Wang On Group Limited — Capital/Financing Update 2005

Feb 7, 2005

The Stock Exchange 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.

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WANG ON GROUP LIMITED （宏安集團有限公司）[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1222)

(1) ISSUE OF CONVERTIBLE NOTES

AND

(2) RESUMPTION OF TRADING

(1) ISSUE OF CONVERTIBLE NOTES

On 4 February 2005, the Company entered into the Placing Agreement with the Placing Agent, pursuant to which, the Placing Agent, has agreed to place, on a best efforts basis, to not fewer than six independent professional, corporate or individual investors the Convertible Notes, which are proposed to be issued in aggregate principal amount of HK$68,640,000.

The conversion prices were negotiated on an arm’s length basis between the Company and Placing Agent. The initial conversion price of HK$2.40 per Share represents (i) a premium of approximately 14.29% to the closing price of HK$2.10 per Share as quoted on the Stock Exchange on 4 February 2005, being the last trading date before the release of this announcement; and (ii) a premium of approximately 19.11% to the average closing price of approximately HK$2.015 per Share for the last five trading days ended 4 February 2005, being the last trading date before suspension pending this announcement.

Completion is conditional upon the fulfillment or waiver by the relevant party of the conditions set out under the sections headed “Conditions of the Placing Agreement” below.

No application will be made for the listing of the Convertible Notes on the Stock Exchange or any other stock exchange. Application will be made to the Stock Exchange for the listing of Conversion Shares. Such Conversion Shares, when fully paid, will rank pari passu in all respects with all Shares in issue or to be issued.

(2) RESUMPTION OF TRADING

At the request of the Company, trading in the Shares on the Stock Exchange was suspended with effect from 9:30 a.m. on Monday, 7 February 2005 pending for the release of this announcement. Application has been made by the Company for the resumption of trading in the Shares on the Stock Exchange with effect from 9:30 a.m. on Tuesday, 8 February 2005.

(1) ISSUE OF CONVERTIBLE NOTES

The Placing Agreement

Date:

4 February 2005

Issuer:

Wang On Group Limited

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Placing Agent:

Kingsway Financial Services Group Limited

The Placing Agent has conditionally agreed to place on a best efforts basis, the Convertible Notes in an aggregate principal amount of HK$68,640,000 to independent professional, corporate or individual investors.

The Placing Agent are not connected persons (as defined in Listing Rules) of the Company and are third parties independent of the Company and its connected persons.

Placees

The Placing Agent will place the Placing Shares to not fewer than six Placees, each of whom (i) will not be a connected person (as defined in Listing Rules) of the Company; and (ii) is independent of the other Placees of the Company and its connected persons.

Conditions of the Placing Agreement

The Placing Agreement is conditional upon:

• (i) the Listing Committee of the Stock Exchange having granted listing of and permission to deal in the Conversion Shares;

• (ii) if required, the Bermuda Monetary Authority having approved the issue of the Convertible Notes and the Shares to be issued upon the conversion of the Convertible Notes and the transferability of the Convertible Notes and the Conversion Shares; and

• (iii) the Placing Agent receiving application for all of the Convertible Notes.

on or before 28 February 2005, or such later date as may be agreed between the Company and the Placing Agent,

Termination and force majeure

The Placing Agreement may be terminated by the Placing Agent if at any time prior to 10:00 a.m. on the date of Completion, in the reasonable opinion of the Placing Agent, the success of the Placing or the business or financial prospects of the Company would or might be adversely affected by any of the following events:

• (a) the Company commits any material breach of or omits to observe any of the obligations or undertakings expressed or assumed under the Placing Agreement;

• (b) there occurs:

• (i) the introduction of any new laws or regulations or any change in existing laws or regulations (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may, in the reasonable opinion of the Placing Agent, materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or

• (ii) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before and/or after the date hereof) of a political, military, financial, economic, currency (including a change in the system under which the value of the Hong Kong currency is linked to the currency of the United States of America) or other nature (whether or not sui generis with any of the foregoing), or in the nature of any local, national, international outbreak or escalation of hostilities or armed conflict, or affecting local securities market or the occurrence of any combination of circumstances which would, in the reasonable opinion of the Placing Agent, materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or adversely prejudices the success of the placing of the Convertible Notes by potential investor(s) or otherwise makes it inexpedient or inadvisable for the Company or the Placing Agent to proceed with the placing of Convertible Notes.

The Placing Agent shall be entitled by giving a notice in writing to the Company to elect to treat such matter or event as releasing and discharging the Placing Agent from its obligations under the Placing Agreement.

The Directors are not aware of the occurrence of any of such events as at the date of this announcement. However, in the event that Placing Agreement is terminated, a further announcement will be issued by the Company.

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Completion of the Placing of Convertible Notes

Completion of the placing of Convertible Notes is expected to take place on or before the third Business Day after the fulfillment of all the conditions set out in the Placing Agreement, which shall take place on or before 28 February 2005, or such later date as may be agreed between the Company and the Placing Agent. If the aggregate principal amount of the Convertible Notes actually placed by the Placing Agent at Completion is less than HK$68,640,000, an announcement will be issued by the Company.

