A & S Group (Holdings) Limited — Proxy Solicitation & Information Statement 2008

May 2, 2008

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Le Saunda Holdings Ltd. , you should at once hand this circular to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

This circular is for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities nor is it calculated to invite any such offer or invitation.

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(Incorporated in the Bermuda with limited liability) (Stock Code: 738)

DISCLOSEABLE TRANSACTION

ESTABLISHMENT OF A JOINT VENTURE ARRANGEMENT TO CARRY OUT A NEW LINE OF FOOTWEAR BUSINESS

Financial Adviser to Le Saunda Holdings Ltd.

* For identification purposes only

5 May 2008

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Appendix — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15

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DEFINITIONS

In this circular, the following expressions shall have the meanings set out below unless the context requires otherwise:

“ASV” Andrea Sanchí Verdu, an independent third party not connected with each of the Company and connected persons of the Company “Board” the board of Directors “Company” Le Saunda Holdings Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange “Completion” completion of the JV Agreements “Directors” the directors of the Company “DPEND 99, S.L.” a company established in Spain which undertakes to provide exclusive sales and marketing management services to FM “FM” Florencia Marco, S.L., a company established in Elda, Spain, which is beneficially owned as to 99% by JJSB and 1% by ASV “FM Group” FM and Mark Co “Group” the Company and its subsidiaries “HK$” Hong Kong dollars, the lawful currency of Hong Kong “JJSB” José Juan Sanchís Busquier, an independent third party not connected with each of the Company and connected persons of the Company as at the date of the JV Agreements “JV Agreements” the SP Agreement and the Subscription Agreement “JV Company” Grandmark Holdings Limited, a company which is wholly owned by the Company as at the Latest Practicable Date “JV Group” the JV Company and its subsidiaries (from time to time) “Latest Practicable Date” 30 April 2008, being the latest practicable date prior to the printing of this circular for ascertaining certain information referred to in this circular “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

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DEFINITIONS

“LS (B.V.I.)” Le Saunda (B.V.I.) Limited, a company established under the laws of British Virgin Islands and is a wholly-owned subsidiary of the Company “Mark Co” Marcas Olimpicas, S.L., a company established in Spain and is wholly-owned by FM “Purchaser” the purchaser of the entire issued share capital of FM under the SP Agreement “Resan Debt” the amount of the trade payable owing by Resan Retail, S.L. to FM Group “SFO” the Securities and Futures Ordinance (Cap.571 of the Laws of Hong Kong) “SP Agreement” the Share Purchase Agreement dated 14 April 2008 entered into between the JV Company and the Vendors in respect of the sale and purchase of the entire issued capital of FM “Shareholder(s)” the shareholder(s) of the Company “Shareholders’ Agreement” the shareholders’ agreement (in the agreed form attaching to the Subscription Agreement) to be entered into by the Company, LS (B.V.I.), JJSB, the Subscriber and the JV Company in relation to the management and corporate governance of the JV Company upon Completion “Stock Exchange” The Stock Exchange of Hong Kong Limited “Subscriber” Los Rebecos 2008 S.L., a company owned by JJSB as to 99% and Vicente M Pastor Perez as to 1% “Subscription Agreement” the Subscription Agreement dated 14 April 2008 entered into between the Subscriber, the JV Company and LS (B.V.I.) in relation to, among other things, the issuance of 100 shares of JV Company to the Subscriber “Transactions” the entering into of the JV Agreements, the Shareholders’ Agreement and the transactions contemplated thereunder “Vendors” JJSB and ASV who hold in aggregate the entire issued capital of FM

In this circular, amounts expressed in C= have been translated into HK$ at C= 1 = HK$12.249 (or otherwise indicated in this circular) for illustrative purposes only. No representation is made that any amount in Hong Kong dollars or Euro could have been or can be converted at the above rate or at any other rate.

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LETTER FROM THE BOARD

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(Incorporated in the Bermuda with limited liability)

(Stock Code: 738)

Executive Directors:

Mr. Lee Tze Bun, Marces (Chairman and Chief Executive Officer)

Ms. Chui Kwan Ho, Jacky (Managing Director) Ms. Tsui Oi Kuen Ms. Lau Shun Wai Ms. Wong Sau Han

Independent non-executive Directors

Mr. Lam Siu Lun, Simon Mr. Leung Wai Ki, George Mr. Hui Chi Kwan

Registered Address: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Principal place of business in Hong Kong: 30th Floor, Hing Wai Centre 7 Tin Wan Praya Road Aberdeen Hong Kong 5 May 2008

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION ESTABLISHMENT OF A JOINT VENTURE ARRANGEMENT TO CARRY OUT A NEW LINE OF FOOTWEAR BUSINESS

1. INTRODUCTION

On 14 April 2008, the JV Company and LS (B.V.I.) entered into the JV Agreements (comprising the SP Agreement and the Subscription Agreement) with the Vendors and the Subscriber in respect of the proposed formation of a joint venture business arrangement in respect of the ladies’ footwear business of FM which is currently wholly-owned by the Vendors.

