10:10 NEW SMART<00091> - Announcement (3) The Board is informed by Mr. Tong that the Sale Share was transferred to the Vendor in August 2004 at a nominal value of US$1 (or HK$7.8) from Mr. Tong and given the relationship of the Vendor with Mr. Tong set out above, the Acquisition is a connected transaction under Chapter 14A of the Listing Rules. Mr. Tong has also confirmed that his total costs of investing in the Fernleign Group was approximately HK$28.5 million, in the form of cash consideration for the acquisition of equity interests in the Fernleign group in April 2000 from an independent third party. The Vendor is the sole director of Fernleign since 31 August 2004 while Mr. Tong was the sole director from 7 March 2000 to 31 August 2004. The Vendor and Mr. Zhou Su Yue (who is not related to the Vendor or Mr. Tong) have been the directors of ChinaCCM.com, Inc. since 31 August 2004 and 13 June 2000 respectively while Mr. Tong was a director from 15 March 2000 to 31 August 2004 and there were two other former directors. The Vendor has been the sole director of Express Time Enterprises Limited since 31 August 2001 while Mr. Tong, resigned on 31 August 2004, was one of the five former directors. The Vendor, Ms. Cong Lin (both appointed in September 2004) and Mr. Philip Wong Man Cheung (appointed on 7 February 2005) are the directors of Express Time (Beijing) while Mr. Tong was a director until September 2004. Save (i) the possible resignation of Mr. Zhou Su Yue from the board of ChinaCCM.com, Inc.; and (ii) the possible resignation of the Vendor from the board of each of Fernleign, ChinaCCM.com, Inc. and Express Time Enterprises Limited (and the possible appointment of Mr. Leung Wai Kwan as replacement director to each of these three companies) following Completion, the Group does not currently expect any changes to the directorship of the Fernleign Group set out above. Consideration and adjustment The consideration for the Sale Share shall be determined on the basis of a 6 times historical price/earnings multiple of the audited consolidated net profit of the Fernleign Group for the year ended 31 December 2004. As set out above, the unaudited net profit of Express Time (Beijing) for the year ended 31 December 2004 was approximately RMB3.89 million (or HK$3.67 million), 92.47% of which is attributable to Fernleign and as such, RMB3.59 million (or HK$3.39 million) would be attributable to Fernleign (assuming there are no consolidation adjustments).). The consideration shall be subject to downward adjustment if the amount of net profit as shown in the 2004 audited accounts of the Fernleign Group (under generally accepted accounting principles of Hong Kong) is less than RMB3.59 million (or HK$3.39 million) and in any event, shall not be less than HK$2 million (approximately RMB2.12 million). For the avoidance of doubt, in no circumstances shall the consideration be increased by any adjustment. The terms of the Agreement and the consideration are reached after arm's length negotiations with reference to the unaudited net profits of Express Time (Beijing) of approximately RMB 3.89 million (or HK$3.67 million) for the year ended 31 December 2004, and on the basis of a six times price/earnings multiple, which valued the interest in Express Time (Beijing) attributable to the Group at approximately HK$20.4 million (after adjusting the 7.53% minority interests in ChinaCCM.com, Inc.). The Board (excluding members of the Independent Board Committee and the non executive Director) considers that the terms and conditions of the Agreement are fair and reasonable and on normal commercial terms and in the interests of the Company and its Shareholders as a whole. Payment terms and guarantee The consideration for the Sale Share will be payable in the following manner: (i) the Deposit and part payment in the sum of HK$9 million in cash was paid by the Company to the Vendor on 15 February 2005 upon the entering into of the Agreement; and