Sinopharm Tech Holdings Limited — Proxy Solicitation & Information Statement 2006

Aug 18, 2006

THIS CIRCULAR REQUIRES YOUR IMMEDIATE ATTENTION

This circular is for information purpose only and does not constitute an invitation or offer to acquire or subscribe for securities.

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

If you have sold or transferred all your shares in China Vanguard Group Limited, you should at once hand this circular, to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

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(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 8156)
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MAJOR TRANSACTION DISPOSAL OF INTERESTS IN SUBSIDIARIES

A notice convening the extraordinary general meeting of China Vanguard Group Limited to be held at the 30th Floor, Sunshine Plaza, No. 353 Lockhart Road, Hong Kong on 4th September, 2006 at 10:00 a.m. is set out on pages 23 to 24 of this circular. Whether or not you are able to attend the extraordinary general meeting, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the principal place of business of China Vanguard Group Limited at the 30th Floor, Sunshine Plaza, No. 353 Lockhart Road, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the extraordinary general meeting or any adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting at the extraordinary general meeting or any adjourned meeting (as the case may be) should you so wish.

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

* for identification purpose only

18th August, 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 –

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
The Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Information on Wuhu Bee & Bee and Zhuhai Bee & Bee . . . . . . . . . . . . . . . . .	6
Reasons for the Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Financial Effect of the Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Major Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
APPENDIX I – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .	14
NOTICE OF EXTRAORDINARY GENERAL MEETING. . . . . . . . . . . . . . . . . . .	23

– ii –

DEFINITIONS

In this circular, the following expressions have the meanings respectively set opposite them unless the context otherwise requires:

“Agreement”	the agreement dated 4th August, 2006 and entered into
	between Loyalion Limited and Davidson Agents in
	relation to the Disposals
“Aptus”	Aptus Holdings Limited, a company whose shares are
	listed on the GEM of the Stock Exchange
“Bozone IT”	Shenzhen Bozone IT Co., Limited
“CNPC”	China National Petroleum Corporation
“Company”	China Vanguard Group Limited
	( ), an exempted company
	incorporated in the Cayman Islands with limited liability
	and whose Shares are listed on the GEM board of the
	Stock Exchange
“Companies”	collectively Wuhu Bee & Bee and Zhuhai Bee & Bee
“Consideration”	HK$76,000,000
“Davidson Agents”	Davidson Agents Limited, an Independent Third Party
“Directors”	the directors of the Company
“Disposals”	the disposal by Loyalion Limited of a 55% and 100%
	equity interest in Wuhu Bee & Bee and Zhuhai Bee & Bee
	respectively to Davidson Agents pursuant to the
	Agreement
“EGM”	means the extraordinary general meeting of the Company
	to be held at the 30th Floor, Sunshine Plaza, No. 353
	Lockhart Road, Hong Kong on 4th September, 2006 at
	10:00 a.m., the notice of which is set out on pages 23 to
	24 of this circular
“GEM”	the Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules”	Rules Governing the Listing of Securities on GEM
“Group”	the Company and its subsidiaries

– 1 –

DEFINITIONS

“Guangzhou Latech”	Guangzhou Latech Computer Technology Co., Limited
“Hong Kong”	Hong Kong Special Administrative Region of the PRC
“Hua You”	China Hua You Group Corporation
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Independent Third Party”	person who himself is, and (in the case of corporate
	entity) its ultimate beneficial owners are, to the best of
	the Directors’ knowledge, information and belief, having
	made all reasonable enquiries, third parties who are not
	connected persons (as that term is defined in the GEM
	Listing Rules) of the Company and are independent of the
	Company and its subsidiaries, their directors, chief
	executives and substantial shareholders or their
	respective associates (as that term is defined in the GEM
	Listing Rules)
“Jinan Weita”	Jinan Weita Technology Company
“Latest Practicable Date”	15th August, 2006, being the latest practicable date prior
	to the printing of this circular for the purpose of
	ascertaining certain information contained in this circular
“Loyalion Limited”	Loyalion Limited, a wholly owned subsidiary of the
	Company
“MOU”	memorandum of understanding
“Notice”	means the notice convening the EGM which is set out on
	pages 23 to 24 of this circular
“PRC”	the People’s Republic of China
“RMB”	Renminbi, the lawful currency of the PRC
“Share(s)”	share(s) of HK$0.01 each of the Company
“Shareholder(s)”	shareholder(s) of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited

