IRC Limited — Capital/Financing Update 1999

Apr 13, 1999

Listed Company Information

LAI SUN DEV<0488>& LAI FUNG HOLD<1125>-Joint Announcement & Resumption 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. LAI SUN DEVELOPMENT LAI FUNG HOLDINGS Lai Sun Development Company Limited Lai Fung Holdings Limited (incorporated in Hong Kong with (Incorporated in the Cayman limited liability) Islands with limited liability) Grant of Option by Lai Sun Development Company Limited Summary The board of directors (the `Board') of Lai Fung Holdings Limited (`LFH' or the `Company') has received notice from Sun Chung Estate Company, Limited (the `Optionholder') and Lai Sun Development Company Limited (`LSD') that the Optionholder has on 7th April, 1999 entered into an option agreement with LSD as supplemented by a supplemental agreement dated 12th April, 1999 (the `Option Agreement') whereby in consideration of the payment of HK$10 by the Optionholder to LSD, the Optionholder has been granted the right (the `Option') to purchase 230,000,000 existing shares in the Company (the `Option Shares'). The Option is exercisable in whole or in part and from time to time upon the Optionholder giving to LSD at least 7 days' notice during the period commencing from 7th April, 1999 and ending on the date falling 42 months thereafter (i.e. 6th October, 2002) (the `Option Period') at HK$0.65 per Option Share (the `Option Price') (subject to adjustment in certain events as mentioned below). The Board also wishes to take this opportunity to announce that it is now exploring the possibility of arranging a fund raising exercise for working capital purposes with the Optionholder. The Board wishes to remind shareholders and potential investors of the Company that the method and timing of the fund raising exercise are still under consideration and no terms have been agreed by the parties and the proposed transaction may or may not proceed. Accordingly, shareholders and potential investors of the Company are advised to exercise caution when dealing in the shares of the Company. The Company will make a further announcement on the development of the above matter as and when appropriate. Introduction The Board has received notice from the Optionholder and LSD that the Optionholder has entered into the Option Agreement with LSD whereby in consideration of the payment of HK$10 by the Optionholder to LSD, the Optionholder has been granted the Option to purchase the Option Shares from LSD. The Option is exercisable in whole or in part and from time to time upon the Optionholder giving to LSD at least 7 days' notice during the period commencing from 7th April, 1999 and ending on the date falling 42 months thereafter (i.e. 6th October, 2002) at HK$0.65 per Option Share (subject to adjustment in certain events as mentioned below). Other terms of the Option The Option is personal to and is not transferable by the Optionholder to any third party without the prior written consent of LSD. The Option does not impose any obligation on LSD to purchase or procure the purchase of any of the Option Shares in the event that the Optionholder exercises the Option and holds any of the Option Shares. LSD has undertaken to the Optionholder that it will not dispose of or otherwise deal with any of the Option Shares prior to the expiry of the Option Period. Save as mentioned above, there is no other material condition regarding the grant or exercise of the Option. The Option Agreement contains detailed provisions relating to the adjustment to the Option Price. The following is a summary of, and is subject to, the adjustment provisions of the Option Agreement. The Option Price will be adjusted in the following events: (i) an alteration in the nominal amount of LFH shares; (ii) an issue (other than in lieu of a cash dividend) by LFH of LFH shares credited as fully paid by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve fund); (iii) a Capital Distribution (as defined in the Option Agreement) being made by LFH whether on a reduction of capital or otherwise, to holders of LFH shares in their capacity as such; (iv) an offer or grant being made by LFH to holders of LFH shares by way of rights, or of options or warrants to subscribe new LFH shares, at a price which is less than the Option Price in force immediately prior to the announcement of the terms of the offer or grant; (v) an issue wholly for cash being made by LFH of securities, or an issue wholly for cash already made by LFH of securities (including bonds), convertible into or exchangeable for or carrying rights of subscription for new LFH shares, if the Total Effective Consideration (as defined in the Option Agreement) per LFH share initially receivable for such securities is less than the Option Price in force immediately prior to the announcement of the terms of issue of such securities or, in the case of securities already issued, the Option Price in force immediately prior to the conversion or exchange, or the terms of any such issue are altered so that the said Total Effective Consideration per LFH share initially receivable for such securities is less than the Option Price in force immediately prior to the announcement of the proposal to alter such rights of conversion or exchange or subscription; (vi) an issue being made wholly for cash of new LFH shares at a price less than the Option Price in force immediately prior to the announcement of the terms of such issue; (vii) a declaration being made by LFH of cash dividends in any financial year that, in aggregate, exceed HK$0.10 per LFH share; and (viii) any other event not falling within any of the previous paragraphs which the Optionholder considers will give rise to an adjustment to the Option Price. Information on the Optionholder The Optionholder is a wholly-owned subsidiary of the Bank of China (`BOC'). The Optionholder is involved in the property, infrastructure and investment businesses. BOC is one of the principal bankers of the LFH group. The Optionholder became a strategic investor of the Company upon its listing in November 1997 and currently holds about 2.05% of the Company's shares but does not hold any shares in LSD. Save its shareholding interest in the Company as aforesaid and the Option, the Optionholder does not have any other interest in any of LSD or the Company or any of their respective subsidiaries and is an independent third party not connected with any director, chief executive or substantial shareholder of any of LSD or the Company or any subsidiary of any of LSD or the Company or any of their respective associates. Upon