CHINA STATE CONSTRUCTION DEVELOPMENT HOLDINGS LIMITED — M&A Activity 1999

Jun 7, 1999

Listed Company Information

DVB (HOLDINGS)<0500> & UNIVERSAL APPLI<0419> - Announcement & Resumption of Trading DVB (Holdings) Limited Universal Appliances Limited (Incorporated in Bermuda with (Incorporated in Hong Kong limited liability) with limited liability) Joint Announcement Discloseable and Connected Transaction Discloseable and Connected Transaction Connected Transactions Connected Transaction Adoption of New Share Option Scheme Increase in Authorised Share Capital The directors of UAL and DVB are pleased to announce the entering into of the following agreements on 3rd June, 1999: Share Swap Agreement UAL and Blue World entered into a conditional agreement pursuant to which Blue World agreed to subscribe for 82,654,000 New UAL Ordinary Shares and 240,760,000 non-voting UAL Preference Shares and transfer to UAL the Fifth Dimension Shares. The value of the Fifth Dimension Shares was agreed at HK$102,000,000. The New UAL Ordinary Shares represent approximately 4.2% and 4.0% respectively of the share capital of UAL currently in issue and as enlarged by the issue of the New UAL Ordinary Shares. The UAL Preference Shares carry the right to convert into the Converted UAL Shares on a one-for-one basis (subject to adjustments). The Converted UAL Shares represent approximately 12.1% of the existing share capital of UAL. Assuming full conversion of the UAL Preference Shares, the New UAL Ordinary Shares together with the Converted UAL Shares would represent approximately 14.0% of the existing share capital of UAL as enlarged by the issue of the New Ordinary UAL Shares and the Converted UAL Shares. The only asset of Fifth Dimension is the holding of a 67% interest in Prime Pacific which in turn holds approximately 53.4% of the DVB Shares currently in issue. Upon completion of the Share Swap Agreement, UAL's interest in Fifth Dimension will increase from 51% to 100%. The Share Swap Agreement constitutes a discloseable and connected transaction for UAL under the Listing Rules. Sale and Purchase Agreement UAL and DVB entered into a conditional sale and purchase agreement pursuant to which DVB agreed to acquire the entire issued share capital of Dynamic Network, a wholly-owned subsidiary of UAL, and related shareholders' loans for an aggregate consideration of HK$93,000,000. The consideration will be satisfied by the issue of 26,956,522 New DVB Shares at an issue price of HK$3.45 each. The New DVB Shares represent approximately 16.0% and 13.8% respectively of the existing and enlarged ordinary issued share capital of DVB. The Sale and Purchase Agreement constitutes a discloseable and connected transaction for each of UAL and DVB. Licensing Agreement UAL entered into a licensing and outsourcing agreement with DVB (BVI) and DVB in relation to the granting to DVB (BVI) of a licence to use certain technology belonging to the UAL Group in respect of set top boxes. Under the Licensing Agreement, UAL has also agreed to provide certain broadcasting centre, telephone banking and subscriber management services to DVB (BVI). Given that the Licensing Agreement constitutes a connected transaction for both UAL and DVB and it is of an ongoing nature, applications will be made to the Stock Exchange for the grant of waivers from strict compliance with the Listing Rules on each occasion transactions contemplated under the Licensing Agreement arise. The directors of UAL are also pleased to announce the following proposals: * Increase the authorised share capital of UAL from HK$450,000,000 to HK$657,000,000 * Adopt a new share option scheme for directors and employees of UAL and its subsidiaries Trading in the shares of UAL was suspended at the request of UAL with effect from 3:21 p.m. on 2nd June, 1999 and DVB requested a suspension of the trading in its shares with effect from 10:00 a.m. on 3rd June, 1999. Both UAL and DVB have applied to the Stock Exchange for the resumption of share trading with effect from 10:00 a.m. on Monday, 7th June, 1999. SHARE SWAP AGREEMENT Parties (1) Blue World (2) UAL The Share Swap Subject to the terms and conditions of the Share Swap Agreement, (i) Blue World will subscribe for, and UAL will allot and issue to Blue World, 82,654,000 New UAL Ordinary Shares and 240,760,000 UAL Preference Shares and (ii) Blue World will transfer to UAL the Fifth Dimension Shares. The New UAL Ordinary Shares represent approximately 4.2% and 4.0% respectively of the share capital of UAL currently in issue and as enlarged by the issue of the New UAL Ordinary Shares. The UAL Preference Shares carry the