HK Bourse: Release from China Travel Invest On Connected Deal -3

China Travel Services

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.
CHINA TRAVEL INTERNATIONAL INVESTMENT HONG KONG LIMITED
(Incorporated in Hong Kong under the Companies Ordinance)
(Stock Code: 308)
CONNECTED TRANSACTION
On 4 April 2005, CTS Cargo, a wholly-owned subsidiary of the Company,
reached an agreement with the CTSIT Management whereby CTS Cargo would
sell all its interest in the entire registered capital of SHIEC for a
consideration of RMB14,295,387.69 (approximately HK$13,486,214.80).
The CTSIT Management are directors and senior management of CTSIT and
therefore are connected persons of the Company. The Disposal constitutes
a connected transaction for the Company under the Listing Rules. As each
of the applicable percentage ratios as defined in Rule 14A.10 of the
Listing Rules is more than 0.1% but less than 2.5%, the Disposal falls
within the provision of Rule 14A.32 and is only subject to the reporting
and announcement requirements and is exempt from the independent
shareholders' approval requirements. Details of the Disposal is
accordingly disclosed in this announcement and will be included in the
next published annual report of the Company in accordance with Rule
14A.45.
DETAILS OF THE DISPOSAL AGREEMENT
Date: 4 April 2005
Parties:
(1) CTS Cargo acting through its agents, as the vendor; and
(2) CTSIT Management, as the purchasers.
Assets disposed
The entire registered capital of SHIEC will be sold under the Disposal
Agreement. For further information about SHIEC, please refer to the
paragraph headed "Information on SHIEC" below. The CTSIT Management will
take up the entire registered capital of SHIEC in the following
proportion:
% in SHIEC
Name Share of consideration to be acquired
*(Wang Jia Ao) RMB2,859,077.54 20%
(approximately HK$2,697,242.96)
*(Gu Ping Pu) RMB2,382,540.79 16.6665%
(approximately HK$2,247,679.99)
*(Zhou Xu Qing) RMB1,977,480.98 13.833%
(approximately HK$1,865,548.09)
*(Cai Xian Zhong) RMB1,977,480.98 13.833%
(approximately HK$1,865,548.09)
*(Liu Hong) RMB1,977,695.41 13.8345%
(approximately HK$1,865,750.39)
*(Dong Wei Zhong) RMB1,215,107.95 8.5%
(approximately HK$1,146,328.26)
*(Zhu Zhao Rong) RMB953,002.02 6.6665%
(approximately HK$899,058.51)
*(Ma Chuan You) RMB953,002.02 6.6665%
(approximately HK$899,058.51)
TOTAL: RMB14,295,387.69 100%
(approximately HK$13,486,214.80)
Under the Disposal Agreement, all the earnings of SHIEC for the period
commenced from 30 June 2004 will belong to the CTSIT Management
Completion
After the signing of the Disposal Agreement, the parties will apply for
the approval from the relevant State Administration for Industry and
Commerce for the transfer contemplated under the Disposal Agreement. The
Disposal will be deemed to be completed once such approval is obtained.
If such approval cannot be obtained within 2 months from the signing of

