09:16     HON PO GROUP<00228> - Announcement & Resumption (5)                 

    Use of proceeds                                                           
                                                                              
    The aggregate net proceeds from the Placing will be about HK$39.4         
    million after taking into consideration of the placing commission         
    payable to the Placing Agent and other accrual expenses (e.g.             
    professional fee & printing fee etc.) and will be used as general         
    working capital for the Group.                                            
                                                                              
    The Board considers that the Placing is in the interest of the Company    
    and the Shareholders as a whole.                                          
                                                                              
    The following table shows the capital raising activities of the Company   
    during 12 months period immediately preceding the date of this            
    announcement:                                                             
                                                                              
             Date of general    Intended                                      
       Announcement       mandates    use of proceeds    Actual use           
    Description   date   Net proceeds   granted   as announced   of proceeds  
                                                                              
                                                                              
    Placing of    20 January 2005   About   27 May 2004   General             
    Reserved                                                                  
      126,000,000 Shares       HK$7.6 million        working capital     as   
    intended                                                                  
      and subscription of                                                     
      126,000,000 new                                                         
      Shares at                                                               
      HK$0.0624                                                               
      per Share                                                               
                                                                              
    Shareholders should note that completion of the Placing Agreement are     
    conditional. Shareholders and potential investors should exercise         
    caution when dealing in the Shares.                                       
                                                                              
    (2)   PROPOSED SHARE CONSOLIDATION                                        
                                                                              
    For the reasons stated below, the Board proposes that every 5 Shares in   
    the issued and unissued share capital of the Company be consolidated      
    into one Consolidated Share in the issued and unissued share capital of   
    the Company. As at the date of this announcement, there are 756,000,000   
    Shares in issue and 2,000,000,000 Shares to be issued pursuant to the     
    Placing. Assuming no further Shares will be issued from the date of this  
     announcement up to the date of the EGM, there will be 151,200,000        
    Consolidated Shares in issue following the Share Consolidation and there  
     will be 551,200,000 Consolidated Shares in issue assuming of fully       
    conversion of the Convertible Notes at HK$0.10 per Consolidated Share.    
    The authorized share capital of the Company will remain at                
    HK$100,000,000. The number of authorized shares will be reduced as a      
    result of the Share Consolidation from 10,000,000,000 Shares to           
    2,000,000,000 Consolidated Shares.                                        
                                                                              
    As at the date of this announcement, there are no outstanding options,    
    warrants or securities convertible or exchangeable into Shares.           
                                                                              
    The implementation of the Share Consolidation is conditional upon :       
                                                                              
    (i)   the passing of the necessary ordinary resolution by the             
    Shareholders at the EGM to approve the Share Consolidation; and           
                                                                              
    (ii)   the Listing Committee of the Stock Exchange granting the listing   
    of, and permission to deal in, the Consolidated Shares.                   
                                                                              
    Application will be made to the Stock Exchange for the listing of, and    
    permission to deal in, the Consolidated Shares.                           
                                                                              
    Status of the Consolidated Shares                                         
                                                                              
    The Consolidated Shares will rank pari passu in all respects with each    
    other and the Share Consolidation will not result in any change in the    
    relative rights of the Shareholders. Fractional Consolidated Shares will  
     not be issued by the Company to Shareholder. Any fractional entitlement  
     to the Consolidated Shares will be aggregated, sold and retained for     
    the benefit of the Company. In order to alleviate the difficulties        
    arising from the existence of odd lots of Consolidated Shares, the        
    Company has agreed to procure an agent to arrange for matching service    
    regarding the sale and purchase of odd lots of Consolidated Shares.       
    Further details in respect of the odd lots arrangement and colour of the  
     new share certificates will be set out in the circular of the Company    
    to be dispatched to the Shareholders.                                     
                                                                              
    Shareholders should note that successful matching of the sale and         
    purchase of odd lots of Consolidated Shares is not guaranteed.            
                                                                              
    (3)   CHANGE OF BOARD LOT SIZE