Planetree International Development Limited — Capital/Financing Update 2000

Feb 17, 2000

Listed Company Information

YUGANG INT'L<0613> - Announcement & Resumption of Trading 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 (the `Company') (Incorporated in Bermuda with limited liability) PLACING OF EXISTING SHARES AND SUBSCRIPTION FOR NEW SHARES Chongqing Industrial Limited (the `Vendor') has agreed to place, through its placing agent, Tai Fook Securities Company Limited (`Tai Fook'), 406,850,000 existing ordinary shares (`Placing Shares') of HK$0.10 each in the share capital of the Company (`Shares') to independent investors at a price of HK$0.52 per Share (`Placing') and the Vendor will subscribe for 643,800,000 new Shares (`Subscription Shares') at the price of HK$0.52 per Share (`Subscription'). The Placing is fully underwritten by Tai Fook. The Placing Shares represent approximately 12.64% of the existing issued share capital of the Company of 3,219,201,978 Shares and approximately 10.53% of the Company's issued share capital as enlarged by the Subscription of 643,800,000 new Shares. The net proceeds from the Subscription of approximately HK$330 million will be used as general working capital for the Company and its subsidiaries (the `Group') (as set out in greater detail below). The Vendor together with persons acting in concert have approximately a 36.81% interest in the Company as at the date of this announcement. The shareholding of the Vendor together with persons acting in concert will be reduced from approximately 36.81% to approximately 24.17% immediately upon completion of the Placing and will be increased from approximately 24.17% to approximately 36.81% immediately upon completion of the Subscription. Trading in the Shares was suspended on 16th February, 2000 at the request of the Company pending the issue of this announcement and application has been made to the Stock Exchange of Hong Kong Limited (the `Stock Exchange') for the resumption of trading of the Shares from 10:00 a.m. on 17th February, 2000. A. PLACING OF 406,850,000 EXISTING SHARES A placing agreement dated 15th February, 2000 (the `Placing Agreement') was entered into between the Vendor and Tai Fook containing the following terms:- Vendor The Vendor, Chongqing Industrial Limited, is the controlling shareholder of the Company. Placing agent and Underwriter Tai Fook, who is independent of, not connected with the directors, chief executive or substantial shareholders of the Company and any of its subsidiaries or any of their respective associates (as defined under the Rules (the `Listing Rules') Governing the Listing of Securities on the Stock Exchange). Tai Fook would receive placement commission of 2% on the gross proceeds of the Placing which is approximately HK$4.5 million. Placees The placees (which will be six or more individual, corporate and/or institutional investors) will be independent of, not connected and not acting in concert with the directors, chief executive or substantial shareholders of the Company and any of its subsidiaries or any of their respective associates. It is expected that no placee will become a substantial shareholder of the Company as a result of the Placing. Placing price HK$0.52 per Placing Share. This price was agreed after arm's length negotiations and represents (i) a discount of approximately 23.53% to the closing price of HK$0.68 per Share quoted on the Stock Exchange on 15th February, 2000, being the last trading day of the Shares immediately before the date of this announcement; and (ii) a discount of approximately 15.58% over the average closing price of approximately HK$0.616 per Share as quoted on the Stock Exchange from 31st January, 2000 to 15th February, 2000, both dates inclusive, being the last ten trading days of the Shares immediately before the Suspension Date. Rights The Placing Shares will rank equally with the existing Shares. Number of existing Shares to be placed 406,850,000 Shares to be placed, representing approximately 12.64% of the existing issued share capital of the Company of 3,219,201,978 Shares and approximately 10.53% of the issued capital of the Company as enlarged by the Subscription of 643,800,000 new Shares. The Placing is fully underwritten by Tai Fook. Completion of the Placing The Placing is conditional on resumption of trading of the Shares no later than the second business day after the date of the Placing Agreement. Completion of the Placing shall take place on or before 10:30 a.m. on the first business day following fulfillment of the condition of the Placing. B. SUBSCRIPTION OF 643,800,000 NEW SHARES A Subscription Agreement dated 15th February, 2000 between the Vendor and the Company containing the following terms:- Subscriber The Vendor Number of new Shares to be subscribed for The Company will issue 643,800,000 new Shares and the Vendor will subscribe for them, representing approximately 20% of the existing issued share capital of the Company and approximately 16.67% of the issued share capital of the Company as enlarged by the Subscription. Subscription Price HK$0.52 per Subscription Share. The Company will bear the costs and expenses in connection with the Placing and the Subscription. The estimated expenses for the Placing and the Subscription will be approximately HK$4.5 million. The net proceeds of the Subscription is approximately HK$330 million. General Mandate to issue Subscription Shares The Subscription Shares will be issued pursuant to the general mandate to allot, issue and deal with Shares granted to the directors of the Company by resolution of its shareholders passed at the Company's special general meeting held on 15th February, 2000 with the total number of issued shares at 3,219,201,978 on that date. Ranking of the Subscription Shares The Subscription Shares will rank equally with Shares of the Company in issue at the time of issue and allotment of the Subscription Shares. Use of Proceeds On 17th January, 2000, the Company has completed a placing of existing shares and subscription for new