Sunny Optical Technology (Group) Company Limited — Capital/Financing Update 2007

Oct 25, 2007

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

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

==> picture [398 x 58] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability)

(Stock Codes :1044 (Shares) and 2561 (Convertible Bonds))

TOP-UP PLACING OF EXISTING SHARES AND SUBSCRIPTION OF NEW SHARES UNDER GENERAL MANDATE AND RESUMPTION OF TRADING

On 24 October, 2007, the Vendor and the Company entered into the Share Placing Agreement with the Placing Agent pursuant to which the Placing Agent has agreed, as agent of the Vendor, to procure purchasers to purchase or, failing which, to purchase itself the Placing Shares at the Placing Price.

The Placing Shares to be placed represent approximately 5.55% of the existing issued share capital of the Company of 1,081,520,142 Shares and approximately 5.26% of the Company’s issued share capital as enlarged by the allotment and issue of the Subscription Shares (see below).

On the same day, the Vendor and the Company entered into the Subscription Agreement, under which the Vendor has conditionally agreed to subscribe for the Subscription Shares which are, equivalent, in number, to the number of the Placing Shares.

The net proceeds from the Subscription are estimated to be approximately HK$1,797 million, net of commissions, professional fees and other ancillary expenses. It is the intention of the Company to use the net proceeds from the Subscription principally for potential acquisitions, capacity expansion and general working capital purposes.

The Subscription Shares will be allotted and issued pursuant to the general mandate granted to the Directors at the annual general meeting of the Company held on 15 May, 2007. The Company will apply to the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares.

Trading in the Shares and the Convertible Bonds was suspended from 9:30 a.m. on 25 October, 2007 at the request of the Company pending the issue of this announcement and application has been made to the Stock Exchange for the resumption of trading of the Shares and the Convertible Bonds from 9:30 a.m. on 26 October, 2007.

1

PLACING UNDER THE SHARE PLACING AGREEMENT DATED 24 OCTOBER, 2007

Vendor

As at the date of the Share Placing Agreement, the Vendor is interested in 224,619,751 Shares, representing approximately 20.77% of the existing issued share capital of the Company (comprising 1,081,520,142 Shares). The Vendor is also interested in a further 180,000 Shares pursuant to options awarded to him under the Company’s existing share option scheme.

Placing Agent

Morgan Stanley & Co. International plc. Insofar as Morgan Stanley & Co International plc, in performing its functions under the Placing Agreement, is “dealing in securities” as defi ned in Schedule 5 of the SFO, it shall only do so through its agent, Morgan Stanley Asia Limited, and only in circumstances such that none of the sub-provisions (I), (II), (III), (IV) and (V) in subparagraph (iv) to the defi nition of “dealing in securities” in Part 2 of Schedule 5 of the SFO are applicable. To the best knowledge and belief of the Directors, having made all reasonable enquiries, the Placing Agent is independent of the Company and the Company’s connected persons (as defi ned in the Listing Rules). The ultimate benefi cial parent company of the Placing Agent is Morgan Stanley, a public company incorporated in the State of Delaware, United States.

Total Number of Placing Shares

60,000,000 Shares owned by the Vendor, representing approximately 5.55% of the existing issued share capital of the Company of 1,081,520,142 Shares, and approximately 5.26% of the issued share capital of the Company as enlarged by the Subscription.

Placing Price

The Placing Price of HK$30.47 per Share was arrived at after arm’s length negotiations between the Company, the Vendor and the Placing Agent by reference to the market condition and the Share price of the Company.

The Placing Price represents:

• (i) a discount of approximately 4.78% to the closing price of HK$32.0 per Share quoted on the Stock Exchange on 24 October, 2007, being the last trading day immediately before suspension of trading in the Shares on 25 October, 2007 (the “ Suspension Date ”);

• (ii) a discount of approximately 4.03% to the average closing price of HK$31.75 per Share quoted on the Stock Exchange from 17 October, 2007 to 24 October, 2007, both dates inclusive, being the last fi ve trading days of the Shares immediately before the Suspension Date;

2

• (iii) a discount of approximately 2.93% to the average closing price of approximately HK$31.39 per Share as quoted on the Stock Exchange from 10 October, 2007 to 24 October, 2007, both dates inclusive, being the last ten trading days of the Shares immediately before the Suspension Date; and

• (iv) a premium of approximately 1.70% to the average closing price of approximately HK$29.96 per Share as quoted on the Stock Exchange from 10 September, 2007 to 24 October, 2007, both dates inclusive, being the last thirty trading days of the Shares immediately before the Suspension Date.

