Walnut Capital Limited — AGM Information 2006

May 2, 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold all your shares in HAYWOOD INVESTMENTS LIMITED , you should at once hand this circular and the accompanying proxy form to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

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: 905)

RE-ELECTION OF DIRECTORS AT THE AGM GENERAL MANDATES TO ISSUE SHARES AND REPURCHASE SHARES OF THE COMPANY

A notice convening an annual general meeting of Haywood Investments Limited (“the Company”) to be held at Conference Room 204, 2/F, 4 Harbour Road, Wanchai, Hong Kong on Friday, 23rd June, 2006 at 2:30 p.m. is set out on pages 14 to 16 of this circular. Whether or not you propose to attend the annual general meeting, you are requested to complete the accompanying proxy form in accordance with the instructions printed thereon and return the same to the principal place of business of the Company in Hong Kong at Unit 2206, 22nd Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the annual general meeting.

Hong Kong, 28th April, 2006

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Re-election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
General mandate to issue Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
General mandate to repurchase Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
AGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Right to demand a poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Appendix I – Details of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Appendix II – Explanatory Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Notice of Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14

– i –

DEFINITIONS

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

“AGM” the annual general meeting of the Company to be held at Conference Room 204, 2/F, 4 Harbour Road, Wanchai, Hong Kong on Friday, 23rd June, 2006 at 2:30 p.m., notice of which is set out on pages 14 to 16 of this circular

• “associate” has the same meaning as defined in the Listing Rules

• “Board”/Directors” directors of the Company

• “Companies Law” the Companies Law (2004 Revision) (Cap. 22) of the Cayman Islands

• “Company” Haywood Investments Limited, a company incorporated in the Cayman Islands with limited liability whose shares are listed on the Stock Exchange

• “connected person” has the same meaning as defined in the Listing Rules

• “Hong Kong” Hong Kong Special Administrative Region of People’s Republic of China

• “Latest Practicable Date” 24th April, 2006, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Share(s)” share(s) of HK$0.025 each in the capital of the Company

• “Shareholder(s)” the holder(s) of the Shares

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

• “Takeovers Code” the Hong Kong Code on Takeovers and Mergers

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong

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LETTER FROM THE BOARD

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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 905)

Executive Directors: Mr. ZHOU Chao (Chairman) Ms. HUANG Song Mr. PHANG Yul Cher Yeow Mr. CHU Kin Wang, Peleus

Non-executive Directors: Mr. FONG Chi Hou Mr. WANG Yao Dong

Independent Non-executive Directors: Mr. LIU Wing Ting, Stephen Ms. LAM Lin Chu Ms. TSE Po Chu

Registered office: Ugland House P.O. Box 309 George Town Grand Cayman Cayman Islands

Principal place of business in Hong Kong: Unit 2206, 22nd Floor Office Tower, Convention Plaza 1 Harbour Road Wanchai Hong Kong, Hong Kong, 28th April, 2006

To the shareholders

Dear Sir or Madam,

RE-ELECTION OF DIRECTORS AT THE AGM GENERAL MANDATES TO ISSUE SHARES

AND

REPURCHASE SHARES OF THE COMPANY

INTRODUCTION

The Board wishes to seek the approval of the Shareholders at the AGM for (i) re-election of directors; (ii) granting of the general mandate to issue Shares (referred to in resolution no. 4 of the notice of the AGM accompanying this circular); and (iii) granting of the general mandate to repurchase Shares (referred to in resolution no. 5 of the notice of AGM accompanying this circular).

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LETTER FROM THE BOARD

The purpose of this circular is to (i) provide you details of the directors who are subject to re-election at the AGM; (ii) provide you with details of the general mandate to issue Shares; (iii) provide you with details of the general mandate to repurchase Shares; (iv) set out an explanatory statement regarding the general mandate to repurchase Shares as required under the Listing Rules; and (v) give you notice of the AGM.

RE-ELECTION OF DIRECTORS

In accordance with Article 157 of the Articles of Association, no director shall retire from office by rotation at the AGM.

Mr. Zhou Chao, Ms. Huang Song, Mr. Chu Kin Wang, Peleus, Mr. Fong Chi Hou, Mr. Wang Yao Dong, Mr. Liu Wing Ting, Stephen and Ms. Tse Po Chu who were appointed by the Directors after the 2005 annual general meeting of the Company will in accordance with Article 123 of the Articles of Association, retire by rotation at the AGM and being eligible, offer themselves for re-election at the AGM.

