09:22 CHINA INV HOLD<00132> - Announcement (3) (h) Shareholders' approval The Preliminary Agreement does not provide for any condition precedent. Since the Disposal constitutes a major transaction, it is subject to approval of the shareholders of the Company at the SGM under the Listing Rules. The Preliminary Agreement has not however made the approval of the Disposal by the shareholders of the Company a condition precedent because (i) the Directors consider that the Disposal represents a good opportunity for the Company to dispose of the Sale Land (as more particularly elaborated in paragraph (2) below) and (ii) the Purchaser would only agree to an unconditional sale and purchase of the Sale Land. In the event that the shareholders of the Company at the SGM do not approve the Disposal, the Company may consider not to proceed with the completion of the Disposal in which case the Vendors shall return to the Purchaser the initial deposit of RMB5.1 million (equivalent to approximately HK$4.81 million) paid by the Purchaser and pay an additional sum of RMB5.1 million (equivalent to approximately HK$4.81 million) as compensation to the Purchaser pursuant to the Preliminary Agreement. Mighty Management Limited (which is wholly owned by Mr. Leung Siu Fai, the chairman of the Company) and Sintex Investment Limited (which is 50% owned by Mr. Kam Hung Chung, the managing director of the Company) have undertaken to vote in favour of the Disposal at the SGM. Mighty Management Limited and Sintex Investment Limited hold 16.57% and 6.44% of the total issued share capital of the Company respectively. 2. Reasons for the Disposal The Company acquired the Sale Land in 1992 for the purpose of development of commercial buildings for sale. Wise Lite Limited and Skyway Limited entered into the Development Agreement with the Developer on 6th February, 1993. Under the Development Agreement, the Developer shall be responsible for seeking and paying contractors to carry out construction work of the commercial buildings and shall be entitled to share profit derived from the sale of such commercial buildings with Wise Lite Limited and Skyway Limited. However, the Developer failed to fulfill its obligations under the Development Agreement. Wise Lite Limited and Skyway Limited therefore terminated the Development Agreement in 2000. On the other hand, since the acquisition of the Sale Land, the prices of commercial premises have been decreasing and the vacancy rate of commercial premises has been high in Huizhou, the PRC. As the land use right of the Sale Land is restricted to development of the Sale Land into commercial buildings, the Company had made application to the relevant government authority of the PRC for conversion of such land use right into development of the Sale Land into residential and commercial buildings. However, such application was not approved by the relevant government authority of the PRC. Since the termination of the Development Agreement, the Group had been seeking buyers for the Sale Land. In the meantime, the Group had also been seeking developers to develop the Sale Land with the Group in vain because the aforesaid application of conversion of land use was not approved. As the Sale Land has not been developed and has been vacant since its acquisition in 1992, the PRC government authority has rights to impose (unused land levy*) on the Vendors and/or confiscate the Sale Land under (The Urban Real Estate Administration Law of the PRC*). The Vendors received a notice dated 1st July, 2004 from the People's Government of Huizhou City informing the Vendors that as the Sale Land had not been developed, the People's Government of Huizhou City decided to confiscate the land use right of the Sale Land from the Vendors. The Vendors applied to (People's Government of Guangdong Province*) for an administration review in respect of the aforesaid decision of the People's Government of Huizhou City through a firm of lawyers in the PRC on the ground that such decision had not complied with the statutory procedure in respect of (unused land *) under the PRC law. During the process of the administration review, the People's Government of Huizhou City withdrew its decision to confiscate the Sale Land on 25th November, 2004. The Vendors received on 22nd February, 2005 a notice from the Land Bureau requesting the Vendors to explain the status of the usage and the development of the Sale Land, failing which the Land Bureau would deal with the Sale Land in accordance with the relevant PRC law and regulations in respect of (unused land*). The Vendors had explained the status of the usage and the development of the Sale Land to the Land Bureau. The Vendors have not received any further notice in relation to the Sale Land from the Land Bureau or the People's Government of Huizhou City as at the date of this announcement. The Directors consider that as the Sale Land remains vacant, the disposal of the Sale Land will not have any material impact on the operations of the Group. The Directors are of the opinion that in view of the aforesaid reasons, the Disposal is in the interest of the Company and its shareholders as a whole. The Directors confirmed that the terms of the Preliminary Agreement are fair and reasonable. The proceeds of the Disposal will be used as working capital of the Group. If the disposal of the Sale Shares is completed, the Vendors will