09:35 NEW WORLD CHINA<00917> - Announcement (3) The significant increase of the annual cap for the three financial years of 2006, 2007 and 2008 as compared to the three financial years of 2003, 2004 and 2005 is principally due to the significant increase of GFA planned to be developed by the Group in the forthcoming three financial years. The Company has a land bank of an aggregate GFA of approximately 17 million sq.m. spanning over 17 cities in the PRC. With the view that the PRC economy will remain strong and stable in the future, the Board believes that the acceleration of the development pace of the Projects would be generally beneficial to the development of the Group. On this basis, the Company expects that it will invite NWD Group to tender for Services relating to an aggregate GFA of approximately 1 million sq.m. for the forthcoming three financial years. The above annual caps are arrived at by assuming NWD Group is engaged to undertake all the Services it is invited to bid for, and taking into account the complexity of the Services that NWD Group is required to render as the Group will put more emphasis on developing residential and commercial complex in the forthcoming three financial years. Such annual caps are in line with the corresponding historical transaction amounts for the three financial years of 2003, 2004 and 2005 in terms of the service fees payable by the Group to NWD Group per sq.m. and the projection of the Group's future development. In the event that any of the annual caps set forth above is exceeded, the Company will make a further announcement and will comply with the Listing Rules as and when necessary. REASONS FOR AND BENEFITS OF ENTERING INTO THE MASTER SERVICE AGREEMENT The Company is principally engaged in property development and property related investment in the PRC. Given that (a) the aggregate GFA planned to develop by the Group is sizable; (b) the Projects would inevitably involve different types of Operational Agreements for different construction sites which are expected to be entered into at different points of time; and (c) the engagement of NWD Group to provide the Services will be on a regular and continuing basis, the Board believes that it is impracticable to seek shareholders' approval each time the relevant Operational Agreement is entered into. The Board therefore resolved to enter into the Master Service Agreement to regulate the future possible business relationship with and the engagement of NWD Group. In addition, NWD Group is engaged to continue to provide the Services relating to the Uncompleted Works so as to maintain the quality and the continuity and to ensure the smooth operation of the construction works of the uncompleted projects of the Group. The Board believes that the transactions contemplated under the Master Service Agreement will enable the Company to benefit from the expertise, experience, efficiency and economies of scale of NWD Group, which would enable the Company to obtain quality services at competitive prices. On this basis, the executive Directors are of the view that the terms of the Master Service Agreement are fair and reasonable and in the interests of the Company and its shareholders as a whole. CONTINUING CONNECTED TRANSACTION NWD is the substantial shareholder of the Company, which together with its subsidiaries, is holding approximately 72% of the shares of the Company in issue as at the date of this Announcement. The transactions contemplated under the Master Service Agreement constitute continuing connected transaction of the Company under Rule 14A.14 of the Listing Rules. Given that each of the relevant percentage ratios (as defined in Rule 14.07 of the Listing Rules) of the maximum annual value of the Master Service Agreement exceeds 2.5%, the Company's engagement of NWD to provide the Services under the Master Service Agreement is subject to the reporting and announcement requirements and Independent Shareholders' approval. An independent board committee of the Company has been appointed to advise the Independent Shareholders on the terms of the Master Service Agreement. Commerzbank has been appointed as the independent financial advisor to advise the independent board committee of the Company and the Independent Shareholders on the terms of the Master Services Agreement. A circular containing details of the Master Service Agreement, a letter from the independent board committee of the Company and a letter of advice from the independent financial advisor to the independent board committee of the Company and the Independent Shareholders together with a notice convening the EGM will be despatched to the shareholders of the Company on or about Friday, 10 June 2005. NWD and its associates and parties acting in concert with them (as defined in the Listing Rules) will abstain from voting on the resolution to approve the Master Service Agreement at the EGM.