CHINA EB TECH<0256> - Announcement

The Stock Exchange of Hong Kong Limited takes no responsibilities 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.

CHINA EVERBRIGHT TECHNOLOGY LIMITED
(Incorporated in the Cayman Islands with limited liability)

Announcement

CONNECTED TRANSACTIONS

At the request of The Stock Exchange of Hong Kong Limited (the "Stock 
Exchange"), China Everbright Technology Limited (the "Company") is making 
disclosure on (i) certain connected transactions arising from the giving 
of the US Dollar Guarantees (as defined below) in November and December of 
1997 and the RMB Guarantee (as defined below) in October 1998 by Fuyuan 
O.A. Products (Shenzhen) Co., Ltd. ("Fuyuan"), a wholly-owned subsidiary 
of the Company, to secure three bank loans borrowed by Huayuan Industrial 
Group Co., Ltd. ("HIG") without the Company's knowledge and consent; and 
(ii) certain connected transactions made between Fuyuan or Huayuan (as 
defined below) and the various subsidiaries of HIG.

The US Dollar Guarantees were given prior to completion in January 1998 of 
the acquisition of Fuyuan by the Company in a discloseable transaction of 
the Company published in an announcement of the Company on 31st October 
1997.

HIG is a substantial shareholder of a subsidiary of the Company by virtue 
of its holding 25% equity interest in that subsidiary and is hence a 
connected person of the Company within the meaning of the Rule Governing 
the Listing of Securities on the Stock Exchange (the "Listing Rules"). The 
Stock Exchange considers that the Company has breached the Listing Rules 
and reserves the right to take appropriate action. Apart from the 
preliminary measures already taken, the Company is considering further 
actions to prevent similar events from happening again.

I.      Background

On 31st October 1997, the Company entered into a conditional sale and 
purchase agreement (the "SP Agreement") with G. Yean Group Company Limited 
("G. Yean") for acquisition (the "Acquisition") of the entire issued share 
capital of Transan Limited ("Transan"). Transan is a private limited 
company incorporated in Hong Kong and owns the entire equity interest in 
Fuyuan, a wholly foreign-owned enterprise established in Shenzhen. Fuyuan 
holds 75% equity interest in Shenzhen Huayuan Technology Development Co., 
Ltd. ("Huayuan"), a joint venture company established on 15th April 1993 
in Shenzhen. The remaining 25% equity interest in Huayuan is owned by HIG, 
a PRC company listed in Shenzhen. As the Acquisition constituted a 
discloseable transaction for the Company, particulars of the Acquisition 
was disclosed in a circular to shareholders dated 10th December 1997.

The Acquisition was completed on 9th January 1998 and since then Transan, 
Fuyuan and Huayuan have respectively become a subsidiary of the Company 
and HIG has become a substantial shareholder of the Company's subsidiary 
and a connected person within the meaning as defined in the Listing Rules.

When the Company entered into the Acquisition, the Company was given a 
profit guarantee for three years ending 31st December 1999 (the "Profit 
Guarantee Period") on the understanding that the original management of 
Fuyuan and Huayuan would remain unchanged during the Profit Guarantee 
Period in order to achieve the profit guarantee (the profits guaranteed 
under the Acquisition for the years 1997 and 1998 have been achieved). 
After the Acquisition, the previous management of Fuyuan and Huayuan have 
been allowed to remain in office and the Company, as the investment 
holding company, has not interfered the day-to-day operations of Fuyuan 
and Huayuan. But each month Fuyuan and Huayuan have to submit financial 
reports on their respective business operations so that the Company could 
maintain a management control on their operations. Besides, the management 
of Fuyuan and Huayuan would meet the Company's management for general 
discussion on the overall business operations and management of Fuyuan and 
Huayuan from time to time. The Company has briefed the management of 
Fuyuan and Huayuan on the requirements of the Company under the Listing 
Rules. Due to their misinterpretation of the Listing Rules and oversight, 
the management of Fuyuan and Huayuan entered into the connected 
transactions mentioned below without strict compliance with the 
requirements of the Listing Rules. As a remedial action and also to 
further strengthen the Company's supervision on and management control of 
these two subsidiaries, the Company in April 1999 appointed a 
representative into the management of Fuyuan and Huayuan respectively in 
order to ensure that there will be no further inadvertent breach of the 
Listing Rules in the future.

