10:16 SHIMAO CHINA<00649> - Announcement & Resumption (5) together) is located in Russian territory and has been expressly acknowledged by the parties to the Undertaking as a property development project outside of Mainland China for the purposes thereof. See the Suifenhe Announcement and paragraph (4) under "Reasons for and Benefits of the Delineation" below for further details of the Suifenhe Shimao Development Project. The reasons for the business delineation and the entering into of the Undertaking by the Group, including the benefits that the Group believe may derive from the business delineation as well as background information on the operating environment in Mainland China, are set out in the paragraph headed "Reasons for and Benefits of the Delineation" below. BUSINESS DELINEATION Principal Terms of the Undertaking The Company proposes to enter into the Undertaking with Mr. Hui, SPHL, Overseas Investment, Shimao Enterprises and the A Share Company to enable the Group to focus its business activities on property developments and investments in locations outside of Mainland China. The Board will put the Undertaking to Independent Shareholders for their approval. Under the terms of the Undertaking, the Group will enjoy the benefit of an undertaking from Mr. Hui and the relevant parties that they will not carry on any property business outside of Mainland China, other than through Mr. Hui's interest in the Group and Mr. Hui's interests in properties acquired and held for his own use, including for the use of his family, provided that such activities do not involve any commercial property development. In return for this undertaking, the Company will agree not to (and will procure that none of its subsidiaries, and will use its best endeavours to procure that none of its associated companies, shall) engage in the property development and investment business in Mainland China, except that the Group may continue to undertake its existing property developments and investments in Mainland China. The Group currently has one property development and two property investments in Mainland China, which it will continue as permitted by the Undertaking. In addition, as stated in the Suifenhe Announcement, the Company proposes to acquire the Suifenhe Shimao Development Project, a property development project which is located in both Mainland Chinese and Russian territory but, given that around two-thirds of the overall site of this project (i.e. phases one and two taken together) is located in Russian territory, has been expressly acknowledged by the parties to the Undertaking as a property development project outside of Mainland China for the purposes thereof. The Undertaking will be in place so long as Overseas Investment (the controlling shareholder of both the Group and SPHL) directly or indirectly (through its subsidiaries) holds 30% or more of the issued share capital of the Group and SPHL (or controls the exercise of the voting rights in respect thereof). Overview of business delineation between parties to the Undertaking The following chart shows the shareholding and other relationships between parties to the Undertaking as the date of this circular: Project Location Planned Use(1) (m2) (1) Status Zhenshi Development Zone Fujian Province Composite 93,333 (1) Substantially completed and sold Wuyi Tourist Resort Fujian Province Tourist and resort 333,331 (1) Substantially completed and sold Gold Coast Resort Fujian Province Tourist and resort 1,313,045 (1) Substantially completed Asia Games Garden Beijing Residential 66,369 Substantially completed and sold Zizhu Garden Beijing Residential 152,261 Substantially completed and sold Royal Garden Beijing Residential 94,149 Substantially completed and sold Epoch Centre Beijing Residential, retail 130,618 Substantially completed and sold Zhenshi Hotel Fujian Province Hotel 21,114 Completed Wuyishan Fishing Lake Hotel Fujian Province Hotel 3,735 Completed Note: (1) The measurements for Zhenshi Development Zone, Wuyi Tourist Resort and Gold Coast Resort relate to site area. The measurements for Asia Games Garden, Zizhu Garden, Royal Garden, Epoch Centre, Zhenshi Hotel and Wuyishan Fishing Lake Hotel relate to total completed GFA. Although Mr. Hui and his immediate family owns, through the Private Group, a number of property developments within Mainland China, these developments are either completed or substantially completed. Furthermore, as these development projects (other than the hotels) are primarily developed for sale rather than for investment purposes, they are likely to generate only minimal revenue, if any. Upon the execution of the Undertaking, the Private Group will not carry on any new property development business and its sole business will be investment holding. The Group's Strategic Business Focus The Group continuously reviews its business strategy and evaluates opportunities for the Group's development. The management of the Company carries out such reviews on a regular basis and brings suitable proposals to the Board for consideration and, if thought fit, adoption of resolutions. The proposed terms of the Undertaking were provided to all members of the Board on 7 February 2005, which were discussed at a board meeting held on 15 February 2005. The Undertaking was the subject of a decision taken at further meeting of the Board on 19 February 2005. On the basis of this decision, the Group will pursue a business strategy of property development and investment in international markets outside Mainland China, including Hong Kong and the Asia Pacific Region. In addition, as stated in the Suifenhe Announcement, the Company has entered into an agreement to purchase the Suifenhe Shimao Development Project, subject to conditions (including the approval of Independent Shareholders). The Suifenhe Shimao Development Project is the first significant opportunity in the non-Mainland China market following the entering into of the Undertaking, given that around two-thirds of the overall site of this project (i.e. phases one and two taken