09:57 DENWAY MOTORS<00203> - Announcement (3) internal resources of the Group and as to HK$305,900,000 by the proceeds obtained from the Subscription took place in 2000. Pursuant to the Placing and Subscription Announcement dated 7 September 2000, it was intended that, among the net proceeds of approximately HK$437 million obtained from the Subscription, (1) approximately 70% would be used in Guangzhou Honda; (2) approximately 10% would be used for the development of sales and trading network and the automobile parts business; (3) approximately 12% would be used for automobile manufacturing business; and (4) the balance thereof would be used as working capital of the Company. As at the date of this announcement, the application and balance of the Subscription proceeds are summarised, as follows: Application of the Estimated usage as Actual amount being Subscription stated in the applied as at the proceeds Placing and date of this Subscription announcement Announcement HK$ million HK$ million For the use of 305.90 - Guangzhou Honda Development of 43.70 43.70 sales and trading network and the automobile parts business For the use of 52.44 52.44 automobile manufacturing business Working capital of 34.96 34.96 the Company Balance available - 305.90 for the satisfaction of the Cash Portion ----------------------------------- Total 437.00 437.00 =================================== Since completion of the Subscription in September 2000, Guangzhou Honda has experienced an unprecedented organic growth. Given that the internal funding being generated by Guangzhou Honda was more than sufficient to meet for its capacity expansion needs, which is expected to be so in the foreseeable future, the net proceeds of HK$305,900,000 obtained from the Subscription (the `Remaining Funding') that were originally designated for use in the capital expansion of Guangzhou Honda became unnecessary. The Company has since then deposited the Remaining Funding as short-term bank deposits in Hong Kong. Instead of earning a relatively low interest return on the short-term bank deposits, the Directors consider that the application of the Remaining Funding towards the settlement of part of the Cash Portion represents an excellent opportunity for the Company to achieve a better equity return for its Shareholders. The Consideration Shares On the basis of the closing price of the Company of HK$2.75 per Share as quoted on the Stock Exchange on 3 January 2005 (being the date of the Acquisition Agreement), the market value of the Consideration Shares is approximately HK$203.0 million. The Consideration Shares represent approximately 1.00% of the existing issued share capital of the Company or approximately 0.99% of the enlarged issued share capital of the Company immediately upon Completion. The Issue Price of HK$2.803 per Share is equivalent to the average closing price per Share for the last 30 trading days prior to the date of the Acquisition Agreement up to and including 31 December 2004 and (i) represents a premium of approximately 1.93% to the closing price of the Shares of HK$2.75 per Share as quoted on the Stock Exchange on 3 January 2005, being the date of the Acquisition Agreement; and (ii) represents a premium of approximately 1.56% to the average closing price of the Shares of HK$2.76 per Share for the last five trading days up to and including 3 January 2005, being the date of the Acquisition Agreement. The Consideration Shares will rank pari passu with the existing issued Shares in all respects. The Acquisition and the allotment and issue of the Consideration Shares will be subject to the approval by the Independent Shareholders at the EGM. Application will be made to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares. Conditions to the Acquisition Completion of the Acquisition Agreement is conditional upon, among others: (1) the passing by Independent Shareholders at the EGM by poll of an