Sinopharm Tech Holdings Limited - Proxy Solicitation & Information Statement 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Vanguard Group Limited (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser or the 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 (the “ Stock Exchange ”) 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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(incorporated in the Cayman Islands with limited liability)
(Stock Code: 8156)
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MAJOR TRANSACTION REGARDING DEEMED DISPOSAL OF APTUS HOLDINGS LIMITED BY POTENTIAL DILUTION ARISING FROM THE ISSUE OF SHARES OF APTUS HOLDINGS LIMITED UPON CONVERSION OF CONVERTIBLE BONDS

A notice convening an extraordinary general meeting (the “ EGM ”) of the Company to be held at 30th Floor, Sunshine Plaza, 353 Lockhart Road, Hong Kong on Thursday, 7 December 2006 at 10:30 a.m. is set out on pages 37 to 38 of this circular. A form of proxy for use thereat is also enclosed.

Whether or not you are able to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the office of the Company’s branch share registrar and transfer office in Hong Kong, Standard Registrars Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

This circular will remain on the GEM website at http://www.hkgem.com on the “Latest Company Announcements” page for at least seven days from the date of its posting.

* For identification purpose only

20 November 2006

CHARACTERISTICS OF GEM

GEM has been established as a market designed to accommodate companies to which a high investment risk may be attached. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. Furthermore, there may be risks arising out of the emerging nature of companies listed on GEM and the business sectors or countries in which the companies operate. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

The principal means of information dissemination on GEM is publication on the Internet website operated by the Stock Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the GEM website in order to obtain up-to-date information on GEM-listed issuers.

– i –

	Page
Characteristics of GEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	i
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Bond Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Principal Terms of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Stock Lending Arrangement by the Company . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Effect on the Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Reasons for and Benefits of the Bonds Issue . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Deemed Disposal by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Financial and Trading Prospect of the Group . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Listing Rules Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Appendix I – Procedures by which Shareholders may demand
a poll at general meeting pursuant to
the Articles of Association . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Appendix II – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	37

– ii –

DEFINITIONS

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

“Agency Agreement” the paying and conversion agency agreement to be dated on or about 21 November 2006 (made among Aptus, the Trustee, the Principal Paying Agent, the Registrar and other paying, conversion and transfer agents named herein) in relation to the Bonds
“Agents” paying, conversion and transfer agents appointed under the Agency Agreement
“Alternative Stock Exchange” means at any time, in the case of the Aptus Shares, if they are not at that time listed or traded on the Stock Exchange, the principal stock exchange or securities market approved by the Trustee and on which the Aptus Shares are then listed or quoted or dealt in
“Aptus” Aptus Holdings Limited, an exempted company incorporated in Cayman Islands with limited liability and the Aptus Shares are listed on GEM
“Aptus Conversion Shares” Aptus Shares to be allotted and issued by Aptus upon conversion of the Bonds
“Aptus Directors” the directors of Aptus “Aptus General Mandate” the general mandate granted by the Aptus Shareholders to the Aptus Directors with respect to the issuance of up to 333,688,285 Aptus Shares, representing 20% of the issued share capital of Aptus as at the annual general meeting of Aptus held on 24 October 2006
“Aptus Group” Aptus and its subsidiaries “Aptus Share(s)” ordinary share(s) of HK$0.01 each in the capital of Aptus “Aptus Shareholder(s)” holder(s) of the Aptus Share(s) “Board” the board of Directors “Bond(s)” the zero coupon secured convertible bond(s) in an aggregate principal amount of HK$234,000,000 with a step-up cash coupon from and including 21 May 2008

– 1 –

DEFINITIONS

“Bond Purchase Agreement”	the Bond Purchase Agreement dated 7 November 2006
	entered into between Aptus and the Purchaser in relation
	to the Offering
“Bondholder(s)”	holder(s) of the Bonds from time to time
“business day”	any day (not being a Saturday, Sunday or public holiday)
	on which licensed banks in Hong Kong are generally
	open for business throughout their normal business hours
“Charged Property”	the property, rights and interest over which the Security
	is granted
“Closing Date”	a date as soon as practicable, but in no event later than 21
	November 2006 or such other date as the Purchaser and
	Aptus may agree
“Closing Price”	in respect of an Aptus Share on any Trading Day shall be
	the closing price published in the Daily Quotation Sheet
	published by the Stock Exchange or, as the case may be,
	the equivalent quotation sheet of an Alternative Stock
	Exchange for such day
“CNPC Huayou”	CNPC Huayou Cu Energy Investment Co. Ltd., a sino
	foreign co-operative joint venture enterprise established
	in the PRC
“Company”	China Vanguard Group Limited (formerly known as B &
	B Group Holdings Limited), an exempted company
	incorporated in the Cayman Islands with limited liability
	and the shares of which are listed on the GEM Board; the
	ultimate shareholder of Aptus, holding approximately
	54.88% equity interests of Aptus as at the Latest
	Practicable Date
“Conversion Price”	HK$2.40 per Aptus Share (subject to adjustment)
“Conversion Ratio”	the principal amount of each Bond divided by the initial
	Conversion Price or (if applicable) the Conversion Price
	as adjusted pursuant to the reset provisions (each as
	adjusted in accordance with the terms and conditions of
	the Bonds)

– 2 –

DEFINITIONS

“Conversion Right”	the right of a Bondholder to convert any Bonds into Aptus
	Shares
“Directors”	the directors of the Company
“Disposal”	the deemed disposal of the equity interest in Aptus by
	dilution under Rule 19.29 of the GEM Listing Rules on
	the part of the Company
“Early Redemption Amount”	for each HK$10,000 principal amount of the Bonds, is
	determined so that it represents for the Bondholder a
	gross yield at 11% per annum, calculated on a semi-
	annual basis
“EGM”	the extraordinary general meeting of the Company to be
	convened and held to consider and, if thought fit,
	approve, among other matters, the Disposal
“Encumbrance”	a mortgage, charge, pledge, lien or other encumbrance or
	security interest securing any obligation of any person
“Extraordinary Resolution”	extraordinary resolution of the Bondholder(s)
“Future Additional Funding”	has the meaning ascribed to it under paragraph headed
	“Principal Terms of the Bonds”
“GEM”	the Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules”	the Rules Governing the Listing of Securities on GEM
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC
“Issue Limit”	8.85% of the issued share capital of Aptus as enlarged by
	the issue of the Aptus Conversion Shares assuming full
	conversion of the Bonds as referred to in the circular of
	Aptus dated 19 October 2006

– 3 –

DEFINITIONS

“Joint Venture Contract”	the joint venture contract dated 31 March 2006 between
	Reliance Asia International Inc., China Hua You Group
	Corporation and Good United Management Limited
“Latest Practicable Date”	17 November 2006, being the latest practicable date prior
	to the printing of this circular for the purpose of
	ascertaining certain information for inclusion in this
	circular
“Madam Cheung’s Parties”	has the meaning ascribed to it under the paragraph headed
	“Use of Proceeds”
“Maturity Date”	21 November 2011
“Minimum Reset Reference	has the meaning ascribed to it under paragraph headed
Price”	“Principal Terms of the Bonds”
“Offering”	the offering of the Bonds to subscribers for the Bonds
	who are independent of and not connected with Aptus and
	its connected persons
“Paying Agent”	a paying agent appointed under the Agency Agreement
“PRC”	the People’s Republic of China
“Principal Paying Agent”	The Bank of New York
“Purchaser”	has the meaning ascribed to it under paragraph headed
	“Principal Terms of the Bonds”
“Put Exercise Notice”	has the meaning ascribed to it under paragraph headed
	“Principal Terms of the Bonds”
“Put Option Date”	has the meaning ascribed to it under paragraph headed
	“Principal Terms of the Bonds”
“Registrar”	The Bank of New York (Luxembourg) S.A.
“Relevant Event”	has the meaning ascribed to it under paragraph headed
	“Principal Terms of the Bonds”
“Relevant Event Redemption	has the meaning ascribed to it under paragraph headed
Notice”	“Principal Terms of the Bonds”

– 4 –

DEFINITIONS

“Relevant Redemption Date”	has the meaning ascribed to it under paragraph headed
	“Principal Terms of the Bonds”
“Reset Date”	has the meaning ascribed under paragraph headed
	“Principal Terms of the Bonds”
“Restricted Shares”	an aggregate of 915,571,428 Aptus Shares, directly or
	indirectly, held by the Company
“Security”	has the meaning ascribed to it under paragraph headed
	“Principal Terms of the Bonds”
“Security Trustee”	BNY Corporate Trustee Services Limited
“SFO”	Securities and Futures Ordinance (Cap. 571 of the Laws
	of Hong Kong)
“Share(s)”	ordinary share(s) of HK$0.01 each in the capital of the
	Company
“Share Charge”	has the meaning ascribed to it under paragraph headed
	“Principal Terms of the Bonds”
“Shareholder(s)”	holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Stock Exchange Business Day”	any day (other than a Saturday or Sunday) on which the
	Stock Exchange or the Alternative Stock Exchange, as
	the case may be, is open for business for dealing in shares
“Stock Lending Agreement”	the Stock Lending Agreement to be dated on or about 21
	November 2006 made between the Company and the
	Purchaser

– 5 –

DEFINITIONS

“Subsidiary”

any company or other business entity of which that person owns or controls (either directly or through one or more other Subsidiaries) more than 50% of the issued share capital or other ownership interest having ordinary voting power to elect directors, managers or trustees of such company or other business entity or any company or other business entity which at any time has its accounts consolidated with those of, or accounted for as a jointly controlled entity of, that person or which, under Cayman Islands or Hong Kong law, regulations or generally accepted accounting principles from time to time, should have its accounts consolidated with those of, or accounted for as a jointly controlled entity of, that person

