09:36 SHANGHAI ZENDAI<00755> - Announcement & Resumption (4) Date and shall lapse on the earliest of: (a) the date on which the Convertible Notes have been fully converted immediately prior to the Option Commencement Date; (b) the expiry of the Option Period; or (c) the date of commencement of winding up of the Company. The maximum number of Option Shares which may be allotted and issued pursuant to the exercise of the Option shall be the maximum aggregate Exercise Price payable by the Funds divided by the Exercise Price. Assuming that the Convertible Notes have not been fully converted into the Conversion Shares before the Option Commencement Date and the Conversion Price then in effect remains at HK$0.24 per Share, the maximum number of Option Shares will be equivalent to the maximum number of Conversion Shares which may fall to be allotted and issued pursuant to the exercise of the conversion rights attached to the Convertible Notes at the Conversion Price of HK$0.24 per Share. The Directors confirm that the Exercise Price was arrived at after arm's length negotiation between the Company and Value Partners with reference to the Conversion Price. General mandate Assuming full conversion of the Convertible Notes at the initial Conversion Price of HK$0.24 per Conversion Share, a maximum number of 333,333,333 Conversion Shares will be issued, representing approximately 7.21% of the existing issued share capital of the Company comprising 4,622,887,558 Shares and approximately 6.73% of the Company's issued share capital comprising 4,956,220,891 Shares as enlarged by the issue of such Conversion Shares respectively. Assuming that the Convertible Notes have not been converted into the Conversion Shares at all prior to the Option Commencement Date and the Conversion Price then in effect remains at HK$0.24 per Share, a maximum number 333,333,333 Options Shares will be issued. These Conversion Shares and/or Option Shares (as the case may be) will be issued under the general mandate to allot, issue and deal with the Shares granted to the Directors pursuant to a resolution of the Shareholders passed at the annual general meeting of the Company held on 18 May 2004. The Directors confirmed that such general mandate had not been utilised since the date of passing of the aforesaid resolution and up to the date of Subscription Agreement. Reason for subscription and use of net proceeds The Group is principally engaged in property investment and development in Shanghai, the PRC and its surrounding areas. The net proceeds from the issue of the Convertible Notes (after deduction of expenses) which will amount to approximately HK$79,600,000 will be used for future investment or development of suitable projects related to the principal businesses of the Group. As at the date of this announcement, no specific investment opportunity has been identified by the Group. The Directors consider that the issue of the Convertible Notes may provide the Company with immediate funding without immediate dilution of the shareholding of the existing shareholders of the Company and an opportunity for the Company, if the conversion rights attached to the Convertible Notes are exercised or failing the conversion of the Convertible Notes but the exercise of the Option, to enlarge its capital base and also broaden its shareholders base by the introduction of a renowned institutional investor. The Directors consider that the terms of the Subscription Agreement (including the grant of the Option) are fair and reasonable and are in the interests of the Company and its Shareholders as a whole. The Company has not conducted any equity-related fund raising exercise for the past 12 months immediately prior to the date of this announcement. Effect on shareholding structure The existing shareholding structure of the Company and the shareholding structure of the Company upon full conversion of the Convertible Notes or (assuming the Convertible Notes have not been exercised at all) upon the exercise of the Option in full are as follows: Shareholding structure (assuming