Upon Completion, each of the Group and the Subscriber (99% owned by JJSB) will each effectively hold 50% of the equity interest in the JV Company which, through its wholly-owned subsidiaries (including FM), will own the “REBECA SANVER” and “TO BE” branded footwear design and worldwide wholesale business. The JV Group will also own the trademarks in relation to the “REBECA SANVER” and “TO BE” brands.

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LETTER FROM THE BOARD

Presently the “REBECA SANVER” and “TO BE” branded footwear design and wholesale business are beneficially owned by FM, the entire issued capital of which will be sold to the Purchaser. Pursuant to the SP Agreement, the Vendors have procured the relevant trademarks be transferred to FM Group. At the Latest Practicable Date, the JV Company was an indirectly wholly-owned subsidiary of the Company. A total cash consideration of C= 4.5 million (equivalent to approximately HK$55.1 million) will be payable by the Purchaser to the Vendors. The consideration payable by the Purchaser pursuant to the SP Agreement will be financed by LS (B.V.I.), a directly wholly-owned subsidiary of the Company, by the way of a shareholder’s loan. Pursuant to the Subscription Agreement, such shareholder’s loan will be capitalized into 99 new shares of the JV Company upon Completion resulting in the Group holding 100 shares in the JV Company. The SP Agreement is conditional, among other things, the Subscription Agreement becoming unconditional.

Pursuant to the Subscription Agreement, the JV Company will allot and issue 100 new shares to the Subscriber at a total consideration of HK$100, representing the aggregate par value of such new shares. The Subscription Agreement is conditional on, among other things, the SP Agreement becoming unconditional and shall only be completed simultaneously upon completion of the SP Agreement. Accordingly, upon Completion, the JV Company will own the entire issued capital of FM and will be owned as to 50% by the Group and 50% by the Subscriber.

The Shareholders’ Agreement governing the management and corporate governance structure of the JV Company will be signed upon Completion. Pursuant to the Shareholders’ Agreement, each of the Company and JJSB agrees, among other things, to provide a shareholder’s loan of not more than C= 2.0 million (equivalent to approximately HK$24.5 million) to the JV Group after Completion.

The Transactions constitute a discloseable transaction for the Company under Listing Rules. The purpose of this circular is to set out details of the JV Agreements and the Shareholders’ Agreement for your information.

2. THE TRANSACTIONS

(A) The JV Agreements

On 14 April 2008, the JV Company, LS (B.V.I.), the Vendors and the Subscriber entered into the JV Agreements (comprising the SP Agreement and the Subscription Agreement) regarding the proposed formation of a joint venture business arrangement in respect of the ladies’ footwear business of FM which is currently wholly-owned by the Vendors.

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LETTER FROM THE BOARD

The SP Agreement

Date

14 April 2008

Parties

Purchaser : The JV Company, a wholly-owned subsidiary of the Company (the JV Company intends to assign and transfer all of its rights and obligations under the SP Agreement to its wholly-owned subsidiary to be established prior to Completion for future business development) Sellers : the Vendors, the beneficial owners of the entire issued share capital of FM

To the best of the Director’s knowledge, information and belief having made all reasonable enquiries, the Vendors are third parties independent of each of the Company and any connected person of the Company.

Consideration

Pursuant to the SP Agreement, the Vendors have agreed to sell their holdings in the entire issued share capital of FM to the Purchaser for an aggregate consideration of C= 4.5 million (which is equivalent to approximately HK$55.1 million). Upon Completion, the Purchaser shall pay an amount equal to the difference between C= 4.5 million and the Resan Debt outstanding as at 4 April 2008 (being the latest practicable date for ascertaining the amount of the Resan Debt prior to the entering into of the SP Agreement) to the Vendors in cash. This arrangement is to secure the settlement of the Resan Debt (being a trading amount payable by Resan Retail S.L., a retailer of FM Group’s products in which JJSB owns a 51% equity interest, to FM Group) recorded prior to the entering of the JV Agreements. The Vendors shall repay or procure or cause to be repaid, the Resan Debt in full by 10 equal monthly instalments starting from the last business day of the month in which Completion takes place. Upon each instalment payment, the Purchaser shall pay to the Vendors an amount equal to the amount of that payment. It is expected that any trade payable owing from Resan Retail S.L. to FM arising after 4 April 2008 shall be settled in accordance with the credit terms of 60 days.

