Minmetals Land Limited — M&A Activity 2000

Feb 28, 2000

Listed Company Information

MASCOTTE HOLD<0136> - 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. MASCOTTE HOLDINGS LIMITED (Incorporated in Bermuda with limited liability) ABLE TIME INVESTMENTS LIMITED (Incorporated in the British Virgin Islands with limited liability) POSSIBLE UNCONDITIONAL OFFERS BY ONSHINE SECURITIES LIMITED ON BEHALF OF ABLE TIME FOR ALL THE ISSUED SHARES AND OUTSTANDING SHARE OPTIONS OF MASCOTTE HOLDINGS LIMITED OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY ABLE TIME DISCLOSEABLE AND CONNECTED TRANSACTIONS Financial adviser to Able Time Deloitte & Touche Corporate Finance Ltd Financial adviser to the independent board committee of the Company ANGLO CHINESE CORPORATE FINANCE, LIMITED On 14 January 2000, Able Time entered into the Share Sale Agreement with Honeyard, pursuant to which Able Time will acquire 187,140,000 Shares from Honeyard and 400,000 Shares to be delivered by Honeyard, in aggregate representing approximately 53.0% of the issued share capital of the Company. Total consideration for the Share Sale is HK$75,016,000, representing HK$0.40 per Share. MIL, a wholly owned subsidiary of the Company, entered into the Property Disposal Agreement with Ms. Chan, pursuant to which Ms. Chan will acquire, conditional upon Completion, a residential property from MIL for a consideration of HK$3 million. Upon Completion, the Company will enter into the NKL Agreement with Honeyard, pursuant to which Honeyard will be granted a call option to acquire the NKL Shares from the Company for a consideration of HK$32 million within six months from the date of the NKL Agreement and the Company will be granted a put option to sell the NKL Shares to Honeyard for a consideration of HK$32 million within the seventh month to the twelveth month from the date of the NKL Agreement. The only major asset of NKL is a residential property located in Sai Kung, New Territories. In addition, MGL, a wholly owned subsidiary of the Company, will enter into the Service Agreement with Ms. Chan. The Share Sale is conditional, inter alia, upon the Proposals having been approved by the independent shareholders of the Company at a special general meeting. Upon Completion, unconditional cash offers will be made by Onshine Securities on behalf of Able Time to acquire all the issued Shares at HK$0.416 per Share and outstanding Share Options at HK$0.175 per Share Option other than those already held or agreed to be acquired by Able Time or parties acting in concert with it. Since 14 January 2000, trading in the Shares has been suspended pending the release of this announcement. Application has been made to the Stock Exchange for resumption of trading in the Shares at 10:00 a.m. on 28 February 2000. The Offers will be made only if Completion occurs. Investors should exercise extreme caution before buying or selling Shares. SHARE SALE AGREEMENT Date of the Agreement 14 January 2000 Parties Buyer: Able Time (a company 100% owned by Mr. Cheng) Seller: Honeyard (a company 100% owned by a discretionary trust, the beneficiaries of which include Ms. Chan and her family members) Warrantor: Ms. Chan Number of Shares to be acquired Able Time will acquire 187,140,000 Shares from Honeyard and 400,000 Shares to be delivered by Honeyard. The 187,140,000 Shares represent the entire shareholding of Honeyard in the Company. The arrangement relating to Able Time's acquisition of an additional 400,000 Shares is to ensure that, in case there are no acceptances of the Offers, Able Time will have acquired sufficient Shares to control at least 50.1% of the issued share capital of the Company after the exercise of all the outstanding Share Options. It is the intention of Ms. Chan that she will exercise 400,000 Share Options and sell 400,000 Shares to Able Time. Upon Completion, Able Time and parties acting in concert with it will be interested in 187,540,000 Shares, representing approximately 53.0% of the existing issued share capital of the Company and 50.1% of the issued share capital of the Company on a fully diluted basis assuming the exercise in full of all existing outstanding Share Options. Sale price and payment terms The cash consideration for the 187,140,000 Shares to be sold by Honeyard is HK$74,856,000, representing HK$0.40 per Share. Able Time has paid a deposit of HK$5 million into an escrow account. Upon Completion, Able Time will release the deposit to Honeyard and pay HK$53 million to Honeyard and the balance of HK$16,856,000 into an escrow account, which will be paid to Honeyard thirteen months after Completion. The balance of HK$16,856,000 represents retention monies to Able Time and will be payable to Honeyard one month after completion of Ms. Chan's initial one-year term of employment under the Service Agreement. The cash consideration of the 400,000 Shares to be delivered by Honeyard is HK$160,000, representing HK$0.40 