Luen Thai Holdings Limited — Proxy Solicitation & Information Statement 2009

Sep 15, 2009

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 stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in the Company, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or other transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

LUEN THAI HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 311)

MAJOR TRANSACTION CONSTRUCTION CONTRACT

16 September 2009

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Principal Terms of the Construction Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Reasons for Entering into the Construction Contract . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Financial Effects on the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Financial and Trading Prospects of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Implications under the Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
APPENDIX I — FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . .	10
APPENDIX II — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	81

– i –

DEFINITIONS

In this circular, the following expressions have the following meanings unless the context otherwise requires:

• ‘‘Adjoining Land’’ a parcel of land located in Qingyuan City with a site area of approximately 79,703.36 sq.m., which is adjoining the Converted Land and is owned by the Group through the acquisition of Victory Land Properties Limited, as disclosed in the announcement of the Company dated 17 February 2009;

• ‘‘Capital Glory’’ Capital Glory Limited, a company incorporated in the British Virgin Islands;

• ‘‘Company’’ Luen Thai Holdings Limited, the shares of which are listed on the Stock Exchange;

• ‘‘Completion the certificate issued by the relevant government authority upon Certificate’’ the satisfaction of the practical completion of all the works under the Construction Contract;

• ‘‘Connected Person’’ shall have the meaning as ascribed to it under the Listing Rules;

• ‘‘Construction the construction contract entered into between the Contractor Contract’’ and QYRE on 14 August 2009 for the construction work of the Project;

• ‘‘Contractor’’ 廣東中城建設集團有限公司, a company incorporated in the PRC;

• ‘‘Contract Sum’’ the sum of RMB240,700,000 (or approximately HK$272,977,870);

• ‘‘Converted Land’’ a parcel of land located at Pi Keng, Luen Thai Industrial City, Long Tang Town, Qing Shing District, Qingyuan City, Guangdong Province, the PRC with a site area of approximately 423,814 sq. m., which is currently owned by the Group;

• ‘‘Directors’’ directors of the Company for the time being; ‘‘Group’’ the Company and its subsidiaries; ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong; ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the People’s Republic of China;

• ‘‘Latest Practicable 14 September 2009, being the latest practicable date for Date’’ ascertaining certain information contained in this circular;

– 1 –

DEFINITIONS

‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange; ‘‘PRC’’ the People’s Republic of China (excluding, for the purposes of this circular, Hong Kong, Macau and Taiwan); ‘‘Project’’ the project known as ‘‘The LUXRIVER’’ for the redevelopment of the Converted Land and the Adjoining Land into residential/ commercial development; ‘‘QYRE’’ Luen Thai (Qingyuan) Real Estate Limited (聯泰（清遠）房地產有 限公司), a company incorporated in the PRC and an indirect wholly-owned subsidiary of the Company; ‘‘RMB’’ Renminbi, the lawful currency of the PRC; ‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong); ‘‘Share(s)’’ ordinary share(s) in the share capital of the Company, with a par value of US$0.01 each; ‘‘Shareholder(s)’’ the shareholder(s) of the Company; ‘‘sq. m.’’ square metre(s); ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited.

For illustration purpose, in this circular, amounts in RMB have been translated into HK$ at the exchange rate of RMB1.00 to HK$1.1341. Such translation does not constitute a representation that any amount has been, could have been or may be exchanged at such rate.

– 2 –

LETTER FROM THE BOARD

LUEN THAI HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 311)

Executive Directors: Mr. Tan Siu Lin (Chairman) Mr. Tan Henry Mr. Tan Cho Lung, Raymond Mr. Tan Sunny Ms. Mok Siu Wan, Anne

Non-executive Directors: Mr. Tan Willie Lu Chin Chu

Independent non-executive Directors:

Registered Office: Cricket Square Hutchins Drive, P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Head office and Principal place of business in Hong Kong: 5/F, Nanyang Plaza 57 Hung To Road Kwun Tong, Kowloon Hong Kong

Mr. Chan Henry Mr. Cheung Siu Kee

Mr. Seing Nea Yie

Hong Kong, 16 September 2009

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION CONSTRUCTION CONTRACT

INTRODUCTION

As stated in the announcement of the Company dated 14 August 2009, the Group currently plans to redevelop the site on the Converted Land and the Adjoining Land in phases as residential/commercial development. To implement the Project, QYRE has entered into the Construction Contract with the Contractor.

The purpose of this circular is to provide you with further details regarding the Construction Contract and the transactions contemplated thereunder and to provide other information in accordance with the Listing Rules.

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LETTER FROM THE BOARD

PRINCIPAL TERMS OF THE CONSTRUCTION CONTRACT

To implement the Project, QYRE has entered into the Construction Contract with the Contractor for the construction work of the Project by the Contractor. The principal terms of the Construction Contract are as follows:

Date

: 14 August 2009.