Details of the above named Directors who are subject to re-election in the AGM are set out in Appendix I of this circular in accordance with the relevant requirements of the Listing Rules.

GENERAL MANDATE TO ISSUE SHARES

It will be proposed at the AGM two ordinary resolutions respectively granting to the Directors a general mandate to allot, issue and deal with Shares not exceeding 20% of the issued share capital of the Company as at the date of passing the resolution and adding to such general mandate so granted to the Directors any Shares representing the aggregate nominal amount of the Shares repurchased by the Company after the granting of the general mandate to repurchase Shares up to 10% of the issued share capital of the Company as at the date of passing such resolution.

Subject to the passing of relevant resolution to approve the general mandate to repurchase Shares and on the basis that no further Shares are issued or repurchased between the Latest Practicable Date and the AGM, the Company would be allowed under the said general mandate to repurchase a maximum of 16,000,000 Shares.

GENERAL MANDATE TO REPURCHASE SHARES

At the annual general meeting of the Company held on 24th May, 2005, a general mandate was given by the Company to the Directors to exercise the powers of the Company to repurchase shares. Such mandate will be lapsed at the conclusion of the forthcoming AGM to be held on Friday, 23rd June, 2006. The Directors propose to seek your approval of an ordinary resolution regarding general mandate to repurchase Shares to be proposed at the forthcoming AGM.

An explanatory statement as required under the Listing Rules concerning the general mandate to repurchase Shares is set out in the Appendix II to this circular.

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LETTER FROM THE BOARD

AGM

On pages 14 to 16 of this circular, you will find a notice convening the AGM at which the following business and resolutions will be proposed:

• as ordinary business to re-elect Directors;

• an ordinary resolution to grant to the Directors a general mandate to authorise the Directors to issue, allot and deal with Shares not exceeding 20% of the issued share capital of the Company as at the date of passing such resolution;

• an ordinary resolution to grant to the Directors a general mandate to exercise all powers of the Company to repurchase on the Stock Exchange Shares representing up to 10% of the issued share capital of the Company as at the date of passing the resolution to approve the general mandate on repurchase shares; and

• an ordinary resolution to extend the general mandate which will be granted to the Directors to issue, allot and deal with additional Shares by adding to it the number of Shares repurchased pursuant to the general mandate on repurchase Shares after the granting of such general mandate.

You will find enclosed a proxy form for use at the AGM. Whether or not you are able to attend the AGM, you are required to complete the proxy form and return it to the principal place of business of the Company in Hong Kong at Unit 2206, 22nd Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the AGM. Completion and return of the proxy form will not prevent you from attending and voting at the AGM if you so wish.

RIGHT TO DEMAND A POLL

Pursuant to Article 100 of the Articles of Association, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is required under the Listing Rules or (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is duly demanded. A poll may be demanded by:

• (a) the Chairman of the meeting; or

• (b) at least five members present in person or by proxy and entitled to vote; or

• (c) any member or members present in person or by proxy (or in the case of a corporation, by its duly authorized representative) and representing 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

• (d) any member or members present in person or by proxy (or in the case of a corporation, by its duly authorized representative) 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 note less than one-tenth of the total sum paid up on all shares conferring that right.

RECOMMENDATION

The Directors consider that the re-election of Directors, the granting of the general mandates to Directors to issue Shares and repurchase Shares are in the best interests of the Company and its Shareholders. Accordingly, the Directors recommend that all Shareholders should vote in favour of the resolutions set out in the notice of AGM.

Yours faithfully For and on behalf of the Board Phang Yul Cher Yeow Director

Hong Kong, 28th April, 2006

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DETAILS OF DIRECTORS

APPENDIX I

The following are the particulars of the Directors (as required by the Listing Rules) proposed to be re-elected at the AGM to be held on Friday, 23rd June, 2006.

