09:28     BAOYE GROUP<02355> - Announcement (4)                               

    undertaking and implementation of construction                            
    projects. Mr Wang Liequan, Mr Chen Baorong and Mr Xia                     
    Weimin are the promoters of the Company.                                  
                                                                              
    Minghua Textile is owned as to 67% by Mr Li, a former                     
    director of Shaoxing Baogang, a non-wholly owned                          
    subsidiary of the Company. Mr Li resigned as a                            
    director of Shaoxing Baogang on 30 April 2004. Minghua                    
    Textile is principally engaged in the undertaking of                      
    the construction project of Zhejiang Textile Raw                          
    Material Exhibition City Textile Raw Material Trade                       
    Centre (#).                                                               
                                                                              
    In view that Minghua Textile is an associate of Mr                        
    Li, Minghua Textile is a connected person of the                          
    Company and the transaction contemplated under the                        
    Construction Agreement constitutes a connected                            
    transaction for the Company under the Listing Rules.                      
                                                                              
    In accordance with the Listing Rules, independent                         
    shareholders' approval for the Construction                               
    Agreement is required. The Directors propose to seek                      
    the independent shareholders' approval of the                             
    Construction Agreement at the EGM by way of a poll.                       
    No Shareholder is required to abstain from voting at                      
    the EGM as none of the Shareholders or their                              
    respective associates have any material interest in                       
    the Construction Agreement.                                               
                                                                              
    The Independent Board Committee will be formed to                         
    consider the Construction Agreement, and an                               
    independent financial adviser will be appointed to                        
    advise the Independent Board Committee and the                            
    independent shareholders on those issues. A circular                      
    containing, among other things, details of the                            
    Construction Agreement, the recommendation of the                         
    Independent Board Committee, the advice of its                            
    independent financial adviser and the notice of EGM                       
    will be despatched to the Shareholders as soon as                         
    practicable.                                                              
                                                                              
    Reasons and benefits of the Construction Agreement                        
    The Group is principally engaged in (i) the                               
    undertaking and implementation of construction                            
    projects; (ii) research and development, production                       
    and sale of building materials; and (iii) real estate                     
    development.                                                              
                                                                              
    The design, construction and installation work under                      
    the Construction Agreement and the execution of the                       
    Construction Agreement form part of the ordinary and                      
    usual course of business of the Group.                                    
                                                                              
    The Directors (excluding the Independent Board                            
    Committee comprising all independent non-executive                        
    Directors and whose opinion will be set out in the                        
    circular after taking into account the principal                          
    factors and reasons considered by the independent                         
    financial adviser and its advice set out in the                           
    circular) consider that the Construction Agreement                        
    was entered into in the ordinary and usual course of                      
    business of the Group and on normal commercial terms,                     
    and the entering into of the Construction Agreement                       
    is in the interests of the Company and the                                
    Shareholders as a whole and the terms of which are                        
    fair and reasonable as far as the Shareholders are                        
    concerned.                                                                
                                                                              
    ACQUISITION AGREEMENT                                                     
    The principal terms of the Acquisition Agreement are                      
    as follows:                                                               
                                                                              
    Date    :       26 February 2005