• Acquisition of 500 hectares of freehold land in the State of Brandenburg, Germany, together with all buildings erected thereon ("Property")
  
  
• Proposed development of an edutainment and leisure based tourist holiday destination with tropical island setting within the Property ("Project")
  
  
• Restructuring of joint venture arrangement to complete acquisition of the Property and undertake the Project
  
  

1. INTRODUCTION
   
   It was announced on 11 July 2003 that:
   
   
   1. Tanjong Entertainment Sdn Bhd ("TESB"), a wholly-owned subsidiary of Tanjong, had entered into a joint venture agreement dated 11 July 2003 ("Original JVA") with Au Leisure Investments Pte Ltd ("Au Leisure") in respect of Central Pacific Assets Limited ("CPA"), being the joint venture company ("Original Joint Venture"); and
      
      
   2. Tropical Island Management GmbH and Tropical Island Asset Management GmbH ("TIAM") (collectively referred to as the "German Companies"), in which TESB had a 50% equity interest via CPA at that juncture, had entered into a conditional purchase and loan contract with the insolvency trustee of the CargoLifter AG group of companies ("Liquidator") dated 11 July 2003 ("Conditional Purchase and Loan Contract"), to acquire, inter-alia, all the pieces of land owned by the CargoLifter AG group of companies measuring approximately 500 hectares located at Brand in the State of Brandenburg, Germany, together with all such buildings erected thereon and all rights attached thereto, for a total purchase consideration of EUR17.5 million (or approximately RM79.6 million) ("Purchase Consideration").
   
   Further to the above, Tanjong is pleased to announce that the Conditional Purchase and Loan Contract has been completed today. Further details are set out in Section 2 below.
   
   Tanjong further announces the restructuring of the arrangements under the Original Joint Venture ("JV Arrangement Restructuring"), as more particularly detailed in Section 3 below.
   
   For purposes of this announcement, an exchange rate of EUR1.00 : RM4.55 has been adopted.
   
   
2. COMPLETION OF THE CONDITIONAL PURCHASE AND LOAN CONTRACT
   
   As announced on 11 July 2003, under the terms of the Conditional Purchase and Loan Contract:
   
   
   1. a deposit of EUR5 million has been paid;
      
      
   2. TIAM shall extend a loan of up to EUR2 million ("Loan") to the Liquidator pending the completion of the Conditional Purchase and Loan Contract. This amount shall be set-off against the balance Purchase Consideration due to the Liquidator upon completion of the Conditional Purchase and Loan Contract;
      
      
   3. A non-refundable real estate transfer tax amounting to EUR678,832 shall be payable by the German Companies; and
      
      
   4. A refundable value-added tax ("VAT") equivalent to 16% of the Purchase Consideration or EUR2.8 million shall be payable by the German Companies.
   
   Concurrent with the completion of the Conditional Purchase and Loan Contract, the German Companies have today effected a payment of EUR12.5 million to the Liquidator in full settlement of the Purchase Consideration, of which a sum of EUR41,000 has been retained to meet payments for works to be performed within the hangar.
   
   The Loan was not required by the Liquidator and was therefore not extended to the Liquidator as originally provided in the Conditional Purchase and Loan Contract.
   
   In addition to the payment of the balance Purchase Consideration, the non-refundable real estate transfer tax amounting to EUR678,832 (or approximately RM3.1 million) has been paid by the German Companies on 22 September 2003, whilst a portion of the refundable VAT amounting to EUR92,800 (approximately RM422,240) has been paid today.
   