exercise in full of the Option, the Optionholder will hold approximately 24.07% of the Company's existing shares and approximately 18.03% of the Company's enlarged issued share capital (assuming that all the outstanding LFH convertible guaranteed bonds are converted into LFH shares at the current conversion price of HK$2.94 per LFH share). The Optionholder has not yet indicated to LSD or LFH of its intention to exercise the Option or its holding intentions in respect of the Option Shares. In the event that all the outstanding LFH convertible guaranteed bonds are fully converted into LFH shares, the percentage of LFH shares held by LSD will be decreased to about 55.95% (assuming that the conversion price on the maturity of the outstanding LFH convertible guaranteed bonds is HK$2.94 per LFH share) and about 23.41% (assuming that the conversion price on the maturity of the outstanding LFH convertible guaranteed bonds is HK$0.45 per LFH share) and in the latter case, LFH will cease to be a major subsidiary (as defined in the Listing Rules) of LSD. Effects of the Transaction The Option Shares represent about 22.02% of the existing issued share capital of the Company and about 16.50% of the enlarged issued share capital of the Company (assuming that all the outstanding LFH convertible guaranteed bonds are fully converted into LFH shares at the current conversion price of HK$2.94 per LFH share). The Option Price represents a premium of 44% to the closing price of HK$0.45 per LFH share as quoted on The Stock Exchange of Hong Kong Limited (`Stock Exchange') on 7th April, 1999. Upon exercise in full of the Option by the Optionholder, LSD's holding in LFH will be reduced from about 74.67% to about 52.65% (assuming that none of the outstanding LFH convertible guaranteed bonds are converted into LFH shares at the current conversion price of HK$2.94 per LFH share) and about 39.44% (assuming that all the outstanding LFH convertible guaranteed bonds are converted into LFH shares at the current conversion price of HK$2.94 per LFH share). However, it is unlikely that the outstanding LFH convertible guaranteed bonds will be converted at the conversion price of HK$2.94 per LFH share which is at a premium of about 550% to the closing price of HK$0.45 per LFH share on 7th April, 1999. Use of Proceeds for LSD Proceeds receivable by LSD upon conversion of the Option will be used for general working capital purposes and there is no current intention regarding any specific use of such proceeds. Reasons for the Transaction The Option is priced at a premium to the current market price of the LFH shares reflects that the Option lasts for about 42 months. The Optionholder became a strategic investor of the Company upon its listing in November, 1997 and the directors of LSD and LFH believed that the granting of the Option will enhance the relationship. Thus, the directors of LSD consider that the granting of the Option is in the interest of both companies and to the benefit of their respective shareholders. The directors of LSD also consider that the duration of the Option and the consideration for the grant of the Option to be fair and reasonable in the commercial interest of LSD. Impact on the Company The Board does not expect any change in the principal business of the LFH group. The Optionholder is entitled to nominate two persons to the Board at any time during the Option Period even though the Option has not been exercised by the Optionholder. As at the date of this announcement, the Optionholder has not yet requested LSD to procure the appointment of any person to the Board. The directors of LSD believe that the possible participation of the Optionholder's nominee(s) in the Board may strengthen LFH's existing management and is beneficial to LFH in the long run. In the event that the Option is fully exercised by the Optionholder during the period commencing from the date of this announcement and ending on 28th November, 2000 (being the date on which LFH shall elect to redeem all the outstanding LFH convertible guaranteed bonds or to convert mandatorily all the outstanding LFH convertible guaranteed bonds) (the `Relevant Period'), the percentage of LFH shares held in public hands will fall below 25% (assuming that none of the outstanding LFH convertible guaranteed bonds are converted into LFH shares during the Relevant Period) and trading in the LFH shares might be suspended pending compliance by LFH of its public float requirement. The directors of LSD have undertaken to the Stock Exchange that in the event that the Option is fully exercised by the Optionholder before the end of the Relevant Period, LSD will use all reasonable endeavours to place out such number of existing LFH shares to independent third parties to maintain LFH's public float requirement and to retain more than 50% interest in LFH. Others The Board also wishes to take this opportunity to announce that it is now exploring the possibility of arranging a fund raising exercise for working capital purposes with the Optionholder. The Board wishes to remind shareholders and potential investors of the Company that the method and timing of the fund raising exercise are still under consideration and no terms have been agreed by the parties and the proposed transaction may or may not proceed. Accordingly, shareholders and potential investors of the Company are advised to exercise caution when dealing in the shares of the Company. The Company will make a further announcement on the development of the above matter as and when appropriate. It should be noted that any transaction between the Optionholder and LFH will constitute a connected transaction for LSD and LFH and will be subject to disclosure and/or shareholder approval requirement under the Listing Rules and LSD and LFH will comply with the Listing Rules in relation to any such transaction. General Further announcements will be made by LSD and LFH as soon as practicable after the Optionholder has exercised the Option (whether wholly or partially). LSD will also immediately notify the Stock Exchange upon receiving a request for a transfer of the Option by the Optionholder to other third party. The securities of LSD and LFH were suspended for trading on the Stock Exchange on 8th April, 1999 pending the release of this announcement. Application has been made to resume trading from 10:00 a.m. on 13th April, 1999. By Order of the Board Lai Sun Development Company Limited Yeung Kam Hoi Company Secretary By Order of the Board LAI FUNG HOLDINGS LIMITED Yeung Kam Hoi Company Secretary Hong Kong, 12th April, 1999