Sinopharm Tech Holdings Limited — Proxy Solicitation & Information Statement 2009

Jan 20, 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect about 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, you should at once hand this circular to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).

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

This document appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities.

==> picture [221 x 22] intentionally omitted <==

----- Start of picture text -----

(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 8156)
----- End of picture text -----

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

A letter from the Board is set out on pages 7 to 20 of this circular.

This circular will remain on the “Latest Company Announcements” page of the GEM website at www.hkgem.com for at least 7 days from the date of its publication and on the website of the Company at www.cvg.com.hk.

* for identification purpose only

21 January 2009

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. 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 and no assurance is given that there will be a liquid market in the securities traded on GEM.

– i –

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
The Second Amendment Deed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Major Effect of the Second Amendment Deed on
the Principal Terms of the Bond(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Effect on the Share Capital of Aptus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Reasons for, and Benefits of, Aptus entering into
the Second Amendment Deed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Deemed Disposal by the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
GEM Listing Rules Implication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Further Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . .	21

– 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 dated 22 November 2006 made between Aptus, The Bank of New York Mellon (as principal agent), The Bank of New York (Luxembourg) S.A. (as registrar) and The Bank of New York Mellon (as Trustee) “Amended Bonds” the Bond(s) as amended by the Second Amendment Deed

• “Amended Conversion Price” has the meaning ascribed to it under the section headed “The Second Amendment Deed” in this circular

• “Amended Minimum Reset has the meaning ascribed to it under the section headed Reference Price” “The Second Amendment Deed” in this circular

“Aptus” Aptus Holdings Limited , an exempted company incorporated in the Cayman Islands with limited liability, the shares of which are listed on GEM. The Company indirectly holds approximately 55.16% equity interests of Aptus as at the Latest Practicable Date “Aptus Board” the board of Aptus Directors “Aptus Directors” the directors of Aptus “Aptus Group” Aptus and its subsidiaries “Aptus Share(s)” ordinary share(s) of HK$0.01 in the capital of Aptus “Aptus Shareholder(s)” the shareholder(s) of Aptus “associate” has the meaning ascribed to it under the GEM Listing Rules “Best Frontier” Best Frontier Investments Limited, a company incorporated in the British Virgin Islands and is owned as to approximately 99.89% and approximately 0.11% respectively by Madam Cheung Kwai Lan (the chairman and an executive director of both Aptus and the Company) and Mr. Chan Tung Mei (an executive director of the Company), who are spouse to each other

“Board” the board of Directors

– 1 –

DEFINITIONS

“Bond(s)”	the zero coupon secured convertible bond(s) in the
	principal amount of HK$234,000,000 due 2011 with a
	step-up cash coupon in 2008 issued by Aptus pursuant to
	the Bond Purchase Agreement in its original form or, if
	the context requires, such convertible bond(s) as
	amended by the First Amendment Deed
“Bond Purchase Agreement”	the Bond Purchase Agreement dated 7 November 2006
	entered into between Aptus and Evolution in relation to
	the Offering
“Bondholder(s)”	holder(s) of the Bond(s) from time to time
“business days”	any day (not being a Saturday, Sunday and 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 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
“Company”	China Vanguard Group Limited, an exempted company
	incorporated in the Cayman Islands with limited liability,
	the shares of which are listed on GEM
“Conversion Price”	HK$2.40 per Aptus Share (subject to adjustment)
“Conversion Ratio”	the principal amount of each Bond divided by the
	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 Bond(s))
“Conversion Right”	the right of a Bondholder to convert any Bond(s) into
	Aptus Shares
“Conversion Shares”	the Aptus Shares to be allotted and issued by Aptus upon
	conversion of the Bond(s) or the Amended Bonds

– 2 –

DEFINITIONS

• “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 contemplated by the Second Amendment Deed

• “Early Redemption Amount” for each HK$10,000 principal amount of the Bond(s), is determined so that it represents for the Bondholder(s) a gross yield at 11 % per annum, calculated on a semiannual basis

• “Event of Default” the event(s) of default specified in the Trust Deed “Evolution” Evolution Master Fund Ltd. SPC, Segregated Portfolio M, an Asia-focused fund organised and existing under the laws of the Cayman Islands. Its investment managers are Evo Capital Management Asia Limited, a Hong Kongbased asset management company, and Evolution Capital Management LLC, a U.S.-based investment adviser. Evo Capital Management Asia Limited is licensed under the SFO to carry on Type 9 (asset management) activities

• “First Amendment Deed” the amendment deed dated 23 October 2008 entered into amongst Aptus, the Trustee and the Security Trustee amending the Trust Deed

• “First Announcement Date” 9 November 2006, being the date of the joint announcement of Aptus and the Company pursuant to which it was announced that, amongst other things, the Bond Purchase Agreement had been entered into

• “Fulfillment Notice” the written notice to be given by Aptus to the other parties in accordance with the Second Amendment Deed pursuant to which Aptus will notify the other parties to the Second Amendment Deed of the fulfillment of all the conditions precedent to the Second Amendment Deed within one Trading Day of the fulfillment of the last of the conditions precedent set out in the Second Amendment Deed

“GEM” the Growth Enterprise Market of the Stock Exchange

“GEM Listing Rules” the Rules Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange

– 3 –

DEFINITIONS

“General Mandate Limit”	333,688,285 Aptus Shares, being the maximum number
	of Aptus Shares which the Aptus Directors were
	authorised to allot and issue pursuant to the general
	mandate granted by the Aptus Shareholders to the Aptus
	Directors in the annual general meeting of Aptus held on
	24 October 2006
“Good United”	Good United Management Limited, a company
	incorporated in the British Virgin Islands and a wholly-
	owned subsidiary of Aptus
“Good United Share Charge”	the share charge dated 22 November 2006 in favour of the
	Security Trustee on behalf of the Bondholder(s), granted
	by Aptus in respect of the entire issued share capital of
	Good United
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC
“Latest Practicable Date”	15 January 2009, being the latest practicable date for
	ascertain certain information contained in this circular
	prior to printing
“Long Stop Date”	20 February 2009 (or such other date as the parties to the
	Second Amendment Deed may agree in writing)
“Maturity Date”	21 November 2011
“Minimum Reset Reference	the minimum reset reference price per Conversion Share
Price”	for the purpose of adjusting downwards on each Reset
	Date the Conversion Price provided that any adjustment
	to the Conversion Price pursuant to the reset provisions
	of the Bond(s) shall be limited such that the adjusted
	Conversion Price shall not less than 60.42% of the
	Conversion Price, but adjusted to reflect any adjustments
	which may occur prior to the Reset Date
“Offering”	the offering of the Bond(s) to subscribers for the Bond(s)
	who are independent of and not connected with Aptus and
	its connected persons