Terms of Convertible Notes

The principal terms of the Convertible Notes are summarized as follows:

Issuer:	Wang On Group Limited
Principal amount	Up to HK$68,640,000 in denomination of HK$240,000
and denomination:
Conversion price(s):	The conversion price, subject to the usual adjustment in accordance with the
	terms and conditions thereof, is HK$2.40.
	The conversion prices of the Convertible Notes are subject to adjustment provisions
	which as standard terms for convertible securities of similar type. The adjustment
	events will arise as a result of certain change in the share capital of the Company
	including consolidation or sub-division of Shares, capitalisation of profits or
	reserves, capital distributions in cash or specie or subsequent issue of securities
	in the Company.
Interest:	1% per annum on the principal amount of the Convertible Notes outstanding from
	time to time, payable semi-annually in arrears at the end of each six-month period
	from the date of issue of the Convertible Notes.
Conversion period:	Subject to the exercise of the right of redemption by the Company, the Convertible
	Notes may be converted in whole or in part at any time from the date of issue of
	the Convertible Notes before the Maturity Date.
Conversion Shares:	On the basis of the principal amount of HK$68,640,000 and the initial conversion
	price of HK$2.40 per Share, a maximum total of 28,600,000 Conversion Shares
	may be issued upon full conversion of the Convertible Notes. The Conversion
	Shares shall, upon issue, rank pari passu in all respects with the then issued
	Shares.
Maturity Date:	Three years from the date of issue of the Convertible Notes, the Company shall,
	unless the Convertible Notes have previously been converted, repay the outstanding
	principal amount of the Convertible Notes, together with all unpaid interest accrued
	thereon up to and including the date of actual repayment.
Transferability:	the Convertible Notes may not be assigned or transferred to any connected person
	(as defined in the Listing Rules) of the Company.
Early Redemption:	The Company shall, at any time before the Maturity Date, have the option to
	redeem the Convertible Notes in whole or in part. The amount payable for any
	redemption shall be the aggregate of (i) the relevant amount of the principal
	amount of the Convertible Notes so redeemed; and (ii) interest accrued in respect
	of the relevant amount of the principal amount of the Convertible Notes so
	redeemed.
Voting Right	The Convertible Notes do not confer any voting rights at general meetings of the
	Company on the noteholders.
Listing:	No application will be made for the listing of the Convertible Notes on the Stock
	Exchange or any other stock exchange. Application will be made to the Stock
	Exchange for the listing of the Conversion Shares. Such Shares, when fully paid,
	will rank pari passu in all respects with all Shares in issue or to be issued.

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The conversion prices were negotiated on an arm’s length basis between the Company and Placing Agent. The initial conversion price of HK$2.40 per Share represents (i) a premium of approximately 14.29% to the closing price of HK$2.10 per Share as quoted on the Stock Exchange on 4 February 2005, being the last trading date before the release of this announcement; and (ii) a premium of approximately 19.11% to the average closing price of approximately HK$2.015 per Share for the last five trading days ended 4 February 2005, being the last trading date before suspension pending this announcement.

The maximum number of the Conversion Shares which may be issued upon full conversion of all the Convertible Notes based on the initial conversion price of HK$2.40 per Share is 28,600,000 Shares, representing (i) approximately 19.96% of the existing issued share capital of the Company comprising 143,320,366 Shares; and (ii) approximately 16.64% of the Company’s issued share capital comprising 171,920,366 Shares as enlarged by the full conversion of all the Convertible Notes.

Reasons for the Placing and Use of Proceeds

The Directors consider that the issue of the Convertible Notes is an appropriate means through which the Group can raise funds as it provides the Company with the flexibility to redeem the whole or any part of the outstanding principal amount of the relevant Convertible Notes. The Directors also consider that the terms of the Convertible Notes and the Placing Agreement are fair and reasonable given the existing market condition and the general economic environment and in the interests of the Company and its Shareholders as a whole.

The net proceeds to be raised by the Company from the issue of the Convertible Notes (after deducting the expenses) will amount to approximately HK$66 million. It is the intention of the Company to use HK$40 million of the proceeds for property development and the remaining balance for general working capital purposes.

The general mandate to issue shares in the capital of the Company granted to the board pursuant to the ordinary resolutions passed by Shareholders at the special general meeting on 28 January 2005 (the “General Mandate”) has not been utilized. The Conversion Shares will be issued upon exercise of the conversion rights attached to the Convertible Notes under the General Mandate.

Funds Raised by the Company during the 12 Months immediately before the Date of this Announcement

Set out below are the fund raising activities conducted by the Company during the past 12 months:

				Actual use of
				net proceeds
				as at the
Date of		Net proceeds	Intended use of	date of this
announcement	Event	(approximately)	the net proceeds	announcement
22 November 2004	Issue of convertible	HK$35 million	General working	Fully utilised as
	notes for a total of		capital purpose	intended
	28,600,000 new Shares
	upon full conversion
	at a price of HK$1.30
	per share

Effect on Conversion Price of Existing CB

According to instrument of Existing CB, no adjustment is required to be made to the conversion price as a result of the issue of the Convertible Notes.

