09:36 KOWLOON DEV<00034> - Announcement & Resumption (4) attractive investment projects in the PRC to be acquired by Shenzhen Properties with a gross value of not less than RMB500 million within 12 months of the date of the Completion. Pursuant to the Agreement, the Purchaser has undertaken to hold the shares in Shenzhen Properties acquired pursuant to the Agreement for a period of not less than 3 years. Pursuant to the Agreement, the Purchaser and the Company has undertaken to give a guarantee in the amount of RMB20 million in favour of an affiliated financial institution of the Seller against borrowings of Shenzhen Properties to replace a comparable guarantee currently provided by one of the Sellers. Under the Agreement, no other security is required to be provided by the Company in this regard. Each of the Company and the administrator of the Sellers undertakes to the other that in the event that the Purchaser and the Sellers cannot fulfill their obligations under the Agreement, the Company and the administrator of the Sellers will fulfill such rights and obligations. Pursuant to the Agreement, if the Agreement is terminated without cause by any party to the Agreement, such party shall be liable to pay a penalty to the other party of approximately RMB22.9 million plus any losses or damages incurred by the other party. However, if the Agreement is terminated due to any party's failure to perform its obligations under the Agreement, the defaulting party shall be responsible for any losses or damages incurred as a result thereof. If both the Purchaser and the Seller are in default, each defaulting party shall be responsible for its own liabilities arising therefrom. Further, if the Purchaser fails to pay the consideration contemplated under the Agreement for a period exceeding 30 days, the Sellers are entitled to terminate the Agreement and the Purchaser is also liable to pay a penalty of not exceeding approximately RMB22.9 million to the Sellers. The amount of RMB22.9 million has been determined based on 5% of the aggregate consideration under the Agreement no other penalty is applicable in the event of default. Subject to the above, if the Agreement is terminated, other amounts constituting part of the consideration under the Agreement will be refunded to the Company (without interest). 9. Takeover obligations As the A-shares and B-shares of Shenzhen Properties are listed on the Shenzhen Stock Exchange, upon all necessary regulatory approvals being obtained for the Acquisition, the Purchaser will be obliged to make a general offer for the remaining shares in Shenzhen Properties other than those to be acquired by the Purchaser. The Purchaser intends to apply to the CSRC for a waiver from the obligation to make a general offer for the remaining shares in Shenzhen Properties. In the event that the waiver is not granted by the CSRC by way of a no comment letter, the Purchaser will be obliged to make a general offer for the remaining shares in Shenzhen Properties. On the basis of the closing prices of the shares in Shenzhen Properties on 31 March 2005, the Directors estimate that such general offer will result in additional cash expenditure of approximately RMB524.9 million if all shareholders accept the offer. A further announcement will be made by the Company upon the decision by the CSRC on whether the waiver is being granted. 10. Source of funding for the Acquisition and financing undertaking The Group intends to finance the Acquisition from internal resources and bank borrowings. In the event that the Group is required to provide RMB500 million for the working capital of Shenzhen Properties or make a general offer for the shares in Shenzhen Properties as mentioned above, such funds (amounting to a maximum of RMB1.5 billion) shall be financed by internal resources or bank borrowings of the Group. No detailed plans as to the allocation of such amounts among internal resources and bank borrowings have been determined by the Board. 11. Reasons for and benefits of the Acquisition The Directors are optimistic on the long-term prospects of the property market in China. The Acquisition represents a major step for the Group in pursuing a strategy in expanding into the China property market. Shenzhen Properties possesses a portfolio of quality investment and development properties in prime locations with a few located in Shenzhen that comprise both residential and commercial properties and a team of professional management familiar with the property market and property development in China, enabling the Group to speed up its development in the China market in a safe and healthy manner. The Group intends to maintain the listing status of Shenzhen Properties and utilise it as the flagship entity for developing the China property market and other investments in China.