Central Development Holdings Limited — Capital/Financing Update 2003

Jun 19, 2003

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.

SEAPOWER RESOURCES INTERNATIONAL LIMITED （海暉國際實業有限公司）

MANY RETURNS LIMITED

(Incorporated in the British Virgin Islands with limited liability)

(Provisional Liquidators Appointed)

(Incorporated in the Cayman Islands with limited liability)

RESTRUCTURING OF SEAPOWER RESOURCES INTERNATIONAL LIMITED (PROVISIONAL LIQUIDATORS APPOINTED) INVOLVING, INTER ALIA, CAPITAL RESTRUCTURING, DEBT RESTRUCTURING INVOLVING CREDITORS’ SCHEMES OF ARRANGEMENT IN ACCORDANCE WITH SECTION 86 OF THE CAYMAN COMPANIES LAW AND SECTION 166 OF THE COMPANIES ORDINANCE, SUBSCRIPTION OF NEW SHARES AND WARRANTS AND WHITEWASH WAIVER

FINANCIAL ADVISER TO SEAPOWER RESOURCES INTERNATIONAL LIMITED (PROVISIONAL LIQUIDATORS APPOINTED)

FINANCIAL ADVISER TO MANY RETURNS LIMITED

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The Provisional Liquidators and the Investor are pleased to announce that the Restructuring Agreement in relation to the Restructuring Proposal for the Company was signed on 14 May 2003. The key terms of the Restructuring Agreement are set out in this announcement.

The Restructuring Proposal, if successfully implemented, will, amongst other things, result in:

• a) a restructuring of the share capital of the Company whereby the par value of the issued Shares will be reduced from HK$0.05 to HK$0.01 each through par reduction, share consolidation and share subdivision as contained in the Capital Restructuring;

• b) all the Creditors of the Company discharging and waiving their claims against the Company pursuant to the Schemes;

• c) the Investor holding a controlling interest in the issued share capital of the Company; and

• d) the resumption of trading in the New Shares of the Company upon Completion subject to sufficient public float being restored.

Key terms of the Schemes include the following:

• a) in consideration of the Creditors’ agreement to discharge and waive all their claims against the Company (total claims of the Creditors are estimated to be approximately HK$1,512 million as at the date of this announcement, but will be subject to formal adjudication by the Scheme Administrators pursuant to the terms of the Schemes), the Company will pay HK$38 million in cash, issue and allot 96,000,000 New Shares (representing approximately 2.0% of the issued share capital of the Company upon Completion) and any cash held by the Company as at the date of the Completion to the Scheme Administrators for distribution to the Creditors pursuant to the Schemes; and

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• b) in the event that the Company or the Group, within 12 months following Completion, makes any recoveries or realisations in connection with the Receivables, the Creditors will be entitled to 50% of the net proceeds from such recoveries and/or realisations whenever the aggregate entitlements of the Scheme Administrators to receive such recoveries and/or realisations (not already paid to them) exceed HK$200,000. The remaining 50% will be retained by the Company.

An independent financial adviser will be appointed to advise the Independent Shareholders regarding the Restructuring Agreement and the Whitewash Waiver. A circular containing, amongst other things, details of Capital Restructuring, Debt Restructuring, the Subscription, the Whitewash Waiver, the advice of the independent financial adviser and notice of the EGM, will be despatched to the Shareholders as soon as practicable.

The Stock Exchange informed the Company on 7 March 2003 that the Company had been placed into the second stage of the delisting procedures in accordance with Practice Note 17 of the Listing Rules.

The release of this announcement does not necessarily indicate that the Restructuring Proposal will be successfully implemented and completed as the conditions precedent to the Restructuring Agreement may not be fulfilled or otherwise waived. Trading in the Shares of the Company has been suspended since 2:30 p.m. on 28 December 2001 and will remain suspended until Completion and a sufficient public float has been restored. Further announcements will be issued as and when appropriate.

THE RESTRUCTURING PROPOSAL

The Provisional Liquidators and the Investor are pleased to announce that the Restructuring Agreement in relation to the Restructuring Proposal was signed on 14 May 2003.

The Restructuring Proposal involves, amongst other things, the Capital Restructuring, Debt Restructuring involving the Schemes, and the Subscription.

(A) CAPITAL RESTRUCTURING

The existing authorised share capital of the Company is HK$1,000,000,000 divided into 20,000,000,000 Shares, of which 1,547,042,829 Shares of par value of HK$0.05 each are issued and credited as fully paid up. The Company’s share capital will be reorganised as follows:

• (a) the par value of every issued Share will be reduced from HK$0.05 to HK$0.0006 and every unissued Share will be cancelled;

• (b) every 100 issued shares reduced pursuant to (a) above of HK$0.0006 will be consolidated into 1 share of HK$0.06;

• (c) each issued share reduced and consolidated pursuant to (a) and (b) above will be divided into 6 New Shares of HK$0.01 each; and

• (d) the Company’s authorised share capital will be reduced to HK$100,000,000 divided into 10,000,000,000 New Shares.

Details of the board lot size, trading arrangement and arrangement for any fractions of Shares which arise after the Capital Restructuring becoming effective will be set out in the circular of the Company to be despatched to the Shareholders and announced by way of public announcements.