“Tax Redemption Notice”
has the meaning ascribed to it under paragraph headed “Principal Terms of the Bonds”
“Trading Day”
a day on which the Stock Exchange is open for trading
“Trust Deed”
the trust deed to be dated on or about 21 November 2006 constituting the Bonds
“Trustee”
The Bank of New York
“Undertaking”

an undertaking to be signed by each of Good United Management Limited, Reliance Asia International Inc, China Hua You Group Corporation and CNPC Huayou in relation to the distribution of profits by CNPC Huayou to its shareholders in accordance with applicable laws and regulations, the articles of association of CNPC Huayou and the Joint Venture Contract and additionally, in the case of Good United Management Limited and CNPC Huayou only, in relation to the arrangements relating to removal and appointment of directors to the board of directors of CNPC Huayou as may from time to time be nominated by Good United Management Limited

“United States” or “U.S.” United States of America
“U.S. person(s)”

any person or entity deemed to be a U.S. person for purposes of Regulation S under the Securities Act of 1933, as amended

– 6 –

DEFINITIONS

“Volume Weighted Average Price”
“Warrants”
“%”

means, in respect of an Aptus Share on any Trading Day, the order book volume-weighted average price of an Aptus Share appearing on or derived from Bloomberg screen 8212 HK Equity VAP or such other source as shall be determined to be appropriate by an independent investment bank of international repute (acting as expert) selected by Aptus and approved by the Trustee in its sole and absolute discretion, on such Trading Day, provided that on any such Trading Day where such price is not available or cannot otherwise be determined as provided above, the Volume Weighted Average Price of an Aptus Share in respect of such Trading Day shall be the Volume Weighted Average Price, determined as provided above, on the immediately preceding Trading Day on which the same can be so determined

the 124,810,561 warrants issued by the Company on 1 November 2006 entitling holders thereof to subscribe for, in aggregate, 124,810,561 Shares at an initial exercise price of HK$1.33 per Share (subject to adjustment) during the period commencing from 3 November 2006 to 2 November 2008

per cent.

– 7 –

LETTER FROM THE BOARD

(incorporated in the Cayman Islands with limited liability) (Stock Code: 8156)

Executive Directors:

Madam Cheung Kwai Lan Mr. Chan Tung Mei Mr. Chan Ting Mr. Lau Hin Kun

Independent non-executive Directors: Mr. Tian He Nian Mr. Zhao Zhi Ming Mr. To Yan Ming, Edmond

Registered office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Head office and principal place of business in Hong Kong: 30th Floor, Sunshine Plaza 353 Lockhart Road Hong Kong

20 November 2006

To the Shareholders and, for information only, holders of warrants and outstanding options granted under the share option scheme of the Company

Dear Sir or Madam,

MAJOR TRANSACTION REGARDING DEEMED DISPOSAL OF APTUS HOLDINGS LIMITED BY POTENTIAL DILUTION ARISING FROM THE ISSUE OF SHARES OF APTUS HOLDINGS LIMITED UPON CONVERSION OF CONVERTIBLE BONDS

INTRODUCTION

By an announcement dated 9 November 2006, the Company announced with Aptus, an indirect non wholly-owned subsidiary of the Company, that Aptus and the Purchaser have entered into the Bond Purchase Agreement under which Aptus has agreed to issue and the Purchaser has agreed to subscribe and pay for the Bonds in the principal amount of HK$234,000,000.

Assuming full conversion of the Bonds at the initial Conversion Price, the Bonds will be convertible into 97,500,000 Aptus Conversion Shares (subject to adjustment), representing approximately 5.8% of the issued share capital of Aptus as at the Latest Practicable Date and

For identification purpose only

– 8 –

LETTER FROM THE BOARD

approximately 5.5% of the issued share capital as enlarged by the Aptus Conversion Shares. Assuming full conversion of the Bonds at the Minimum Reset Reference Price, the Bonds will be convertible into 161,379,310 Aptus Conversion Shares, (subject to adjustment), representing approximately 9.7% of the issued share capital of Aptus as at the Latest Practicable Date and approximately 8.8% of the issued share capital of Aptus as enlarged by the Aptus Conversion Shares.

As a result of Aptus entering into the Bond Purchase Agreement with the Purchaser, assuming there will not be any further issue and repurchase of Aptus Shares, the Company’s indirect interests in Aptus may be diluted for, up to 3.03 percentage points from holding approximately 54.88% to approximately 51.85% assuming full conversion of the Bonds into Aptus Conversion Shares at the initial Conversion Price or, up to 4.84 percentage points from holding approximately 54.88% to approximately 50.04% assuming full conversion of the Bonds into Aptus Conversion Shares at the Minimum Reset Reference Price, while the Company will continue to hold, indirectly, 915,571,428 Aptus Shares. The potential dilution is regarded as deemed disposal under Rule 19.29 of the GEM Listing Rules and that it constitutes a major transaction under Rule 19.06 of the GEM Listing Rules which is subject to Shareholders’ approval at an extraordinary general meeting of the Company.

The purpose of this circular is to provide you with, among other matters, further details of the Disposal, information on the Group and to set out the notice of EGM at which resolution for, among other matters, the Disposal will be proposed to the Shareholders for approval.

BOND PURCHASE AGREEMENT

Date:	7 November 2006
Issuer:	Aptus
Purchaser:	The Bonds have been placed with Evolution Master Fund Ltd.
	SPC, Segregated Portfolio M, who and its ultimate beneficial
	owner(s), to the Company’s and Aptus’ knowledge and belief
	having made reasonable inquiries, are independent third parties,
	and not connected persons (as defined in the GEM Listing Rules)
	of Aptus, the Company or any of their connected persons. The
	Purchaser is an Asia focused investment fund.
Subscription:	Aptus has agreed to issue and the Purchaser has agreed to
	subscribe and pay for the Bonds in an aggregate principal amount
	of HK$234,000,000.

– 9 –

LETTER FROM THE BOARD

Conditions precedent:

Completion of the subscription of the Bonds is conditional upon, amongst other things:

(1) the Aptus Shareholders approving the capital contribution by Aptus to two PRC joint ventures for participation in the natural gas business as set out in the Aptus’ announcement dated 2 August 2006 at an extraordinary general meeting held on 7 November 2006, as outlined in Aptus’ circular dated 19 October 2006;
(2) the issuance of English, Cayman Islands, British Virgin Islands, PRC and Hong Kong (in respect of the Undertaking) legal opinions;
(3) the execution of the Trust Deed and the Agency Agreement in relation to the Bonds, each in a form approved by the Trustee and the execution of the Stock Lending Agreement;
(4) the payment obligations and the performance of all of the obligations of Aptus under the Bonds, the Trust Deed and the Agency Agreement shall have been secured by the Share Charge, in favour of the Security Trustee on behalf of the Bondholder(s), granted by Aptus in respect of 100% of the issued share capital of Good United Management Limited which is owned by Aptus;
(5) each of Good United Management Limited, Reliance Asia International Inc., China Hua You Group Corporation and CNPC Huayou shall have executed a relevant Undertaking; and
(6) the delivery to the Purchaser of such other resolutions, consents, authorities and documents relating to the issue of the Bonds and the Aptus Conversion Shares, except for the approval for the listing of the Aptus Conversion Shares issuable on conversion of the Bonds on the Stock Exchange.

In the event that the conditions are not satisfied or waived on or prior to the Closing Date, parties to the Bond Purchase Agreement shall be released and discharged from their respective obligations under the Bond Purchase Agreement. The Purchaser, may at its discretion and upon such terms as it think fit, waive compliance with all or any of the conditions precedent.

As at the Latest Practicable Date, condition 1 has been fulfilled.

– 10 –

LETTER FROM THE BOARD

Undertakings	by	the	The Company, the ultimate controlling Aptus Shareholder, has
Company:			undertaken that, from the date of the Bond Purchase Agreement
			up to 90 days after the Closing Date, neither it nor any of its
			subsidiaries or affiliates over which it exercises management or
			voting control nor any pledge of Aptus Share beneficially owned
			by it, nor any person acting on its or their behalf will, without
			prior written consent of Purchaser, dispose of (or publicly
			announce any such disposal) the Restricted Shares except to the
			Purchaser pursuant to the Stock Lending Agreement.
Completion:			Subject to the above conditions, completion of subscription of the
			Bonds is expected to take place on the Closing Date.

PRINCIPAL TERMS OF THE BONDS

The principal terms of the Bonds are summarized as follows:

Issuer:	Aptus.
Principal amount of	HK$234,000,000.
the Bonds:
Interest:	The Bonds do not bear interest from 21 November 2006, being
	the issue date, to and including 20 May 2008. The Bonds will
	bear interest from and including 21 May 2008 at the rate of 5.0
	per cent per annum of the principal amount of the Bonds. Interest
	is payable semi-annually in arrear on 21 May and 21 November
	in each year commencing on 21 November 2008.
Conversion period:	Bondholder(s) may exercise Conversion Rights at any time from
	1 January 2007 up to the close of business on 11 November 2011
	or, if the Bonds shall have been called for redemption before the
	Maturity Date, up to the close of business on a date no later than
	7 business days prior to the date fixed for redemption thereof.

– 11 –

LETTER FROM THE BOARD

Conversion Price:

The initial Conversion Price will be HK$2.40 per Aptus Conversion Share, representing a premium of approximately 20.0% over the closing price of HK$2.00 per Aptus Share as quoted on the Stock Exchange on 6 November 2006, which is the last trading date before the Bond Purchase Agreement was signed, and a premium of approximately 19.9% and 18.4% over the average of the closing price of the Aptus Shares as quoted on the Stock Exchange for the five and ten Trading Days ended 6 November 2006 of HK$2.00 and HK$2.03 respectively. The initial Conversion Price of HK$2.40 also represents 92.1 times of the net asset value per Aptus Share of HK$0.02607 as at 30 June 2006 and a premium of approximately 50.0% over the closing price of HK$1.60 per Aptus Share as quoted on the Stock Exchange on the Latest Practicable Date.