Rights

The Placing Shares will be sold free of all liens, charges and encumbrances. The placees, or the Placing Agent if it takes up any Placing Shares, will receive all dividends and distributions declared, made or paid on or after the date of the Share Placing Agreement.

Independence of placees

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, each of the placees will not be connected persons of the Company and will be third parties independent from and not parties acting in concert with the directors, chief executive or substantial shareholders of the Company or any of their respective associates (as defi ned in the Listing Rules). It is expected that the placees, of which it is intended that there shall be six or more, will be (i) professional and institutional investors, which generally include brokers, dealers and companies (including fund managers) whose ordinary business involves dealing in shares and other securities; and/or (ii) corporate entities which regularly invest in shares and other securities.

The Placing Agent is currently not a connected person under the Listing Rules for the purposes of this transaction.

Completion of the Placing

Completion of the Placing is expected to take place on 29 October, 2007, or such other time or date as may be agreed by the Vendor and the Placing Agent.

Condition of the Placing

Completion of the Placing is conditional upon, amongst things:

• (a) there not being any breach of the representations, warranties or undertakings in the Placing Agreement prior to closing;

• (b) trading in the Company’s securities not being suspended prior to closing (save for the suspension pending the publication of this announcement); and

3

• (c) there not occurring, prior to closing, certain events of a force majeure nature including, amongst other things, a suspension of securities trading generally on the Stock Exchange or a material change in fi nancial markets that, in the Placing Agent’s judgement, makes it impracticable or inadvisable to proceed with the sale of the Placing Shares.

Lock-up

The Vendor has undertaken to the Placing Agent that, for a period of 180 days from the date of completion of the Placing, he will not, without the prior written consent of the Placing Agent:

• (i) offer, pledge, charge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of (either conditionally or unconditionally, or directly or indirectly, or otherwise) any Shares (including the Subscription Shares) or any interests therein or any securities convertible into or exercisable or exchangeable for any such Shares or interests; or

• (ii) enter into any swap or similar agreement that transfers to another, in whole or in part, the economic risk of ownership of such Shares,

whether any such transaction described in (i) or (ii) above is to be settled by delivery of Shares or such other securities, in cash or otherwise; or

• (iii) announce any intention to enter into or effect any such transaction described in (i) or (ii) above.

Notwithstanding the aforegoing, the Vendor may complete the sale of the Placing Shares and has been permitted to transfer Shares to the trustee(s) of any trust to be constituted by a trust deed and of which the Vendor is the sole benefi ciary, provided always that the trustee(s) execute(s) a lockup undertaking in respect of the subject Shares on like terms.

The Company has undertaken to the Placing Agent, and the Vendor has undertaken to the Placing Agent to use its reasonable endeavours to procure, that the Company will not, for a period of 180 days from the date of completion of the Placing, without the prior written consent of the Placing Agent:

• (i) allot, issue, offer to allot or issue, grant any option, right or warrant to subscribe, offer, pledge, charge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of (either conditionally or unconditionally, or directly or indirectly, or otherwise) any Share(s) or any interests therein or any securities convertible into or exercisable or exchangeable for any such Shares or interests; or

• (ii) enter into any swap or similar agreement that transfers to another, in whole or in part, the economic risk of ownership of such Shares,

4

whether any such transaction described in (i) or (ii) above is to be settled by delivery of Shares or such other securities, in cash or otherwise; or

• (iii) announce any intention to enter into or effect any such transaction described in (i) or (ii) above.

Notwithstanding the aforegoing, the Company may complete the allotment of the Subscription Shares to the Vendor and may allot Shares pursuant to any share option scheme of the Company in force as at the date of the Share Placing Agreement. The Placing Agent has also confi rmed that the Company may allot Shares upon conversion of the Convertible Bonds.

SUBSCRIPTION UNDER THE SUBSCRIPTION AGREEMENT DATED 24 OCTOBER, 2007

Subscriber

The Vendor

Issuer

The Company

Number of Subscription Shares

The Company will allot and issue and the Vendor will subscribe for 60,000,000 new Shares in aggregate, representing approximately 5.55% of the existing issued share capital of the Company and approximately 5.26% of the issued share capital of the Company as enlarged by the Subscription. The number of Subscription Shares is equivalent to the number of the Placing Shares.

Subscription Price

The Subscription Price is equivalent to the Placing Price, less the amount of the commission and expenses incurred by the Vendor in relation to the Placing. The net proceeds per Subscription Share equate to approximately HK$29.96.

General mandate to issue new Shares

The Subscription Shares will be issued under the general mandate granted to the Directors pursuant to a resolution passed by the shareholders of the Company at the annual general meeting of the Company held on 15 May, 2007. The Company is authorised to allot, issue or otherwise deal with up to 216,195,090 new Shares under the general mandate. The Company has not issued any Shares pursuant to the general mandate.

