irasia.com - Yue Yuen Industrial (Holdings) Limited

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YUE YUEN INDUSTRIAL (HOLDINGS) LIMITED
(Incorporated in Bermuda with limited liability)

CONNECTED TRANSACTIONS

Sale of three plots of land together with three factory buildings and two dormitory
buildings erected thereon and Lease of four dormitory buildings at Yue Yuen Industrial Estate,
He Lu Industrial Area, Huang Jiang Town, Dongguan,
Guangdong Province, PRC ("Yue Yuen Industrial Estate")

On 27th April, 2001, Highmark Services Limited ("Highmark"), a wholly owned subsidiary of Yue Yuen Industrial (Holdings) Limited (the "Company"), has entered into a Sale Agreement and a Lease Agreement with High Class Properties Limited ("High Class"). Under the Sale Agreement, Highmark assigns the land use rights in relation to three plots of land (Lots 25, 27 and 32) representing approximately 17% of total land area at Yue Yuen Industrial Estate, He Lu Industrial Area, Huang Jiang Town, Dongguan, Guangdong Province, PRC () , owned by Highmark, together with three factory buildings and two dormitory buildings erected thereon ("Properties 1") to High Class at the consideration of US$25.76 million (HK$200.93 million). Under the Lease Agreement, Highmark leases to High Class four dormitory buildings ("Properties 2") at Yue Yuen Industrial Estate mentioned above representing approximately 1% of total land area of Yue Yuen Industrial Estate at monthly rent of US$43,600 (HK$340,080).
High Class is a wholly-owned subsidiary of Golden Brands Developments Limited ("Golden Brands"), which is 85% owned by Eminent Leader Investments Ltd. ("Eminent Leader") of which the sole shareholder, Mr. Tsai Chi Jui, is a substantial shareholder of the Company. This renders High Class to be a connected person under Chapter 14 of the Listing Rules. Accordingly, the above mentioned transactions constitute two connected transactions for the Company. However, since the consideration of the transactions aggregates to US$26,283,200 (HK$205,008,960) which amounts to 2.77% of the book value of the net tangible assets of the Company of US$948,904,000 (HK$7,401,451,200) as disclosed in its latest published audited consolidated accounts for the year ended 30th September, 2000, no independent shareholders' approval is required. The Company will include details of the transactions in its next published annual report and accounts for the year ending 30th September, 2001.

(1) Date of Sale Agreement: 27th April, 2001

Vendor: Highmark Services Limited, a wholly-owned subsidiary of the Company with its principal business of manufacture and marketing of athletic footwear, athletic style leisure footwear and casual footwear.

Purchaser: High Class Properties Ltd., a wholly-owned subsidiary of Golden Brands Developments Limited, which in turn is a 85% owned subsidiary of Eminent Leader Investments Ltd., the sole shareholder of which is Mr. Tsai Chi Jui, who is deemed to hold approximately 24% interest in the Company.

Contractual right of the
Subject Properties
involved in the sale: Highmark entered into four contracts (collectively called the "Contracts") with the local government of Huang Jiang on 1st August, 1993, 22nd January, 1998, 5th May, 1999 and 18th June, 1999 wherein Highmark was first assigned the right to use four plots of land adjoining together (the "Land") covering an area of approximately 1,967,000 sq.m. located at Gi Ti Kong, He Lu Industrial Area of Huang Jiang Town, Dongguan, Guangdong Province, the People's Republic of China (). By the Contracts, Highmark secured the right to use the Land (including Properties 1) for the establishment of an industrial estate ("Yue Yuen Industrial Estate"). Although Highmark has not obtained the land use right certificate with regard to Properties 1, the directors of the Company have provided confirmation that the terms of the Contracts permit Highmark to assign its land use right in Properties 1 to other parties. Pursuant to the agreement between Highmark and High Class as mentioned in this Announcement, Highmark agreed to transfer to High Class the land use rights relating to Properties 1.

(2) Date of Lease Agreement: 27th April, 2001.

Landlord: Highmark Services Limited, a wholly-owned subsidiary of the Company with its principal business of manufacture and marketing of athletic footwear, athletic style leisure footwear and casual footwear.

Tenant: High Class Properties Limited, a wholly-owned subsidiary of Golden Brands Developments Limited, which in turn is a 85% owned subsidiary of Eminent Leader Investments Ltd., the sole shareholder of which is Mr. Tsai Chi Jui, who is deemed to hold approximately 24% interest in the Company.

Term of the Lease
Agreement: One year commencing from 1st April, 2001.

