul 13, 2007

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, 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 announcement.

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HUALI HOLDINGS (GROUP) LIMITED 華力控股（集團）有限公司

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 3366)

DISCLOSEABLE AND CONNECTED TRANSACTION IN RESPECT OF DISPOSAL OF PROPERTIES CONTINUING CONNECTED TRANSACTION IN RESPECT OF LEASEBACK OF PROPERTIES

The Board is pleased to announce that on 11 July 2007, the Vendor, an indirect wholly-owned subsidiary of the Company, entered into the S&P Agreement with the Purchaser, pursuant to which the Vendor conditionally agreed to sell the Properties to the Purchaser at an aggregate consideration of RMB 50,600,000 (equivalent to approximately HK$51,929,000). The Vendor and the Purchaser also entered into the Tenancy Agreement pursuant to which the Purchaser (as landlord) agrees to lease back the Properties to the Vendor (as tenant) at a monthly rental of approximately RMB263,824 (equivalent to approximately HK$270,755) for a fixed term up to 31 December 2009.

The Disposal constitutes a discloseable transaction for the Company under the Listing Rules. The Purchaser, OCT Properties, is a non-wholly owned subsidiary of OCT Group. OCT Group is the ultimate shareholder of 100% interest in OCT (HK) (OCT (HK) owns 100% equity interest in Pacific Climax Limited, which is the controlling shareholder of the Company). Thus, the Purchaser is a connected person of the Company within the meaning of the Listing Rules. Accordingly, the Disposal constitutes a connected transaction, and the Leaseback constitutes a continuing connected transaction for the Company under the Listing Rules. As the consideration of the Disposal is more than HK$10,000,000 and the applicable percentage ratios for the Disposal is more than 2.5%, the Disposal and the Leaseback are subject to the reporting, announcement and Independent Shareholders’ approval requirements under the Listing Rules.

A circular containing, among other things, (i) further details of the Disposal and the Leaseback; (ii) the advice of the independent financial adviser to the independent committee of the Board and the Independent Shareholders in relation to the Disposal and the Leaseback; (iii) the recommendation of the independent committee of the Board to the Independent Shareholders in relation to the Disposal and the Leaseback; (iv) a valuation report prepared by an independent property valuer in relation to the Properties; and (v) a notice convening the EGM, will be dispatched to the Shareholders as soon as practicable.

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THE S&P AGREEMENT

Date: 11 July 2007

Vendor: Shenzhen Huali, a wholly foreign owned enterprise with limited liability established in the PRC and an indirect wholly-owned subsidiary of the Company

Purchaser: OCT Properties, a connected person of the Company within the meaning of the Listing Rules

Pursuant to the S&P Agreement, the Vendor has agreed to sell the Properties to the Purchaser subject to the terms and conditions thereof.

Information of the Properties

The Properties consisted of two factory buildings with a total gross floor area of 21,985.37 sq.m. are erected on the Land which is located at Huaqiaocheng, Nanshan District, Shenzhen, the PRC and have been issued with the real estate title certificate (房地產証 ). The Properties shall be used for industrial purpose. The land use right of the Land has been granted for a term of 50 years expiring on 25 October 2041.

Consideration

The consideration for the Disposal is RMB50,600,000 (equivalent to approximately HK$51,929,000). The consideration was arrived at after arm’s length negotiations between the Vendor and the Purchaser with reference to the valuation of the Properties of RMB50,600,000 (equivalent to approximately HK$51,929,000) as at 30 April 2007 made by Savills Valuation and Professional Services Limited, an independent property valuer engaged by the Group.

Payment of consideration

The consideration shall be paid in cash by the Purchaser in the following manner:

1. 50% of the consideration shall be paid to the Vendor within 7 days from the date the S&P Agreement takes effect;

2. the remaining 50% of the consideration shall be paid within 7 days after completion of the procedures for the transfer of the Properties.

Conditions

The S&P Agreement shall take effect from the date of approval of the Disposal by the Independent Shareholders at the EGM.

The parties shall proceed with the procedures for registering the Disposal with the relevant PRC authorities. The registration procedures for the Disposal will complete when the real estate title certificate concerning the Properties is issued in the name of the Purchaser.

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Financial Effect of the Disposal

With reference to the audited account of the Group for the year ended 31 December 2006, the net book value of the Properties were approximately RMB13.9 million as at 31 December 2006. It is estimated that the Disposal will result in a book profit (before tax and expenses) of approximately RMB36.7 million with reference to the net book value of the Properties as at 31 December 2006 for the financial year ended 31 December 2006.

Immediately after the Disposal, in so far as assets and liabilities are concerned, bank balance of the Group will be increased by approximately RMB34.2 million while the net book value of the properties will be reduced by approximately RMB13.9 million.

Use of Proceeds

The net proceeds of approximately RMB34.2 million from the Disposal, after deducting tax of approximately RMB16 million and expenses of approximately RMB0.4 million arising therefrom will be used as general working capital of the Group.

