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. CHINA SILVER DRAGON GROUP LIMITED 中國銀龍集團有限公司 * (Continued in Bermuda with limited liability) (Stock Code: 855) (1) PROPOSED OPEN OFFER OF NEW SHARES ON THE BASIS OF ONE OFFER SHARE FOR EVERY TWO SHARES HELD ON RECORD DATE; (2) PROPOSED AMENDMENTS TO THE BYE LAWS OF THE COMPANY; AND (3) CHANGE OF AUDITORS

Financial advisor to the Company

Underwriters

KINGSTON SECURITIES LIMITED

ASSET FULL RESOURCES LIMITED PROPOSED OPEN OFFER The Company proposes to raise approximately HK$29.2 million, before expenses, by issuing 146,013,900 Offer Shares at a price of HK$0.2 per Offer Share by way of the Open Offer, payable in full on application, on the basis of one Offer Share for every two existing Shares held on the Record Date. The Open Offer will not be available to the Excluded Shareholders. To qualify for the Open Offer, all transfers of Shares must be lodged for registration with the Registrar by 4:00 p.m. on Wednesday, 2 June 2004. The register of members is expected to be closed from Thursday, 3 June 2004 to Monday, 7 June 2004 (both dates inclusive) to determine the entitlements to the Open Offer.

– 1 – The Open Offer is fully underwritten by the Underwriters subject to and upon the terms and conditions of the Underwriting Agreement. The net proceeds of the Open Offer will amount to about HK$27.6 million. The Company intends to use the net proceeds from the Open Offer of about HK$11 million for its general working capital, as to about HK$2.3 million for repayment of other payables of the Company such as secretarial and professional fees and printing charges, as to about HK$ 5.3 million for repayment of remaining consideration for acquisition of two water sewage plants as disclosed in the announcement dated 18 December 2003 and the circular dated 8 January 2004 (the sale and purchase agreements regarding the acquisition of two water sewage plants were signed and completed on 17 December 2003) and as to about HK$ 9 million for development of water supply business for the Company’s joint venture which located at Renhua Xian, Province. WARNING OF RISKS OF DEALING IN SHARES The Open Offer is conditional upon the Underwriting Agreement having become unconditional and the Underwriters not having terminated the Underwriting Agreement in accordance with the terms thereof (a summary of which is set out in the sub-paragraph headed “Termination of the Underwriting Agreement” in the paragraph headed “Underwriting Agreement” in the section headed “Proposed Open Offer” below). Accordingly, the Open Offer may or may not proceed. Shareholders and potential investors should therefore exercise caution when dealing in the Shares, and if they are in any doubt about their position, they should consult their professional advisers. Shareholders should note that the Shares will be dealt with on an ex-entitlements basis commencing from Tuesday, 1 June 2004 and that dealings in such Shares will take place while the conditions to which the Underwriting Agreement is subject remain unfulfilled. Any Shareholder or other person dealing in such Shares up to the date on which all conditions to which the Open Offer is subject are fulfilled (which is expected to be on Friday, 2 July, 2004), will accordingly bear the risk that the Open Offer cannot become unconditional and may not proceed. Any Shareholders or other persons contemplating selling or purchasing Shares who is in any doubt about his/her/its position is recommended to consult his/her/its own professional adviser.

– 2 – PROPOSED AMENDMENTS TO THE BYE LAWS OF THE COMPANY On 30 January 2004, the Stock Exchange announced amendments to appendix 3 of the Listing Rules to require bye laws or equivalent document of a listed issuer to conform with various provisions. All the aforesaid amendments to the Listing Rules have come into effect on 31 March 2004. In order to align with the recent changes on the Listing Rules, the Board proposes to amend the bye laws. Details of the amendments of the bye laws will be set out in the circular to be despatched to the Shareholders. CHANGE OF AUDITORS The Board also like to announce that Messrs. Ernst & Young have resigned as auditors of the Company on 23 April 2004 due to the Company failed to agree with Messr. Ernst & Young about the audit fee for the financial year ended 31 March 2004. Messrs. Ernst & Young have confirmed in their resignation letter that there are no circumstances connected with their resignation other than the above reason that they consider ought to be brought to the attention of the Company’s members or creditors. Following the resignation of Messrs. Ernst & Young, the Directors has appointed Messrs. RSM Nelson Wheeler to fill the casual vacancy until the next annual general meeting. GENERAL The SGM will be held to consider and, if thought fit, passing the resolutions to approve, among others, the Open Offer and the proposed amendments to the bye-laws of the Company. An independent board committee will be established to make recommendations to the independent Shareholders in relation to the proposed Open Offer and the independent financial adviser will be appointed to advise the independent board committee and the independent Shareholders in relation to the proposed Open Offer.

