10:33 CROCODILE<00122> & LAI SUN INT'L<00191>-JA & Resumption (3) The audited turnover and net profit (in the latter case, both before and after taxation and extraordinary items) of the CGL Group attributable to the Property for the financial year ended 31st July, 2004, as incorporated in CGL's audited consolidated accounts for that year, were approximately HK$4.7 million and HK$15.6 million, respectively, which included profit generated from leasing of the Property of HK$4.6 million and, in the case of the net profit figure, a reversal of deficit on revaluation of the Property, credited to consolidated profit and loss account, in the amount of HK$11 million. Taking into account LSG's 54.93% interest in CGL, the audited turnover and net profit (in the latter case, both before and after taxation and extraordinary items) of the LSG Group attributable to the Property for the financial year ended 31st July, 2004, as incorporated in LSG's audited consolidated accounts for such year, were approximately HK$4.7 million and HK$8.6 million, respectively. The carrying value of the Property as incorporated in the respective audited consolidated balance sheets as at 31st July, 2004 of both CGL and LSG was HK$66 million. Taking into account the consideration of HK$145 million, the gain on disposal of the Property before expenses to accrue to CGL's consolidated accounts is estimated to be HK$79 million. Taking into account LSG's 54.93% interest in CGL, the net gain on disposal of the Property before expenses, after the 45.07% minority interest, to accrue to LSG's consolidated accounts is estimated to be approximately HK$43.4 million. 9. Reasons for Disposal The Property was acquired by GNDL in 1994, which has since held the Property as an investment property for rental purposes. The CGL Directors and the LSG Directors, respectively, believe that the terms and conditions of, including the consideration for, the Disposal are fair and reasonable in the current market conditions and in the best interests of the shareholders of CGL as a whole and the shareholders of LSG as a whole. The fairness of the Disposal is supported by reference to the valuation of the Property by FPD Savills (Hong Kong) Limited, an independent professional valuer, as commissioned by CGL, which valued it at HK$120,000,000 as at 29th December, 2004. Both the CGL Directors and the LSG Directors also consider that the Disposal represents an excellent opportunity for CGL to reduce its indebtedness. 10. Use of proceeds The Property, and its rental proceeds, are charged and assigned to a bank (the "Lender") under an all-monies mortgage and an assignment of rentals respectively, to secure a banking facility of HK$35,000,000 and all other sums from time to time due or owing to the Lender in respect of any other banking facilities provided by the Lender. The net proceeds of the Disposal will be used for full repayment of the outstanding amounts due or owing to the Lender, which stood at approximately HK$5.5 million as at 25th January, 2005. The balance of the net proceeds is intended to be used by CGL for general working capital purposes. In this context, CGL is exploring the feasibility of a number of plans to enhance the value of the Crocodile Building at No. 79 Hoi Yuen Road, Kwun Tong. However, no definitive plan has been adopted to date. 11. Major transactions The Disposal constitutes a major transaction for each of CGL and LSG under the Listing Rules and is therefore subject to the approval of the shareholders of both companies. In the case of CGL, its controlling shareholder is LSG, which directly holds 2,666,000 CGL shares and indirectly (through its wholly-owned subsidiary, Joy Mind Limited) holds 336,316,809 CGL shares, together representing approximately 54.93% of the entire issued share capital of CGL. As no shareholder of CGL is required to abstain from voting at a general meeting of CGL to approve the Disposal, and in light of LSG's aggregate direct and indirect holding of approximately 54.93% of the issued share capital of CGL, the written approvals of LSG and Joy Mind Limited (as a "closely allied group of shareholders") have been given to approve the Disposal in lieu of a majority vote at a general meeting of CGL pursuant to Listing Rule 14.44. Accordingly, it is not necessary that an extraordinary general meeting of CGL be convened to consider the Disposal. To the best knowledge, information and belief of the CGL Directors and the LSG Directors the interests of all shareholders of CGL in relation to the Disposal are the same in all material respects. So far as the CGL Directors are aware, neither the Purchaser nor its ultimate beneficial owner holds any shares in CGL.