Sallmanns (Far East) Limited, an Independent Valuer, in Connection with Its Valuation As at June 30, 2006 of the Property Interests of the Group
APPENDIX III PROPERTY VALUATION
The following is the text of a letter, summary of values and valuation certificates, prepared for the purpose of incorporation in this prospectus received from Sallmanns (Far East) Limited, an independent valuer, in connection with its valuation as at June 30, 2006 of the property interests of the Group. Sallmanns Corporate valuation and consultancy www.sallmanns.com 22nd Floor, Siu On Centre 188 Lockhart Road Wan Chai, Hong Kong Tel: (852) 2169 6000 Fax: (852) 2528 5079
September 25, 2006
The Board of Directors Computime Group Limited 17th Floor, Great Eagle Centre, No. 23 Harbour Road, Hong Kong
Dear Sirs,
In accordance with your instructions to value the properties in which Computime Group Limited (the “Company”) and its subsidiaries (hereinafter together referred to as the “Group”) have interests in Hong Kong, the People’s Republic of China (the “PRC”), the United States of America (the ”USA”) and the United Kingdom (the “UK”), we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the capital values of the property interests as at June 30, 2006 (the “date of LR.5.06(8) & 5.07 valuation”).
Our valuations of the property interests represent the market value which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion”.
We have valued the property interests in Group I by the direct comparison approach assuming sale of the property interests in their existing state with the benefit of immediate vacant possession and by making reference to comparable sale transactions as available in the relevant market.
We have attributed no commercial value to the property interests in Groups II, III and IV, which are leased by the Group in Hong Kong, the PRC, the USA and the UK respectively, due either to the short-term nature of the leases or the prohibition against assignment or sub-letting or otherwise due to the lack of substantial profit rents.
Our valuations have been made on the assumption that the seller sells the property interests in the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to affect the values of the property interests.
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No allowance has been made in our report for any charges, mortgages or amounts owing on any of the property interests valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values.
In valuing those property interests of the Group in Hong Kong held under the Government Leases expiring before June 30, 1997, we have taken account of the stipulations contained in Annex III of the Joint Declaration of the Government of the United Kingdom and the Government of the People’s Republic of China on the question of Hong Kong and the New Territories Leases (Extension) Ordinance 1988 that such leases have been extended without premium until June 30, 2047 and that a rent of three per cent of the then rateable value is charged per annum from the date of extension.
In valuing the property interests, we have complied with all the requirements contained in Chapter 5 and Practice Note 12 to the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited; the RICS Appraisal and Valuation Standards (5th Edition May 2003) published by the Royal Institution of Chartered Surveyors; and the HKIS Valuation Standards on Properties (1st Edition January 2005) published by the Hong Kong Institute of Surveyors. LR.5.05 & 5.06(9)
We have relied to a very considerable extent on the information given by the Group and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters.
We have been provided with copies of the tenancy agreements relating to the property interests and have caused searches to be made at the Hong Kong Land Registries in relation to the property interests located in Hong Kong. However, we have not searched the original documents to verify ownership or to ascertain any amendment.
We have been shown copies of various title documents including Realty Title Certificates and official plans relating to the property interests located in the PRC and have made relevant enquiries. Where possible, we have examined the original documents to verify the existing titles to the property interests in the PRC and any material encumbrances that might be attached to the property interests or any lease amendments. We have relied considerably on the advice given by the Company’s PRC legal advisor — King & Wood, concerning the validity of the Group’s titles to the property interests.
We have not carried out detailed site measurements to verify the correctness of the site areas in respect of the properties but have assumed that the site areas shown on the documents and official site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken.
We have inspected the exterior and, where possible, the interior of the properties. However, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report whether the properties are free of rot, infestation or any other structural defects. No tests were carried out on any of the services.
We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We have also sought confirmation from the Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and we have no reason to suspect that any material information has been withheld.
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Unless otherwise stated, all monetary figures stated in this report are in Hong Kong Dollars. PN12 14
Our valuations are summarized below and the valuation certificates are attached.
Yours faithfully, LR.5.06(7) for and on behalf of Sallmanns (Far East) Limited Paul L. Brown B.Sc. FRICS FHKIS Director
Note: Paul L. Brown is a Chartered Surveyor who has 23 years’ experience in the valuation of properties in the PRC and 26 years of property valuation experience in Hong Kong, the United Kingdom and the Asia-Pacific region.