– 3 – A circular containing, among other things, details of the Open Offer and the proposed amendments to the bye laws of the Company, the recommendations of the independent board committee in relation to the proposed Open Offer and a letter of advice from the independent financial adviser to advice the independent board committee and the independent Shareholders in relation to the proposed Open Offer and the notice of the SGM, will be despatched to the Shareholders as soon as possible. SUSPENSION AND RESUMPTION OF TRADING At the request of the Company, trading in Shares on the Stock Exchange was suspended from 9:30 a.m. on Friday, 23 April, 2004 pending the release of this announcement. Application has been made by the Company to the Stock Exchange for resumption of trading in Shares on the Stock Exchange with effect from 9:30 a.m. on Thursday, 29 June, 2004. PROPOSED OPEN OFFER Issue statistics: Basis of the Open Offer : One Offer Share for every two Shares held on the Record Date Number of Shares in issue as at the date of this announcement : 292,027,800 Shares Number of Offer Shares : 146,013,900 Shares, representing 50% of the existing issued Shares and about 33.3% of the issued Shares as enlarged by the issue of the Offer Shares Underwriters : Kingston and Asset Full The Company has not made any open offer or rights issue by the Company within 12 months preceding this announcement of the proposed Open Offer and there is also no open offer or rights issue made by the Company prior to such 12 months period where dealing in respect of such shares issued pursuant thereto commenced within such 12 months period preceding this announcement of the proposed Open Offer.

– 4 – As at the date of this announcement, there are outstanding convertible notes amounted to HK$10,608,000 issued to CN Holder thereof to convert and subscribe for an aggregate of up to 13,260,000 Shares, representing about 4.5% of the existing issued share capital of the Company. As per the terms of the Convertible Notes, the Convertible Notes can only be converted into Shares on or after 17 June 2004, which is after the Record Date. CN Holder therefore will not be entitled to the Open Offer. For the details of the Convertible Notes and CN Holder, please refer to the Company’s announcement dated 18 December 2003 and the Company’s circular dated 8 January 2004. The CN Holder has irrevocably undertaken not to convert the Convertible Notes and subscribe for any Offer Shares prior to the Record Date. Other than the Convertible Notes, the Company has no other outstanding options, warrants or convertible securities as at the date of the announcement. No Shares shall be allotted or issued between the date of this announcement up to and including the Record Date. Qualifying Holders: The Company will make the Open Offer and send the Prospectus Documents to the Qualifying Holders. However, the Company will send the Prospectus to the Excluded Shareholders for information only. All Shareholders other than the Excluded Shareholders will be entitled for the Open Offer. To qualified for the Open Offer, Shareholders must be registered as members of the Company on the Record Date. In order to be registered as members of the Company on the Record Date, Shareholders must lodge any transfer of Shares (with the relevant share certificates) for registration with the Registrar at Ground Floor, Bank of Harbour View Centre, 56 Gloucester Road, Waichai, Hong Kong by 4:00 p.m. on Wednesday, 2 June 2004. The invitation to apply for the Offer Shares will not be transferable and there will be no trading in nil-paid entitlements on the Stock Exchange and the Qualifying Holders will not be entitled to subscribe for any Offer Shares in excess of their respective entitlements. The Directors consider that as the additional administrative work is saved and the timing for receiving the requisite capital by the Company will be shortened for not offering the Shareholders to trade in nil-paid entitlements on the Stock Exchange nor to subscribe for any Offer Shares in excess of the Shareholders’ respective entitlements, after evaluating on the cost and benefit of the aforesaid arrangement, the existing arrangement shall be in the best interests of the Company and the Shareholders as a whole.