– 4 –

DEFINITIONS

“Potential Event of Default” an event or circumstance which would, with the giving of notice and/or the lapse of time and/or the issuing of a certificate, become an Event of Default “PRC” the People’s Republic of China, excluding Hong Kong, Macau Special Administrative Region and Taiwan for the purpose of this circular “Put Option Date” the put option date under the Trust Deed “Reset Date” each of the date on which the Conversion Price shall be adjusted downwards pursuant to the terms of the Bond(s) “Reset Reference Price” 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

• “Second Amendment Deed” the second amendment deed dated 30 December 2008 entered into between Aptus, the Trustee and the Security Trustee to further amend the Trust Deed

• “Security” the security for the payment obligations and the performance of all of the obligations of Aptus under the Bond(s), the Trust Deed and the Agency Agreement created by the Good United Share Charge

• “Security Trustee” BNY Corporate Trustee Services Limited

• “SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• “Share(s)” ordinary share(s) of HK$0.01 each in the capital of the Company

• “Shareholder(s)” holder(s) of the Share(s) “Specific Mandate” the specific mandate proposed to be granted to the Aptus Directors pursuant to which, amongst other things, the Aptus Directors will be authorised to allot and issue new Aptus Shares required to be allotted and issued upon conversion of the Amended Bonds

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

– 5 –

DEFINITIONS

“Surplus Cash” HK$58,000,000 “Trading Day” a day on which the Stock Exchange is open for trading “Trust Deed” the trust deed constituting the Bond(s) dated 22 November 2006 entered into between Aptus, the Trustee and the Security Trustee in its original form or, if the context requires, such Trust Deed as amended by the First Amendment Deed “Trustee” The Bank of New York Mellon “United States” or “U.S.” United States of America “US$” United States dollars, the lawful currency of the United States “Volume Weighted Average in respect of an Aptus Share on any Trading Day, the Price” 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

For the purposes of illustration, certain figures in this circular have been subject to rounding adjustments.

– 6 –

LETTER FROM THE BOARD

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

Executive Directors: Madam Cheung Kwai Lan (Chairman) Mr. Chan Tung Mei Mr. Chan Ting Ms. Chan Siu Sarah Mr. Lau Hin Kun

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

Independent non-executive Directors:

Mr. Tian He Nian Mr. Zhang Xiu Fu Mr. Zhao Zhi Ming Mr. To Yan Ming Edmond

Head office and principal place of business in Hong Kong: Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong

21 January 2009

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

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION

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

BACKGROUND

By a joint announcement dated 9 November 2006, Aptus and the Company announced that Aptus and Evolution had entered into the Bond Purchase Agreement under which Aptus agreed to issue and Evolution agreed to subscribe and pay for the Bond(s) in the principal amount of HK$234,000,000 and by a joint announcement dated 22 November 2006, Aptus and the Company announced that the Bond Purchase Agreement had been completed.

* for identification purpose only

– 7 –

LETTER FROM THE BOARD

By a joint announcement dated 23 October 2008, Aptus and the Company announced that Aptus, the Trustee and the Security Trustee had entered into the First Amendment Deed pursuant to which the Trust Deed was amended by replacing the first Put Option Date of 21 November 2008 with 21 February 2009.

By a joint announcement dated 7 January 2009, Aptus and the Company jointly announced that the Second Amendment Deed was entered into between Aptus, the Trustee and the Security Trustee. The principal terms of the Second Amendment Deed are summarised below.

THE SECOND AMENDMENT DEED

Date 30 December 2008 (after trading hours)

Parties Aptus, the Trustee and the Security Trustee. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Trustee and the Security Trustee and their respective ultimate beneficial owner(s) are third parties independent of, and are not connected persons of any director, chief executive or substantial shareholder of Aptus or the Company or their respective subsidiaries or any of their respective associates

Conditions Precedent The Second Amendment Deed becoming effective is conditional on the following conditions being fulfilled on or before the Long Stop Date:

• (a) the approval of the Stock Exchange of the amendments to the Bond(s) contemplated by the Second Amendment Deed under the GEM Listing Rules having been granted;

• (b) if required by the Stock Exchange, the controlling shareholder of the Company, being Best Frontier, having given its written approval regarding the Disposal or the Shareholders having passed resolutions in a general meeting approving the Disposal in accordance with the GEM Listing Rules;

• (c) the Specific Mandate to allot, issue or otherwise to deal in the unissued shares in the capital of Aptus for the purpose of issuing Conversion Shares under the terms of the Amended Bonds having been granted by the Aptus Shareholders; and

– 8 –

LETTER FROM THE BOARD

• (d) the approval of the listing of, and permission to deal in, the Conversion Shares having been granted (either unconditionally or subject only to conditions acceptable to Aptus) by the GEM Listing Committee of the Stock Exchange (and such listing and permission not subsequently being revoked prior to the date of the Fulfillment Notice).

None of the conditions precedent can be waived.

Aptus shall use its best endeavours to fulfill or to procure the fulfillment of the conditions precedent on or before the Long Stop Date. With respect to the condition precedent under paragraph (b) above, the shareholders’ approval referred to thereunder will not be required as the Disposal (which constitutes a discloseable transaction under the GEM Listing Rules) does not require shareholders’ approval under the GEM Listing Rules.

If any of the conditions precedent shall not have been fulfilled on or before the Long Stop Date (or such other date as may be agreed by the parties in writing), the Second Amendment Deed shall cease to have any effect.