the Disposal Agreement, the consideration shall be refunded to CTSIT
Management without interest and the Disposal will lapse.
Other arrangement
In consideration of the Disposal Agreement, the CTSIT Management has
agreed to waive their entitlement to bonuses of RMB14.7 million payable
by CTSIT in 2004.
Consideration
The consideration for the Disposal of RMB14,295,387.69 (approximately
HK$13,486,214.80) were payable in cash by each of the CTSIT Management
in proportion to their respective proposed shareholding percentage in
SHIEC. 20% of such consideration has been paid as deposit upon signing
of the Disposal Agreement, and the balance of such consideration will be
paid within 7 days from the signing of the Disposal Agreement.
The above consideration was arrived at after arm's length negotiations
between the parties based on an agreed valuation of RMB70 million
(approximately HK$66 million) for CTSIT, in which SHIEC has a 20%
interest and the carrying value of the investment of SHIEC of
HK$13,486,214.80. The said agreed valuation of RMB70 million
(approximately HK$66 million) of CTSIT was agreed between the parties to
the Disposal based on a recent proposed disposal of CTSIT of its 4%
interest in CTSIT at RMB2.8 million (approximately HK$2.6 million) by an
independent third party minority shareholder which is not connected with
the directors, chief executives and substantial shareholders of the
Company and its subsidiaries, and any of their associates.
It is expected that no gain or loss will be accrued to the Company, as
the consideration equals to the carrying value of the investment of
SHIEC of HK$13,486,214.80 as recorded in the unaudited management
accounts of the Company as at 31 December 2004. The proceeds of
consideration received as a result for the Disposal will be applied by
the Group as general working capital.
INFORMATION ON SHIEC
SHIEC was a limited liability company established in the PRC with a
registered capital of RMB11 million (approximately HK$10.4 million) and
is engaging in strategic investment in providing services to travelling
PRC nationals. It holds, as its major asset, a 20% shareholding in
CTSIT, which is engaged in freight-forwarding business in the PRC. The
Company's interests in SHIEC were accounted for as an investment by the
Group as the Company's intention was to hold the 20% interest in CTSIT
as investment, and the said 20% interests of CTSIT was therefore not
consolidated in the financial statements of the Group as reflected in
the Company's financial statements since the acquisition of such
interests in 2003. Other than the said 20% interest through SHIEC, the
Company is holding 76% interests in CTSIT which has been consolidated in
the Group's financial statements since the acquisition of such interests
in 1997 and the Company will continue to hold such 76% interests in
CTSIT immediately after the Completion. As such, CTSIT will remain a non
wholly-owned subsidiary of the Company immediately after the Completion.
As at 31 December 2004, the audited net asset value (in accordance with
HK GAAP) of SHIEC (in accordance with HK GAAP) was RMB28.8 million
(approximately HK$27.17 million). For the financial year ended 31
December 2004, the audited net profits of SHIEC (in accordance with HK
GAAP) before and after taxation were RMB0.3 million (approximately
HK$0.3 million) and RMB0.3 million (approximately HK$0.3 million)
respectively. For the financial year ended 31 December 2003, the audited
net profits of SHIEC (in accordance with HK GAAP) before and after
taxation were RMB2.6 million (approximately HK$2.4 million) and RMB2.2
million (approximately HK$2.1 million) respectively. For the financial
year ended 31 December 2002, the audited net profits of SHIEC (in
accordance with HK GAAP) before and after taxation were RMB5.4 million
(approximately HK$5.1 million) and RMB4.6 million (approximately HK$4.3
million) respectively.
REASON FOR THE DISPOSAL
The Board considers that the Disposal will allow the Group to further
capitalise on the potential growth in the freight-forwarding business in
the PRC by tapping the management talents of the CTSIT Management
through their equity participation in CTSIT.
The Directors (including all the independent non-executive directors)
consider the terms of the Disposal Agreement, including the
consideration for the Disposal, to be normal commercial terms, and fair
and reasonable and in the interests of the Company and all the
shareholders as a whole.
GENERAL
The Group is engaged in travel and travel-related services, theme park
business, transportation business, hotel business, golf club business
and investment in infrastructure.

The CTSIT Management are directors and senior management of CTSIT and
therefore are connected persons of the Company. The Disposal constitutes
a connected transaction for the Company under the Listing Rules. As each
of the applicable percentage ratios as defined in Rule 14A.10 of the
Listing Rules is more than 0.1% but less than 2.5%, the Disposal falls
within the provision of Rule 14A.32 and is only subject to the reporting
and announcement requirements and is exempt from the independent
shareholders' approval requirements. Details of the Disposal is
accordingly disclosed in this announcement and will be included in the
next published annual report of the Company in accordance with Rule
14A.45.
DEFINITIONS
Expressions Meanings
"Company" China Travel International Investment Hong Kong Limited
"Completion" completion of the Disposal
"connected person(s)", "substantial shareholder(s)" each has the
meaning ascribed to it under the Listing Rules
"CTS Cargo" China Travel Service Cargo (Investment) Limited (*, a
wholly-owned subsidiary of the Company
"CTSIT" CTS International Transportation Co., Ltd. (*)
"CTSIT Management" *(Wang Jia Ao), *(Gu Ping Pu), *(Zhou Xu Qing),
*(Cai Xian Zhong), *(Liu Hong), *(Dong Wei Zhong), *(Zhu Zhao Rong) and
*(Ma Chuan You), being directors and senior management of CTSIT and the
purchasers of the entire interest in the registered capital of SHIEC under
the Disposal Agreement
"Directors" directors of the Company
"Disposal" disposal of all the interest in the entire registered
capital of SHIEC pursuant to the Disposal Agreement
"Disposal Agreement" the disposal agreement dated 4 April 2005,
details of which are set out above
"Group" the Company and its subsidiaries
"HK GAAP" generally accepted accounting principles in Hong Kong
"HK$" Hong Kong dollars, the lawful currency of Hong Kong
"Listing Rules" the Rules Governing the Listing of Securities on
the Stock Exchange
"party" or "parties" the party or parties to the Disposal Agreement
"PRC" the People's Republic of China
"RMB" Renminbi, the lawful currency of the PRC
"SHIEC" Shanghai Huajian Import-Export Company (*)
"Stock Exchange" The Stock Exchange of Hong Kong Limited
* Exchange rate used in this announcement is for reference only and is
HK$100 to RMB106
Source: Stock Exchange of Hong Kong