09:13 EGANAGOLDPFEIL<00048> - Announcement (1) 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. EGANA GOLDPFEIL (HOLDINGS) LIMITED (Incorporated in the Cayman Islands with limited liability) (stock code: 048) CONTINUING CONNECTED TRANSACTIONS SUMMARY The Group has been purchasing the Raw Materials from Kuraray group for manufacturing man-made leather under the Supply Agreement in its ordinary and usual course of business. Kuraray and its subsidiaries are connected persons of the Company for the purpose of the Listing Rules. On 30 August 2001, the Stock Exchange granted a waiver to the Company from strict compliance with the announcement and/or independent shareholders' approval requirements in respect of the continuing connected transactions under Chapter 14 of the Old Listing Rules. The waiver expired on 31 December 2003. Upon expiry of the waiver, such transactions between Kuraray group and the Group constitute continuing connected transactions of the Company under Rule 14A.34 of the Listing Rules. Details of the transactions has been included in the Company's published annual report and accounts for the year ended 31 May 2004 under Rule 14A.45 of the Listing Rules. BACKGROUND The Group is principally engaged in the design, assembly, manufacturing and distribution of timepiece, jewellery and leather products. Kuraray and its subsidiaries are engaged in the manufacture and distribution of full grain-type and suede-type man-made leather. KEG, a wholly owned subsidiary of Kuraray, holds 30% issued shares in Lorica. Save as disclosed above, Kuraray and its subsidiaries are independent third parties not connected with the directors, chief executive or substantial shareholder of the Group or their respective associates (as defined in the Listing Rules). THE LORICA TRANSACTIONS Lorica, an Italian incorporated subsidiary in which the Company holds 70% interest, is engaged in the manufacture of man-made leather with its patented technology through dyeing and/or other finishing treatment. It has been purchasing the Raw Materials from Kuraray group for the manufacture of man-made leather in its ordinary and usual course of business. Since KEG is a subsidiary of Kuraray and holds 30% shares in Lorica, Kuraray and its subsidiaries are connected persons of the Company for the purpose of the Listing Rules. The purchase of the Raw Materials by Lorica from Kuraray group in the ordinary and usual course of business of Lorica constitutes continuing connected transactions of the Company under Chapter 14A of the Listing Rules. Purchases have been transacted based on the terms of the Supply Agreement pursuant to which Kuraray supplies the Raw Materials to Lorica for use in Europe and to use or sell the Finished Products in the world except Japan on an exclusive basis. The Supply Agreement entered into is in the ordinary and usual course of business of the Company and on a normal commercial terms. The Finished Products are marketed under trademarks that provide specific and differentiated identification of the Finished Products. The prices of the Raw Materials supplied by Kuraray group shall be determined through negotiations in good faith between the parties involved and those for the years 2004 - 2006 are and will be determined as per a price agreement dated 24 February 2003. The Supply Agreement has an initial term commencing from 30 March 2000 until 31 December 2006. The Stock Exchange has previously granted a waiver to the Company from strict compliance with the connected transaction requirements under Chapter 14 of the Old Listing Rules in connection with these transactions for three years ended on 31 December 2003. Under the waiver, the cap amount of the aggregate value of such transactions for each financial year should not exceed 5% of the total cost of sales of the Group in that year. For the 17 months period ended on 31 May 2002 and the financial year ended on 31 May 2003, the aggregate purchases made by Lorica from KEG and its associates amounted to approximately HK$34,562,000 and HK$22,047,000 respectively, representing approximately 1.81% and 1.41% of the total cost of sales of the Group in the relevant period/year. For the 7 months period ended 31 December 2003, the aggregate value of these transactions was approximately HK$18,347,000, representing approximately 0.85% of the total cost of sales of the Group for the financial year ended 31 May 2004. The Company has complied with the waiver granted by the Stock Exchange.