09:28     TEXHONG TEXTILE<02678> - Ann. & Resumption of Trading (2)           

    is the liquidation committee of Jiangsu Yinyu Sanlian                     
    Group Limited, a distressed textile manufacturer                          
    registered in Xuzhou of the PRC. To the best of the                       
    Directors' knowledge, information and belief having                       
    made all reasonable enquiry, Jiangsu Yinyu and its                        
    ultimate beneficial owners are independent third                          
    parties not connected with the Company, the Directors,                    
    chief executive or substantial shareholders of the                        
    Company or any of its subsidiaries or an associate                        
    of any of them.                                                           
                                                                              
    (iii)   Xuzhou Textile as the lease facilitator, and is                   
    a textile manufacturer registered in Xuzhou, the PRC.                     
    To the best of the Directors' knowledge, information                      
    and belief having made all reasonable enquiry, Xuzhou                     
    Textile and its ultimate beneficial owners are                            
    independent third parties not connected with the                          
    Company, the Directors, chief executive or                                
    substantial shareholders of the Company or any of its                     
    subsidiaries or an associate of any of them.                              
                                                                              
    The Leased Assets                                                         
    Manufacturing facilities owned by Jiangsu Yinyu                           
    include No. 1 yarn plant, No. 2 yarn plant, No. 3 yarn                    
    plant, Longda textile plant and Twisting plant. The                       
    production facilities in these five plants are not                        
    less than 87,000 spindles, 80 air-jet looms and 20                        
    twisting machines. The Leased Assets also include,                        
    accessory production facilities, equipment and                            
    buildings for production and administration                               
    purposes.                                                                 
                                                                              
    Term of the Lease Agreement                                               
    Major terms of the Lease Agreement are set out below:                     
                                                                              
    1.      The Lease Agreement is for a term commencing 1                    
    February 2005 to 30 April 2007, with a rent free period                   
    from 1 February 2005 to 1 May 2005.                                       
                                                                              
    2.      Total annual rentals of the Leased Assets are                     
    RMB3,960,000 (equivalent to approximately                                 
    HK$3,736,000).                                                            
                                                                              
    3.      Texhong BVI agrees to provide preferential                        
    employment opportunities to the labour forces to be                       
    referred by Jiangsu Yinyu Sanlian Group Limited when                      
    Texhong BVI needs to recruit workers to operate the                       
    Leased Assets.                                                            
                                                                              
    4.      If any part or all of the Leased Assets except for                
    the factory buildings are sold to Texhong BVI during                      
    the lease period, Xuzhou Textile, as the lease                            
    facilitator, is responsible to construct new plants                       
    and lease the plants to Texhong BVI for its relocation                    
    of production facilities.                                                 
                                                                              
    Reasons for the transaction                                               
    As disclosed in the Company's prospectus dated 30                         
    November 2004, the Group plans to expand its                              
    production capacity, particularly yarn spinning mill.                     
    The Directors consider that it is a good opportunity                      
    for the Group to increase its production capacity                         
    substantially without significant capital investment.                     
    The Group's production capacity of yarn will increase                     
    substantially by 87,000 spindles (or 42.9%), from                         
    203,000 spindles to 290,000 spindles. The Directors                       
    plan to utilise the Leased Assets as another major                        
    manufacturing base of the Group's spandex stretch                         
    yarn and believe the entering into the Lease Agreement                    
    and the planned subsequent utilisation of the Leased                      
    Assets can increase the Group's total yarn production                     
    output and enhance the Group's profitability.