per Share, and is payable upon Completion. The sale price of HK$0.40 per Share represents a discount of about 1.2% to the last traded price of HK$0.405 on 13 January 2000, the last trading day before trading in the Shares was suspended pending the issue of this announcement, and a premium of about 24.3% to the average closing price of HK$0.32175 per Share over the 20 trading days up to and including 13 January 2000. The price of HK$0.40 per Share also represents a discount of about 22% to the audited consolidated net tangible asset value per Share of about HK$0.51 as at 31 March 1999. Conditions Completion of the Share Sale Agreement is conditional upon the following conditions being fulfilled (or in respect of conditions (a), (b), (f) and (g) being waived by Able Time): (a) Able Time being satisfied that the net asset value of the Group is not less than HK$130,000,000 as at 30 November 1999 after taking into account, inter alia, the contingent liabilities based on management accounts of the Group as reviewed by DTCFL. (As at 30 November 1999, the Group had no material contingent liabilities.); (b) the Shares remaining listed and traded on the Stock Exchange prior to Completion, and no notification being received from the Stock Exchange or the SFC that the listing of the Shares on the Stock Exchange will or may be withdrawn or suspended at, upon or as a result of, Completion or otherwise in connection with the terms of the Share Sale Agreement, or for any reason other than an inadequate percentage of the issued share capital of the Company being in public hands following the close of the Offers; (c) the Proposals having been approved by the independent shareholders of the Company at a special general meeting as ordinary resolution(s); (d) the Executive having granted consents to the Proposals under Note 4 to Rule 25 of the Takeover Code; (e) each of the agreements contemplated under the Proposals becoming unconditional in all respects save as regards any condition requiring the Share Sale Agreement to become unconditional; (f) all waivers, consents or approvals of the Stock Exchange and the SFC and any other authority in Hong Kong, Bermuda or elsewhere, which are required or appropriate for the entry into and the implementation of the Share Sale Agreement, having been obtained; (g) receipt of written confirmation from the Honeyard's Solicitors confirming that they have in their custody the certificates in respect of all the Sale Shares and transfer forms in respect thereof duly executed by persons named in such certificates together with instructions from such persons (expressed to be irrevocable) to release the same to Able Time(or as it may nominate) subject only to Completion. Completion Completion will take place on the second business day after all conditions of the Share Sale Agreement have been fulfilled and/or waived. It is expected that the date of Completion will be in the last week of March 2000. In the event that the above conditions of Share Sale Agreement are not fulfilled or waived by 29 March 2000 or such later date as the parties may agree in writing, the Share Sale Agreement will lapse. Upon Completion, the Company will enter into the NKL Agreement with Honeyard and MGL will enter into the Service Agreement with Ms. Chan. PROPERTY DISPOSAL AGREEMENT On 14 January 2000, MIL, a wholly owned subsidiary of the Company, entered into the Property Disposal Agreement with Ms. Chan, pursuant to which Ms. Chan will acquire from MIL a residential unit at South Horizons, Hong Kong for a consideration of HK$3 million. The unit has a floor area of 940 square feet and is used as a staff quarter for an expatriate sales executive. The consideration of HK$3 million has been arrived at after taking into account of current market prices and a property valuation will be carried out by an independent valuer. The Property Disposal will provide working capital to the Group whilst it will result in a book loss of approximately HK$1.4 million. The Property Disposal Agreement constitutes a connected transaction under the Listing Rules and is subject to the approval of the independent shareholders of the Company at a special general meeting. The Property Disposal Agreement is also conditional upon Completion. The Property Disposal Agreement constitutes a "Special Deal" and will require the consent of the Executive under Note 4 to Rule 25 of the Takeover Code. NKL AGREEMENT Upon Completion, the Company will enter into the NKL Agreement with Honeyard, pursuant to which Honeyard will be granted a call option to acquire the NKL Shares for a consideration of HK$32 million within six months from the date of the NKL Agreement. Pursuant to the NKL Agreement, the Company will also be granted a put option to sell the NKL Shares to Honeyard for a consideration of HK$32 million within the seventh month to the twelveth month from the date of the NKL Agreement. NKL is a wholly owned subsidiary