Effective Date

• Amendments to the provisions relating to Security

Aptus shall give a written notice to the other parties to the Second Amendment Deed notifying them of the fulfillment of all the conditions precedent and the date of such notice will be the date on which the amendments to the Bond(s) set out in the Second Amendment Deed will come into effect.

Clause 5 of the Trust Deed governing “Security” is amended so that, provided no Event of Default or Potential Event of Default shall have occurred, the Charged Property (or any part thereof) may be disposed of by Aptus at any time (the “ Approved Sale ”) on, amongst other things, the following terms and conditions:

• (a) the net proceeds from the sale of the Charged Property shall be deposited into an escrow account on terms that Aptus shall give notice of redemption of all the Bond(s) then outstanding;

– 9 –

LETTER FROM THE BOARD

• (b) the amounts in the escrow account after the above deposit shall exceed the Early Redemption Amount of all of the Bond(s) then outstanding plus any accrued interest and any amounts payable to the Trustee and the Security Trustee pursuant to the Trust Deed; and

• (c) the amounts in the escrow account shall be used to redeem all of the Bond(s) then outstanding together with any accrued interest and any amounts payable to the Trustee and the Security Trustee pursuant to the Trust Deed.

• Amendments to the Condition 6A(i) of the Bond(s) is amended so that the Conversion provisions relating to Rights will be restricted as follows: Conversion Period

• (a) on or prior to 21 November 2009, the Bondholder(s) shall only be entitled to exercise the Conversion Rights to the extent that the aggregate number of Aptus Shares issued and to be issued on conversion shall not exceed 9% of the issued share capital of Aptus as enlarged by the Conversion Shares to be issued; and

• (b) after 21 November 2009, the above restrictions shall continue to apply if a notice of redemption has been served by Aptus pursuant to Condition 8B (being a Condition pursuant to which Aptus has the option to redeem the Bond(s)) on or prior to 21 November 2009.

• Amendments to the Condition 6A of the Bond(s) is further amended as follows: provisions relating to Conversion Price and (a) the Conversion Price is reset to HK$0.5756 per Reset Reference Price Conversion Share, a price being 120% of the Reset Reference Price at the date of the Second Amendment Deed (the “ Amended Conversion Price ”);

• (b) the Amended Conversion Price will be adjusted downwards on each Reset Date to 120% of the Reset Reference Price if 120% of the Reset Reference Price is less than the Conversion Price in effect on the relevant Reset Date: Provided that any adjustment to the Conversion Price shall be limited such that the adjusted Conversion Price in no event shall be less than 70% of the Amended Conversion Price (the “ Amended Minimum Reset Reference Price ”); and

– 10 –

LETTER FROM THE BOARD

	(c) the Conversion Price will still be subject to adjustment
	upon the occurrence of certain prescribed dilution events
	such as consolidation, subdivision or reclassification, but
	will be limited to those dilution events occurring after 30
	December 2008 (being the date of the Second
	Amendment Deed).
Amendments to the	The proviso to Aptus’ right to redeem the Bond(s) that the
provisions relating to	Closing Price of the Aptus Shares for the previous 30 consecutive
redemption of the	Trading Days is at least 130% of the applicable Early Redemption
Bond(s) at the option	Amount divided by the Conversion Ratio contained in Condition
of Aptus	8B is deleted.
Amendments to the	Condition 8E is amended so that the Bondholder(s) may only
provisions relating to	exercise its right to require redemption of the Bond(s) on any date
redemption of the	during the period from 21 February 2009 to 20 November 2009 if
Bond(s) at the option	Aptus shall have the Surplus Cash (HK$58,000,000) following
of the Bondholder(s)	such redemption. This requirement does not apply to redemption
	by the Bondholder(s) on the Put Option Date of 21 November
	2009 and 21 November 2010.

Save as amended by the First Amendment Deed and the Second Amendment Deed, the terms and conditions of the Trust Deed remain in full force and effect and continue to be binding on the parties thereto.

MAJOR EFFECT OF THE SECOND AMENDMENT DEED ON THE PRINCIPAL TERMS OF THE BOND(S)

The major effect of the Second Amendment Deed on the principal terms of the Bond(s) is summarised below:

Security

Under the Bond(s)

No provision permitting Aptus to dispose of the Charged Property for the purpose of redeeming all of the Bond(s) then outstanding.

Under the Amended Bonds

Aptus may dispose of the Charged Property (or any part thereof) at any time for the purpose of redeeming all of the Bond(s) then outstanding subject to the terms of the Trustee Deed (as amended by the Second Amendment Deed).

– 11 –

LETTER FROM THE BOARD

Conversion Period

Under the Bond(s)

Bondholder(s) may exercise the Conversion Right at any time from 1 January 2007 up to the close of business on 11 November 2011 or, if the Bond(s) 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.

Under the Amended Bond(s)

The right of the Bondholder(s) to exercise the Conversion Rights will be restricted. On or prior to 21 November 2009, the Bondholder(s) shall only be entitled to exercise the Conversion Rights to the extent that the aggregate number of Aptus Shares issued and to be issued on conversion shall not exceed 9% of the issued share capital of Aptus as enlarged by the Conversion Shares to be issued. That restriction shall continue if Aptus has served a redemption notice under Condition 8B on or prior to 21 November 2009.

Conversion Price and Conversion Price Reset

Under the Bond(s)

The Conversion Price was HK$2.40, representing a premium of approximately 20% over the closing price of HK$2.00 per Aptus Share as quoted on the Stock Exchange on 6 November 2006, which was the last Trading Day 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 Conversion Price of HK$2.40 also represented 92.1 times of the net asset value per Aptus Share of HK$0.02607 as at 30 June 2006.

The Conversion Price is subject to adjustment upon the occurrence of certain prescribed dilution events.

– 12 –

LETTER FROM THE BOARD

Under the Amended Bonds

• (a) the Conversion Price of HK$2.40 is reset to the Amended Conversion Price of HK$0.5756;

• (b) each of the Reset Dates of 15 January 2008, 15 April 2008, 15 July 2008, 15 October 2008, 15 January 2009 is deleted, the remaining Reset Dates being 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;

• (c) the Conversion Price will be adjusted downwards on each Reset Date to 120% of the Reset Reference Price if 120% of the applicable Reset Reference Price is less than the Conversion Price in effect on the relevant Reset Date; and

• (d) any adjustment to the Conversion Price shall be limited such that the adjusted Conversion Price in no event shall be less than the Amended Minimum Reset Reference Price.

