09:42     HAYWOOD INV<00905> - Announcement (2)                               

    (b)     advise acquisitions and realizations of investments and           
    submit relevant proposals to the Board for approval.                      
                                                                              
    The investment management fee shall be an amount equal to 0.375%          
    of the Net Asset Value on each Quarter Date for the quarter and           
    shall be payable on the date the Net Asset Value for the relevant         
    Quarter Date is calculated. The fee shall not be less than                
    HK$150,000 per three months. Accordingly, the minimum investment          
    management fee shall be HK$ 600,000 per annum. Based on the               
    unaudited Net Asset Value as disclosed in the announcement of             
    the Company on 17 May 2005, the investment management fee shall           
    be approximately HK$225,600 per annum and the minimum fee of              
    HK$600,000 shall apply. The investment management fee was                 
    negotiated on an arm's length basis.                                      
                                                                              
    Save for the investment management fee the term of services of            
    the investment manager and the terms relating to the termination          
    of the investment management agreement, there is no material              
    difference between the IM Agreement and the New IM Agreement.             
                                                                              
    REASON FOR THE ENTERING INTO THE NEW IM AGREEMENT                         
                                                                              
    The Company considers that since Hua Yu has extensive investment          
    experience in Hong Kong and the PRC, it will be beneficial to             
    the Company's business to terminate the IM Agreement and appoint          
    Hua Yu as the investment manager in order to fully capture the            
    investment opportunities in the PRC.                                      
                                                                              
    The Company has no intention to change the investment objectives          
    and policies of the Company after entering into the New IM                
    Agreement.                                                                
                                                                              
    BACKGROUND OF HUA YU                                                      
                                                                              
    Hua Yu was incorporated in Hong Kong in 1998 and is a deemed              
    Licensed Corporation under the SFO permitted to carry on Type             
    4 (advising on securities), Type 6 (advising on corporate finance)        
    and Type 9 (asset management) of the regulated activities. Hua            
    Yu is principally engaged in the business of investment                   
    management and provision of corporate advisory services.                  
                                                                              
    Hua Yu is a subsidiary of Yu Ming Investment Management Limited           
    ("Yu Ming"), and is owned as to approximately 91% by Yu Ming              
    and as to approximately 9% by Hua Jian International Finance              
    Company Limited. Yu Ming is a deemed Licensed Corporation under           
    the SFO permitted to carry on Type 1 (dealing in securities),             
    Type 4 (advising on securities), Type 6 (advising on corporate            
    finance) and Type 9 (asset management) of the regulated                   
    activities.                                                               
                                                                              
    Hua Yu was the investment manager of Sino Technology Investments          
    Limited, an investment company listed on the Stock Exchange,              
    between July 2002 and June 2003. The directors of Hua Yu at that          
    time were Mr. Fung Yiu Fai, Peter, Mr. Lee Wa Lun, Warren, Mr.            
    Wang Yi Nan and Mr. Lau Lap Kwan. There is no change of directors         
    of Hua Yu since Hua Yu acted as the investment manager of Sino            
    Technology Investments Limited. Presently, Hua Yu is not an               
    investment manager of any investment company in Hong Kong other           
    than the Company.                                                         
                                                                              
    After entering into the New IM Agreement, the Board will                  
    concentrate on the administration (including but not limited              
    to legal compliance and financial management) of the Company              
    while Hua Yu shall concentrate on identifying and carrying out            
    analysis or investigation of investment opportunities,                    
    assessing the possibility of acquisitions and realizations of             
    investments for the Company.