Mr. Zhou Chao, aged 31, has been an executive director and Chairman of the Company since June 2005. Mr. Zhou is the deputy general manager of Xiyang Corporation ( ) and general manager of (Liaoning Xiyang Fertilizer Joint Stock Company Limited). Mr. Zhou has been the director of (i) Xiyang International Limited and Ding Yang Trading Limited since 1997; (ii) (Haicheng Xiyang Import & Export Company) since 2001; (iii) (Guizhou Xiyang Transportation Company Limited), (Haicheng Xiyang Steel & Iron Company Limited), (Hicheng Haixing Transportation Company Limited), (Heishan Jinyang Water Purification Agent Company Limited) and (Shenyang Xiyang Steel & Iron Company Limited) since 2003; (iv) (Haicheng Xiyang Group Design and Research Company Limited) and (Heishan Xiyang Fertilizer Transportation Company Limited) since 2004; and (v) (Inner Mongolia Aohanqi Xiyang Mining Company Limited) and (Ningxia Xiyang Heng Li Group Limited) since 2005. Mr. Zhou is now the member of All China Youth Federation ( ), member of the Jinzhou Committee of Chinese Political Consultative Conference ( ), the Vice-chairman of Jinzhou Youth Federation ( ) and the Vice-chairman of Sole Proprietorship Business Association of Jinzhou ( ).

Mr. Zhou has not entered into any service contract with the Company. The appointment of Mr. Zhou is of a term of 3 years commencing from the date of appointment and shall continue unless and until terminated by either Mr. Zhou or the Company by one month’s notice. The remuneration of Mr. Zhou comprises of an annual salary of HK520,000, which will be reviewed annually by the Board, and discretionary bonus. The amount of remuneration of Mr. Zhou is determined with reference to his experiences and efforts to be contributed to the Company.

As at the Latest Practicable Date, Mr. Zhou is not connected with any directors, senior management, substantial or controlling shareholders of the Company. Xiyang International Limited is holding 42,710,400 shares in the Company. Since Mr. Zhou is interested in 90% of the entire issued share capital of Xiyang International Limited, he is deemed to be interested in 42,710,400 shares in the Company under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), representing approximately 26.69% of the total issued share capital of the Company. Save as disclosed above and his directorship in the Company, Mr. Zhou does not hold any positions with the Company and other members of the Company, and did not hold any directorships in other listed public companies in the last three years.

Save for the aforesaid, there are no other matters that need to be brought to the attention of the Shareholders.

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DETAILS OF DIRECTORS

APPENDIX I

Ms. Huang Song, aged 26, has been an executive director of the Company since July 2005, and re-designated as an executive director since September 2005. Ms. Huang has been the director of (Haicheng Xiyang Mining Company Limited) since February 2004, the director Xiyang International Limited (the substantial shareholder of the Company) and Ding Yang Trading Limited since March 2004, the director of (Haicheng Xiyang Cold Rolling Company Limited) and (Guizhou Zingzhen Aluminum Chemical Company Limited) since early 2005. Ms. Huang graduated from Dalian University of Foreign Languages ( ) and is now holding a Level-1 Certificate of Japanese Language Proficiency Test ( ).

Ms. Huang has not entered into any service contract with the Company. The appointment of Ms. Huang is of a term of 1 year commencing from the date of appointment and shall continue unless and until terminated by either Ms. Huang or the Company by one month’s notice. The remuneration of Ms. Huang comprises of an annual salary of HK$120,000, which will be reviewed annually by the Board. There will be no discretionary/ fixed bonus. The amount of remuneration of Ms. Huang is determined with reference to her experiences and efforts to be contributed to the Company.

As at the Latest Practicable Date, Ms.Huang is the sister-in-law of Mr. Zhou Chao, the Chairman of the Company. Save as disclosed above and her directorship in the Company, Ms. Huang is not connected with any directors, senior management, substantial or controlling shareholders of the Company, nor has she any interest or deemed interest in the shares or underlying shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance. Ms. Huang does not hold any positions with the Company and other members of the Company and did not hold any directorship in other listed public companies in the last three years.

Save for the aforesaid, there are no other matters that need to be brought to the attention of the Shareholders.

Mr. Chu Kin Wang, Peleus, aged 41, has been an executive director of the Company since September 2005. Mr. Chu is a fellow practicing member of Hong Kong Institute of Certified Public Accountants (“HKICPA”), fellow member of Chartered Association of Certified Accountants, associate member of Hong Kong Institute of Chartered Secretaries and Chartered Institute of Secretaries and Administrators. Mr. Chu graduated from the University of Hong Kong with a Master degree in business administration. Mr. Chu was company secretary of the Company from January 2004 to May 2005 and has been re-appointed as company secretary since November 2005. He did not hold any directorships in other listed companies in the last three years and does not hold any position in the Company or any subsidiary of the Company.