The Amended Conversion Price is HK$0.5756 per Conversion Share, representing a premium of approximately 18.7% over the closing price of HK$0.485 per Aptus Share as quoted on the Stock Exchange on 30 December 2008, which was the Trading Day on which the Second Amendment Deed was entered into and a premium of approximately 21.4% and 22.3% 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 30 December 2008 of HK$0.474 and HK$0.471 respectively.

Conversion Shares

Under the Bond(s)

If all the Bond(s) are converted at the Conversion Price of HK$2.40, there will be 97,500,000 Conversion Shares (subject to adjustment), representing approximately 5.8% of the issued share capital of Aptus as at the First Announcement Date and 5.5% of the issued share capital of Aptus as enlarged by the Conversion Shares.

– 13 –

LETTER FROM THE BOARD

If all the Bond(s) are converted at the Minimum Reset Reference Price of HK$1.45 (i.e. 60.42% of the Conversion Price of HK$2.40) each, there will be 161,379,310 Conversion Shares (subject to adjustment), representing approximately 9.7% of the issued share capital of Aptus as at the First Announcement Date and 8.8% of the issued share capital of Aptus as enlarged by the Conversion Shares.

Under the Amended Bonds

If all the Amended Bonds are converted at the Amended Conversion Price of HK$0.5756, there will be 406,532,314 Conversion Shares (subject to adjustment), representing approximately 23.1% of the issued share capital of Aptus as at the Latest Practicable Date and 18.7% of the issued share capital of Aptus as enlarged by the Conversion Shares.

If all the Amended Bonds are converted at the Amended Minimum Reset Reference Price of HK$0.4029 (i.e. 70% of the Amended Conversion Price of HK$0.5756) each, there will be 580,789,278 Conversion Shares (subject to adjustment), representing approximately 33% of the issued share capital of Aptus as at the Latest Practicable Date and 24.8% of the issued share capital of Aptus as enlarged by the Conversion Shares.

Accordingly, the Conversion Shares to be issued upon full conversion of the Amended Bonds at either the Amended Conversion Price or the Amended Minimum Reset Reference Price will exceed the General Mandate Limit.

Redemption at option of Aptus Under the Bond(s)

Aptus may redeem the Bond(s) subject to the condition that 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.

– 14 –

LETTER FROM THE BOARD

Under the Amended Bonds

The requirement that the Closing Price of the Aptus Shares is at least 130% of the applicable Early Redemption Amount divided by the Conversion Ratio is deleted.

Redemption at option of Bondholder(s)

Under the Bond(s)

On each of 21 February 2009, 21 November 2009 and 21 November 2010, each Bondholder will have the right to require Aptus to redeem in whole or in part of the Bond(s) of such Bondholder on each of the date mentioned above at their Early Redemption Amount together with interest accrued to the Put Option Date.

Under the Amended Bonds

The Bondholder(s) may only exercise its right to require redemption of the Bond(s) on any date during the period from 21 February 2009 to 20 November 2009 provided that Aptus shall have the Surplus Cash (HK$58,000,000) after such redemption.

The Bondholder(s) remain entitled to require redemption of the Bond(s) on the Put Option Date of 21 November 2009 and 21 November 2010 without being subject to Aptus having the Surplus Cash.

– 15 –

LETTER FROM THE BOARD

EFFECT ON THE SHARE CAPITAL OF APTUS

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

							Assuming the Amended Bonds	Assuming the Amended Bonds	Assuming the Amended Bonds
				Assuming the Amended Bonds			are fully converted into
				are fully converted into			Aptus Shares
				Aptus Shares (subject to			(subject to adjustment) at
				adjustment) at the			the Amended Minimum
	As at the			Amended Conversion Price		of	Reset Reference Price of
	Latest Practicable Date			HK$0.5756 each			HK$0.4029 each
					Approximate %			Approximate %
		Approximate %			of enlarged			of enlarged
	No. of Aptus	of issued	share	No. of Aptus	issued	share	No. of Aptus	issued	share
Name of Shareholder	Shares	capital of	Aptus	Shares	capital of	Aptus	Shares	capital of Aptus
Precise Result Profits
Limited_(Note 2)_	971,746,428		55.16	971,746,428		44.81	971,746,428		41.48
China Success
Enterprises Limited
(Note 2)	971,746,428		55.16	971,746,428		44.81	971,746,428		41.48
The Company
(Note 2)	971,746,428		55.16	971,746,428		44.81	971,746,428		41.48
Best Frontier_(Note 3)_	971,746,428		55.16	971,746,428		44.81	971,746,428		41.48
Cheung Kwai Lan
(Note 3)	971,746,428		55.16	971,746,428		44.81	971,746,428		41.48
Chan Tung Mei
(Note 3)	971,746,428		55.16	971,746,428		44.81	971,746,428		41.48
Evolution
(Notes 4 to 6)	–		–	406,532,314		18.75	580,789,278		24.79
Evolution Capital
Management LLC
(Notes 4 to 6)	–		–	406,532,314		18.75	580,789,278		24.79
Structured Investments
Ltd.(Notes 4 to 6)	–		–	406,532,314		18.75	580,789,278		24.79

– 16 –

LETTER FROM THE BOARD

Name of Shareholder Evo Capital Management Asia Limited (Notes 4 to 6) Public Total	As at the Latest Practicable Date No. of Aptus Shares Approximate % of issued share capital of Aptus – – 790,095,000 44.84 1,761,841,428 100	Assuming the Amended Bonds are fully converted into Aptus Shares (subject to adjustment) at the Amended Conversion Price of HK$0.5756 each No. of Aptus Shares Approximate % of enlarged issued share capital of Aptus 406,532,314 18.75 790,095,000 36.44 2,168,373,742 100	Assuming the Amended Bonds are fully converted into Aptus Shares (subject to adjustment) at the Amended Minimum Reset Reference Price of HK$0.4029 each No. of Aptus Shares Approximate % of enlarged issued share capital of Aptus 580,789,278 24.79 790,095,000 33.73 2,342,630,706 100	Assuming the Amended Bonds are fully converted into Aptus Shares (subject to adjustment) at the Amended Minimum Reset Reference Price of HK$0.4029 each No. of Aptus Shares Approximate % of enlarged issued share capital of Aptus 580,789,278 24.79 790,095,000 33.73 2,342,630,706 100
				100

Notes:

1. The table above is based on the entire issued capital of Aptus as at the Latest Practicable Date, being 1,761,841,428 shares.

