09:38 KIU HUNG INT'L<00381> - Announcement (3) Kiu Hung Holdings is a company incorporated in Hong Kong with limited liability and is principally engaged in investment holding. The subsidiaries of Kiu Hung Holdings are principally engaged in manufacturing and trading of chemical products and property investment. INFORMATION ON HUGE PROFIT Huge Profit, a wholly-owned subsidiary of the Company, is incorporated on 28 November 2003 in the British Virgin Islands with limited liability and is an investment holding company of the Group. Huge Profit owns 30% of the equity interests in Sangyang Spandex. The remaining 70% of the equity interests in Sangyang Spandex is owned as to 25%, 23% and 22% by Sinochem International Company Limited, Sangyang Textile Co. Ltd. and Harvest City Enterprises Limited respectively. To the best of the Directors' knowledge, Sinochem International Company Limited, Sangyang Textile Co. Ltd., Harvest City Enterprises Limited, their ultimate beneficial owners and their associates are third parties independent of and not connected with the Company and its Connected Persons. Sangyang Spandex is a Chinese-foreign equity joint venture established on 13 January 2004 in the PRC and is principally engaged in production, research and development and sale of spandex in the PRC. The registered capital of Sangyang Spandex is US$12,000,000 (equivalent to approximately HK$93,600,000). Each of Huge Profit, Sinochem International Company Limited, Sangyang Textile Co. Ltd. and Harvest City Enterprises Limited is required to contribute US$3,600,000 (equivalent to approximately HK$28,080,000), US$3,000,000 (equivalent to approximately HK$23,400,000), US$2,760,000 (equivalent to approximately HK$21,528,000) and US$2,640,000 (equivalent to approximately HK$20,592,000) respectively towards the registered capital of Sangyang Spandex. As at the date of this announcement, Huge Profit, Sinochem International Company Limited, Sangyang Textile Co. Ltd., Harvest City Enterprises Limited, has contributed approximately US$1,800,000 (equivalent to approximately HK$14,040,000), US$450,000 (equivalent to approximately HK$3,510,000), US$2,760,000 (equivalent to approximately HK$21,528,000) and nil respectively towards the registered capital of Sangyang Spandex and US$1,800,000 (equivalent to approximately HK$14,040,000), US$2,550,000 (equivalent to approximately HK$19,890,000), nil and US$2,640,000 (equivalent to approximately HK$20,592,000) remains unpaid. Upon Completion, the Group will not be responsible to make the outstanding payment towards the registered capital of Sangyang. According to the consolidated accounts of Huge Profit for the year ended 31 December 2003, Huge Profit had no turnover and the net loss before and after taxation and extraordinary items of Huge Profit were approximately HK$10,300. As at 31 December 2004, the principal asset of Huge Profit was its equity interests in Sangyang Spandex of approximately HK$27,607,000. The principal liabilities of Huge Profit were the shareholder's loan owing to Legend Wealth and the amount due towards the registered capital of Sangyang Spandex of approximately HK$14,029,904 and HK$14,040,000 respectively. As at 31 December 2004, the unaudited consolidated total assets of Huge Profit was approximately HK$27,634,000 and the unaudited consolidated net liabilities of Huge Profit was approximately HK$1,605,000. According to the unaudited consolidated accounts of Huge Profit for the year ended 31 December 2004, Huge Profit had no turnover and the net loss before and after taxation and extraordinary items of Huge Profit were approximately HK$1,672,000. For further details regarding the formation of Sangyang Spandex, please refer to the announcements of the Company in relation to the discloseable transaction and the supplemental agreement in respect of the establishment of the joint venture dated 19 December 2003 and 28 April 2004 respectively and the circular of the Company in relation to the discloseable transaction dated 9 January 2004. REASONS FOR THE DISPOSAL The Group is principally engaged in design, manufacture and sale of a wide range of toys and decorative gift items. According to the audited consolidated accounts of the Group for the year ended 31 December 2003, the turnover of the Group was approximately HK$84,046,000, the net loss before taxation and extraordinary items of the Group was approximately HK$4,776,000 and the net loss after taxation and extraordinary items of the Group was approximately HK$4,607,000.