Vinda International : CONTINUING CONNECTED TRANSACTIONS - NEW ANNUAL CAPS

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Vinda International Holdings Limited

維達國際控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 3331) CONTINUING CONNECTED TRANSACTIONS - NEW ANNUAL CAPS BACKGROUND

Reference is made to the Announcements and the Circular.

As disclosed in the Circular, Vinda China, as tenant, leases the Sanjiang Properties from Former Taiyuan pursuant to the Lease Agreements. Pursuant to the Company Division, the Sanjiang Properties have been transferred to Dynasty Paper who thereby became the landlord under each of the Lease Agreements.

NEW ANNUAL CAPS

As the Previous Annual Caps expired on 31 December 2016, the Company proposes to set the annual caps for each of the Lease Agreements for the year ending 31 December 2017 as set out further below.

Previous Annual Caps and historical transaction amounts

The historical transaction amounts paid by the Group under each of the Lease Agreements and the Previous Annual Caps for the indicated periods were as follows:

Year ended 31 December 2014 2015 2016 Historical Amount paid Previous Annual Caps Historical Amount paid Previous Annual Caps Historical Amount paid Previous Annual Caps

(RMB'000) (RMB'000) (RMB'000)

Phase I Agreement 25,573 29,000 28,948 29,000 29,000 29,000

Phase II Agreement 15,400 16,800 16,800 16,800 16,800 16,800

Supplemental Lease Agreement 11,806 16,200 16,200 16,200 16,200 16,200

Total 52,779 62,000 61,948 62,000 62,000 62,000

The New Annual Caps

The Company proposes that the New Annual Caps be set as follows:

Year ending 31 December 2017

(RMB'000)

Phase I Agreement 29,000

Phase II Agreement 16,800

Supplemental Lease Agreement 16,200

Aggregated Annual Caps 62,000

Basis of determining the New Annual Caps

The New Annual Caps in respect of the rental under the Lease Agreements were determined after taking into account of (a) the indicative annual rental of the properties leased as valued by the independent property valuer engaged by the Company; (b) the annual rental under the Phase I Agreement, the Phase II Agreement and the Supplemental Lease Agreement, respectively; (c) the location of the land and the buildings and facilities erected thereon; and (d) Vinda China's rights to use Dynasty Paper's pollution discharge quota in Vinda China's business operation.

The Board has reviewed the existing annual rental under each of the Lease Agreements with reference to the advisory reports issued by an independent property valuer in respect of the properties leased under each of the Lease Agreements and is of the view that the respective annual rental under each of the Lease Agreements for the year ending 31 December 2017 shall remain unchanged.

The Board also took into account of the fact that, as disclosed in the Circular, each of the Lease Agreements will be terminated upon completion of the Group's acquisition of the entire equity interest in Dynasty Paper, which is expected to take place in early 2017. In the event that the Lease Agreements are not terminated by 31 December 2017, the Company will set new annual caps for each of the Lease Agreements and make further announcements, as required under the Listing Rules.

REASONS FOR AND BENEFITS OF THE LEASE AGREEMENTS AND THE NEW ANNUAL CAPS

The Directors are of the view that the business nature of the Group requires Vinda China to continue leasing the Sanjiang Properties under each of the Lease Agreements for the following reasons:

1. The market in Southern China for tissue paper products enjoyed tremendous growth in recent years. As there is a great demand for tissue paper products in Southern China, the Group requires the Sanjiang Properties for its production and to capture the opportunities available. To this end, the Group entered into the Phase I Agreement, the Phase II Agreement and the Supplemental Lease Agreement which the Directors believe will be the most time-and-cost efficient arrangement to maintain the Group's production needs.

2. The rented site and the tailor-made factory will provide the required compliance with the sewage indicator for the manufacturing of tissue papers products and the factory and the ancillary infrastructures and facilities will be constructed in accordance with the Group's specifications and requirements and sewage indicator imposed by the PRC.

3. In order to make full use of the buildings and ancillary facilities at the Sanjiang Properties which were constructed in accordance with the Group's specifications and requirements.

The Directors (including the independent non-executive Directors but excluding Mr. Li Chao Wang, Ms. Yu Yi Fang and Mr. Dong Yi Ping, each an executive Director) are of the view that

(a) each of the Lease Agreements and the transactions contemplated thereunder were entered into in the ordinary and usual course of the business of the Group; (b) the rental under each of the Lease Agreements were arrived at based on normal commercial terms after arm's length negotiations between the parties and with reference to the indicative annual rental indicated by the independent valuer engaged by the Company, the location of the land and the factory and the approval certification of pollution emission issued by the relevant PRC environmental protection bureau; and (c) the terms of each of the Lease Agreements and the New Annual Caps are fair and reasonable and are in the interests of the Company and its shareholders as a whole. Due to their respective interests in Fu An, the holding company of Dynasty Paper, Mr. Li Chao Wang, Ms. Yu Yi Fang and Mr. Dong Yi Ping are regarded to be interested in the Lease Agreements, and thereby had abstained from voting on the relevant resolutions of the Board approving the New Annual Caps.

GENERAL INFORMATION

The Group is principally engaged in the manufacturing and sale of tissue and personal care products in the PRC, Hong Kong, Macau, Korea, Malaysia, Taiwan and other Southeast Asian countries including, among others, Singapore, Thailand, Indonesia, and its principal products include toilet paper, hanky, softpack, box tissues, wet wipes, paper napkins, baby diapers, incontinence products and feminine care products.

Vinda China is an operating subsidiary of the Group established under the laws of the PRC, and is principally engaged in the manufacturing and sale of household consumable paper products in the PRC.

Former Taiyuan is a company established under the laws of the PRC and wholly-owned by Fu An, a company owned as to 74.21% by Mr. Li Chao Wang, 15.79% by Ms. Yu Yi Fang and 10.00% by Mr. Dong Yi Ping, each an executive Director. Former Taiyuan was permitted to be engaged in production of packaging paper but has ceased operation for some time.