5

Ranking

The Subscription Shares, when fully paid, will rank pari passu in all respects with the existing Shares of the Company in issue as at the date of issue of the Subscription Shares. The Company will apply to the Listing Committee for the listing of, and permission to deal in, the Subscription Shares.

Conditions

The Subscription by the Vendor of the Subscription Shares is conditional upon:

• (i) completion of the Placing; and

• (ii) the granting of the listing of, and permission to deal in, such Subscription Shares by the Listing Committee of the Stock Exchange (and such listing and permission not subsequently revoked prior to the delivery of defi nitive share certifi cate(s) representing the Subscription Shares).

Completion of the Subscription

Completion of the Subscription shall take place within 2 Business Days after the date upon which the last of the conditions to be satisfi ed shall have been so satisfi ed, provided that it shall take place on a date no later than the date falling 14 days after the date of the Subscription Agreement.

If the Subscription is not completed within 14 days after the date of the Subscription Agreement, namely by 7 November 2007, proceeding to complete the Subscription (which the Company and the Vendor would intend to do) will constitute a connected transaction of the Company and the Company would have to comply with the requirements of the Listing Rules, including obtaining shareholders’ approval from the independent shareholders of the Company.

Adjustments to conversion price of Convertible Bonds

The Company has issued outstanding Convertible Bonds entitling holders of the Convertible Bonds to convert the same into Shares at the current conversion price of HK$19.13 per Share. As the gross Subscription Price (of HK$30.47) is below the average closing price of HK$31.75 per Share quoted on the Stock Exchange for the fi ve consecutive Business Days ending on the last trading day immediately preceding the date of this announcement, the terms and conditions of the Convertible Bonds require an adjustment to be made to the conversion price of the Convertible Bonds. The conversion price of the Convertible Bonds will, with effect from the date of issue of the Subscription Shares, be adjusted from HK$19.13 per Share to HK$19.09 per Share. The above adjustment in relation to the conversion price of the Convertible Bonds has been computed by the Company in accordance with the terms and conditions of the Convertible Bonds.

6

EFFECT OF THE PLACING AND THE SUBSCRIPTION

The shareholdings in the Company before and after the Placing and the Subscription are summarised as follows:

			Immediately after	Immediately after	Immediately after	Immediately after	Immediately after
			Completion of the		Completion	of	the
			Placing but before		Placing and
	At present		Subscription(Note 1)		Subscription(Note 1)
	No. of Shares	%	No. of Shares	%	No. of Shares		%
Vendor_(Note 2)_	224,619,751	20.77	164,619,751	15.22	224,619,751	19.68
Directors
(other than
the Vendor)	320,910,988	29.67	320,910,988	29.67	320,910,988	28.11
Placees	N/A	N/A	60,000,000	5.55	60,000,000		5.26
			(Note 3)		(Note 3)
Public
shareholders
(other than
the Placees)	535,989,403	49.56	535,989,403	49.56	535,989,403	46.95
Total	1,081,520,142	100	1,081,520,142	100	1,141,520,142		100

Notes:

1. The fi gures assume that other than the Subscription Shares, no Shares are issued or purchased by the Company and other than the Placing Shares, no Shares are sold or purchased by the Vendor, in each case after the date of this announcement up to the date of the completion of the Subscription.

2. The fi gure represents the personal and family interests of the Vendor. In addition, but not shown in the table above, the Vendor is interested in 180,000 Shares pursuant to options awarded to him under the Company’s existing share option scheme.

3. The 60,000,000 Placing Shares will be placed by the Placing Agent to placees which are not connected person of the Company and are independent third parties. Pursuant to the terms of the Share Placing Agreement, if the Placing Agent fails to place the Placing Shares to the placees, the Placing Agent has to purchase the Placing Shares not taken up by the placees. If the Placing Agent has to purchase all the Placing Shares, the Placing Agent will be interested in approximately 5.55% of the existing issued share capital of the Company before completion of the Subscription (and hence will become a substantial shareholder of the Company) and approximately 5.26% of the Company’s issued share capital as enlarged by the Subscription.

The Company does not expect that any placee will become a substantial shareholder of the Company (as defi ned in the Listing Rules) as a result of the Placing.

7

REASONS FOR THE PLACING AND THE SUBSCRIPTION AND USE OF PROCEEDS

The Group is principally engaged in the manufacturing, distribution and sale of personal hygiene products comprising sanitary napkins, disposable diapers, tissue paper products and skincare and cleansing products, mainly in the PRC.