(B) DEBT RESTRUCTURING

The total indebtedness due by the Company to the Creditors is estimated by the Provisional Liquidators at approximately HK$1,512 million as at the date of this announcement. This estimate is for indicative purposes only and the Creditors’ claims will be subject to formal adjudication by the Scheme Administrators once the Schemes have been implemented.

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The Schemes:

In consideration of the Creditors’ discharging and waiving all their claims against the Company, the Scheme Administrators will receive the following with an estimated value of HK$39 million (being the cash amount and the value of New Shares estimated at par value) from the Company for distribution to the Creditors pursuant to the Schemes:

• a) HK$38 million in cash from the Subscription proceeds to be paid by the Investor upon Completion;

• b) 96,000,000 New Shares of HK$0.01 each (representing approximately 2.0% of the issued share capital of the Company upon Completion); and

• c) any cash held by the Company as at the date of Completion. As the Company has a number of outstanding legal and other costs associated with the termination of Former Restructuring Agreement and the adjudication of claims to the Company and its subsidiaries, the Provisional Liquidators expect the cash available on Completion to be minimal.

The Provisional Liquidators, on behalf of the Company, entered into the Restructuring Agreement with the Investor. Pursuant to the Restructuring Agreement, the Company (not the Investor) undertakes that it will use its best endeavours to realise in full and make all possible recoveries in connection with the Receivables within 12 months following Completion.

In the event that the Company or the Group, within 12 months following Completion, makes any recoveries or realisations in connection with the Receivables, the Creditors will be entitled to 50% of the net proceeds from such recoveries and/or realisations whenever the aggregate entitlements of the Scheme Administrators to receive such recoveries and/or realisations not already paid to them exceed HK$200,000. The remaining 50% will be retained by the Company. The Receivables are mainly due from the former margin customers of the Company’s financial services subsidiary, Seapower Finance Limited.

The Investor will undertake to the Company that the Company will not dispose of any of the Group’s assets if such disposal will result in the Company breaching paragraph 38 of its Listing Agreement with the Stock Exchange.

The Provisional Liquidators have received the written, in principle support from creditors representing approximately 92% of the total indebtedness of the Company in respect of the Restructuring Agreement.

(C) SUBSCRIPTION

The Investor will subscribe for 4,600,000,000 New Shares at HK$0.01 in accordance with the terms of the Subscription Agreement to be entered into by the Investor, the Provisional Liquidators and the Company before Completion, for an aggregate amount of HK$46 million in cash. The number of New Shares to be subscribed for by the Investor pursuant to the terms of the Subscription Agreement represents approximately 96.06% of the enlarged issued share capital of the Company immediately after Completion.

In addition, the Investor will, in accordance with the terms of the Subscription Agreement, subscribe for Warrants which entitle the holder(s) thereof to subscribe for a number of New Shares representing 20% of the enlarged issued share capital of the Company upon Completion, at an exercise price of HK$0.01 per New Share (subject to adjustment), for a total consideration of HK$1.00. The Warrants, if fully exercised by the Investor at the exercise price of HK$0.01 per New Share, will provide additional capital of approximately HK$9.58 million to the Company and approximately 957,764,000 New Shares will be issued upon full exercise of the Warrants.

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All New Shares to be issued pursuant to the Subscription and upon exercise of the Warrants will rank pari passu in all respects, including all rights in relation to dividends, voting and return of capital, with the New Shares in issue upon Capital Restructuring becoming effective.

Of the Subscription proceeds of HK$46 million from the subscription of 4,600,000,000 New Shares, HK$38 million will be applied to the cash payment to the Scheme Administrators for distribution to the Creditors pursuant to the Schemes, HK$1 million will be paid to the Petitioning Creditor to settle all or part of the Petitioning Creditor’s costs outstanding upon Completion, HK$6.4 million will be applied towards the costs and expenses of the Restructuring Proposal and an aggregate amount of HK$0.6 million will be applied to meet the general working capital requirements of the Group up to Completion. Pursuant to the Restructuring Agreement, the interim working capital of up to HK$0.6 million will be held in a designated working capital account and be used by the Provisional Liquidators to meet the working capital requirement of the Company during the restructuring. Any unused portion of the interim working capital, i.e. cash, upon Completion will be paid by the Provisional Liquidators to the Company and will not be transferred to the Scheme Administrators.

(D) CONDITIONS PRECEDENT TO THE RESTRUCTURING PROPOSAL

Completion of the Restructuring Proposal will be subject to, amongst others, the fulfillment of the following:

• (a) the Subscription Agreement being executed;

• (b) the Warrant Instrument being executed;

• (c) the Courts sanctioning the Schemes;

• (d) the Cayman Islands Court sanctioning the Capital Restructuring;

• (e) all necessary resolutions being passed by the Shareholders (other than those who are not allowed to vote pursuant to the Listing Rules or the Code) approving:

• (i) the Investor’s Subscription of New Shares and Warrants;

• (ii) the Capital Restructuring;

• (iii) the appointment of a number of new directors to the Company (such number to be agreed between the Investor and the Company) and the removal of a number of current directors (such number to be agreed between the Investor and the Company) conditional only upon Completion taking place;

