Planetree International Development Limited — Capital/Financing Update 2003

Apr 10, 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt about this circular, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitors, professional accountant or other professional adviser.

If you have sold all your shares in YUGANG INTERNATIONAL LIMITED (the “Company”), you should at once hand this circular to the purchaser or to the bank or stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, 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 circular.

YUGANG INTERNATIONAL LIMITED （渝港國際有限公司） [*]

(Incorporated in Bermuda with limited liability)

CIRCULAR ON GENERAL MANDATE FOR REPURCHASE BY THE COMPANY OF ITS OWN SHARES AND WARRANTS

This circular explains the repurchase mandate to be passed as an ordinary resolution at the Annual General Meeting of the Company to be held on 26th May, 2003.

The notice convening an Annual General Meeting of Yugang International Limited to be held at Boardroom I, M Floor, Grand Hyatt Hong Kong, 1 Harbour Road, Hong Kong on Monday, 26th May, 2003 at 11:00 a.m. is contained in the Annual Report for the year ended 31st December, 2002. Whether or not you propose to attend the meeting, you are advised to read the notice and to complete the accompanying form of proxy enclosed with the Annual Report in accordance with the instructions printed thereon and return the same to the Company’s principal place of business of the Company in Hong Kong at Rooms 3301-3307 China Resources Building, 26 Harbour Road, Wanchai, Hong Kong not later than 11:00 a.m. on Saturday, 24th May, 2003.

* For identification purposes only.

10th April, 2003

LETTER FROM THE BOARD

YUGANG INTERNATIONAL LIMITED （渝港國際有限公司） [*]

(Incorporated in Bermuda with limited liability)

(the “Company”)

Executive Directors: Cheung Chung Kiu (Chairman and Managing Director) Yuen Wing Shing Zhang Qing Xin Lam Hiu Lo Liang Kang

Independent Non-Executive Directors: Wong Wai Kwong, David Lee Ka Sze, Carmelo

Registered Office: Clarendon House Church Street Hamilton HM 11 Bermuda

Head Office and Principal Place of Business in Hong Kong Rooms 3301-3307 China Resources Building 26 Harbour Road Wanchai Hong Kong

10th April, 2003

• To: the shareholders of the Company

(and for information only, the warrantholders and convertible note holders)

Dear Sir or Madam,

GENERAL MANDATE FOR REPURCHASE BY THE COMPANY OF ITS OWN SHARES AND WARRANTS

INTRODUCTION

The purpose of this circular is to provide you with information regarding an ordinary resolution to be proposed at the annual general meeting of the Company (the “Annual General Meeting”) to be held on 26th May, 2003 relating to a general mandate for repurchase by the Company of its own shares and warrants (the “Securities”).

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LETTER FROM THE BOARD

GENERAL MANDATE TO REPURCHASE SECURITIES

The ordinary resolution no. 5 of the notice of the Annual General Meeting, if passed, will give the directors of the Company (the “Directors”) a general and unconditional mandate to exercise the powers of the Company to repurchase shares of HK$0.01 each in the share capital of the Company (“Shares”) up to a maximum of 10% of the aggregate nominal amount of the issued share capital of the Company at the date of the passing of the resolution and Warrants up to 10% of the total amount of subscription rights attached to the Warrants outstanding at the date of the passing of the resolution at any time until the next annual general meeting of the Company following the passing of the said ordinary resolution or such earlier period as stated in the said ordinary resolution (the “Repurchase Mandate”).

An explanatory statement to provide shareholders with all the information reasonably necessary for them to make an informed decision in relation to this proposed resolution as required by the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) concerning the regulation of repurchases by companies of their own securities on the Stock Exchange is set out in the Appendix to this circular.

ANNUAL GENERAL MEETING

A notice convening the Annual General Meeting of the Company to be held on 26th May, 2003 is set out on pages 70 to 72 of the annual report of the Company sent to you together with this circular and a form of proxy for use at the Annual General Meeting is therein enclosed. Whether or not you intend to be present at the Annual General Meeting, you are requested to complete the form of proxy and return it to the Company’s principal place of business in Hong Kong at Rooms 3301-3307 China Resources Building, 26 Harbour Road, Wanchai, Hong Kong in accordance with the instructions printed thereon not later than 48 hours before the time for holding the Annual General Meeting. Completion and delivery of the form of proxy will not prevent shareholders of the Company from attending and voting at the Annual General Meeting if they so wish.

RECOMMENDATION

The Directors consider that the Repurchase Mandate is in the best interests of the Company and its shareholders and accordingly recommend that you should vote in favour of the resolution referred to above to be proposed at the Annual General Meeting.

By Order of the Board of Directors

YUEN WING SHING

Director

* For identification purposes only.

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EXPLANATORY STATEMENT ON REPURCHASE OF THE COMPANY’S SHARES AND WARRANTS

APPENDIX

This explanatory statement contains all the information required pursuant to rule 10.06(1)(b) and other relevant provisions of the Listing Rules.

THE SHARE REPURCHASE RULES

The Listing Rules permit companies whose primary listings are on the Stock Exchange to repurchase their fully-paid up Shares on the Stock Exchange subject to certain restrictions. In this regard, the definition of “Shares” in the Listing Rules would, and where used below in this explanatory statement (including the use of the word “Share”) shall (unless the context otherwise requires) include shares of all classes and securities which carry a right to subscribe or purchase shares of the Company.

