09:42 CHINA VELOCITY<00149> - Announcement (1) The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. China Velocity Group Limited (Incorporated in Bermuda with limited liability) (Stock Code: 149) DISCLOSEABLE AND CONNECTED TRANSACTION: ACQUISITION OF HONG KONG COMPANIES The Acquisition The Directors announce that on 13 April 2005, the Agreement was entered into between the Vendors and the Purchaser which sets out the terms in respect of the proposed acquisition of the Sale Shares for the aggregate purchase price of HK$5,500,000. The Acquisition constitutes a discloseable transaction of the Company under the Listing Rules. A circular of the Company in relation to the Acquisition will be dispatched to shareholders of the Company as soon as reasonably practicable. As Mr. Fu is a Director of the Company and the Purchaser, the Acquisition also constitutes a connected transaction for the Company under the Listing Rules. As the total consideration for the Acquisition is less than HK$10,00,000 and each of the relevant percentage ratios under Chapter 14 of the Listing Rules is less than 25%, the Acquisition is exempted from independent shareholders' approval requirement but is subject to the reporting and announcement requirements as set out in Rules 14A.45 to 14A.47 of the Listing Rules. Suspension of trading At the request of the Company, the shares of the Company have been suspended from trading on the Stock Exchange from 10:53a.m. on 22 April 2005, pending the release of an announcement relating to a major transaction of the Company. Trading of shares of the Company will remain suspended until the publication of the abovementioned announcement. Agreement dated 13 April 2005 Parties: The Vendors and the Purchaser To the best of the Directors' knowledge, information and belief having made all reasonable enquiry, Mr. Chen of the Vendors is an Independent Third Party, while Mr. Fu, the other Vendor, is a Director of the Company and the Purchaser. Interest Acquired: The Sale Shares being the entire issued share capital of Health Food and JLT. Health Food and JLT are wholly beneficially owned by the Vendors in equal shares. The Vendors subscribed for the Sale Shares at HK$1 each when Health Food and JLT were incorporated in 2003. Consideration: The aggregate purchase price for the Sale Shares is HK$5,500,000 comprising (i) HK$2,150,000 as purchase price of the Health Food Shares and (ii) HK$3,350,000 as purchase price of the JLT Shares, which has been determined at arm's length negotiation with reference to the net asset value of approximately RMB4.0 million as at 31 December 2004 of the Acquired Group. The respective purchase prices for the Health Food Shares and the JLT Shares were determined with reference to the respective net asset value of Beijing JLT and Shenzhen JLT and the respective percentage holding of Health Food and JLT in Beijing JLT and Shenzhen JLT. Operations commenced in 2003 and the financial performance has improved every year. While the performance only improved marginally, the Directors are of the view that the losses of the Acquired Group are acceptable for such a start up venture in the food and beverages industry. The aim of the Company in acquiring the Acquired Group is to broaden its income base, which it will do as the revenue of Beijing JLT and Shenzhen JLT, amounting to an aggregate of HK$13.5 million for 2003 and HK$20.7 million for 2004, are very steady. The Company sees potential in applying its management skills to improve the Acquired Group's costs savings and marketing in order to improve the profitability of the Acquired Group, while retaining the steady income stream. There will also be opportunities in the future to promote the brand through its property development projects. The Directors are optimistic regarding the prospects of the Acquired Group and were therefore prepared to proceed with the Acquisition at a premium to its net asset. The losses of the