• (iv) the removal and appointment of the Company’s auditor on Completion as requested by the Investor (The latest audited accounts of the Company for the financial year ended 31 March 2001 were audited by Deloitte Touche Tohmatsu);

• (v) the Whitewash Waiver being granted by the Executive; and

• (vi) all transactions contemplated under the Restructuring Agreement and the Subscription Agreement;

• (f) either: (i) conditional approval by the Stock Exchange of the resumption of trading in the Shares and trading of the New Shares; or (ii) approval by the Stock Exchange of the Company’s draft announcement in respect of, inter alia, the resumption of trading in the Shares and trading of the New Shares;

• (g) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the New Shares in issue on Completion and to be issued pursuant to the Restructuring Agreement and the Subscription Agreement;

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• (h) confirmation that the Executive has granted the Whitewash Waiver (either unconditionally or subject to conditions to which the Investor does not object) to the Investor pursuant to Note 1 on Dispensations from Rule 26 of the Code;

• (i) the Petitioning Creditor withdrawing the petition to wind up the Company; and

• (j) the discharge of the Provisional Liquidators conditional only on Completion.

If any of the above conditions have not been fulfilled or waived in writing within 150 days of the date of the publication of this announcement or such later date up to 31 December 2003 as the Investor, the Company and the Provisional Liquidators may agree, in writing, pursuant to the terms of the Restructuring Agreement, the Restructuring Agreement will lapse.

The Provisional Liquidators and the Investor have agreed that they will not waive or amend conditions (f) and (h). Hence, the Restructuring Agreement will lapse if the conditions (f) and (h) are not fulfilled before Completion.

The deposits which have already been paid by the Investor total HK$10.5 million and are held by the Escrow Agent. These deposits will be either applied to the restructuring costs or restructuring consideration in accordance to the terms of the Restructuring Agreement.

The majority of these deposits are non-refundable if the Investor breaches or defaults in any of its obligations under the Restructuring Agreement.

CHANGES IN SHAREHOLDINGS AND MAINTENANCE OF THE LISTING OF THE COMPANY

The shareholding structure of the Company upon Completion, both before and after full exercise of the Warrants by the Investor, is estimated as follows:

			Upon Completion	Upon Completion	Upon Completion	Upon Completion
	Existing		but before full	exercise	and after full	exercise
	Shareholding		of Warrants		of Warrants
			(million		(million
	(million Shares)	%	New Shares)	%	New Shares)	%
Investor and its concert parties	–	–	4,600.00	96.06	5,557.76	96.71
Creditors	–	–	96.00	2.00	96.00	1.67
I-China Holdings Limited
(Provisional Liquidators Appointed)	426.19	27.55	25.57	0.53	25.57	0.45
Other Existing Public Shareholders	1,120.85	72.45	67.25	1.41	67.25	1.17
Total	1,547.04	100.00	4,788.82	100.00	5,746.58	100.00

As set out in the above shareholding table, immediately upon Completion, the Investor together with parties acting in concert with it, will be interested in approximately 96.06% and 96.71% of the enlarged issued share capital of the Company before and after the full exercise of the Warrants respectively. The Investor will apply to the SFC for a waiver from its obligation under the Code to make a general offer for all the New Shares of the Company other than those to be owned by the Investor together with parties acting in concert with it.

Pursuant to paragraph 8 of Schedule VI of the Code, where the Independent Shareholders approve the issue of the Warrants where no immediate voting rights are obtained, the Executive will view the approval as sanctioning the maximum subscription at the earliest possible moment without the necessity for the making of an offer under Rule 26 of the Code. After the subscription for New Shares as contemplated by the Warrants, the Investor and parties acting in concert with it shall be interested in an aggregate of approximately a percentage of 96.71% of the enlarged issued share capital of the Company.

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If the Investor and parties acting in concert with it acquire further voting rights after Completion, the Whitewash Waiver, to the extent applicable to the Warrants, will only apply to subscription for, such number of voting rights as, when added to the purchases, does not exceed the number originally approved by the Independent Shareholders. The Company will put forward a resolution in relation to this, to be taken by poll, to the Independent Shareholders at the EGM.

As the Investor and parties acting in concert with it will hold more than 50% of the voting rights of the Company upon Completion, the creeper provisions of the Code will not apply and they will be free to acquire further voting rights in the Company without triggering a general offer obligation pursuant to paragraph 4(c) of Schedule VI of the Code.

In view of the Investor and the parties acting in concert with it holding in aggregate more than 75% of the enlarged issued share capital of the Company upon Completion, the Investor and the proposed directors of the Company have undertaken to the Stock Exchange that they will use their best endeavours to ensure that a sufficient number of New Shares will be sold, placed or otherwise disposed of to independent third parties to restore the public float of not less than 25% of the enlarged issued share capital of the Company as required under Rule 8.08 of the Listing Rules before the resumption of trading of the Company’s Shares. The Investor will make arrangements for the restoration of the public float of the Company and no underwriting or irrevocable placing agreement has been entered into as at the date of this announcement.

The Investor has undertaken to the Stock Exchange that it will not exercise the conversion rights of the Warrants if such conversion would result in the public float falling below 25% as required under the Listing Rules.