As at the date of the SP Agreement, JJSB owed FM a loan amounting to approximately C= 0.4 million (equivalent to approximately HK$4.7 million). The Vendors have agreed under the SP Agreement that such loan to JJSB shall be repaid in full to FM on or before Completion (by means of using the consideration monies payable by the Purchaser to JJSB under the SP Agreement or otherwise).

The payment of the consideration will be financed by LS (B.V.I.) by way of a shareholder’s loan to the JV Group. Pursuant to the Subscription Agreement (as detailed below), such shareholder’s loan will be capitalized into 99 new shares of the JV Company upon Completion resulting in the Group holding 100 shares in the JV Company.

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LETTER FROM THE BOARD

The Vendors warrant and undertake to the Purchaser and guarantee that:

• (a) the consolidated value of net tangible assets of FM before any asset revaluation as at Completion shall not be less than C= 2.0 million (which is equivalent to approximately HK$24.5 million);

• (b) the amount represented by all borrowings of FM Group less the total amount of cash and bank balances of FM Group (other than the proceeds of the disposal or transfer of the properties held by FM Group for storage and office purposes as referred to in condition (j) to the SP Agreement) (net debts), on a consolidated basis, as at Completion shall not be more than C= 0.1 million (which is equivalent to approximately HK$1.2 million);

• (c) the consolidated value of the fixed assets of FM at book cost before depreciation as at Completion shall not be less than C= 0.15 million (which is equivalent to approximately HK$1.8 million); and

• (d) the consolidated value of the inventory of FM as at Completion shall not be less than C= 0.7 million (which is equivalent to approximately HK$8.6 million).

By no later than 60 days after Completion, a completion account of FM Group to be certified by an auditor to be appointed by the Purchaser and the Vendors shall be prepared in accordance with the SP Agreement to certify the amount of the net tangible assets, net debts, inventory value and fixed assets value of FM Group as at the date of Completion.

If any of the certified net tangible assets, inventory value or fixed assets value of FM Group as shown in the certified completion account as at Completion is less than the respective warranted amounts or the certified net debts of FM Group is higher than the warranted amount, the Vendors have undertaken to pay to the Purchaser an amount equal to:

A + B + C + D

A = the certified net debts of FM Group as at the date of Completion - the warranted net debts amount (provided that A should not be less than 0)

B = the warranted inventory value of FM Group as at the date of Completion - the certified inventory value (provided that B should not be less than 0)

C = the warranted fixed assets of FM Group as at the date of Completion - the certified fixed asset value (provided that C should not be less than 0)

D = the warranted net tangible assets of FM Group as at the date of Completion - the certified net tangible asset value - A - B - C (provided that D should not be less than 0)

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LETTER FROM THE BOARD

Conditions precedent

Completion of the SP Agreement is conditional upon the fulfillment or waiver of the following conditions and shall take place on the third business day or such other date as the parties may agree in writing after all the conditions below are fulfilled or waived (as the case may be):

• (a) the Purchaser having notified the Vendors on or before 30 June 2008 that it is satisfied on inspection and investigation as to

• the financial, contractual, taxation and trading position of FM Group; and

• the title of FM Group to their respective assets (including, without limitation, the properties, the trademarks and the domain names);

• (b) the Purchaser having obtained in terms acceptable to it, of all consents, approvals, clearances and authorizations of any relevant governmental authorities or other relevant third parties or persons in Spain, Hong Kong or elsewhere as may be considered necessary or desirable by it for the execution and implementation of the SP Agreement;

• (c) FM Group having received all relevant consents and approvals from third parties or persons as may be necessary in connection with the proposed change in shareholding of FM;

• (d) there being provided to the Purchaser a copy of the management accounts of FM Group as at 4 April 2008 and for the period from 1 January 2008 to 4 April 2008, certified true and complete by JJSB;

• (e) the completion of the transfer of the trademarks and domain names set forth in the SP Agreement to Mark Co;

• (f) the termination of the service agreement between FM and DPEND 99, S.L. in relation to the provision of services by DPEND 99, S.L. to FM including management, advice, coordination and support in relation to the marketing of FM and improvement of FM’s products production without any compensation and damages payable or paid by FM and the entering into of a new service agreement relating to FM in a form satisfactory to the Purchaser;

• (g) resolutions having been passed by the board of directors (or equivalent governing body) of FM approving:

• the transfer of the entire issued shares of FM from the Vendors to the Purchaser and the registration of the Purchaser as the holder of such issued shares in FM’s share register book, and the issue of the appropriate share certificate(s) to it; and

• such other matter as the Purchaser may reasonably require for the purpose of giving effect to the provisions of the SP Agreement;

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LETTER FROM THE BOARD

• (h) the Subscription Agreement having been entered into and having become unconditional in all respects (save as to any condition relating to completion of the SP Agreement);