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SUMMARY OF VALUES
GROUP I — PROPERTY INTERESTS OWNED AND OCCUPIED BY THE GROUP IN HONG KONG
Capital value in existing state as at No. Property June 30, 2006 LR.5.06(8)
HK$
1. 7th Floor 12,000,000 How Ming Factory Building No. 99 How Ming Street Kwun Tong Kowloon Hong Kong
Sub-total: 12,000,000
GROUP II — PROPERTY INTERESTS RENTED AND OCCUPIED BY THE GROUP IN HONG KONG
Capital value in existing state as at No. Property June 30, 2006 L.R.5.06(8)
HK$
2. 21st and 22nd Floors No commercial value Spectrum Tower No. 53 Hung To Road Kwun Tong Kowloon Hong Kong
Sub-total: Nil
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GROUP III — PROPERTY INTERESTS RENTED AND OCCUPIED BY THE GROUP IN THE PRC
Capital value in existing state as at No. Property June 30, 2006 LR.5.06(8)
HK$
3. Various buildings located at 88 Kang Qiao Road No commercial value Yue Ken Guang Yu Industrial Zone Danzhutou Village Buji Town Longgang District Shenzhen Guangdong Province The PRC
4. F/2, Unit B No commercial value Productivity Building j/o Science Middle 3rd Road and Gaoxin Middle 2nd Road Science Park Nanshan District Shenzhen Guangdong Province The PRC
Sub-total: Nil
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GROUP IV — PROPERTY INTERESTS RENTED AND OCCUPIED BY THE GROUP IN OVERSEAS COUNTRIES
Capital value in existing state as at No. Property June 30, 2006 LR.5.06(8)
HK$
5. Unit #201 No commercial value 650 West Grand Avenue Elmhurst Illinois 60126 The USA
6. Suite 1000 No commercial value 2305 Hurstbourne Village Drive Hurstbourne Village Office Condominiums Louisville Kentucky 40299 The USA
7. Unit 18 No commercial value Bala Enterprise Park Bala Gwynedd LL 23 7 NL The UK
Sub-total: Nil
Grand-total: 12,000,000
Note: Subsequent to the date of valuation, the Group has entered into a tenancy agreement with an independent party to rent a property in Hong Kong for office purpose. We have attributed no commercial value to this property interest. Please refer to page III-16.
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VALUATION CERTIFICATE
GROUP I — PROPERTY INTERESTS OWNED AND OCCUPIED BY THE GROUP IN HONG KONG
Capital value in Particulars of existing state as at Property Description and tenure occupancy June 30, 2006 LR.5.06(8) HK$
1. 7th Floor The property comprises the whole of 7th floor of The property is 12,000,000 LR.5.06(1) How Ming Factory an 11-storey industrial building completed in currently Building No. 99 about 1970. occupied by the How Ming Street Group for Kwun Tong The property has a saleable area of storage and Kowloon approximately 1,566.7 sq.m. ancillary office Hong Kong purposes. The property is held under Conditions of Sale 4/48th equal undivided No. 8624 for a term of 99 years less the last parts or shares of and in three days thereof commencing from July 1, Kwun Tong Inland 1898 which has been statutorily extended till Lot No. 506 June 30, 2047.
The current Government Rent is an amount equal to 3% of the rateable value per annum.
Notes: 1. The registered owner of the property is Computime Limited vide Assignment Memorial No. UB3933778 dated 6 December 1988. 2. The property is subject to a Deed of Mutual Covenant vide Memorial No. UB758496 dated August 25, 1970. 3. Pursuant to a provisional agreement for sale and purchase dated September 15, 2006, Computime Limited agrees to sell the property to an independent third party at a consideration of HK$18,500,000, and the transaction is expected to be completed on or before March 31, 2007.
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VALUATION CERTIFICATE
GROUP II — PROPERTY INTERESTS RENTED AND OCCUPIED BY THE GROUP IN HONG KONG
Capital value in Particulars of existing state as at Property Description and tenure occupancy June 30, 2006 LR5.06(8) HK$ 2. 21st and 22nd Floors The property comprises the whole of 21st and The property is No commercial value LR5.06(1) Spectrum Tower 22nd floors of a 23-storey industrial/office currently No. 53 Hung To Road building completed in about 1997. occupied by the Kwun Tong Group for office Kowloon The property has a total gross floor area of purposes. Hong Kong approximately 1,432 sq.m.
Pursuant to a lease dated October 14, 2004, the property is leased to Computime Limited from New Hung Property Limited, an independent third party for a term of two years commencing from November 1, 2004 and expiring on October 31, 2006 at a monthly rent of HK$161,847 exclusive of management fees, rates, government rent and air-conditioning charges. The lease contains provisions for two rent free periods from November 1, 2004 to December 31, 2004 and from November 1, 2005 to January 31, 2006.