Trading of the New Shares will be resumed when sufficient public float is restored after the implementation of the Restructuring Proposal.

If the Stock Exchange believes that a false market exists or may exist in the New Shares or there are insufficient New Shares in public hands to maintain an orderly market, it will consider exercising its discretion to suspend trading in the New Shares.

The Stock Exchange has further stated that, if the Company remains listed on the Stock Exchange, any asset dispositions or asset acquisitions by the Group will be subject to the provisions of the Listing Rules. Under the Listing Rules, the Stock Exchange has the discretion to require the Company to issue an announcement and/or a circular to its Shareholders irrespective of the size of the proposed transactions. The Stock Exchange also has the power under the Listing Rules to aggregate a series of transactions and any such transactions may result in the Company being treated as if it were a new applicant for listing and subject to the requirements for new listing applicants as set out in the Listing Rules.

REASONS FOR THE RESTRUCTURING OF THE COMPANY

On 12 December 2001, winding up petitions were served on the Company and Yiu Fung Cold Storage & Warehousing Limited, Yiu Fai Warehousing Limited, Seapower Resources Cold Storage & Warehousing Limited and South East Asia Overseas Finance Limited, all of which are wholly owned subsidiaries of the Company, by a banking syndicate as disclosed in the Company’s announcement dated 14 December 2001. The High Court of Hong Kong then ordered the Provisional Liquidators be appointed to the Company with effect from 31 December 2001. The key focus of the Provisional Liquidators has been to carry on, stabilise and enhance the current operations of the Company, including facilitating a restructuring of the Company. On 5 March 2003, the Former Restructuring Agreement was terminated due to, inter alia, the on-going default by the Former Investors in relation to the subscription proceeds and the post closing working capital. Details in relation to the termination were set out in full in the public announcement dated 5 March 2003. The Provisional Liquidators confirm that there is no litigation in relation to such termination.

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Since the termination of the Former Restructuring Agreement, the Provisional Liquidators have been actively searching for potential investors to facilitate the necessary restructuring of the Company. After taking into consideration the current financial position of the Group and other alternative restructuring proposals received by the Company since the termination of the Former Restructuring Agreement, the Provisional Liquidators are of the view that the present Restructuring Proposal represents the best option available to the Company, its Creditors and its Shareholders having regard to all relevant factors, including the returns available to both the Creditors and the Shareholders, the availability of alternatives for the Creditors to recover their debts and the time required to conclude the Restructuring Proposal. On 14 May 2003, the Provisional Liquidators and the Investor entered into the Restructuring Agreement.

If the Restructuring Proposal is successfully implemented, all the Company’s indebtedness of approximately HK$1,512 million as at the date of this announcement will be discharged and waived pursuant to the Schemes. If the Company is unable to restructure its indebtedness with its Creditors as set out in the Restructuring Proposal, the Provisional Liquidators believe that there is a strong likelihood that the Company will be wound up. Should the Company be wound up, the return to the Creditors will be minimal and there is unlikely to be any return to the Shareholders.

MANAGEMENT OF THE COMPANY

The current Board comprises six Directors, Ms. Shirley Choi Siu Lui, Ms. Ou Yirong, Mr. Norman Choi Sung Fung, Mr. Choi Sai Leung, Ms. Judy Wong Tak Kwan and Mr. Ronald Lau Kin Hon. The powers of the directors have been suspended since the appointment of the Joint and Several Provisional Liquidators. The Investor intends that, upon Completion, all existing Directors will be removed from the Board. Mr. Kenneth Chan, Mr. Steven Wong, Mr. Christie Yau, Mr. Francis K Tung and Ms. Kitty Wong will be appointed as the new Directors to the Company and to the subsidiaries of the Company upon Completion and the board will appoint other directors as appropriate or necessary following Completion. Mr. Kenneth Chan, Mr. Steven Wong, Mr. Francis K Tung and Ms. Kitty Wong will be appointed as the new executive Directors upon Completion. Mr. Christie Yau will be appointed as an independent non-executive Director upon Completion. One more independent non-executive director will be appointed once the nomination is finalised. Mr. Francis K Tung will be appointed as the Chairman of the Company upon Completion.

Mr. Kenneth Chan BSc, MBA, AHKIS, ACIArb, RPS is a chartered surveyor and qualified project manager. He possesses a BSc degree and a MBA degree and has over 14 years experience in the real estate industry in Hong Kong and the Asia Pacific. Mr. Chan has experience in managing organisations including as an Associate of Spence Robinson Ltd, a architectural firm in HK for 8 years. Following this, he was Senior Associate Director managing the Project and Development Department of Jones Lang LaSalle Ltd, a global company listed in the New York Stock Exchange for 5 years. Most recently, Mr. Chan was Director and Country Head in CityAxis Ltd, a contracting company listed in the Singapore Stock Exchange for 1 year. Mr. Chan is currently a director of Integrated Project Solutions Limited which is engaged in project management and consultancy services.