• Parties : (a) QYRE, an indirect wholly-owned subsidiary of the Company; and

• (b) the Contractor.

• Scope of the construction

• : Phase 1 of the construction work for the Project, including (a) site formation works, (b) foundation works, (c) structural works, external wall finishes works and rough internal finishes works for villas, low-rise apartment towers and associated shops and club house, (d) external landscaping works including swimming pools, lake, entrance gate, fountains, roads, footpaths and soft landscaping works, and (e) external underground electrical and mechanical works.

• Tentative timetable : The construction work is expected to be completed within 300 days after its commencement.

Contract Sum

• : RMB240,700,000 (or approximately HK$272,977,870), payable by QYRE to the Contractor pursuant to the terms of the Construction Contract.

• Payment terms : The Contract Sum will be paid by QYRE in cash by instalments in accordance with the progress of the construction:

  • (a) 8% of the Contract Sum (i.e. RMB19,256,000 (or approximately HK$21,838,230)), for the first instalment representing a payment in advance, will be payable within 7 days after signing of the Construction Contract, and will be used as deduction from payment of the sixth (6th) to eleventh (11th) interim progress payments in the manner as described below;

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LETTER FROM THE BOARD

• (b) the interim progress payments will be paid on a monthly basis. For the second (2nd) to the eleventh (11th) interim progress payments, an amount representing 85% of the value of the work done for that month will be paid. Payment amounting to 90% of the value of the work done for a milestone (as described in paragraph (d) below) will be made when such milestone is completed. Each of such interim progress payments will be paid when the quantity surveyor for the Project delivers to QYRE a certificate assessing the value of the work completed for the month in issue;

• (c) payment in advance made for the first instalment representing a total of 8% of the Contract Sum will be used as deduction from payment for the sixth (6th) to eleventh (11th) interim progress payments respectively by RMB1,930,000 (or approximately HK$2,188,813) in respect of the sixth (6th) interim progress payment, RMB3,470,000 (or approximately HK$3,935,327) each in respect of the seventh (7th) to the tenth (10th) interim progress payments, and RMB3,446,000 (or approximately HK$3,908,109) in respect of the eleventh (11th) interim progress payments;

– 5 –

LETTER FROM THE BOARD

• (d) there are five milestones in the construction works. When all the works for each milestone are completed, payment amounting to 90% of the Contract Sum will be made upon completion of the work for all the five milestones. The remaining 10% of the Contract Sum will be paid in the manner as described in paragraphs (e) and (f) below. The five milestones are as follows:

Milestone 1 — structural works of basement including basement top slab and associated electrical and mechanical cast-in conduit and wiring;

Milestone 2 — structural works and brickworks of all buildings including roof slab and associated electrical and mechanical cast-in conduit and wiring;

Milestone 3 — All builder’s works and electrical and mechanical works of all buildings;

Milestone 4 — receiving the certificate from the relevant government authority on the satisfaction of the testing and commissioning of the fire service system; and

Milestone 5 — all external works including builder’s works and electrical and mechanical works; (e) When the Completion Certificate is received by QYRE certifying the due completion of the work for all the five milestones, payment amounting to 97% of the Contract Sum shall be paid;

• (f) The remaining 3% of the Contract Sum shall be retention money. This retention money (after deducting a sum of RMB500,000 in the manner as described below) will be paid 1 year from the issuance of the Completion Certificate; and

– 6 –

LETTER FROM THE BOARD

• (g) a sum of RMB500,000 (or approximately HK$567,050) will be withheld from payment of the said remaining 3% of the Contract Sum as waterproofing guarantee money to cover the costs of rectifying any quality defects. Subject to any deduction for the cost of rectifying any quality defects, the said sum of RMB500,000 will be paid 2 years after the issuance of the Completion Certificate.

The Group intends that more than 90% of the payment of the Contract Sum will be financed by a specific line of banking facilities made available to the Group with the remaining part made out of the Group’s own internal resources.

The construction work under the Construction Contract has commenced on 15 August 2009.

REASONS FOR ENTERING INTO THE CONSTRUCTION CONTRACT

The Contractor was selected by the Group through a tender process, having regard to the quotations submitted, experience of the tenderers and the quality of work demonstrated in other construction projects undertaken by the tenderers. The terms of the Construction Contract were negotiated on an arm’s length basis. The Directors (including the independent non-executive Directors) considered that the terms and the transactions under the Construction Contract are on normal commercial terms, fair and reasonable and are in the interests of the Group and the Company’s shareholders as a whole.

The entering into of the Construction Contract with the Contractor is for implementation of the Project, which will enhance the commercial value of the Converted Land and the Adjoining Land, and will generate a new source of income for the Group, which is to the benefit of the Group.

