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

May 22, 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Huali Holdings (Group) Limited (the “Company”), you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the 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.

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HUALI HOLDINGS (GROUP) LIMITED

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 3366)

DISCLOSEABLE TRANSACTION DISPOSAL OF 100% EQUITY INTEREST IN MISSION HOLDINGS SERVICES LIMITED

22 May 2007

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7

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DEFINITIONS

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

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||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|“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|
|“Completion”|the|completion|of|the|Transfer|Agreement|
|“connected|person(s)”|has|the|meaning|as|ascribed|to|it|under|the|Listing|Rules|
|“Consideration”|the|consideration|for|the|Equity|Interest|Transfer|
|pursuant to the Transfer Agreement, being HK$9,920,000|
|(equivalent|to|RMB9,780,000)|
|“Directors”|the|directors|of|the|Company|
|“Equity|Interest|Transfer”|the|transfer|of|100%|equity|interest|in|Mission|Holdings|
|from|the|Transferor|to|the|Transferee|pursuant|to|the|
|terms|of|the|Transfer|Agreement|
|“Group”|the|Company|and|its|subsidiaries|
|“HK$”|Hong|Kong|dollars,|the|lawful|currency|of|Hong|Kong|
|“Hong|Kong”|the|Hong|Kong|Special|Administrative|Region|of|the|
|PRC|
|“Latest|Practicable|Date”|18 May 2007, being the latest practicable date prior to the|
|printing|of|this|circular|for|ascertaining|certain|
|information|contained|in|this|circular|
|“Listing|Rules”|the|Rules|Governing|the|Listing|of|Securities|on|the|
|Stock|Exchange|
|“Max|Surplus”|or|“Transferor”|Max|Surplus|Limited|(|),|a|company|
|incorporated|in|British|Virgin|Islands|with|limited|
|liability|

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DEFINITIONS

“Mission Holdings”	Mission Holdings Services Limited, a	company	company
	incorporated in British Virgin Islands with		limited
“Mudanjiang Huali”	liability (Mudanjiang Huali	Packaging
	Company Limited), a Sino-foreign equity joint		venture
	enterprise incorporated in the PRC
“PRC”	the People’s Republic of China
“RMB”	Renminbi, the lawful currency of the PRC
“SFO”	the Securities and Futures Ordinance (Chapter	571 of the
	Laws of Hong Kong) as amended or supplemented from
	time to time
“Shares”	shares of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Transfer Agreement”	the agreement for the transfer of the 100% equity		interest
	in Mission Holdings owned by the Transferor		to the
	Transferee dated 8 May 2007 entered into between the
	Transferor and the Transferee
“Transferee”	Mr. Liu, a third party independent of and not	connected
	with the Group and the connected persons		of the
	Company
“%”	per cent

If there is any inconsistency between the Chinese names of PRC entities, departments, facilities or titles mentioned in this circular and their English translations, the Chinese version shall prevail.

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LETTER FROM THE BOARD

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HUALI HOLDINGS (GROUP) LIMITED

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 3366)

Executive Directors: Mr. Zheng Fan (Chairman) Mr. Ni Zheng Mr. Liu Danlin Mr. Zhou Guangneng

Non-executive Director:

Registered Office: Clifton House 75 Fort Street PO Box 1350 GT George Town Grand Cayman Cayman Islands

Ms. Xie Mei

Head Office and

Independent non-executive Directors: Ms. Wong Wai Ling Mr. Chen Xiangdong Mr. Xiao Yongping

Principal Place of Business: Suite 3203-3204, Tower 6 The Gateway, Harbour City Canton Road Tsim Sha Tsui Kowloon, Hong Kong

22 May 2007

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION DISPOSAL OF 100% EQUITY INTEREST IN MISSION HOLDINGS SERVICES LIMITED

A. INTRODUCTION

On 9 May 2007, the Board announced that the Transferor, a wholly-owned subsidiary of the Company, entered into the Transfer Agreement with the Transferee on 8 May 2007, pursuant to which the Transferor agrees to transfer 100% equity interest in Mission Holdings to the Transferee at a consideration of HK$9,920,000 (equivalent to RMB9,780,000). Upon completion, the Company will cease to have any equity interest in Mission Holdings and Mission Holdings will cease to be a subsidiary of the Company.