Notes: 1. Computime Limited is a 100% owned subsidiary of the Company. 2. The registered owner of the property is New Hung Property Limited vide Assignment Memorial No. UB4595298 dated October 17, 1990.
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VALUATION CERTIFICATE
GROUP III — PROPERTY INTERESTS RENTED AND OCCUPIED BY THE GROUP IN THE PRC
Capital value in Particulars of existing state as at Property Description and tenure occupancy June 30, 2006 LR.5.06(8) HK$ 3. Various buildings located The property comprises an ancillary office The property is No commercial value LR.5.06(1) at 88 Kang Qiao Road building, four industrial buildings, two currently Yue Ken Guang Yu dormitories and a warehouse completed in occupied by the Industrial Zone various stages between 2004 and 2005. Group for Danzhutou Village production, Buji Town The buildings have a total gross floor area of storage, staff Longgang District approximately 60,155.19 sq.m. The details of quarters and Shenzhen which are tabulated below: ancillary office Guangdong Province No. Building Gross Floor purposes. The PRC Area (sq.m.)
1 Dormitory No. 2, 22,475.19 Factories Nos. 1 and 2
2 Dormitory No. 1, 32,098.92 Factories Nos. 3 and 4
3 Office building 5,364.94
4 Warehouse 216.14 Total: 60,155.19
The property is leased to the Group pursuant to ten agreements as stated in notes no. 1 to 10.
Notes: 1. A tenancy agreement dated May 16, 2003 entered into between ( ), an independent third party, and Computime Manufacturing Limited (CML), a 100% owned subsidiary of the Company in relation to the leasing of Dormitory No. 2, Factories Nos. 1 and 2 . 2. A supplemental tenancy agreement dated May 16, 2003 entered into between , and CML in relation to the leasing of Phase I Factories and Dormitory (i.e. Factories Nos. 1 and 2 and Dormitory No. 2), Phase II Factories and Dormitory (i.e. Factories Nos. 3 and 4 and Dormitory No. 1), Levels 2-5 of office building. 3. A supplemental tenancy agreement dated December 28, 2003 entered into between and CML in relation to the leasing of the whole office building and a warehouse. 4. A tenancy agreement dated February 7, 2005 entered into between and ( ), a 100% owned subsidiary of CML, in relation to the leasing of Dormitory No. 1, Factories Nos. 3 and 4. 5. A supplemental tenancy agreement dated February 8, 2005 entered into between and CML in relation to the leasing of Dormitory No. 1, Factories Nos. 3 and 4. 6. A tenancy agreement dated December 1, 2005 entered into between and in relation to the leasing of the whole office building. 7. A tenancy agreement dated April 1, 2006 entered into between and in relation to the leasing of Dormitory No. 2, Factories Nos. 1 and 2. 8. An agreement dated April 24, 2006 entered into between and CML in relation to termination of the tenancy of the warehouse of a gross floor area of approximately 216.14 sq.m. with effect from July 1, 2006. 9. A tenancy agreement dated June 30, 2006 entered into between and in relation to the leasing of Dormitory No. 1, Factories Nos. 3 and 4.
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10. A supplemental tenancy agreement dated July 1, 2006 entered into between , CML and in relation to, inter alia, the replacement of CML by in relation to the supplemental tenancy agreements mentioned in notes 2, 3 and 5. 11. Pursuant to the above agreements, the updated terms of the tenancies of the property in respect of floor area, lease term and rents are as follow:
Factory Nos. 3 and 4 , Factory Nos. 1 and 2 , Dormitory No. 1 Dormitory No. 2 Office Warehouse
Area (sq.m) .... 32,098.92 22,475.19 5,364.94 216.14 Term...... commencing from November commencing from September 1, commencing from December 1, commencing from November 1, 15, 2004 and expiring on 2003 and expiring on December 2003 and expiring on December 2003 and expiring on June 30, December 31, 2013 31, 2013 31, 2013 2006 Monthly Rent A) March 1, RMB 12/sq.m. A) September RMB 12/sq.m. A) February 1, RMB 16/sq.m. A) February 1, RMB 12/sq.m. 2005 to 1, 2003 to 2004 to 2004 to June 30, March 31, March 31, March 31, 2006 2006 2005 2006 B) July 1, 2006 RMB 13/sq.m. B) April 1, RMB 13/sq.m. B) April 1, RMB 17/sq.m. B) April 1, RMB 13/sq.m. to March 2006 to 2005 to 2006 to 31, 2008 March 31, March 31, June 30, 2008 2006 2006 C) April 1, To be reviewed C) April 1, To be reviewed C) April 1, RMB 18/sq.m. 2008 to every four 2008 to every four 2006 to March 31, years with March 31, years with March 31, 2012 reference to 2012 reference to 2008 rental of rental of similar similar properties, properties, increment or increment or reduction not reduction not to exceed 10% to exceed 10% of the existing of the existing rent. rent. D) April 1, To be D) April 1, To be D) April 1, To be reviewed 2012 to confirmed by 2012 to confirmed by 2008 to every four December the lessor and December the lessor and March 31, years with 31, 2013 lessee 31, 2013 lessee 2012 reference to rental of similar properties, increment or reduction not to exceed 10% of the existing rent. E) April 1, To be 2012 to confirmed by December the lessor and 31, 2013 lessee