of the Company and its major asset is Rose De Casa, a residential property investment located at 648, Clear Water Bay Road, Sai Kung, New Territories. Rose De Casa comprises six 2-storey townhouses with total gross floor area of 11,864 square feet, of which 4 units are rented out with aggregate monthly rental income of HK$113,000, one is the director quarter for Ms. Chan and one vacant. The consideration of HK$32 million has been arrived by reference to quotes by estate agents as to the asking prices of similar properties within proximity of Rose De Casa which may not reflect the current market prices and a property valuation will be carried out by an independent valuer. The entering into of the NKL Agreement will provide a flexible arrangement to the Company whereby the Company will be allowed to sell its major property investment for additional working capital with the put option in place hedging against the risk of further decline in property prices. In light of the put option agreed to be granted to the Company by Honeyard, the Company has agreed that it will grant the call option to Honeyard for the NKL Shares upon Completion. The sale of NKL Shares upon the exercise of the call option or put option will provide substantial working capital to the Group for its manufacturing operation whilst it will result in a book loss of approximately HK$22 million. Dr. J. C. Duan, Professor of Finance at the Hong Kong University of Science and Technology, has been retained to carry out an independent valuation of the option arrangement as contained in the NKL Agreement. Dr. Duan has confirmed that, on the basis that the independent valuation of Rose De Casa is HK$32 million, the option arrangement as contained in the NKL Agreement represents a special benefit to Honeyard equivalent to 2.3% of the exercise price of HK$32 million of the options. In order to comply with the Takeover Code and extend such special benefit to all the other shareholders of the Company, Able Time has agreed to increase its prices for the Share Offer and the Option Offer by HK$0.004, on the basis that, under the option arrangement of the NKL Agreement, Honeyard and Ms. Chan will receive a "special benefit" of HK$736,000, equivalent to 2.3% of the exercise price of HK$32 million of the options, as deemed under Rule 25 of the Takeover Code. Further details on the prices of Share Offer and the Option Offer are set out in the section headed "Possible unconditional cash offers" below. The possible sale of NKL Shares under the NKL Agreement also constitutes a "Special Deal" and will require the consent of the Executive under Note 4 to Rule 25 of the Takeover Code. The entering into of the NKL Agreement constitutes a connected and discloseable transaction under the Listing Rules and is subject to the approval of independent shareholders of the Company at a special general meeting. The entering into of the NKL Agreement is also conditional upon the completion of the Share Sale Agreement. Following the entering into of the NKL Agreement, the Company will make an announcement at an appropriate time on whether the call option has been exercised by Honeyard or has expired. In the event that the call option has expired, the Company will make a separate announcement at another appropriate time on whether the put option has been exercised by the Company or has expired and on the reasons therefor. As detailed in the paragraph headed "Background and intention of Able Time" below, it is the intention of Able Time that after Completion, the Company will realise part of its investments in properties as additional working capital for its manufacturing and trading businesses. Able Time intends that the Company will exercise the put option to sell the NKL Shares to Honeyard within the first week of the seventh month from the date of the NKL Agreement, unless Honeyard has already exercised its call option or the Company has received a higher offer price for the property. In the event that the Company has decided to exercise the put option to sell the NKL Shares to Honeyard, the exercise of the put option and the acquisition of the NKL Shares by Honeyard will constitute a connected transaction and may constitute a notifiable transaction (subject to the size test of the Listing Rules) and will be subject to the approval of independent shareholders of the Company at a separate special general meeting. SERVICE AGREEMENT Upon Completion, MGL, a wholly owned subsidiary of the Company, will enter into the Service Agreement with Ms. Chan for an initial term of one year (or such other period as the parties may agree). Pursuant to the Service Agreement, Ms. Chan will continue to manage the manufacturing and trading operations and businesses of the Group. This arrangement is to retain the management skill and expertise of Ms. Chan and provide her remuneration commensurate with her position. Pursuant to the Service Agreement, the remuneration