10:19     WEIQIAO TEXTILE<02698> - Announcement (4)                           

    (e) a buffer of approximately 5% in excess of the Group's total expected  
    electricity and steam purchases (excluding VAT) from Holding              
    Company.                                                                  
                                                                              
    The Group's total consumption of electricity and steam by volume had      
    increased by an average rate of approximately 88% and 192% per annum      
    respectively during the three financial years from 2002 to 2004. Both     
    electricity and steam were consumed during the production process of      
    grey fabric and cotton yarn. However, more steam were consumed during     
    the production process of grey fabric than that for cotton yarn.          
    Electricity was principally consumed during the production process of     
    cotton yarn. During the same period, the production volume of cotton      
    yarn and grey fabric had increased by an average rate of                  
    approximately 84% and approximately 113% per annum, respectively.         
    Therefore, the average rate of increase for the Group's total             
    consumption of steam by volume during that period is much higher than     
    the average rate of increase for the Group's total consumption of         
    electricity by volume.                                                    
                                                                              
    In the past three financial years of the Company, the rate of             
    increase of electricity and steam consumption had increased               
    significantly because:                                                    
                                                                              
    (a) Holding Company supplied electricity and steam only to the Company    
    in 2002;                                                                  
                                                                              
    (b) Holding Company commenced supplying electricity and steam to certain  
    subsidiaries of the Company in 2003 (i.e. in addition to the              
    Company);                                                                 
                                                                              
    (c) Holding Company commenced supplying electricity and steam to all      
    members of the Group that were in need of electricity and/or steam        
    from 2004 onwards; and                                                    
                                                                              
    (d) there had been a significant increase in the operation and            
    production volume of the Group during the same period.                    
                                                                              
    Holding Company currently principally supplies electricity and steam      
    to its subsidiaries and the Group.                                        
                                                                              
    In determining the Annual Cap for each of the three financial years       
    ending 31 December 2007, the Company has also taken into account the      
    following factors:                                                        
                                                                              
    (a) Pricing basis: It is expected that the portion of electricity and     
    steam consumption in excess of the Planned Electricity Purchase           
    and/or Planned Steam Purchase will be charged at market rates under       
    the Supplemental Agreement. Under the new pricing bases, the price        
    will be charged by tiers for all of its electricity and steam             
    consumption.                                                              
                                                                              
    (b) Projected increase in consumption: The projected rate of increase in  
    the consumption of electricity and steam for the financial years          
    ending 31 December 2005 to 2007 has been determined:                      
                                                                              
    (i) on the basis of the projected increase in turnover and the            
    corresponding increase in demand for electricity and steam during the     
    same period; and                                                          
                                                                              
    (ii) based on the principal assumptions that, for the duration of the     
    projected period:                                                         
                                                                              
    (aa) the production output of the Group will continue to grow at a rate   
    of approximately 40%;                                                     
                                                                              
    (bb) there will not be any adverse change or disruption in market         
    conditions, operation and business environment or government policies     
    which may materially affect the Group's businesses; and                   
                                                                              
    (cc) the textile industry in which the Group operates will remain stable. 
                                                                              
                                                                              
    The Company will make a further announcement and seek Independent         
    Shareholders' approval (where appropriate) in the event that any of       
    the Annual Caps for the three financial years ending 31 December 2007     
    set out above is exceeded.                                                
                                                                              
    5. Reasons for and benefits of entering into the Transaction              
    As disclosed in the results announcement issued by the Company on 28      
    February 2005, the Group had an aggregate production volume of about      
    543,000 tons of cotton yarn, 1,205,000,000 meters of grey fabric and