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12. We have been provided with a legal opinion on the legality of the tenancy agreements in relation to the property issued by the Company’s PRC legal advisor, which contains, inter alia, the following: (i) The tenancy of the warehouse has been terminated; (ii) the lessor, , has not obtained the Realty Title Certificate of Dormitory No.1. According to a letter dated June 29, 2006 issued by the lessor, construction of the dormitory has been completed and satisfactorily inspected by the Construction Bureau. However, due to land acquisition for road widening by the government, the Realty Title Certificate of this building cannot be processed pending finalization of the relevant planning; (iii) the lessor, has obtained the Realty Title Certificates of Factories Nos. 1-4, Dormitory No. 2 and the office building (these buildings), and has the rights to let these buildings; (iv) According to the documents provided by the Company and verified by the Company’s PRC legal advisor, these buildings are not subject to mortgage or any third party’s rights. (v) the above tenancy agreements and supplemental tenancy agreements are legal, valid, binding and enforceable; and (vi) has the rights to use the above office building, factories and dormitories during the terms of the tenancies
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VALUATION CERTIFICATE
Capital value in Particulars of existing state as at Property Description and tenure occupancy June 30, 2006 LR.5.06(8) HK$
4. F/2, Unit B The property comprises an unit of a 7-storey The property is No commercial value LR.5.06(1) Productivity Building building within the Science Park completed in currently j/o Science Middle 3rd about 2005. occupied by the Road and Gaoxin Group for Middle 2nd Road The property has a gross floor area of research and Science Park approximately 728.35 sq.m. development and Nanshan District office purposes. Shenzhen Pursuant to a tenancy agreement dated April 17, Guangdong Province 2006 and a supplemental agreement dated July The PRC 26, 2006, the property is leased to CML from Shenzhen Science & Industry Park Corporation, an independent third party for a term of three years commencing from May 15, 2006 and expiring on May 14, 2009 at a monthly rent of RMB43,701 exclusive of water, electricity and gas charges.
Notes: 1. CML is a 100% owned subsidiary of the Company. 2. We have been provided with a legal opinion on the legality of the tenancy agreement in relation to the property issued by the Company’s PRC legal advisor, which contains, inter alia, the following: (i) The contents of the tenancy agreement are legal, but as no relevant document in relation to the lessor’s ownership in the property has been provided, no legal opinion is provided in relation to the Iessor’s right to let the property and the rights of CML to use the property during the term of the tenancy; (ii) According to the terms and conditions of the tenancy agreement, the lessor should ensure that the leased property is suitable and fits for the use and purpose under the tenancy agreement and that the safety of the leased property complies with the relevant laws and regulations. In the event that the lessee suffers losses caused by the lessor’s acts or faults, the lessee has the rights to seek for compensation from the lessor. Therefore, the Company’s PRC legal advisor is of the opinion that if the lessee is unable to continue to use the property because the lessor has not obtained the title of the property, the lessee has the rights to claim compensation from the lessor for the losses so caused.
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VALUATION CERTIFICATE
GROUP IV — PROPERTY INTERESTS RENTED AND OCCUPIED BY THE GROUP IN OVERSEAS COUNTRIES
Capital value in Particulars of existing state as at Property Description and tenure occupancy June 30, 2006 LR.5.06(8) HK$ LR.5.06(1) 5. Unit #201 The property comprises an office/warehouse unit The property is No commercial value 650 West Grand Avenue of an 1-storey building completed in about 1987. currently Elmhurst occupied by the Illinois 60126 The property has a gross building area of Group for office The USA approximately 230 sq.m. and warehouse purposes. Pursuant to a lease dated June 6, 2005 the property is leased to Computime (N.A.) Technology Center, Inc. from La Salle National Bank as successor trustee to La Salle National Trust, NA, as trustee under Trust No. 107031, an independent third party for a term of three years commencing from July 1, 2005 and expiring on June 30, 2008, with an option to renew for a further term of two years, at a monthly rent of USD 2,400 from July 1, 2005 to June 30, 2006, USD 2,472 from July 1, 2006 to June 30, 2007, and USD 2,546 from July 1, 2007 to June 30, 2008, exclusive of maintenance costs and other outgoings.