2. 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 is interested in approximately 65.21% of the issued share capital of the Company. The Aptus Shares referred to herein relate to the same parcel of shares held by Precise Result Profits Limited.

3. 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, each of Madam Cheung Kwai Lan and Mr. Chan Tung Mei is deemed to be interested in the Aptus Shares directly held by Precise Result Profits Limited under the SFO, being 971,746,428 Aptus Shares.

4. Evolution is an Asia-focused fund organised and existing under the laws of the Cayman Islands.

The investment managers of Evolution are Evo Capital Management Asia Limited (“Evo Capital”), a Hong Kong-based asset management company, and Evolution Capital Management LLC (“Evo LLC”), a U.S. based investment adviser. Evo Capital is licensed under the SFO to carry on Type 9 (asset management) activities.

1. As at the Latest Practicable Date, Evolution has borrowed 48,750,000 Aptus Shares (“ Borrowed Shares ”) from Precise Result Profits Limited pursuant to the stock lending agreement dated 22 November 2006 entered into between CVG and Evolution.

Prior to the entering into of the Second Amendment Deed, Evolution was interested in 161,379,310 underlying shares in Aptus (“ Underlying Shares ”), being the Conversion Shares issuable pursuant to the exercise of the Conversion Right at the Minimum Reset Reference Price in addition to the Borrowed Shares.

Each of Evo Capital and Evo LLC is interested in the Borrowed Shares in its capacity as investment manager. Structured Investments Ltd. (a wholly-owned subsidiary of Evolution) is interested in the Borrowed Shares by virtue of Evolution having written a participation right to it.

– 17 –

LETTER FROM THE BOARD

As to the interest of Evo Capital, Evo LLC and Structured Investments Ltd. in the Conversion Shares which may be issued pursuant to the exercise of the Conversion Right, please refer to the table above for more details.

1. Upon full conversion of the Amended Bonds, a maximum of 580,789,278 Aptus Shares will be allotted and issued to Evolution and Evolution will be holding 580,789,278 Aptus Shares (excluding the Borrowed Shares), representing approximately 24.79% of the issued capital of Aptus enlarged by the issue of the Conversion Shares. As such, Evolution will become a substantial shareholder (as defined in the GEM Listing Rules) of Aptus and its shareholding in Aptus will not be counted for the purpose of considering whether Aptus has at least 25% of its total issued share capital held by the public.

REASONS FOR, AND BENEFITS OF, APTUS ENTERING INTO THE SECOND AMENDMENT DEED

In relation to Aptus, the Aptus Directors are of the view that the amendments to the Bond(s) pursuant to the Second Amendment Deed provides greater financial flexibility to Aptus as compared to the existing terms of the Bond(s) since Aptus will, subject to the terms of the Amended Bonds, be permitted to dispose of the Charged Property for the purpose of redeeming the outstanding Bond(s), thus providing an additional option to raise funding and reduce the outstanding debts of Aptus. Under the proposed amendments, the Bondholder(s) can exercise its option to call for redemption of the outstanding Bond(s) during the period from 21 February 2009 to 20 November 2009 subject to Aptus having the Surplus Cash (HK$58,000,000) after redemption. Aptus now has the ability to call for redemption of the Bond(s) at anytime putting it in a better position to reduce potential dilution levels should its financial position allows. Given the current bearish debt and equity market, the Aptus Directors believe that the proposed terms of the Second Amendment Deed are fair, reasonable, on normal commercial terms and are in the interests of Aptus Group and the Aptus Shareholders as a whole.

In relation to the Company, the Directors noted the reasons for entering into the Second Amendment Deed on the part of Aptus set out above that it is made for the benefit of the Aptus Group and the Aptus Shareholders as a whole. Having considered the benefits accrued to Aptus (an indirect non wholly-owned subsidiary of the Company) and indirectly to the Company and the factors and considerations taken into account as set out above in relation to the entering into of the Second Amendment Deed, the Directors (including the independent non-executive Directors) consider that the terms, and the entering into, of the Second Amendment Deed (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.

DEEMED DISPOSAL BY THE COMPANY

As a result of Aptus entering into the Second Amendment Deed, the Company’s indirect interests in Aptus may be diluted by, up to 10.35 percentage points from approximately 55.16% to approximately 44.81% assuming full conversion of the Amended Bonds into Conversion Shares at the Amended Conversion Price or, up to 13.68 percentage points from approximately 55.16% to approximately 41.48% assuming full conversion of the Amended Bonds into Conversion Shares at the Amended Minimum Reset Reference Price, while the Company will continue to hold, indirectly, 971,746,428 Aptus Shares. The Company’s auditors have

– 18 –

LETTER FROM THE BOARD

confirmed that Aptus will continue to be consolidated into the accounts of the Group on the basis that the Company can still exercise significant influence on the financial and operating policies of Aptus and control the Aptus Board pursuant to the Hong Kong Accounting Standards No. 27 “Consolidated and Separate Financial Statements”. As Aptus will continue to be consolidated into the accounts of the Group, it will remain as a subsidiary of the Company for the purpose of the GEM Listing Rules.

The Disposal is regarded as a deemed disposal on the part of the Company under Rule 19.29 of the GEM Listing Rules and constitutes a discloseable transaction under Chapter 19 of the GEM Listing Rules.

Based on Aptus’ annual report for the year ended 30 June 2008, the net loss before and after taxation of Aptus for the year ended 30 June 2008 were approximately HK$57,499,000 and HK$57,087,000 respectively. Aptus recorded a negative net asset value of approximately HK$17,711,000 as at 30 June 2008.

