The board of directors of Continental Engineering Corp. (CEC), a subsidiary of the Continental Holdings (3703) Corp. (CHC), at today’s board meeting made the decision to separate CEC’s construction and development operations and a portion of its long-term investment equity, which will then be transferred to the newly-established Continental Development Corp. (CDC). CDC will issue new shares to CHC in return. CEC will simultaneously reduce its capital in proportion to the business value transferred to the new company. Continental Development Corp. is expected to be formally established on June 2 of this year.

This restructuring of CEC chiefly reflects the company’s response to the changes in the construction and development industry over several years. In view of factors including differences between the construction and real estate development industries, the maturity of Taiwan’s infrastructure market, the diversification of real estate operations, the divergence of branded and contract construction business models, and operating performance, CEC’s board of directors has accordingly made the decision to restructure the company.

According to CEC’s settlement statement of March 31, 2010, the assets to be transferred have a total value of roughly NT$19.2 billion. When transferred liabilities of approximately NT$12.6 billion are subtracted, roughly NT$6.6 billion in business value will be transferred, and Continental Development Corp. will issue common stock valued at NT$3.0 billion to CHC. The amount by which business value exceeds face value will constitute CDC’s capital reserves. CEC will simultaneously reduce its capital by NT$4.17 billion, leaving CEC with total assets of NT$18.5 billion. After capital reduction, CEC will have paid-in capital of NT$4.25 billion and net value of approximately NT$8.8 billion.

The purpose of this spin-off is to adjust CEC’s organizational structure. After separating the operating units, CEC and Continental Development Corp. will both be wholly-owned subsidiaries of CHC. As such, the equity of CHC and its shareholders will not be affected. The baseline date for the separation has been set for June 2, 2010. If necessary, CEC’s board of directors may adjust the separation baseline date, business value, assets and liabilities, or other relevant matters in accordance with the law.

Pursuant to the Business Mergers and Acquisitions Act, this CEC board of directors meeting was deemed the founders’ meeting for Continental Development Corp., and in such capacity may determine the start-up company’s articles of incorporation and elect directors and supervisors. In accordance with law, CHC has assigned three directors and one supervisor to serve on CDC’s board of directors. On the same day, CDC called a meeting of the board of directors, at which time Mr. Chang Liang-Gi (Christopher Chang) was nominated and elected as chairman of the board of directors.