FINANCIAL EFFECTS ON THE GROUP

As the residential/commercial buildings in respect of the Project have yet to be constructed, the following financial effects are attributable to the Construction Contract only.

(i) Earnings

As the payment of the consideration under the Construction Contract together with the interest expense related to the specific bank loans for the Construction Contract will be capitalized as inventory during the construction period, there will not be any material impact to the earnings of the Group.

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LETTER FROM THE BOARD

(ii) Cashflow

As the consideration under the Construction Contract will be substantially financed by specific bank loans, it is expected that there would be no material negative impact to the cashflow of the Group.

(iii) Assets

As the costs attributable to the Construction Contract will be capitalized as inventory and the payment under the Construction Contract will be mainly financed by specific bank loans, there will be an increase in asset value of the Group.

(iv) Liabilities

As there will be a specific bank loan for financing the Construction Contract, the liabilities of the Group will be increased.

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

As mentioned above, the entering into of the Construction Contract is for implementation of the Project on the Converted Land and the Adjoining Land, which is expected to bring increased value to the Group. The Directors consider that the Project will generate a new source of income for the Group and further diversify the Group’s business risks by entering into the PRC property development market, which will enhance the Group’s overall competitiveness and improve its business and financial performance.

IMPLICATIONS UNDER THE LISTING RULES

To the best knowledge of the Directors and having made reasonable enquiry, the Contractor and its ultimate beneficial owner are third parties independent of the Company and the Connected Persons of the Company. According to the applicable percentage ratios, the Construction Contract constitutes a major transaction for the Company pursuant to Rule 14.06(3) of the Listing Rules and is subject to the disclosure and Shareholders’ approval requirements under the Listing Rules.

As no Shareholder has a material interest in the Construction Contract and the transactions contemplated thereunder, no Shareholder is required to abstain from voting on the entering into of the Construction Contract. Capital Glory, being the controlling shareholder of the Company holding 614,250,000 ordinary shares or approximately 61.89% of the total issued shares of the Company and the Shareholders’ voting rights as at the date hereof, has given an irrevocable and unconditional written confirmation dated 14 August 2009 to the Company that it approves the entering into of the Construction Contract by the Company and the transactions contemplated thereunder. Pursuant to Rule 14.44 of the Listing Rules, the Shareholders’ approval requirement is deemed to have been fulfilled and hence no separate general meeting will need to be convened for approval of the entering into of the Construction Contract by the Company and the transactions contemplated thereunder.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider that the Construction Contract was negotiated on an arm’s length basis and its terms are fair and reasonable and in the interests of the Group and the Shareholders as a whole. If a general meeting of the Shareholders were to be held for the purpose of considering and, if thought fit, approving the Construction Contract and the transactions contemplated thereunder, the Board would recommend the Shareholders to vote in favour of the ordinary resolution in this regard.

GENERAL

The Group is principally engaged in the manufacturing and trading of garment, textile products and laptop bags, and the provision of freight forwarding and logistics services.

The Contractor is principally engaged in building construction in the PRC.

QYRE is principally engaged in real estates development in the PRC.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Yours faithfully, For and on behalf of Luen Thai Holdings Limited Tan Henry

Chief Executive Officer and Executive Director

– 9 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. THREE YEAR FINANCIAL SUMMARY

The following is a summary of the audited consolidated financial information of the Company for each of the three years ended 31 December 2006, 2007 and 2008 as extracted from the relevant annual report for the respective years.

There were no qualified or modified opinions in the auditors’ reports in respect of the Company’s audited consolidated financial information for each of the three years ended 31 December 2006, 2007 and 2008.

Summary Consolidated Results

	For the year ended 31 December	For the year ended 31 December	For the year ended 31 December
	2006	2007	2008
	US$’000	US$’000	US$’000
Revenue	661,836	800,877	832,002
Operating profit	13,533	23,995	23,112
Finance income	3,500	3,601	2,087
Finance costs	(6,608)	(4,670)	(4,609)
Profit before income tax	10,044	24,613	21,960
Income tax (expense)/credit	(5,000)	(4,208)	1,213
Profit for the year	5,044	20,405	23,173
Minority interest	(2,535)	(7,890)	(11,344)
Profit attributable to the equity holders of
the Company	2,509	12,515	11,829
Summary Consolidated Assets, Liabilities and	Equity
	As at 31 December
	2006	2007	2008
	US$’000	US$’000	US$’000
Total assets	445,894	457,124	541,796
Total liabilities	231,661	227,044	295,336
Capital and reserves attributable to the
equity holders of the Company	198,731	220,286	221,562
Minority interest	15,502	9,794	24,898
Total equity	214,233	230,080	246,460