Mr. Steven Wong, B.E.S., MARCH, RIBA, RMAIC, AAA, is a qualified architect and has over 28 years of experience in property development projects in Hong Kong, China and Canada. He also has experience in organizations including the role of Managing Director in DLS Management, an international consultancy company for 5 years, as Project Director in City University for 4 years, as Property Development Manager in HK and China Gas for 5 years, as Development Manager in University of Science and Technology for 1 and a half years, and as Manager in Sun Hung Kai Real Estate Ltd for 1 year. Mr. Wong is currently a director of Steven C S Wong Associates Limited which is engaged in project management and consultancy services.

Mr. Christie Yau, BSc (Hons), is an experienced project manager and building surveyor. He has 6 years of experience in project management in Jones Lang LaSalle Ltd.

Mr. Francis K Tung has over 20 years’ experience in international corporate finance, investment banking and accountancy. Starting his early career as an auditor with Price Waterhouse, Mr. Tung practiced as a Chartered Accountant for seven years. In 1988, Mr. Tung began his merchant banking career with Bankers

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Trust Company of New York, in which he had worked for 2 years. He was subsequently appointed as Chief Financial Officer of a conglomerate in Hong Kong for 3 years to head its corporate finance and investment functions in the Asian region, developing extensive experience during this period in both corporate and advisory roles. He continued his career in corporate finance and investment banking after he left the Hong Kong conglomerate through two private companies involved in financial advisory of non listed securities. In 1996, Mr. Tung founded Horwath Capital Asia Limited which became licensed with the SFC in 1997 as investment adviser. Mr. Francis K Tung is currently a group managing director of Horwath Capital Asia Group Limited.

Ms. Kitty Wong has over 8 years of corporate finance experience in Hong Kong. She is admitted as a solicitor of the High Court of Hong Kong SAR and a solicitor of the Supreme Court of England and Wales and she is also a member of the Hong Kong Securities Institute. Before she joined Horwath Capital Asia Limited, HCAL, she worked in other local financial services groups as financial adviser and legal counsel. Ms. Wong is currently a director of HCAL.

Although the new executive Directors have no experience in the core businesses of the Group, they possess the capability of determining corporate objectives, planning strategies for future business development and reviewing the overall operations and business plans of the Group as they are involved in senior management of the organization engaged in business consultancy and project and financial management as mentioned in the paragraphs above. Moreover, the Investor and its sole director will reestablish a strong professional management team for the Company by recruiting employees with relevant experience in cold storage warehousing and logistics businesses in Australia, Hong Kong and the PRC. The Investor and its sole director will retain the Group’s current key senior managers Ms. Olivia Wai Yee Yung and Ms. Rosie Song Yue to oversee the daily operations of the cold storage warehousing and logistics divisions of the Group. Details in this regard can be found in the last paragraph under the section headed “Reasons for the Subscription by the Investor”.

EXISTING BUSINESS OF THE GROUP AND ITS PAST PERFORMANCE

The Provisional Liquidators were appointed on 31 December 2001 to stabilize the Group’s affairs and facilitate a restructuring of the Company. Throughout this, the operations of the Company have continued to be maintained. The Group’s current principal activities are the provision of logistics management services and the operation of warehousing and cold storage businesses.

The deterioration of the Group’s financial position was mainly caused by the rapid expansion into noncore businesses, the Asian financial crisis and recession and substantial borrowings. These factors caused the Group’s financial performance to deteriorate. The Group’s audited turnover and net loss for the year ended 31 March 2001 were approximately HK$201 million and HK$239 million respectively. The primary reasons for such a loss were huge provisions for bad and doubtful debts, deficits on revaluation of properties and interest expense.

Since the appointment of the Provisional Liquidators on 31 December 2001, the Group’s non-core business operations have been discontinued and only the core businesses of logistics management services and cold storage and warehousing have been maintained. Given that the Company is currently in provisional liquidation and is suffering from a lack of working capital, only the core businesses have survived and are able to support the current operations themselves albeit on a lesser scale than in previous years. The turnover of the Group in the period since the appointment of the Provisional Liquidators is considerably less than the turnover of year 2001 and detailed audited financial information for the financial years ended 31 March 2002 and 31 March 2003 will be disclosed in the circular to be dispatched to the Shareholders in accordance with the Listing Rules and the Code.

Following Completion of the Restructuring Proposal, the Investor will conduct a detailed review of the financial position, business operations and assets of the Group with a view to developing a corporate strategy to revitalize the Group’s existing businesses and enhance the profitability of the Group. The Investor may also explore new and appropriate investment opportunities of similar lines of existing businesses in order to strengthen the earnings, cashflow and liquidity of the Company.

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On Completion, it is anticipated that the financial position of the Company will be improved as all liabilities of the Company will be compromised and discharged through the Schemes pursuant to section 86 of the Cayman Companies Law and section 166 of the Hong Kong Companies Ordinance and the Group will have positive net tangible asset value and sufficient working capital for on-going operations.

On the basis of the above, and taking into account the reasons for the Investor’s Subscription in the Company as set out in section headed “Reasons for the Subscription by the Investor” of this announcement, the Provisional Liquidators and the Investor are satisfied that the Company has sufficient operations and assets to comply with Paragraph 38 of the Listing Agreement and to warrant the continued listing of the shares of the Company upon Completion.