LEASEBACK

The Vendor as tenant entered into the Tenancy Agreement dated 11 July 2007 with the Purchaser as landlord, pursuant to which the Vendor will lease back the Properties based on the following principal terms:

Term: Subject to the approval from Independent Shareholders, commencing from the day the Purchaser having obtained the title of the Properties by having the real estate title certificate concerning the Properties being issued in the name of the Purchaser, and ending on 31 December 2009.

• Premises: Two factory buildings with a total gross floor area of 21,985.37 sq.m. erected on the Land. The Vendor may, upon giving one-month advance notice to the Purchaser, reduce the renting area.

Rental: RMB12 per sq.m., totaling RMB263,824 (equivalent to approximately HK$270,755) per month during the tenancy term.

The rent was determined after arm’s length negotiations between the Vendor and the Purchaser with reference to the location and conditions of the Properties. As advised by Savills Valuation and Professional Services Limited, an independent property valuer engaged by the Group, the rental value is below the current market rent. In case the renting area is reduced, the rent shall be adjusted accordingly in proportion to the reduced renting area.

The Properties have been occupied by the Group as office and production base.

The Company intends to satisfy the rent payable under the Tenancy Agreement with internal resources of the Company. The rental may be subject to adjustment in case of the leased area has been reduced.

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Conditions

The Tenancy Agreement shall be effective when both of the following conditions have been fulfilled: (1) the date of the Independent Shareholders’ approval on the Leaseback; and (2) the Purchaser having the real estate title certificate concerning the Properties being issued in the name of the Purchaser.

Annual Caps of the Tenancy Agreement

The annual caps for each of the financial years ended 31 December 2007, 2008, 2009 will be approximately RMB1,320,000, 3,166,000 and 3,166,000 respectively. The annual caps are determined by reference to the aggregate annual rent payable by the Group to OCT Properties under the Tenancy Agreement. For the annual cap for the financial year ended 31 December 2007, it is assumed that the Tenancy Agreement will come into force from 1 August 2007, subject to the Independent Shareholders’ approval has been obtained and the real estate title certificate concerning the Properties has been issued in the name of the Purchaser.

REASONS FOR THE DISPOSAL AND LEASEBACK

The Company intends to relocate its production base with a view to improve the logistic management within the factory zone and to enhance production efficiency.

After the Disposal, the Company plans to relocate its production base to the parcel of land at Hangcheng Industrial Park, Xinqiao Village, Danshui Town, Huiyang District, Guangdong Province, the PRC with a total area of approximately 220,000 sq.m. The parcel of land was acquired by the Group on 19 March 2007. The site where the land is situated has a well developed transport and road network which represents a significant advantage to the Group.

The Company intends to relocate its production base to the above site step by step and is planning to build new production facility at the above site. As the production facility at the above site is expected to be completed at the end of 2008, the Leaseback will allow the Group to maintain its production at the Properties for the time being. As the Purchaser agrees that the Group may reduce the renting area of the Properties during the term of the tenancy, it offers flexibility to the Group to relocate its production base by phases.

The terms of the S&P Agreement and the Tenancy Agreement were arrived at after arm’s length negotiation and are on normal commercial terms. The Directors (including the independent nonexecutive Directors) consider that the terms of the S&P Agreement and the Tenancy Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

INFORMATION ON THE GROUP

The Group is principally engaged in the manufacture of quality paper-based packaging containers and materials, including corrugated paperboard and printed cartons for customers.

INFORMATION ON SHENZHEN HUALI

Shenzhen Huali, a limited liability company established in the PRC, is an indirect wholly-owned subsidiary of the Company. It is principally engaged in the manufacture of quality paper-based packaging containers and materials, including corrugated paperboard and printed cartons for customers.

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INFORMATION ON OCT PROPERTIES AND OCT GROUP

OCT Group is the ultimate shareholder of 100% interest in OCT (HK) (OCT (HK) owns 100% equity interest in Pacific Climax Limited, which is the controlling shareholder of the Company, holding approximately 67.185% of the Company as at the date of this announcement). OCT Properties is a non-wholly owned subsidiary of OCT Group.

OCT Properties is principally engaged in property development projects.