– 10 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2008

Consolidated Balance Sheet

As at 31 December 2008

Note ASSETS Non-current assets Leasehold land and land use rights 6 Property, plant and equipment 7 Intangible assets 8 Interests in associated companies 10 Interests in jointly controlled entities 11 Deferred income tax assets 12 Other non-current assets Current assets Inventories 13 Trade and bills receivables 14 Amounts due from related companies 35 Amounts due from associated companies and jointly controlled entities 35 Deposits, prepayments and other receivables Pledged bank deposits 15 Cash and bank balances 15 Total assets EQUITY Capital and reserves attributable to the equity holders of the Company Share capital 16 Other reserves 17 Retained earnings — Proposed final dividend — Others Minority interest Total equity	2008 US$’000 10,644 117,679 68,870 377 9,531 230 4,955 212,286 76,208 108,351 4,143 1,584 19,876 1,509 117,839 329,510 541,796 9,925 101,340 1,439 108,858 221,562 24,898 246,460	2007 US$’000 4,476 92,578 65,004 382 6,745 759 4,295
		174,239
		65,245 100,065 3,175 5,127 11,086 1,519 96,668
		282,885
		457,124
		9,925 108,052 1,727 100,582
		220,286 9,794
		230,080

– 11 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note LIABILITIES Non-current liabilities Bank borrowings 18 Loan from a minority shareholder of a subsidiary 35 Retirement benefit obligations 19 Deferred income tax liabilities 12 Consideration payable and other long-term liabilities 20 Current liabilities Trade and bills payables 21 Other payables and accruals Amounts due to related companies 35 Amounts due to associated companies and jointly controlled entities 35 Borrowings 18 Derivative financial instruments 22 Current income tax liabilities Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	2008 US$’000 33,259 3,097 2,431 5,075 33,959 77,821 66,196 81,039 817 3,953 50,281 2,199 13,030 217,515 295,336 541,796 111,995 324,281	2007 US$’000 33,750 — 3,135 3,769 26,673
		67,327
		55,755 69,323 2,837 1,647 18,408 — 11,747
		159,717
		227,044
		457,124
		123,168
		297,407

– 12 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Balance Sheet

As at 31 December 2008

Note ASSETS Non-current assets Investments in subsidiaries 9 Current assets Deposits, prepayments and other receivables Cash and bank balances 15 Amount due from a subsidiary 9 Total assets EQUITY Capital and reserves attributable to the equity holders of the Company Share capital 16 Other reserves 17 Retained earnings — Proposed final dividend — Others Total equity LIABILITIES Current liabilities Other payables and accruals Total equity and liabilities Net current assets Total assets less current liabilities	2008 US$’000 200,326 1 435 2,500 2,936 203,262 9,925 190,089 1,439 1,492 202,945 317 203,262 2,619 202,945	2007 US$’000 199,626
		23 167 2,500
		2,690
		202,316
		9,925 189,664 1,727 741
		202,057
		259
		202,316
		2,431
		202,057

– 13 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Income Statement

For the year ended 31 December 2008 (By function of expense)

Note Revenue 23 Cost of sales 25 Gross profit Other gains — net 24 Selling and distribution expenses 25 General and administrative expenses 25 Operating profit Finance income 27 Finance costs 27 Share of (losses)/profits of associated companies Share of profits of jointly controlled entities Profit before income tax Income tax credit/(expense) 28 Profit for the year Attributable to: Equity holders of the Company Minority interest Earnings per share for profit attributable to the equity holders of the Company, expressed in US cents per share 30 — Basic — Diluted Dividends 31	2008 US$’000 832,002 (677,713) 154,289 2,713 (23,306) (110,584) 23,112 2,087 (4,609) (16) 1,386 21,960 1,213 23,173 11,829 11,344 23,173 1.2 1.2 3,553	2007 US$’000 800,877 (645,982) 154,895 2,259 (26,158) (107,001) 23,995 3,601 (4,670) 95 1,592 24,613 (4,208) 20,405 12,515 7,890 20,405 1.3 1.3 3,762