REASONS FOR THE SUBSCRIPTION BY THE INVESTOR

The Investor is a company incorporated in the British Virgin Islands with limited liability. Mr. Kenneth Chan, the sole beneficial shareholder and sole director of the Investor, is a chartered surveyor and has over 14 years experience in the real estate industry in Hong Kong and the Asia Pacific. Mr. Chan was educated in HK and received his undergraduate degree in the UK and obtained a Master of Business Administration degree from Australia. The Investor and Mr. Kenneth Chan, the sole beneficial shareholder and sole director of the Investor, are independent of, not connected with and not acting in concert with the directors, chief executive or substantial shareholder of the Company and its subsidiaries and their respective associates as defined in the Listing Rules.

In view of the Group having provided specialized storage services for climate-controlled products for about 20 years to importers, traders, wholesalers and manufacturer/processors and its substantial experience in the storage of refrigerated and frozen meat in New South Wales, Australia, the Investor and its sole director consider the Group has the capability to provide value added services to the existing customers by extending its existing cold storage business to associated businesses, such as providing total logistics solutions, including warehousing, inventory management, transportation and distribution, and door-to-door logistics management services for the local and foreign-based manufacturers, traders, importers, fast food shops and supermarket chains. The Investor and its sole director consider that the current cold storage warehousing business presents an opportunity for developing storage and logistics businesses and offering a one-stop cold storage warehousing and logistics services in Australia and the Asia Pacific region.

The Group is also engaged in the provision of logistics management services for local and foreign-based manufacturers, traders, distributors and importers in the PRC. The Investor believes logistics is one of the growth industries in mainland China and in light of the Group’s 20 year period of experience in cold storage and warehousing business in Hong Kong and Australia, the Group has accumulated significant expertise in logistical handling and trust from international clients.

Given the current development of the PRC economy, growing internal demand throughout PRC and China’s entry into the World Trade Organisation (“WTO”), many multinational companies propose selling their products to China and to increase their market share in the mainland China. This will lead to require direct trade links and businesses between China and other parts of the world. Operational efficiency is particularly important in moving high quality fresh climate-controlled products to designated markets. Hence, there will be increasing demand for logistics services by both PRC based and overseas enterprises.

The Investor and its sole director believe that the previous deterioration of the Group’s financial position has been largely caused by the Group’s over-diversification into other non-core businesses and the downturn in Asian economies. However, the Company’s business goodwill provides a sound base and the Investor and its sole director believe that the Company and the industries in which it operates have tremendous business potential. As shown in the second paragraph under the section headed “Existing Business of the Group and its Past Performance” of this announcement, the primary reasons for the Group’s loss were huge provisions for bad and doubtful debts, deficits on revaluation of properties and interest expense, which will not recur after successful restructuring of the Company. In addition, the existing core businesses of the Group have survived and are able to support the current operations

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themselves albeit on a lesser scale than in previous years given that the Company is currently in provisional liquidation and is suffering from a lack of working capital. The Investor’s and its sole director’s intention is to focus on the Group’s core businesses of providing logistics management services and the operation of warehousing and cold storage businesses and the recent growth rate of the PRC economy of about 8% in year 2002 led the Investor and its sole director to believe that the Company’s core businesses of providing logistics management services and the operation of warehousing and cold storage businesses have substantial potential.

As set out above, the Investor and its sole director will conduct a detailed review of the financial position, business operations and assets of the Group following Completion with a view to developing a corporate strategy to revitalize the Group’s existing businesses and enhance the profitability of the Group. Subject to this review, the Investor and its sole director intend to continue the Group’s principal businesses of cold storage warehousing and logistics management services. The Investor and its sole director may also explore new and appropriate investment opportunities along similar lines as the existing businesses in order to strengthen the earnings, cashflow and liquidity of the Company. The Investor and its sole director have no intention to divest any assets of the Group other than the realization of the Receivables. The Investor and its sole director do not have any plan as to the layoff of employees of the Group.

The Investor and its sole director will re-establish a strong professional management team for the Company by recruiting employees with relevant experience in cold storage warehousing and logistics businesses in Australia, Hong Kong and the PRC. The Investor and its sole director will retain the Group’s current key senior managers Ms. Olivia Wai Yee Yung and Ms. Rosie Song Yue to oversee the daily operations of the cold storage warehousing and logistics divisions of the Group. The Group intends to retain Ms. Olivia Wai Yee Yung to oversee the cold storage and warehousing operation in Australia and Ms. Rosie Song Yue to run the logistic operation in the PRC. Ms. Yung joined Australian Division of the Group in 1992. She is currently the executive manager of the Australian division and has over 10 years’ experience in managing cold storage, storage and logistic operations in Australia. Ms. Rosie Song Yue is the senior manager of the China business development division of the Group and she has over eight years of experience in sales and marketing and is especially familiar with the business development in the PRC. The Investor and its sole director believe the Group could capitalize on the experience and contacts of Ms. Song in the PRC in expanding the Group’s logistics operation in the PRC. The Investor also intends to keep the existing employees of the Company subject to its operational and business review after Completion.

DEALINGS

The Investor and parties acting in concert with it confirm that they have not dealt in the securities of the Company during the six month period immediately prior to the date of the Restructuring Agreement. They have also undertaken not to deal in the securities of the Company before the EGM to be convened to consider the Restructuring Proposal.