The Conversion Price is subject to adjustment upon the occurrence of certain prescribed dilution events (i.e. the antidilution mechanism in Condition 6(C) of the terms and conditions of the Bonds). These prescribed events include consolidation, subdivision or reclassification of shares, capitalisation of profits or reserves, distributions, rights issues, rights issues of other securities, issues at a discount, etc., all of which are provisions for a convertible bond. However, the Conversion Price may not be reduced so that, on conversion of Bonds, Aptus Shares would fall to be issued at a discount to their nominal value or would require Aptus Shares to be issued below their par value or in any other circumstances not permitted by applicable law.

Conversion Price Reset:

The Conversion Price shall be adjusted downwards on each of 15 January 2008, 15 April 2008, 15 July 2008, 15 October 2008, 15 January 2009, 15 April 2009, 15 July 2009, 15 October 2009, 15 January 2010, 15 April 2010, 15 July 2010, 15 October 2010, 15 January 2011, 15 April 2011, 15 July 2011 and 15 October 2011 (each a “ Reset Date ”) to the Reset Reference Price if the applicable Reset Reference Price is less than the Conversion Price in effect on the relevant Reset Date (taking into account any adjustments set out in the terms and conditions of the Bonds which may have occurred prior to the Reset Date).

Reset Reference Price means in respect of each Reset Date, the arithmetic average of the Volume Weighted Average Price of an Aptus Share for each day during the period of 45 consecutive Trading Days immediately prior to the Reset Date.

– 12 –

LETTER FROM THE BOARD

The Conversion Price as adjusted pursuant to the reset provisions shall be rounded upwards, if necessary, to the nearest Hong Kong cent, provided that any adjustment to the Conversion Price pursuant to the reset provisions shall be limited such that the adjusted Conversion Price shall be not less than 60.42% of the initial Conversion Price of HK$2.40, but adjusted to reflect any adjustments (i.e. the above anti-dilution adjustment mechanism mentioned under the section “Conversion Price” above) which may have occurred prior to the Reset Date as may be required (“ Minimum Reset Reference Price ”).

Aptus Conversion Shares:

If all the Bonds are converted at the initial Conversion Price of HK$2.40 each, there will be 97,500,000 Aptus Conversion Shares (subject to adjustment), representing approximately 5.8% of the issued share capital of Aptus as at the Latest Practicable Date and 5.5% of the issued share capital of Aptus as enlarged by the Aptus Conversion Shares. If all the Bonds are converted at the Minimum Reset Reference Price of HK$1.45 (i.e. 60.42% of the initial Conversion Price of HK$2.40) each, there will be 161,379,310 Aptus Conversion Shares (subject to adjustment), representing approximately 9.7% of the issued share capital of Aptus as at the Latest Practicable Date and 8.8% of the issued share capital of Aptus as enlarged by the Aptus Conversion Shares.

Accordingly, the Aptus Conversion Shares to be issued upon full conversion of the Bonds at the Minimum Reset Reference Price will not exceed the Issue Limit. Further, as up to 333,688,285 Aptus Shares may be issued under the Aptus General Mandate, such Aptus Conversion Shares to be issued upon full conversion of the Bonds will be issued and allotted pursuant to the Aptus General Mandate. The Aptus Directors have not to date utilised their authority under the Aptus General Mandate.

Ranking of Aptus Conversion Shares:

Aptus Conversion Shares will rank pari passu in all respects with the Aptus Shares then in issue on the relevant conversion date.

– 13 –

LETTER FROM THE BOARD

Redemption at option of On or at any time after 21 November 2008 and prior to 11 Aptus: November 2011, Aptus may, having given not less than 30 nor more than 60 days’ notice to the Bondholder(s), the Trustee and the Principal Paying Agent redeem the Bonds in whole but not in part at the Early Redemption Amount, together with the interest accrued to the redemption date, provided that no such redemption may be made unless the Closing Price of the Aptus Shares for each of the 30 consecutive Trading Days immediately prior to the date upon which notice of such redemption is given is at least 130% of the applicable Early Redemption Amount divided by the Conversion Ratio.
Redemption for taxation At any time, Aptus may, having given not less than 30 nor more reasons: than 60 days’ notice (a “ Tax Redemption Notice ”) to the Bondholder(s), redeem the outstanding Bonds in whole but not in part at the Early Redemption Amount on the date specified in such notice, together with interest accrued to the redemption date if (i) Aptus satisfies the Trustee immediately prior to the giving of such notice that Aptus has or will become obliged to pay additional amounts of taxes, duties, assessments or governmental charges as a result of any change in, or amendment to, the laws or regulations of the Cayman Islands or as the case may be, Hong Kong or any political subdivision or any authority thereof or therein having power to tax, or any change in the general application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after 7 November 2006, and (ii) such obligation cannot be avoided by Aptus taking reasonable measures available to it, provided that no Tax Redemption Notice shall be given earlier than 90 days prior to the earliest date on which Aptus would be obliged to pay such additional amounts were a payment in respect of the Bonds then due. Upon the expiry of the Tax Redemption Notice, Aptus will be bound to redeem the Bonds at their Early Redemption Amount. If Aptus gives such notice, each Bondholder will have the right to elect that his Bond(s) shall not be redeemed whereupon no additional amounts shall be payable in respect thereof and payment of all amounts shall be made subject to the deduction or withholding of the taxation required to be withheld or deducted by the Cayman Islands or, as the case may be, Hong Kong or any authority thereof or therein having power to tax.

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LETTER FROM THE BOARD

Redemption for Delisting:

Each Bondholder has the right, at such Bondholder’s option, to require Aptus to redeem in whole or in part of that Bondholder’s Bonds following the occurrence of any of the following events at their Early Redemption Amount, which shall be, for each HK$10,000 principal amount of the Bonds, determined so that it represents for the Bondholder(s) a gross yield at 11% per annum, calculated on a semi-annual basis, together with the interest accrued to the Relevant Event Redemption Date: (a) when the Aptus Shares cease to be listed or admitted to trading on the Stock Exchange or an Alternative Stock Exchange; or (b) approval for the listing of the Aptus Shares to be issued on conversion of the Bonds on the Stock Exchange has not been obtained by 15 Stock Exchange Business Days after the Closing Date (each a “ Relevant Event ”). To exercise such right, the holder of the relevant Bond must complete, sign and deposit at the specified office of any Paying Agent a duly completed and signed notice of redemption, in the form for the time being current, obtainable from the specified office of any Paying Agent (the “ Relevant Event Redemption Notice ”) together with the bond certificate evidencing the Bonds to be redeemed by not later than 60 days following a Relevant Event, or, if later, 60 days following the date upon which notice thereof is given to Bondholder(s) by Aptus. The “ Relevant Event Redemption Date ” shall be the 14th day after the expiry of such period of 60 days as referred to above.
Redemption at option of On each of 21 November 2008, 21 November 2009 and 21 the Bondholder(s): November 2010 (each a “ Put Option Date ”), each Bondholder will have the right to require Aptus to redeem in whole or in part of the Bonds of such Bondholder on the Put Option Date at their Early Redemption Amount together with interest accrued to the Put Option Date. To exercise such right, the Bondholder must complete, sign and deposit at the specified office of any Paying Agent a duly completed and signed notice of redemption, in the then current form obtainable from the specified office of any Paying Agent (the “ Put Exercise Notice ”) together with the bond certificate evidencing the Bonds to be redeemed not earlier than 60 days and not later than 30 days prior to the relevant Put Option Date.
Cash Settlement Option:
Aptus may elect to provide cash in lieu of Aptus Shares in order to satisfy Bondholder(s)’ Conversion Right in whole or in part.

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LETTER FROM THE BOARD

Maturity:	Unless previously redeemed, converted or purchased and
	cancelled, each Bond shall be redeemed at 150.15% of their
	principal amount on the Maturity Date.
Voting rights:	Except in meetings of Bondholder(s) as specified in the Trust
	Deed, Bondholder(s) will not have any right to attend or vote in
	any meeting of Aptus by virtue of their being Bondholder(s).
Listing:	An application has been made to the Stock Exchange for the
	listing of, and permission to deal in the Aptus Conversion Shares.
Yield to maturity:	11% per cent. per annum, calculated on a semi-annual basis.
Form of the Bonds:	Registered.
Denomination:	HK$10,000 per Bond.
Status:	The Bonds constitute secured obligations of Aptus and the Bonds
	shall at all times rank pari passu and without any preference or
	priority among themselves. The payment obligations of Aptus
	under the Bonds shall, save for such exceptions as may be
	provided by applicable legislation and subject to provisions
	relating to security, at all times, be secured and rank in priority to
	all of its unsecured obligations.
Security:	The payment obligations and the performance of all of the
	obligations of Aptus under the Bonds, the Trust Deed and the
	Agency Agreement are secured (the “Security”) by a first priority
	fixed charge (the “Share Charge”) in favour of the Security
	Trustee on behalf of the Bondholder(s), granted by Aptus in
	respect of 100% of the issued share capital of Good United
	Management Limited, now or thereafter owned by Aptus
	including any future dividends and any other cash receivables
	arising therefrom (the “Charged Property”). The Share Charge
	provides that where the Aptus is to raise Future Additional
	Funding, the Share Charge may be released whereupon a new
	share charge in respect of the Charged Property shall be entered
	into by Aptus in favour of the chargee under the Share Charge and
	such new chargee(s) as may be required.

Future Additional Funding:

The proposed funding of up to HK$234,000,000 to be raised by Aptus incurring further indebtedness which ranks pari passu or subordinate to the Bonds or such other means of funding with the approval of an extraordinary resolution of the Bondholder(s).