The Directors consider that the Placing and the Subscription have the combined effect of strengthening the capital base of the Company and will improve its credit fundamentals. The Company estimates that the net proceeds of the Subscription will amount to approximately HK$1,797 million. The Company intends to use the net proceeds from the Subscription principally for potential acquisitions, capacity expansion and general working capital purposes.

Save as disclosed in this announcement and except for the issue of Shares upon the exercise of options granted under the Company’s share option scheme or upon the conversion of the Convertible Bonds, the Company has not undertaken any equity fund raising exercise over the period of twelve months prior to the date of this announcement.

The Directors consider that the terms of the Placing and the Subscription are fair and reasonable and believe that the Placing and the Subscription are in the best interests of the Company and the Shareholders as a whole. The Directors further consider that the lock up period for the Vendor and the Company as set out above is fair and reasonable on the grounds that: (i) the lock up period is only for 180 days which is in line with the market practice and as a result of the arm’s length commercial negotiation between the Company, the Vendor and the Placing Agent; and (ii) it can ensure an orderly marketing of the Shares based on market practice.

Trading in the Shares and the Convertible Bonds was suspended from 9:30 a.m. on 25 October, 2007 at the request of the Company pending the issue of this announcement and application has been made to the Stock Exchange for the resumption of trading of the Shares and the Convertible Bonds from 9:30 a.m. on 26 October, 2007.

DEFINITIONS

“Business Day”

any day (excluding a Saturday) on which banks are generally open for business in Hong Kong

• “Company”

Hengan International Group Company Limited (恒安國際集團 有限公司), a company incorporated in the Cayman Islands with limited liability and the Shares of which are listed on the Stock Exchange

• “connected person” has the meaning ascribed to it under the Listing Rules

• “Convertible Bonds”

the zero coupon convertible bonds due 2011 of an aggregate principal amount of HK$1,500,000,000, including optional bonds with an aggregate principal amount of up to HK$300 million issued by the Company on 20 April, 2006

8

“Director(s)”	the director(s) of the Company
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong Dollars, the lawful currency of the Hong Kong
	Special Administrative Region of the PRC
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Placing”	the placing of the Placing Shares by the Placing Agent on behalf
	of the Vendor pursuant to the Share Placing Agreement
“Placing Agent”	Morgan Stanley & Co. International plc. Insofar as the Placing
	Agent, in performing its functions under the Placing Agreement,
	is “dealing in securities” as def ned in Schedule 5 of the SFO, it
	shall only do so through its agent, Morgan Stanley Asia Limited,
	and only in circumstances that none of the sub-provisions (I),
	(II), (III), (IV) and (V) in sub-paragraph (iv) to the def nition
	of “dealing in securities” in part 2 of Schedule 5 of the SFO are
	applicable
“Placing Price”	HK$30.47 per Placing Share
“Placing Shares”	the 60,000,000 Shares currently owned by the Vendor and to be
	placed under the Placing
“PRC”	the People’s Republic of China
“SFO”	the Securities and Futures Ordinance (Cap 571 of the laws of
	Hong Kong)
“Share(s)”	ordinary share(s) of nominal value of HK$0.10 each in the capital
	of the Company
“Share Placing Agreement”	the share placing agreement entered into on 24 October, 2007
	between the Vendor, the Company and the Placing Agent in
	relation to the Placing
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription”	the subscription for the new Shares by the Vendor pursuant to the
	Subscription Agreement
“Subscription Agreement”	the subscription agreement entered into on 24 October, 2007
	between the Company and the Vendor in relation to the
	Subscription

9

“Subscription Price”

an amount equal to the Placing Price, less the amount of the commission and expenses incurred by the Vendor in relation to the Placing

• “Subscription Shares”

• 60,000,000 new Shares to be subscribed by the Vendor pursuant to the Subscription Agreement

• “Vendor”

Mr. Hui Lin Chit, a director and substantial shareholder of the Company

By Order of the Board Hengan International Group Company Limited Sze Man Bok Chairman

Hong Kong, 25 October, 2007

As at the date hereof, the Board comprises seven executive directors, namely Mr. Sze Man Bok (Chairman), Mr. Hui Lin Chit, Mr. Yeung Wing Chun, Mr. Hung Ching Shan, Mr. Xu Da Zuo, Mr. Xu Chun Man and Mr. Loo Hong Shing Vincent and three independent non-executive directors, namely Mr. Chan Henry, Mr. Chu Cheng Chung and Ms. Ada Ying Kay Wong.

Website: http://www.hengan.com http://www.irasia.com/listco/hk/hengan

• For identifi cation purpose only

10