OTHER INFORMATION

In an announcement dated 21 February 2003, the Provisional Liquidators informed the public of the delay in the completion of the Former Restructuring Agreement and disclosed that there had been no progress in obtaining the Certificate for Housing Ownership and land use right title in respect of an investment made by Pentagon Profits in 24 townhouses in Beijing. Following the termination of the Former Restructuring Agreement, the Provisional Liquidators engaged a firm of PRC legal advisers to investigate the likelihood of Certificate for Housing Ownership and land use right title being obtained in relation to the 24 townhouses. As a result of Severe Acute Respiratory Syndrome, these investigations by the Provisional Liquidators’ PRC legal advisers have been delayed and are yet to be completed, but it appears that there would be little prospect of Certificate for Housing Ownership and land use right title being obtained. Accordingly, no value is attributed to Pentagon Profits in respect of the townhouses upon Completion. If a full provision for the investment in the townhouses is made, the financial effect to the Group would be an increase in the net liabilities of the Group after taking into account of the adjustments made subsequent to the unaudited balance sheet of the Group as at 30 September 2001 and up to 30 September 2002 but prior to the implementation of the Restructuring Proposal by HK$121,400,000 to HK$560,108,000. Further

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financial information will be included in the audited financial statements of the Group for the years ended 31 March 2002 and 31 March 2003 and the pro forma consolidated balance sheet of the Group upon Completion will be included in the circular to be despatched to the Shareholders.

Based on the legal advice received by the Provisional Liquidators to date, the eventual findings in relation to the investigations on Pentagon Profits and the 24 townhouses may require further action both in Hong Kong and the PRC. No final decision in this regard will be possible until the investigations are finalized. The Provisional Liquidators expect that the investigations by the PRC legal advisers will be completed by about 31 July 2003. The Provisional Liquidators will, with the benefit of such advice as they consider appropriate, then decide on the appropriate steps, if any, to be taken. Further announcements in relation to this will be issued as and when appropriate.

The Investor will submit an application to the Executive for a Whitewash Waiver which, if granted, would normally be subject to the approval of the Independent Shareholders to be conducted by way of a poll at the EGM.

The Company will submit an application to the Stock Exchange for the listing of, and permission to deal in, the New Shares in issue and to be issued pursuant to the Restructuring Proposal.

Asian Capital (Corporate Finance) Limited has been appointed as the financial adviser to the Company. Horwath Capital Asia Limited has been appointed as the financial adviser to the Investor. An independent financial adviser will be appointed to advise the Independent Shareholders on the Restructuring Proposal and the Whitewash Waiver. Further announcement will be made upon appointment of the independent financial adviser. A circular containing, amongst other things, details of Capital Restructuring, Debt Restructuring, the Subscription, the Whitewash Waiver, the advice of the independent financial adviser and notice of the EGM, will be despatched to the Shareholders as soon as practicable.

The Stock Exchange informed the Company on 7 March 2003 that the Company had been placed into the second stage of the delisting procedures in accordance with Practice Note 17 of the Listing Rules.

The release of this announcement does not necessarily indicate that the Restructuring Proposal will be successfully implemented and completed as the conditions precedent to the Restructuring Agreement may not be fulfilled or otherwise waived. Trading in the Shares of the Company has been suspended since 2:30 p.m. on 28 December 2001 and will remain suspended until Completion and a sufficient public float has been restored. Further announcement will be issued as and when appropriate.

DEFINITIONS:

“Board” the board of Directors of the Company

“Capital Restructuring” the proposed (a) reduction of the par value of every issued Shares from HK$0.05 each to HK$0.0006 each and cancellation of all unissued Shares; (b) consolidation of every 100 issued shares reduced pursuant to (a) above of HK$0.0006 each into 1 share of HK$0.06; (c) subdivision of each of the issued share reduced and consolidated pursuant to (a) and (b) above into 6 New Shares of HK$0.01 each; and (d) reduction of the authorised share capital to HK$100,000,000 divided into 10,000,000,000 New Shares of HK$0.01 each

• “Cayman Companies Law” the Companies Law (2001 Second Revision) of the Cayman Islands as amended from time to time

“Code”