The appointment of Mr. Chu is of a term of one year commencing from the date of appointment and shall continue unless and until terminated by either Mr. Chu or the Company by one month’s notice. The amount of emoluments for Mr. Chu is HK$30,000 per month, which will be reviewed by the Board annually. There will be no discretionary/fixed bonus. The amount of remuneration of Mr. Chu is determined with reference to his experiences and efforts to be contributed to the Company.

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DETAILS OF DIRECTORS

APPENDIX I

As at the Latest Practicable Date, Mr. Chu is not connected with any directors, senior management, substantial or controlling shareholders of the Company, nor has he has interest or deemed interesting the shares or underlying shares of the Company within the meaning of part XV of the Securities and Futures Ordinance.

Save for the aforesaid, there are no other matters that need to be brought to the attention of the Shareholders.

Mr. Fong Chi Hou , aged 42, has been a non-executive director of the Company since November 2005. Mr. Fong is engaged in the businesses in the business of food manufacturing and trading in the People’s Republic of China (the “PRC”) and building materials and property investment in Macau. The appointment of Mr. Fong is of a term of one year commencing from the date of appointment and shall continue unless and until terminated by either Mr. Fong or the Company by one month’s notice. For termination of services, the Company is not required to give a period of notice of more than one year or to pay compensation or make other payments equivalent to more than one year’s emoluments. He is entitled to receive an annual director’s fee of HK$60,000 which will be reviewed annually by the Board. There will be no discretionary/fixed bonus. The amount of remuneration of Mr. Fong is determined with reference to his experiences and efforts to be contributed to the Company.

As at the Latest Practicable Date, Mr. Fong has beneficial interest in 10,300,000 shares of the Company, representing about 6.44% of the existing issued share capital of the Company. Save as disclosed above, Mr. Fong does not have any interest in shares of the Company which is required to be disclosed under Part XV of the Securities and Futures Ordinance and Mr. Fong does not have any relationships with any other directors or senior management or substantial or controlling shareholders of the Company. Mr. Fong did not hold any directorships in other listed companies in the last three years.

Save for the aforesaid, there are no other matters that need to be brought to the attention of the Shareholders.

Mr. Wang Yao Dong, aged 42, has been a non-executive director of the Company since November 2005. Mr. Wang obtained a Bachelor and Master Degree in History from Lanzhou University in 1986 and 1989 respectively. Mr. Wang has been teaching world modern history and world economics history since 1989. In 1996, Mr. Wang migrated to New Zealand for further studies and returned to the PRC in 2000 and joined Xiyang Corporation. Mr. Wang is currently the business representative and assistant manager of the Beijing Office of Xiyang Corporation. Xiyang Corporation is a company incorporated in PRC which is principally engaged in the businesses of fertilizers and steel. Mr. Zhou Chao, chairman and executive director of the Company, owns one-third of the equity interests of Xiyang Corporation.

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APPENDIX I

DETAILS OF DIRECTORS

The appointment of Mr. Wang is of a term of one year commencing from the date of appointment and shall continue unless and until terminated by either Mr. Wang or the Company by one month’s notice. For termination of services, the Company is not required to give a period of notice of more than one year or to pay compensation or make other payments equivalent to more than one year’s emoluments. He is entitled to receive an annual director’s fee of HK$60,000 which will be reviewed annually by the Board. There will be no discretionary/fixed bonus. The amount of remuneration of Mr. Wang is determined with reference to his experiences and efforts to be contributed to the Company.

Save as disclosed above, Mr. Wang does not have any interest in shares of the Company which is required to be disclosed under Part XV of the Securities and Futures Ordinance and Mr. Wang does not have any relationships with any other directors or senior management or substantial or controlling shareholders of the Company. Mr. Wang did not hold any directorships in other listed public companies in the last three years.

Save for the aforesaid, there are no other matters that need to be brought to the attention of the Shareholders.