– 14 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Changes in Equity

For the year ended 31 December 2008

Balance at 1 January 2007 Net income recognized directly in equity — currency translation differences Profit for the year Total recognized income for 2007 Dividends paid Purchase of additional interests in subsidiaries from minority shareholders Derecognition of financial liabilities upon acquisition of minority interest Dividends paid to minority shareholders of subsidiaries Share based compensation expense Balance at 31 December 2007 Balance at 1 January 2008 Net income recognized directly in equity — currency translation differences Profit for the year Total recognized income for 2008 Dividends paid Recognition of financial liability arisen from acquisition of a subsidiary (Note 17) Acquisition of subsidiaries (Note 33) Dividends paid to minority shareholders of subsidiaries Share based compensation expense Balance at 31 December 2008	A Share capital US$’000 9,925	ttributable to equity holders of the Company Share premium Other reserves Retained earnings Total Minority interest Total equity US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 116,998 (18,370) 90,178 198,731 15,502 214,233 — 4,550 — 4,550 — 4,550 — — 12,515 12,515 7,890 20,405 — 4,550 12,515 17,065 7,890 24,955 — — (2,035) (2,035) — (2,035) — — — — (4,142) (4,142) — 4,311 1,651 5,962 — 5,962 — — — — (9,456) (9,456) — 563 — 563 — 563 — 4,874 (384) 4,490 (13,598) (9,108) 116,998 (8,946) 102,309 220,286 9,794 230,080 116,998 (8,946) 102,309 220,286 9,794 230,080 — 3,985 — 3,985 — 3,985 — — 11,829 11,829 11,344 23,173 — 3,985 11,829 15,814 11,344 27,158 — — (3,841) (3,841) — (3,841) — (11,122) — (11,122) — (11,122) — — — — 12,566 12,566 — — — — (8,806) (8,806) — 425 — 425 — 425 — (10,697) (3,841) (14,538) 3,760 (10,778) 116,998 (15,658) 110,297 221,562 24,898 246,460	ttributable to equity holders of the Company Share premium Other reserves Retained earnings Total Minority interest Total equity US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 116,998 (18,370) 90,178 198,731 15,502 214,233 — 4,550 — 4,550 — 4,550 — — 12,515 12,515 7,890 20,405 — 4,550 12,515 17,065 7,890 24,955 — — (2,035) (2,035) — (2,035) — — — — (4,142) (4,142) — 4,311 1,651 5,962 — 5,962 — — — — (9,456) (9,456) — 563 — 563 — 563 — 4,874 (384) 4,490 (13,598) (9,108) 116,998 (8,946) 102,309 220,286 9,794 230,080 116,998 (8,946) 102,309 220,286 9,794 230,080 — 3,985 — 3,985 — 3,985 — — 11,829 11,829 11,344 23,173 — 3,985 11,829 15,814 11,344 27,158 — — (3,841) (3,841) — (3,841) — (11,122) — (11,122) — (11,122) — — — — 12,566 12,566 — — — — (8,806) (8,806) — 425 — 425 — 425 — (10,697) (3,841) (14,538) 3,760 (10,778) 116,998 (15,658) 110,297 221,562 24,898 246,460	ttributable to equity holders of the Company Share premium Other reserves Retained earnings Total Minority interest Total equity US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 116,998 (18,370) 90,178 198,731 15,502 214,233 — 4,550 — 4,550 — 4,550 — — 12,515 12,515 7,890 20,405 — 4,550 12,515 17,065 7,890 24,955 — — (2,035) (2,035) — (2,035) — — — — (4,142) (4,142) — 4,311 1,651 5,962 — 5,962 — — — — (9,456) (9,456) — 563 — 563 — 563 — 4,874 (384) 4,490 (13,598) (9,108) 116,998 (8,946) 102,309 220,286 9,794 230,080 116,998 (8,946) 102,309 220,286 9,794 230,080 — 3,985 — 3,985 — 3,985 — — 11,829 11,829 11,344 23,173 — 3,985 11,829 15,814 11,344 27,158 — — (3,841) (3,841) — (3,841) — (11,122) — (11,122) — (11,122) — — — — 12,566 12,566 — — — — (8,806) (8,806) — 425 — 425 — 425 — (10,697) (3,841) (14,538) 3,760 (10,778) 116,998 (15,658) 110,297 221,562 24,898 246,460	ttributable to equity holders of the Company Share premium Other reserves Retained earnings Total Minority interest Total equity US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 116,998 (18,370) 90,178 198,731 15,502 214,233 — 4,550 — 4,550 — 4,550 — — 12,515 12,515 7,890 20,405 — 4,550 12,515 17,065 7,890 24,955 — — (2,035) (2,035) — (2,035) — — — — (4,142) (4,142) — 4,311 1,651 5,962 — 5,962 — — — — (9,456) (9,456) — 563 — 563 — 563 — 4,874 (384) 4,490 (13,598) (9,108) 116,998 (8,946) 102,309 220,286 9,794 230,080 116,998 (8,946) 102,309 220,286 9,794 230,080 — 3,985 — 3,985 — 3,985 — — 11,829 11,829 11,344 23,173 — 3,985 11,829 15,814 11,344 27,158 — — (3,841) (3,841) — (3,841) — (11,122) — (11,122) — (11,122) — — — — 12,566 12,566 — — — — (8,806) (8,806) — 425 — 425 — 425 — (10,697) (3,841) (14,538) 3,760 (10,778) 116,998 (15,658) 110,297 221,562 24,898 246,460	Minority interest US$’000 15,502	Total equity US$’000 214,233
	— —	— —	4,550 —	— 12,515	4,550 12,515	— 7,890	4,550 20,405
	—	—	4,550	12,515	17,065	7,890	24,955
	— — — — —	— — — — —	— — 4,311 — 563
	—	—	4,874
	9,925	116,998			220,286	9,794	230,080
	9,925	116,998			220,286	9,794	230,080
	— —	— —	3,985 —	— 11,829	3,985 11,829	— 11,344	3,985 23,173
	—	—	3,985	11,829	15,814	11,344	27,158
	— — — — —	— — — — —
	—	—					(10,778)
	9,925	116,998			221,562	24,898	246,460