– 5 – Rights of the Excluded Shareholders: The Prospectus Documents will be registered or filed under any securities or equivalent legislation in jurisdictions in the registered place of the Qualifying Shareholders and Bermuda. Having reviewed the register of members of the Company, there is no Shareholder whose name is registered outside Hong Kong as at the date of this announcement. As if on the record date, there are Shareholders whose names are registered on the register of members of the Company outside Hong Kong, the Company will make enquiry regarding the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange and only will exclude such Shareholders for the Open Offer as it would be necessary or expedient to do so in accordance with Rule 13.36(2). The Company will send the Prospectus to the Excluded Shareholders for their information only. The Company will not send the Application Forms to the Excluded Shareholders. The Excluded Shareholders will be entitled to vote at the SGM to consider and, if thought fit, passing the resolutions approving, among others, the Open Offer. Closure of register of members: The register of members of the Company will be closed from Thursday, 3 June 2004 to Monday, 7 June 2004, both dates inclusive, to determine the eligibility of the Open Offer. No transfer of Shares will be registered during this period. Subscription Price: HK$0.2 per Offer Share, payable in full on application. The Subscription Price represents: (i) a discount of approximately 29.8% to the closing price of HK$0.285 per Share as quoted on the Stock Exchange on 22 April, 2004, being the last trading day before the publication of this announcement; (ii) a discount of approximately 22.2% to the theoretical ex- entitlement price of approximately HK$0.257 per Share based on the aforesaid closing price per Share; (iii) a discount of approximately 31.3% to the average closing price of HK$0.291 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including 22 April, 2004; and

– 6 – The Subscription Price was arrived at after arm’s length negotiations between the Company and the Underwriters with reference to the prevailing market conditions. The Directors consider the terms of the Open Offer to be fair and reasonable and in the best interests of the Company and the Shareholders as a whole. Status of the Offer Shares: The Offer Shares, when allotted and issued, will rank pari passu in all respects with the Shares in issue on the date of allotment and issue of the Offer Shares. Holders of the Offer Shares will be entitled to receive all future dividends and distributions which are declared, made or paid on or after the date of allotment and issue of the Offer Shares. Certificates of the Offer Shares: Subject to fulfillment of the conditions of the Open Offer, share certificates for the Offer Shares are expected to be posted on or before Wednesday, 7 July 2004 to those Qualifying Holders who have validly applied and paid for the Offer Shares at their own risks. No fractional entitlements or allotments are expected to arise as a result of the Open Offer. Application for listing: The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Offer Shares. Dealings in the Offer Shares will be subject to the payment of stamp duty in Hong Kong.

Underwriting Agreement Date: 22 April., 2004 Underwriters: Kingston and Asset Full Number of Offer Shares underwritten: 115,015,567 Offer Shares, being the total number of Offer Shares to which holders of the existing Shares are entitled to subscribe pursuant to the Open Offer less the 30,998,333 Offer Shares which Asset Full has undertaken to accept or procure acceptance according to its respective pro rata entitlement under the Open Offer

– 7 – Pursuant to the Underwriting Agreement, each of Kingston and Asset Full has agreed to underwrite or procure the sub-underwriting of the Underwritten Shares on a several basis such that (i) Asset Full will underwrite the first 36,227,302 Underwritten Shares; and (ii) Kingston will underwrite the remaining 78,788,265 Underwritten Shares not underwritten by Asset Full. Accordingly, the Open Offer is fully underwritten. Asset Full is the substantial Shareholder interested in 61,996,666 Shares, representing about 21.2% of the total issued share capital of the Company. As at the date of this announcement and Asset Full’s entire issue capital is wholly and beneficially owned by Mr. Duan Chuan Liang, the chairman of the Company, and is considered to a connected person (as defined in the Listing Rules) of the Company by virtue of its shareholding interests in the Company and the directorship of Mr. Duan Chuan Liang. The main reason for Asset Full to engage in underwriting the underwritten shares is to give a vote of its confidence in the future of the Company. Asset Full’s business does not include underwriting in general but managing its investment in the Company is its core business. Participating in the underwriting of a Open Offer by the Company is considered as part of Asset Full’s business in managing its investment in the Company. Kingston is not a connected person (as defined in the Listing Rules) of the Company. Pursuant to the Underwriting Agreement, each of Kingston and Asset Full will receive HK$665,000 and HK$65,000 respectively, representing, in aggregate, 2.5% of underwriting commission for the Open Offer. Undertaking from Asset Full Subject to the Underwriting Agreement becoming unconditional and not being terminated in accordance with its terms, Asset Full has undertaken to the Company and Kingston that the Shares beneficially owned by them as at the date of this announcement will remain registered in the same name on the Record Date and that Asset Full will accept or procure the acceptance of its respective pro rata entitlement to 30,998,333 Offer Shares to be provisionally allotted to Asset Full or its respective nominees as the holders of such Shares pursuant to the Open Offer. Assuming Asset Full has subscribed for 30,998,333 Offer Shares pursuant to its undertaking and also has taken up its maximum obligation pursuant to the Underwriting Agreement, the shareholding of Asset Full in the Company will be increased from approximately 21.2% as at the date of this announcement to 29.5% immediately after completion of the Open Offer.

