10:04 TCL COMM<02618> - Announcement & Resumption of Trading (3) D. Use of Proceeds Out of the entire amount of the net proceeds from the Notes Issue (which is anticipated to be close to ?20,000,000 (about HK$199,510,000) principal amount due to minimal expenses to be involved in the Notes Issue), about HK$40 million is intended to be applied to pay for the listing expenses, and about HK$120 million will be applied to Huizhou TCL Mobile Communication Co., Ltd., a wholly-owned subsidiary of the Company incorporated in the PRC, for its operating needs, and the remaining net proceeds will be used as working capital of the Group for its general operating usage. The Company has not raised any funds since its listing on the Stock Exchange on 27 September 2004. E. Reasons for the Notes Issue The Notes Issue on the principal terms set out above will increase the Group's working capital and can be used by the Group to finance its operation and is therefore beneficial for the Company. The Directors believe that the Subscription Agreement was entered into on an arm's length basis in the ordinary and usual course of business of the Group and on normal and commercial terms which are fair and reasonable and in the interests of the Shareholders as a whole. F. Application for Listing No application will be made for the listing of, or permission to deal in, the Convertible Notes on the Stock Exchange or any other exchange. An application will be made to the Stock Exchange for the listing of, and permission to deal in, the new Shares which may be issued upon the conversion of the Convertible Notes. II. EGM The Notes Issue constitutes a discloseable transaction for the Company under the Listing Rules. As the Subscriber is a connected person of the Company by virtue of its indirect about 57.4% interest in the Company, the Notes Issue also constitutes a connected transaction for the Company under the Listing Rules. As the amount involved in the Notes Issue exceeds 2.5% of the Relevant Ratio, the Notes Issue is subject to the requirements of reporting, announcement and the Independent Shareholders' approval in accordance with Chapter 14A of the Listing Rules. An EGM will be convened as soon as practicable at which ordinary resolution will be proposed to approve the Notes Issue. In view of the interest of the Subscriber in the Notes Issue, the Subscriber and its associates will abstain from voting at the EGM in respect of the resolution to approve the Notes Issue. The Independent Board Committee has been formed to advise the Independent Shareholders on whether or not the terms of the Notes Issue are fair and reasonable so far as the Independent Shareholders are concerned. An independent financial adviser will be appointed to advise the Independent Board Committee in respect of the terms and conditions of the Notes Issue. III. GENERAL The Company is an investment holding company. The Group is principally engaged in research, development, manufacturing and sale of mobile handsets. For further information on the Group, please visit www.tclcom.com. The Subscriber is a major PRC conglomerate that designs, develops, manufactures and markets a wide range of the electronic, telecommunications, information technology and electrical products. The brand name ``TCL'' is among the most widely recognized in China. According to recent survey by Beijing Famous-Brand Evaluation Co. Ltd., ``TCL'' was the sixth most valuable brand name in China in 2004. For further information on the Subscriber, please visit www.tcl.com. A circular containing, among other things, further information on the Notes Issue, the letter from an independent financial adviser containing its advice to the Independent Board Committee in relation to the Notes Issue, the recommendation of the Independent Board Committee in relation to the Notes Issue and the notice convening the EGM referred to above will be dispatched to the Shareholders as soon as practicable. DBS Asia Capital Limited has been appointed as the independent financial adviser to advise the Company on the transactions contemplated by the Notes Issue. This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the Shares or any securities of the Company.