right to convert into the Converted UAL Shares on a one-for-one basis (subject to adjustments). The Converted UAL Shares represent approximately 12.1% of the existing share capital of UAL. Assuming full conversion of the UAL Preference Shares, the New UAL Ordinary Shares together with the Converted UAL Shares will represent approximately 14.0% of the existing share capital of UAL as enlarged by the issue of the New UAL Ordinary Shares and the Converted UAL Shares. The only asset of Fifth Dimension is the holding of a 67% interest in Prime Pacific which in turn holds approximately 53.4% of the DVB Shares currently in issue. Based on the DVB Shares currently in issue, the Fifth Dimension Shares represent an attributable interest of approximately 17.5% in DVB. The terms of the Share Swap Agreement were determined after arm's length negotiation. The Fifth Dimension Shares was agreed between Blue World and UAL at HK$102,000,000 by reference to, inter alia, the market price of the DVB Shares. Based on the agreed value of the Fifth Dimension Shares, a value of approximately HK$3.45 per DVB Share would be ascribed to the 17.5% attributable interest in DVB held by Blue World. Such ascribed value represents (i) a discount of approximately 9.2% to the closing price of HK$3.80 per DVB Share quoted on the Stock Exchange on 2nd June, 1999; (ii) a discount of approximately 10.9% to the average closing price of approximately HK$3.87 per DVB Share for the ten trading days up to and including 2nd June, 1999; and (iii) a discount of approximately 0.3% to the average closing price of approximately HK$3.46 per DVB Share for the twenty trading days up to and including 2nd June, 1999. Conditions precedent Completion of the Share Swap Agreement is conditional upon: * the Stock Exchange granting the listing of and permission to deal in the New UAL Ordinary Shares and the Converted UAL Shares upon conversion of the UAL Preference Shares * all consents from third parties (including without limitation the shareholders of UAL) necessary for the consummation of the transactions contemplated under the Share Swap Agreement shall have been obtained In the event that the conditions precedent are not fulfilled on or before 31st August, 1999 or such later date as the parties may agree, the Share Swap Agreement will lapse. Upon completion of the Share Swap, it is intended that Mr. Wu will be appointed a director of UAL. The New UAL Ordinary Shares The New UAL Ordinary Shares will rank pari passu in all respects with the existing UAL Shares. Mr. Wu and Blue World have covenanted with UAL that (i) Blue World shall not transfer, sell, mortgage, charge or otherwise dispose of any of the New UAL Ordinary Shares for a period of one year from the date of completion of the Share Swap Agreement and (ii) for as long as Blue World remains the holder of any New UAL Ordinary Shares, there shall be no change in the beneficial ownership of Blue World save with the prior consent of the board of directors of UAL. Principal terms of the UAL Preference Shares Dividend The holders of the UAL Preference Shares will be entitled to receive, out of funds lawfully available for dividend distribution, a non-cumulative cash dividend in Hong Kong dollars at the same rate as any dividend declared by UAL in respect of the UAL Shares. In a scrip dividend scheme, where holders of the UAL Shares are entitled to the right to opt between the payment of cash dividends and the issue of scrip dividends at a certain rate, the holders of the UAL Preference Shares shall be entitled to the same right and at the same rate as if they had converted the UAL Preference Shares at that time held by them into the Converted UAL Shares in full. Capital On a return of capital on liquidation or otherwise, the UAL Preference Shares will rank in priority to any other class of shares in the capital of UAL and the assets of UAL available for distribution among the members of UAL will be applied first towards repayment of the amounts paid up or credited as paid up on the UAL Preference Shares. Conversion rights The holders of the UAL Preference Shares will be entitled to convert their UAL Preference Shares into the Converted UAL Shares on a one-for-one basis (subject to adjustments, in case of consolidation or subdivision of the share capital of UAL and rights issue by UAL, according to the adjustment formulae as set out in the Share Swap Agreement) subject to the following conversion timetable: Maximum number of UAL Preference Shares that can Time period be converted in a time period First Conversion Period 82,654,000 Second Conversion Period 82,654,000 Third Conversion