Assuming there will not be any further issue or repurchase of Aptus Shares by Aptus, the Company will be deemed to dispose of up to 10.35 percentage points of its stake in Aptus in the case of full conversion of the Amended Bonds at the Amended Conversion Price, or up to 13.68 percentage points of its stake in Aptus in the event the Amended Bonds are converted at the Amended Minimum Reset Reference Price.

Upon full conversion of the Amended Bonds, the liability component of the Amended 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$274,324,000 (based on Aptus’ consolidated balance sheet as at 30 June 2008) 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 10.35 percentage points (in the case of full conversion of the Amended Bonds at the Conversion Price) or by 13.68 percentage points (in the case of full conversion of the Amended Bonds at the Minimum Reset Reference Price), the increase in the consolidated net asset value of the Group of approximately HK$274,324,000 will further enhance by the negative dilution effect of the Disposal which amounts to approximately HK$1,833,000 (in the case of full conversion of the Amended Bonds at the Amended Conversion Price) or approximately HK$2,423,000 (in the case of full conversion of the Amended Bonds at the Amended Minimum Reset Reference Price) calculated based on the negative equity attributable equity holders of Aptus of approximately HK$17,711,000 as at 30 June 2008.

The full conversion of the Amended Bonds will cause Aptus’ net asset value to increase by HK$274,324,000, and the Company to report a gain of approximately HK$124,758,000 (in the case of full conversion of the Amended Bonds at the Amended Conversion Price) and approximately HK$116,212,000 (in the case of full conversion of the Amended Bonds at the Amended Minimum Reset Reference Price) based on the negative equity attributable to equity holders of Aptus of approximately HK$32,989,000 as at 30 June 2008.

Based on the annual report of Aptus for the year ended 30 June 2008, the audited negative net asset value of Aptus as at 30 June 2008 was approximately HK$17,711,000.

– 19 –

LETTER FROM THE BOARD

According to the annual reports of Aptus for the two years ended 30 June 2007 and 30 June 2008, its net loss (before and after taxation) for the year ended 30 June 2007 were approximately HK$110,635,000 and HK$111,099,000 respectively and for the year ended 30 June 2008 were approximately HK$57,499,000 and HK$57,087,000 respectively.

GENERAL

The Group is principally engaged in (i) lottery-related businesses in the PRC via Shenzhen Bozone IT Co., Ltd., its subsidiary; (ii) oil and gas-related businesses via Aptus; and (iii) technology platforms for intellectual property protection and value-added services in the entertainment sector in the PRC via Grand Promise International Limited, its subsidiary.

GEM LISTING RULES IMPLICATION

As the applicable ratio in respect of the Disposal exceeds 5% but less than 25%, the Disposal constitutes a discloseable transaction for the Company under Chapter 19 of the GEM Listing Rules.

FURTHER INFORMATION

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

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

– 20 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purposes 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 or facts 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. DISCLOSURE OF INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES

• (a) Directors’ and Chief Executives’ Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company or any Associated Corporation

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 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:

– 21 –

GENERAL INFORMATION

APPENDIX

• (i) Long positions in the ordinary shares of the Company or any of its associated corporations

Number of ordinary shares held

	Company/
	Name of	Interest in				Approximate
Name of	associated	controlled	Beneficial	Family		percentage of
Director	corporation	corporation	owner	interest	Total interest	shareholding
Cheung Kwai Lan	Company	2,095,857,322	2,070,000	–	2,097,927,322	65.27%
		(Note 1)	(Note 2)
Chan Tung Mei	Company	–	–	2,097,927,322	2,097,927,322	65.27%
				(Notes 1& 2)
Lau Hin Kun	Company	–	1,410,000	–	1,410,000	0.04%
Cheung Kwai Lan	Best Frontier	–	909	1	910	–
				(Note 3)
Chan Tung Mei	Best Frontier	–	1	909	910	–
				(Note 3)
Cheung Kwai Lan	Aptus	971,746,428	–	–	971,746,428	55.16%
		(Note 4)
Chan Tung Mei	Aptus	–	–	971,746,428	971,746,428	55.16%
				(Note 4)

Notes:

1. The 2,095,857,322 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 who are spouse to each other. As Madam Cheung Kwai Lan is entitled to exercise or controls the exercise of one-third or more of the voting powers at any general meeting of Best Frontier, she is deemed to be interested in all the shares of the Company held by Best Frontier by virtue of the SFO. As Mr. Chan Tung Mei is the spouse of Madam Cheung Kwai Lan, he is deemed to be interested in all such 2,095,857,322 shares by virtue of the SFO. Madam Cheung Kwai Lan and Mr. Chan Tung Mei, both being Directors, are also directors of Best Frontier.

2. 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 such shares under the SFO.

3. 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.

4. 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

– 22 –

GENERAL INFORMATION

APPENDIX

also deemed to be interested in the shares of Best Frontier by virtue of being the spouse of Madam Cheung Kwai Lan under the SFO. As at the Latest Practicable Date, Best Frontier is interested in approximately 65.21% of the issued share capital of the Company which in turn holds directly 100% shareholding of China Success Enterprises Limited and holds indirectly 100% shareholding of Precise Result Profits Limited, the company directly holding 971,746,428 Aptus Shares of which, 48,750,000 Aptus Shares have been lent to Evolution Master Fund Ltd. SPC, Segregated Portfolio M.

(ii) 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 satisfies the criteria of the Share Option Scheme, to take up options to subscribe for the Shares.

