09:23     <00017> & <00917> - Joint Ann & NEW WORLD CHINA Resumed (5)         

    Reasons for the Rights Issue and the use of proceeds                      
                                                                              
    The principal activities of the Group are property development and        
    property related investments in the PRC. The Group recorded a net         
    loss before and after tax and extraordinary items of approximately        
    HK$1,844.6 million and HK$1,841.4 million for the year ended 30 June      
    2003, respectively and a net profit before and after tax and              
    extraordinary items of approximately HK$211.6 million and HK$166.8        
    million for the year ended 30 June 2004, respectively.                    
                                                                              
    Upon the full subscription of the Rights Shares, the Company will         
    receive approximately HK$6,285.13 million (assuming no Shares are         
    issued and allotted to holders of Share Options on or before the          
    Record Date pursuant to the exercise of the Vested Share Options)         
    or approximately HK$6,401.33 million (assuming Shares are issued and      
    allotted to holders of Share Options on or before the Record Date         
    pursuant to the full exercise of all Vested Share Options) by way         
    of subscription proceeds net of expenses. The Directors intend to         
    use the net proceeds of the Rights Issue as follows:                      
                                                                              
    (a)   approximately HK$3.3 billion to reduce the Group's debts;           
                                                                              
    (b)   approximately HK$2.5 billion to settle the outstanding              
    resettlement costs; and                                                   
                                                                              
    (c)   the remaining balance to fund the development costs of the          
    Group's property projects and as general working capital for future       
    development of the Group.                                                 
                                                                              
    The Directors consider that it is in the best interest of the Company     
    and the Shareholders to raise further capital to meet the Company's       
    funding requirements for the above-mentioned purposes by way of the       
    Rights Issue, which will allow all Qualifying Shareholders the            
    opportunity to maintain their respective pro-rata shareholding            
    interests in the Company.                                                 
                                                                              
    UNDERWRITING ARRANGEMENTS                                                 
                                                                              
    Underwriting Agreement                                                    
                                                                              
    Date:   18 February 2005                                                  
                                                                              
    Underwriter:   New World Development Company Limited, a controlling       
    shareholder of the Company directly and indirectly interested in          
    1,054,107,600 Shares representing approximately 70.2% of the              
    existing issued share capital of the Company                              
                                                                              
    Number of Shares underwritten:   Not less than 730,846,500 Rights         
    Shares (assuming that no Shares are issued and allotted to holders        
    of Share Options on or before the Record Date pursuant to the exercise    
    of the Vested Share Options) and not more than 772,767,540 Rights         
    Shares (assuming that Shares are issued and allotted to holders of        
    Shares Options on or before the Record Date pursuant to the full          
    exercise of all Vested Share Options) (Note)                              
                                                                              
    Commission:   1% of the total issue price of the Rights Shares            
    underwritten by NWD                                                       
                                                                              
    The maximum commission to be received by the Underwriter will be          
    approximately HK$21.6 millionNote: These figures exclude                  
    1,522,579,638 Rights Shares provisionally allotted to NWD in respect      
    of its beneficial shareholding of the Company which it has undertaken     
    to subscribe for in full.                                                 
                                                                              
    The entering into of the Underwriting Agreement by the Company with       
    NWD constitutes a connected transaction of the Company under the          
    Listing Rules but is exempted from the reporting, announcement and        
    independent Shareholders' requirements pursuant to Rule 14A.31(3)(c)      
    of the Listing Rules.                                                     
                                                                              
    Pursuant to the terms of the Underwriting Agreement, the Company and      
    NWD agreed that if the conditions of the Rights Issue are fulfilled       
    on the Latest Acceptance Date (or such later time and/or date as the      
    Company and NWD may determine) and the Underwriting Agreement             
    becomes unconditional and is not terminated in accordance with the        
    terms thereof, NWD shall pay the Subscription Monies in cash net of       
    the commission entitled by NWD, being 1% of the total issue price         
    of the Rights Shares underwritten by NWD, on the date to be agreed        
    by the Company and NWD, but in the absence of such agreed date, not       
    later than 4:30 p.m. on the third Business Day following the Latest       
    Acceptance Date. NWD will discharge its payment obligation under the      
    Underwriting Agreement by its internal resources.