– 2 –

DEFINITIONS

“Wuhu Bee & Bee” Wuhu Bee & Bee Natural Food Company Limited ( ), a sino-foreign equity joint venture established in the PRC and is an indirect subsidiary of the Company “Zhuhai Bee & Bee” Zhuhai Fee Trade Zone Bee & Bee Natural Food Company Limited ( ), a wholly foreign owned enterprise established in the PRC and is an indirect wholly owned subsidiary of the Company “%” per cent.

– 3 –

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. Lau Hin Kun Mr. Chan Ting

Non-executive Director: Mr. Shaw Kyle Arnold Junior

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

Registered office: Century Yard Cricket Square Hutchins Drive P.O. Box 2681 GT George Town Grand Cayman British West Indies Cayman Islands

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

18th August, 2006

To the Company Shareholders

Dear Sir/Madam,

MAJOR TRANSACTION DISPOSAL OF INTERESTS IN SUBSIDIARIES

THE DISPOSALS

The Board announced that on 4th August, 2006, Loyalion Limited, a wholly owned subsidiary of the Company, entered into the Agreement with Davidson Agents in relation to the disposal by Loyalion Limited of a 55% and 100% equity interest in Wuhu Bee & Bee and Zhuhai Bee & Bee respectively. The principal terms and conditions of the Agreement are set out below.

* for identification purpose only

– 4 –

LETTER FROM THE BOARD

AGREEMENT

Date: 4th August, 2006 Parties: (a) Loyalion Limited (as vendor) (b) Davidson Agents (as purchaser) The Directors confirm that to the best of their knowledge, information and belief having made all reasonable enquiry, Davidson Agents and its ultimate beneficial owner is an Independent Third Party. So far as the Directors are aware, Davidson Agents carries on the business of investment holding. Subject matter of the (i) a 55% equity interest in Wuhu Bee & Bee. Agreement: (ii) a 100% equity interest in Zhuhai Bee & Bee. Completion: Completion of the Disposals will take place on the third business day following Loyalion Limited having notified Davidson Agents about the satisfaction of the conditions precedent referred to in the paragraph headed “Conditions precedent” below but in any event no later than 30th September, 2006.

Consideration

The consideration for the Disposals is HK$76,000,000 in cash, as to 30% payable on completion of the Disposals and the balance within 3 months thereafter, which was determined on an arm’s length basis on normal commercial terms and was arrived at after taking into account a price to earning ratio of approximately 3.5 times the profit of the Companies for the projected twelve months ended 30th June, 2006 (based on the nine months ended 31st March, 2006 results divided by 9 times 12). The Consideration represents a premium of approximately HK$70,710,000 to the cost of investment. The Consideration also represents a premium of approximately HK$29,639,000 to the net asset value of the Companies shared by the Group as at 31st March, 2006. In view of the fact that the Consideration was determined by the parties on an arm’s length basis, the Directors (including the independent non-executive Directors) are of the view that the basis for determination of the Consideration as set out above is fair and reasonable.

The Group is expected to make a gain of approximately HK$29,639,000 up to 31st March, 2006 as a result of the Disposals.

– 5 –

LETTER FROM THE BOARD

Conditions Precedent

The completion of the Disposals is subject to Shareholders’ approval at the EGM of the Agreement and the transaction contemplated thereunder. The Agreement shall be terminated forthwith in the event that the approval of the Shareholders is not obtained on or before 30 September, 2006.

INFORMATION ON WUHU BEE & BEE AND ZHUHAI BEE & BEE

Wuhu Bee & Bee was formed as a sino-foreign equity joint venture in October 2001 with Wuhu Bee & Bee Winery Company Limited for the manufacture, research and development of the natural supplementary food product, mead. Wuhu Bee & Bee is the production plant for the mead.

Zhuhai Bee & Bee was established in December 2001 by the Group in order to facilitate (i) the expansion of the Group’s sales, production, storage and research and development capacity and (ii) the enhancement of its marketing strategies so as to further penetrate into the natural supplementary food products market in the PRC. Zhuhai Bee & Bee distributes mead.