Mr. Liu Wing Ting, Stephen , Justice of Peace (JP), aged 53, has been an independent non-executive director of the Company since July 2005. Mr. Liu has been the proprietor of Stephen Liu and Company, Certified Public Accountants since 1 April 1978. He is the independent non-executive director of Lung Kee (Bermuda) Holdings Limited since 15 December 1992 and the chairman of the Audit Committee of the Company. Lung Kee (Bermuda) Holdings Limited is a company whose securities are listed on The Stock Exchange of Hong Kong Limited. He is the founder director of Hong Kong Aids Foundation Limited and Hospital Governing Committee Member of the Prince of Wales Hospital of the Hospital Authority.

Mr. Liu is now a fellow practising member of Hong Kong Institute of Certified Public Accountants, a fellow member of the Association of Chartered Certified Accountants, UK, an associate member of Taxation Institute of Hong Kong, the member of Institute of Internal Auditors, Hong Kong and the member of Society of Chinese Auditors.

As at the Latest Practicable Date, Mr. Liu has not entered into any service contract with the Company. The appointment of Mr. Liu is of a term of 1 year commencing from the date of appointment and shall continue unless and until terminated by either Mr. Liu or the Company by one month’s notice. The remuneration of Mr. Liu comprises of an annual salary of HK$120,000, which will be reviewed annually by the Board. There will be no discretionary/fixed bonus. The amount of remuneration of Mr. Liu is determined with reference to his experiences and efforts to be contributed to the Company. Mr. Liu is not connected with any directors, senior management, substantial or controlling shareholders of the Company, nor has he any interest or deemed interest in the shares or underlying shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance. Save as disclosed above and his directorship in the Company, Mr. Liu does not hold any positions with the Company and other members of the Company.

Save for the aforesaid, there are no other matters that need to be brought to the attention of the Shareholders.

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DETAILS OF DIRECTORS

APPENDIX I

Ms. Tse Po Chu, aged 51, has been an independent non-executive director of the Company since September 2005. Ms. Tse is a fellow practicing member of HKICPA. Ms. Tse is currently a partner with CCIF CPA Limited. She did not hold any directorships in other listed companies in the last three years and does not hold any position in the Company or any subsidiary of the Company.

The appointment of Ms. Tse is of a term of one year commencing from the date of appointment and shall continue unless and until terminated by either Ms. Tse or the Company by one month’s notice. The amount of emoluments for Ms. Tse is HK$10,000 per month, which will be reviewed by the Board annually. There will be no discretionary/fixed bonus. The amount of remuneration of Ms. Tse is determined with reference to her experiences and efforts to be contributed to the Company.

As at the Latest Practical Date, Ms. Tse is not connected with any directors, senior management, substantial or controlling shareholders of the Company, nor has she has interest or deemed interesting the shares or underlying shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance.

Save for the aforesaid, there are no other matters that need to be brought to the attention of the Shareholders.

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EXPLANATORY STATEMENT

APPENDIX II

This section includes an explanatory statement required by the Stock Exchange to be presented to the Shareholders concerning the general mandate to repurchase Shares proposed to be granted to the Directors at the AGM.

1. STOCK EXCHANGE RULES FOR REPURCHASE OF SHARES

The Listing Rules permit companies with a primary listing on the Stock Exchange to repurchase Shares on the Stock Exchange subject to certain restrictions.

The Listing Rules provide that all proposed repurchases of Shares by a company with a primary listing on the Stock Exchange must be approved by Shareholders in advance by an ordinary resolution, either by way of a general mandate or by a specific approval of a particular transaction and that the Shares to be repurchased must be fully paid up.

2. SHARE CAPITAL

As at the Latest Practicable Date, the issued share capital of the Company comprised 160,000,000 fully paid Shares of HK$0.025 each.

Subject to the passing of relevant resolution to approve the general mandate to repurchase Shares and on the basis that no further Shares are issued or repurchased between the Latest Practicable Date and the AGM, the Company would be allowed under the said general mandate to repurchase a maximum of 16,000,000 Shares.

3. REASONS FOR REPURCHASE

The Directors believe that it is in the best interests of the Company and its Shareholders to have a general authority from the Shareholders to enable the Directors to repurchase Shares on the market. Such repurchase may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net assets and/or earnings per Share of the Company and will only be made when the Directors believe that such a repurchase will benefit the Company and its Shareholders.