   
3. DETAILS OF THE JV ARRANGEMENT RESTRUCTURING
   
   To facilitate the completion of the Conditional Purchase and Loan Contract:
   
   
   1. Tanjong Entertainment (L) Ltd ("TEL"), a wholly-owned subsidiary of TESB, has entered into a share sale agreement dated 16 April 2004 ("Share Sale Agreement") with Au Leisure and CPA for the acquisition by TEL from CPA of 375 shares of EUR25 each representing 75% of the issued and paid-up share capital of Tropical Island S.ar.l ("TISARL"), being the new joint venture company ("TISARL Acquisition"). Au Leisure holds the balance of the 25% interest in TISARL ("New Joint Venture");
      
      
   2. In conjunction with the TISARL Acquisition, TEL has entered into a deed of assignment dated 16 April 2004 ("Deed of Assignment") with TISARL, TIAM, CPA and Au Leisure for the assignment by CPA of the outstanding debt of EUR9.3 million owing by TIAM to CPA, to TISARL ("Debt Assignment");
      
      
   3. TEL has further entered into a joint venture and shareholders' agreement with Au Leisure and TISARL dated 16 April 2004 ("New JVSA") in respect of TISARL to regulate the participation of TEL and Au Leisure in the New Joint Venture; and
      
      
   4. Consequent to the TISARL Acquisition and the New Joint Venture, TESB and Au Leisure have agreed to terminate the Original JVA vide the termination agreement dated 16 April 2004 ("Termination Agreement").
      
   
   
3. (3.1)TISARL Acquisition and Debt Assignment
   
   Pursuant to the Share Sale Agreement, TEL has acquired 375 shares of EUR25 each representing 75% equity interest in TISARL from CPA at par for a total cash consideration of EUR9,375 (or approximately RM42,656), whilst Au Leisure has acquired the remaining 25% equity interest in TISARL from CPA, also at par for a total cash consideration of EUR3,125 (or approximately RM14,219) based on the same terms.
   
   The purchase consideration of EUR9,375 has been funded by TEL through internal funds and was paid upon the completion of the TISARL Acquisition on 16 April 2004. Consequent thereto, TISARL, together with its wholly-owned subsidiaries, Tropical Island Holding GmbH and the German Companies, have become 75%-owned subsidiaries of TEL on 16 April 2004, and in turn of Tanjong, with the remaining 25% equity interest held by Au Leisure.
   
   Concurrent with the TISARL Acquisition, CPA has, in accordance with the terms of the Deed of Assignment, assigned to TISARL its rights over the outstanding debt owing by TIAM amounting to EUR9.3 million ("Debt"). The Debt was originally funded by CPA, an investment holding company, through shareholders' advances from TESB and Au Leisure.
   
   CPA had subscribed for the shares in TISARL on 8 July 2003 at a cost of EUR12,500.
   
   Save for the Debt Assignment, there are no liabilities relating to TISARL acquired pursuant to the TISARL Acquisition.
   
   
3. (3.2)New Joint Venture
   
   Pursuant to the New JVSA, TEL and Au Leisure hold 75% and 25% equity interests respectively in TISARL, being the new joint venture company established for the purpose of identifying, developing and operating edutainment and leisure based holiday destinations with a tropical island setting.
   
   Following the completion of the TISARL Acquisition today, TEL has subscribed to a further 104,625 new shares of EUR25 each in TISARL at par for a total cash consideration of EUR2,615,625 (or approximately RM11.9 million), whilst Au Leisure has subscribed to a further 34,875 new shares of EUR25 each in TISARL at par for a total cash consideration of EUR871,875 (or approximately RM4.0 million). TEL has funded the said share subscription through bank borrowings.
   
   TEL has further extended a shareholder's advance of EUR7.2 million to TISARL upon completion of the New JVSA to part-finance the payment of the balance Purchase Consideration.
   
   
3. (3.3)Termination of Original Joint Venture
   
   Consequent to the aforementioned restructuring, TESB and Au Leisure have mutually agreed to terminate the Original JVA vide the Termination Agreement.
   
   
4. INFORMATION ON TISARL
   
   TISARL was incorporated in Luxembourg on 8 July 2003 as a private limited company. The issued share capital of TISARL was EUR12,500 represented by 500 shares of EUR25 each. Following the completion of the New JVSA, the issued share capital of TISARL has been increased to EUR3.5 million represented by 140,000 shares of EUR25 each.
   