The Equity Interest Transfer constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules. The purpose of this circular is to provide you with further details in relation to, among other things, the Equity Interest Transfer.

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LETTER FROM THE BOARD

B. THE TRANSFER AGREEMENT

Date: 8 May 2007 Transferor: Max Surplus, a wholly owned subsidiary of the Company Transferee: Mr. Liu

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Transferee is a third party independent of and not connected with the Group and the connected persons of the Company.

Pursuant to the Transfer Agreement, the Transferor agrees to transfer 100% equity interest in Mission Holdings to the Transferee, subject to the terms and conditions thereof.

C. CONSIDERATION

Pursuant to the Transfer Agreement, the Transferor agrees to transfer 100% equity interest in Mission Holdings to the Transferee, at the Consideration of HK$9,920,000 (equivalent to RMB9,780,000), which was arrived at after arm’s length negotiations between the Transferor and the Transferee and was determined by reference to the unaudited net asset value of Mudanjiang Huali, a subsidiary which is held directly as to 85% by Mission Holdings, as at 31 March 2007 as shown in its management accounts, and the value as assessed by an independent valuer engaged by the Group as at 31 March 2007. According to the valuation report, the book value (after adjustment) of the net assets of Mudanjiang Huali as at 31 March 2007 amounted to approximately HK$10,800,000, and the net assets of Mudanjiang Huali as at 31 March 2007 as valued by the valuer amounted to approximately HK$10,820,000.

D. PAYMENT TERMS

The Consideration shall be satisfied by the Transferee in the following manner:

• (a) within 3 days from the date of the Transfer Agreement, the Transferee shall pay 50% of the Consideration to the Transferor;

• (b) the remaining 50% of the Consideration shall be paid by the Transferee to the Transferor on or before 20 May 2007.

If the total sum of the balances of the account receivables and inventories netting of the account payables of Mudanjiang Huali as at 31 March 2007 as confirmed by both the Transferor and the Transferee is less than the total sum of the balances of the account receivables and inventories netting of the account payables of Mudanjiang Huali as reported in the management accounts of Mudanjiang Huali as at 31 March 2007 for an amount over RMB100,000 (except the discrepancy is caused by applying different accounting standards for the preparation of the financial statements), the Transferor shall compensate the Transferee for the amount equivalent to the portion in excess of RMB100,000.

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LETTER FROM THE BOARD

Within 90 days from the date of the Transfer Agreement, Mudanjiang Huali could be operated under its original name “ ”. Upon expiration of such period, the Transferee shall procure Mudanjiang Huali to change its name and refrain from using any trade name containing the word “ ”.

As at the Latest Practicable Date, the Transferor has received HK$9,230,000 (equivalent to RMB9,100,000) from the Transferee.

E. COMPLETION

Completion will take place when the Consideration has been fully paid by the Transferee to the Transferor and the formalities in regard to the Equity Interest Transfer have been completed, including the approval of transfer of share from the Transferor to the Transferee by the board of directors of Mission Holdings. Upon Completion, the Company will cease to have any direct or indirect equity interest in Mission Holdings and Mudanjiang Huali (as the case may be), and both companies will cease to be subsidiaries of the Company.

F. INFORMATION OF MISSION HOLDINGS AND MUDANJIANG HUALI

Mission Holdings is an investment holding company incorporated in the British Virgin Islands with paid-up share capital of US$1.00. Its only asset is the holding of 85% equity interest of Mudanjiang Huali, a Sino-foreign equity joint venture enterprise incorporated in the PRC and is principally engaged in manufacturing and operating of cartons and other packaging materials. Save as the equity interest in Mudanjiang Huali, Mission Holdings does not have any other investment or operations.

G. FINANCIAL INFORMATION

The net profits (both before and after taxation and extraordinary items) attributable to the shareholders of Mudanjiang Huali for the two financial years ending 31 December 2006, were approximately HK$2,055,000 and HK$1,830,000 respectively. As a result of the Equity Interest Transfer pursuant to the Transfer Agreement, the Group expects to record an unaudited gain of approximately HK$731,000 by reference to the Group’s share of Mudanjiang Huali’s net book value of approximately HK$9,183,000 as at 31 March 2007. The net proceeds of HK$9,872,000 of the Equity Interest Transfer are intended to be used for general working capital purposes.