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LETTER FROM THE BOARD

Transfer: Each Bond may be transferred by delivery of the Bond certificate issued in respect of that Bond, with the form of transfer on the back duly completed and signed by the holder or his attorney duly authorised in writing, to the specified office of the Registrar or any of the Agents.

The Bonds will not be sold to any connected persons (as defined in the GEM Listing Rules) of Aptus. Aptus will notify the Stock Exchange upon becoming aware of any dealing in the Bonds by any connected persons of Aptus. No applications will be made by Aptus for the listing of the Bonds.

STOCK LENDING ARRANGEMENT BY THE COMPANY

As a condition precedent to the issue of the Bonds, the Company will enter into the Stock Lending Agreement with the Purchaser on or before the Closing Date pursuant to which the Company agrees to lend to the Purchaser up to 48,750,000 Aptus Shares (the “ Borrowed Shares ”). The principal terms of the Stock Lending Agreement are summarized as follows:

Number of Borrowed Up to 48,750,000 Aptus Shares. This represents approximately Shares: 2.9% of the issued share capital of Aptus as at the Latest Practicable Date. Adjusted Number of If some of the Bonds have been transferred to independent third Borrowed Shares: parties, redeemed, converted or purchased and cancelled in accordance with the terms and conditions of the Bonds (each a “ Stock Borrowing Relevant Event ”), the number of Borrowed Shares available for borrowing shall be reduced by: (i) in the case of a conversion, a Borrowed Share for each Share issued upon such conversion; and (ii) in the case of a transfer to independent third parties, redemption or purchase and cancellation, the number of Borrowed Shares equivalent to the number of Aptus Shares that would have been issued upon a conversion of the amount of Bonds so transferred, redeemed or purchased and cancelled immediately prior to such Stock Borrowing Relevant Event. The reduced number of Borrowed Shares available for borrowing shall be referred to as the “ Adjusted Number of Borrowed Shares ”.

If the number of Borrowed Shares held by the Purchaser immediately after the Stock Borrowing Relevant Event exceeds the Adjusted Number of Borrowed Shares, the Company may require redelivery of the number of excess Borrowed Shares by not less than 5 business days’ notice to the Purchaser.

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LETTER FROM THE BOARD

Redelivery of Borrowed The Purchaser undertakes to redeliver the Borrowed Shares to the Shares: Company or to its order not later than the earlier of: (i) 21 November 2011 or such other date as the Company and the Purchaser agree; and (ii) the date of termination of the Stock Lending Agreement.

The Purchaser undertakes that where they hold the Borrowed Shares at a time when a right to vote arises in respect of such Borrowed Shares, the Company may require redelivery of all or some of the Borrowed Shares (to the extent such Borrowed Shares have not been transferred from the Purchaser to independent third parties) by not less than 5 business days’ written notice to the Purchaser.

In the event the redelivery of the Borrowed Shares will trigger a bid obligation on the part of the Company under Rule 26 of the Hong Kong Code on Takeovers and Mergers to make a general offer for all the issued Aptus Shares, the parties shall, prior to such redelivery, negotiate in good faith with each other and agree on such reasonable proposals (including but not limited to the disposal of the relevant Aptus Shares) with an aim that no such bid obligation will be incurred by the Company.

Stock Borrowing Fee: The Company shall be entitled to charge and receive from the Purchaser a fee of 2.5 per cent. per annum of the aggregate value of the Borrowed Shares (to be calculated by or on behalf of Purchaser by reference to the closing price of the Aptus Shares on each trading day for which they are borrowed as quoted by the Stock Exchange) from the date of delivery of the Borrowed Shares to the Purchaser to the date of redelivery of the Borrowed Shares to the Company.

The Company’s Rights: The Company shall be entitled to receive such amounts as are equal to the amounts of all dividends or other distributions or payments of any kind whatsoever made on or in respect of the Borrowed Shares, the payment dates or record dates (as the case may be) for which occur during the term of the borrowing under Stock Lending Agreement.
Default Interests: If a default is made in the payment of any amount due to the Company or the Purchaser, as the case may be, under the Stock Lending Agreement, interest will accrue at the rate of 5 per cent. per annum (after as well as before any judgment) up to but excluding the date on which such amount due is received by or on behalf of the Company or the Purchaser, as the case may be.

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LETTER FROM THE BOARD

In view of the low liquidity of the Aptus Shares, the arrangement of the Stock Lending Agreement may assist the Purchaser to hedge against their risk exposure. The Company will enter into the Stock Lending Agreement with the Purchaser to facilitate the issue of the Bonds and in return for a fee of 2.5 per cent. per annum of the aggregate value of the Borrowed Shares as disclosed above.

The transfer of the Borrowed Shares by the Purchaser to any independent third parties or the redelivery of the Borrowed Shares may constitute a notifiable transaction under the GEM Listing Rules. Separate announcement will be made by the Company in relation thereto as and when appropriate in compliance with the GEM Listing Rules.

EFFECT ON THE SHARE CAPITAL

The following table summarises the shareholding structure of Aptus as at the Latest Practicable Date and as a result of full conversion:

Name of Aptus Shareholder Precise Result Profits Limited China Success Enterprises Limited (Note 1) The Company (Note 1) Best Frontier Investments Limited (Note 1) Cheung Kwai Lan (Note 2) Chan Tung Mei (Note 2) Bondholder(s) (Note 3) Public Total	As at Latest Practicable Date No. of Aptus Shares Approximate % of issued share capital of Aptus 915,571,428 54.88% 915,571,428 54.88% 915,571,428 54.88% 915,571,428 54.88% 915,571,428 54.88% 915,571,428 54.88% – – 752,870,000 45.12% 1,668,441,428 100.00%	Assuming the Bonds are fully converted into Aptus Shares (subject to adjustment) at the initial Conversion Price of HK$2.40 each No. of Aptus Shares Approximate % of enlarged issued share capital of Aptus 915,571,428 51.85% 915,571,428 51.85% 915,571,428 51.85% 915,571,428 51.85% 915,571,428 51.85% 915,571,428 51.85% 97,500,000 5.52% 752,870,000 42.63% 1,765,941,428 100.00%	Assuming the Bonds are fully converted into Aptus Shares (subject to adjustment) at the Minimum Reset Reference Price of HK$1.45 each No. of Aptus Shares Approximate % of enlarged issued share capital of Aptus 915,571,428 50.04% 915,571,428 50.04% 915,571,428 50.04% 915,571,428 50.04% 915,571,428 50.04% 915,571,428 50.04% 161,379,310 8.82% 752,870,000 41.14% 1,829,820,738 100.00%	Assuming the Bonds are fully converted into Aptus Shares (subject to adjustment) at the Minimum Reset Reference Price of HK$1.45 each No. of Aptus Shares Approximate % of enlarged issued share capital of Aptus 915,571,428 50.04% 915,571,428 50.04% 915,571,428 50.04% 915,571,428 50.04% 915,571,428 50.04% 915,571,428 50.04% 161,379,310 8.82% 752,870,000 41.14% 1,829,820,738 100.00%
				100.00%

Notes:

Precise Result Profits Limited is a wholly owned subsidiary of China Success Enterprises Limited. China Success Enterprises Limited is a wholly owned subsidiary of the Company. As at the Latest Practicable Date, Best Frontier Investments Limited was interested in approximately 38.64% of the issued share capital of the Company. The Aptus Shares referred to herein relate to the same parcel of Aptus Shares held by Precise Result Profits Limited.

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LETTER FROM THE BOARD

Madam Cheung Kwai Lan and Mr. Chan Tung Mei have equity interests of 99.89% and 0.11%, respectively of the issued share capital of Best Frontier Investments Limited. Madam Cheung Kwai Lan is the spouse of Mr. Chan Tung Mei. Accordingly, Madam Cheung Kwai Lan and Mr. Chan Tung Mei are deemed to be interested in the Aptus Shares under the SFO. The Aptus Shares referred to herein relate to the same parcel of Aptus Shares held by Precise Result Profits Limited.
Besides, Madam Cheung Kwai Lan held 2,070,000 Shares, and 276,000 underlying Shares pursuant to a bonus issue of warrants issued by the Company on 3 November 2006 as at the Latest Practicable Date.
Bondholder(s) is/are public shareholder(s).

USE OF PROCEEDS

The net proceeds from the issue of the Bonds, after deducting certain expenses and fees, are estimated to be approximately HK$223.3 million. Aptus presently intends to use such proceeds for the following purposes: (a) approximately HK$130.1 million for the acquisition of a 48.33% equity interest in the Changde Joint Venture and approximately HK$78.7 million for the acquisition of a 33% equity interest in the Hunan Joint Venture, (details of the Changde Joint Venture and the Hunan Joint Venture are set out in Aptus’ joint announcement with the Company dated 2 August 2006); and (b) the balance of approximately HK$14.5 million for Aptus’ general working purposes. The acquisitions of Changde Joint Venture and Hunan Joint Venture are not conditional on the issue of the Bonds. Other than being an indirect Aptus Shareholder through the Company and Best Frontier Investments Limited, a company which is controlled by Madam Cheung Kwai Lan and her associates (as defined under the GEM Listing Rules) (“ Madam Cheung’s Parties ”), and interested in approximately 38.86% of the Company, none of the Madam Cheung’s Parties would be interested in or benefited from the issue of the Bonds. The issue of the Bonds is made entirely for the benefit of Aptus Group and the Aptus Shareholders and indirectly for the benefit of the Company as a whole and none of the Madam Cheung’s Parties would have any interests or benefits which the other Shareholders or Aptus Shareholders do not share.