The major assets of Wuhu Bee & Bee and Zhuhai Bee & Bee are production plant, machineries, inventories, cash, land use rights and accounts receivables.

The audited profit before taxation and extraordinary items of Wuhu Bee & Bee for the years ended 30th June, 2004 and 2005 were approximately RMB669,000 (approximately HK$631,000) and approximately RMB382,000 (approximately HK$360,000) respectively.

The audited profit after taxation of Wuhu Bee & Bee for the years ended 30th June, 2004 and 2005 were approximately RMB596,000 (approximately HK$562,000) and approximately RMB361,000 (approximately HK$341,000) respectively.

The net asset value of Wuhu Bee & Bee was approximately RMB11,343,000 (approximately HK$10,907,000) as at 31st March, 2006.

The audited profit before taxation and extraordinary items of Zhuhai Bee & Bee for the years ended 30th June, 2004 and 2005 were approximately RMB47,532,000 (approximately HK$44,842,000) and approximately RMB30,014,000 (approximately HK$28,315,000) respectively.

The audited profit after taxation of Zhuhai Bee & Bee for the years ended 30th June, 2004 and 2005 were approximately RMB45,645,000 (approximately HK$43,061,000) and approximately RMB27,369,000 (approximately HK$25,820,000) respectively.

The net asset value of Zhuhai Bee & Bee was approximately RMB41,977,000 (approximately HK$40,362,000) as at 31st March, 2006.

– 6 –

LETTER FROM THE BOARD

Pursuant to the Company’s listing prospectus dated 29th October, 2002, it was stated therein that Zhuhai Bee & Bee had been granted the land use rights to a plot of land situated at Zone no. 47 of Zhuhai Free Trade Zone, Guangdong Province, the PRC. The plot of land was to be used for the building of a new production facilities of the Group. Following the Disposals, the building of the new production facilities will be at the direction and decision of Davidson Agents. An amount of approximately HK$3,300,000 had been contributed by the Group to the building of the Zhuhai factory. The balance of proceeds set aside by the Group for this project of approximately HK$3,500,000 has been and will continue to be placed in short term deposit with financial institutions or licensed banks in Hong Kong until suitable projects are identified by the Group. As to the status of the Zhuhai factory, this has been partially completed with most of the concrete foundation layed, constructed and strengthened.

REASONS FOR THE DISPOSALS

The Group is principally engaged in the production and/or distribution of bee related products, other natural products and trading of edible oil and has recently expanded its business into the research and development and application of information technology in the lottery field, and the oil and gas business in the PRC. The disposal of the Companies would allow the Group to focus its resources on investments in research and development and application of information technology in the lottery field, and the oil and gas business in the PRC which have better earning potentials than the honey mead business. The Directors believe it is in the interest of the Company and its Shareholders that the Group focus on information technology in the lottery related field, and oil and gas business in the PRC.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Shareholders as a whole. The consideration was arrived at on a willing buyer willing seller basis having regards to the fact that the consideration is greater than that cost of investment paid for by the Company and greater than that the net asset value of the Companies as at 31st March, 2006.

The Business of the Group before and after the Disposals

Before the Disposals, the Group manufactures mead and distributes natural products in Hong Kong and China including: bee related natural products – mead, honey, bee pollen, royal jelly, etc, natural hangover remedy, slimming drinks, herbal formulated slimming cream, brown seaweed body cleansing product, natural skin care products, soft drinks, snacks and other food supplements, trading of edible oil, and provision of information technology services relating to the lottery industry and sales of wagering terminals. After the Disposals, the Group will continue to distribute natural products in Hong Kong and China but shall only be in relation to bee related natural products – honey, bee pollen, royal jelly, etc, natural hangover remedy, slimming drinks, herbal formulated slimming cream, brown seaweed body cleansing product, natural skin care products, soft drinks, snacks and other food supplements, trading of edible oil, and provision of information technology services relating to the lottery industry and sales of wagering terminals.