The Share Option Scheme will remain valid for a period of 10 years commencing from 18 October 2002. Particulars of the options to subscribe for Shares granted to the Directors pursuant to the Share Option Scheme as at the Latest Practicable Date are set out below:

				Maximum
				number of
				Shares
				subject to
				the
	Capacity/Nature	Date of	Exercise	outstanding
Name of Director	of interest	grant	period	options
Cheung Kwai Lan (Note)	Beneficial	23/11/2006	23/11/2006 –	1,560,000
	owner/personal		17/10/2012
		23/11/2006	23/5/2007 –	1,560,000
			17/10/2012
		23/11/2006	23/11/2007 –	3,120,000
			17/10/2012
Chan Tung Mei (Note)	Beneficial	23/11/2006	23/11/2006 –	1,560,000
	owner/personal		17/10/2012
		23/11/2006	23/5/2007 –	1,560,000
			17/10/2012
		23/11/2006	23/11/2007 –	3,120,000
			17/10/2012

– 23 –

GENERAL INFORMATION

APPENDIX

				Maximum
				number of
				Shares
				subject to
				the
	Capacity/Nature	Date of	Exercise	outstanding
Name of Director	of interest	grant	period	options
Chan Ting	Beneficial	23/11/2006	23/11/2006 –	1,560,000
	owner/personal		17/10/2012
		23/11/2006	23/5/2007 –	1,560,000
			17/10/2012
		23/11/2006	23/11/2007 –	3,120,000
			17/10/2012
Lau Hin Kun	Beneficial	23/11/2006	23/11/2006 –	350,000
	owner/personal		17/10/2012
		23/11/2006	23/5/2007 –	350,000
			17/10/2012
		23/11/2006	23/11/2007 –	700,000
			17/10/2012
Tian He Nian	Beneficial	23/11/2006	23/11/2006 –	260,000
	owner/personal		17/10/2012
		23/11/2006	23/5/2007 –	260,000
			17/10/2012
		23/11/2006	23/11/2007 –	530,000
			17/10/2012
Zhao Zhi Ming	Beneficial	23/11/2006	23/11/2006 –	260,000
	owner/personal		17/10/2012
		23/11/2006	23/5/2007 –	260,000
			17/10/2012
		23/11/2006	23/11/2007 –	530,000
			17/10/2012
To Yan Ming Edmond	Beneficial	23/11/2006	23/11/2006 –	260,000
	owner/personal		17/10/2012
		23/11/2006	23/5/2007 –	260,000
			17/10/2012
		23/11/2006	23/11/2007 –	530,000
			17/10/2012

Note:

As Mr. Chan Tung Mei and Madam Cheung Kwai Lan are the spouse to each other, each of Mr. Chan Tung Mei and Madam Cheung Kwai Lan is deemed to be interested in the Shares which may be allotted to his/her spouse pursuant to the exercise of the options referred to in the above table under the SFO.

– 24 –

APPENDIX

GENERAL INFORMATION

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.

(b) Substantial Shareholders’ Interests and Short Positions in the Shares, Underlying Shares and Debentures of the Company

As at the Latest Practicable Date, so far as is known to the Directors or chief executive of the Company, the following person (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:

(i) Long positions in the Shares

Number of Shares held

				Approximate
Name of				percentage of
Shareholder	Capacity	Long position	Short position	shareholding
Best Frontier	Beneficial owner	2,095,857,322	–	65.21%
		(Note)

Note:

The 2,095,857,322 shares are held 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.

– 25 –

GENERAL INFORMATION

APPENDIX

(ii) Long positions in underlying Shares

Number of Shares held

				Approximate
Name of				percentage of
Shareholder	Capacity	Long position	Short position	shareholding
The Goldman	Interest in	343,211,215	–	10.68%
Sachs Group,	controlled	(Note 1)
Inc.	corporation

Notes:

1. A maximum of 343,348,554 new Shares (without taking into account any Shares which have already been exchanged for) will be allotted and issued to Liberty Harbor Master Fund I, L.P. (“ Liberty Harbor ”) upon its exercise of the exchange option under the Grand Promise Notes (as defined below). Liberty Harbor is advised by GS Investment Strategies, LLC, a Delaware limited liability company, whose sole member is The Goldman Sachs Group, Inc., a Delaware corporation. As at the Latest Practicable Date, Liberty Harbor has exchanged US$10,000 together with the interest thereon into 105,931 Shares.

2. The meanings of the capitalised terms below are set out for the purpose of note 1 above:

3. (a) Grand Promise means Grand Promise International Limited, a company incorporated in the British Virgin Islands and a wholly-owned subsidiary of the Company.

4. (b) Grand Promise Investors means collectively, Liberty Harbor and Evolution and any permitted transferees.

5. (c) Grand Promise Notes means collectively (i) a senior convertible redeemable note dated 30 November 2007 in the principal amount of US$25,000,000 issued by Grand Promise to Liberty Harbor and (ii) a senior convertible redeemable note dated 30 November 2007 in the principal amount of US$10,000,000 issued by Grand Promise to Evolution pursuant to which, amongst other things, the Grand Promise Notes might, at the options of the Grand Promise Investors, be exchangeable into a maximum number of 480,687,974 Shares (of which up to 137,339,420 Shares representing approximately 4.27% of the entire issued share capital of the Company as enlarged by such Shares as at the Latest Practicable Date may be allotted and issued to Evolution upon exercise of the rights to exchange for new Shares by Evolution pursuant to the senior convertible redeemable note mentioned in (ii) above), at a strike price of HK$0.80 after completion of the Grand Promise SPA.

6. (d) Grand Promise SPA means the agreement for sale and purchase dated 17 January 2008 entered into between the Company and the Grand Promise Vendors pursuant to which, amongst other things, the Company acquired the entire issued share capital of Grand Promise for the consideration of US$200,000,000 (equivalent to approximately HK$1,560,900,000) which was satisfied by the allotment and issue of 2,262,173,906 Shares to the Grand Promise Vendors (and/or their respective nominees) at an issue price of HK$0.69 per Share.

7. (e) Grand Promise Vendors means Best Frontier, Mega Capital International Limited, Kiree Group Limited, Ms. Lo Wai Kwan Anna, Mr. Tang Ping Fai Rocky, Integrated Asset Management (Asia) Limited, Mr. Chan Ka Yin and Mr. Wong Sze Chuen.

– 26 –

APPENDIX

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, so far as is known to the Directors or chief executives of the Company, there was no substantial shareholder of the Company (other than the Director or chief executive of the Company) who had interests or short positions 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, had direct or indirect interests amounting to 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of the Company and/or any other member of the Group, or were required, pursuant to section 336 of the SFO, to be entered in the register referred to therein.

(c) Interests of other persons in the Company

Save as disclosed above, as at the Latest Practicable Date, so far as is known to the Directors or chief executives of the Company, there was no person or company (other than a Director, chief executive or substantial shareholder of the Company) who had any interests or short positions 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, and recorded in the register required to be kept under section 336 of the SFO, and who were directly or indirectly deemed to be interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Group.

