10:12 NEW SMART<00091> - Announcement (7) The Group welcomes this opportunity to enter into the Agreement as upon completion of the Acquisition, Fernleign will become a subsidiary of the Group, which will enable the Group to better enhance the turnover of the Group further by diversifying its businesses into web site service industry, the result of which will broaden its income base. The Board (excluding members of the Independent Board Committee and the non-executive Director) believes the Acquisition will make further contribution to the Group's future prospects as ChinaCCM.com is well established and generating stable revenue. The Acquisition will also allow the Group to gain a foothold in the PRC information services sector. The Group intends to hire a web site specialist who was an employee of the Group until recently to oversee the ChinaCCM.com web site operation. The Company is of the view that such appointment of a specialist, together with Mr. Tong and the Vendor (who has also been involved in managing the ChinaCCM.com), will enable the Group to have sufficient experience and expertise in managing and building the business of ChinaCCM.com. The terms and conditions of the Agreement were negotiated on an arm's length basis and were made on normal commercial terms. The Board (excluding members of the Independent Board Committee and the non-executive Director) considers that those terms and conditions are fair and reasonable to the Company and in the interests of the Shareholders and the Group as a whole. GENERAL On the basis of the revenue ratio and based on the unaudited accounts of Express Time (Beijing), the Acquisition constitutes a major and connected transaction for the Company under Chapters 14 and 14A of the Listing Rules respectively. Further, the Vendor is a connected person under the Listing Rules and as such, the Acquisition also constitutes a connected transaction for the Company. The Company will re-calculate the relevant percentage ratios set out under the Listing Rules once the audited consolidated accounts of Fernleign for the year ended 31 December 2004 are available and if based on such calculations, should the Acquisition become a very substantial acquisition, the Company will make further announcement and to comply with the relevant Listing Rules requirements. The Acquisition, the issue of the Convertible Note and Conversion Shares are therefore subject to the approval of the Independent Shareholders at the EGM and Mr. Tong and his associates shall abstain from voting at the EGM. An application will be made to the Stock Exchange for the listing of and permission to deal in the Conversion Shares. An Independent Board Committee will be formed to advise Shareholders in relation to the Acquisition and an independent financial adviser will be appointed to advise the Independent Board Committee and the Independent Shareholders. A circular containing further information on the Acquisition, including an independent letter of advice from an independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Acquisition, audited accounts on the Fernleign Group and a notice of the EGM will have to be despatched to the Shareholders within 21 days from the date of this announcement. DEFINITIONS "Acquisition" the Acquisition of the Sale Share by the Company from the Vendor in accordance with the terms and conditions of the Agreement "Agreement" a legally binding sale and purchase Agreement dated 15 February 2005 entered into by the Vendor, the Vendor Guarantor and the Company in connection with the Acquisition "Board" the board of Directors "Business Day(s)" the day(s) (other than Saturday(s)) or Sunday(s) on which banks are open for business in Hong Kong