Planetree International Development Limited — Capital/Financing Update 2000

May 15, 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)

ANNOUNCEMENT

Connected Transaction

Proposed Subcription of Convertible Note

The Board announces that on 9th May, 2000, Faircom Limited, a wholly owned subsidiary of the Company, entered into a Convertible Note Subscription Agreement with Qualipak International in relation to the subscription of the HK$150,000,000 Convertible Note of Qualipak International.

Completion of the subscription of the Convertible Note is subject to the fulfillment of certain conditions which include, inter alia, the approval of the shareholders of the Qualipak International at the SGM and the approval by the Listing Committee of the Stock Exchange of the listing of, and permission to deal in , the new Conversion Shares falling to be issued by the Issuer upon conversion of the Convertible Note.

The shares and warrants of the Company were suspended from trading on the Stock Exchange from 10:00 a.m. on the 10th May, 2000 at the request of the Company. The Company has made an application to resume trading of its shares and warrants on the Stock Exchange from 10:00 a.m. on the 15th May, 2000.

‍THE CONVERTIBLE NOTE SUBSCRIPTION AGREEMENT DATED 9TH MAY, 2000

‍

Parties

Issuer:	Qualipak International Holdings Limited (“Qualipak International”), a company incorporated in Bermuda and is a subsidiary of the Company.
Subscriber:	Faircom Limited, a company incorporated in the Bristish Virgin Islands and wholly owned by the Company. Principal Terms of the Convertible Note
Issuer:	Qualipak International
Noteholder:	the Subscriber
Amount:	HK$150,000,000, which will be paid by the Company through its internal resources to Qualipak International on Completion.
Conversion price:	Subject to adjustments in accordance with the terms of the Convertible Note:
	1. HK$0.81 for the period from the date of issue of the Convertible Note up to the first anniversary of the date of issue of the Convertible Note (“First Year”);
	* 1. HK$0.88 for the period from the date immediately following the first anniversary of date of issue of the Convertible Note up to the second anniversary of the date of issue of the Convertible Note (“Second Year”); and
	* + 1. HK$0.96 for the period from the date immediately following the second anniversary of the date of issue of the Convertible Note up to the third anniversary of the date of issue of the Convertible Note (“Third Year”).
	Such conversion prices represent a premium of approximately 9.5%, 18.9% and 29.7% respectively to the average closing price of HK$0.74 per Share quoted on the Stock Exchange for the ten consecutive trading days prior to the date of this announcement and a premium of approximately 8.0%, 17.3% and 28.0% respectively to the closing price of HK$0.75 per Share prior to the date of this announcement. The conversion price of the Convertible Note was negotiated between the Company and Qualipak International on an arm's length basis.
Maturity:	Unless previously converted, the principal amount of the Convertible Note (together with all unpaid and accrued interest) will be repaid by Qualipak International to the Company upon its maturity on the date of the third anniversary of the date of issue of the Convertible Note.
Interest:	Five per cent per annum from the date of issue and accrued on a daily basis on the principal amount of the Convertible Note outstanding, payable by Qualipak International semi-annually in arrears on dates falling six months and one year after the date of issue of the Convertible Note and on the anniversaries of such dates for each year thereafter. The first payment shall be made on the date falling six months after the date of issue of the Convertible Note.
Transferability:	The Convertible Note may be assigned or transferred to any holding company or any subsidiary of the Subscriber or any subsidiary of any holding company of the Subscriber or, if required by the Stock Exchange, with the prior approval of the Stock Exchange, to any other party. Subject to the said restrictions, the Convertible Note may be assigned or transferred in whole or in part of its principal amount outstanding.
Conversion:	The outstanding principal amount of the Convertible Note or part thereof (in amounts not less than HK$1,000,000) may be converted into Shares any time prior to the maturity date at the relevant conversion price (subject to adjustment). Subject that if the principal amount of the Convertible Note outstanding at any time is less than HK$1,000,000, the whole (but not part only) of the principal outstanding amount of the Convertible Note may be converted. No fraction of a Share will be issued but a cash payment in Hong Kong dollars will be made to the holders of the Convertible Note in respect of such fraction (except in cases where any such cash payment would amount to less than HK$10).
Listing:	No application will be made for the listing of the Convertible Note on the Stock Exchange or any other stock exchange. An application will be made by Qualipak International for the listing of Conversion Shares to be issued upon exercise of the conversion rights attaching to the Convertible Note.

