Planetree International Development Limited — Earnings Release 2001

Apr 15, 2002

YUGANG INTERNATIONAL LIMITED

（渝 港 國 際 有 限 公 司）*

(incorporated in Bermuda with limited liability)

ANNOUNCEMENT OF FINAL RESULTS

FOR THE YEAR ENDED 31 DECEMBER 2001

The Board of Directors of Yugang International Limited ("the Company") is pleased to announce the audited consolidated results of the Company and its subsidiaries ("the Group") for the year ended 31 December 2001 together with the comparative figures (as restated) for the corresponding year in 2000 as follows:

2001 2000

Notes HK$'000 HK$'000

(Restated )

Turnover 365,364 771,827

Cost of sales (298,814 ) (666,369 )

Gross profit 66,550 105,458

Other revenue and gains 65,998 88,529

Selling and distribution costs (6,866 ) (15,282 )

Administrative expenses (83,734 ) (86,358 )

Other operating income/(expenses), net 4 50,881 (128,129 )

Profit/(Loss) from operating activities 5 92,829 (35,782 )

Finance costs 6 (13,922 ) (5,576 )

Share of profits of:

Jointly-controlled entities 142 -

Associates 12,013 5,651

Profit/(loss) before tax 91,062 (35,707 )

Taxation 7 (4,658 ) (4,579 )

Profit/(loss) after tax 86,404 (40,286 )

Minority interests (11,689 ) (23,581 )

Net profit/(loss) attributable

to shareholders 74,715 (63,867 )

Underprovision for 1999 final dividend - (782 )

Earnings/(loss) per share 8

• Basic 0.88HK cents (0.78)HK cents

• Diluted 0.81HK cents N/A

Notes:

1. Basis of presentation and comparative figures

The Group has adopted the following new and revised Statements of Standard Accounting Practice ("SSAPs") issued by the Hong Kong Society of Accountants for the first time in the preparation of the financial statements for the current year. Accordingly, certain comparative figures for the prior year have therefore been restated in order to achieve a consistent presentation.

• SSAP 9: (Revised): "Events after the balance sheet date"

• SSAP 14: (Revised): "Leases"

• SSAP 18: (Revised): "Revenue"

• SSAP 26: "Segment reporting"

• SSAP 28: "Provisions, contingent liabilities and contingent assets"

• SSAP 29: "Intangible assets"

• SSAP 30: "Business combination"

• SSAP 31: "Impairment of assets"

• SSAP 32: "Consolidated financial statements and accounting for investments in subsidiaries"

2. Prior year adjustments

The Group has adopted the transitional provision of SSAP 30 which permits negative goodwill in respect of previous acquisitions of subsidiaries and associates to be restated to the non-current assets section of the balance sheet.

The prior year adjustment so arising has resulted in negative goodwill previously credited to the capital reserve being restated as the cost of the negative goodwill and recognised as income in the consolidated profit and loss account on a systematic basis over the remaining average useful life of the acquired depreciable/amortisable assets. Negative goodwill recognised as income in 2000 adjusted retrospectively amounting to HK$8,312,000.

3. Segment information

Business segments

For management purposes, the Group is currently organised into three operating divisions - trading of automobile parts, manufacturing and sale of packaging products and properties & other investments. These divisions are the basis on which the Group reports its primary segment information.

Segment information about these businesses for 2001 and 2000 (restated) is presented below.

For the year ended 31st December 2001

Manufacturing

Trading of and sale of Properties

automobile packaging and other Corporate

parts products investments and other Consolidated

HK$'000 HK$'000 HK$'000 HK$'000 HK$'000

Segment revenue:

Sales to external customers 143,370 221,540 454 - 365,364

Segment results (36,826 ) 29,639 49,383 (4,365 ) 37,831

Interest and dividend income 54,998

Finance costs (13,922 )

Share of profits of:

Jointly-controlled entities - - - 142 142

Associates - - 12,013 - 12,013

Profit before tax 91,062

Tax (4,658 )

Minority interests (11,689 )

Net profit attributable to shareholders 74,715

Business segments

For the year ended 31st December 2000

Manufacturing

Trading of and sale of Properties

automobile packaging and other Corporate

parts products investments and other Consolidated

HK$'000 HK$'000 HK$'000 HK$'000 HK$'000

Segment revenue:

Sales to external customers 494,290 276,798 739 - 771,827

Segment results 6,833 54,556 (161,025 ) (12,690 ) (112,326 )

Interest and dividend income 76,544

Finance costs (5,576 )

Share of profits of associates - - 5,651 - 5,651

Loss before tax (35,707 )

Tax (4,579 )

Minority interests (23,581 )

Net loss attributable to shareholders (63,867 )

Geographical segments

The following table provides an analysis of the Group's revenue and segment results by geographical market.

