Kowloon Development Company Limited — M&A Activity 2001

Aug 22, 2001

The Stock Exchange of Hong Kong Limited ("Stock Exchange") 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.

Kowloon Development Company Limited

九龍建業有限公司

(Incorporated in Hong Kong with limited liability)

ANNOUNCEMENT

On 13 August 2001, the board of directors of the Company was informed by certain of its substantial shareholders, namely Mr. Ng Siu Chan, Mr. Tang Yat Sun, Richard and Austral International Limited (together the "Vendors"), of a possible signing of an agreement (the "Agreement") some time that day for the sale of their interests in the Company to Chow Tai Fook Nominee Limited, Yu Ming Investments Limited and Mr. Fung Wing Cheung, Tony (together the "Purchasers"). The Agreement might lead to an acquisition of control within the meaning of the Hong Kong Code on Takeovers and Mergers (the "Code") by the Purchasers of the sale shares (the "Sale Shares"). Suspension of trading of the Company's shares (the "Shares") on the Stock Exchange commenced at 10:00 a.m. on 13 August 2001. The Company confirmed with the Vendors and the Purchasers that the Agreement was signed on 13 August 2001. Completion of the Agreement was conditional upon the Purchasers being satisfied with the result of the Purchasers' due diligence review on the Company. The Purchasers had given notice to the Vendors purportedly stating, without giving any reason, that they were not satisfied with the result of the due diligence review. The Agreement has not legally lapsed, and the Vendors are presently seeking legal advice and may forfeit the deposit of HK$101,775,000 paid by the Purchasers. Further details are set out below. Application has been made to the Stock Exchange for the trading of the Company's shares to be resumed with effect from 10:00 a.m. on 22 August 2001.

On 13 August 2001, the board of directors of the Company was informed by the Vendors of a possible signing of the Agreement some time that day for the sale of their interests in the Company to the Purchasers. The Company was advised that the Purchasers and parties acting in concert with them did not own any Shares or securities convertible into Shares or any rights to acquire Shares or securities convertible into Shares as at the date of the Agreement. The Agreement would, if materialized, lead to an acquisition of control within the meaning of the Code by the Purchasers of the Sale Shares. In view of the sensitive nature of the Agreement, the Company applied to the Stock Exchange for a suspension of trading of the Shares on the Stock Exchange since 10:00 a.m. on 13 August 2001. The Company confirmed with both the Vendors and the Purchasers that the Agreement was signed on 13 August 2001.

Under the Agreement a due diligence review on the Company was to be conducted by the Purchasers. The scope of the due diligence review was limited to the matters stipulated in Schedule B of the Agreement, which included matters concerning the financial position of the Company, its assets and property holdings, investments in securities, major subsidiaries and associates and cash and bank borrowings. The due diligence review was to be completed on or before 20 August 2001 and completion should take place within 3 working days of the completion of the due diligence review, that is, 23 August 2001. Completion of the Agreement was conditional upon the Purchasers being satisfied with the result of the due diligence review. The Company has been advised by the Vendors that the Purchasers have, by a letter dated 17 August 2001, given notice to the Vendors purportedly stating that they were not satisfied with the result of the due diligence review. No reason had been given by the Purchasers as to why and in what respects they were allegedly dissatisfied with the result of the due diligence review. The Agreement has not legally lapsed, and the Vendors are presently considering their rights under the Agreement and are seeking legal advice thereon. The Company has been advised by the Vendors that they may terminate the Agreement and forfeit the deposit of HK$101,775,000 paid by the Purchasers under the Agreement. Further announcement in this regard will be made as and when appropriate.

Application has been made to the Stock Exchange for the trading of the Company's shares to be resumed with effect from 10:00 a.m. on 22 August 2001.

Holders of Shares and other investors who are contemplating dealing in the Shares are advised to exercise extreme caution.

By Order of the Board

Ma Mi Chun, Conita

Company Secretary

Hong Kong, 21 August, 2001

The directors of the Company jointly and severally accept full responsibility for the accuracy of the information contained in this announcement and confirm, having made all reasonable enquiries, 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 South China Morning Post"