Period 75,452,000 If part or all of the maximum number of the UAL Preference Shares are not converted within the corresponding time period, such number of UAL Preference Shares may be converted in the next time period and the maximum number of UAL Preference Shares that can be converted in the next time period shall be increased accordingly. Transferability The UAL Preference Shares shall not be transferable. Mr. Wu and Blue World have covenanted with UAL that (i) Blue World shall not transfer, sell, mortgage, charge or otherwise dispose of any of the Converted UAL Shares for a period of five years from the date of completion of Share Swap Agreement, (ii) Blue World shall not transfer, sell, mortgage, charge or otherwise dispose of any of the UAL Preference Shares, and (iii) Mr. Wu shall ensure that for as long as Blue World remains the holder of any UAL Preference Shares or Converted UAL Shares, there shall be no change in the beneficial ownership of Blue World save with the prior consent of the board of directors of UAL. Listing No application will be made for the listing of or permission to deal in the UAL Preference Shares on the Stock Exchange or any other stock exchanges. Ranking The Converted UAL Shares will rank pari passu in all respects with the UAL Shares as at the date of conversion, including the right to receive all dividends and other distributions the record date of which falls on a date on or after the date of conversion. Reasons for and benefits of the Share Swap Agreement Based on the DVB Shares currently in issue, UAL has an indirect interest of 51% in Fifth Dimension and its attributable interest in DVB is approximately 18.2%. Following completion of the Share Swap Agreement only, Fifth Dimension will be wholly-owned (directly and indirectly through Gold Pagoda) by UAL and UAL's attributable interest in DVB will be increased to approximately 35.8%. The directors of UAL believe that DVB's EDT business has considerable development potential and the increase in attributable interest in DVB represents a further step in UAL's strategy of focusing its investments in high-growth areas. The directors of UAL consider that the Share Swap is in the interest of UAL and its shareholders. General Mr. Wu is a director of DVB, a subsidiary of UAL, and therefore Blue World falls within the definition of connected person under the Listing Rules. Accordingly, the Share Swap constitutes a connected transaction for UAL under the Listing Rules which is conditional upon the approval by the shareholders of UAL and an extraordinary general meeting of UAL will be convened for this purpose. The Share Swap Agreement also constitutes a discloseable transaction for UAL. Application will be made to the Stock Exchange for the listing of and permission to deal in the New UAL Ordinary Shares and the Converted UAL Shares. SALE AND PURCHASE AGREEMENT Parties (1) UAL (2) DVB The Sale/Purchase Subject to the terms of the Sale and Purchase Agreement, DVB agreed to acquire the entire issued share capital of Dynamic Network plus related shareholders' loans in the amount of HK$25,283,939. Consideration UAL will receive 26,956,522 New DVB Shares, representing approximately 16.0% and 13.8% of the existing and enlarged ordinary issued share capital of DVB respectively, as consideration for the Sale. Based on the aggregate consideration of HK$93,000,000 for the shares in Dynamic Network and related shareholders' loans the New DVB Shares are to be issued at a price of HK$3.45 each. The New DVB Shares will be issued upon completion of the Sale and Purchase Agreement. The Issue Price represents (i) a discount of approximately 9.2% to the closing price of HK$3.80 per DVB Share quoted on the Stock Exchange on 2nd June, 1999; (ii) a discount of approximately 10.9% to the average closing price of approximately HK$3.87 per DVB Share for the ten trading days up to and including 2nd June, 1999; and (iii) a discount of approximately 0.3% to the average closing price of approximately HK$3.46 per DVB Share for the twenty trading days up to and including 2nd June, 1999. The New DVB Shares to be issued pursuant to the Sale and Purchase Agreement will rank pari passu with the existing DVB Shares. The terms of the Sale and Purchase Agreement were determined after arm's length negotiations between UAL and DVB based on normal commercial terms. The consideration was determined by reference to, amongst other things, the earnings potential of Dynamic Network and its subsidiaries. The directors of UAL and DVB (including the respective independent non-executive directors) consider that the terms of the Sale and Purchase