Planetree International Development Limited — Capital/Financing Update 2000

Aug 14, 2000

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.

YUGANG INTERNATIONAL LIMITED

(Incorporated in Bermuda with limited liability)

PLACING OF CONVERTIBLE NOTES

Placing Underwriter	Financial Adviser
Tai Fook Securities Company Limited	Tai Fook Capital Limited

On 11th August, 2000, the Company entered into the Placing Agreement in respect of placement of the Convertible Notes amounting to the aggregate sum of HK$219,700,000 to independent investors. The net proceeds of the Placement are estimated to be approximately HK$216 million which will be used for general working capital purposes.

Completion of the Placement is subject to the fulfilment of certain conditions which include, inter alia, the approval for the issue of the Convertible Note and granting listing of, and permission to deal in, the Conversion Shares by the Listing Committee of the Stock Exchange.

The Placing Underwriter is entitled, on the occurrence of certain events (as defined below), to terminate the Placing Agreement by giving notice to the Company on or before 10:00 a.m. on the business date preceding to the date of completion of the Placing Agreement.

PLACING AGREEMENT DATED 11TH AUGUST, 2000

1. Date

11th August, 2000

1. Parties

Issuer:	The Company
Financial adviser:	Tai Fook Capital Limited
Underwriter:	Tai Fook Securities Company Limited

1. Independence of Tai Fook, the Placing Underwriter and the placees

Tai Fook and the Placing Underwriter are independent third parties not connected with any of the directors, chief executive or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates.

The Placing Underwriters have undertaken, on a fully underwritten basis, to place the Convertible Notes to not less than six placees who are independent institutional and/or professional investors not connected with any of the directors, chief executive, or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates.

1. Principal terms of the Convertible Notes

Issuer:	The Company
Principal amount:	HK$219,700,000 in aggregate
Conversion price:	HK$0.13 per Share, subject to adjustments, representing a premium of about 0.78% to the 30-day average closing price of the Shares as quoted on the Stock Exchange of HK$0.129 per Share for the period from 3rd July, 2000 to 11th August, 2000, a premium of about 4.00% to the 10-day average closing price of the Shares as quoted on the Stock Exchange of HK$0.125 per Share for the period from 31st July, 2000 to 11th August, 2000 and a premium of about 4.00% to the closing price of HK$0.125 per Share on 11th August, 2000.
Interest:	5% per annum payable annually in arrears
Conversion period:	The Convertible Notes may be converted in whole or in part (in an amount or integral multiple of HK$100,000) at any time following the date of issue of the Convertible Notes until maturity
Maturity:	The Company shall repay the outstanding principal amount of the Convertible Notes, together with interest accrued from the last interest payment date up to and including the date of repayment, on second anniversary of the date of issue of the Convertible Notes
Transferability:	The Convertible Notes may not be assigned or transferred without the prior written consent of the Company except to the subsidiaries or holding company of the holders of the Convertible Notes or, with the prior written consent of the Company and the Stock Exchange, may be assigned or transferred to any third party
Listing:	No application will be made for the listing of the Convertible Notes on the Stock Exchange. An application will be made for the listing of Shares to be issued upon exercise of the conversion rights attaching to the Convertible Notes.

The terms of the Convertible Notes were negotiated between the Company and the Placing Underwriter on an arm's length basis. The Company considers that the terms of the Convertible Notes are fair and reasonable and in the best interest of the Company and its shareholders as a whole.

Upon conversion of the Convertible Notes in full, a total of 1,690,000,000 new Shares will be issued, which, assuming no other issue of Shares being made before full conversion of the Convertible Notes, represent approximately 19.99% of the existing issued ordinary share capital of the Company and approximately 16.66% of the issued ordinary share capital of the Company as enlarged by the issue of the Conversion Shares.

The Conversion Share will be issued and allotted under the general mandate granted to the directors of the Company at the annual general meeting held on 12th June, 2000 which has not previously been utilised. The Conversion Shares will rank pari passu in all respects with the existing Shares in issue.