– 8 – Termination of the Underwriting Agreement The Underwriters may terminate the Underwriting Agreement by notice in writing to the Company if, prior to 4:00 p.m. on the fifth business day after Thursday, 24 June, 2004, being the latest date for acceptance of the Offer Shares, or such date as may be agreed between the Company and the Kingston (on behalf of the Underwriters), any of the following grounds of termination happens, (1) in the reasonable opinion of the Underwriters, the success of the Open Offer would be materially and adversely affected by: (a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the reasonable opinion of Kingston (on behalf of the Underwriters), materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Open Offer; or (b) 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 of the Underwriting Agreement) of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the reasonable opinion of Kingston (on behalf of the Underwriters) materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Open Offer or otherwise makes inexpedient or inadvisable to proceed with the Open Offer; or (2) any adverse change in market conditions (including, without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the reasonable opinion of Kingston (on behalf of the Underwriters) is likely to materially and adversely affect the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or

– 9 – (3) there is any change in the circumstance of the Company or any member of the Group which in the reasonable opinion of Kingston (on behalf of the Underwriters) will adversely affect the prospects of the Company, including without limitation the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group; or (4) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than five consecutive business days, excluding any suspension in connection with the clearance of this announcement, the circular or the Prospectus Documents or other announcements or circulars in connection with the Open Offer. If the Underwriters terminate the Underwriting Agreement, the Open Offer will not proceed. Conditions of the Underwriting Agreement The Underwriting Agreement is conditional upon, among other things,: (i) the passing by the Shareholders (except Asset Full and its associates) at the SGM of resolutions to approve the Open Offer; (ii) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked listing of, and permission to deal in, the Offer Shares; (iii) the delivery to the Stock Exchange for authorisation and the registration with the Registrar of Companies in Hong Kong respectively one copy of each of the Prospectus Documents in compliance with the Listing Rules and the Companies Ordinance; (iv) the filing with the Registrar of Companies in Bermuda of one copy of the each of the Prospectus Documents in compliance with the Companies Act; (v) the posting of the Prospectus Documents to the Qualifying Shareholders; (vi) Asset Full having subscribed or procure the subscription of the relevant underwritten shares pursuant to the Underwriting Agreement; and

– 10 – (vii) if necessary, the Bermuda Monetary Authority granting consent to the allotment and issue of the Offer Shares. If conditions to the Underwriting Agreements are not fulfilled on the dates as specified in the Underwriting Agreements (or such later date or dates as Kingston (on behalf of the Underwriters) may agree with the Company in accordance with its terms), the Underwriting Agreements shall terminate and the obligations and liabilities of the parties thereto shall cease and determine save for any antecedent breaches of the terms thereof. The Open Offer is subject to the Underwriting Agreement having become unconditional and not being terminated in accordance with its terms. WARNING OF RISKS OF DEALING IN SHARES If the Underwriters terminate the Underwriting Agreement, or if the conditions of the Underwriting Agreement have not been fulfilled in accordance with the terms thereof, the Open Offer will not proceed. Shareholders and potential investors should therefore exercise caution when dealing in the Shares, and if they are in any doubt about their position, they should consult their professional advisers. Shareholders should note that the Shares will be dealt with on an ex-entitlement basis commencing from Tuesday, 1 June, 2004 and that dealings in such Shares will take place while the conditions to which the Underwriting Agreement is subject remain unfulfilled. Any Shareholder or other person dealing in such Shares up to the date on which all conditions to which the Open Offer is subject are fulfilled (which is expected to be on Friday, 2 July, 2004), will accordingly bear the risk that the Open Offer cannot become unconditional and may not proceed. Any Shareholders or other persons contemplating selling or purchasing Shares who is in any doubt about his/her/its position is recommended to consult his/her/its own professional adviser.

