09:38     KIU HUNG INT'L<00381> - Announcement (4)                            

    As Sangyang Spandex has not commenced any operation, the Directors        
    believe that the Disposal would have negligible impact on the business    
    operations of the Group.                                                  
                                                                              
    According to the Joint Venture Agreement, Huge Profit, Sinochem           
    International Company Limited, Sangyang Textile Co. Ltd. and Harvest      
    City Enterprises Limited are required to pay the whole amount of their    
    respective capital contribution towards the registered capital of         
    Sangyang Spandex on or before 12 July 2004. However, other than Sangyang  
    Textile Co. Ltd., the parties to the Joint Venture Agreement have not     
    made their respective capital contribution within the payment schedule    
    as set out in the Joint Venture Agreement.                                
                                                                              
    As Huge Profit, Sinochem International Company Limited and Harvest City   
    Enterprises Limited have not fully paid up their respective capital       
    contribution and the parties to the Joint Venture Agreement intend to     
    consider the timetable for the construction of the production facilities  
    of Sangyang Spandex after all the capital contributions have been fully   
    paid up, the parties are unable to agree on the timetable for the         
    construction of the production facilities of Sangyang Spandex.            
                                                                              
    As the parties to the Joint Venture Agreement cannot mutually agree with  
    a revised schedule of capital contributions and no expected timetable     
    for the construction of the production facilities of Sangyang Spandex     
    has been agreed after more than one year from the date of establishment   
    of Sangyang Spandex, the Directors believe that the Disposal provides an  
    opportunity for the Group to liquidate its investment in Sangyang         
    Spandex and to re-allocate its internal resources to other operations of  
    the Group.                                                                
                                                                              
    Save for the Disposal, the Directors have no present intention to         
    dispose of the Company's other subsidiaries.                              
                                                                              
    FINANCIAL EFFECT OF THE DISPOSAL                                          
                                                                              
    The net proceeds arising from the Disposal, after deducting the related   
    expenses, will amount to approximately HK$13,800,000 and will be used by  
    the Group for general working capital purposes. Based on the unaudited    
    management account of Huge Profit for the year ended 31 December 2004,    
    it is estimated that the Group will record a gain on disposal of          
    approximately HK$1,605,000 upon Completion which will be reflected in     
    the consolidated profit and loss account of the Company for the year      
    ending 31 December 2005. The gain on disposal is calculated based on the  
    disposal of the net liabilities of Huge Profit of approximately           
    HK$1,605,000.                                                             
                                                                              
    LISTING RULES IMPLICATION                                                 
                                                                              
    As the entire issued share capital of Kiu Hung Holdings is owned by Mr    
    Hui Kee Fung, Mr Hui Ki Yau, Madam Hui Hung Tan, Teresa (all being        
    executive Directors) and their associates, Kiu Hung Holdings is           
    therefore a Connected Person. Accordingly, the Disposal constitutes a     
    connected transaction on the part of the Company and will be subject to   
    the approval of the Independent Shareholders at the EGM by way of poll.   
    The transaction also constitutes a discloseable transaction on the part   
    of the Company.                                                           
                                                                              
    Details of the Disposal will be included in the next published annual     
    report of the Company.                                                    
                                                                              
    A circular containing, among other things, details of the Disposal, the   
    letter from the independent financial adviser to the Independent Board    
    Committee and the Independent Shareholders on the Disposal, the           
    recommendation of the Independent Board Committee to the Independent      
    Shareholders on the Disposal, information regarding the Group and a       
    notice of EGM will be despatched to the Shareholders.                     
                                                                              
    EGM                                                                       
                                                                              
    The Disposal is subject to, among others, the approval by the             
    Independent Shareholders at the EGM to be taken by way of poll. Legend    
    Win, Mr Hui Kee Fung, Mr Hui Ki Yau, Madam Hui Hung Tan, Teresa and       
    their associates will abstain from voting for the resolution at the EGM   
    due to their interests in the Disposal. In aggregate, Legend Win, Mr Hui  
    Kee Fung, Mr Hui Ki Yau, Madam Hui Hung Tan, Teresa and their associates  
    are interested in approximately 74.55% of the issued share capital of     
    the Company. The Independent Board Committee comprising Mr Sy Chin Mong,  
    Stephen, Dr Lin Al Yue and Mr Pang Guanghui, all being the independent    
    non-executive Directors, will be formed to advise the Independent         
    Shareholders as to the fairness and reasonableness of the Disposal. An    
    independent financial adviser will be appointed to advise the             
    Independent Board Committee and the Independent Shareholders in this      
    regard.                                                                   
                                                                              
    DEFINITIONS