CAI Corp — Capital/Financing Update 2005

Sep 30, 2005

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular letter, 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 circular.

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HARBOUR CENTRE DEVELOPMENT LIMITED

(Incorporated in Hong Kong with limited liability) Stock Code: 51

Directors: Gonzaga W. J. Li (Chairman) B. S. Forsgate T. Y. Ng H. M. V. de Lacy Staunton M. K. Tan*

Registered Office: 16th Floor, Ocean Centre, Harbour City, Canton Road, Kowloon, Hong Kong

(* Independent Non-executive Directors)

30th September, 2005

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION Acquisition of Properties

INTRODUCTION

On 9th September, 2005, a press announcement was made by the Company regarding Manniworth Company Limited (“ Manniworth ”), which is a wholly-owned subsidiary of Harbour Centre Development Limited (the “ Company ”; together with its subsidiaries, the “ Group ”), as the tenderer, having succeeded in tendering for the acquisition from Thong Shing Investment Company Limited and Thong Sia Company Limited (the “ Vendors ”) certain properties known as Portion A1 of Portion A of the Second Floor and Portion A of the Third Floor and all those lavatories located at the staircases between the Second and Third Floors and between the Third and Fourth Floors, Star House, No. 3 Salisbury Road, Kowloon, Hong Kong, at a total consideration of HK$298.0 million. Such a tender (the “ Tender ”) was duly accepted by the Vendors on 6th September, 2005, with the written acceptance having been received by Manniworth on 8th September, 2005.

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Harbour Centre Development Limited

The transaction constitutes a discloseable transaction for the Company under Chapter 14 of the Rules Governing the Listing of Securities (the “ Listing Rules ”) of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”). The purpose of this circular letter is to provide the shareholders of the Company with the relevant information relating to the acquisition of the abovementioned properties.

DETAILS OF THE TENDER

Tender Dates : 25th August, 2005 (submission date) 6th September, 2005 (date of signing of acceptance) 8th September, 2005 (date of receipt of written acceptance by Manniworth) Parties : Thong Shing Investment Company Limited and Thong Sia Company Limited as the vendors. Manniworth as the purchaser. Properties to acquire: Portion A1 of Portion A of the Second Floor and Portion A of the Third Floor and all those lavatories located at the staircases between the Second and Third Floors and between the Third and Fourth Floors, Star House, No. 3 Salisbury Road, Kowloon, Hong Kong, together representing 1,391 equal undivided 19,328th parts or shares of that building with a total gross floor area of 50,780 sq. ft. (the “ Properties ”).

Consideration and payment terms:

The total amount of consideration for the Properties is HK$298.0 million. Upon the submission of the Tender on 25th August, 2005, a sum in cash of HK$20.0 million was paid by Manniworth to the Vendor’s solicitors as deposit. On the signing of an agreement for sale and purchase of the Properties by the three parties on 22nd September, 2005, a further sum in the form of banker’s cashier order of HK$9.8 million was paid to the Vendors’ solicitors. The balance of the purchase price will then be paid in the form of banker’s cashier order to the Vendors’ solicitors on completion of the transaction, which will take place on or before 8th November, 2005.

The consideration payable by Manniworth is intended to be funded from the internal resources of the Group.

INFORMATION ON THE PROPERTIES

The Properties, which are the subject of the transaction under the Tender (the “ Transaction ”), are subject to existing licenses and tenancies with different expiry dates and with remaining terms of less than three years. The purchase consideration is equal to HK$5,868 per sq. ft. on the basis of 50,780 sq. ft. gross area. The Properties on the basis of the purchase consideration will give a yield of 4.8% per annum based on rental revenue of the existing licenses and tenancies and an expected potential reversionary yield of 6.1% per annum. Certain parts of the Properties are now mortgaged or charged to a bank. Completion of the Transaction is subject

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Harbour Centre Development Limited

to the Vendors discharging the Properties from the mortgages at their sole expense on or before completion to the effect that the Properties will be sold free from the mortgages.

Pursuant to the Occupation Permit of Star House, the Properties are for department stores for non-domestic use. The Properties represent about 7.2% of undivided shares of the entire Star House.

REASONS FOR AND BENEFITS OF THE ACQUISITION

It is the intention of the Group to hold the Properties for long term rental revenue purpose in view of the continuous booming of the retail industry in Hong Kong amid a stable investment environment.

The directors of the Company (the “ Directors ”) are of the view that the acquisition of the Properties is a viable investment, which will broaden the asset and earnings base of the Group. Furthermore, the Directors believe that the terms of the Transaction are fair and reasonable and in the interests of the shareholders of the Company as a whole.

GENERAL

The Transaction was entered into on an arm’s length and willing-buyer and willing-seller basis. The consideration for the Transaction was determined on the basis of and by reference to recent transactions of comparable properties in Hong Kong.

The principal business activities of the Group are ownership of hotels and properties and investment, and that of the Vendors is property owning.

On completion of the Transaction, the total carrying value of the properties held by the Group will increase by about HK$309 million, while the Group’s cash or cash equivalent will decrease by the same amount. The Company believes that the Transaction will not have any significant effect on the Group’s earnings and liabilities.

To the best of knowledge, information and belief of the Directors having made all reasonable enquiry, the Vendors and the ultimate beneficial owner (if any) of the Vendors are third parties independent of the Company and not connected persons of the Company.