REASONS FOR AND BENEFITS OF THE BONDS ISSUE

The conversion of the Bonds into Aptus Conversion Shares will enlarge and diversify the shareholder base of Aptus. It will also provide financing for the capital contributions to the Hunan Joint Venture and Changde Joint Venture. The Aptus Directors are of the view that these two investments will enhance the business of Aptus and represent a further step in achieving the Aptus Group’s objective to become a major oil and gas company. The Bonds will bear no cash interest for at least the first 18 months which provides Aptus with financial flexibility. Aptus Directors believe that given the current market environment that the terms of the bonds are fair and reasonable, on normal commercial terms and are in the interests of the Aptus Shareholders as a whole. The issue of the Bonds is to an independent third party not connected with the Company and the funds to be raised will be used to finance Aptus’ very substantial acquisitions as described in its circular dated 19 October 2006, being transactions with independent third parties who are not connected with the Company or its associates. Accordingly, in respect of the issue of the Bonds, the interest of the Company as a shareholder in Aptus should be no different from other shareholders of Aptus. As such, the Company considers those overlapping directors for Aptus and the Company should not be excluded from

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LETTER FROM THE BOARD

voting on the relevant resolutions. The overlapping directors are Madam Cheung Kwai Lan and Mr. Chan Ting who are executive directors of both Aptus and the Company, and the three independent non-executive directors of both Aptus and the Company.

DEEMED DISPOSAL BY THE COMPANY

As a result of Aptus entering into the Bond Purchase Agreement with the Purchaser, the Company’s indirect interests in Aptus may be diluted for, up to approximately 3.03 percentage points from holding approximately 54.88% to approximately 51.85% assuming full conversion of the Bonds into Aptus Conversion Shares at the initial Conversion Price or, up to approximately 4.84 percentage points from holding approximately 54.88% to approximately 50.04% assuming full conversion of the Bonds into Aptus Conversion Shares at the Minimum Reset Reference Price, while the Company will continue to hold, indirectly, 915,571,428 Aptus Shares. Upon all of the Aptus Conversion Shares having been issued, Aptus will remain as an indirect non wholly-owned subsidiary of the Company and the accounts of Aptus will continue to be consolidated with that of the Company.

The Disposal is regarded as a deemed disposal on the part of the Company under Rule 19.29 of the GEM Listing Rules. Details of the Bond Purchase Agreement, the terms of the Bonds and their dilution effect, are set out under the headings “Bond Purchase Agreement”, “Principal Terms of the Bonds” and “Effect on the Share Capital” above.

The Aptus Group is principally engaged in the business of trading of edible oil and operation of oil and gas related business. The Aptus Board intends to continue with the existing business of the Aptus Group upon issue of the Bonds. Aptus has not undertaken any fund raising on any issue of equity securities in the past 12 months.

The Directors noted under the headings “Use of Proceeds” and “Reasons for and benefits of the Bonds Issue” above that the issue of the Bonds is made for the benefit of the Aptus Group and the Aptus Shareholders as a whole, in particular, it is for the financing of (i) Aptus’ acquisitions in the Changde Joint Venture and the Hunan Joint Venture; and (ii) as Aptus’ general working capital. The Directors (including the independent non-executive Directors) concur with the Aptus Directors that the issue of the Bonds is in the interest of the Aptus Group and the Aptus Shareholders as a whole.

Having considered the benefits accrued to Aptus, a non wholly-owned subsidiary of the Company, and indirectly to the Company, the dilution effect on the Company in the interest of Aptus and the factors and considerations taken into account as set out above in relation to the issue of the Bonds, the Directors (including the independent non-executive Directors) consider that the terms and the entering into of the Bond Purchase Agreement (including the transactions contemplated thereby and the Disposal) to be fair and reasonable, on normal commercial terms and in the interests of the Group and the Shareholders as a whole.

Based on Aptus’s annual report for the year ended 30 June 2006 and for the nine months ended 30 June 2005, the net loss before and after taxation of Aptus for the year ended 30 June 2006 were both approximately HK$41 million and for the nine months ended 30 June 2005

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LETTER FROM THE BOARD

were both approximately HK$3.7 million. Aptus recorded a net asset value of approximately HK$43.5 million and approximately HK$13 million as at 30 June 2006 and 30 June 2005 respectively.

Assuming there will not be any further issue or repurchase of Aptus Shares by Aptus, the Disposal will deem the Company to have disposed of up to 3.03 percentage points in the case of full conversion of the Bonds at the initial Conversion Price or up to 4.84 percentage points of its stake in Aptus in the event the Bonds are converted at the Minimum Reset Reference Price, causing Aptus’ net asset value to increase by approximately HK$223.3 million, which is the estimated net proceeds from the issuance of the Bonds and the Company to report a gain of approximately HK$115 million (in the case of full conversion of the Bonds at the Initial Conversion Price) and approximately HK$110 million (in the case of full conversion of the Bonds at the Minimum Reset Reference Price) based on the equity attributable to equity holders of Aptus of approximately HK$29,424,000 as at 30 June 2006.

Following the issue of Bonds, Aptus will record an increase in asset (cash) of HK$234 million, a liability component of approximately HK$223.3 million and an equity component of approximately HK$10.7 million. Upon full conversion of the Bonds, the liability component of the Bonds will be converted into equity component in the financial statement of Aptus. The net asset value of Aptus will then be increased by approximately HK$223.3 million and the Group’s net asset value will also be increased by the same amount accordingly. Although the equity interest of the Group in Aptus will be diluted by 3.03 percentage points (in the case of full conversion of the Bonds at the Initial Conversion Price) or by 4.84 percentage points (in the case of full conversion of the Bonds at the Minimum Reset Reference Price), the increase in the consolidated net asset value of the Group of approximately HK$223.3 million will outweigh the dilution effect of the Disposal which amounts to approximately HK$892,000 (in the case of full conversion of the Bonds at the Initial Conversion Price) or approximately HK$1,424,000 (in the case of full conversion of the Bonds at the Minimum Reset Reference Price) calculated based on the equity attributable equity holders of Aptus of approximately HK$29,424,000 as at 30 June 2006.

FINANCIAL AND TRADING PROSPECT OF THE GROUP

The Group was principally engaged in the production and/or distribution of bee related products. Since early 2006, the Group had been embarking on various acquisitions to develop its presence in the fast growing lottery-related industry and oil and gas related industries in the PRC. The Company intends to shift its business focus to research, development and application of information technology in the lottery field and the oil and gas related business in the PRC.

Companies acquired in the PRC lottery-related operations include Shenzhen Bozone IT Co. Limited which is engaged principally in the research and development and application of information technology in the lottery field. Shenzhen Bozone IT Co. Limited provides its services in return for a share in the lottery revenue. In June 2006, the Group has further completed the formation of a joint venture, Guangzhou Latech Computer Technology Company Limited which is principally engaged in the integration and provision of technical services for

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LETTER FROM THE BOARD

computer systems, provision of repairs and maintenance services for lottery and development and sales of computer hardware and software. The Group had also announced its entering into of an agreement to acquire 63% stake in Jinan Weita Technology Company Limited which has a core business of research, development, manufacture and sale of lottery terminals in the PRC. Details of these acquisitions have been set out in various announcements of the Company relating thereto.

In setting the pace for the Group’s oil and gas related operations, in January 2006, the Group completed the acquisition of a 70% equity interests (56% effective interests) in CNPC Huayou giving the Group in return for a profit sharing rights in the Xin Jiang Oilfield. In July 2006, the Group entered into two agreements to make capital contributions to Changde Huayou Gas Co., Ltd (a city level natural gas pipeline project) and Hunan Huayou Natural Gas Transportation and Distribution Company Limited (a provincial level natural gas pipeline project). Details in relation to these transactions have also been set out in various announcements of the Company relating thereto.

Apart from the above acquisitions, the Group had further disposed of its interests in Wuhu Bee & Bee Natural Food Company Limited and Zhuhai Free Trade Zone Bee & Bee Natural Food Company Limited in August 2006, both of which constituted the Group’s production and distribution arm in bee related products. With the said disposals being completed in September 2006, the Group may focus its resources on its operation in the PRC lottery-related industry and the oil and gas related industries. The Board expects that its participation in the PRC lottery-related sector will generate rapid growth in revenue and that by developing in the oil and gas related industries, the Group may capitalize on the current strong demand and pricing environment for natural resources and thereby enhancing the profitability and growth of the Group going ahead.

The Board is optimistic on the prospect of the Group in the coming years given the benefits anticipated to be accrued to Group as a result of the aforesaid investments. The Group will continue to look for opportunities to expand the oil and gas related business by acquisitions that will bring good returns which suit the objectives of the Group.

With the expected cash inflow generated by the Xin Jiang Oilfield project and the investments aforesaid, the Directors are of the view that the Group would have sufficient financial resources for the ongoing operations including interests payment and obligations of the Bonds to be issued by Aptus.

LISTING RULES IMPLICATIONS

The Disposal constitutes a major transaction under Rule 19.06 of the GEM Listing Rules which is subject to the Shareholders’ approval at an extraordinary general meeting.

As at the Latest Practicable Date, no Shareholder is required to abstain from voting on the resolution regarding, among other matters, the Disposal at the EGM. Both Best Frontier Investments Limited and Oppenheimer International Small Company Fund had indicated that

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LETTER FROM THE BOARD

they intend to vote in favour of the resolutions proposed at the EGM. Assuming Best Frontier Investments Limited and Oppenheimer International Small Company Fund holding approximately 38.64% and 17.63% respectively in the Company voted together on a poll in favour of the resolution for the entering into of the Bond Purchase Agreement and the issue of the Bonds thereof and the matters contemplated thereby, including the Disposal, such resolution will be passed at the EGM as an ordinary resolution.

EGM

The EGM will be held at 30th Floor, Sunshine Plaza, 353 Lockhart Road, Hong Kong on Thursday, 7 December 2006, at 10:30 a.m. or any adjournments thereof, for the purpose of considering and, if thought fit, passing the resolutions to approve, among other matters, the issue of the Bonds, the entering into of the Bond Purchase Agreement, the matters contemplated thereunder, including the Disposal. A notice convening the EGM is set out on pages 37 to 38 of this circular.