• (i) the completion of the acquisition of all the issued share capital in Mark Co by FM and the production of a legal opinion in the form satisfactory to the Purchaser confirming the due and proper completion of the above acquisition and no adverse taxation effect on FM Group and any potential shareholder of FM and other incidental matters as may be required by the Purchaser in relation to such acquisition;

• (j) the completion of the disposal or transfer of all the real properties of FM Group (as referred to in the paragraph headed “Consideration” above) at a price or value not less than the net book value of such properties in the accounts of FM Group and the entering into of a lease arrangement in relation to such properties in favour of FM Group subject to and on terms and conditions satisfactory to the Purchaser;

• (k) there being no material adverse change to the financial, operations, business, human resources, assets or prospects of FM Group; and

• (l) there having been no breach of any of the covenants and warranties of the Vendors contained in the SP Agreement.

In the event that any or all of the conditions stated above are not fulfilled or waived, on or before 30 June 2008, the SP Agreement shall lapse and cease to have effect.

In respect of condition (i), FM acquired the entire issued share capital of Mark Co on 4 April 2008 at a consideration of C= 36,000 (equivalent to approximately HK$440,964). However, the required legal opinion has not been provided to the Purchaser.

In respect of condition (j) above, the disposal of the relevant properties was proposed by the Vendors. The Company understands from the Vendors that it is their intention to have the relevant real properties be sold to JJSB or his associates.

As at the Latest Practicable Date, save for condition (d) and (e) which had already been satisfied, none of the above conditions had been satisfied or waived.

The Subscription Agreement

Date

14 April 2008

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LETTER FROM THE BOARD

Parties

Subscriber	:	Los Rebecos 2008 S.L., an investment
		holding company
Issuer	:	the JV Company
Existing sole shareholder of the JV Company	:	LS (B.V.I.)

To the best of the Director’s knowledge, information and belief having made all reasonable enquiries, the Subscriber and its ultimate beneficial owners are third parties independent of each of the Company and any connected person of the Company.

Shares to be issued

Pursuant to the Subscription Agreement, the Subscriber has agreed to subscribe for and the JV Company has agreed to allot and issue 100 new shares of the JV Company to the Subscriber at a total consideration of HK$100, representing the aggregate par value of such new shares.

Shareholder’s loan capitalization

As mentioned above, the shareholder’s loan in the aggregate principal amount of C= 4.5 million will be made by LS (B.V.I.) to the JV Group to finance the payment of the consideration by the Purchaser under the SP Agreement.

At Completion, such entire shareholder’s loan shall be capitalized by the allotment and issue of 99 new shares of the JV Company, credited as fully paid and ranking pari passu with all the then issued shares of the JV Company (including the shares to be subscribed by the Subscriber) in all respects, to LS (B.V.I.), which will then own 50% of the JV Company.

Conditions precedent

Completion of the Subscription Agreement is conditional upon the fulfillment or waiver of the following conditions and shall take place simultaneously with the completion of the SP Agreement.

• (a) the SP Agreement becoming unconditional in all respects; and

• (b) there having been no breach of any covenants and warranties of the JV Company contained in the Subscription Agreement.

In the event that any or all of the conditions stated above are not fulfilled or waived, on or before 30 June 2008, the Subscription Agreement shall lapse and cease to have effect.

As at the Latest Practicable Date, none of the above conditions had been satisfied or waived.

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LETTER FROM THE BOARD

Share capital of the JV Company

The table below sets out the existing issued share capital of the JV Company and that upon Completion:

Name of shareholder LS (B.V.I.) the Subscriber	Before Completion Number of shares % 1 100 0 0	After Completion
		Number of shares % 100 50 100 50

As at the Latest Practicable Date, the issued share capital of the JV Company was HK$1 and the net asset value of the JV Group was HK$1. Prior to Completion, the JV Company intends to set up certain new overseas wholly-owned subsidiaries with an initial aggregate share capital of C= 15,600 (equivalent to approximately HK$191,084).

(B) The Shareholders’ Agreement

Date and Parties

Pursuant to the Subscription Agreement, LS (B.V.I.), the Company, the JV Company, the Subscriber and JJSB will, upon Completion, enter into the Shareholders’ Agreement (in the agreed form attaching to the Subscription Agreement) which will govern the management and corporate governance structure of the JV Company after Completion. LS (B.V.I.) and the Subscriber will be the shareholders of the JV Company after Completion. The Company will, among other things, guarantee the performance of the duties and obligations of LS (B.V.I.) under the Shareholders’ Agreement and JJSB will, among other things, guarantee the performance of the duties and obligations of the Subscriber under the Shareholders’ Agreement.