– 7 –

LETTER FROM THE BOARD

Following the Disposals, from a financial perspective (based on the management accounts and audited accounts of the Company for the nine months ended 31st March, 2006 and for the year ended 30th June, 2005 respectively), the Company will continue to have the following business operations:

• sale of bird’s nest

• trading of edible oil

• provision of information technology services relating to the lottery industry and sales of wagering terminals

• sales of natural products

Set out below is a table showing the turnover of the Group derived from various sectors of the Group’s businesses:

Business – sales of honey mead – sale of bird’s nest – trading of edible oil – provision of information technology services relating to the lottery industry and sales of wagering terminals – sales of natural products Total	Unaudited nine months turnover (1/7/05 to 31/03/06) HK$’000 35,447 252 20,350 2,407 1,024 59,480	Audited turnover for the year ended 30/06/05 HK$’000 75,205 613 109,784 0 3,529
		189,131

– 8 –

LETTER FROM THE BOARD

Set out below is a table showing the turnover of the Group from the remaining businesses of the Group on the assumption that the Disposals have been completed:

	Unaudited
	three	Unaudited	Audited
	months	nine months	turnover for
	turnover	turnover	the year
	(1/4/06 to	(1/7/05 to	ended
Business	30/06/06)	31/03/06)	30/06/05
	HK$’000	HK$’000	HK$’000
– sale of bird’s nest	91	252	613
– trading of edible oil	10,470	20,350	109,784
– provision of information technology
services relating to the lottery
industry and sales of wagering
terminals	10,551	2,407	0
– sales of natural products	330	1,024	3,529

USE OF PROCEEDS

The Group intends to place the net proceeds from the Disposals of approximately HK$76,000,000 in short term deposits with financial institutions or licensed banks in Hong Kong until suitable investments can be identified. Currently, no suitable investment has been identified. A small portion of the proceeds of not more than 15% may be used as general working capital. The balance of 85% will be set aside for future investment projects. No such projects have yet been identified. A further announcement will be made by the Company when a suitable investment project is identified by the Company.

FINANCIAL EFFECT OF THE DISPOSALS

Following the Disposals, Wuhu Bee & Bee and Zhuhai Bee & Bee will cease to be subsidiaries of the Company.

It is estimated that, as a result of the Disposals, the Group will record a gain of approximately HK$29,639,000 up to 31st March, 2006. This is calculated on the basis of equity accounting which is equal to the Consideration less the investment cost and the share of profit of the Companies.

The profit attributable to the Group from the Companies for the year ended 30th June, 2005 was approximately HK$26,007,000. The Disposals are expected to have an effect on the financials of the Company given that the profit attributable to the Group from the Companies for the year ended 30th June, 2005 was approximately 82.08% of the total profit of the Group. There may be a negative impact on the financial position of the Group as a result of the Disposals but at the same time the cash position of the Group will be strengthened.

– 9 –

LETTER FROM THE BOARD

Statement of Indebtedness

As at 30th June, 2006, the Group has secured and unsecured borrowings of approximately HK$4,080,000 and HK$30,928,000. As for the unsecured borrowings, HK$22,500,000 is due within 2 years from its drawdown date. The balance unsecured borrowings of HK$8,428,000 does not have any fixed term of repayment.

Save as aforesaid and apart from intra-group liabilities, the Group did not have any outstanding mortgages, charges, debentures, loan capital, debt securities, loans, bank overdraft or other similar indebtedness, financial lease or hire purchase commitments, liabilities under acceptance or acceptance credits or guarantees or other contingent liabilities as at 30th June, 2006.

Save as disclosed above, the Directors confirm that there has been no material change in the indebtedness and contingent liabilities of the Group since 30th June, 2006.

Working Capital

After due and careful enquiry and taking into account the estimated net proceeds from the Disposals upon their completion, the Directors are satisfied that the Group will have available sufficient working capital for the Group’s present requirements, that is for at least the next 12 months from the date of publication of this circular.