– 11 – Shareholding structure of the Company: The following is the shareholding structure of the Company immediately before and after completion of the Open Offer: Immediately after Immediately after completion of the completion of the Open Offer (Assuming Open Offer (Assuming all Shareholders have Kingston and Asset Before completion of taken up the Open Full have taken up the Open Offer Offer in full) the Open Offer in full Shares % Shares % Shares % (approximately) (approximately) (approximately) Asset Full (Note 1) 61,996,666 21.2% 92,994,999 21.2% 129,222,301 29.5% Tsui Chi Kin (Note 2) 7,500,000 2.6% 11,250,000 2.6% 7,500,000 1.7% Kingston –– – –78,788,265 18.0% Public 222,531,134 76.2% 333,796,701 76.2% 222,531,134 50.8% Total 292,027,800 100.0% 438,041,700 100.0% 438,041,700 100.0% Note 1: Asset Full is wholly and beneficially owned by Mr. Duan Chuan Liang, the chairman of the Company. Note 2: Mr. Tsui Chi Kin is the executive director of the Company.

– 12 – EXPECTED TIMETABLE 2004 Despatch of the circular to the Shareholders ...... Friday, 14 May containing, among others, notice of SGM Last day of dealings in Shares on ...... Monday, 31 May cum-entitlement basis First day of dealings in Shares ...... Tuesday, 1 June on ex-entitlement basis Latest time for lodging transfers of Shares ...... 4:00 p.m. on in order to be entitled to the Open Offer Wednesday, 2 June Register of members closes ...... Thursday, 3 June to (both dates inclusive) Monday, 7 June Latest time for lodging forms of proxy ...... 10:00 a.m. on for the purpose of the SGM (not Saturday, 5 June less than 48 hours) Time and date of SGM ...... 10:00 a.m. on Monday, 7 June Record Date ...... Monday, 7 June Register of members reopens ...... Tuesday, 8 June Despatch of the Prospectus Documents ...... Thursday, 10 June Latest time for lodging application ...... 4:00 p.m. on Thursday, 24 June for Offer Shares and payment Latest time for the Open Offer ...... 4:00 p.m. on Friday, 2 July to become unconditional Announcement of results of the Open Offer ...... Tuesday, 6 July Share certificates for Offer Shares to be posted ...... Wednesday, 7 July Dealing in Offer Shares commences ...... Friday, 9 July Dates stated in this announcement for events in the timetable for are indicative only and may be extended or varied. Any changes to the anticipated timetable for the Open Offer will be announced as appropriate. Reasons for the Open Offer and use of proceeds: The Company is principally engaged in the subcontracting, manufacture and sale of electronic products. As stated in the Company’s announcement dated 27th January 2004, the Directors are monitoring the financial position of the Group and where necessary, the Company may conduct further debt/equity fund raising exercise.

– 13 – In view of the current market conditions and the considerable amount intended to be raised, the Directors consider that the Open Offer provides a good opportunity for the Group to strengthen its capital base and to enhance its financial position. Additionally, since the Open Offer could also allow the Qualifying Shareholders to maintain their respective pro rata shareholdings in the Company, the Directors consider that it is in the interests of the Company and its Shareholders as a whole to raise the capital through the Open Offer. The estimated expense of the Open Offer is about HK$1.6 million, which will be borne by the Company. The net proceeds of the Open Offer will amount to about HK$27.6 million. The Company intends to use the net proceeds from the Open Offer of about HK$11 million for its general working capital, as to about HK$2.3 million for repayment of other payables of the Company such as secretarial and professional fees and printing charges, as to about HK$ 5.3 million for repayment of remaining cash consideration for acquisition of two water sewage plants as disclosed in the announcement dated 18 December 2003 and the circular dated 8 January 2004 (the sale and purchase agreements regarding the acquisition of two water sewage plants were signed and completed on 17 December 2003) and as to about HK$ 9 million for development of water supply business for the Company’s joint venture which located at Renhua Xian, Guangdong Province.