Major terms of the Shareholders’ Agreement are summarized below:

Composition of the board of directors of the JV Company

The board of the JV Company shall consist of not less than 4 and not more than 9 directors. LS (B.V.I.) and the Subscriber shall be entitled to appoint such number of directors proportional to their then shareholding in the JV Company. It is currently intended that the board of directors of the JV Company will initially comprise 4 directors after Completion including 2 representatives of LS (B.V.I.) and 2 representatives of the Subscriber.

The quorum at the board meetings shall be 2 directors, of whom one shall be a director appointed by LS (B.V.I.) and one shall be a director appointed by the Subscriber.

Unless unanimously approved by the shareholders of the JV Company, so long as LS (B.V.I.) and the Subscriber remain shareholders of the JV Company, the composition of the board of directors of each subsidiary of the JV Company as identified under the Shareholders’ Agreement shall be the same as that of the JV Company and the appointment and removal of each such subsidiary shall be made mutatis mutandis in accordance with the provisions of the Shareholders’ Agreement.

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LETTER FROM THE BOARD

Shareholders’ loans

Pursuant to the Shareholders’ Agreement, each of LS (B.V.I.) and the Subscriber will agree to advance and will make available promptly on demand of the JV Company, shareholders’ loans to the JV Company with an aggregate principal amount of not exceeding C= 2.0 million (equivalent to approximately HK$24.5 million) in good and immediately available funds. The amount of shareholders’ loans to be provided under the Shareholders’ Agreement was determined based on the level of estimated working capital required by the JV Group for the establishment of its retail business in Mainland China. LS (B.V.I.) and the Subscriber may mutually agree on the terms of the shareholders’ loans which may be unsecured, interest free and for an indefinite term if no further agreement is resolved between LS (B.V.I.) and the Subscriber.

Additional funding

To finance further investment, the JV Company may obtain additional funds through borrowings from banks, financial institutions and other similar outside sources on terms as to interest, repayment and security reasonably obtainable in the market and in relation to a borrower having similar standing as the JV Company. Apart from the shareholders’ loans mentioned above, LS (B.V.I.) and the Subscriber shall not be obliged to provide financing to the JV Company in relation to the further investment of the JV Company.

Management of the JV Company

Pursuant to the Shareholders’ Agreement, JJSB will undertake, among other things, that during the continuance of the Shareholders’ Agreement he will devote sufficient time and attention to, and use his best efforts and apply due skill and care for the management and development of, the business and the affairs of the JV Company for the purpose of achieving the goals and targets of the annual business plan in effect from time to time in an expeditious and timely manner. Without limitation to the generality of the foregoing, he will continue and remain as the chief designer for FM during the continuance of the Shareholders’ Agreement.

The JV Group shall have a chief executive officer whose appointment and removal shall be at the sole discretion of the board of directors of the JV Company. It is intended that upon the date of signing of the Shareholders’ Agreement, the first chief executive officer of the JV Group will be a representative nominated by the Company and the chairman will be JJSB.

3. INFORMATION OF FM

FM is principally engaged in the design and wholesale of ladies’ footwear under the “REBECA SANVER” and “TO BE” brands. Pursuant to the SP Agreement, all registrations in respect of the trademarks “REBECA SANVER” and “TO BE” have already been transferred to Mark Co, which is a directly wholly-owned subsidiary of FM.

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LETTER FROM THE BOARD

Set out below are the unaudited profit before and after taxation of FM (prepared in accordance with the applicable accounting principles in Spain) for the years ended 31 December 2006 and 2007. The Company understands from the Vendors that there are no legal requirements in Spain requiring FM to prepare audited financial statements.

Turnover Profit before taxation Profit after taxation	For the year ended 31 December 2006 C = ’000 equivalent to approximately HK$’000 16,666 204,142 90 1,102 100 1,225	For the year ended 31 December 2007
		C = ’000 equivalent to approximately HK$’000 13,427 164,467 138 1,690 119 1,458

The unaudited net asset value of FM was approximately C= 2.3 million (equivalent to approximately HK$28.2 million) as at 31 December 2007. Upon Completion, FM will be whollyowned by the JV Company which will be held as to 50% by the Company and as to 50% by the Subscriber. The JV Company and FM will become jointly controlled entities of the Company.

The diagram below shows the shareholding structure of FM after Completion.

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----- Start of picture text -----

Vicente M
The Company JJSB
Pastor Perez
100% 99% 1%
LS (B.V.I.) The Subscriber
50% 50%
the JV Company
100%
FM
100%
Mark Co
----- End of picture text -----*

• The JV Company will incorporate some overseas wholly-owned subsidiaries to hold the entire shareholding interest of FM for future business development.