Business Review

The Group is principally engaged in the research and development and application of information technology in the lottery field and of production and/or distribution of bee related products, other natural products and trading of edible oil and the oil and gas business in the PRC. For the year ended 30th June, 2005, the Group has recorded a turnover of approximately HK$189,131,000 and a net profit of approximately HK$31,685,000, which represented a slightly decrease of approximately 2.0% and an increase of approximately 9.2% respectively compared to prior year. For the nine months ended 31st March, 2006, the Group has recorded a turnover of approximately HK$59,480,000 and a net profit of approximately HK$15,232,000, representing a decrease of approximately 60.6% and 47.9% respectively over the corresponding period of last year.

The Company has transformed from predominantly being a producer and distributor of bee and natural products to a group engaged in the distribution of bee and natural products and two new industries, namely the lottery and the oil and gas sectors in China. Following the Disposals, the Group will no longer participate in the manufacture of bee related products in the PRC.

Via subsidiary, Bozone IT, the agreement to acquire a stake in Jinan Weita (as announced on 15th March, 2006) and the formation of joint venture Guangzhou Latech (as announced on 3rd July, 2006), the Group is developing a broad presence in the China lottery sector. Bozone

– 10 –

LETTER FROM THE BOARD

IT is a vertically integrated service provider to the traditional welfare lottery sector in China offering software and technical related services, hardware, marketing and promotion and assistance in POS management services. Jinan Weita is engaged in the research and development, manufacture and sale of lottery sales terminals in the PRC. Meanwhile Guangzhou Latech intends to be principally engaged in the business of the development, manufacture and sale of computer software, integration of computer software and hardware systems, and provision of computer-related technical services and after-sale services in the PRC relating to the sports lottery industry.

Total lottery revenues in the PRC have grown rapidly over the past few years. According to the Development Research Centre of the State Council in the PRC, total lottery revenues in China are forecast to grow from RMB70 billion in 2005 to over RMB100 billion in 2007. We believe that Bozone IT, Jinan Weita and Guangzhou Latech will give us a solid foundation upon which to build, expand and capitalize on the fast growing market.

With regard to the Company’s listed oil and gas subsidiary, Aptus, it is continuing to work with Hua You, a wholly-owned subsidiary of CNPC, on bringing onstream production at the Xin Jiang Oilfield, an oilfield development project in Feng Cheng, Xin Jiang in the PRC in which Aptus has a 70% stake.

According to technical consultant, Information and Technology Development Company, Xin Jiang Oilfield has geological crude reserves of 31 million tonnes of which 6.1 million to 7.7 million tonnes is recoverable. Although development rights on the field extend to 31st December, 2016, according to the consultant, all recoverable oil can be extracted within a 9 year period. The mining operation of Xin Jiang Oilfield is anticipated to be managed and operated by Hua You.

Production at the Xin Jiang Oilfield is planned to commence in the second half of this calendar year, enabling the Group to capitalize on the current strong demand and pricing environment for crude thereby enhancing its profitability and operational cashflow.

On 31st March, 2006, Aptus entered into two MOUs with an independent third party, to make capital contributions to two joint venture companies in the southern part of the PRC, each of which is principally engaged in the business of gas pipeline design, and supply, development and management of natural gas pipelines and distribution facilities in the PRC. On 2nd August, 2006, Aptus and the Company jointly announced that on 25th July, 2006 Aptus entered into the capital injection agreements with Hua You pursuant to which Aptus has conditionally agreed to make capital contributions to the above joint ventures in the aggregate amount of RMB211,306,900 (approximately HK$205,153,000). Upon completion of the capital contribution, Aptus would hold 33.00% and 48.33% respectively in the two joint venture companies.

The longer term objective of management is to develop Aptus into a diversified oil and gas company with the acquisition of the Xin Jiang Oilfield and the signing of the two capital injection agreements representing a good start to this process.

– 11 –

LETTER FROM THE BOARD

While the Group’s operations in the lottery and oil and gas sectors in China are expected to become the main growth drivers in future, the Group will continue to operate its natural products and edible oil trading business.

MAJOR TRANSACTION

As the relevant percentage ratios are more than 25% but less than 75%, the Disposals constitute a major transaction for the Company and is conditional on approval by the Shareholders. Since no Shareholder has any material interest in the Disposals, no Shareholder is required to abstain from voting in respect of the proposed resolution to approve the Disposals.