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Effect on Shareholding Structure

The existing shareholding structure of the Company and the expected shareholding structure of the Company upon full conversion of the Convertible Notes are set out below:

Caister Limited_(Note 1) Tang Ching Ho(Note 2) Yau Yuk Yin(Note 3) Tang Mui Fong(Note 4) Tang Mui Fun(Note 5) Yau Yuk Tong(Note 6)_ Existing CB holders Placees Public Total	Existing Number of % of issued Shares held Shares held 2,247,227 1.57 614,355 0.43 614,354 0.43 5,551,269 3.87 15,298,239 10.67 3,393,955 2.37 – – – – 115,600,967 80.66 143,320,366 100.00	Assume full conversion of the Convertible Notes (and none of the Existing CB is converted) Number of % of issued Shares held Shares held 2,247,227 1.31 614,355 0.36 614,354 0.36 5,551,269 3.23 15,298,239 8.90 3,393,955 1.97 – – 28,600,000 16.64 115,600,967 67.23 171,920,366 100.00	Assume full conversion of the Existing CB and the Convertible Notes Number of % of issued Shares held Shares held 2,247,227 1.12 614,355 0.31 614,354 0.31 5,551,269 2.77 15,298,239 7.63 3,393,955 1.69 28,600,000 14.26 28,600,000 14.26 115,600,967 57.65 200,520,366 100.00	Assume full conversion of the Existing CB and the Convertible Notes Number of % of issued Shares held Shares held 2,247,227 1.12 614,355 0.31 614,354 0.31 5,551,269 2.77 15,298,239 7.63 3,393,955 1.69 28,600,000 14.26 28,600,000 14.26 115,600,967 57.65 200,520,366 100.00
				100.00

Notes:

1. Caister Limited is wholly and beneficially owned by Tang Ching Ho.

2. Tang Ching Ho is the chairman and managing director of the Company.

3. Yau Yuk Yin is the wife of Tang Ching Ho, and the deputy managing director and deputy chairman of the Company.

4. Tang Mui Fong is a sister of Tang Ching Ho.

5. Tang Mui Fun is a sister of Tang Ching Ho.

6. Yau Yuk Tong is a brother of Yau Yuk Yin.

(2) RESUMPTION OF TRADING

At the request of the Company, trading in the Shares on the Stock Exchange was suspended with effect from 9:30 a.m. on Monday, 7 February 2005 pending for the release of this announcement. Application has been made by the Company for the resumption of trading in the Shares on the Stock Exchange with effect from 9:30 a.m. on Tuesday, 8 February 2005.

DEFINITIONS

In this announcement, the following expressions have the following meanings:

“associate(s)” has the meaning ascribed thereto under the Listing Rules “Board” the board of Directors “Business Day” any day (excluding Saturday) on which banks generally are open for business in Hong Kong

“Company”

Wang On Group Limited, a company incorporated in Bermuda with limited liability the shares of which are listed on the main board of the Stock Exchange

“Completion” completion of the Placing Agreement

“Conversion Shares” new Shares falling to be issued upon conversion of the Convertible Notes

“Convertible Notes” the 3-year 1%-convertible redeemable notes, in an aggregate principal amount of up to HK$68,640,000 to be placed under the Placing Agreement

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“Directors”	directors of the Company
“Existing CB”	Convertible notes of an aggregate principal amount of HK$37,180,000 of the
	Company with the rights to convert into up to 28,600,000 new Shares upon full
	conversion at a price of HK$1.30
“Group”	the Company and its subsidiaries
“Hong Kong”	Hong Kong Special Administrative Region of the PRC
“Listing Rules”	The Rules Governing the Listing of Securities on the Stock Exchange
“Maturity Date”	Three years from the date of issue of the Convertible Notes
“Placees”	the placees procured by the Placing Agent pursuant to the Placing Agreement
“Placing”	the placing of the Convertible Notes by the Placing Agent in an aggregate principal
	amount of HK$68,640,000 on a best efforts basis
“Placing Agent”	Kingsway Financial Services Group Limited, a licensed corporation to carry on
	business in types 1, 4, 6, and 9 regulated activities (dealing in securities, advising
	on securities and corporate finance and asset management) under the Securities
	and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Placing Agreement”	a conditional placing underwriting agreement dated 4 February 2005 made between
	the Company and the Placing Agent in relation to the Placing
“Shares”	shares of nominal value HK$0.10 each in the share capital of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.
	By Order of the Board
	Wang On Group Limited
	Chan Chun Hong, Thomas
	Director

Hong Kong, 7 February 2005

* For identification purpose only

As at the date hereof, the Board of the Company comprises of three executive Directors, namely Mr. Tang Ching Ho, Ms. Yau Yuk Yin and Mr. Chan Chun Hong, Thomas, and four independent non-executive Directors, namely Dr. Lee Peng Fei, Allen, Mr. Wong Chun, Justein, Dr. Siu Yim Kwan, Sidney and Mr. Siu Kam Chau.

"Please also refer to the published version of this announcement in The Standard"

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