of Ms. Chan will be a fixed monthly salary of HK$250,000 and a bonus calculated as 10% of the amount, if any, of net operating profit in excess of HK$10,000,000 of those subsidiaries of the Company that are engaged in the manufacture and sale of accessories for photographic, electrical and multimedia products. Compared to the current service contract of Ms. Chan as described below, the calculation of her bonus under the Service Agreement will not take into account the operating profit of the Group's property and other investment activities because her job responsibilities under the Service Agreement will not cover those activities. Pursuant to her current service contract, the remuneration of Ms. Chan includes a fixed monthly salary of HK$43,200 and a fixed sum bonus equal to one month's fixed salary. Ms. Chan also entitles to a discretionary bonus calculated as a percentage of the audited consolidated profit of the Group to be determined by the board of the Company provided that the aggregate amount of the discretionary bonus to all executive directors of the Company will not exceed 10% of such profit. On the basis of the operating profit of the Group for the year ended 31 March 1999, Ms. Chan would have received total remuneration of about HK$3.25 million under the Service Agreement, representing an increase of HK$2.21 million or 212.5% from the amount of HK$1.04 million she would have received under her current service contract. The SFC has advised that it considers the Service Agreement to be a "Special Deal" under Rule 25 of the Takeover Code. In order to comply with the Takeover Code and extend such special benefit to all the other shareholders of the Company, Able Time has agreed to increase its price for the Share Offer and the Option Offer by HK$0.012, on the basis that, under the Service Agreement, Honeyard and Ms. Chan will receive a "special benefit" of HK$2,210,000 as deemed under Rule 25 of the Takeover Code, representing the difference between the remunerations payable under the Service Agreement and her existing service contract. Further details on the prices of Share Offer and the Option Offer are set out in the section headed "Possible unconditional cash offers" below. Able Time has undertaken that it will not renew the Service Agreement after the initial term of one year on terms that would be better than the terms of Ms. Chan's existing service contract. There are no other agreements, arrangements or understanding between Able Time, the Group and Ms. Chan other than the Service Agreement with respect to Ms. Chan's service to the Group. The Service Agreement constitutes a connected transaction under the Listing Rules and is subject to the approval of the independent shareholders of the Company at a special general meeting. The employment of Ms. Chan under the Service Agreement is conditional upon the Completion. POSSIBLE UNCONDITIONAL CASH OFFERS The Offers As at the date of this announcement, Able Time and parties acting in concert with it do not own any interest in the Company. Upon Completion, Able Time and parties acting in concert with it will be interested in 187,540,000 Shares, representing approximately 53.0% of the existing issued share capital of the Company and 50.1% of the issued share capital of the Company on a fully diluted basis assuming the exercise in full of all existing outstanding Share Options. As at the date of this announcement, there are outstanding Share Options to subscribe for a total of 20,000,000 Shares. The existing shareholding structure and shareholding structure upon Completion are set out in the section headed "Shareholding structure" below. Under Rule 26 of the Takeover Code, upon Completion, Able Time will be required to make unconditional general offers for all the issued Shares and outstanding Share Options other than those already owned or agreed to be acquired by Able Time or parties acting in concert with it. Neither Able Time nor parties acting in concert with it is interested in any Shares as at the date of this announcement (other than pursuant to the Share Sale Agreement) or had dealt in the Shares during the six month period prior to the date of this announcement. The making of the Offers is conditional upon the Completion and Completion is subject to the Conditions mentioned above. Shareholders and investors should exercise extreme caution when buying or selling Shares. If the Offers are made, they will be on the terms set out below. The Share Offer Onshine Securities, on behalf of Able Time, will make an unconditional cash offer for all the issued Shares other than those already owned or agreed to be acquired by Able Time or parties acting in concert with it on the following basis: For each Share HK$0.416 in cash The offer price of HK$0.416 per Share is the sum of the sale price of HK$0.40 per Share under the Share Sale Agreement and the aggregate of the deemed "special benefit" of HK$736,000 to