With reference to information available and having made all reasonable enquiries, and to the best ability, knowledge and belief of Directors, there is no Shareholder or their respective associates who has a material interest in the Disposals and therefore at the date of the Agreement and the date of this circular, no Shareholder would be required to abstain from voting on the resolution in relation thereof.

EGM

A notice convening the EGM to be held at the 30th Floor, Sunshine Plaza, No. 353 Lockhart Road, Hong Kong on 4th September, 2006 at 10:00 a.m. is set out on pages 23 to 24 of this circular.

A form of proxy for use at the EGM is enclosed. Whether or not you are able to attend the EGM, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s principal place of business at the 30th Floor, Sunshine Plaza, No. 353 Lockhart Road, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding of the EGM or any adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting at the EGM or any adjourned meeting (as the case may be) should you so wish.

A resolution put to the vote at the EGM will be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is duly demanded. A poll may be demanded by:

• (a) the chairman of the EGM; 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 members having the right to attend and vote at the meeting; or

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LETTER FROM THE BOARD

• (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.

RECOMMENDATION

The Directors, including the independent non-executive Directors, consider that the Disposals are in the best interest of the Company and the Shareholders as a whole and that the terms and conditions thereof are fair and reasonable so far as the Company and the Shareholders are concerned and as such would recommend Shareholders to vote in favour of the relevant resolution at the EGM.

ADDITIONAL INFORMATION

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

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

– 13 –

APPENDIX I

GENERAL INFORMATION

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 Company. 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

	Company/ name of		Number of ordinary shares held	Number of ordinary shares held			Approximate percentage
Name of	associated	Corporate	Personal	Family		Total	of
Directors	corporation	interest	interest	interest		interest	shareholding
Cheung Kwai	Company	241,130,000	1,380,000		–	242,510,000	38.86%
Lan		(Note 1)
Chan Tung Mei	Company	241,130,000	–	1,380,000		242,510,000	38.86%
		(Note 2)		_(Note _	3)
Shaw Kyle	Company	46,600,000	–		–	46,600,000	7.47%
Arnold Junior		(Note 4)
Lau Hin Kun	Company	–	450,000		–	450,000	0.07%
Cheung Kwai	Best	–	909		1	910	–
Lan	Frontier			_(Note _	5)
	Investments
	Limited
Chan Tung Mei	Best	–	1	909		910	–
	Frontier			_(Note _	6)
	Investments
	Limited

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APPENDIX I

GENERAL INFORMATION

Notes:

1. The 241,130,000 shares are owned by Best Frontier Investments Limited (“Best Frontier”) which is owned as to 99.89% and 0.11% by Madam Cheung Kwai Lan and Mr. Chan Tung Mei respectively. Madam Cheung Kwai Lan is the spouse of Mr. Chan Tung Mei. Accordingly, Madam Cheung Kwai Lan is deemed to be interested in the shares under the SFO.

2. The 241,130,000 shares 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 respectively. Mr. Chan Tung Mei is the spouse of Madam Cheung Kwai Lan. Accordingly, Mr. Chan Tung Mei is deemed to be interested in the shares under the SFO.

3. The 1,380,000 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.

4. These interests represent Mr. Shaw Kyle Arnold Junior’s interests in:

5. (a) 1,030,000 shares beneficially owned by Shaw, Kwei & Partners (Asia) Ltd. of which Mr. Shaw Kyle Arnold Junior is deemed under the SFO to have an interest by reason of his being the indirect controlling shareholder of Shaw, Kwei & Partners (Asia) Ltd. through his controlled corporation Haven Associates Limited.

6. (b) 24,620,000 shares 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.) and its indirect controlling shareholder Mr. Shaw Kyle Arnold Junior are both deemed under the SFO to have interest in the same 24,620,000 shares.

7. (c) 20,950,000 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.) and its indirect controlling shareholder Mr. Shaw Kyle Arnold Junior are both deemed under the SFO to have interest in the same 20,950,000 shares.

8. The 1 share of US$1 in Best Frontier is owned by Mr. Chan Tung Mei who is the spouse of Madam Cheung Kwai Lan. Accordingly, Madam Cheung Kwai Lan is deemed to be interested in the shares under the SFO.