A form of proxy for use at the EGM is enclosed. Whether or not you are able to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the office of the Company’s branch share registrar and transfer office in Hong Kong, Standard Registrars Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

RECOMMENDATION

Having considered the above factors and reasons, we are of the opinion that the issue of the Bonds, the entering into of the Bond Purchase Agreement by Aptus and the Disposal are in the interests of the Group and the Shareholders as a whole and that the terms of the Bond Purchase Agreement together with the Disposal are fair and reasonable so far as the Group and the Shareholders are concerned. The Board recommends the Shareholders to vote in favour of the issue of the Bonds, the entering into of the Bond Purchase Agreement and the matters contemplated thereby including the Disposal at the EGM.

FURTHER INFORMATION

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

Yours faithfully For and on behalf of the Board of China Vanguard Group Limited Chan Ting Director

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PROCEDURES BY WHICH SHAREHOLDERS MAY DEMAND A POLL AT GENERAL MEETING PURSUANT TO THE ARTICLES OF ASSOCIATION

APPENDIX I

PROCEDURES FOR DEMANDING A POLL AT EXTRAORDINARY GENERAL MEETING

As at the Latest Practicable Date, according to Article 80 of the articles of association of the Company (the “ Articles ”), at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless voting by way of a poll is required by the GEM Listing Rules or (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 duly demanded. A poll may be demanded by:

(a) the chairman of the meeting; or
(b) at least five Shareholders present in person or by proxy or, in the case of corporations, by their duly authorised representatives, and entitled to vote or who represent in the aggregate not less than one-tenth of the total voting rights of all Shareholders having the right to attend and vote at the meeting; or
(c) any Shareholder or Shareholders present in person or by proxy or, in the case of corporations, by their duly authorised representatives, and holding Shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all Shares conferring that right; or
(d) if required by the GEM Listing Rules, any Director holding proxies if such aggregate proxies held individually or collectively by the Directors account for five (5) per cent or more of the total voting rights at that meeting, and if on a show of hands in respect of any resolution, the meeting votes in the opposition manner to that instructed in those proxies.

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GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, include particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:

(a) the information contained in this circular is accurate and complete in all material respects and not misleading;
(b) there are no other matters the omission of which would make any statement in this circular misleading; and
(c) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

2. DIRECTORS’ INTERESTS AND SHORT POSITION IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executives 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 notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange, were as follows:

(1) Long positions in the shares of the Company or any of its associated corporations

	Company/ Name of		Number	of shares held		Approximate percentage
Name of	associated	Corporate	Personal	Family	Total	of
Directors	corporation	interest	interest	interest	interest	shareholding
Cheung Kwai	Company	361,695,000	2,070,000	–	363,765,000	38.86%
Lan		(Note 1)	(Note 2)
Chan Tung Mei	Company	–	–	363,765,000	363,765,000	38.86%
				(Notes 1 & 2)
Lau Hin Kun	Company	–	675,000	–	675,000	0.07%

– 26 –

APPENDIX II

GENERAL INFORMATION

	Company/ Name of		Number of shares held	Number of shares held		Approximate percentage
Name of	associated	Corporate	Personal	Family	Total	of
Directors	corporation	interest	interest	interest	interest	shareholding
Cheung Kwai	Best	–	909	1	910	–
Lan	Frontier			(Note 3)
	Investments
	Limited
Chan Tung Mei	Best	–	1	909	910	–
	Frontier			(Note 3)
	Investments
	Limited
Cheung Kwai	Aptus	915,571,428	–	–	915,571,428	54.88%
Lan	Holdings	(Note 4)
	Limited
Chan Tung Mei	Aptus	–	–	915,571,428	915,571,428	54.88%
	Holdings			(Note 4)
	Limited

Notes:

The 361,695,000 Shares are owned by Best Frontier Investments Limited (“ Best Frontier ”) which is owned as to 99.89% and 0.11% by respectively Madam Cheung Kwai Lan and Mr. Chan Tung Mei who are spouse to each other. Accordingly, Madam Cheung Kwai Lan is deemed to be interested in the Shares held by Best Frontier and Mr. Chan Tung Mei is deemed to be interested in all 363,765,000 Shares by virtue of being the spouse of Madam Cheung Kwai Lan under the SFO.
The 2,070,000 Shares are owned by Madam Cheung Kwai Lan who is the spouse of Mr. Chan Tung Mei. Accordingly, Mr. Chan Tung Mei is deemed to be interested in the Shares under the SFO.
The 1 share and 909 shares of US$1 each in Best Frontier is owned respectively by Mr. Chan Tung Mei and Madam Cheung Kwai Lan who are spouse to each other. Accordingly, Madam Cheung Kwai Lan and Mr. Chan Tung Mei are deemed to be interested in the shares held by each other under the SFO.
Madam Cheung Kwai Lan and Mr. Chan Tung Mei have equity interests of 99.89% and 0.11% respectively of the issued share capital of Best Frontier. Madam Cheung Kwai Lan and Mr. Chan Tung Mei are spouse to each other. Accordingly, Madam Cheung Kwai Lan is deemed to be 100% interested in the shares of Best Frontier, and Mr. Chan Tung Mei is also deemed to be interested in the shares of Best Frontier by virtue of being the spouse of Madam Cheung under the SFO. As at the Latest Practicable Date, Best Frontier is interested in approximately 38.64% of the issued share capital of the Company which in turn holds 100% shareholding of China Success Enterprises Limited which holds 100% shareholding of Precise Result Profits Limited, the company directly holds 915,571,428 Aptus Shares.

– 27 –

GENERAL INFORMATION

APPENDIX II

(2) Share options of the Company

The Company has adopted a share option scheme on 18 October 2002 (the “ Share Option Scheme ”), under which the Board may, at its discretion, invite any persons who satisfy the criteria of the Share Option Scheme, to take up options to subscribe for Shares.

The Share Option Scheme will remain valid for a period of 10 years commencing from 18 October 2002.

Options held as at the Name of Director Date of grant Latest Practicable Date Lau Hin Kun 18 August 2004 1,600,000

(3) Long positions in underlying Shares

By an announcement dated 29 September 2006, the Board announced, among other matters, that it had resolved to propose to issue bonus warrants (“ Bonus Warrants ”) to qualifying Shareholders on the basis of one Bonus Warrant for every five then existing Shares. The Bonus Warrants are exercisable at an initial exercise price of HK$1.33 per Share for a subscription period of two years, i.e. up to and including 2 November 2008. The Bonus Warrants were issued to the qualifying Shareholders on 1 November 2006. Each Bonus Warrant entitles the holder thereof to subscribe for one Share. For further details, please refer to the circular of the Company dated 6 October 2006.

Number of Bonus Warrants held as at the Name of Directors Capacity Latest Practicable Date Cheung Kwai Lan Directly beneficially owned 276,000 Lau Hin Kun Directly beneficially owned 90,000

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in any shares, underlying shares or debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange.

– 28 –

GENERAL INFORMATION

APPENDIX II

3. SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY

As at the Latest Practicable Date, according to the register kept by the Company pursuant to section 336 of SFO, and so far as is known to the Directors or chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had, or was deemed or taken to have, an interest or short position in the shares or underlying shares of the Company 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, carrying rights to vote in all circumstances at general meeting of any member of the Group:

(1) Long positions in the Shares

		Number of	Shares held	Approximate
Name of		Long	Short	percentage of
Shareholder	Capacity	position	position	shareholding
Best Frontier	Directly beneficial	361,695,000	–	38.64%
Investments	Owned	(Note 1)
Limited
Oppenheimer	Investment manager	165,000,000	–	17.63%
Funds, Inc.
Haven Associates	Controlled corporation	69,900,000	–	7.47%
Limited		(Note 2)
Shaw Kyle Arnold	Controlled corporation	69,900,000	–	7.47%
Junior		(Note 2)
Deutsche Bank	Beneficial owner and	44,545,000	–	4.76%
Aktiengesellschaft	person having a	(Note 3)
	security interest in
	shares

Notes:

The 361,695,000 Shares are owned by Best Frontier Investments Limited which is owned as to 99.89% and 0.11% respectively by Madam Cheung Kwai Lan and Mr. Chan Tung Mei who are spouse to each other.
The 69,900,000 Shares represent:
(a) 1,545,000 Shares beneficially owned by Shaw, Kwei & Partners (Asia) Ltd.
(b) 36,930,000 Shares beneficially owned by China Value Investment Limited which is whollyowned by Asian Value Investment Fund L. P. (AVIF, L.P.), a limited liability partnership, whose general partner Shaw, Kwei & Partners (Asia) Ltd. (having a 1% interest in AVIF, L.P.) is deemed under the SFO to have interest in the same 36,930,000 Shares.

– 29 –

GENERAL INFORMATION

APPENDIX II

(c) 31,425,000 Shares beneficially owned by Javelin Capital Holdings Limited which is wholly owned by Asian Value Investment Fund II, L.P. (AVIF II, L.P.), a limited liability partnership, whose general partner SKP Capital Limited (having a 1.19% interest in AVIF II, L.P.) is deemed under the SFO to have interest in the same 31,425,000 Shares.
(d) Haven Associates Limited a company controlled by Mr. Shaw Kyle Arnold Junior, a former Director who had been retired from his office after the conclusion of the Company’s annual general meeting held on 24 October 2006, is the controlling shareholder of Shaw, Kwei & Partners (Asia) Ltd. and SKP Capital Limited.
Of the 44,545,000 Shares, 10,902,500 Shares are held as beneficial owner and the remaining 38,269,500 Shares are held as person having a security interest in the Shares. Other than 44,545,000 Shares, Deutsche Bank Aktiengesellschaft also holds 4,627,000 Bonus Warrants as person having a security interest in the Bonus Warrant; details of which are set out under the heading “Long positions in underlying Shares” below. The aggregate of 44,545,000 Shares and 4,627,000 Shares to be issued upon the exercise of the subscription rights attaching to 4,627,000 Bonus Warrants represents approximately 5.25% of the issued share capital of the Company.