II.     US Dollar Guarantees

Without disclosing to the Company and in breach of the SP Agreement, G. 
Yean had allowed Fuyuan to enter, before completion of the Acquisition, 
into two guarantee loan contracts respectively dated 13th November 1997 
and 17th December 1997 (collectively, the "Guarantee Loan Contracts") 
whereby Fuyuan, as guarantor, has undertaken to guarantee respectively 
(collectively, the "US Dollar Guarantees") the repayment by HIG of two 
non-revolving bank loans in the respective amounts of US$500,000 
(equivalent to approximately HK$3,900,000) and US$1,500,000 (equivalent to 
approximately HK$11,700,000) borrowed by HIG from Guangdong Development 
Bank, Shenzhen Branch (the "Bank") together with interest accrued thereon. 
It is provided in the Guarantee Loan Contracts that HIG should utilize the 
loans for working capital purposes. The US Dollar Guarantees are given on 
a continuous basis until the said two loans and the interest accrued 
thereon are fully repaid. As at 15th June 1999, the aggregate principal 
amounts of the two bank loans have been reduced to US$810,000 (equivalent 
to approximately HK$6,300,000) and the total amount of the interests 
accrued thereon is US$47,000 (equivalent to approximately HK$367,000). 
These two sums (together with any further interest accrued on the 
outstanding principal amount) represent Fuyuan's current obligation 
(contingent liabilities) under the US Dollar Guarantees.

The Company became aware of the US Dollar Guarantees in about mid-July of 
1998 when HIG requested Fuyuan to enter into new guarantee loan contracts 
to replace the Guarantee Loan Contracts. The Company refused HIG's request 
and immediately conducted fact-finding exercises and discovered the 
particulars of the Guarantee Loan Contracts. Since then, the Company had 
made various demands on G. Yean to rectify the matter by procuring that 
Fuyuan's obligations under the Guarantee Loan Contracts be fully and 
absolutely discharged and released.

In response, G. Yean procured Shenzhen Max O.A. Equipment Co., Ltd. 
("Max"), a non-wholly owned subsidiary of HIG, to give a counter-guarantee 
dated 18th January 1999 (the "Counter-Guarantee") in favour of Fuyuan in 
respect of Fuyuan's obligations under the US Dollar Guarantees. The 
Counter-Guarantee is an irrevocable guarantee whereby Max guarantees in 
favour of Fuyuan in respect of repayment of the principal amounts of the 
two bank loans borrowed by HIG in the aggregate sum of US$2,000,000 
(equivalent to approximately HK$15,600,000) and all the interests accrued 
thereon under the Guarantee Loan Contracts. The Counter-Guarantee will 
remain valid and effective until HIG has repaid to the Bank all the 
outstanding loans and interest accrued thereon under the Guarantee Loan 
Contracts. Based on the audited financial statements of Max for the 
financial year ended 31st December 1998 and Max's latest management 
accounts as at 30th April 1999, the Company believes that Max has the 
required financial resources to satisfy its obligations under the 
Counter-Guarantee.

Without the prior knowledge and consent of the Company, the management of 
Fuyuan for and on behalf of Fuyuan entered as a guarantor into a loan 
extension agreement in Chinese dated 25th December 1998 with the Bank and 
HIG whereby the aforesaid US$500,000 loan under the guarantee loan 
contract dated 13th November 1997 is extended for a further period from 
30th December 1998 until 29th June 1999. The obligation of Fuyuan under 
this loan extension agreement is the same as that under the US Dollar 
Guarantees (i.e. Fuyuan guarantees the repayment of the said US$500,000 
loan and the interest accrued thereon until the same have been fully 
settled by HIG). The Company has requested G. Yean to procure that 
Fuyuan's obligation under the US Dollar Guarantees be fully discharged and 
released. However, the release has not been approved by the Bank. So far 
Fuyuan has not suffered any financial loss and damage as a result of the 
US Dollars Guarantees.

III.    RMB Guarantee

In pursuing the fact-finding exercise in respect of US Dollar Guarantees, 
it came to the attention of the Company after office hours on 26th March 
1999 that, without the Company's knowledge and consent, the management of 
Fuyuan for and on behalf of Fuyuan entered as a guarantor into (i) a 
non-revolving loan contract in Chinese dated 29th October 1998 with the 
Bank and HIG (the "RMB Loan Contract") and (ii) a guarantee contract in 
Chinese dated 29th October 1998 with the Bank separately. Under these two 
contracts, Fuyuan has agreed to guarantee (the "RMB Guarantee") the 
repayment by HIG of a non-revolving loan in the sum of RMB12 million 
(equivalent to approximately HK$11.2 million) (the "RMB Loan") borrowed by 
HIG from the Bank together with the interest accrued thereon. It is 
provided in the RMB Loan Contract that the RMB Loan is for a period of 12 
months commencing from the date of advancement. As at 15th June 1999, the 
aggregate of the outstanding principal amount and the interest thereon is 
approximately RMB12.48 million (equivalent to approximately HK$11.7 
million).