Ms. Chan under the option arrangement of the NKL Agreement and the deemed "special benefit" of HK$2,210,000 to Ms. Chan under the Service Agreement divided by the aggregate of 187,140,000 Shares sold to Able Time by Honeyard and 400,000 Shares sold to Able Time by Ms. Chan following exercise of part of the Share Options granted to her. The offer price of HK$0.416 per Share represents a premium of about 2.7% to the last traded price of HK$0.405 on 13 January 2000, the last trading day before trading in the Shares was suspended pending the issue of this announcement, and a premium of about 29.3% to the average closing price of HK$0.32175 per Share over the 20 trading days up to and including 13 January 2000. The offer price of HK$0.416 per Share also represents a discount of about 18.4% to the audited consolidated net tangible asset value per Share of about HK$0.51 as at 31 March 1999. The Option Offer As at the date of this announcement, the Company has granted 8,000,000 Share Options to Ms. Chan and a total of 12,000,000 to the other three executive directors of the Company. The Share Options granted entitle the holders thereof to subscribe for a total of 20,000,000 Shares (one Share per Share Option), representing 5.6% of the existing issued share capital of the Company and 5.3% of the issued share capital of the Company assuming the exercise in full of all existing outstanding Share Options, at an initial subscription price of HK$0.241 per Share during the period from 16 August 1998 to 15 August 2001. Subject to the Share Offer being made, Onshine Securities, on behalf of Able Time, will also offer to pay cash to the holders of the Share Options for cancellation on the following basis: For each Share Option HK$0.175 in cash The price for each of the outstanding Share Option under the Option Offer represents the difference of the offer price of HK$0.416 per Share under the Share Offer and the subscription price of the Share Options of HK$0.241 per Share. It is the intention of Ms. Chan that she will exercise 400,000 Share Options and sell 400,000 Shares to Able Time. Ms. Chan does not have specific intention as to her remaining 7,600,000 Share Options under the Option Offer. As at the date of this announcement, the other executive directors of the Company do not have specific intention as to their respective interests under the Option Offer. Save as disclosed above, the Company has no outstanding warrants or any other securities convertible into Shares. Conditions The making of the Share Offer is conditional upon Completion. If the Share Offer is made, it will be unconditional with respect to acceptance. The making of the Option Offer is conditional on the making of the Share Offer. Total consideration At present, there are 354,000,100 Shares in issue. At a price of HK$0.40 for the Share Sale and a price of HK$0.416 per Share for the Share Offer, the aggregate amount payable by Able Time would be HK$144.3 million before taking into account the exercise of the outstanding Share Options. In the event that the Share Offer were accepted in full and that all outstanding Share Options were exercised and tendered to the Share Offer, the aggregate amount payable by Able Time would be about HK$152.6 million. In the event that all the outstanding 20,000,000 Share Options were tendered to the Option Offer, the aggregate amount payable to the holders of the Share Options would be HK$3.5 million. DTCFL is satisfied that sufficient resources are available to Able Time to satisfy acceptances of the Offers in full. Effect of accepting the Offers By accepting the Share Offer, shareholders of the Company will sell their Shares and all rights attached to them, including the right to receive all dividends and distributions declared, made or paid on or after the date of the Share Sale Agreement. The Company will effect cancellation of any Share Options tendered to the Option Offer by any holders of the Share Options. Stamp Duty Stamp duty at a rate of HK$1.25 for every HK$1,000 or part thereof of the amount payable in respect of relevant acceptances will be deducted from the amount payable to shareholders who accept the Share Offer. No stamp duty will be deducted from the amount paid to the holders of the Share Options who accept the Option Offer. SHAREHOLDING STRUCTURE As at the date of this announcement, the Company has an authorised share capital of HK$100 million divided into 1,000,000,000 shares of HK$0.10 each, of which 354,000,100 shares have been issued and are fully paid. As at the date of this announcement , there are outstanding Share Options to subscribe for a total of 20,000,000 Shares at an initial subscription price of HK$0.241 per Share. As at the date of this announcement, Honeyard and parties acting in concert with it own 187,140,000 Shares, representing approximately 52.9% of the existing issued share capital of the Company. Assuming the exercise in full of all the outstanding