(2) Share options of the Company

Options held as at the Name of Director Date of grant Latest Practicable Date Shaw Kyle Arnold Junior 19 October 2004 1,200,000 (Note)

Note: The share options of the Company were granted to Mr. Shaw Kyle Arnold Junior when he was a non-executive Director. Mr. Shaw Kyle Arnold Junior has retired from his office on 24 October 2006 and those share options will lapse in six months time from 24 October 2006, the date on which he retired from his office, if not exercised under the Share Option Scheme.

(3) Long positions in underlying Shares

		Number of Bonus
		Warrants held as at the
Name of Shareholders	Capacity	Latest Practicable Date
Best Frontier Investments	Directly beneficially	48,226,000
Limited	owned (Note 1)
Oppenheimer Funds, Inc.	Investment manager	22,000,000
Deutsche Bank	Person having a	4,627,000
Aktiengesellschaft	security interest in
	Shares
Haven Associates Limited	Controlled corporation	9,320,000
	(Note 2)
Shaw Kyle Arnold Junior	Controlled corporation	9,320,000
	(Note 2)

Notes:

The 48,226, 000 Bonus Warrants are owned by Best Frontier which is owned as to 99.89% and 0.11% by Madam Cheung Kwai Lan and Mr. Chan Tung Mei who are spouse to each other respectively.

– 30 –

GENERAL INFORMATION

APPENDIX II

The 9,320,000 Bonus Warrants represent:
(a) 206,000 Bonus Warrants beneficially owned by Shaw, Kwei & Partners (Asia) Ltd.
(b) 4,924,000 Bonus Warrants beneficially owned by China Value Investment Limited which is wholly-owned by Asian Value Investment Fund L. P. (AVIF, L.P.), a limited liability partnership, whose general partner Shaw, Kwei & Partners (Asia) Ltd. (having a 1% interest in AVIF, L.P.) is deemed under the SFO to have interest in 4,924,000 Bonus Warrants.
(c) 4,190,000 Bonus Warrants beneficially owned by Javelin Capital Holdings Limited which is wholly owned by Asian Value Investment Fund II, L.P. (AVIF II, L.P.), a limited liability partnership, whose general partner SKP Capital Limited (having a 1.19% interest in AVIF II, L.P.) is deemed under the SFO to have interest in 4,190,000 Bonus Warrants.
(d) Haven Associates Limited, a company controlled by Mr. Shaw Kyle Arnold Junior, a former Director who had been retired from his office after the conclusion of the Company’s annual general meeting held on 24 October 2006, is the controlling shareholder of Shaw, Kwei & Partners (Asia) Ltd. and SKP Capital Limited.

Save as disclosed above, as at the Latest Practicable Date, the Directors or chief executive of the Company were not aware of any person (other than a Director or chief executive of the Company) who had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, was, directly or indirectly, interest in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any other member of the Group.

4. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against any member of the Group.

5. SERVICE CONTRACTS

None of the Directors had entered into any service agreements with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation).

6. COMPETING INTERESTS

As at the Latest Practicable Date, so far as the Directors were aware, none of them or the management shareholders of the Company or their respective associates had any interests in a business which competes or may compete with the business of the Group nor are there any conflicts of interest which any such persons have with the Group.

– 31 –

GENERAL INFORMATION

APPENDIX II

7. DIRECTORS’ INTEREST IN CONTRACTS AND ASSETS

No contract or arrangement in which any Directors is materially interested which is significant in relation to the business of the Group subsisted as at the Latest Practicable Date. As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been, since 30 June 2006 (the date to which the latest published audited consolidated accounts of the Company were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of or leased to any member of the Group.

8. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by a member of the Group within the two years immediately preceding the Latest Practicable Date:

(a) the agreement dated 4 March 2005 entered into between Aptus and Solarmax Limited in respect of disposal of the entire equity interest of Aptus Medical Group Limited;
(b) the agreement dated 17 June 2005 in relation to the acquisition of 70% equity interest in CNPC Huayou from China United (International) Investment Development Limited by Good United Management Limited pursuant to the agreement;
(c) the conditional sale and purchase agreement entered into between Bemaestro International Limited and China Success Enterprises Limited dated 10 August 2005 in relation to the acquisition of a 75% equity interest in Skilltime Management Limited;
(d) the placing agreement as constituted by a letter dated as of 12 August 2005 issued by the Shenyin Wanguo Capital (H.K.) Limited to Best Frontier Investments Limited and Madam Cheung Kwai Lan in relation to the placing of 36,000,000 shares of the Company at HK$1.4356 per share;
(e) the subscription agreement dated as of 12 August 2005 made between the Company and Best Frontier Investments Limited in relation to the subscription of 30,000,000 shares of the Company at HK$1.4356 per share;
(f) two termination agreements entered into between (i) Best Frontier Investments Limited and Madam Cheung Kwai Lan and the Shenyin Wanguo Capital (H.K.) Limited (item (d) above); and (ii) Best Frontier Investments Limited and the Company (item (e) above) both on 26 August 2005;
(g) the rescission agreement in relation to the rescission of the conditional sale and purchase agreement with Bemaestro International Limited dated 26 August 2005;

– 32 –

GENERAL INFORMATION

APPENDIX II

(h) the agreement dated 28 November 2005 and entered into between Mr. Xu Ming, Mr. Li Jun, Mr. Lin Zhiwei, Mr. Miao Jian, Mr. Jiang Chuan, Ms. Liu Ling and Ms. Zhu Yuan and Ace Bingo Group Limited in relation to the acquisition an aggregate of 51% of the registered capital of Shenzhen Bozone IT Co., Limited;
(i) a placing and subscription agreement dated 12 January 2006 and entered into between, inter alia, Best Frontier Investments Limited, the Company and Pacific Foundation Securities Limited for a total of 68,000,000 shares of the Company at HK$2.15 per share;
(j) the agreement dated 15 March 2006 and entered into between Shenzhen Bozone IT Co. Ltd. and Greatest Luck Limited in relation to the acquisition of a 70% interest in Shenzhen Bozone Mobile Technology Company Limited;
(k) the agreement dated 15 March 2006 and entered into between Mr. Xu Ming and Greatest Luck Limited in relation to the acquisition of a 30% interest in Shenzhen Bozone Mobile Technology Company Limited;
(l) a deed of variation dated 17 March 2006 in relation to the agreement dated 28 November 2005 and entered into between the Mr. Xu Ming, Mr. Li Jun, Mr. Lin Zhiwei, Mr. Miao Jian, Mr. Jiang Chuan, Ms. Liu Ling and Ms. Zhu Yuan and Ace Bingo Group Limited in relation to the acquisition of an aggregate of 51% of the registered capital of Shenzhen Bozone IT Co., Limited;
(m) an agreement dated 13 April 2006 entered into between Loyalion Limited and Human Friendship Apollo Company Limited in relation to the disposal by Loyalion Limited of a 20.83% equity interest in Your Mart Co. Ltd.;
(n) an agreement dated 25 July 2006 entered into between Aptus, China Hua You Group Corporation and Changde State-owned Asset Operation Management Company relating to the increase in the registered capital of Changde Hua You Gas Co. Ltd;
(o) an agreement dated 25 July 2006 entered into between Aptus, China Hua You Group Corporation and Beijing Xin Hua Lian Gas Investment Co. Ltd relating to the increase in the registered capital of Hunan Huayou Natural Gas Transportation & Distribution Company Limited;
(p) the agreement dated 4 August 2006 entered into between Loyalion Limited and Davidson Agents Limited in relation to the disposal by Loyalion Limited of 55% and 100% equity interest in Wuhu Bee & Bee Natural Food Company Limited and Zhuhai Free Trade Zone Bee & Bee Natural Food Company Limited respectively; and
(q) the Bond Purchase Agreement.

– 33 –

GENERAL INFORMATION

APPENDIX II

9. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the Group’s present internal resources and availability banking facilities or similar indebtedness upon the completion, the Group has sufficient working capital for its present requirements for at least the next 12 months from the date of publication of this circular.

10. INDEBTEDNESS

At the close of business on 31 October 2006, being the latest practicable date for the purpose of preparing this indebtedness statement prior to the printing of this circular, the Group had unsecured borrowings of approximately HK$32,890,000, of which HK$22,500,000 is due within 2 years from its drawdown date and the balance of HK$10,390,000 does not have any fixed terms of repayment. The HK$22,500,000 unsecured borrowings was taken out by Aptus and guaranteed by the Company. In addition, the Group has a charged deposit of HK$5,000,000 to secure a general banking facility obtained from a bank. As the Latest Practicable Date, the facility has not been utilised.

Save as aforesaid and apart from intra-group liabilities, as at 31 October 2006, the Group had no debt securities issued and outstanding, and authorised or otherwise created but unissued, term loans, distinguishing between guaranteed, unguaranteed, secured and unsecured, and guaranteed, unguaranteed, secured and unsecured bank borrowings including, bank loans and overdrafts or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credit, hire purchase or finance lease commitments, guarantees, mortgages, charges or other material contingent liabilities.