Agreement are fair and reasonable. Conditions precedent Completion of the Sale and Purchase Agreement is conditional upon, inter alia, the following: * the passing by independent shareholders of DVB of the necessary resolution to approve the Purchase * the Stock Exchange granting the listing of and permission to deal in the New DVB Shares * the obtaining of the necessary corporate, regulatory and third party approvals and consents for the transactions contemplated by the Sale and Purchase Agreement In the event that the conditions precedent are not fulfilled on or before 31st August, 1999, the Sale and Purchase Agreement shall lapse. Profit guarantee UAL has undertaken to DVB that if the Audited Profit is less than HK$8,000,000, then UAL shall within 7 days of notice from DVB pay Dynamic Network on demand such amount as is equal to the shortfall between HK$8,000,000 and the Audited Profit. Information on Dynamic Network The principal business of Dynamic Network and its subsidiaries (including Telequote Data International Limited) is the provision of international financial market information and selective real time consumer data to end users primarily in Asia. The consolidated losses before and after taxation and extraordinary items of Dynamic Network for the year ended 31 December, 1997 were approximately HK$8.5 million and HK$8.6 million respectively. The consolidated profits before and after taxation and extraordinary items of Dynamic Network for the year ended 31st December, 1998 were both approximately HK$1.4 million. The consolidated net shareholders' deficit of Dynamic Network as at 31st December, 1998 was approximately HK$28.3 million. Based on the consolidated profits after taxation of Dynamic Network for the year ended 31st December, 1998 of approximately HK$1.4 million and the Audited Profit of HK$8.0 million, the consideration for the Sale/Purchase of HK$93 million represents a price earnings multiple of approximately 66.4 times and 11.6 times respectively. Reasons for and benefits of the Sale and Purchase Agreement DVB has set up a framework for the provision of a digital platform for value-added services through satellite, terrestrial fibre optic networks or other forms of telecommunication and cable networks, video and other digital image and sound transmission, related software and the management of subscriber base businesses. Such value-added services include video entertainment, data and educational programming for the Mandarin speaking market. The directors of both UAL and DVB consider the grouping of Dynamic Network with DVB will create synergies for the existing businesses of and improve efficiencies for both Dynamic Network and DVB. General The Sale constitutes a discloseable and connected transaction for UAL under the Listing Rules. The Purchase constitutes a discloseable transaction for DVB and, as UAL is the controlling shareholder and thus a connected person of DVB, also constitutes a connected transaction for DVB. Accordingly, completion of the Sale and Purchase Agreement is subject to approval by the respective shareholders of UAL and DVB (other than those prohibited from voting under the Listing Rules). Extraordinary/special general meetings of UAL and DVB will be convened for this purpose. Application will be made to the Stock Exchange for the listing of and permission to deal in the New DVB Shares to be issued pursuant to the Sale and Purchase Agreement. (For the chart shows the existing shareholding structure of DVB and its structure immediately following completion of the Share Swap Agreement and the Sale and Purchase Agreement, please refer to the press announcement today.) LICENSING AGREEMENT Parties: (1) UAL (2) DVB (BVI) (3) DVB The Licence UAL, through its subsidiaries, has certain knowledge and proprietary materials in respect of set top boxes and has developed certain intelligent network and data transmission technology. Pursuant to the Licensing Agreement, UAL has agreed, inter alia, to grant DVB (BVI) a licence to exploit the relevant technology in respect of set top boxes and other systems to be agreed from time to time. DVB (BVI) will be granted the right to design and to authorise the manufacture of set top boxes based on UAL's technology and to install, operate and use the other agreed systems. UAL has also agreed to provide certain broadcasting centre, telephone banking and subscriber management services to DVB (BVI). Consideration The consideration to be paid by DVB (BVI) for the granting of licences and the provision of services under the Licensing Agreement comprises the following: Development fee DVB has agreed to pay UAL