Share Options (including the 8,000,000 Share Options granted to Ms. Chan), Honeyard and parties acting in concert with it will own 195,140,000 Shares, representing 52.1% of the issued share capital of the Company as enlarged by the issue of new Shares upon the exercise of all the outstanding Share Options. The entire issued share capital of Honeyard is held by The Honeyard Trust, a discretionary trust, the beneficiaries of which include Ms. Chan and her family members. As at the date of this announcement, Ms. Chan has outstanding Share Options to subscribe for 8,000,000 Shares at an initial subscription price of HK$0.241 per Share. It is the intention of Ms. Chan that she will exercise 400,000 Share Options and sell 400,000 Shares to Able Time whereas she does not have specific intention as to her remaining 7,600,000 Share Options under the Option Offer. Both Honeyard and Ms. Chan and parties acting in concert with each of them did not deal in the Shares during the past six months preceding the date of this announcement. Set out below is a table showing the existing shareholding structure and the shareholding structure upon Completion. Shareholding structure Existing shareholding on exercise of Shareholding Structure structure Share Options in full upon Completion # of shares % # of shares % # of shares % Honeyard 187,140,000 52.9% 187,140,000 50.0% - - Ms. Chan - - 8,000,000 2.1% 7,600,000 2.0% ----------- ----- ------------ ------ ---------- ----- 187,140,000 52.9% 195,140,000 52.1% 7,600,000 2.0% Able Time - - - - 187,540,000 50.1% Other directors 56,700,000 16.0% 68,700,000 18.4% 68,700,000 18.4% Other shareholders 110,160,100 31.1% 110,160,100 29.5% 110,160,100 29.5% ----------- ----- ----------- ----- ----------- ----- 354,000,100 100.0% 374,000,100 100.0% 374,000,100 100.0% ----------- ------ ----------- ------ ----------- ------ Notes: (i) The shareholding structure upon Completion is prepared on the assumptions that all the outstanding Share Options have been exercised prior to Completion and that Ms. Chan will sell 400,000 Shares to Able Time. (ii) The other shareholders of the Company are regarded as public shareholders pursuant to Rule 8.24 of the Listing Rules. INFORMATION ON THE GROUP Business The Company is incorporated in Bermuda with limited liability and its Shares have been listed on the Stock Exchange since 1997. The Company is an investment holding company and its subsidiaries are principally engaged in the manufacture and sale of accessories for photographic, electrical and multimedia products. Financial information The following table sets out a summary of the audited consolidated results of the Company for the two years ended 31 March 1999. (In HK$'000 except for earnings per share) 1/4/1998-31/3/1999 1/4/1997-31/3/1998 Turnover 178,167 224,273 Profit for the year 14,518 46,201 Earnings per share 4.2 cents 16.2 cents As at 31 March 1999, the Group had audited consolidated net assets of HK$181.3 million and contingent liabilities and lease commitments of HK$5.6 million. On 22 December 1999, the Group reported unaudited turnover of HK$114,493,000 (1998: HK$89,756,000) and profit after tax of HK$10,186,000 (1998: HK$10,786,000) for the six months ended 30 September 1999. Effects of the Proposals & use of proceeds The Property Disposal and the entering into of the NKL Agreement will allow the Group to realise part of its investments in properties so that additional working capital will be available for its core businesses of trading and manufacturing and for the expansion of these two businesses. Completion of the Property Disposal and the sale of the NKL Shares after the exercise of the call option or put option under the NKL Agreement will result in total cash proceeds of about HK$35 million to the Group. The employment of Ms. Chan under the Service Agreement is to retain the management skill and expertise of Ms. Chan after the Share Sale and provide her remuneration commensurate with her position. BACKGROUND AND INTENTION OF ABLE TIME Able Time, incorporated on 29 November 1999 in the British Virgin Islands, is 100% beneficially owned by Mr. Cheng Yung Pun and has not engaged in any business activities except the entering into of the Share Sale Agreement. It is the intention of Mr. Cheng that Able Time will only invest in the Company and will not be engaged in other business activities. Mr. Cheng is a Hong Kong based businessman and has more than twenty years experience in manufacturing and property development and investment. Since mid-1980s, he has a substantial beneficial interest in and is an executive director of Keyhinge Industrial Company Limited which, together with its associates, are engaged in the manufacturing and sale of premium toy and gift items with factories in China and Vietnam, and, since 1993, have become one of the major suppliers to McDonald restaurant chain worldwide for premium toy items. Mr. Cheng is also engaged in