9. The 909 shares of US$1 each in Best Frontier 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.

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APPENDIX I

GENERAL INFORMATION

(2) Share options of the Company

The Company has adopted a share option scheme on 18th 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 18th October, 2002.

Name of Director Date of grant Lau Hin Kun 18/8/2004 Shaw Kyle Arnold Junior 19/10/2004 Total	Outstanding at Latest Practicable Date 1,600,000 1,200,000
	2,800,000

(3) Long positions in the shares of an associated corporation – Aptus Holdings Limited

		Number of ordinary shares held		Approximate percentage
	Corporate	Personal Family	Total	of
Name of Director	interest	interest interest	interest	shareholding
Cheung Kwai Lan (Note)	915,571,428	– –	915,571,428	54.88%

Note: 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 is the spouse of Mr. Chan Tung Mei. Accordingly, Madam Cheung Kwai Lan is deemed to be 100% interested in the shares of Best Frontier 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. China Success Enterprises Limited then holds 100% shareholding of Precise Result Profits Limited which directly holds 915,571,428 shares of Aptus Holdings Limited. Besides, Madam Cheung Kwai Lan holds 1,380,000 shares of the Company as at the Latest Practicable Date.

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.

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APPENDIX I

GENERAL INFORMATION

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 Company Shares or underlying the Company Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were directly or indirectly interested in 10% or more of the nominal value of any class of share capital, carrying rights to vote in all circumstances at general meeting of any member of the Group:

		Number of ordinary	Number of ordinary
		shares held		Approximate
		Long	Short	percentage of
Name of Shareholder	Capacity	position	position	shareholding
Best Frontier Investments Limited	Directly	241,130,000	–	38.64%
	Beneficial	(Note 1)
	owned
Oppenheimer Funds, Inc.	Investment	110,000,000	–	17.63%
	manager
Haven Associates Limited	Controlled	46,600,000	–	7.47%
	corporation	(Note 2)

Notes:

1. The 241,130,000 shares are owned by Best Frontier Investments Limited which is owned as to 99.89% and 0.11% by Madam Cheung Kwai Lan and Mr. Chan Tung Mei respectively.

2. The 46,600,000 shares represent:

3. (a) 1,030,000 shares beneficially owned by Shaw, Kwei & Partners (Asia) Ltd.

4. (b) 24,620,000 shares 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 the same 24,620,000 shares.

5. (c) 20,950,000 shares beneficially owned by Javelin Capital Holdings Limited which is whollyowned 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 20,950,000 shares.

6. (d) Haven Associates Limited 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 Company Shares or underlying the Company Shares which would fall to be disclosed to the Company under the provisions of

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GENERAL INFORMATION

APPENDIX I

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.

7. DIRECTORS’ INTEREST IN CONTRACTS AND ASSETS

No contract or arrangement in which any Directors is materially interested and 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 30th June, 2005 (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 4th March, 2005 entered into between Aptus Holdings Limited and Solarmax Limited in respect of disposal of the entire equity interest of Aptus Medical Group Limited;

• (b) the agreement dated 17th June, 2005 in relation to the acquisition of 70% equity interest in (CNPC Huayou Cu Energy Investment

– 18 –

GENERAL INFORMATION

APPENDIX I

Co. Ltd.) 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 10th August, 2005 in relation to the acquisition the acquisition of a 75% equity interest in Skilltime Management;

• (d) the placing agreement as constituted by a letter dated as of 12th August, 2005 issued by the Shenyin Wanguo Capital (H.K.) Limited to the Best Frontier Investments Limited and Madam Cheung Kwai Lan in relation to the Placing;

• (e) the subscription agreement dated as of 12th August, 2005 made between the Company and Best Frontier Investments Limited in relation to the Subscription;

• (f) two termination agreements were entered into between (i) the Best Frontier Investments Limited and Madam Cheung Kwai Lan and the Shenyin Wanguo Capital (H.K.) Limited; and (ii) Best Frontier Investments Limited and the Company both on 26th August, 2005;

• (g) the rescission agreement in relation to the rescission of the Conditional Sale and Purchase Agreement with the Bemaestro International Limited dated 26th August, 2005;

• (h) the agreement dated 28th 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 an aggregate of 51% of the registered capital of Shenzhen Bozone IT Co., Limited;