Consideration for the sale
and the lease: Under the sale agreement Highmark assigned land use rights of the Properties 1 to High Class at the price of US$25.76 million (HK$200.93 million). Under the lease agreement Highmark leased the Properties 2 to High Class at the rent of US$43,600 (HK$340,080) per month. Both the sale and the lease were negotiated on an arm's length basis between Highmark and High Class and the consideration is equivalent to the value of the Properties 1 & 2 as stated in a property valuation report as at 31st March, 2001 prepared by an independent professional valuer, Knight Frank, commissioned by Highmark. The Company benefits from the transactions by way of a financial gain. Under the sale agreement, 20% of the consideration was paid in cash upon signing of the agreement. Completion date will be the same day as when the payment of the remaining 80% of consideration is received, at which point all risks associated with Properties 1 will have passed to High Class. The remaining 80% of the consideration is payable in cash within 7 days after signing of the agreement, on 4th May, 2001. There are no condition precedents for the sale of the Properties 1. The Company is satisfied that High Class has sufficient resources to complete the transactions.

Use of proceeds: The net proceeds derived from the sale amount to US$25.76 million (HK$200.93 million). The proceeds from the sale and the lease will further reinforce the Company's strong financial position and will be used for general working capital and operational requirements.

Reason for the sale and the lease: The Company's strategy is to focus on building up its core footwear business. This transaction is a strategic move to demonstrate the Company's commitment to this strategy. The management believes the divestment would sharpen the Company's focus and improve its asset utilization. The disposal will not affect the Company's continuous expansion plan of its core business. The management believes this ongoing strategy of concentrating on its footwear business and efficient asset utilization will continue to enhance shareholder's investment value and return.

Connected transactions: High Class is a wholly-owned subsidiary of Golden Brands which in turn is 85% owned by Eminent Leader, the sole shareholder of which is Mr. Tsai Chi Jui, who is a substantial shareholder, deemed to hold approximately 24% of the existing issued share capital of the Company. High Class is therefore an associate (as defined in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("Listing Rules")) of a substantial shareholder of the Company. Hence, the Sale Agreement and the Lease Agreement constitute two connected transactions respectively for the Company under the Listing Rules.
The directors (including the independent non-executive directors) are of the opinion that the terms of the agreements are on normal commercial terms (as the considerations represent open market values of the Properties as verified by Knight Frank, an independent firm of professional property valuers) and are fair and reasonable so far as the independent shareholders of the Company are concerned. Since the consideration payable under the Sale Agreement and the Lease Agreement aggregates to US$26,283,200 (HK$205,008,960) and amounts to 2.77% of the book value of the net tangible assets of the Company of US$948,904,000 (HK$7,401,451,200) as disclosed in its latest published audited consolidated accounts for the year ended 30th September, 2000, the transactions are not subject to independent shareholders' approval. Details of the connected transactions will be included in the Company's next annual report and accounts for the year ending 30th September, 2001 in accordance with the Listing Rules.

Definitions

"Lease Agreement" the agreement dated 27th April, 2001 between High Class and Highmark for the lease of four dormitory buildings representing approximately 1% of total land area of Yue Yuen Industrial Estate.

"Sale Agreement" the agreement dated 27th April, 2001 between High Class and Highmark for the sale of three plots of land representing approximately 17% of total land area at Yue Yuen Industrial Estate together with three factory buildings and two domitory buildings erected thereon

By the Order of the Board
Tsai Chi Neng
Chairman

Hong Kong, 2nd May, 2001

(The exchange rate used in this announcement is US$1 = HK$7.8)