property development and investment in Sydney, Australia. With his substantial experience in manufacturing, Mr. Cheng intends that he will use his expertise and experience to assist the Group to further improve the returns of its manufacturing operation. It is the intention of Mr. Cheng that the Group will allocate more resources to its core businesses of trading and manufacturing and realise part of its investments in properties as additional working capital for these two businesses. Able Time and Mr. Cheng have undertaken that Able Time, Mr. Cheng and their associates are not and will not be engaged in any businesses that will compete with the businesses of the Group. Able Time and Mr. Cheng and their respective associates and concert parties have no plan to inject any of their assets in the Company, although they will look for new business opportunities in the Group's ordinary course of business. Able Time and Mr. Cheng undertake to the Stock Exchange that they will not inject assets into the Company for a period of twelve months after Completion. The Stock Exchange states that, if the Company remains a listed company on the Stock Exchange, any future injections of assets into or disposals of assets by the Company will be subject to the provisions of the Listing Rules. Pursuant to the Listing Rules, the Stock Exchange has the discretion to require the Company to issue a circular to the shareholders where any acquisition or disposal by the Group, irrespective of the size of such acquisition or disposal, in particular where such acquisition or disposal, represents a departure from the principal activities of the Group. The Stock Exchange also has the power, pursuant to the Listing Rules, to aggregate a series of acquisitions, or proposals by the Company and any such acquisitions may, in any event, result in the Company being treated as a new applicant for listing and subject to the requirement for new applicants as set out in the Listing Rules. In the event that they inject assets in the Company, Able Time and Mr. Cheng will ensure that the relevant disclosure and/or approval requirements under the Listing Rules will be complied with. It is the intention of Able Time and Mr. Cheng that the listing of the Company will be maintained on the Stock Exchange after the closing of the Offers. Able Time is aware that the Company's public float may be below 25% of its issued share capital following the close of the Offers and it has undertaken to the Stock Exchange that appropriate steps will be taken to ensure that sufficient public float exists for the Shares. If the Stock Exchange believes a false market exists or may exist in the Shares or there are too few Shares in public hands to maintain an orderly market, it will consider exercising its discretion to suspend trading in the Shares. Both Able Time and Mr. Cheng have no prior business relationships with the Group and Ms. Chan. Mr. Cheng is an independent third party not connected with (as defined in the Listing Rules) the Company or any of its subsidiaries or their directors or any of their respective associates (as defined in the Listing Rules). Able Time has appointed DTCFL as its financial adviser. DTCFL is satisfied that Able Time will have sufficient financial resources to complete the Offers. MANAGEMENT OF THE COMPANY AFTER COMPLETION As soon as permissible under the Code, all the existing executive directors of the Company, comprising Ms. Chan, Mr. Lam Yu Ho, Daniel, Mr. Cheng Lok Hing and Mr. Cheng Chun Kit, will resign from the board of the Company. These directors will remain as management of the Company on similar terms of employment except that Ms. Chan will enter into the Service Agreement. Mr. Cheng , sole shareholder and a director of Able Time, will be appointed as an executive director of the Company upon Completion. It is anticipated that four to five new directors will be appointed to the board of the Company. GENERAL An independent board committee will be formed by the Company to give advice to the independent shareholders of the Company in relation to the Proposals and the Offers. Anglo Chinese has been appointed by the Company to advise the independent board committee in relation to the Proposals and the Offers. A special general meeting of the Company will be convened in order for the independent shareholders of the Company to consider and, if thought fit, to approve the Proposals and matters relating thereto. Ms. Chan, who has an interest in the Company with her Share Options and via her interest in Honeyard, and who is involved in the Proposals, has undertaken that both she and Honeyard and their respective associates (as defined under the Listing Rules) will abstain from voting on the resolution(s) to approve the Proposals at the special general meeting. Application will be made to the Executive for a consent under Note 2 to Rule 8.2 of the Takeover Code to despatch the offer document on a date more