4. FUNDING OF REPURCHASES

In repurchasing Shares, the Company may only apply funds legally available for such purpose in accordance with its Memorandum and Articles of Association and the Companies Law. The Companies Law provides that the amount of capital repaid in connection with a share repurchase may be paid out of the profits of the Company or the proceeds of a fresh issue of shares made for the purposes of the repurchase or out of capital subject to and in accordance with the Companies Law. The amount of premium payable on repurchase may only be paid out of either the profits of the Company or out of the share premium account before or at the time the Company’s Shares are repurchased in the manner provided for in the Companies Law.

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EXPLANATORY STATEMENT

APPENDIX II

There might be material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in the audited accounts contained in the annual report for the year ended 31st December, 2005) in the event that the power to repurchase Shares was to be carried out in full at any time during the proposed repurchase period.

However, the Directors do not propose to exercise the power to repurchase Shares if such general mandate will be granted to them to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

5. SHARE PRICES

The highest and lowest prices at which the Shares were traded on the Stock Exchange during each of the previous twelve months prior to the Latest Practicable Date were as follows:

	Highest	Lowest
	HK$	HK$
May 2005	0.080	0.065
June 2005	0.085	0.066
July 2005	0.123	0.083
August 2005	0.130	0.077
September 2005	0.085	0.060
October 2005	0.075	0.068
November 2005	0.090	0.062
December 2005	0.090	0.065
January 2006	0.072	0.058
February 2006	0.078	0.056
March 2006	0.086	0.040
April 2006 (up to the latest practicable date)	0.093	0.083

6. UNDERTAKING

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the powers of the Company to make repurchases in accordance with the Listing Rules and the applicable laws of the Cayman Islands.

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, their associates, have any present intention to sell any Shares to the Company or its subsidiaries under the general mandate to repurchase Shares if such is approved by the Shareholders of the Company.

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EXPLANATORY STATEMENT

APPENDIX II

No other connected persons (as defined in the Listing Rules) have notified the Company that they have a present intention to sell Shares to the Company or its subsidiaries, or have undertaken not to do so, in the event that the general mandate to repurchase Shares is approved by the Shareholders of the Company.

7. EFFECT OF THE TAKEOVERS CODE

If on the exercise of the power to repurchase Shares pursuant to the general mandate, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purposes of Rule 32 of the Takeovers Code. As a result, a Shareholder or group of Shareholders acting in concert, could obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rules 26 and 32 of the Takeovers Code.

As at the Latest Practicable Date, the register maintained by the Company pursuant to Section 336 of the Securities and Future Ordinance shows the following Shareholders having interests in Shares of 5% or more of the issued Shares:

		Percentage
	No. of	of issued
Name	Shares	capital
Zhou Chao (note 1)	42,710,400	26.69%
Fong Chi Hou (note 2)	10,300,000	6.44%
Lam Yih Jiun Michael (note 3)	9.040,000	5.65%

Note:

(1) 42,710,400 shares are held by Xiyang International Limited, a Company in which Mr. Zhou Chao holds 90% and Ms. Huang Song holds 10% equity interests.

• (2) 10,300,000 shares are held by Ms. Kam Lai Iong, spouse of Mr. Fong Chi Hou.

• (3) An idependent third party.

The Directors are not aware of any consequences which may arise under the Takeovers Code as a result of any repurchases made under the general mandate. The Company have no present intention to repurchase Shares to such extent as to result in the amount of Shares held by the public being reduced to less than 25%.

8. SHARES REPURCHASE MADE BY THE COMPANY

The Company had not repurchased any Shares (whether on the Stock Exchange or otherwise) in the six months preceding the Latest Practicable Date.

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NOTICE OF ANNUAL GENERAL MEETING

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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 905)

NOTICE IS HEREBY GIVEN that an annual general meeting of the Company will be held at Conference Room 204, 2/F, 4 Harbour Road, Wanchai, Hong Kong on Friday, 23rd June, 2006 at 2:30 p.m. for the following purposes:

1. To receive and adopt the audited financial statements and the reports of the directors and auditors for the year ended 31st December, 2005.