Revenue by Segment results by

geographical market geographical market

2001 2000 2001 2000

HK$'000 HK$'000 HK$'000 HK$'000

Hong Kong 72,218 84,706 38,118 (185,840 )

Elsewhere in the PRC 143,370 494,287 (16,196 ) 41,427

North & South America 63,730 92,059 6,769 15,318

European Union 70,726 81,663 7,513 13,589

Others 15,320 19,112 1,627 3,180

365,364 771,827 37,831 (112,326 )

4. Other operating income/(expenses), net

2001 2000

HK$'000 HK$'000

Write-back of provision/(provision)

for doubtful debts, net (13,819 ) 18,700

Surplus/(deficit) arising from revaluation of

investment properties (300 ) 200

Unrealised holding gains/(losses)

on other investments 78,045 (138,111 )

Gain/(loss) on disposal of other investments (5,111 ) 2,782

Loss on deemed disposal of partial interest in subsidiaries (1,201 ) -

Provision for impairment in value of

convertible debentures and notes (10,000 ) (11,700 )

Warrant subscription reserve recognised

upon expiry of warrants 8,364 -

Removal costs of production plants (5,129 ) -

Gain on disposal of subsidiaries 32 -

50,881 (128,129 )

5. Profit/(loss) from operating activities

The Group's profit/(loss) from operating activities is arrived at after charging/(crediting) the following:

2001 2000

HK$'000 HK$'000

(Restated )

Depreciation 9,308 8,645

Negative goodwill recognised as income (6,879 ) (8,312 )

6. Finance costs

2001 2000

HK$'000 HK$'000

Interest on bank loans, overdrafts and other loans

wholly repayable within five years 812 2,009

Interest on convertible notes 13,104 3,541

Hire purchase interest 6 26

13,922 5,576

7. Taxation

Hong Kong profits tax has been provided at the rate of 16% (2000: 16%) on the estimated assessable profits arising in Hong Kong during the year.

2001 2000

HK$'000 HK$'000

Group:

Hong Kong 3,092 4,607

Over-provision in prior year (331 ) (207 )

2,761 4,400

Share of tax of:

Jointly-controlled entity 24 -

Associates 1,873 179

4,658 4,579

8. Earnings/(loss) per share

The calculation of basic and diluted earnings/(loss) per share is based on:

2001 2000

HK$'000 HK$'000

(Restated )

Earnings/(loss)

Net profit/(loss) attributable to shareholders

for the purpose of basic earnings per share 74,715 (63,867 )

Interest saving on the exercise of convertible note 11,000 -

Net profit/(loss) attributable to shareholders

for the purpose of diluted earnings per share 85,715 (63,867 )

Number of Shares

Weighted average number of ordinary shares

for the purpose of basic earnings per share 8,453,321,700 8,216,203,949

Effect of dilutive convertible notes 2,111,917,808 -

Weighted average number of ordinary shares

for the purpose of diluted earnings per share 10,565,239,508 8,216,203,949

The share options and warrants outstanding during the year had no dilutive effect on the basic earnings per share for 2001.

The diluted loss per share for the year ended 31 December 2000 has not been shown as the share options, warrants and convertible notes outstanding during that year had an anti-dilutive effect on the basic loss per share for that year.

FINAL DIVIDEND

The Board of Directors has resolved not to recommend any final dividend in respect of the financial year ended 31st December, 2001 at the forthcoming Annual General Meeting to be held on 29th May, 2002.

BUSINESS REVIEW AND PROSPECT

BUSINESS REVIEW

The Group's net profit attributable to shareholders for the year was HK$74,715,000, representing a significant improvement when compared with the net loss attributable to shareholders of HK$63,867,000 as restated for the last corresponding year.

With the implementation of the Group's diversification strategy, the base contribution to the net profit of the Group had been enlarged by equity investment in packaging business, property investment and infrastructure projects.

Packaging Business

The packaging business is carried on by a subsidiary, Qualipak International Holdings Ltd ("Qualipak"), a company listed in Hong Kong. The sales of packaging products performed relatively well during the eight months period to August 2001 but impacted by the events of September 11 in the United States. This led to reduced demands for these products as well as occurrence of postponement of shipments in response to temporary negative market sentiment by major customers. As a result, the turnover of packaging business recorded a decrease of approximately 20% with a net profit of HK$24.4 million for the year ended 31 December 2001 and contributed to our Group a net profit of approximately HK$12.7 million.