shares to the Vendor. The net proceeds from that subscription which was approximately HK$224 million was used by the Company as additional working capital and for investment to further fulfil the Group's diversification plan into technology related fields. The net proceeds from the Subscription of approximately HK$330 million will be used by the Company as additional working capital, for investment to fulfil the Group's diversification plan into technology related fields and for expansion of the Group's business including investing in other strategic investments, if opportunity arises. The Company is now considering an investment opportunity. If a decision is made by the Company in respect thereof which will result in the investment constituting a discloseable transaction of the Company at that time, the Company will comply with the applicable requirements of the Listing Rules. The principal activity of the Company is investment holding whilst the principal activities of its subsidiaries are general trading, property holding, packaging and investment holding. 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, trading in industrial equipment, trading in automobile parts, trading in agricultural products and trading in metal and plastic materials. Condition of the Subscription The Subscription is conditional upon: (a) completion of the Placing; and (b) the Listing Committee of the Stock Exchange granting listing of, and permission to deal in, the Subscription Shares to be issued under the Subscription; and (c) waiver from the obligation of the Vendor together with persons acting in concert with it to make a general offer to the shareholders of the Company under Rule 26 of the Hong Kong Codes on Takeovers and Mergers (the `Code') as a result of the Placing and the Subscription being granted by the executive director of the Corporate Finance Division of the Securities and Futures Commission (`SFC') (the `Executive'). Completion Under the Listing Rules, the Subscription must be completed within 14 days from the date of the Placing and Subscription Agreement, that is, on or before 29th February, 2000 (or such later date as the Company, the Vendor and the Placing Agent may agree such agreement not to unreasonably withheld or delayed and subject to compliance with the Listing Rules), failing which the Subscription shall cease and terminate. Application for listing Application will be made by the Company to the Stock Exchange to grant the listing of and permission to deal in the Subscription Shares. Application has been made with the SFC for a waiver from the obligation of the Vendor together with persons acting in concert with it to make a general offer to the shareholders of the Company under Rule 26 of the Code being granted by the Executive. C. EFFECTS OF THE PLACING AND THE SUBSCRIPTION The shareholding of the Vendor in the Company immediately before completion of the Placing, immediately after completion of the Placing but before completion of the Subscription, and immediately after completion of both the Placing and the Subscription are and will be as follows:- Shareholding in the No. of Shares in Company held by the the Company held by Vendor together the Vendor together with persons acting with persons acting in concert (Note) in concert (Note) Immediately before 36.81% 1,184,983,360 the Placing and the Subscription Immediately after 24.17% 778,133,360 the Placing but before the Subscription Immediately after 36.81% 1,421,933,360 the Placing and the Subscription Note: Assumes that other than the Subscription Shares, no new Shares are issued or purchased by the Company and other than the Placing Shares no Shares are sold or purchased by the Vendor, in each case after the date of this announcement up to the date of the completion of the Subscription. Save and except for Shares to be issued on exercise of the outstanding options and warrants and the Subscription Shares, the Company has no intention to issue any new share or to purchase any of its Shares. D. REASON FOR THE PLACING AND SUBSCRIPTION In view of the current market conditions, the directors of the Company consider that the Placing and Subscription together represents a good opportunity to raise capital for the Company while broadening the shareholders base and the capital base of the Company and also enables the Group to have a higher level of working capital to further diversify its business. E. ADJUSTMENT OF SUBSCRIPTION PRICE OF WARRANTS As at the date of this announcement, the Company has outstanding warrants carrying rights to subscribe up to HK$116,150,000 for Shares at a subscription price of HK$0.22 per Share (subject to adjustment) for at any time up to 15th September, 2001. The issue of the Subscription Shares will result in an adjustment to the subscription price of the warrants. Subject to completion of the Placing, the issue of the Placing Shares will result in an adjustment to the subscription price of the warrants from HK$0.22 to HK$0.21 per Share which has been certified by Tai Fook Capital Limited, to be appropriate in accordance with the terms of the warrant instrument. F. GENERAL Mr. Cheung Chung Kiu, the chairman and managing director of the Company is the beneficial owner of the entire interest in the Vendor. Trading in the Shares was suspended on 16th February, 2000 at the request of the Company pending the issue of this announcement and application has been made to the Stock Exchange for the resumption of trading of the Shares from 10:00 a.m. on 17th February, 2000. By order of the board of directors of Yugang International Limited Cheung Chung Kiu Chairman Hong Kong, 16th February, 2000 The directors of the Company jointly and severally accept full responsibility for the accuracy of the information contained in this announcement and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement, have been arrived at after due and careful consideration and there are no other facts not contained in this announcement the omission of which would make any statement in this announcement misleading.