09:26 FOUNDER HOLD<00418> - Announcement (3) Founder Japan as at 30 June 2003; (ii) the subscription price under the subscription agreement dated 22 July 2004 of JPY300,000 per share of Founder Japan, which was the subject of an announcement and a circular of the Company issued on 23 July 2004 and 13 August 2004 respectively and which was approved by the independent Shareholders on 30 August 2004; and (iii) the subscription price of JPY300,000 per share under a share subscription on 12 November 2004 by an Independent Third Party (owned by certain staff members of Founder Japan Group) of 201 shares of Founder Japan, representing 7.21% of the then enlarged issued share capital. The Loan Assignment The consideration payable for the Loan Assignment is equivalent to the outstanding balance of the Shareholders' Loan. Founder Hong Kong has undertaken that the outstanding amount of the Shareholders' Loan as at the date of Completion will not be less than the balance outstanding as at the date of the Agreement, being JPY70,000,000. The Company expects that the outstanding amount of the Shareholders' Loan as at the date of Completion will not be materially different from that sum. The board of directors of the Company considers that the terms of the Agreement are fair and reasonable so far as the Shareholders are concerned as a whole. The Independent Board Committee will provide their further view and recommendation on the terms of the Agreement subject to the advice of the independent financial adviser in respect thereof. Conditions Completion of the Agreement is conditional upon (a) the obtaining of the approval of the Disposal and the Loan Assignment from the independent Shareholders at a general meeting of the Company by poll and (b) the termination of the investment agreement (to which the Company is a party) dated 15 September 2000 in relation to Founder Japan by certain other shareholders, or the release of all of the obligations of the Company or its subsidiaries under such agreements by the relevant parties thereto. In respect of the approval to be sought from the independent Shareholders, under Rule 14A.18 of the Listing Rules, Peking Founder and its associates are required to abstain from voting on the relevant resolutions to be proposed at such general meeting including the approval of the Disposal and the Loan Assignment. Completion shall take place fifteen (15) days after the fulfillment of all the conditions under the Agreement, but in any event shall not be later than 30 June 2005. If the conditions precedent under the Agreement are not fulfilled on or before 15 June 2005, the Agreement shall lapse and become null and void and the parties thereto will be released from the obligations under the Agreement. REASONS FOR AND BENEFITS OF THE DISPOSAL The Group is principally engaged in software development and systems integration relating to the media industry and certain other industries, and the distribution of information products in the PRC. True Luck has been loss-making since 2001 and would require substantial new financial resources for the continuing support of the operation and development of Founder Japan's existing Japanese language electronic publishing software business. For the year ended 31 December 2003, the consolidated loss before and after taxation and minority interests of True Luck amounted to approximately HK$6.1 million and HK$2.8 million respectively. For the six months ended 30 June 2004, True Luck recorded a consolidated loss before and after taxation and minority interests of approximately HK$6.9 million and HK$6.0 million respectively. As at 30 June 2004, True Luck had a consolidated net asset deficit of HK$9.1 million. True Luck has been loss-making in the past few years and although the loss of True Luck has been reduced, the Directors have no solid ground to believe when True Luck will record a profit again in the coming future. The Directors consider that the Disposal would relieve the financial burden that the Company would have to shoulder in order to fund the continuing business development and operation of True Luck. The Disposal would also allow the Company to focus its resources on its core business being software development and systems integration relating to multi-media industry in the PRC. In addition, it is estimated that a gain on disposal of approximately HK$26 million will be recorded by the Company based on the consolidated net asset value of True Luck as at 30 November 2004. As at the date of this announcement, the issued share capital of the Company is owned as to approximately 32.67% by Peking Founder, a controlling shareholder and a connected person of the Company within the meaning of the Listing Rules. The Purchaser is a subsidiary of Peking Founder and thus an associate of Peking Founder. Accordingly, the Disposal and the Loan Assignment together constitutes a connected transaction for the Company under Rule 14A.13 of the Listing Rules and is subject to the reporting, announcement and independent Shareholders' approval requirements under Rules 14A.18, 14A.45 to 14A.54 of the Listing Rules. The Disposal and the Loan Assignment together also