However, we expect that there will be an economic recovery in US in the second half of 2002 and Qualipak can increase the overall competitiveness as a result of an excellent design and marketing team as well as the new production facilities in Zhongshan, PRC which have already commenced production in the second half of this year.

Property Investment Business

In September 2000, the Group further diversified into the property investment business through investment in an associate, Prestige Properties Holdings Ltd ("Prestige"), a company listed in Hong Kong.

The major investment properties of Prestige include Century Square in Central, Prestige Tower in Tsimshatsui, Playmates Factory Building in Tuen Mun and 2/F New Mandarin Plaza in Tsimshatsui East etc.

Prestige had a net profit of HK$33.1 million for the year ended 31 December 2001. The gross rental income of Prestige for the year was HK$127.1 million, representing a slightly decrease of about 12% over that last year. During the year, Prestige successfully maintained a relatively higher level of occupancy rate of above 95% for its major commercial properties even though the market condition of commercial leasing market was still difficult. Prestige also benefited from the reduction in interest expense by an amount of HK$21.9 million for the year as a result of massive interest rate cut.

Prestige will continue to strengthen its contribution to the Group's net profit by virtue of its desired leasing result, their proactive leasing approach as well as their dedicated management services.

Infrastructure Business

In March 2001, the Group further diversified into an infrastructure business through Prestige to acquire 51,755,924 shares of The Cross-Harbour (Holdings) Ltd ("Cross Harbour"), a company listed in Hong Kong. The principal activities of Cross Harbour are carried out through investment in the Western Harbour Tunnel, Hong Kong School of Motoring and Autotoll Limited. Cross Harbour reported a net profit of HK$63.9 million for the year ended 31 December 2001. This was attributable to the performance of an infrastructure of Western Harbour Tunnel, which generates a steady stream of toll income and benefits by lower interest expenses after massive rate cuts during the year. Since this acquisition, it has started to contribute to our Group indirectly with a stable recurrent income.

Trading of Automobile Parts

As a result of diversification, the importance of traditional trading of automobile parts in the overall contribution to the Group's operating profit has been diminished. In fact, the sluggishness of trading activities of automobile parts virtually caused the Group's turnover for the year drop to HK$365.3 million.

PROSPECT

With a strong business activity base in mid West area of PRC, the Company expects to benefit from the development strategy for the Western Region of China - a strategy that is set to give a huge impetus to economic and social development in the region and stimulate domestic consumption demand. In addition, the accession of China to the World Trade Organisation has also provided renewed impetus for foreign investors to establish their presence in the Mainland market. These will make our Company seize the opportunity to the thriving business prospects in the mid West area of PRC.

The Group has successfully implemented the diversification strategy to expand its business and strengthen its income and assets base. This series of acquisitions have definitely provided our Group with a far-reaching future economic benefit. The Group will continue to explore any business opportunities in strategic acquisition of equity interests in Hong Kong or abroad.

MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW

The Group's net profit attributable to shareholders for the year was HK$74,715,000, representing a significant improvement when compared with the net loss attributable to shareholders of HK$63,867,000 as restated for the last corresponding year.

As at 31st December 2001, the Group's net asset value was increased to HK$1,870.3 million and had a net asset value per share of HK$0.22. The Group's total asset and liabilities (excluding minority interest of HK$153.5 million) were HK$2,471.3 million and HK$447.5 million respectively. The Group's contingent liabilities for bills receivable discounted with recourse were HK$7.8 million. The gearing ratio, defined as long-term liabilities to shareholders' fund, was calculated as 5.4%.

LIQUIDITY AND FINANCIAL RESOURCES

The Group maintained its long-standing policy of conservative and prudent financial management. As at 31st December 2001, the net cash balance of the Group stood at HK$648.1 million and there were sufficient unused lines of credit available from financial institutions. The Group has a working capital ratio of approximately 4.5 signifying that the working capital is sufficient to support the Group's operation.

The Group had no banking borrowings as at 31st December 2001.

Whilst sales of the Group mainly denominated in Hong Kong and US dollars, purchases of raw materials are in majority made in Hong Kong dollars. Most bank deposits are maintained in Hong Kong and US dollars. Hence, the Group's exposure to foreign exchange risk is minimal.