   TISARL is an investment holding company. Its two wholly-owned German subsidiaries, Tropical Island Management GmbH and TIAM, which are held through an intermediate holding company, Tropical Island Holding GmbH, are involved in the development and operation of an edutainment and leisure based tourist holiday destination with tropical island setting in Brand, approximately 60km south of Berlin, Germany (the "Tropical Islands Project").
   
   
5. INFORMATION ON TEL AND AU LEISURE
   
   TEL was incorporated on 9 April 2004 in Labuan, Malaysia as a company limited by shares under the Labuan Offshore Companies Act, 1990. It has an authorised share capital of USD100,000 comprising 100,000 ordinary shares of USD1.00 each, of which 2 ordinary shares have been issued and fully paid-up. TEL is an investment holding company and has been wholly-owned by TESB since 9 April 2004.
   
   Au Leisure was incorporated on 10 July 2003 in Singapore as a private limited company under Singaporean laws. It has an authorised share capital of SGD1,000,000 comprising 1,000,000 ordinary shares of SGD1.00 each, of which 2 ordinary shares have been issued and fully paid-up. Au Leisure is an investment holding company and is controlled by Mr Colin Au.
   
   
6. RATIONALE AND PROSPECTS
   
   Tourism is an important sector of the German economy. In 2001, the tourism industry represented 8% of Germany's gross domestic product and accounted for 8% of the nation's workforce. Domestic travel dominates for Germans, with foreign destinations accounting for only approximately 28% of the total trips made by Germans in 2001 (Source: German National Tourist Board).
   
   In view of the foregoing, the prospects for the German tourism industry remain positive and this bodes well for the Tropical Islands Project. Consequently, the increased percentage of equity participation in TISARL to 75% will accord the Tanjong Group control of TISARL. As a subsidiary of the Tanjong Group, TISARL would be better placed to draw upon the Tanjong Group's internal resources and external business relationships in its development of the Tropical Islands Project.
   
   
7. EFFECTS ON TANJONG
   
   
   1. Effects on share capital, shareholding structure and consolidated net tangible assets ("NTA")
      
      The JV Arrangement Restructuring will not have any effect on the share capital or shareholding structure of Tanjong including its foreign equity ownership, as they will not involve the issuance of new ordinary shares by Tanjong.
      
      The JV Arrangement Restructuring is not expected to have any material effect on the consolidated NTA of Tanjong.
      
      
   2. Effects on earnings
      
      The JV Arrangement Restructuring is not expected to have any material effect on the earnings of the Tanjong group of companies for the current financial year.
      
   
   
8. INVESTMENT RISKS
   
   There are no additional risks involved with the JV Arrangement Restructuring save for the risks relating to the Tropical Islands Project, as described in the announcement dated 11 July 2003.
   
   
9. APPROVALS REQUIRED
   
   The JV Arrangement Restructuring is not subject to the receipt of any regulatory or shareholders' approvals.
   
   
10. DIRECTORS' OPINION
    
    After careful deliberation, the Directors of Tanjong are of the opinion that the JV Arrangement Restructuring is in the best interest of the Group.
    
    
11. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR ANY PERSONS CONNECTED WITH THEM
    
    None of the directors nor major shareholders of Tanjong and/or any persons connected with them have any interest, whether direct or indirect, in the JV Arrangement Restructuring.
    
    
12. THE SECURITIES COMMISSION'S POLICIES AND GUIDELINES ON ISSUE/OFFER OF SECURITIES
    
    As far as Tanjong is aware, the JV Arrangement Restructuring does not fall within the ambit of the Securities Commission's Policies and Guidelines on Issue/Offer of Securities.
    
    
13. DOCUMENTS AVAILABLE FOR INSPECTION
    
    Copies of the Share Sale Agreement, Deed of Assignment, New JVSA and Termination Agreement shall be made available for inspection at Tanjong's principal office located at Level 30, Menara Maxis, Kuala Lumpur City Centre, 50088 Kuala Lumpur, during normal business hours from Mondays to Fridays (inclusive) for a period of 3 months from the date hereof.

Date Posted : 16 Apr 2004
Source : Kuala Lumpur