a development fee with respect to the grant of a licence for the UAL technology and also for the provision of UAL services based on UAL's broadcasting centre platform and telephone banking system. The respective development fees for set top boxes, services based on broadcasting centre platform and telephone banking system amount to US$260,000, US$600,000 and US$250,000 respectively. The development fee for other systems (if any) will be agreed by the parties as and when such system is accepted by DVB (BVI). Royalty and other payments DVB (BVI) has agreed to pay UAL a royalty for the licence of the relevant technology and to make other payments for the grant of a licence for the UAL technology and also for the provision of UAL services based on UAL's broadcasting centre platform and telephone banking system. More particularly, in relation to: (a) set top boxes, DVB (BVI) has agreed to pay UAL a royalty of US$5.00 for each manufactured set top box; (b) UAL's services which are based on the broadcasting centre platform, DVB (BVI) will pay UAL a technical support and licensing fee of US$200,000 per centre and a maintenance fee calculated as 12% of the cost of the system during the year; and (c) UAL's services which are based on the telephone banking system, DVB (BVI) will pay UAL a royalty of RMB1.00 for every payment transaction (inclusive of banking charges), RMB0.20 for every 3 minutes of every call and RMB500,000 per year for every 150,000 subscribers, increasing to RMB300,000 for each and every incremental increase of 150,000 subscribers. Reasons for and benefits of the Licensing Agreement Set top box is one of the essential hardware for DVB's EDT business. A set top box is a stand alone box used to receive and decode digital video broadcasting signals which can be linked with a television set to display normal television programmes and digital data information. DVB does not itself possess the technical know-how for, inter alia, the design of the set top boxes. Furthermore, implementation of the EDT business also requires the utilisation of technologies such as broadcasting centre platform and telephone banking system. The directors of DVB consider that it will be more efficient and cost-effective to utilise existing technologies developed by and the related services to be provided by the UAL Group. General The directors of UAL and DVB (including the respective independent non-executive directors) are satisfied that the Licensing Agreement is entered into in the ordinary course of business of UAL and DVB and on normal commercial terms. DVB is a subsidiary of UAL. The Licensing Agreement constitutes a connected transaction for both UAL and DVB and it will be of an ongoing nature, the directors of UAL and DVB believe that it would not be practicable to make disclosure of or, if necessary, obtain shareholders' approval on each occasion transactions contemplated under the Licensing Agreement arise. Applications will be made by both UAL and DVB to the Stock Exchange for the grant of waivers from strict compliance with the relevant requirements of the Listing Rules with respect to the transactions contemplating under the Licensing Agreement, subject to the approval by shareholders (other than those prohibited from voting under the Listing Rules) of the respective companies (if the annual aggregate transaction value for each company exceeds the limit stipulated in the Listing Rules). A further announcement will be made to inform shareholders of both UAL and DVB on further details of the respective waiver applications. INCREASE IN AUTHORISED SHARE CAPITAL OF UAL UAL currently has an authorised share capital of HK$450,000,000 divided into 2,500,000,000 shares of HK$0.18 each and a fully paid issued share capital of HK$357,064,048 divided into 1,983,689,157 UAL Shares. To ensure that a sufficient number of unissued UAL Shares is available for future purposes following the completion of the Share Swap Agreement and the adoption of the new share option scheme, a resolution will be proposed at the extraordinary general meeting of UAL to increase the authorised share capital of UAL from HK$450,000,000 to HK$657,000,000 by the creation of an additional 1,150,000,000 shares of HK$0.18 each. ADOPTION OF A NEW SHARE OPTION SCHEME FOR UAL UAL's employee share option scheme which was previously adopted by resolution of the shareholders of UAL expired on 17th June, 1997. The directors of UAL consider that the motivation of personnel and retention of key employees is important to the success of the UAL Group. The directors of UAL believe that the adoption of a new share option scheme will