Source: Yue Yuen Industrial Holdings Limited

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(1)	Date of Sale Agreement:	27th April, 2001
	Vendor:	Highmark Services Limited, a wholly-owned subsidiary of the Company with its principal business of manufacture and marketing of athletic footwear, athletic style leisure footwear and casual footwear.
	Purchaser:	High Class Properties Ltd., a wholly-owned subsidiary of Golden Brands Developments Limited, which in turn is a 85% owned subsidiary of Eminent Leader Investments Ltd., the sole shareholder of which is Mr. Tsai Chi Jui, who is deemed to hold approximately 24% interest in the Company.
	Contractual right of the Subject Properties involved in the sale:	Highmark entered into four contracts (collectively called the "Contracts") with the local government of Huang Jiang on 1st August, 1993, 22nd January, 1998, 5th May, 1999 and 18th June, 1999 wherein Highmark was first assigned the right to use four plots of land adjoining together (the "Land") covering an area of approximately 1,967,000 sq.m. located at Gi Ti Kong, He Lu Industrial Area of Huang Jiang Town, Dongguan, Guangdong Province, the People's Republic of China (). By the Contracts, Highmark secured the right to use the Land (including Properties 1) for the establishment of an industrial estate ("Yue Yuen Industrial Estate"). Although Highmark has not obtained the land use right certificate with regard to Properties 1, the directors of the Company have provided confirmation that the terms of the Contracts permit Highmark to assign its land use right in Properties 1 to other parties. Pursuant to the agreement between Highmark and High Class as mentioned in this Announcement, Highmark agreed to transfer to High Class the land use rights relating to Properties 1.
(2)	Date of Lease Agreement:	27th April, 2001.
	Landlord:	Highmark Services Limited, a wholly-owned subsidiary of the Company with its principal business of manufacture and marketing of athletic footwear, athletic style leisure footwear and casual footwear.
	Tenant:	High Class Properties Limited, a wholly-owned subsidiary of Golden Brands Developments Limited, which in turn is a 85% owned subsidiary of Eminent Leader Investments Ltd., the sole shareholder of which is Mr. Tsai Chi Jui, who is deemed to hold approximately 24% interest in the Company.
	Term of the Lease Agreement:	One year commencing from 1st April, 2001.
Consideration for the sale and the lease:		Under the sale agreement Highmark assigned land use rights of the Properties 1 to High Class at the price of US$25.76 million (HK$200.93 million). Under the lease agreement Highmark leased the Properties 2 to High Class at the rent of US$43,600 (HK$340,080) per month. Both the sale and the lease were negotiated on an arm's length basis between Highmark and High Class and the consideration is equivalent to the value of the Properties 1 & 2 as stated in a property valuation report as at 31st March, 2001 prepared by an independent professional valuer, Knight Frank, commissioned by Highmark. The Company benefits from the transactions by way of a financial gain. Under the sale agreement, 20% of the consideration was paid in cash upon signing of the agreement. Completion date will be the same day as when the payment of the remaining 80% of consideration is received, at which point all risks associated with Properties 1 will have passed to High Class. The remaining 80% of the consideration is payable in cash within 7 days after signing of the agreement, on 4th May, 2001. There are no condition precedents for the sale of the Properties 1. The Company is satisfied that High Class has sufficient resources to complete the transactions.
Use of proceeds:		The net proceeds derived from the sale amount to US$25.76 million (HK$200.93 million). The proceeds from the sale and the lease will further reinforce the Company's strong financial position and will be used for general working capital and operational requirements.
Reason for the sale and the lease:		The Company's strategy is to focus on building up its core footwear business. This transaction is a strategic move to demonstrate the Company's commitment to this strategy. The management believes the divestment would sharpen the Company's focus and improve its asset utilization. The disposal will not affect the Company's continuous expansion plan of its core business. The management believes this ongoing strategy of concentrating on its footwear business and efficient asset utilization will continue to enhance shareholder's investment value and return.
Connected transactions:		High Class is a wholly-owned subsidiary of Golden Brands which in turn is 85% owned by Eminent Leader, the sole shareholder of which is Mr. Tsai Chi Jui, who is a substantial shareholder, deemed to hold approximately 24% of the existing issued share capital of the Company. High Class is therefore an associate (as defined in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("Listing Rules")) of a substantial shareholder of the Company. Hence, the Sale Agreement and the Lease Agreement constitute two connected transactions respectively for the Company under the Listing Rules. The directors (including the independent non-executive directors) are of the opinion that the terms of the agreements are on normal commercial terms (as the considerations represent open market values of the Properties as verified by Knight Frank, an independent firm of professional property valuers) and are fair and reasonable so far as the independent shareholders of the Company are concerned. Since the consideration payable under the Sale Agreement and the Lease Agreement aggregates to US$26,283,200 (HK$205,008,960) and amounts to 2.77% of the book value of the net tangible assets of the Company of US$948,904,000 (HK$7,401,451,200) as disclosed in its latest published audited consolidated accounts for the year ended 30th September, 2000, the transactions are not subject to independent shareholders' approval. Details of the connected transactions will be included in the Company's next annual report and accounts for the year ending 30th September, 2001 in accordance with the Listing Rules.
Definitions
"Lease Agreement"		the agreement dated 27th April, 2001 between High Class and Highmark for the lease of four dormitory buildings representing approximately 1% of total land area of Yue Yuen Industrial Estate.
"Sale Agreement"		the agreement dated 27th April, 2001 between High Class and Highmark for the sale of three plots of land representing approximately 17% of total land area at Yue Yuen Industrial Estate together with three factory buildings and two domitory buildings erected thereon