– 14 – The following table summaries the capital raising activities of the Group for the 12 months immediately before the date of this announcement: Actual use of Date of Net proceeds Intended use proceeds as at the announcement Event (approximately) of proceeds date of this announcement 28 May 2003 Convertible Bonds HK$5.8 million HK$1.9 million use Used as the intended purposes. of HK$6.0 million to reduce certain existing debts of the Group, HK$0.9 million to pay professional fees for the Re-domicile and the Capital Reorganisation, HK$3.0 million for use as general working capital of the Group. 21 July 2003 Convertible Bonds HK$7.3 million For partial settlement Used as the intended purpose. of HK$7.5 million with creditors 2 October 2003 Placing of existing HK$9.5 million For general Used as the intended purpose shares and working capital subscription of new shares of 32,500,000 shares at the price of HK$0.3 per shares

– 15 – 18 February 2004 Placing of existing HK$11.1 million For general Approximately HK$5.7 million for shares and working capital settlement of the principal debts, subscription of new interest and legal costs of Jade shares of 37,500,000 Electronic Company Limited and shares at the price approximately HK$ 2.4 million for of HK$0.315 acquisition of fixed assets and per shares inventories of Cedar Electronic under auction in March 2004 as disclosed in the announcement dated 30 March 2004. Approximately HK$1.8 million for payment of part of the cash consideration of acquisition of two water sewage plants as disclosed in a circular dated 8 January 2004. The remaining of approximately HK$ 1.2 million will be used as general working capital of the Group. PROPOSED AMENDMENTS TO THE BYE LAWS OF THE COMPANY On 30 January 2004, the Stock Exchange announced amendments to appendix 3 of the Listing Rules to require bye laws or equivalent document of a listed issuer to conform with various provisions, inter alia, (i) a restriction on the voting power of a director on resolutions in relation to contracts or arrangements or proposals in which the director or his associate(s) has a material interest; (ii) a restriction on the voting power of a shareholder on resolutions which he/she is required to abstain from voting or restricted to voting only for or only against such resolutions under the Listing Rules; and (iii) a provision which states that the period for lodgment of notices for nomination of a director and notices of willingness to be elected from the proposed director will commence no earlier than the day after the dispatch of the notice of the shareholders’ meeting appointed for the election of the director and end no later than seven days prior to the date of such meeting. All the aforesaid amendments to the Listing Rules have come into effect on 31 March 2004. In order to align with the recent changes on the Listing Rules, the Board proposes to amend the bye laws. Details of the amendments of the bye laws will be set out in the circular to be despatched to the Shareholders.

– 16 – CHANGE OF AUDITORS The Board also like to announce that Messrs. Ernst & Young have resigned as auditors of the Company on 23 April 2004 due to the Company failed to agree with Messr. Ernst & Young about the audit fee for the financial year ended 31 March 2004. Messrs. Ernst & Young have confirmed in their resignation letter that there are no circumstances connected with their resignation other than the above reason that they consider ought to be brought to the attention of the Company’s members or creditors. Following the resignation of Messrs. Ernst & Young, the Directors has appointed Messrs RSM Nelson Wheeler to fill the casual vacancy until the next annual general meeting. GENERAL The SGM will be held to consider and, if thought fit, passing the resolutions to approve, among others, the Open Offer and the proposed amendments to the bye-laws of the Company An independent board committee will be established to make recommendations to the independent Shareholders in relation to the proposed Open Offer and the independent financial adviser will be appointed to advise the independent board committee and the independent Shareholders in relation to the proposed Open Offer. A circular containing, among other things, details of the Open Offer and the proposed amendments to the bye laws of the Company, the recommendations of the independent board committee in relation to the proposed Open Offer and a letter of advice from the independent financial adviser to advice the independent board committee and independent Shareholders in relation to the proposed Open Offer and the notice of the SGM, will be despatched to the Shareholders as soon as possible. Pursuant to the Listing Rule, Asset Full or its associates will be abstained from voting for the Open Offer in the SGM and the voting on the Open Offer will be taken on a poll and the result of poll for the Open Offer will be announced by publishment in the newspapers on the business day following the SGM. SUSPENSION AND RESUMPTION OF TRADING At the request of the Company, trading in Shares on the Stock Exchange was suspended from 9:30 a.m. on Friday, 23 April, 2004 pending the release of this announcement. Application has been made by the Company to the Stock Exchange for resumption of trading in Shares on the Stock Exchange with effect from 9:30 a.m. on Thursday, 29 April, 2004.