JJSB is an entrepreneur and established FM in 1987 in Spain. JJSB has been a key management of FM and has substantial involvements in the design, commercialization and distribution of “REBECA SANVER” and “TO BE” branded ladies footwear. The JV Group will, through its interest in FM Group, own the relevant trademarks (or the worldwide exclusive perpetual right to use the relevant trademarks) after Completion. The wholesale network of FM covers Europe, Asia and America. FM’s products are wholesaled to a number of distributors (including companies owned by the Vendors).

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LETTER FROM THE BOARD

JJSB will continue to be the key management of FM after Completion. The Group has been manufacturing FM’s products on an OEM basis since 1987. It is anticapited that the above business transactions between the Group and the JV Group and those between the JV Group and companies owned by JJSB will continue after Completion. According to the Shareholders’ Agreement, such transactions will have to be carried out on normal commercial terms. Under the Listing Rules, and the present circumstances, neither JJSB nor the JV Company will become connected persons of the Company after Completion. Accordingly, the above business transactions shall not constitute continuing connected transactions for the Company.

4. REASONS FOR THE FORMATION OF THE JOINT VENTURE ARRANGEMENT

The Group is principally engaged in the manufacturing, trading, merchandising, and retailing of footwear and property holdings. As mentioned in the interim report of the Company for the six months ended 31 August 2007, the management of the Company would continue to review its existing businesses and at the same time to further enrich the Group’s product portfolio in order to fulfill customers’ demand. The Board is of the view that the formation of the joint venture arrangement with JJSB in respect of the footwear business of FM is in line with the business strategy of the Group to extend the Group’s product offerings to fulfill the diversifying customers’ demand and, by leveraging on the business network of the Group.

Transactions under the SP Agreement and the Subscription Agreement are part and parcel. Completion of the two agreements is inter-conditional and shall take place simultaneously. Upon Completion, the Group will hold an effective 50% equity interest in the JV Company which will in turn hold the entire issued share capital of FM Group. In assessing the terms of the SP Agreement and the Subscription Agreement, the two agreements should be viewed as a whole. As at the Latest Practicable Date, the JV Company only had net assets of HK$1.0. The subscription of new shares in the JV Company by the Subscriber under the Subscription Agreement is only a nominal transaction in order to allow JJSB to continue to control a 50% interest in FM Group through his interests in the Subscriber. Accordingly the new shares of JV Company are to be issued to the Subscriber at par value.

The consideration of C= 4.5 million under the SP Agreement actually represents the amount payable by the Group for the acquisition of a 50% interest in FM Group. Such consideration was determined after arm’s length negotiation between the Company and the Vendors. The Company has taken into account the recent performance of FM (including qualitative factors like the turnover and profits achieved in the past few years and improvement in the profitability in 2007 as compared to that of 2006), the experience of JJSB (as the key management of FM) in the ladies’ footwear industry, the worldwide market position of the brands of FM Group and the market potential of FM Group’s design and products when agreeing the terms of the JV Agreements with the Vendors and the Subscriber. Having taken into account the above reasons and factors, the Directors (including the independent non-executive Directors) consider that the terms of the JV Agreements are fair and reasonable so far as the interests of the Company and the Shareholders are concerned and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole.

As the JV Company will become a jointly controlled entity of the Company, the investment of the Group in the JV Company and the results of the JV Company will be accounted for in the consolidated financial statements of the Group using equity method of accounting.

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LETTER FROM THE BOARD

5. FINANCIAL EFFECTS OF THE TRANSACTION

The formation of the joint venture arrangement will be treated as investment in jointly controlled entities in the Group’s financial statements after Completion. It is expected that the capital contribution and shareholder’s loan to the JV Company by LS (B.V.I.) will be financed by internal resources of the Group and would not have any immediate effect on the earnings, total assets and total liabilities of the Group as the Group’s investments in the JV Group will be accounted for using equity method of accounting after Completion.

6. DISCLOSEABLE TRANSACTION

The JV Company is not a major subsidiary of the Company for the purposes of the Listing Rules. As the applicable percentage ratios for the Transactions under the Listing Rules are more than 5% but less than 25%, the Transactions constitute a discloseable transaction for the Company under Listing Rules.

7. ADDITIONAL INFORMATION

Your attention is drawn to the general information set out in the appendix to this circular.

Yours faithfully For and on behalf of the Board Lee Tze Bun, Marces Chairman

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GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement contained in this circular misleading.