‍Conditions and completion of the Convertible Note Issue

Completion of the Convertible Note Issue will take place on the third business day after the fulfillment of, inter alia, the following conditions or such other date as may be agreed between the Company and the Subscriber but in any event shall take place not later than 30th June, 2000;

1. the shareholders of Qualipak International (other than the Company and its associates) approving at the SGM the Convertible Note Issue and the allotment and issue of new Conversion Shares falling to be issued upon conversion of the Convertible Note;
2. the Listing Committee of the Stock Exchange granting listing of, and permission to deal in, the new Conversion Shares falling to be issued upon conversion of the Convertible Note; and
3. the Bermuda Monetary Authority granting approval to the issue of the Convertible Note and the new Conversion Shares falling to be issued pursuant to the exercise of the conversion rights attaching to the Convertible Note.

The new Conversion Shares will be issued free from all liens, charges and encumbrances and will rank equally in all respects with the then existing Shares in issue.

‍CHANGES TO THE SHAREHOLDING OF QUALIPAK INTERNATIONAL AS A RESULT OF THE CONVERTIBLE NOTES ISSUE

Upon full conversion of the Convertible Note at HK$0.81 per Share, a total of 185,185,185 Shares will be issued, which represent approximately 95.3% of the existing issued share capital of Qualipak International and approximately 48.8% of the issued share capital of Qualipak International as enlarged by such conversion, assuming no other issue of Shares is made before full conversion of the Convertible Note.

The respective shareholdings of the Company in Qualipak International immediately before conversion of the Convertible Note and following full conversion of the Convertible Note are as follows:--

	Immediately before conversion of the Convertible Note	Upon full conversion of the Convertible Note
the Company	99,158,030 Shares (about 51.03%)	284,343,215 Shares (about 74.93%)
Public	95,141,970 Shares (about 48.97%)	95,141,970 Shares (about 25.07 %)
Total	194,300,000 Shares	379,485,185 Shares

Upon full conversion of the Convertible Note and assuming no other issue of Conversion Shares will be made before such conversion, the interests of the Company in the issued share capital of Qualipak International will be increased from approximately 51.03%, to approximately 74.93%.

‍REASONS AND BENEFITS OF SUBSCRIPTION OF THE CONVERTIBLE NOTES

The Convertible Note Issue will provide funds for the general working capital and further investments by its subsidiary, Qualipak International which may bring about vertical and horizontal integration and possible synergy effect for Qualipak International and its subsidiaries. The Convertible Note Issue will also increase the Company's shareholding and control in Qualipak International. The relevant conversion price are negotiated on an arms length basis between the Company and Qualipak International and the Directors are of the view that the terms of the Convertible Note Issue are fair and reasonable.

The terms of the Convertible Note Subscription Agreement have been arrived at after arm's length negotiations and are on normal commercial terms. The Directors (including the independent Directors) consider the terms of the Convertible Note Subscription Agreement to be fair and reasonable and in the interests of the Company and its shareholders taken as a whole.

‍GENERAL

As the Convertible Note Issue falls within Rule 14.25(2) of the Listing Rules, the Convertible Note Issue is considered to be a connected transaction for the Company. Pursuant to Rule 14.25(2) of the Listing Rules, datials of the Convertible Note Issue will be disclosed in the Company’s next published annual report and account following completion of the Convertible Note Issue.

An application will be made by Qualipak International to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the new Conversion Shares.

The shares and warrants of the Company were suspended from trading on the Stock Exchange from 10:00 a.m. on the 10th May, 2000 at the request of the Company. The Company has made an application to resume trading of its shares and warrants on the Stock Exchange from 10:00 a.m. on the 15th May, 2000.

“Board”	the board of Directors
“Company”	Yugang International Limited, a company incorporated in Bermuda with limited liability, the shares and warrants of which are listed on the Stock Exchange and has an indirect interest of approximately 51.03% in Qualipak International.
“Convertible Note Subscription Agreement”	the conditional convertible note subscription agreement dated 9th May, 2000 and entered into between Qualipak International and the Subscriber relating to the subscription of the Convertible Note in an amount of HK$150,000,000
“Convertible Note”	the convertible note to be issued by the Company pursuant to the Convertible Note Issue
“Convertible Note Issue”	the issue of the Convertible Note under the Convertible Note Subscription Agreement
“Conversion Shares”	shares in the capital of Qualipak International to be issued upon conversion of the Convertible Note pursuant to the terms thereof
“Directors”	directors of the Company
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“HK$”	Hong Kong dollars
“%”	per cent
“Qualipak International”	Qualipak International Holdings Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Stock Exchange
“Listing Rules”	Rules Governing the Listing of Securities on the Stock Exchange
“PRC”	the People’s Republic of China
“SGM”	the special general meeting of the Qualipak International to be held on 12th June, 2000 to approve, inter alia, Convertible Note Issue
“Shares”	Shares in the capital of Qualipak International
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscriber”	Faircom Limited, a company incorporated in the British Virgins Islands with limited liability and a wholly owned subsidiary of the Company

By Order of the Board
Yugang International Limited
Cheung Chung KiuChairman
Hong Kong, 13th May, 2000