To the best understanding and knowledge of the Directors, the Directors confirmed that there is no material adverse change in the indebtedness position of the Group since 31 October 2006 up to the Latest Practicable Date.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business of the Company at 30th Floor, Sunshine Plaza, 353 Lockhart Road, Hong Kong during normal business hours on any weekday other than public holidays, up to and including the date of the EGM:

(a) the memorandum and articles of association of the Company;
(b) the material contracts referred to in the paragraph headed “Material Contracts” in this appendix;
(c) the annual reports of the Company for the last two financial years immediately preceding the issue of this circular;
(d) the circular of the Company dated 22 December 2005 relating to the acquisition of 51% interest in Shenzhen Bozone IT Co., Limited;

– 34 –

GENERAL INFORMATION

APPENDIX II

(e) the circular of the Company dated 22 May 2006 relating to the disposal of 20.83% interest in Your Mart Co. Limited;
(f) the circular of the Company dated 18 August 2006 relating to the disposal of 55% equity interest in Wuhu Bee & Bee Natural Food Company Limited and 100% equity interest in Zhuhai Fee Trade Zone Bee & Bee Natural Food Company Limited;
(g) the circular of the Company dated 6 October 2006 relating to the proposed bonus issue of shares and bonus issue of warrants;
(h) the service contract dated 18 October 2002 entered into between Madam Cheung Kwai Lan and the Company;
(i) the service contract dated 18 October 2002 entered into between Mr. Chan Tung Mei and the Company;
(j) the service contract dated 18 October 2002 entered into between Mr. Chan Ting and the Company;
(k) the circular of the Company dated 19 October 2006 relating to the investment in joint ventures for participation in the natural gas business; and
(l) this circular.

12. GENERAL

(a) The registered office of the Company is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands and the head office and principal place of business of the Company is at 30th Floor, Sunshine Plaza, 353 Lockhart Road, Hong Kong. The branch share registrar and transfer office of the Company is Standard Registrars Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(b) The compliance officer of the Company is Mr. Chan Ting.
(c) The company secretary of the Company is Mr. Tsui Wing Tak. Mr. Tsui holds a bachelor’s degree in economics from Macquarie University, Australia. Mr. Tsui is a member of both the Hong Kong Institute of Certified Public Accountants and CPA Australia.
(d) The qualified accountant of the Company is Mr. Kwan Yiu Ming, Patrick. Mr. Kwan holds a bachelor degree of commerce in accounting from the Curtin University of Technology in Australia. Mr. Kwan is a fellow member of Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants.

– 35 –

GENERAL INFORMATION

APPENDIX II

(e) The Company established an audit committee on 18 October 2002 comprising three independent non-executive Directors with written terms of reference in compliance with Rules 5.28 to 5.29 of the GEM Listing Rules. The primary duties of the audit committee are to review the Company’s annual report and accounts, half-year reports and quarterly reports and to provide advice and comments thereon to the Board. The audit committee is also responsible for reviewing and supervising the financial reporting process and internal control procedures of the Group. The details of the members are as follows:

Mr. Tian He Nian, aged 66, an independent non-executive Director. He was the deputy head of the Department of United Front Work of the Central Government of the PRC from 1998 to 2003. He is the vice-chairman of China Overseas Association. He is also an independent non-executive director and audit committee member of Aptus. He joined the Group in November 2004.

Mr. Zhao Zhi Ming, aged 64, an independent non-executive Director. He is the committee member of the Specialist Committee of the China Development Bank and the Professor of LiaoNing Technical University. After graduation from the University in 1965, he had worked for several governmental authorities of the PRC, such as Tianjin Government, National Energy Investment Company of the PRC and China Development Bank. Mr. Zhao had been engaged in the general management, investment, review and approval, and risk management of some sizable national infrastructure projects in the PRC. He has extensive knowledge of and experience in management, investment and capital markets. He is also an independent nonexecutive director and audit committee member of Aptus. He joined the Group in December 2005.

Mr. To Yan Ming, Edmond, aged 34, an independent non-executive Director. He holds a bachelor degree in commerce in accounting from Curtin University of Technology in Western Australia. He is a practicing accountant and presently the director of Fortitude C.P.A. Limited, Certified Public Accountants. He is a member of both the CPA Australia and Hong Kong Institute of Certified Public Accounts. He worked for one of the international accounting firms, Deloitte Touche Tohmatsu and has over 8 years of experience in auditing, accounting, flotation and taxation matters. He is also an independent non-executive director and audit committee member of Aptus. He joined the Group in January 2006.

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

– 36 –

NOTICE OF EGM

(incorporated in the Cayman Islands with limited liability) (Stock Code: 8156)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ EGM ”) of China Vanguard Group Limited (the “ Company ”) will be held at 30/F., Sunshine Plaza, 353 Lockhart Road, Hong Kong on Thursday, 7 December 2006 at 10:30 a.m. to transact the following business and, if thought fit, passing the following resolution as ordinary resolution:

ORDINARY RESOLUTION

“ THAT subject to (a) the fulfillment or waiver of the conditions set out in the bond purchase agreement (the “ Bond Purchase Agreement ”) dated 7 November 2006 and entered into between Aptus Holdings Limited (“ Aptus ”), a non-wholly owned subsidiary of the Company, and Evolution Master Fund Ltd. SPC, Segregated Portfolio M (the “ Purchaser ”) in respect of the issue by Aptus to the Purchaser of zero coupon secured convertible bonds in an aggregate principal amount of HK$234,000,000 with a step-up cash coupon from and including 21 May 2008 (the “ Bonds ”) (a copy of the Bond Purchase Agreement having been produced to the EGM and marked “A” and initialed by the chairman of the EGM for the purpose of identification); and (b) the Bond Purchase Agreement not being terminated in accordance with its terms,

(i) the Bond Purchase Agreement and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(ii) the issue and the creation of the Bonds to the Purchaser by Aptus be and are hereby approved, confirmed and ratified;
(iii) the allotment and issue of new shares (the “ Aptus Conversion Shares ”) of HK$0.01 each in the capital of Aptus upon exercise of the conversion rights attaching to the Bonds at an initial conversion price of HK$2.40 per Aptus Conversion Share (subject to adjustment) or at not less than 60.42% of the initial conversion price of HK$2.40 per Aptus Conversion Share be and are hereby approved;
(iv) the dilution of the equity interest held by the Company in Aptus as a result of the partial or full conversion of the Bonds into Aptus Conversion Shares be and is hereby approved (the “ Deemed Disposal ”); and

– 37 –

NOTICE OF EGM

(v) the directors of the Company be and are hereby authorised to do all such acts and things as they consider necessary or expedient in connection with the Deemed Disposal as a result of the issue of the Bonds pursuant to the terms and conditions of the Bond Purchase Agreement and the allotment and issue of the Aptus Conversion Shares upon the exercise of the conversion rights attaching to the Bonds.”

By order of the Board China Vanguard Group Limited Chan Ting Director

Hong Kong, 20 November 2006

Registered office: Head office and principal place of Cricket Square business in Hong Kong: Hutchins Drive 30th Floor P.O. Box 2681 Sunshine Plaza Grand Cayman KY1-1111 353 Lockhart Road Cayman Islands Hong Kong

– 38 –

AI assistant

Sinopharm Tech Holdings Limited — Proxy Solicitation & Information Statement 2006

51300_rns_2006-11-20_97eabfc5-fb16-4dd2-bae9-a500b6239958.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

MAJOR TRANSACTION REGARDING DEEMED DISPOSAL OF APTUS HOLDINGS LIMITED BY POTENTIAL DILUTION ARISING FROM THE ISSUE OF SHARES OF APTUS HOLDINGS LIMITED UPON CONVERSION OF CONVERTIBLE BONDS

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

MAJOR TRANSACTION REGARDING DEEMED DISPOSAL OF APTUS HOLDINGS LIMITED BY POTENTIAL DILUTION ARISING FROM THE ISSUE OF SHARES OF APTUS HOLDINGS LIMITED UPON CONVERSION OF CONVERTIBLE BONDS

INTRODUCTION

LETTER FROM THE BOARD

BOND PURCHASE AGREEMENT

LETTER FROM THE BOARD

PRINCIPAL TERMS OF THE BONDS

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

STOCK LENDING ARRANGEMENT BY THE COMPANY

LETTER FROM THE BOARD

EFFECT ON THE SHARE CAPITAL

LETTER FROM THE BOARD

USE OF PROCEEDS

REASONS FOR AND BENEFITS OF THE BONDS ISSUE

DEEMED DISPOSAL BY THE COMPANY

LETTER FROM THE BOARD

FINANCIAL AND TRADING PROSPECT OF THE GROUP

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

LETTER FROM THE BOARD

EGM

RECOMMENDATION

FURTHER INFORMATION

PROCEDURES FOR DEMANDING A POLL AT EXTRAORDINARY GENERAL MEETING

1. RESPONSIBILITY STATEMENT

2. DIRECTORS’ INTERESTS AND SHORT POSITION IN SHARES, UNDERLYING SHARES AND DEBENTURES

(1) Long positions in the shares of the Company or any of its associated corporations

GENERAL INFORMATION

(2) Share options of the Company

(3) Long positions in underlying Shares

3. SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY

(1) Long positions in the Shares

(2) Share options of the Company

Options held as at the Name of Director Date of grant Latest Practicable Date Shaw Kyle Arnold Junior 19 October 2004 1,200,000 (Note)

(3) Long positions in underlying Shares

4. LITIGATION

5. SERVICE CONTRACTS

6. COMPETING INTERESTS

7. DIRECTORS’ INTEREST IN CONTRACTS AND ASSETS

8. MATERIAL CONTRACTS

9. WORKING CAPITAL

10. INDEBTEDNESS

11. DOCUMENTS AVAILABLE FOR INSPECTION

12. GENERAL

NOTICE OF EGM

NOTICE OF EXTRAORDINARY GENERAL MEETING

ORDINARY RESOLUTION

NOTICE OF EGM

By order of the Board China Vanguard Group Limited Chan Ting Director

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Sinopharm Tech Holdings Limited Proxy Solicitation & Information Statement 2006