2. DISCLOSURE OF INTERESTS

(I) Interests of directors and chief executive of the Company

As at the Latest Practicable Date, the Directors and chief executive of the Company had the following interests in the shares of HK$0.10 each in the capital of the Company (the “Shares”), underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO), the Model Code for Securities Transactions by Directors of Listed Companies and which are required to be entered in the register under section 352 of the SFO:

(A) Long position in the Shares

Number of Shares

						Approximate
						% of the
						issued share
	Personal	Family	Corporate	Other		capital of the
Name of Directors	interests	interests	interests	interests	Total	Company
Mr. Lee Tze Bun, Marces	27,450,000	—	31,384,000	205,000,000	263,834,000	41.29%
(“Mr. Lee”)			(Notes 1 & 2)	(Note 3)
Ms. Chui Kwan Ho,	4,646,000	—	—	50,000,000	54,646,000	8.55%
Jacky (“Ms. Chui”)				(Note 4)		(Note 5)
Ms. Tsui Oi Kuen	1,000,000	—	—	50,000,000	51,000,000	7.98%
(“Ms. Tsui”)				(Note 4)		(Note 6)
Ms. Lau Shun Wai	350,000	—	—	—	350,000	0.05%
(“Ms. Lau”)
Ms. Wong Sau Han	64,000	150,000	—	—	214,000	0.03%
(“Ms. Wong”)					(Note 7)

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GENERAL INFORMATION

APPENDIX I

• (B) Long position in shares in associated corporation of the Company

			Approximate % of the
			issued share capital of
			the associated
Name of associated	Name of		corporation of
corporation	Director	Personal interests	the Company
L. S. Retailing Limited	Mr. Lee	20,000 non-voting	100%
		deferred shares	(in respect of
		(Note 8)	non-voting
			deferred shares)

Notes :

1. 30,000,000 Shares are held by Succex Limited, which is wholly-owned by Mr. Lee. Therefore, Mr. Lee is deemed to be interested in those Shares.

2. 1,384,000 Shares are held by Xin Chuan Middle School Foundation Limited (“Xin Chuan”), of which Mr. Lee is a governor. Therefore, Mr. Lee is deemed to be interested in those Shares.

3. Stable Gain Holdings Limited (“Stable Gain”) holds 205,000,000 Shares, representing approximately 32.08% of the issued share capital of the Company. Those Shares were transferred from Lee Tze Bun Trustee Holding Corporation, being the trustee of a unit trust called The Lee Tze Bun Unit Trust (“LTB Trust”), as to 155,000,000 Shares, and from Lee Keung Trustee Holding Corporation, being the trustee of a unit trust called The Lee Keung Unit Trust (“LK Trust”), as to 50,000,000 Shares, upon termination of both the LTB Trust and the LK Trust on 28 July 2006. The entire issued share capital of Stable Gain is registered in the name of LGT Trustees Ltd. (“LGT”) as trustee of The Lee Keung Family Trust (“Lee Family Trust”), a discretionary trust, of which Mr. Lee is the founder and an eligible beneficiary thereunder. Therefore, Mr. Lee is deemed to be interested in those Shares.

4. Ms. Chui, Ms. Tsui and Ms. Lee Wing Kam Rowena Jackie (“Ms. Lee”), the daughter of Mr. Lee, being the trustees of The Lee Keung Charitable Foundation (“the Charitable Foundation”) jointly hold 50,000,000 Shares, representing approximately 7.83% of the issued share capital of the Company. Therefore, Ms. Chui, Ms. Tsui and Ms. Lee are deemed to be interested in those Shares.

5. Ms. Chui personally holds 4,646,000 Shares. Together with the Shares mentioned in (4) above, Ms. Chui is interested in an aggregate of 54,646,000 Shares, representing approximately 8.55% of the issued share capital of the Company.

6. Ms. Tsui personally holds 1,000,000 Shares. Together with the Shares mentioned in (4) above, Ms. Tsui is interested in an aggregate of 51,000,000 Shares, representing approximately 7.98% of the issued share capital of the Company.

7. Ms. Wong personally holds 64,000 Shares. Together with 150,000 Shares owned by the husband of Ms. Wong in which Ms. Wong is deemed to be interested, Ms. Wong is interested in an aggregate of 214,000 Shares, representing approximately 0.03% of the issued share capital of the Company.

8. Mr. Lee beneficially owns 20,000 non-voting deferred shares in L. S. Retailing Limited, a wholly-owned subsidiary of the Company.

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GENERAL INFORMATION

APPENDIX I

• (C) Short position in shares and underlying shares of the Company and associated corporations

As at the Latest Practicable Date, none of the directors and chief executive of the Company or their associates had any short position in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

• (D) Interest in share options

As at the Latest Practicable Date, no share options were held by the directors of the Company.