enhance staff motivation and performance and will enable employees of the UAL Group to identify their interests with those of the shareholders of UAL. Accordingly, the directors of UAL propose that a resolution be put to the UAL's shareholders at the extraordinary general meeting to adopt a new employee share option scheme. GENERAL The DVB group is principally engaged in the sale of computer monitors and related products and has since December 1998, following the establishment of S&E with the PRC Ministry of Culture's China Audio and Video Publishing House, diversified into the EDT business. As stated in the announcement dated 30th March, 1999, the 30 year joint venture agreement for the establishment of S&E has been approved by and the business licence issued to S&E by the relevant PRC government authorities. S&E is now commencing commercial operations. The UAL Group including the DVB group continues to be engaged in on-going discussions and negotiations with potential strategic industry partners and investors for possible business collaborations and development of the EDT business in the Asia Region. Business collaborations in relation to the EDT business may take the form of supply arrangements, manufacturing/sub-assembly arrangements, technical service arrangements and/or equity or joint venture participation. DVB is also in discussion with China Star Entertainment Limited (which is listed on the Stock Exchange) in respect of the sourcing of distribution rights of video products from China Star Entertainment Limited for DVB's EDT business. Depending on the progress and the results of these discussions, consummation of the above discussions may take place in the near future. The UAL Group is principally engaged in the manufacture and distribution of consumer electronic, household electrical and telecommunications products, the dissemination of international financial market information and consumer data, the sale of computer monitors and the EDT business. The Share Swap Agreement, Sale and Purchase Agreement and Licensing Agreement are part of the UAL Group's strategy to develop further in those business areas offering the potential for good growth, including EDT and telephony systems integration related businesses. The UAL Group's cordless telephone design and manufacturing division continues to operate at a loss and the directors of UAL are exploring alternatives with a view to formulating a strategy to try and curtail the losses being incurred by this division. The UAL directors consider that the UAL Group's other businesses have good growth potential and the directors of UAL shall continue their efforts to return the UAL Group to profitability. The terms of the Share Swap Agreement, Sale and Purchase Agreement and Licensing Agreement have been negotiated on an arm's length basis. For UAL, (1) the Share Swap Agreement constitutes a discloseable and connected transaction, (2) the Sale and Purchase Agreement constitutes a discloseable and connected transaction and (3) the Licensing Agreement constitutes a connected transaction. For DVB, (1) the Sale and Purchase Agreement constitutes a discloseable and connected transaction and (2) the Licensing Agreement constitutes a connected transaction. UAL and DVB will establish their respective independent board committees (comprising the independent non-executive directors) to advise their respective independent shareholders in respect of the connected transactions. Independent financial advisers will be appointed to advise the independent board committees of UAL and DVB. Circulars containing further details of the Share Swap Agreement, Sale and Purchase Agreement and the Licensing Agreement (as the case may be) and letters from the independent board committees and independent financial advisers together the notices of the general meetings will be sent to the shareholders of UAL and DVB as soon as practicable. The circular to be sent to shareholders of UAL will also contain, inter alia, further details of the increase in authorised share capital and the proposed new share option scheme. Trading in the shares of UAL was suspended at the request of UAL with effect from 3:21 p.m. on 2nd June, 1999 and DVB requested a suspension of the trading in its shares with effect from 10:00 a.m. on 3rd June, 1999. Both UAL and DVB have applied to the Stock Exchange for the resumption of share trading with effect from 10:00 a.m. on Monday, 7th June, 1999. Shareholders and investors are reminded to exercise caution when dealing in the shares of UAL and DVB. DEFINITIONS "Audited Profit" the amount of audited consolidated profit attributable to