Notes: 1. Computime (N.A.) Technology Center, Inc. is a 100% owned subsidiary of the Company. 2. The registered owner of the property is Chicago Title Land Trust Company as successor to La Salle National Bank as trustee, Trust No. 107031, trust agreement dated December 12, 1983. 3. Our valuation conclusion is reached having regard to the valuation report undertaken by Lee F. Canel, MAI, a qualified oversea real estate professional in Real Estate who has 22 years of valuation experience in respect of the properties in the USA and is a member of the Appraisal Institute.
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VALUATION CERTIFICATE
Capital value in Particulars of existing state as at Property Description and tenure occupancy June 30, 2006 LR.5.06(8) HK$ LR.5.06(1) 6. Suite 1000 The property comprises an office unit on 2nd The property is No commercial value 2305 Hurstbourne floor of a two-storey office building completed in currently Village Drive about 1999. occupied by the Hurstbourne Village Group for office Office Condominiums The property has a gross building area of purposes. Louisville approximately 79 sq.m. Kentucky 40299 The USA Pursuant to a lease agreement dated November 1, 2004, the property is leased to CT Global, Inc. from B&M Financial Investment, LLC, an independent third party for a term of three years commencing from December 1, 2004 and expiring on November 30, 2007 at a monthly rent of USD 815, exclusive of maintenance costs and other outgoings.
Notes: 1. CT Global, Inc. is a 100% owned subsidiary of the Company. 2. The registered owner of the property is B&M Financial Investment, LLC.. 3. Our valuation conclusion is reached having regard to the valuation report undertaken by David J. Glauber, MAI & Robert W. Hardin Jr.. Mr. Glauber is a qualified overseas real estate professional in Real Estate who has 20 years of valuation experience in respect of the properties in the USA and is a member of the Appraisal Institute.
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VALUATION CERTIFICATE
Capital value in Particulars of existing state as at Property Description and tenure occupancy June 30, 2006 LR.5.06(8) HK$ LR.5.06(1) 7. Unit 18 The property comprises a single storey The property is No commercial value Bala Enterprise Park warehouse completed in about 2003. currently Bala occupied by the Gwynedd The property has a gross internal area of Group for LL 23 7 NL approximately 526.33 sq.m. storage and The UK office purposes. Pursuant to a lease dated August 1, 2005 the property is leased to Salus Controls PLC from The Welsh Development Agency, an independent third party for a term of six years commencing from August 1, 2005 at an annual rent of £18,837 for the first three years and thereafter at the open market rent, exclusive of rates, insurance and repairing costs.
Notes: 1. Salus Controls PLC is a 55% owned subsidiary of the Company. 2. The property is not currently registered at the Land Registry. 3. Our valuation conclusion is reached having regard to the valuation report undertaken by Gareth Peters, a qualified overseas real estate professional in Real Estate who has 10 years of valuation experience in respect of the properties in the UK and is a member of the Royal Institution of Chartered Surveyors.
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VALUATION CERTIFICATE
PROPERTY INTERESTS RENTED BY THE GROUP IN HONG KONG AFTER THE DATE OF VALUATION
Particulars of Property Description and tenure occupancy
17th Floor The property comprises the whole of 17th floor of a 33-storey commercial The property is Great Eagle Centre building (plus 2 levels of basement) completed in about 1983. currently vacant No. 23 Harbour Road and under Wanchai The property has a saleable area of approximately 1,316.9 sq.m. renovation and Hong Kong fitting out works. Pursuant to a tenancy agreement dated August 1, 2006, the property is leased to Computime Limited from Harbour View 17 Limited, an independent third party for a term of three years commencing from August 1, 2006 and expiring on July 31, 2009, with an option to renew for a further term of two years at the then open market rent, at a monthly rent of HK$383,699 exclusive of air-conditioning charges, service charges, rates and other outgoings. The tenancy agreement contains provisions for a rent free period of 61 days from August 1, 2006.
Notes: 1. Computime Limited is a 100% owned subsidiary of the Company. 2. The registered owner of the property is Harbour View 17 Limited vide Assignment Memorial No. UB8145215 dated June 30, 2000.
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