the Hong Kong Code on Takeovers and Mergers

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“Companies Ordinance”	the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)
“Company”	Seapower Resources International Limited (Provisional Liquidators
	Appointed), a company incorporated in the Cayman Islands, the shares of
	which are listed on the Stock Exchange
“Completion”	the completion of the Restructuring Agreement and the Subscription
	Agreement
“Courts”	the Grand Court of the Cayman Islands and the High Court of Hong Kong
“Creditors”	any person to whom the Company owes a claim other than the preferential
	creditor (which means any creditor of the Company with a claim which would
	be treated as a preferential claim and have priority in winding-up commenced
	on 12th December, 2001 in Hong Kong pursuant to section 265 of the
	Companies Ordinance or would have priority in the Cayman Islands pursuant
	to section 162 of the Cayman Companies Law) and the Investor
“Debt Restructuring”	the proposed restructuring of the indebtedness and liabilities of the Company
	pursuant to the Restructuring Proposal
“Directors”	directors of the Company
“EGM”	the extraordinary general meeting of the Company to be held for the purpose
	of passing the relevant proposed resolutions pursuant to the Restructuring
	Agreement, the Subscription Agreement and the general mandate
“Escrow Agent”	RSM Nelson Wheeler Corporate Advisory Services Limited, a company
	incorporated in Hong Kong, the registered office of which is situated at 7th
	Floor, Allied Kajima Building, 138 Gloucester Road, Wan Chai, Hong Kong
“Executive”	the Executive Director of the Corporate Finance Division of the SFC or any
	delegate of the Executive Director
“Former Investors”	Leader Glory Holdings Limited and Pang Man Kin, Nixon
“Former Restructuring	the restructuring agreement dated 22 June 2002 entered into between the
Agreement”	Provisional Liquidators and the Former Investors and terminated
	by the Provisional Liquidators on 5 March 2003 in accordance with its terms
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent	Shareholders who are not involved or have no interest in the Restructuring
Shareholders”	Agreement, the Subscription Agreement and the Schemes other than their
	interest as Shareholders
“Investor”	Many Returns Limited, a company incorporated in the British Virgin Islands
	with limited liability. The Investor, its sole shareholder and sole director, Mr.
	Kenneth Chan, are independent of and not connected with the directors, chief
	executive or substantial shareholder of the Company and its subsidiaries and
	their respective associates (as defined in the Listing Rules)
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
“New Share(s)”	ordinary shares of HK$0.01 each in the capital of the Company upon the
	Capital Restructuring becoming effective

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“Pentagon Profits”

• Pentagon Profits Limited, the Company’s wholly-owned subsidiary incorporated in the British Virgin Islands with a 100% investment in 24 townhouses in Beijing, PRC

“Petitioning Creditor”	Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., Hong Kong Branch,
	on its own behalf and as an agent for Wing Hang Bank Limited, Wing Lung
	Bank Limited and Standard Chartered Bank in connection with a syndicated
	loan agreement dated 3 December 1998
“PRC”	the People’s Republic of China which, for the purpose of this announcement,
	excludes Hong Kong, the Macau Special Administrative Region of the PRC and
	Taiwan
“Provisional Liquidators”	collectively Messrs. Cosimo Borrelli and Fan Wai Kuen of RSM Nelson
	Wheeler Corporate Advisory Services Limited, the joint and several
	provisional liquidators of the Company
“Receivables”	the Company’s outstanding receivables of approximately HK$187 million as
	at 14 May 2003
“Restructuring Agreement”	the conditional agreement dated 14 May 2003 among the Company, the
	Provisional Liquidators, the Investor and the Escrow Agent
“Restructuring Proposal”	the proposed restructuring of the Company through Capital Restructuring,
	Debt Restructuring involving the Schemes, as well as Subscription
	contemplated under the Restructuring Agreement and the Subscription
	Agreement
“Schemes”	the proposed schemes of arrangement under section 86 of the Cayman
	Companies Law and section 166 of the Companies Ordinance between the
	Company and the Creditors to be approved or imposed by the Courts, with or
	without any modification
“Scheme Administrators”	such persons appointed pursuant to the terms of the Schemes
“SFC”	Securities and Futures Commission
“Share(s)”	ordinary share(s) of HK$0.05 each in the existing issued capital of the
	Company
“Shareholders”	the shareholders of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription”	the proposed subscription of 4,600,000,000 New Shares at par value of
	HK$0.01 each by the Investor, representing approximately 96.06% of the
	issued share capital of the Company upon Completion, for an aggregate
	amount of HK$46 million and the proposed subscription of Warrants by the
	Investor pursuant to the Subscription Agreement
“Subscription Agreement”	the conditional agreement to be entered into between the Company, the
	Provisional Liquidators, the Investor and the Escrow Agent in connection with the
	Subscription

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“Warrants”

3-year unlisted and transferable warrants of the Company to be issued to the Investor upon Completion pursuant to the Subscription Agreement, which entitle the holder(s) to subscribe for a number of New Shares representing 20% of the enlarged issued share capital of the Company immediately upon Completion, or such other number of warrants as the Stock Exchange or any other regulatory authority may approve, at an exercise price of HK$0.01 per New Share, for a total consideration of HK$1.00

• “Warrants Instrument”

the instrument which sets out the terms and conditions of the Warrants

• “Whitewash Waiver”

a waiver by the Executive pursuant to Note 1 of the Notes on dispensations from Rule 26 of the Code from the obligation of the Investor and parties acting in concert with it to make a general offer for all the securities of the Company not already owned or agreed to be acquired by them upon Completion

“HK$” and “cents”

Hong Kong dollars and cents, the lawful currency of Hong Kong

For and on behalf of SEAPOWER RESOURCES INTERNATIONAL LIMITED

(Provisional Liquidators Appointed)

By Order of the Board MANY RETURNS LIMITED Kenneth Chan Director

Cosimo Borrelli

W.K. Fan

Joint and Several Provisional Liquidators

18 June 2003

The Provisional Liquidators jointly and severally accept full responsibility for the accuracy of the information contained in this announcement other than that relating to the Investor and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.

The Investor and its sole director jointly and severally accept full responsibility for the accuracy of the information contained in this announcement other than that relating to the Company and the Group and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.

Please also refer to the published version of this announcement in The Standard.

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