shareholders of Dynamic Network for an eighteen-month period from the date of completion of the Sale and Purchase Agreement on an annualised basis "Blue World" Blue World Investments Limited, a company incorporated in the British Virgin Islands with limited liability which is wholly-owned by Mr. Wu and his wife "Business Day" a day (other than Saturday) on which banks in Hong Kong are open to conduct business "Converted UAL Shares" 240,760,000 (subject to adjustments) UAL Shares which will fall to be issued upon exercise of the conversion rights attached to the UAL Preference Shares "DVB" DVB (Holdings) Limited, a subsidiary of UAL which is incorporated in Bermuda with limited liability, the shares of which are listed on the Stock Exchange "DVB (BVI)" DVB (Group) Limited, a company incorporated in the British Virgin Islands which is wholly-owned by DVB "DVB Share(s)" ordinary share(s) of HK$1.50 each in the issued share capital of DVB "Dynamic Network" Dynamic Network Limited, a company incorporated in the British Virgin Islands with limited liability which is wholly-owned by UAL "EDT" electronic and digital data transmission, including digital data, sound and image transmission "Fifth Dimension" Fifth Dimension Limited, a company incorporated in the British Virgin Islands with limited liability "Fifth Dimension Shares" the 49 shares of US$1.00 each in, representing 49% of, the issued share capital of Fifth Dimension beneficially owned by Blue World "First Conversion Period" the time period from the Business Day immediately following the first anniversary of the Issue Date to the Business Day immediately preceding the second anniversary of the Issue Date "Gold Pagoda" Gold Pagoda Limited, a company incorporated in the British Virgin Islands with limited liability which is wholly-owned by UAL "Issue Date" the date of allotment and issue of the UAL Preference Shares "Issue Price" the issue price of HK$3.45 per New DVB Share pursuant to the Sale and Purchase Agreement "Licensing Agreement" the licensing and outsourcing agreement entered into between UAL, DVB (BVI) and DVB on 3rd June, 1999 "Listing Rules" Rules Governing the Listing of Securities on the Stock Exchange "Mr. Ko" Mr. Ko Chun Shun, Johnson, Chairman of UAL "Mr. Wu" Mr. Wu Zheng, Bruno, an executive director of DVB "New DVB Shares" the 26,956,522 new DVB Shares to be issued pursuant to the Sale and Purchase Agreement "New UAL Ordinary Shares" 82,654,000 UAL Shares to be issued by UAL pursuant to the Share Swap Agreement "PRC" People's Republic of China excluding the Hong Kong Special Administrative Region for the purpose of this announcement "Prime Pacific" Prime Pacific International Limited, a company incorporated in the British Virgin Islands with limited liability "Purchase" the purchase of the entire issued share capital of Dynamic Network and related shareholders' loans by DVB from UAL pursuant to the Sale and Purchase Agreement "S&E" S&E Digital Technology Company Limited, a sino-foreign equity joint venture enterprise established in the PRC, in which DVB has a 70% interest "Sale" the sale of the entire issued share capital of Dynamic Network and related shareholders' loans by UAL to DVB pursuant to the Sale and Purchase Agreement "Sale and Purchase Agreement" the conditional sale and purchase agreement entered into between UAL and DVB on 3rd June, 1999 "Second Conversion Period" the time period from the Business Day immediately following the second anniversary of the Issue Date to the Business Day immediately preceding the third anniversary of the Issue Date "Share Swap" the subscription by Blue World for the New UAL Ordinary Shares and UAL Preference Shares and the transfer by Blue World to UAL of the Fifth Dimension Shares "Share Swap Agreement" the conditional agreement entered into between UAL and Blue World on 3rd June, 1999 in respect of the Share Swap "Stock Exchange" The Stock Exchange of Hong Kong Limited "Third Conversion Period" the time period from the Business Day immediately following the third anniversary of the Issue Date onwards "UAL" Universal Appliances Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Stock Exchange "UAL Group" UAL and its subsidiaries "UAL Preference Shares" 240,760,000 non-voting convertible preference shares of HK0.18 each in the share capital of UAL to be issued by UAL pursuant to the Share Swap Agreement "UAL Share(s) ordinary share(s) of HK$0.18 each in the issued share capital of UAL By Order of the Board By Order of the Board DVB (Holdings) Limited Universal Appliances Limited Wu Zheng, Bruno Ko Chun Shun, Johnson Executive Director Chairman Hong Kong, 4th June, 1999