09:14 COSCO INTL HOLD<00517> - Announcement (3) INFORMATION ON MODERN CAPITAL Modern Capital is an investment holding company incorporated in the BVI on 8th August 1997. Modern Capital owns the entire issued share capital of each of Cash In Hand, Gwee Brothers, Malayan, Tian Lee, Velu Exports, Wing Thye, Year Of The Rat and 99 Prove Finance, all principally engaged in the business of property letting and are owners of 39th, 40th, 42nd, 47th, 48th, 49th, 50th and 51st Floors of COSCO Tower respectively. As at the date of this announcement, the whole of 39th, 40th and 42nd Floors are leased to independent third parties not connected with the Group; the whole of 47th Floor and Unit 4802 of 48th Floor are being used by the Group; and other units in 48th Floor and the whole of 49th, 50th and 51st Floors are leased to COSCO Hong Kong and its subsidiaries. The unaudited consolidated net liabilities of Modern Capital Group as at 31st December 2004 amounted to approximately HK$442,000,000. The original acquisition cost of the entire issued share capital of Modern Capital was HK$7.8. The table below sets out the unaudited consolidated net profits/losses before and after taxation of Modern Capital for the two years ended 31st December 2003 and 2004 respectively: Year ended Modern Capital Group 31st December 2003 31st December 2004 HK$ HK$ Unaudited consolidated net profit/(loss) before taxation (56,620,482) 163,570,671 Unaudited consolidated net profit/(loss) after taxation (56,620,482) 163,570,671 REASONS FOR AND THE BENEFITS OF ENTERING INTO THE AGREEMENT Throughout these years, the Company has been implementing its stated business objective in expanding the scope of the Group's ship trading and supplying services, by acquiring interests in marine paint and coatings manufacturers as well as the acquisition of the marine insurance brokerage arm and the largest marine equipment and spare parts trading company within the COSCO Group, the Group has gradually underpinned success to become one of the leading ship trading and supplying services providers in the PRC. The Group acquired the Properties in 1998 and the original acquisition costs was approximately HK$1.66 billion. The book value of the Properties as at 31st December 2004 was approximately HK$1.1 billion. The Bank Loan which is secured by, among other things, mortgages on the Properties was approximately HK$591,000,000 as at the date of the Agreement representing approximately 54% of the book value of the Properties as mentioned above. After the disposal of the Properties through the Disposal at the Consideration which was determined with reference to the market value of the Properties, and upon full repayment of the Bank Loan with the use of part of the Disposal proceeds, the Group would have available to it additional funds of approximately HK$811,000,000, such sum of HK$811,000,000 will provide further resources for the Group's businesses in particular, the ship trading and supplying services businesses. After Completion, the debt ratio of the Group is expected to drop from approximately 56% to approximately 40%. The Company estimates that the expected gain on the Disposal to the Group based on the financial information of Modern Capital Group as at 31st December 2004 is approximately HK$290,000,000, which is subject to adjustments at Completion. Further, the Group's property portfolio would be substantially reduced as a result of the Disposal enabling the Group to concentrate on its ship trading and supplying services businesses. The Directors consider that the Disposal is on normal commercial terms and the terms of the Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole are concerned. INTENDED USE OF PROCEEDS The Board intends to use the proceeds from the Disposal partly for prepayment of the Bank Loan in full and the remaining amount of approximately HK$811,000,000 (before expenses) as general working capital and/or financial resources for further investments relating to its ship trading and supplying services business. The Group has not committed to engaging in any particular investment that requires the use of such remaining amount of proceeds.