Chinasoft International Limited — M&A Activity 2001

Nov 5, 2001

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.

Melco International Development Limited

(Incorporated in Hong Kong with limited liability)

ANNOUNCEMENT

DESPATCH OF RESPONSE DOCUMENT RELATING TO

VOLUNTARY CASH OFFER FOR THE SHARES OF THE COMPANY

On 3rd November, 2001, the Company despatched a document to Independent Shareholders in relation to the voluntary cash offer to acquire the Shares (the “Response Document”) which contains, among others, the advice of the Independent Board Committee and the opinion of Worldsec Corporate Finance Limited as the independent financial adviser.

Shareholders’ attention are drawn to the information contained in the Response Document which are or may be price-sensitive and summarised below.

The Directors refer to the announcements of Lasting Legend Limited on 16th October, 2001, 20th October, 2001 and 23rd October, 2001, and the announcements of the Company dated 18th October, 2001 and 24th October, 2001 in relation to the voluntary conditional general offer by Lasting Legend Limited for all the Shares in the issued share capital of the Company (other than those currently held by the Offeror or parties acting in concert with it). Terms used in this announcement shall have the same meanings as defined in the Response Document unless otherwise defined herein.

DESPATCH OF RESPONSE DOCUMENT

On 3rd November, 2001, the Response Document has been despatched to Independent Shareholders. The Response Document contains, among others, the advice of the Independent Board Committee and the opinion of Worldsec Corporate Finance Limited as the independent financial adviser to the Independent Board Committee. Shareholders are urged to read carefully the information contained in the Response Document before deciding whether to accept or reject the Offer. We set out below certain information that was reproduced from the Response Document and that are price-sensitive for the public and Shareholders’ consideration.

PRO FORMA STATEMENT OF UNAUDITED ADJUSTED CONSOLIDATED NET TANGIBLE ASSET VALUE

Set out below is a pro forma statement of the unaudited adjusted consolidated net tangible asset value of the Group included in the Response Document which was based on the audited consolidated net tangible assets of the Group as at 31st December, 2000 and adjusted as follows:

	HK$’000
Audited consolidated net tangible assets of the Group as at 31st December, 2000	400,970
Unaudited net loss from ordinary activities attributable to Shareholders for the six months ended 30th June, 2001	(11,205)
Unaudited consolidated net tangible assets of the Group as at 30th June, 2001	389,765
Surplus on revaluation of the Group’s leasehold land and buildings attributable to the Group (Note 1)	2,409
Deficit on revaluation of the Group’s investment properties attributable to the Group (Note 2)	(7,867)
Pro forma unaudited adjusted consolidated net tangible assets	384,307
Pro forma unaudited adjusted consolidated net tangible assets per Share (based on 121,087,134 existing Shares in issue)	HK$3.17

Notes:

(1) The surplus arising on the revaluation of the Group’s leasehold land and buildings will not be incorporated into the Group’s financial statements for the year ending 31st December, 2001.

(2) In accordance with Hong Kong Statement of Standard Accounting Practice (“SSAP”) 13 “Accounting for investment properties”, the Group will perform an independent revaluation for its investment properties as at 31st December, 2001. Any surplus/deficit arising from such revaluation will be incorporated into the Group’s financial statements for the year ending 31st December, 2001.

STATEMENT OF MATERIAL CHANGE

Since the terrorist attack incident in the United States in September 2001, the floating restaurant operations have recorded a slowdown in the number of visitors. The average daily number of visitors has dropped from 1,478 in August 2001 to 1,147 in September 2001, and up to 26th October, 2001, 1,246 for October 2001. This represents a drop of approximately 22% between August 2001 and September 2001.

Save as aforesaid and disclosed in the unaudited interim results of the Group, the statement on the Effect of New Accounting Standards (summary of which is set out below) and the pro forma statement of unaudited adjusted consolidated net tangible asset value in the Response Document, the Directors are not aware of any material change in the financial or trading position of the Group since 31st December, 2000, the date to which the latest audited financial statements of the Company were made up.

SUMMARY OF THE EFFECT OF THE NEW ACCOUNTING STANDARDS

According to the newly issued SSAP 30 “Business combinations” and SSAP 31 “Impairment of assets”, goodwill should be recognised as an asset, amortised over its estimated useful life, which should normally be not more than 20 years, and carried at cost less any accumulated amortisation and any impairment losses. The Group is also required to assess at each balance sheet date whether there are any indications that goodwill may be impaired, and if there are such indications, the recoverable amount of the goodwill is to be determined, and any resulting impairment losses identified should be charged to the profit and loss account. Pursuant to the Interpretation 13, such assessment of impairment of the value also applies to goodwill previously eliminated against reserves. If any impairment loss is identified, it should be recognised as an expense in the profit and loss account.

Goodwill amounted to HK$240.7 million arose in prior years when the Company acquired a controlling interest in Aberdeen Restaurant Enterprises Limited which engages in restaurant operations and related activities. The goodwill has been set off against the Group’s capital reserve since the year of acquisition. The adoption of the new SSAP 30, including the transitional arrangements allowed therein, could result in certain adjustments being made retrospectively to the Group’s previously reported results and effectively result in a transfer from the capital reserve account to the retained profits account. Any such transfer could substantially reduce the retained profits of the Group. The above adjustments, and the adoption of SSAP 32 “Consolidated Financial Statements and Accounting for Investments in Subsidiaries”, could also have impact to the Company’s profit and loss account and hence substantially reduce its retained profits.

TIMING IN RELATION TO THE OFFER

Shareholders are reminded that, unless otherwise extended or revised by the Offeror, the Offer will remain open for acceptance until 4:00 p.m. on Monday, 19th November, 2001. The Offer will close at 9:30 a.m. on Tuesday, 20th November, 2001.

CAUTION

Shareholders and investors are advised to exercise caution in dealing in the Shares.

By Order of the Board
Melco International Development Limited
Dr. Stanley HoChairmanHong Kong, 3rd November, 2001

The information contained in this announcement relating to the Company has been supplied by the Company. The Directors (except for Mr. Roque Choi who is indisposed) jointly and severally accept full responsibility for the accuracy of information contained in this announcement and confirm, having made all reasonable inquiries, that to the best of their knowledge, the opinions expressed in this announcement have been arrived at after due and careful consideration and that there are no other facts not contained in this announcement, the omission of which would make any statement in this announcement misleading.

The information contained in this announcement relating to the Offeror has been extracted or derived from the Offer Document or other public announcements made by the Offeror as has the other information herein specified as having been so extracted or derived. The Directors accept full responsibility for the accuracy of such extraction or derivation but accept no further responsibility in respect of such information. Under the Offer Document, the sole director of the Offeror accepted full responsibility for the accuracy of the information in the Offer Document and confirmed, having had made all reasonable enquiries that to the best of his knowledge, his opinions expressed in the Offer Document had been arrived at after due and careful consideration and there were no other facts not contained in the Offer Document the omission of which would make any of his statements in the Offer Document misleading.

Please also refer to the published version of this announcement in the Hong Kong iMail.