On the demand of the Company to rectify this matter, G. Yean has procured 
Max to give a counter-guarantee dated 30th March 1999 in favour of Fuyuan 
in respect of Fuyuan's obligation under the RMB Guarantee. This 
counter-guarantee is an irrevocable guarantee whereby Max guarantees in 
favour of Fuyuan in respect of the repayment of the principal amount of 
the RMB Loan borrowed by HIG and all the interests accrued thereon under 
the RMB Loan Contract. This counter-guarantee will remain valid and 
effective until HIG has repaid to the Bank all the outstanding principal 
of the RMB Loan and interest accrued thereon under the RMB Loan Contract.
Fuyuan's obligation under the RMB Guarantee remains subsisting until all 
the outstanding principal of the RMB Loan and the interest accrued thereon 
are fully settled. The Company is negotiating with G. Yean to procure that 
Fuyuan's obligation under the RMB Guarantee be fully discharged and 
released.

IV.     Connected Transactions between Fuyuan or Huayuan and Subsidiaries 
of HIG

During the preparation for the audited accounts for the year 1998, it has 
come to the attention of the Company that there have been certain 
transactions entered into between Fuyuan or Huayuan and five companies 
which are, as the Company is informed, subsidiaries of HIG. Particulars of 
those transactions are as follows:*

1.      Transactions between Fuyuan and Ezhou Huayuan Electronic 
Industrial Co. Ltd.

The principal business of Ezhou Huayuan Electronic Industrial Co. Ltd. 
("Ezhou Huayuan") is manufacturing of shells, clamshells and semi-finished 
products of floppy diskettes in the PRC. Since Ezhou Huayuan is more 
cost-effective in manufacturing shells, clamshells of floppy diskettes 
(because of lower labour cost, rental and other running costs in Ezhou, 
Wubei Province), Fuyuan has from time to time purchased such semi-finished 
products from Ezhou Huayuan for manufacturing floppy diskettes. The amount 
of the total purchase prices for those semi-finished products ordered by 
Fuyuan in the period from January 1998 to December 1998 was approximately 
RMB8.05 million (equivalent to approximately HK$7.52 million), whilst the 
amount of the total purchase prices for the period from January 1999 to 
May 1999 was approximately RMB4.61 million (equivalent to approximately 
HK$4.31 million). The transactions were made in the ordinary course of 
business of both parties, on an arm's length basis and by reference to the 
market conditions. The transactions were on normal commercial terms.

2.      Transactions between Huayuan and Ezhou Huayuan

For the purpose of its production activities and self-consumption, Ezhou 
Huayuan purchased from Huayaun SONY diskettes from time to time during the 
period from January 1998 to December 1998. The amount of the total 
purchase prices for the goods ordered from Huyuan by Ezhou Huayaun in that 
period was approximately RMB2 million (equivalent to approximately HK$1.87 
million). The transactions were made in the ordinary course of business of 
both parties, on an arm's length basis and by reference to the market 
conditions. The transactions were on normal commercial terms.

3.      Transactions between Fuyuan and C.H.Y. Industrial (U.S.A.) Inc.

The principal business of C.H.Y. Industrial (U.S.A.) Inc.("CHY Inc.") is 
distribution of floppy diskettes and other data storage media in America. 
In this connection, CHY Inc. has from time to time purchased from Fuyuan 
floppy diskettes for distribution purposes. The amount of the total 
purchase prices for the goods purchased from Fuyuan by CHY Inc. in the 
period from January 1998 to December 1998 was approximately RMB6.59 
million (equivalent to approximately HK$6.14 million), whilst the amount 
of the total purchase prices for the period from January 1999 to May 1999 
was approximately RMB2.49 million (equivalent to approximately HK$2.34 
million). The transactions were made in the ordinary course of business of 
both parties, on an arm's length basis and by reference to the market 
conditions. The transactions were on normal commercial terms.

4.      Transactions between Huayuan and Shenzhen Max O.A. Equipment Co., 
Ltd.

The principal business of Shenzhen Max O.A. Equipment Co., Ltd. ("Max") is 
manufacturing and selling of optical data storage drives (namely CD-Rom 
drive) in the PRC. For its production purposes, Max purchased floppy 
diskette from Huayuan from time to time during the period from January 
1998 to December 1998. The total amount of the prices for the goods 
purchased from Huayaun by Max in that period was approximately RMB5.2 
million (equivalent to approximately HK$4.86 million). The transactions 
were made in the ordinary course of business of both parties, on an arm's 
length basis and by reference to the market conditions. The transactions 
were on normal commercial terms.