H. REASONS FOR THE EQUITY INTEREST TRANSFER

Taking into account Mudanjiang Huali situated at a relatively remote location and the Group’s plan to centralize its operations at economically-developed cities in the PRC, the Directors consider it is in the Group’s long term interest in disposing Mission Holdings at a premium. The Directors consider that the terms of the Equity Interest Transfer and the Transfer Agreement are fair and reasonable and in the interests of the Company and the shareholders of the Company as a whole.

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LETTER FROM THE BOARD

I. INFORMATION OF 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 in the PRC.

J. INFORMATION OF THE TRANSFEREE

The Transferee is a businessman principally engaged in packaging industry. He is the legal representative of two PRC companies which are principally engaged in the manufacture of packaging containers and materials and the manufacture of plastic products respectively.

K. FINANCIAL EFFECT OF THE EQUITY INTEREST TRANSFER

Based on the unaudited net asset value of Mudanjiang Huali of approximately HK$10,800,000 as at 31 March 2007, the Equity Interest Transfer is expected to generate a gain of approximately HK$731,000 to the Group. The consolidated net assets of the Group will be increased by approximately HK$731,000 upon the Completion. Upon Completion, the assets and liabilities of Mudanjiang Huali will no longer be accounted for in the Group’s financial statements.

L. DISCLOSEABLE TRANSACTION

As the relevant percentage ratios in respect of the Equity Interest Transfer are more than 5% but less than 25%, the Equity Interest Transfer constitutes a discloseable transaction for the Company under Chapter 14 of Listing Rules.

M. ADDITIONAL INFORMATION

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

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

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

The Directors collectively and individually accept 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 in this circular misleading.

2. DISCLOSURE OF INTERESTS

(i) Directors’ and chief executive’s interests and/or short positions in securities of the Company and its associated corporations

As at the Latest Practicable Date, interests and short positions 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) held by the Directors and chief executives of the Company which have been notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which were taken or deemed to have under such provisions of the SFO) or have been entered in the register maintained by the Company pursuant to section 352 of the SFO, or otherwise have been notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”) are as follows:

Long Positions in the Ordinary Shares of the Company

			Approximate
		No. of Shares	shareholding
Name	Capacity/Nature	involved	percentage
Ni Zheng (Note 1)	Beneficial owner	2,000,000	1.00%
Liu Danlin (Note 2)	Beneficial owner	1,700,000	0.85%
Zhou Guangneng	Beneficial owner	1,700,000	0.85%
(Note 3)

Notes:

• (1) Ni Zheng is interested as a grantee of options to subscribe for 2,000,000 Shares under the Share Option Scheme of the Company.

• (2) Liu Danlin is interested as a grantee of options to subscribe for 1,700,000 Shares under the Share Option Scheme of the Company.

• (3) Zhou Guangneng is interested as a grantee of options to subscribe for 1,700,000 Shares under the Share Option Scheme of the Company.

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GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executives of the Company had any interests or short positions 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) as recorded in the register required to be kept by the Company under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

(ii) Persons who have interests or short positions which are discloseable under Divisions 2 and 3 of Part XV of the SFO

As at the Latest Practicable Date, as far as is known to the Directors, the following persons (not being a Director or chief executive of the Company) had interests or short positions in the shares or underlying shares of the Company which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO:

Long Position in the Ordinary Shares of the Company

			Approximate
		No. of	shareholding
Name	Capacity/Nature	Shares held	percentage
Substantial Shareholders
Pacific Climax Limited	Beneficial owner	134,370,000	67.185%
(Note 1)
Overseas Chinese Town	Interest of a	134,370,000	67.185%
(HK) Company Limited	controlled
(“OCT (HK)”)	corporation
(Note 2)	(Note 3)
Overseas Chinese Town	Interest of a	134,370,000	67.185%
Enterprises Co.	controlled
(“OCT Group”)	corporation
(Note 4)	(Note 5)
Others
Polyfairz Group Limited	Beneficial owner	15,630,000	7.815%
(formerly known as
Polyfair Limited)
Zhang Zhilin	Interest of a	15,630,000	7.815%
	controlled
	corporation
	(Note 6)
Tang Qinmei	Interest of spouse	15,630,000	7.815%
	(Note 7)

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GENERAL INFORMATION

APPENDIX

Notes:

• (1) Mr. Ni Zheng, Mr. Zhou Guangneng and Ms. Xie Mei, Directors, are also directors of Pacific Climax Limited.

