09:48 SINO GOLF HOLD<00361> - Announcement (2) account all relevant factors relating to the Disposal which are described in more detail under the section headed "Reasons for and Benefit of the Disposal" below. Pursuant to the Supplemental Agreement, the settlement term under the Agreement is amended such that the Purchaser shall pay upon Completion an amount of HK$9,972,436 equal to the sum of (i) the amount representing the excess of the Consideration (i.e. HK$2,581,090) over 62.5% of the Audited Net Asset Value of SHL as at 31 December 2004 and (ii) 60% of the amount equivalent to 62.5% of the Audited Net Asset Value of SHL as at 31 December 2004 (i.e. HK$7,391,346). The Purchaser shall settle the remaining 40% of the amount equivalent to 62.5% of the Audited Net Asset Value of SHL as at 31 December 2004 (i.e. HK$4,927,564) by delivering to SGMCL a promissory note which is to be matured one year after Completion. Expected gain on disposal of the equity capital in SHL by SGMCL As the Audited Net Asset Value of SHL as at 31 December 2004 was HK$19,710,256 and in relation to the 62.5% interest for the Disposal, the attributable Audited Net Asset Value of SHL as at 31 December 2004 was HK12,318,910, the expected gain on the Disposal is approximately HK$2,581,090. The proceeds from the Disposal will be utilized by SGMCL for its general working capital. The Agreement is expected to be completed immediately after the approval from the Shareholders at the SGM which is expected to be held on 27 May 2005. INFORMATION OF SHL SHL was established on 4 April 2001 as a foreign equity joint venture between SGMCL and MI. SHL is principally engaged in the manufacture and distribution of golf equipment and accessories. Based on the audited figures of SHL for the two years ended 31 December 2004, the profit before tax, profit attributable to shareholders and the net asset value of SHL are summarised as follows: 2004 2003 HK'000 HK'000 Profit before tax 3,401 3,111 Profit attributable to shareholders 3,401 3,111 Net asset value 19,710 16,309 INFORMATION OF THE PURCHASER The Purchaser is principally engaged investments and investment holding activity, which is wholly owned by the Su Parties and was set up to enter into this Agreement with SGMCL. None of the Su Founder, the Su Parties or their respective associates hold any shares of the Company. The Company and the Su Parties do not have any joint investment in any companies. REASONS FOR AND BENEFIT OF THE DISPOSAL Since its establishment in 2001, SHL has principally been engaged in producing golf equipment to supply for the Group's export customers. The proportion of domestic customers was relatively insignificant until recent years when Su Founder and Su Parties started to adopt a more aggressive approach to develop domestic customers. Commensurate with their business strategy, Su Parties have expressed keen interest to acquire the Group's 62.5% equity interest in SHL to gain control over SHL. The Directors consider that it will be beneficial to and in the interest of the Group to enter into the Agreement with Su Parties for the disposal of the Group's equity interest in SHL. After taking into consideration that (i) the Group will adopt a strategy to enhance and strengthen its forging production capability and centralize the related management; (ii) there may be potential conflict of interest with MI when it continues to promote domestic customers portfolio of SHL; and (iii) the Disposal gives rise to a gain, the Directors (including the independent non-executive Directors) believe that the Disposal is in the interest of the Company and its shareholders as a whole and the terms are fair, reasonable and on normal commercial terms. FURTHER INFORMATION As the Consideration pursuant to the Supplemental Agreement exceeds HK$10,000,000, the Disposal contemplated under the Agreement constitutes a connected transaction which will be subject to, amongst other things, the approval from the independent Shareholders at the SGM. The board of directors is not aware of any Shareholder who is required to abstain from voting at the SGM. An independent board committee comprising the three independent non-executive Directors will be formed to advise the independent Shareholders as to the fairness and reasonableness of the Disposal. An independent financial advisor has been appointed to advise the independent board committee and independent Shareholders in relation to