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Cash Flow Statement

For the year ended 31 December 2008

Note Cash flow from operating activities Cash generated from operations 32 Interest paid Income tax paid Overseas taxation paid Net cash generated from operating activities Cash flow from investing activities Purchase of property, plant and equipment Purchase of financial assets at fair value though profit and loss Increase in bank deposits maturing beyond three months Decrease/(increase) in pledged bank deposits Proceeds from disposal of property, plant and equipment Acquisition of a subsidiary, net of cash acquired 33 Payment for purchase of additional interests in subsidiaries from minority shareholders Payment of consideration payable for acquisition of a subsidiary Increase in investment in jointly controlled entities Increase in long-term loans to a jointly controlled entity Interest received Increase in other non-current assets Net cash used in investing activities Net cash generated before financing activities	2008 US$’000 66,659 (2,698) (2,181) (73) 61,707 (10,400) — (3,593) 10 1,321 (13,130) — (14,908) (227) (1,173) 2,087 (660) (40,673) 21,034	2007 US$’000 57,146 (3,684) (3,116) (2,338) 48,008 (13,695) 122 — (838) 839 — (9,817) (7,400) (649) (2,459) 3,601 (668) (30,964) 17,044

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Cash flows from financing activities Increase/(decrease) in trust receipts bank loans and collateralized borrowings Increase in bank loans Repayment of bank loans Dividends paid to the Company’s shareholders Dividends paid to minority shareholders of subsidiaries Net cash used in financing activities Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 January Effect of foreign exchange rate changes Cash and cash equivalents at 31 December 15	2008 US$’000 3,355 7,359 (4,500) (3,841) (8,806) (6,433) 14,601 90,805 1,083 106,489	2007 US$’000 (8,140) — (4,900) (2,035) (9,456) (24,531) (7,487) 96,977 1,315 90,805

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes to the consolidated financial statements

1 GENERAL INFORMATION

Luen Thai Holdings Limited (the ‘‘Company’’) and its subsidiaries (together the ‘‘Group’’) are principally engaged in the manufacturing and trading of garment, textile products and accessories and the provision of freight forwarding and logistics services.

The Company is a limited liability company incorporated in the Cayman Islands. The address of its registered office is 5/F, Nanyang Plaza, 57 Hung To Road, Kwun Tong, Kowloon, Hong Kong.

The Company’s shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited.

These consolidated financial statements are presented in thousands of units of United States dollars (US$’000), unless otherwise stated. These consolidated financial statements have been approved for issue by the Board of Directors on 17 April 2009.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented.

2.1 Basis of preparation

The consolidated financial statements of Luen Thai Holdings Limited have been prepared in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRS’’). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss, which are carried at fair value.

The preparation of financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 4.

• (a) Amendments and interpretations effective in 2008

• . HKAS 39, ‘Financial instruments: Recognition and measurement’, amendment on reclassification of financial assets permits reclassification of certain financial assets out of the held-for-trading and available-for-sale categories if specified conditions are met. The related amendment to HKFRS 7, ‘Financial instruments: Disclosures’, introduces disclosure requirements with respect to financial assets reclassified out of the held-fortrading and available-for-sale categories. The amendment is effective prospectively from 1 July 2008. This amendment does not have any impact on the Group’s financial statements, as the Group has not reclassified any financial assets.

• . HK(IFRIC) — Int 11, ‘HKFRS 2 — Group and treasury share transactions, ‘provides guidance on whether share-based transactions involving treasury shares or involving group entities (for example, options over a parent’s shares) should be accounted for as equity-settled or cash-settled share-based payment transactions in the stand-alone accounts of the parent and group companies. This interpretation does not have an impact on the Group’s financial statements.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

• . HK(IFRIC) — Int 14, ‘HKAS 19 — The limit on a defined benefit asset, minimum funding requirements and their interaction’, provides guidance on assessing the limit in HKAS 19 on the amount of the surplus that can be recognized as an asset. It also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding requirement. This interpretation does not have any impact on the Group’s financial statements, as the Group has a pension deficit and is not subject to any minimum funding requirements.

