10:12 WING ON TRAVEL<01189>& CHINA STRATEGIC<00235>-JA & Resume(6) conversion price of HK$0.02, subject to adjustment) in order to replace HK$370 million convertible notes which had then matured (for which issue Wing On Travel did not receive new money) as described in Wing On Travel's announcements dated 17 March 2004, 7 April 2004, 4 May 2004, 10 May 2004, 24 May 2004 and 8 June 2004 and the circular of Wing On Travel dated 24 May 2004 and the issue of Shares on conversion of the Convertible Notes. If the outstanding Convertible Notes are converted in full at the existing conversion price, 2,750,000,000 Shares will fall to be issued, representing 9.6% of the existing issued share capital of Wing On Travel. The directors (including the independent non-executive directors) of Wing On Travel consider the Placing and the Subscription as a whole is desirable as it will enlarge the shareholder base and the capital base of Wing On Travel and will strengthen the financial position of the Wing On Travel Group. They believe that the Placing and the Subscription are in the interests of Wing On Travel. Wing On Travel intends to apply the net proceeds of the Subscription which would amount to approximately HK$160.6 million, principally towards payment of HK$107.5 million of the consideration for the proposed acquisition by Wing On Travel Group of a 34.24% attributable interest in Kingsway Hotel Limited described in the Kingsway Transaction Announcement. The balance of the net proceeds of approximately HK$53.1 million will be utilised as general working capital. As stated in the Kingsway Transaction Announcement on 24 November 2004, the directors of Wing On Travel intended to finance that HK$107.5 million payment by bank borrowings, but they may also consider other debt financing and/or equity funding should these funding arrangements offer terms which are more favourable to the Wing On Travel Group than bank borrowings. In view of recent market response to hotel and entertainment stocks, the directors of Wing On Travel had expected at the time of the making of the Kingsway Transaction Announcement that if investors respond favourably to Wing On Travel's proposed investment in Kingsway Hotel Limited, equity fund raising may be a possibility. Wing On Travel was first approached after the close of the Hong Kong stock market on the Last Dealing Date in relation to the Placing and the Subscription. Since equity funding does not involve costs associated with debt financing, the directors of Wing On Travel considered that it would be desirable for Wing On Travel to proceed with the Placing and the Subscription. Wing On Travel has today paid a further deposit of approximately HK$15.75 million in connection with the proposed acquisition of interest in Kingsway Hotel Limited described in the Kingsway Transaction Announcement. Completion of that acquisition is, however, subject to the fulfillment of conditions precedent (other than that in relation to the due diligence review of various companies which is deemed to have been satisfied on payment of the further deposit) described in the Kingsway Transaction Announcement. LISTING RULES IMPLICATIONS FOR THE PLACING AND SUBSCRIPTION The Placing Agreements constitute connected transactions of Wing On Travel under the Listing Rules, because CEL is a controlling shareholder of Wing On Travel and therefore a connected person of Wing On Travel under the Listing Rules. The First Placing Agreement is exempted under Rule 14A.31(3) of the Listing Rules from reporting, announcement and independent shareholders' approval requirements contained in Chapter 14A of the Listing Rules provided it can be completed within 14 days from the date of the First Placing Agreement. As the General Mandate will have been fully utilized by the issue of Subscription Shares pursuant to the First Placing Agreement, further issues of Subscription Shares under the Second Placing Agreement requires the approval of shareholders of Wing On Travel. As a result, the Second Placing Agreement falls outside the ambit of Rule 14A.31(3) of the Listing Rules, and constitute a connected transaction of Wing On Travel which requires Independent Shareholders approval under the Listing Rules. Wing On Travel will as soon as practicable issue a circular to its shareholders in respect of the Second Placing Agreement, which circular will also contain a letter from an independent board committee of Wing On Travel, a letter from an independent financial adviser to be retained by Wing On Travel to advise its independent board committee and the Independent Shareholders and also a notice convening a special general meeting of Wing On Travel for the purpose of seeking shareholders approval for the issue of Subscription Shares under the Second Placing Agreement. CEL and its associates will abstain from voting on the resolution to approve the issue of Subscription Shares under the Second Placing Agreement at that special general meeting. Voting on that resolution will be taken by poll. The sale of 2,340 million existing Shares and the subscription of 2,340