09:57 KERRY PPT<00683> - Announcement (2) the Ministry of Commerce of the PRC approved such transfer on 6 December 2004 and the Company intends the Second Closing to take place as soon as possible after the First Closing, subject to satisfaction and/or waiver of all other relevant Second Closing Conditions. Kerry Logistics considers that the Second Closing should be brought forward as the intention all along is to acquire 70% of the Eas PRC Group. The transaction had been structured with two closings (and on the basis that the First Closing would basically be unwound if the Second Closing could not take place) because it was contemplated then that a lot more time would potentially be needed to obtain approval from relevant PRC authorities to the transfer of the Eas PRC Shares at the Second Closing. Against such background and in relation to Second Closing Condition II: (i) Huatong's PRC legal advisers have confirmed that the Restructuring has been completed in accordance with the terms of the Restructuring Agreement, although a number of steps remain to be taken, such as the giving of notices by Eas PRC (which is already under the control of the Company) to debtors of certain debts owing to the Eas PRC Group and completion of registration procedures (which, as confirmed by Huatong's legal advisers, will be done in accordance with normal administrative procedures). (ii) As the Second Closing has been brought forward, there is insufficient time for such remaining steps in relation to the implementation of the carve out to be undertaken, such as the giving of notices by Eas PRC to debtors of certain debts owing to the Eas PRC Group and completion of registration procedures. (iii) As disclosed in the Circular, pursuant to the Restructuring Agreement, various companies, assets and liabilities that are not directly connected or have no business synergy with the logistics businesses that Kerry Logistics aims to acquire will be transferred out of the Eas PRC Group (before the Restructuring) in accordance with the terms of the Restructuring Agreement. With the exception of a vehicle related to the logistics businesses that Kerry Logistics aims to acquire, the Restructuring relates to carving out assets and liabilities from the Eas PRC Group (before the Restructuring). (iv) The Restructuring Agreement contains an indemnity from Huatong in favour Eas PRC in respect of any economic loss sustained by Eas PRC on account of any assets or liabilities not being transferred in accordance with the Restructuring. Huatong's legal advisers have confirmed that the indemnity is legally valid and enforceable. (v) As regards assets that have not been carved out from the Eas PRC Group (before the Restructuring) and in respect of which additional steps remain to be taken as at the Second Closing to implement the carve out, Kerry Logistics does not consider that retaining such assets within the Eas PRC Group until all remaining steps have been taken will prejudice the interests of Kerry Logistics or the Eas PRC Group. The Eas PRC Group will simply be holding such assets pending transfer out to Huatong and Eas PRC also has the benefit of an indemnity from Huatong in respect of any economic loss sustained by Eas PRC on account of any such assets not being carved out. (vi) As regards liabilities that have not been carved out from the Eas PRC Group (before the Restructuring) and in respect of which additional steps remain to be taken as at the Second Closing to implement the carve out, such liabilities relate to debts or accounts payable owed by the Eas PRC Group (before the Restructuring) to various third party creditors. The book value of such debts amounted to less than RMB20.5 million as at 30 November 2004 which is less than 2% of the total asset value of the Eas PRC Group as at 30 June 2004 based on the Accountants' Report on the Eas PRC Group set out in Appendix III to the Circular. Kerry Logistics believes that Huatong and/or Eas PRC should be in a position to carve out such liabilities and, in any event, Eas PRC also has the benefit of an indemnity from Huatong in respect of any economic loss sustained by Eas PRC on account of any such liabilities not being carved out. Kerry Logistics has therefore waived Second Closing Condition II, and Huatong's legal advisers have issued a legal opinion confirming paragraphs (i) and (iv) above. As regards Second Closing Condition III, as the First Closing only took place on 31 December 2004 and the Second Closing had been brought forward to 13 January 2005, there was insufficient time for the auditors of Kerry Logistics to prepare the NAV Statement. Kerry Logistics has therefore waived Second Closing Condition III on terms that the NAV statement shall be prepared after the Second Closing. The time within which the NAV Statement should be made available remains the same as under the Sale and Purchase Agreement,