3. LITIGATION

As at the Latest Practicable Date, Muller Group Limited (“ Muller ”), a wholly-owned subsidiary of the Company, has lodged legal proceedings in Singapore against Mr. Dixon Ng, a Singapore lawyer for the recovery of US$600,000 stakeholder money placed with Mr. Dixon Ng’s law firm. The action has been defended. Muller lost its application for summary judgement in the first instance but is considering to appeal against this decision.

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

– 27 –

GENERAL INFORMATION

APPENDIX

4. DIRECTORS’ SERVICE CONTRACTS

Each of Madam Cheung Kwai Lan, Mr. Chan Tung Mei and Mr. Chan Ting had entered into a service contract with the Company for a term of three years from 18 October 2002, renewable automatically for successive terms of one year unless terminated by not less than six months’ notice in writing served by either party on the other. As these service contracts can be renewed automatically, they do not have an expiry date. Pursuant to the amendment letters issued by the Company to each of the above Directors dated 1 September 2007, with effect from 1 September 2007, the remuneration under their respective service contracts was adjusted. The particulars of these service contracts are as follows:

	Annual fixed
	remuneration	Annual fixed
	payable prior to	remuneration payable
Names of Directors	1 September 2007	since 1 September 2007
	HK$	HK$
Cheung Kwai Lan	1,950,000	3,900,000
Chan Tung Mei	650,000	1,300,000
Chan Ting	1,300,000	2,600,000

In addition to the remuneration described above, under the relevant service contracts between the Company and each of Madam Cheung Kwai Lan, Mr. Chan Tung Mei and Mr. Chan Ting:

• (a) after each completed year of service, the remuneration shall be increased at not less than 5% of the annual remuneration immediately prior to such increase for each corresponding relevant year provided that (i) the audited combined/consolidated profit before taxation, minority interest and extraordinary items (if any) of the Group (the “ Profit ”) for the first relevant financial year ending after the date thereof is not less than HK$12,000,000 and (ii) the Profit for each of the following corresponding relevant financial years increases by not less than 10% of the annual Profit of the immediately preceding relevant financial year. Save as the abovementioned, remuneration of the Director may be increased at the discretion of the Board;

• (b) for each completed year of service, a discretionary bonus as may be decided by the Board provided that the total amount of bonus payable to all the Directors for such year (if any) shall not be less than 10% of the Profit for the financial relevant year if the Profit for such financial year is not less than HK$12,000,000. Payment of such bonus shall be made on such date as the Board may resolve; and

• (c) the Director may, at the discretion of the Board, be granted share options entitling the Director to subscribe for shares in the Company under any share option scheme from time to time adopted by the Company in accordance with the terms and conditions of such share option scheme.

– 28 –

GENERAL INFORMATION

APPENDIX

Save as disclosed above, there is no other material variable component of the remuneration under the respective service contracts of Madam Cheung Kwai Lan, Mr. Chan Tung Mei and Mr. Chan Ting. As at the Latest Practicable Date, no discretionary bonus had been paid to any Director.

Save as disclosed herein, as at the Latest Practicable Date:

• (a) there was no other existing or proposed service contract between any of the Directors and any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation));

• (b) none of the Directors had any service contract with the Company or any of its subsidiaries or associated companies (as defined in the Hong Kong Code on Takeovers and Mergers) in force which:

• (i) are continuous contracts with a notice period of 12 months or more;

• (ii) are fixed term contracts with more than 12 months to run irrespective of the notice period; and

• (iii) are continuous or fixed term contracts and have been entered into or amended within six months before 7 January 2009 (being the date on which the Company and Aptus jointly announced that the Second Amendment Deed was entered into).

5. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or the controlling shareholders of the Company and their respective associates had any interest in a business which competes or may compete, directly or indirectly, with the business of the Group.

6. GENERAL

• (a) The registered office of the Company is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.

• (b) The head office and principal place of business of the Company is at Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

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

• (d) The compliance officer of the Company is Mr. Chan Ting.

– 29 –

GENERAL INFORMATION

APPENDIX

• (e) The company secretary and 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 Western Australia. Mr. Kwan is a fellow member of Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants and an associate member of the Institute of Chartered Accountants in England and Wales.

• (f) The Company established an audit committee on 18 October 2002 with written terms of reference in compliance with Rules 5.28 to 5.29 of the GEM Listing Rules. The audit committee of the Company comprises all of the four independent nonexecutive Directors. 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 68, 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 nonexecutive director and audit committee member of Aptus. He joined the Group in November 2004.

Mr. Zhao Zhi Ming, aged 66, is the committee member of the Specialist Committee of the China Development Bank and the Professor of Liao Ning 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 non-executive director and audit committee member of Aptus. He joined the Group in December 2005.

Mr. Zhang Xiu Fu, aged 74, devoted himself to the Chinese Revolution in August 1948 and joined the Communist Party in March 1950. He had served as the head of the municipal police of Hangzhou, Zhejiang province, the chief officer of the provincial police of Zhejiang province, a member of the Communist Party’s Provincial Standing Committee in Zhejiang province and the secretary of the Political and Legislative Affairs Committee. He had also served as the commissar of the Chinese People’s Armed Police, the vice minister and the vice head of the party organization of the Chinese Ministry of Legislation, a representative of the Ninth National People’s Congress, a member of the Legislation Committee of the National People’s Congress and the vice president of China Law Science Association. He currently serves as the president of the China Legal Aid Foundation. He is also an independent non-executive director and audit committee member of Aptus. He joined the Group in January 2008.

– 30 –

GENERAL INFORMATION

APPENDIX

Mr. To Yan Ming Edmond, aged 37, 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 and Edmond To CPA Limited. He is a member of both the CPA Australia and Hong Kong Institute of Certified Public Accountants. He worked for an international accounting firm, Deloitte Touche Tohmatsu and has over 10 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. He was an independent non-executive director of Century Sunshine Group Holdings Limited (a company listed on the Main Board of the Stock Exchange and formerly known as Century Sunshine Ecological Technology Holdings Limited) from 30 August 2007 to 28 April 2008.

– 31 –