– 17 – DEFINITIONS “Application Form(s)” the application form(s) for use by the Qualifying Holders to apply for the Offer Shares “Asset Full” Asset Full Resources Limited, a company incorporated in the British Virgin Islands, whose entire issued share capital is wholly and beneficially owned by Mr. Duan Chuan Liang, the chairman of the Company “associates” has the meaning ascribed thereto in the Listing Rules “Board” the board of Directors “CN Holder” Guangdong Xinxingmei Environment Protection Investment Co., Limited (廣東新星美環保科 技投資有限公司), a company established in the PRC “Company” China Silver Dragon Group Limited, a company incorporated in Bermuda under the Companies Act, the issued Shares of which are listed on the Stock Exchange “Companies Act” Companies Act 1981 of Bermuda “Companies Ordinance” Companies Ordinance (Chapter 32 of the Laws of Hong Kong) “Convertible Notes” HK$10,608,000 issued to CN Holder thereof to convert and subscribe for an aggregate of up to 13,260,000 Shares. “Directors” the directors of the Company, including the independent non- executive directors of the Company

– 18 – “Excluded Shareholders” Shareholders whose names appear on the register of members of the Company as at the close of business on the Record Date and whose addresses as shown in the register of members of the Company are in the places other than Hong Kong provided that the Company, having made enquiry regarding the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange, it would be necessary or expedient to exclude them to the Open Offer “Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Kingston” Kingston Securities Limited, a deemed licensed corporation to carry out business in types 1, 4, 6 and 9 regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “Offer Share(s)” not less than 146,013,900 Shares proposed to be offered to the Qualifying Holders for subscription pursuant to the Open Offer “Open Offer” the proposed issue of the Offer Shares by way of open offer to the Qualifying Holders on the terms to be set out in the Prospectus Documents and summarised herein

– 19 – “PRC” the People’s Republic of China, for the purpose of this announcement, exclude Hong Kong, Macau Special Administration Region and “Prospectus” the Open Offer prospectus “Prospectus Documents” the Prospectus and the Application Form “Qualifying Holders” Shareholders other than Excluded Shareholders whose names appear on the register of members of the Company on the Record Date “Record Date” Monday, 7 June 2004, being the date by reference to which entitlements to the Open Offer will be determined “Registrar” Tengis Limited of Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong, the Company’s branch share registrar in Hong Kong “SGM” the special general meeting of the Company to be convened to approve, the Open Offer and the amendment for the bye-law of the Company “Shares” shares of HK$0.01 each in the share capital of the Company “Shareholder(s)” holder(s) of Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Subscription Price” the subscription price of HK$0.2 per Offer Share pursuant to the Open Offer “Underwriters” Asset Full and Kingston

– 20 – “Underwriting Agreement” the underwriting agreement dated 22 April 2004 entered into between the Company , the Underwriters and Mr. Duan Chuan Liang in relation to the Open Offer “Underwritten Shares” an aggregate of 115,015,567 Offer Shares underwritten by the Underwriters “HK$” Hong Kong dollars. “%” per cent. By Order of the Board Tsui Chi Kin Executive Director Hong Kong,28 April, 2004 * For identification purpose only As at date of this announcement, the Board comprises of two executive Directors, being Mr. Duan Chuan Liang and Mr. Tsui Chi Kin, two non-executive directors, being Zhao Hai Hu and Chiu Shun Pui, Andrew and two independent non-executive director, being Huang Shao Yun and Chen Lizhong. Please also refer to the published version of this announcement in The Standard.

– 21 –