LISTING RULES IMPLICATIONS

The Disposal constitutes a discloseable transaction for the Company under the Listing Rules as the applicable percentage ratios for the Disposal is more than 5%. The Purchaser, OCT Properties, is a non-wholly owned subsidiary of OCT Group. OCT Group is the ultimate shareholder of 100% interest in OCT (HK) (OCT (HK) owns 100% equity interest in Pacific Climax Limited, which is the controlling shareholder of the Company). Thus, the Purchaser is a connected person of the Company within the meaning of the Listing Rules. Accordingly, the Disposal constitutes a connected transaction, and the Leaseback constitutes a continuing connected transaction for the Company under the Listing Rules. As the consideration of the Disposal is more than HK$10,000,000 and the applicable percentage ratios for the Disposal is more than 2.5%, the Disposal is subject to the reporting, announcement and Independent Shareholders’ approval requirements under the Listing Rules. Under the Tenancy Agreement, the aggregate annual rent payable by the Group to OCT Properties is approximately RMB3,166,000. As the applicable percentage ratio is, on annual basis, less than 2.5%, the Tenancy Agreement is not subject to Independent Shareholders’ approval requirement but are subject to the reporting and announcement requirements under the Listing Rules. However, as the Leaseback is resulting from the Disposal which is subject to, inter alia, the Independent Shareholders’ approval requirements under the Listing Rules, for the sake of prudence, the Company elects to voluntarily submit the Leaseback to the Independent Shareholders for their approval.

Pacific Climax Limited and its associates will be required to abstain from voting on the resolutions to approve the Disposal and the Leaseback at the EGM.

GENERAL

An independent committee of the Board comprising the independent non-executive Directors will be formed to advise the Independent Shareholders on the Disposal and Leaseback. The Company will appoint independent financial adviser to advise the independent board committee and Independent Shareholders on the above matter.

A circular containing, among other things, (i) further details of the Disposal and the Leaseback; (ii) the advice of the independent financial adviser to the independent committee of the Board and the Independent Shareholders in relation to the Disposal and the Leaseback; (iii) the recommendation of the independent committee of the Board to the Independent Shareholders in relation to the Disposal and the Leaseback; (iv) a valuation report prepared by an independent property valuer in relation to the Properties; and (v) a notice convening the EGM, will be dispatched to the Shareholders as soon as practicable.

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DEFINITIONS

“Board”	the board of Directors
“Company”	Huali Holdings (Group) Limited, a company incorporated in the
	Cayman Islands with limited liability, the shares of which are
	listed on the Stock Exchange
“connected person”	has the meaning ascribed to it in the Listing Rules
“Directors”	the directors of the Company
“Disposal”	the disposal of the Properties by the Company pursuant to the
	S&P Agreement
“EGM”	the extraordinary general meeting of the Company to be convened
	by the Shareholders to consider and, if thought fit, approve the
	Disposal and the Leaseback
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Shareholder(s)”	Shareholders other than Pacific Climax Limited and its associates
“Land”	a piece of land located at Huaqiaocheng, Nanshan District,
	Shenzhen, the PRC, with a total site area of 12,404.82 sq.m.
“Leaseback”	the tenancy contemplated under the Tenancy Agreement
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“OCT Group”	Overseas Chinese Town Group Company (華僑城集團公司), a
	PRC state-owned company incorporated in the PRC
“PRC”	the People’s Republic of China, for the purpose of this
	announcement, excluding Hong Kong, the Macau Special
	Administrative Region of the PRC and the Taiwan region
“Properties”	two factory buildings with an aggregate gross floor area of
	21,985.37 sq.m. erected on the Land together with the land use
	rights of the Land
“Purchaser” or	Overseas Chinese Town Real Estate Company Limited (深圳華僑
“OCT Properties”	城房地產有限公司), a connected person of the Company within
	the meaning of the Listing Rules
“RMB”	Renminbi, the lawful currency of the PRC
“Shareholder(s)”	holder(s) of shares of the Company

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• “Shenzhen Huali” or “Vendor” 深圳華力包裝貿易有限公司 (Shenzhen Huali Packing & Trading Co., Ltd.), a wholly foreign owned enterprise with limited liability established in the PRC and an indirect wholly-owned subsidiary of the Company

• “Stock Exchange” The Stock Exchange of Hong Kong Limited “S&P Agreement” a sale and purchase agreement dated 11 July 2007 entered into between the Vendor and the Purchaser

“Tenancy Agreement” the tenancy agreement dated 11 July 2007 and entered into between the Purchaser being the landlord and the Vendor being the tenant

“HK$” Hong Kong dollars, the lawful currency of the Hong Kong “sq.m.” square metres “%” per cent

As at the date of this announcement, the Board of the Company comprises eight directors, namely: Mr. Zheng Fan, Mr. Ni Zheng, Mr. Liu Danlin and Mr. Zhou Guangneng as executive directors; Ms. Xie Mei as a non-executive director; Ms. Wong Wai Ling, Mr. Chen Xiangdong and Mr. Xiao Yongping as independent non-executive directors.

• Note: Unless otherwise specified in this announcement, amounts denominated in RMB have been converted, for the purposes of illustration only, into Hong Kong dollars at HK$1.00 to RMB0.9744. The above exchange rate is for purposes of illustration only and does not constitute a representation that any amounts have been, could have been or may be converted at the above rates or at any other rates.

By order of the Board Huali Holdings (Group) Limited Zheng Fan Chairman

Hong Kong, 13 July 2007

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