• (b) Interpretations effective in 2008 but not relevant

The following interpretation to published standards is mandatory for accounting periods beginning on or after 1 January 2008 but is not relevant to the Group’s operations:

• . HK(IFRIC) — Int 12, ‘Service Concession arrangements’

• (c) Standards, amendments and improvements to existing standards that are not yet effective and have not been early adopted by the Group

The following standards, amendments and improvements to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2009 or later periods, but the Group has not early adopted them:

• . HKAS 1 (Revised), ‘Presentation of financial statements’ (effective from 1 January 2009). The revised standard will prohibit the presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner changes in equity’ to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the consolidated income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. The Group will apply HKAS 1 (Revised) from 1 January 2009. It is likely that both the consolidated income statement and statement of comprehensive income will be presented as performance statements.

• . HKAS 23 (Revised), ‘Borrowing costs’ (effective from 1 January 2009). The amendment requires an entity to capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs will be removed. The Group will apply HKAS 23 (Revised) retrospectively from 1 January 2009 but is currently not applicable to the Group as there are no qualifying assets.

• . HKAS 27 (Revised), ‘Consolidated and separate financial statements’ (effective from 1 July 2009).The revised standard requires the effects of all transactions with noncontrolling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value and a gain or loss is recognized in profit or loss. The Group will apply HKAS 27 (Revised) prospectively to transactions with non-controlling interests from 1 January 2010.

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FINANCIAL INFORMATION OF THE GROUP

• . HKFRS 2 (Amendment), ‘Share-based payment’ (effective from 1 January 2009). The amended standard deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. As such these features would need to be included in the grant date fair value for transactions with employees and others providing similar services, that is, these features would not impact the number of awards expected to vest or valuation thereof subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The Group will apply HKFRS 2 (Amendment) from 1 January 2009, but it is not expected to have a material impact on the Group’s financial statements.

• . HKFRS 3 (Revised), ‘Business combinations’ (effective from 1 July 2009). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the consolidated income statement. There is a choice on an acquisition by acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed. The Group will apply HKFRS 3 (Revised) prospectively to all business combinations from 1 January 2010.

• . HKFRS 8, ‘Operating segments’, replaces HKAS 14, ‘Segment reporting’, and aligns segment reporting with the requirements of the US standard SFAS 131, ‘Disclosures about segments of an enterprise and related information’. The new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in an increase in the number of reportable segments presented. In addition, the segments are reported in a manner that is more consistent with the internal reporting provided to the chief operating decision-maker. The Group will apply HKFRS 8 from 1 January 2009. It is likely that the segments information disclosures will be changed and the comparatives for 2008 will also be restated.

• . the HKICPA has issued Improvements to HKFRSs which sets out amendments to HKFRS 5, HKFRS 7, HKAS 1, HKAS 8, HKAS 10, HKAS 16, HKAS 18, HKAS 19, HKAS 20, HKAS 23, HKAS 27, HKAS 28, HKAS 29, HKAS 31, HKAS 34, HKAS 36, HKAS 38, HKAS 39, HKAS 40 and HKAS 41, primarily with a view to removing inconsistencies and clarifying wordings. Except for the amendment to HKFRS 5, which is effective for the financial periods on or after 1 July 2009, other amendments are effective for financial periods beginning on or after 1 January 2009 although there are separate transitional provisions for each standard.

• (d) Interpretations and amendments to existing standards that are not yet effective and not relevant for the Group’s operations

The following interpretations and amendments to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2009 or later periods but are not relevant for the Group’s operations:

• . HKFRS 1 (Amendment), ‘First time adoption of HKFRS’ and HKAS 27 ‘Consolidated and separate financial statements’ (effective from 1 July 2009). The amended standard allows first-time adopters to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

subsidiaries, jointly controlled entities and associates in the separate financial statements. The amendment also removes the definition of the cost method from HKAS 27 and replaces it with a requirement to present dividends as income in the separate financial statements of the investor. The Company will apply HKAS 27 (Amendment) prospectively from 1 January 2010 in its separate financial statements. This amendment is not relevant to the Group.

• . HKAS 32 (Amendment), ‘Financial instruments: Presentation’, and HKAS 1 (Amendment), ‘Presentation of financial statements’ — ‘Puttable financial instruments and obligations arising on liquidation’ (effective from 1 January 2009). The amended standards require entities to classify puttable financial instruments and instruments, or components of instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation as equity, provided the financial instruments have particular features and meet specific conditions. This amendment is not relevant to the Group.

