The MING XUAN SQUARE Shopping Mall

The Ming Xuan Square Mall project is a five-storey high class shopping centre, that is being built in the newly growing commercial centre in the Western District of Zhongshan, a rapidly expanding suburb on the west coast of the Guangdong Province, PRC.

It is located within 1 km of a nearby train terminal (Zhongshan Railway Station) with a regular coach service which goes on to link the entire Pearl River Delta. It just one 1 hour’s drive from Zhuhai Airport and 1.5 hours drive from Guangzhou and Shenzhen airports in the opposite direction.

This Project differs from the projects with which the Company usually deals in that in this case we have not only taken on responsibility for the management and supervision of the whole development but we have also taken a majority equity interest in it.

The Company’s core business, of course, is the provision of Electrical and Mechanical Engineering services. The Company has expanded this more recently into the provision of other building services within the industry. However, in the case of this “Project” the Company was offered an equity stake by the owner of the Land Use Rights and, having conducted an intensive due diligence into the market, determined that there was a need for a development of this nature within the area and that there was a good demand likely for the space to be created. It accordingly agreed to take a majority (51%) equity stake in the project thus giving it not only overall control of the development and its management but the ability to influence. The Board of Management firmly believes that this will contribute significantly to the Company’s profits in both short as well as long term, not only in terms of the strength of rental values, but also by virtue of the appreciation of real estate values that are to be anticipated in the area.

The Board will look closely at this Project as it develops and consider whether it should form a precedent for the future growth of the Company.

However, it should be noted that there is currently a dispute regarding the interests of the Company and the owner of the 49% interests. Full value was paid for these interests at the time and the Company has been advised that the transfer has been legally chopped and is binding on the transferor. The Legal Representative who agreed the sale/transfer and chopped the relevant documents has since died and his children are seeking to challenge the transaction. An initial Court Hearing has already taken place and the result was in favour of the Company and the owner of the minority interest. The issue is still under court proceedings by way of Arbitration and the Company has no reason to believe that the present decision will not be upheld. It is hoped however that the result will be known shortly in order to remove all doubt. The Company will not hazard any guesses as to why a legal document entered into for full value and at arms length has been challenged. Land values have increased since the original transaction.

At present, the Board is looking on this investment as long term although it will always preserve flexibility to meet, for example, market changes.