CAPITAL STRUCTURE

As at 31st December 2001, the Group's net asset was financed by internal resources through share capital & reserves and convertible note borrowings. Total equity attributable to shareholders was HK$1,870.3 million as at 31st December 2001, representing an increase of 5.1% over last year.

As at 31 December 2001, the Group's outstanding convertible notes was totaled HK$319,700,000. It comprised convertible notes of HK$219,700,000 in aggregate issued in September 2000 ("Note A") and convertible notes of HK$100,000,000 in aggregate issued in July 2001 ("Note B"). Both Note A and Note B are unsecured and bears interest at 5% per annum, payable annually in arrears and will be due for redemption on 5 September 2002 and 31 July 2004 respectively.

In July 2001, the Company issued 1,312,586,000 warrants ("New Warrants") through a private placement at an issue price of HK$0.02 per warrant. The net proceeds from the placing of New Warrants were approximately HK$25.7 million. An aggregate of 1,312,586,000 shares will be issued upon full subscription for new shares of the Company at an initial subscription price of HK$0.09 per share (subject to adjustment) upon exercise of the New Warrants.

All of the warrants of the Company expired after 14 September 2001 except the New Warrants.

All of the above proceeds were used as working capital for the Group and to further diversify the Company's business.

PLEDGE OF ASSETS

As at 31st December 2001, the Group pledged its leasehold properties and investment property with an aggregate carrying value of approximately HK$68,795,000 and time deposits of HK$7,947,000 as security for general banking facilities granted to the Group.

EMPLOYEES

As at 31st December 2001, the Group employed a total of 90 employees in Hong Kong and a workforce of 2,544 in the PRC.

Staff remuneration is reviewed by the Group from time to time and increases are granted normally annually or by special adjustment depending on length of service and performance where warranted. In addition to salaries, the Group provides staff benefits including medical insurance, contributions to staff's provident fund and discretionary training subsidies. Share options and bonuses are also available to employees of the Group at the discretion of the directors and depending upon the financial performance of the Group.

MAJOR DISPOSAL OF SUBSIDIARY

On 12 April 2001, the Group disposed of a wholly-owned subsidiary, the principal asset of which is an investment property situated in the People's Republic of China with a carrying value of HK$230,398,000. The cash consideration for the disposal was HK$230,398,000.

SIGNIFICANT INVESTMENTS

As at 31 December 2001, the Group maintained its investment in equity interest of an associate company, Prestige Properties Holdings Ltd ("Prestige"), a company listed in Hong Kong Stock Exchange with a carrying value of HK$611.3 million. The net profit attributable to shareholders of Prestige for the year was

HK$33.1 million. As at 31 December 2001, the Group held a portfolio of listed securities with an aggregated market value of HK$300 million. The dividend income from these listed securities for the year amounted to HK$0.8 million.

CODE OF BEST PRACTICE

None of the directors is aware of any information that would reasonably indicate the Company is not or was not in compliance with the Code of Best Practice (the "Code") as set out in Appendix 14 of the Listing Rules of the Stock Exchange of Hong Kong for any part of the year covered by the annual report.

The Company has an audit committee which was established in accordance with the requirements of the Code, for the purposes of reviewing and providing supervision over the Group's financial reporting process and internal controls. The audit committee comprises the two independent non-executive directors of the Company.

PURCHASE, SALE & REDEMPTION OF LISTED SECURITIES

Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any of the Company's listed securities during the year.

PUBLICATION ON EXCHANGE'S WEBSITE

A detailed results announcement containing all the information required by paragraph 45(1) to 45(3) of Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Ltd will be published on the Stock Exchange's website (http://www.hkex.com.hk) on or before 30th April, 2002.

APPRECIATION

On behalf of the Board of Directors, I would like to extend our gratitude and sincere appreciation to all management and staff members for their hard work and dedication throughout the year.

By order of the Board

Yuen Wing Shing

Executive Director

Hong Kong, 12 April 2002

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company will be held at Broadroom I, Mezzanine Floor, Grand Hyatt Hong Kong, 1 Harbour Road, Hong Kong on Wednesday, 29th May, 2002 at 11:30 a.m. to transact the following ordinary business:-

1. To receive and consider the audited consolidated financial statements and the reports of the directors and auditors for the year ended 31st December, 2001.

2. To determine the maximum number of directors at no more than 15 and to authorise the directors of the Company to appoint additional directors up to such maximum number in addition to those in office at the close of the meeting.

