PDF《CHANGE OF USE OF PROCEEDS FROM IPO》

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1 C * for identification purpose only 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.

(a joint stock limited company incorporated in the People'

s Republic of China) (Stock code: 8115) CHANGE OF USE OF PROCEEDS FROM IPO AND MAJOR, CONNECTED AND CONTINUING CONNECTED TRANSACTIONS (A) THE TRANSACTIONS AND GEM LISTING RULES REQUIREMENTS Reference is made to the Company'

s announcement dated

22 March

2005 in relation to the resignation of the Auditors. While performing the audit of the Company'

s financial statements for the year ended

31 December 2004, it was brought to the attention of the Directors by the Auditors that the Company had failed to strictly comply with the relevant requirements of the GEM Listing Rules in respect of the Transactions and concerns over, among other matters, the valuation of the Equipment were raised by the Auditors. Each of the Transactions is subject to various reporting, disclosure and/or Independent Shareholders'

approval requirements under the GEM Listing Rules. Details of each of the Transactions and the GEM Listing Rules in respect of which the Company had failed to strictly comply with are set out below. (1) THE HUA DONG AGREEMENT C CHANGE IN USE OF PROCEEDS Following a marketing trip, the Company as purchaser and Hua Dong as supplier entered into an agreement on

5 July

2004 in respect of the provision of 4,050 tonnes of raw materials over a period of around one year for the production of the Company'

s products. Hua Dong is an Independent Third Party. Prior to the Hua Dong Agreement, the Company had had no prior business relationship with Hua Dong. The Directors considered that the price of seamless steel pipes in the PRC was rising and the entering into of a long term supply contract would be in the interest of the Company as that would allow the Company to lock in the purchase price of such raw materials at a lower level over a period of time. (2) THE SHP AGREEMENTS - MAJOR AND CONNECTED TRANSACTION The Company entered into the SHP Agreements pursuant to which the Company had agreed to acquire the Equipment from the Six Agents of SHP for the manufacture of pressure cylinders with a volume of 10L to 20L. SHP is a Connected Person whose issued share capital of SHP is owned as to 65% by the Controlling Shareholder. C

2 C The SHP Agreements constituted major and connected transactions of the Company under the GEM Listing Rules and are subject to Independent Shareholders'

approval. (3) THE PROFIT OASIS SALES C CONTINUING CONNECTED TRANSACTIONS EXEMPT FROM INDEPENDENT SHAREHOLDERS'

APPROVAL The Company had been selling pressure cylinders to Profit Oasis on normal commercial terms since March

2004 . Profit Oasis is owned as to 50% by Ms. Zhou Mei Xin, the wife of Mr. Jiang Zi Qiang, an executive Director and the chairman of the Company, and is therefore a Connected Person. As each of the percentage ratios (other than the profits ratio) is on an annual basis equal to or more than 2.5% but less than 25% and the annual consideration is less than HK$10,000,000, the Profit Oasis Sales were exempt from the Independent Shareholders'

approval requirement. However, the Profit Oasis Sales were still subject to reporting and announcement requirements under Rule 20.34 of the GEM Listing Rules. (B) GENERAL The Company has breached the GEM Listing Rules in (i) departing from the use of proceeds of the IPO as set out in the Prospectus without making appropriate announcement;