REGULATORY MATTERS

The Transaction constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules. The following additional information is given in compliance with the Listing Rules:-

(1) Disclosure of Interests

As at [23rd] September, 2005, being the latest practicable date prior to the printing of this circular letter (the “ Latest Practicable Date ”), the interests (all being personal beneficial interests and all being long positions) of the Directors and chief executive (if any) of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporation (within the meaning of Part XV of the Securities and Futures Ordinance (“ SFO ”)), viz. the Company’s parent company, namely, The

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Harbour Centre Development Limited

Wharf (Holdings) Limited (“ Wharf ”), which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered into the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers to be notified to the Company and the Stock Exchange, were as follows:

Name of Director	Number of Shares	Percentage of Holdings
Mr. Gonzaga W. J. Li	686,549	0.028%
Mr. T. Y. Ng	178,016	0.007%

Except as disclosed above, as recorded in the register kept by the Company under section 352 of the SFO in respect of information required to be notified to the Company and the Stock Exchange pursuant to the SFO or to the Model Code for Securities Transactions by Directors of Listed Issuers, there were no interests, both long and short positions, held as at the Latest Practicable Date by any of the Directors or chief executive of the Company in shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO).

(2) Substantial Shareholders’ Interests

Given below are the names of all parties which were, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital of the Company, the respective relevant numbers of shares in which they were, and/or were deemed to be, interested (all being long positions) as at the Latest Practicable Date as recorded in the register kept by the Company under section 336 of the SFO and the percentages which the shares represented to the issued share capital of the Company:

		Number of	Percentage
	Names	Ordinary Shares	of Holdings
(a)	Upfront International Limited	210,379,500	66.79%
(b)	Wharf Estates Limited	210,379,500	66.79%
(c)	The Wharf (Holdings) Limited	210,379,500	66.79%
(d)	WF Investment Partners Limited	210,379,500	66.79%
(e)	Wheelock and Company Limited	210,379,500	66.79%
(f)	HSBC Trustee (Guernsey) Limited	210,379,500	66.79%
(g)	Harson Investment Limited	25,357,500	8.05%

Note: For the avoidance of doubt and double counting, it should be noted that duplication occurs in respect of the shareholdings stated against parties (a) to (f) above in that they represent the same block of shares.

Save as disclosed in this circular, as at the Latest Practicable Date and so far as is known to the Directors or chief executive (if any) of the Company, no other person had, or was deemed or taken to have, any interests or short positions in shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or was,

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Harbour Centre Development Limited

directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

(3) Service Contracts

As at the Latest Practicable Date, there existed no service contract, nor there had been proposed any service contract to be, entered into between any Director with the Company or any of its subsidiaries which will not expire or is not determinable by the employer within one year without payment of compensation (other than statutory compensation).

(4) Directors’ Interests in Competing Business

Save as disclosed below, as at the Latest Practicable Date, none of the Directors and their respective associates have any interests in a business, which competes or may compete with the business of the Group.

Two Directors of the Company, namely, Messrs. G. W. J. Li and T. Y. Ng, being also directors of the Company’s parent company, namely, Wharf, and/or subsidiaries of Wharf, are considered as having an interest in Wharf under paragraph 8.10 of the Listing Rules.

Ownership of property for letting and ownership of hotels by wholly-owned subsidiaries of Wharf constitute competing businesses to the Group.

The commercial premises at Harbour City, being in the vicinity of The Marco Polo Hongkong Hotel, owned by the Wharf group for rental purposes are considered as competing with the commercial premises in The Marco Polo Hongkong Hotel owned by the Group. In view of the Wharf group’s extensive experience and expertise in property letting and management, the Group has appointed a subsidiary of Wharf as the agent for a term up to 31st May, 2008 for the letting, reletting, management, licensing and re-licensing of the commercial premises in The Marco Polo Hongkong Hotel.

Two hotels, namely, The Marco Polo Gateway and The Marco Polo Prince, owned by the Wharf group are also considered as competing businesses of The Marco Polo Hongkong Hotel owned by the Group. In view of the Wharf group’s expertise and very good track record in the management and operation of hotels throughout the Asia Pacific region, the Group has entered into an operations agreement (the “ Agreement ”) with a wholly-owned subsidiary (the “ Operator ”) of Wharf for the appointment of the Operator as manager for a term of 3 years commencing from 1st January, 2004 to operate, direct, manage and supervise The Marco Polo Hongkong Hotel. The Operator is also responsible for the operation of two hotels in Hong Kong, namely, The Marco Polo Gateway and The Marco Polo Prince, and some other hotels in the Asia Pacific region. Under the terms and conditions of the Agreement, the Operator has agreed, inter alia , to operate The Marco Polo Hongkong Hotel as a first class hotel. In the event of the Operator failing to perform the terms and conditions of the Agreement for a period of 20 days after a relevant notice has been served by the Group on the Operator, a 20-day notice of termination may then be given by the Group for terminating the Agreement.

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Harbour Centre Development Limited

For safeguarding the interests of the Group, the independent non-executive Directors and the Audit Committee of the Company would on a regular basis review the business and operational results of the Group to ensure, inter alia , that the Group’s hotel and property leasing and management businesses are and continue to be run on the basis that they are independent of, and at arm’s length from, those of the Wharf group.

(5)

Litigation

As far as the Directors are aware, neither the Company nor any of its subsidiaries is engaged in any litigation or claim of material importance pending or threatened against any member of the Group as at the Latest Practicable Date.

(6)

Other Information

• (a) The secretary of the Company appointed pursuant to Rule 3.24 of the Listing Rules is Mr. Wilson W. S. Chan, who is a fellow member of The Institute of Chartered Secretaries and Administrators.

• (b) The qualified accountant of the Company appointed pursuant to Rule 3.24 of the Listing Rules is Ms. Simmy F. S. Yau, who is a fellow member of The Association of Chartered Certified Accountants and an associate member of The Hong Kong Institute of Certified Public Accountants.

• (c) The transfer office of the Company is that of the Company’s share registrars, namely, Tengis Limited, and is situate at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

By Order of the Board Wilson W. S. Chan Secretary

This circular letter includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquires, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

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Harbour Centre Development Limited