(II) Substantial shareholders

As at the Latest Practicable Date, according to the register of interests kept by the Company under section 336 of the SFO and so far as was known to the Directors and chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital (including any option in respect of such capital) carrying rights to vote in all circumstances at general meetings of any other member of the Group:

Number of Shares

						Approximate
						% of the
						issued share
		Personal	Corporate	Other		capital of the
Name	Note	interests	interests	interests	Total	Company
Mr. Lee	1, 2, 3 & 4	27,450,000	31,384,000	205,000,000	263,834,000	41.29%
LGT	3	—	205,000,000	—	205,000,000	32.08%
Stable Gain	3	205,000,000	—	—	205,000,000	32.08%
Ms. Chui	5	4,646,000	—	50,000,000	54,646,000	8.55%
Ms. Tsui	6	1,000,000	—	50,000,000	51,000,000	7.98%
Ms. Lee	7	4,000,000	—	50,000,000	54,000,000	8.45%
Ms. Chui, Ms. Tsui and Ms.
Lee as trustees of the
Charitable Foundation	5, 6 & 7	—	—	50,000,000	50,000,000	7.83%

Notes :

1. Mr. Lee personally holds 27,450,000 Shares.

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GENERAL INFORMATION

APPENDIX I

1. Succex Limited, in which Mr. Lee is a 100% controlling shareholder, holds 30,000,000 Shares; and Xin Chuan, in which Mr. Lee is a governor, holds 1,384,000 Shares. Therefore, Mr. Lee is deemed to be interested in those Shares.

2. Stable Gain holds 205,000,000 Shares, representing approximately 32.08% of the issued share capital of the Company. Those Shares were transferred from Lee Tze Bun Trustee Holding Corporation, being the trustee of the LTB Trust, as to 155,000,000 Shares, and from Lee Keung Trustee Holding Corporation, being the trustee of the LK Trust, as to 50,000,000 Shares, upon termination of both the LTB Trust and the LK Trust on 28 July 2006. The entire issued share capital of Stable Gain is registered in the name of LGT as trustee of the Lee Family Trust, a discretionary trust, to which Mr. Lee is the founder and an eligible beneficiary thereunder. Therefore, Mr. Lee is deemed to be interested in those Shares.

3. Mr. Lee is interested in an aggregate of 263,834,000 Shares as a result of (1), (2) and (3) above, being approximately 41.29% of the issued share capital of the Company.

4. Ms. Chui is interested in an aggregate of 54,646,000 Shares (comprising 4,646,000 Shares personal interests and the 50,000,000 Shares jointly held with Ms. Tsui and Ms. Lee as trustees of the Charitable Foundation), representing approximately 8.55% of the issued share capital of the Company.

5. Ms. Tsui is interested in an aggregate of 51,000,000 Shares (comprising 1,000,000 Shares personal interests and the 50,000,000 Shares jointly held with Ms. Chui and Ms. Lee as trustees of the Charitable Foundation), representing approximately 7.98% of the issued share capital of the Company.

6. Ms. Lee is interested in an aggregate of 54,000,000 Shares (comprising 4,000,000 Shares personal interests and the 50,000,000 Shares jointly held with Ms. Chui and Ms. Tsui as trustees of the Charitable Foundation), representing approximately 8.45% of the issued share capital of the Company.

According to the register of interests kept by the Company under section 336 of the SFO and so far as was known to the Directors and chief executive of the Company, save as disclosed above, there were no other persons (other than the Directors or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or in any option in respect of such capital.

As at the Latest Practicable Date, Ms. Chui Kwan Ho Jacky, Ms. Tsui Oi Kuen, being directors of the Company, and Ms. Lee Wing Kam Rowena Jackie, the daughter of Mr. Lee Tze Bun Marces, a director of the company, were directors of Stable Gain.

Save as disclosed above, none of the Directors is a director or employee of a company which has an interest in the shares of the Company which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO.

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GENERAL INFORMATION

APPENDIX I

3. SERVICE CONTRACTS

There is no existing or proposed service contract between any of the Directors or proposed Directors and the Company or any of its subsidiaries, which is not determinable within one year without payment of compensation other than by statutory compensation.

4. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective associates had any interest in a business which competes or may compete with the business of the Group.

5. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and, so far as the Directors are aware, no litigation or claim of material importance is pending or threatened against the Company or any of its subsidiaries.

6. GENERAL

• (a) The secretary and the qualified accountant of the Company is Mr. Wong Tai Chung Kenneth. Mr. Wong has over 20 years of experience in auditing, accounting and financial management. He is a fellow member of the Chartered Institute of Management Accountants and an associate member of the Hong Kong Institute of Certificate Public Accountants.

• (b) The registered office of the Company is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

• (c) The head office and principal place of business of the Company is 30th Floor, Hing Wai Centre, 7 Tin Wan Praya Road, Aberdeen, Hong Kong.

• (d) The Bermuda share registrar of the Company is The Bank of Bermuda Limited at 6 Front Street, Hamilton HM11, Bermuda and its Hong Kong share registrar is Computershare Hong Kong Investor Services Ltd. at 46/F., Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.

• (e) The English text of this circular shall prevail over the Chinese text.

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