EXERCISE OF THE REPURCHASE MANDATE

Exercise in full of the Repurchase Mandate, on the basis of 8,453,321,700 existing Shares of the Company in issue as at 3rd April, 2003 (the “Latest Practicable Date”, being the latest practicable date prior to the printing of this circular) and 1,312,586,000 warrants (the “Warrants”) outstanding which carry the right to subscribe for new Shares of the Company at the initial subscription price of HK$0.09 per Share, subject to adjustment, up to an aggregate amount of HK$118,132,740 and on the basis that no new Shares nor Warrants of the Company are issued or repurchased prior to the date of the resolution approving the Repurchase Mandate, could accordingly result in up to 845,332,170 Shares of the Company and Warrants up to an aggregate amount of HK$11,813,274 , representing 10 per cent of the issued share capital and 10 per cent of the warrants currently issued by the Company respectively as at the date of the Annual General Meeting, being repurchased by the Company during the course of the period from the date of resolution granting the Repurchase Mandate until the earlier of the conclusion of the next annual general meeting of the Company, the expiration of the period within which the next Annual General Meeting of the Company is required by law or the bye-laws of the Company to be held or the revocation or variation of the existing repurchase mandate by shareholders of the Company in general meeting.

REASONS FOR REPURCHASES

The Directors believe that it is in the best interests of the Company and its shareholders to have a general authority from shareholders to enable the Directors to repurchase securities of the Company in the market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net assets and/or earnings per Share of the Company and will only be made if the Directors believe that such repurchases will benefit the Company and its shareholders.

FUNDING OF REPURCHASES

In repurchasing its securities, the Company may only apply funds legally available for such purpose in accordance with its memorandum of association and bye-laws, the laws of Bermuda and, where applicable, the relevant instrument creating the warrants.

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EXPLANATORY STATEMENT ON REPURCHASE OF THE COMPANY’S SHARES AND WARRANTS

APPENDIX

Under Bermuda law, purchases may only be effected out of the capital paid up on the purchased shares or out of funds of the Company otherwise available for dividend or distribution or out of the proceeds of a fresh issue of shares made for the purpose. Any premium payable on a purchase over the par value of the shares to be purchased must be provided for out of funds of the Company otherwise available for dividend or distribution or out of the Company’s share premium account.

As compared with the position as disclosed in the Company’s most recent published audited accounts for the year ended 31st December, 2002 and taking into account the current working capital position of the Company, the Directors consider that no material adverse effect on the working capital and gearing position of the Company may result in the event that the Repurchase Mandate was to be exercised in full in the period before the Repurchase Mandate expires. The Directors however do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

GENERAL

None of the Directors, and to the best of their knowledge having made all reasonable enquiries, any associates of any Director, have any present intention in the event that the Repurchase Mandate is approved by shareholders of the Company to sell any of the Company’s Shares to the Company.

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules and the applicable laws of Bermuda.

If, as a result of a Share repurchase, a shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition for the purpose of the Hong Kong Code on Takeovers and Mergers (“Takeover Code”). In certain circumstances, a shareholder or a group of shareholders acting in concert could as a result of increase of its or their interest, obtain or consolidate control of the Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeover Code.

As at the Latest Practicable Date, the following persons hold the following percentage of the Shares of the Company:

	Number of shares of	Percentage of
Name	HK$0.01 each	holding
Chongqing Industrial Limited_(Note 1)_	3,194,434,684	37.79%
Cheung Chung Kiu_(Note 2)_	3,247,754,684	38.42%

Notes:

(1) The voting rights of these shares are exercisable by Chongqing Industrial Limited. Cheung Chung Kiu controls Chongqing Industrial Limited.

• (2) Out of 3,247,754,684 shares HK$0.01 each, 3,194,434,684 shares of HK$0.01 each are held by Chongqing Industrial Limited and 53,320,000 shares of HK$0.01 each are held by Cheung Chung Kiu personally.

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EXPLANATORY STATEMENT ON REPURCHASE OF THE COMPANY’S SHARES AND WARRANTS

APPENDIX

Apart from the aforesaid shareholders, the Directors are not aware of any single shareholder who holds more than 10% of the issued share capital of the Company. If, which is not presently contemplated, the Company was to exercise the Repurchase Mandate in full, the percentage shareholding of Chongqing Industrial Limited and Mr. Cheung Chung Kiu in aggregate would increase to 42.69% and they (including other companies or persons acting in concert with them) would then be obligated to make a mandatory offer in accordance with Rule 26 of the Takeover Code.

However, the Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, cause Chongqing Industrial Limited and/ or Mr. Cheung Chung Kiu to become obliged to make a mandatory offer in accordance with Rule 26 of the Takeover Code.

No connected person (as defined in the Listing Rules) has notified the Company that he has a present intention to sell Shares of the Company to the Company, or has undertaken not to do so, if the Repurchase Mandate was approved by shareholders of the Company.

The Company has not repurchased any of its Shares and Warrants, whether on the Stock Exchange or otherwise, during the previous six months.

The highest and lowest prices at which the Shares and warrants of the Company have traded on the Stock Exchange during the previous twelve months prior to the date of this circular were as follows:—

		Shares	#The 2003	Warrants
	Highest	Lowest	Highest	Lowest
	HK$	HK$	HK$	HK$
April 2002	0.082	0.076	***	***
May 2002	0.094	0.079	***	***
June 2002	0.088	0.058	***	***
July 2002	0.082	0.042	0.028	0.01
August 2002	0.074	0.040	***	***
September 2002	0.045	0.030	0.01	0.01
October 2002	0.034	0.022	0.01	0.01
November 2002	0.030	0.024	***	***
December 2002	0.030	0.020	***	***
January 2003	0.028	0.021	0.01	0.01
February 2003	0.035	0.022	***	***
March 2003	0.040	0.025	***	***

The 2003 Warrants are warrants carrying rights to subscribe for shares of HK$0.01 each in the Company between 18th July, 2001 and 18th July, 2003 at a subscription price of HK$0.09 per Share (subject to adjustment).

*** There was no trading of warrants of the Company for these months.

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