5.      Transactions between Fuyuan and C.H.Y. (International) Company 
Limited

The principal business of C.H.Y. (International) Company Limited ("CHY 
International") is export and distribution of floppy diskettes and other 
data storage media products overseas. Fuyuan has sold its products to CHY 
International from time to time for exports purposes. The total amount of 
the prices for the goods sold by Fuyuan to CHY International in the period 
from January 1998 to December 1998 was approximately RMB10.2 million 
(equivalent to approximately HK$9.53 million), whilst the amount of the 
total prices for the period from January 1999 to May 1999 was 
approximately RMB0.4 million (equivalent to approximately HK$0.37 
million). The transactions were made in the ordinary course of business of 
both parties, on an arm's length basis and by reference to the market 
conditions. The transactions were on normal commercial terms.

6.      Transactions between Huayuan and Shenzhen H.Y. Sunny Technology 
Development Company Limited

Shenzhen H.Y. Sunny Technology Development Company Limited ("HY Sunny") is 
an authorised distributior of the SONY's data cartridge and optical data 
storage media (e.g. CD-R/W) and its principal business is the distribution 
of computer data cartridge and optical data storage media in the PRC. 
Since April 1999, Huyuan has from time to time purchased computer data 
cartidges and optical data storage media from HY Sunny for trading 
purposes. The total amount of the prices for the goods so far purchased by 
Huayuan from HY Sunny is approximately RMB84,000 (equivalent to 
approximately HK$79,000). The transactions were made in the ordinary 
course of business of both parties, on an arm's length basis and by 
reference to the market conditions. The transactions were on normal 
commercial terms.

The aggregate value of all the transactions above-mentioned is 
approximately RMB40 million (equivalent to HK$37 million). As mentioned 
above, HIG is a connected person of the Company and accordingly the 
aforesaid transactions between Huayuan or Fuyuan and HIG's aforesaid 
subsidiaries have constituted connected transactions for the Company. The 
directors of the Company (including its independent directors) have 
reviewed those transactions made in the period from January 1998 to 
December 1998 and have opined in the Company's audited accounts for the 
year ended 31st December 1998 that they were carried out in the ordinary 
course of business and on normal commercial terms.

V.      General Information

Since mid-July of 1998, the Company had spent considerable time on 
ascertaining the details of the facts relating to the US Dollar Guarantees 
and seeking legal advice on the matter. Upon conclusion of such a fact 
finding exercise which also eventually enables the Company to discover the 
RMB Guarantee, the Company notified the Stock Exchange.

The Stock Exchange requires the Company to disclose the US Dollar 
Guarantees, the RMB Guarantee and the connected transactions made between 
Fuyuan or Huayuan and the subsidiaries of HIG by way of a press notice and 
a circular containing an independent financial adviser's advice on the 
matters will be despatched to the shareholders in due course. The Stock 
Exchange considers that the Company has breached the Listing Rules in 
respect of the connected transactions mentioned above and reserves the 
right to take appropriate action. Apart from the preliminary measures 
already taken, the Company is considering further actions to prevent 
similar events from happening again.

The Company understands from G. Yean that G. Yean has disposed of all of 
its interest in HIG in March 1999 (it previously held approximately 30.48% 
interest in HIG indirectly). Besides the Company has recently been 
informed by HIG that HIG intends to dispose of its 25% equity interest in 
Huayuan (the "Disposal") to a third party not connected with the Company 
and the chief executive, directors or substantial shareholders of the 
Company or any of its subsidiaries or any of their respective associates 
(as defined in the Listing Rules). If the proposed Disposal does 
materialize, HIG will no longer be a connected person of the Company and 
the US Dollar Guarantee, the RMB Guarantee and the transactions between 
Fuyuan or Huayuan and the subsidiaries of HIG will no longer constitute 
connected transactions for the Company.

The Company is principally engaged through its subsidiaries in the 
marketing and distribution of consumer audio-video products and 
telecommunications products, manufacture and distribution of computer 
peripheral products and property investment for rental income.

By Order of the Board
Chen Dagang
Executive Director and Chief Executive Officer

Hong Kong, 17th June 1999


In this announcement, for reference purpose only, certain amounts in US$ 
have been translated into HK$ at a rate of US$1.00 to HK$7.80 and certain 
amounts in RMB have been translated into HK$ at a rate of HK$1.00 to 
RMB1.07. Such translation should not be construed as a representation that 
the amounts of US$ or RMB (as the case may be) have been or will be, 
converted into HK$ at those rates.