09:58 DYNAMIC GLOBAL<00231> - Announcement (4) According to the HLJ Audited Accounts, net assets of HLJ Industry were RMB11,659,279 (approximately HK$10,999,000) as at 31 December 2003 and net liabilities were RMB3,816,307 (approximately HK$3,600,000) as at 31 December 2004. The net losses of HLJ Industry for the two years ended 31 December 2003 and 2004 were RMB8,535,000 (approximately HK$8,052,000) and RMB15,475,000 (approximately HK$14,599,000) respectively, while the gross losses for the two years ended 31 December 2003 and 2004 were RMB153,034 (approximately HK$144,371) and RMB11,682 (approximately HK$11,020) respectively. At completion of the 2005 Disposal, the Company will dispose of the entire interest of HLJ Industry to the 2005 Purchaser and HLJ Industry will cease to be a subsidiary of the Company after completion. Reasons for the 2005 Disposal The Company is an investment holding company principally engaged in the investment of different business sectors, including property development and investment as well as high technology business through its associate company, Zotn Digital Technologies, Inc., which is a solution provider focusing on China E-government and enterprise information systems. In the past years, the Company's performance has been plagued by HLJ Industry. The Company has also encountered much difficulty in managing HLJ Industry, on which the auditors of the Company have expressed qualified opinion in regards to HLJ Industry's fixed assets in the financial years ended 31 December 2001 and 2002. The report of the auditors as appeared in the Company's Annual Report 2002 states that the auditors have been unable to perform the procedures they consider necessary to satisfy themselves as to whether any impairment loss is required to be made against the carrying value of the Ski Assets having considered (i) the suspension of the skiing operation; (ii) the imposed restriction by the Court on the transfer of the Ski Assets (although a penalty was paid and the Ski Assets were subsequently released); (iii) the uncertainty of whether the Original Disposal (ie. disposal of the Ski Assets as announced by the Company on 10 September 2002) would be successful. In fact, the skiing operations of HLJ Industry have been suspended since early 2002 despite a partial operation by the 2003 Purchaser for a period of about 2 months when it took over the management right after the Disposal. In light of these unfavourable factors, the Directors, including the independent non-executive directors, considered that the prospect of HLJ Industry was very limited. To mitigate the loss, the Company signed the 2003 S&P Agreement on 13 August 2003 and tried to dispose of an initial 20% interest of HLJ Industry to the 2003 Purchaser together with an option to dispose of the remaining 80% interest of HLJ Industry. Unfortunately, the 2003 Purchaser encountered financial difficulties and was not able to complete the Disposal. In view of the above-mentioned factors, the Directors, including the independent non-executive directors, consider that the 2005 Disposal may prevent continuous drainage of financial and human resources from the Company required to manage HLJ Industry. Based on the HLJ Audited Accounts, successful completion of the 2005 Disposal will generate for the Group an expected gain (before netting off related expenses) of approximately of RMB4.3 million (approximately HK$4.1 million). No proceeds will be generated from the 2005 Disposal. General The 2005 Disposal contemplated under the 2005 Agreement constitutes a discloseable transaction of the Company under the Listing Rules as the relevant size test ratios represent more than 5% and less than 25%. A circular containing details of the 2005 Disposal will be dispatched to the Shareholders as soon as practicable. Trading in the Company's shares has been suspended since 19 August 2004 and remains suspended pending an announcement to clarify the detention of Mr. Liang Jianhua, former chairman of the Company, by the PRC authorities.