• (i) a placing and subscription agreement dated 12th January, 2006 was entered into between, inter alia, Best Frontier Investments Limited, the Company and Pacific Foundation Securities Limited;

• (j) the agreement dated 15th 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 15th 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 17th March, 2006 in relation to the agreement dated 28th 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 an aggregate of 51% of the registered capital of Shenzhen Bozone IT Co., Limited;

– 19 –

GENERAL INFORMATION

APPENDIX I

• (m) an agreement dated 25th 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;

• (n) an agreement dated 25th 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;

• (o) an agreement dated 13th 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.; and

• (p) the agreement dated 4th August, 2006 entered into between Loyalion Limited and Davidson Agents in relation to the disposal by Loyalion Limited of a 55% and 100% equity interest in Wuhu Bee & Bee and Zhuhai Bee & Bee respectively.

9. 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 4th September, 2006:

• (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 22nd December, 2005 relating to the acquisition of 51% interest in Shenzhen Bozone IT Co., Limited;

• (e) the circular of the Company dated 22nd May, 2006 relating to the disposal of 20.83% interest in Your Mart Co. Limited;

• (f) the service contract dated 18th October, 2002 entered into between Madam Cheung Kwai Lan and the Company;

• (g) the service contract dated 18th October, 2002 entered into between Mr. Chan Tung Mei and the Company; and

• (h) the service contract dated 18th October, 2002entered into between Mr. Chan Ting and the Company.

– 20 –

APPENDIX I

GENERAL INFORMATION

10. GENERAL

• (a) The registered office of the Company is at Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681GT, George Town, Grand Cayman, British West Indies, 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 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.

• (e) The Company established an audit committee on 18th October, 2000 comprising 3 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

– 21 –

GENERAL INFORMATION

APPENDIX I

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 non-executive 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.

– 22 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

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

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the “Extraordinary General Meeting”) of the shareholders of China Vanguard Group Limited (the “Company”) will be held at the 30th Floor, Sunshine Plaza, No. 353 Lockhart Road, Hong Kong on 4th September, 2006 at 10:00 a.m. to consider and, if thought fit, pass the following resolution as an ordinary resolution:

“ THAT the agreement dated 4th August, 2006 entered into between Loyalion Limited, a wholly owned subsidiary of the Company as Vendor and Davidson Agents Limited as Purchaser in relation to the disposal of a 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 by the Company at an aggregate consideration of HK$76,000,000 be and is hereby approved, ratified and confirmed in all respects and that any one director of the Company be and is hereby authorised to do or execute all such acts or such other documents which the director may deem necessary, desirable or expedient to carry into effect or to give effect to the disposals.”

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

Hong Kong, 18th August, 2006

Registered office: Principal place of business Century Yard in Hong Kong: Cricket Square 30th Floor Hutchins Drive Sunshine Plaza P.O. Box 2681 GT 353 Lockhart Road George Town Hong Kong Grand Cayman British West Indies Cayman Islands

* for identification purpose only

– 23 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

Notes:

1. A member of the Company entitled to attend and vote at the Extraordinary General Meeting convened by the above notice is entitled to appoint one or more proxies to attend and, on a poll, vote instead of such member. A proxy need not be a member of the Company.

2. In the case of joint holders of shares in the Company, the vote of the senior who tenders a vote whether in person or by proxy, shall be accepted to the exclusion of the vote(s) of the other joint holders, seniority being determined by the order in which names stand in the register of members.

3. In order to be valid, the form of proxy together with a power of attorney or other authority (if any) under which it is signed or a notarially certified copy thereof, must be deposited at the principal place of business of the Company at the 30th Floor, Sunshine Plaza, No. 353 Lockhart Road, Hong Kong not less than 48 hours before the time appointed for holding the Extraordinary General Meeting (or any adjournment thereof).

4. As at the date of this notice, the directors of the Company are Madam Cheung Kwai Lan, Mr. Chan Tung Mei, Mr. Lau Hin Kun, Mr. Chan Ting, Mr. Shaw Kyle Arnold Junior, Mr. Tian He Nian, Mr. Zhao Zhi Ming and Mr. To Yan Ming, Edmond.

– 24 –