3. To re-elect the retiring directors and authorise the board of directors to fix the remuneration of the directors.

4. To appoint auditors and authorise the board of directors to fix their remuneration.

and by way of special business to consider, and if thought fit, pass with or without amendments the following resolutions as Ordinary Resolutions:

1. "THAT:-

5.1. a general mandate be and is hereby unconditionally given to the directors of the Company ("Directors") to exercise during the Relevant Period (as hereinafter defined) all the powers of the Company to allot, issue and deal with unissued shares of the Company ("Shares") or securities convertible into Shares or options, warrants or similar rights to subscribe for any Shares and to make or grant offers, agreements or options which would or might require the exercise of such powers either during or after the Relevant Period, in addition to any Shares which may be issued on a Rights Issue (as hereinafter defined) or under any option scheme or similar arrangement for the time being adopted for the grant or issue to the employees of the Company and/or any of its subsidiaries or any other eligible person(s) of Shares or rights to acquire Shares or upon the exercise of rights of subscription or conversion under the terms of any existing warrants, bonds, debentures, notes or other securities issued by the Company which carry rights to subscribe for or are convertible into Shares of the Company or any scrip dividend pursuant to the bye-laws of the Company from time to time, not exceeding twenty percent. of the aggregate nominal value of the share capital of the Company in issue as at the date of this Resolution; and

5.2. for the purposes of this Resolution:

"Relevant Period" means the period from the passing of this Resolution until whichever is the earlier of:

(a) the conclusion of the next Annual General Meeting of the Company;

(b) 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

(c) the date on which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the Shareholders of the Company in general meeting."

"Rights Issue" means an offer of shares open for a period fixed by the directors to holders of shares on the register of members of the Company on a fixed record date in proportion to their then holdings of such shares (subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of any relevant jurisdiction, or of the requirements of any recognised regulatory body or any stock exchange applicable to the Company)."

1. "THAT there be granted to the Directors an unconditional general mandate to repurchase Shares and warrants issued by the Company ("Warrants") (which Shares and Warrants are together called "Securities"), and that the exercise by the Directors of all powers of the Company to purchase Securities subject to and in accordance with all applicable laws, be and is hereby generally and unconditionally approved, subject to the following conditions:

6.1. such mandate shall not extend beyond the Relevant Period;

6.2. such mandate shall authorise the Directors to procure the Company to repurchase Securities at such price as the Directors may at their discretion determine;

6.3. the Shares to be repurchased by the Company pursuant to paragraph (6.1.) of this Resolution during the Relevant Period shall be no more than ten percent. of the Shares in issue at the date of passing of this Resolution and the Warrants to be repurchased by the Company pursuant to paragraph (6.1.) of this Resolution during the Relevant Period shall not exceed 10% of the Warrants in issue at the date of this Resolution; and

6.4. for the purpose of this Resolution:

"Relevant Period" means the period from the passing of this Resolution until whichever is the earlier of:

(a) the conclusion of the next Annual General Meeting of the Company;

(b) 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

(c) the date on which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the Shareholders of the Company in general meeting."

1. "THAT, subject to the availability of unissued share capital and conditional upon the passing of the Ordinary Resolutions nos. 5 and 6 as set out in the notice convening this meeting, the aggregate nominal amount of the Shares which are repurchased by the Company pursuant to and in accordance with Ordinary Resolution no. 6 set out in the notice convening this meeting shall be added to the aggregate nominal amount of the share capital of the Company that may be allotted or agreed conditionally or unconditionally to be allotted by the Directors pursuant to and in accordance with Ordinary Resolution no. 5 set out in the notice convening this meeting."

By Order of the Board

Albert T. da Rosa, Jr.

Secretary

Hong Kong, 12th April, 2002

Notes:

1. A member who is a holder of two or more shares, and who is entitled to attend and vote at the Annual General Meeting is entitled to appoint one or more than one proxy or a duly authorised corporate representative to attend and vote in his stead. A proxy need not be a member of the Company. Completion and return of the form of proxy will not preclude a member from attending the Annual General Meeting and voting in person. In such event, his form of proxy will be deemed to have been revoked.

2. In order to be valid, the form of proxy which will be enclosed with the annual report of the Company, together with the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power or authority, must be deposited at the principal place of business of the Company in Hong Kong at Rooms 3301-3304 China Resources Building, 26 Harbour Road, Wanchai, Hong Kong not less than 48 hours before the time for holding the Annual General Meeting or any adjournment.

3. With regard to items 5 and 7 above, the Directors wish to state that they have no immediate plans to issue any new shares of the Company by the exercise of such power.

* For identification purpose only

Please also refer to the published version of this announcement in the HK i-Mail.