1. Conditions and completion of the Placement

Completion of the Placement is conditional upon the fulfilment of, inter alia, the following conditions:

(a) the Stock Exchange granting approval to the issue of the Convertible Notes;

(b) the Listing Committee of the Stock Exchange granting listing of, and permission to deal in, the Conversion Shares; and

(c) if necessary, the Bermuda Monetary Authority granting approval to the issue of the Convertible Notes and the Shares falling to be issued upon conversion of the Convertible Notes.

If the conditions are not fulfilled on or before 5th September, 2000 (or such later date as the Company and the Placing Underwriter may agree), the Placing Agreement will lapse.

Completion of the Placement shall take place on 5th September, 2000 or such other date as the Company and the Placing Underwriter may agree.

1. Termination of the Placing Agreement

The Placing Underwriter is entitled, on the occurrence of certain events (including a change in political, economic, fiscal, financial, regulatory or stock markets conditions as would likely prejudice materially the business and financial position of the Group, the imposition of any moratorium, suspension or material restriction on trading in securities of the Company, material breach of any of the undertakings, representations and warranties set out in the Placing Agreement, and material adverse change in the business or financial or trading position of the Company), to terminate the Placing Agreement by giving notice to the Company on or before 10:00a.m. on the business date preceding to the date of completion of the Placing Agreement.

REASONS FOR THE PLACEMENT AND USE OF PROCEEDS

The principal activity of the Company is investment holding whilst the principal activities of its subsidiaries are general trading, property holding, investment holding and through its listed 52.17% subsidiary, Qualipak International Holdings Limited, in manufacturing of gift boxes, watch boxes, spectacle cases and stationary. The trading business of the Company's subsidiaries is mainly in the PRC and includes but not limited to trading in audio-visual products and components, industrial equipment, automobile parts, agricultural products and metal and plastic material.

As disclosed in the announcement of the Company dated 1st August, 2000, the Company has entered into a sale and purchase agreement in relation to an acquisition of 34.25% equity interest in Prestige Properties Holdings Limited which is a listed company in Hong Kong. It is currently expected that the acquisition will be funded in majority by the Company’s internal resources and therefore, following the acquisition, the directors of the Company consider that it is in the interest of the Company to raise further capital by way of placing of Convertible Notes in order to enhance the capital base of the Company.

The net proceeds of the Placement are estimated to be approximately HK$216 million which will be used as general working capital of the Group.

Shareholding of the existing substantial shareholder

As at the date of this announcement, Mr. Cheung Chung Kiu, the substantial shareholder of the Company, is beneficially interested in approximately 38.42% of the existing issued share capital of the Company. Upon the issue and allotment of the Conversion Shares, the interest of Mr. Cheung Chung Kiu in the Company would be reduced to approximately 32.02% of the issued share capital of the Company as enlarged by the issue of the Conversion Shares.

GENERAL

Application will be made to the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares.

DEFINITIONS

“Company”	Yugang International Limited, a company incorporated in Bermuda with limited liability and the securities of which are listed on the Stock Exchange
“Convertible Notes”	the convertible notes with an aggregate principal amount of HK$219,700,000 to be issued by the Company under the Placing Agreement due August 2002
“Conversion Shares”	1,690,000,000 new Shares to be issued upon full conversion of the Convertible Notes
“Group”	the Company and its subsidiaries
“HK$”	Hong Kong dollar(s), the lawful currency of Hong Kong
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
“Placement”	the placing of the Convertible Notes under the Placing Agreement
“Placing Agreement”	a conditional placing and underwriting agreement dated 11th August, 2000 entered into between, inter alia, the Company, Tai Fook and the Placing Underwriter relating to the issue of the Convertible Notes
“Placing Underwriter”	Tai Fook Securities Company Limited, a securities dealer registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)
“Share(s)”	ordinary share(s) of HK$0.10 each in the share capital of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Tai Fook”	Tai Fook Capital Limited, an investment adviser registered under the Securities Ordinance (Chapter 333 of the Laws of Hong Kong)
“%”	per cent.

By Order of the Board
Yugang International Limited
Cheung Chung KiuChairman

Hong Kong, 11th August, 2000