2. To re-elect retiring directors and to fix the remuneration of directors.

3. To re-appoint auditors and to authorise the directors to fix their remuneration.

As special business, to consider and, if thought fit, pass the following resolutions, which will be proposed with or without amendments, as ordinary resolutions of the Company:

1. “ THAT :

2. (a) subject to paragraph (c) below, the exercise by the Directors of the Company during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional shares of HK$0.025 each in the capital of the Company and to make or grant offers, agreements and options (including bonds, warrants and debentures convertible into shares of the Company) which would or might require the exercise of such power be and is hereby generally and unconditionally approved;

3. (b) the approval in paragraph (a) above shall authorise the Directors of the Company during the Relevant Period (as hereinafter defined) to make or grant offers, agreements and options (including bonds, warrants and debentures convertible into shares of the Company) which would or might require the exercise of such power after the end of the Relevant Period;

4. (c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) and issued by the Directors of the Company pursuant to the approval in paragraph (a) above, otherwise than (i) a Rights Issue (as hereinafter defined); (ii) an issue of shares as scrip dividends pursuant to the articles of association of the Company from time to time; or (iii) an issue of shares under any option scheme or similar arrangement for the time being adopted for grant or issue of shares or rights to acquire shares of the

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NOTICE OF ANNUAL GENERAL MEETING

Company; shall not exceed 20% of the aggregate nominal amount of the issued share capital of the Company as at the date of passing this Resolution, and the said approval shall be limited accordingly; and

• (d) for the purpose of this Resolution,

“Relevant Period” means the period from the passing of this Resolution until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by law or the articles of association of the Company to be held; or

• (iii) the date on which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting; and

“Rights Issue” means an offer of shares open for a period fixed by the Directors of the Company to the holders of shares of the Company on the register on fixed record date in proportion to their then holdings of such shares as at that date (subject to such exclusions or other arrangements as the Directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory outside Hong Kong applicable to the Company).”

1. “ THAT :

2. (a) subject to paragraph (b) below, the exercise by the Directors of the Company during the Relevant Period (as hereinafter defined) of all the powers of the Company to repurchase shares of HK$0.025 each in the capital of the Company on The Stock Exchange of Hong Kong Limited (“the Stock Exchange”) or on any other stock exchange on which the shares of the Company may be listed and recognised by the Securities and Futures Commission of Hong Kong and the Stock Exchange for this purpose, subject to and in accordance with all applicable laws and the requirements of the Rules Governing the Listing of Securities on the Stock Exchange or of any other stock exchange as amended from time to time, be and is hereby generally and unconditionally approved;

3. (b) the aggregate nominal amount of shares of the Company which the Directors of the Company is authorised to repurchase pursuant to the approval in paragraph (a) above shall not exceed 10% of the aggregate nominal amount of the issued share capital of the Company as at the date of passing this Resolution; and the said approval shall be limited accordingly; and

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NOTICE OF ANNUAL GENERAL MEETING

• (c) for the purpose of this Resolution,

“Relevant Period” means the period from the passing of this Resolution until whichever is the earliest of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by law or the articles of association of the Company to be held; or

• (iii) the date on which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting.”

• “ THAT subject to the passing of Resolutions No. 4 and No. 5 set out in the notice convening the meeting, the general mandate granted to the Directors of the Company to allot, issue and deal with additional shares pursuant to Resolution No. 4 set out in the notice convening this meeting be and is hereby extended by the addition thereto of an amount representing the aggregate nominal amount of shares in the capital of the Company repurchased by the Company under the authority granted pursuant to Resolution No. 5 set out in the notice convening this meeting, provided that such amount of shares so repurchased shall not exceed 10% of the aggregate nominal amount of the issued share capital of the Company as at the date of passing the said Resolution.”

By Order of the Board Chu Kin Wang, Peleus Company Secretary

Hong Kong, 28th April, 2006

Notes:

• i. A member entitled to attend and vote at the above meeting is entitled to appoint a proxy or proxies to attend and vote for him. A proxy need not be a member of the Company.

• ii. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusions of the vote(s) of the other joint holder(s) and for this purpose seniority shall be determined by the order in which the names stand in the register of members in respect of the joint holding.

• iii. In order to be valid, a form of proxy must be deposited at the Company’s principal place of business in Hong Kong at Unit 2206, 22nd Floor, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong, together with the power of attorney or other authority (if any) under which it is signed (or a certified copy thereof) not less than 48 hours before the time appointed for holding the above meeting or any adjournment thereof.

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