than 21 days of the date of this announcement as the making of the Offer is subject to Completion, which is expected to take place in the last week of March 2000. A circular, containing details of the Proposals and notice of the special general meeting, will be sent to the shareholders of the Company as soon as practicable. Subject to Completion, a composite offer document, containing the terms of the Offers, the advice of the independent board committee and the letter of Anglo Chinese, together with acceptance and transfer forms, will be sent to shareholders of the Company and holders of Share Options within 7 days from the date of Completion. RESUMPTION OF TRADING IN SHARES Since 14 January 2000, trading in the Shares has been suspended pending the release of this announcement. Application has been made to the Stock Exchange for resumption of trading in the Shares at 10:00 am on 28 February 2000. Investors should exercise extreme caution before buying or selling Shares. DEFINITION "Able Time" Able Time Investments Limited (incorporated in the British Virgin Islands with limited liability and wholly owned by Mr. Cheng) "Anglo Chinese" Anglo Chinese Corporate Finance, Limited "Company" Mascotte Holdings Limited (incorporated in Bermuda with limited liability and listed on the Stock Exchange) "Completion" Completion of the Share Sale Agreement "DTCFL" Deloitte and Touche Corporate Finance Ltd. "DTT" Deloitte Touche Tohmatsu "Executive" The Executive Directors of the Corporate Finance Division of the SFC "Group" The Company and its subsidiaries "Honeyard" Honeyard Corporation (incorporated in the British Virgin Islands with limited liability and wholly owned by The Honeyard Trust, the beneficiaries of which include Ms. Chan and her family members) "Listing Rules" Rules Governing Listing of Securities on the Stock Exchange "MGL" Mascotte Group Limited, a wholly owned subsidiary of the Company (incorporated in the British Virgin Islands with limited liability) "MIL" Mascotte Investments Limited, a wholly owned subsidiary of the Company (incorporated in Hong Kong with limited liability) "Ms. Chan" Ms. Chan Oi Ling, Maria Olimpia, Chairman of the Company "Mr. Cheng" Mr. Cheng Yung Pun, sole shareholder and director of Able Time "NKL" Newland Kingdom Limited, a wholly owned subsidiary of the Company (incorporated in Hong Kong with limited liability) "NKL Agreement" The agreement to be entered into by the Company and Honeyard upon Completion relating to the options to purchase and sell the NKL Shares "NKL Shares" The issued shares of NKL "Offers" The Share Offer and Option Offer "Onshine Securities" Onshine Securities Limited "Option Offer" Possible unconditional cash offer on behalf of Able Time for all the outstanding Share Options (other than those already owned or agreed to be acquired by it), details of which are set out in this announcement "Property Disposal" The disposal of the residential property at South Horizons, Hong Kong "Property Disposal Agreement" The agreement dated 14 January 2000 between MIL and Ms. Chan relating to the Property Disposal "Proposals" Proposals for the Property Disposal, entering into of the NKL Agreement and the employment of Ms. Chan under the Service Agreement "Sale Shares" The 187,140,000 Shares to be sold by Honeyard to Able Time "Service Agreement" The service agreement to be entered into by Ms. Chan and MGL upon Completion "SFC" Securities and Futures Commission "Share(s)" Share(s) of HK$0.10 each in the capital of the Company "Share Offer" Possible unconditional cash offer on behalf of Able Time for all the issued Shares (other than those already owned or agreed to be acquired by it), details of which are set out in this announcement "Share Sale Agreement" The agreement dated 14 January 2000 between Able Time, Honeyard and Ms. Chan relating to Share Sale "Share Sale" The sale to Able Time of 187,140,000 Shares by Honeyard and of 400,000 Shares to be delivered by Honeyard "Share Options" Share options to subscribe for Shares under the Company's share option scheme "Takeover Code" Hong Kong Code on Takeovers and Mergers By Order of the Board MASCOTTE HOLDINGS LIMITED ABLE TIME INVESTMENTS LTD. Chan Oi Ling, Maria Olimpia Cheng Yung Pun Chairman Director Hong Kong, 26 February, 2000 The directors of Mascotte Holdings Limited jointly and severally accept full responsibility for the accuracy of the information contained in this announcement, other than for information relating to Able Time Investments Limited and Mr. Cheng Yung Pun, 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. The director of Able Time Investments Limited accepts full responsibility for the accuracy of the information contained in this announcement, other than for information relating to Mascotte Holdings Limited and its subsidiaries, and confirms, having made all reasonable enquiries, that to the best of his 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.