• (2) Mr. Zheng Fan, a Director, is the chairman of the board of directors of OCT (HK). Mr. Ni Zheng and Ms. Xie Mei, Directors, are also directors of OCT (HK). Mr. Liu Danlin and Mr. Zhou Guangneng, Directors, are the deputy general managers of OCT (HK).

• (3) OCT (HK) is the beneficial owner of all the issued share capital in Pacific Climax Limited. Therefore OCT (HK) is deemed, or taken to be interested in these shares which are beneficially owned by Pacific Climax Limited for the purpose of the SFO.

• (4) Mr. Zheng Fan, a Director, is the Chief Cultural Officer of OCT Group. Ms. Xie Mei, a Director, is a supervisor of the strategic development department of OCT Group.

• (5) OCT Group is the beneficial owner of all the issued shares in OCT (HK) (OCT Group holds 454,999,998 shares in OCT (HK) in its own name. Mr. Zheng Fan, an executive Director, and Mr. Guo Yubin hold one share each in OCT (HK) on trust for OCT Group) and which is in turn the beneficial owner of all the issued share capital in Pacific Climax Limited and therefore OCT Group is deemed, or taken to be, interested in the 134,370,000 shares which are beneficially owned by Pacific Climax Limited for the purposes of the SFO.

• (6) Polyfairz Group Limited (formerly known as Polyfair Limited) is beneficially owned as to 90% by Mr. Zhang Zhilin and thus a controlled corporation of Mr. Zhang Zhilin, and Mr.Zhang Zhilin is deemed, or taken to be, interested in the 15,630,000 shares which are beneficially owned by Polyfairz Group Limited for the purpose of the SFO.

• (7) Ms. Tang Qinmei is the spouse of Mr. Zhang Zhilin. Therefore, Ms. Tang Qinmei is deemed, or taken to be, interested in all the Shares in which Mr. Zhang Zhilin is interested for the purpose of the SFO.

Save as disclosed above, no other interests required to be recorded in the register kept under section 336 of the SFO have been notified to the Company.

As at the Latest Practicable Date, the following party (other than the Directors or chief executive of the Company) was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of members of the Group:

		Approximate
		shareholding
Names of shareholder	Name of company	percentage
Mudanjiang Nanhua Hesheng	Mudanjiang Huali	15%
Paper Co., Ltd.
(“Mudanjiang Nanhua”)
(Note)

Note: Mudanjiang Nanhua is formerly known as Mudanjiang Nanhua Industrial Company Limited.

3. COMPETING INTERESTS

As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors or their respective associates (as defined in the Listing Rules) has any interest in any business which competes or is likely to compete with the business of the Group.

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GENERAL INFORMATION

APPENDIX

4. SERVICE CONTRACT

As at the Latest Practicable Date, none of the Directors has a service contract with any member of the Group which was not determinable by the Group within one year without payment of compensation (other than normal statutory compensation).

5. LITIGATION

As at the Latest Practicable Date, so far as the Directors are aware, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance, and so far as the Directors are aware, no litigation or arbitration of material importance is pending or threatened against the Company or any of its subsidiaries.

6. GENERAL

• (a) The company secretary and the qualified accountant of the Company is Mr. Fong Fuk Wai, who is a fellow member of the Hong Kong Institute of Certified Public Accountants.

• (b) The Company’s registered office is at Clifton House, 75 Fort Street, PO Box 1350 GT, George Town, Grand Cayman, Cayman Islands. The head office and principal place of business is at Suites 3203-3204, Tower 6, The Gateway, Harbour City, Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong.

• (c) The Hong Kong branch share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Ltd. at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.

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

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