• . HKAS 39 (Amendment) ‘Financial instruments: Recognition and measurement’ — ‘Eligible hedged items’ (effective from 1 July 2009). This amendment is to clarify how the principles that determine whether a hedged risk or portion of cash flows is eligible for designation shall be applied in particular situations.

• . HK(IFRIC) — Int 13, ‘Customer loyalty programmes’ (effective from 1 July 2008). HK (IFRIC) — Int 13 clarifies that where goods or services are sold together with a customer loyalty incentive (for example, loyalty points or free products), the arrangement is a multiple-element arrangement and the consideration receivable from the customer is allocated between the components of the arrangement using fair values. HK(IFRIC) — Int 13 is not relevant to the Group’s operations because none of the Group’s companies operate any loyalty programmes.

• . HK(IFRIC) — Int 15, ‘Agreements for construction of real estates’ (effective from 1 January 2009) supercedes HK Int-3, ‘Revenue — Pre-completion contracts for the sale of development properties’. HK(IFRIC) — Int 15 clarifies whether HKAS 18, ‘Revenue’ or IAS 11, ‘Construction contracts’ should be applied to particular transactions. It is likely to result in HKAS 18 being applied to a wider range of transactions. HK(IFRIC) — Int 15 is not relevant to the Group’s operations as all revenue transactions are accounted for under HKAS 18 and not HKAS 11.

• . HK(IFRIC) — Int 16, ‘Hedges of a net investment in a foreign operation’ (effective from 1 October 2008). HK(IFRIC) — Int 16 clarifies the accounting treatment in respect of net investment hedging. This includes the fact that net investment hedging relates to differences in functional currency not presentation currency, and hedging instruments may be held anywhere in the Group. The requirements of HKAS 21, ‘The effects of changes in foreign exchange rates’, do apply to the hedged item. It is not expected to have a material impaction on the Group’s financial statements.

• . HK(IFRIC) — Int 17 — ‘Distributions of non-cash assets to owners’ (effective from 1 July 2009). This interpretation applies to non-reciprocal distributions of non-cash assets (or with a cash alternative) except for common control transactions and clarifies that:

• . a dividend payable shall be recognized when the dividend is appropriately authorized and is no longer at the discretion of the entity.

• . the dividend payable shall be measured at the fair value of the assets to be distributed.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

• . the difference between the dividend paid and the carrying amount of the assets distributed shall be recognized in profit or loss.

HK(IFRIC) — Int 17 is not relevant to the Group’ operations because none of the Group’s compliance have been distributed non-cash assets to owners.

• . HK(IFRIC) — Int 18 — ‘Transfers of Assets from Customers’ (effective for transfers on or after 1 July 2009). It clarifies that an asset received from a customer should be recognized initially at fair value, and the related income should be recognized immediately or if there is a future service obligation, over the relevant service period. This interpretation also applies to cash received from a customer for the acquisition or construction of an asset. HK(IFRIC) — Int 18 is not relevant to the Group’s operations because none of the Group’s companies have received any assets nor cash from customers.

2.2 Consolidation

The consolidated financial statements include the financial statements of the Company and all of its subsidiaries made up to 31 December.

(a) Subsidiaries

Subsidiaries are entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group‘s share of the identifiable net assets acquired is recorded as goodwill (Note 2.7). If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated income statement.

Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

In the Company’s balance sheet, the investments in subsidiaries are stated at cost less provision for impairment losses (Note 2.9). The results of subsidiaries are accounted by the Company on the basis of dividend received and receivable.

(b) Transactions with minority interests

The Group applies a policy of treating transactions with minority interests in connection of the equity interest in subsidiaries as transactions with parties external to the Group. Disposals of equity interests in subsidiaries owned by the Group to minority interests result in gains and losses for the Group that are recorded in the consolidated income statement. Purchases of equity interests

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

in subsidiaries owned by the Group from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary.

(c) Associates

Associates are entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for by the equity method of accounting and are initially recognized at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss.

The Group’s share of its associates’ post-acquisition profits or losses is recognized in the income statement, and its share of post-acquisition movements in reserves is recognized in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

(d) Joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity which is subject to joint control and none of the participating parties has unilateral control over the economic activity.

The consolidated income statement includes the Group’s share of the results of jointly controlled entities for the year, and the consolidated balance sheet includes the Group’s share of the net assets of the jointly controlled entities.

2.3 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the ‘‘functional currency’’). The consolidated financial statements are presented in US dollars (‘‘US$’’), which is the Company’s functional and presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated income statement.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation difference on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognized in profit or loss as part of the fair value gain or loss.

(c) Group companies

The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• (i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

• (ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

• (iii) all resulting exchange differences are recognized as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold, exchange differences that were recorded in equity are recognized in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing rate.

2.4 Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

2.5 Property, plant and equipment

The property, plant and equipment are stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are expensed in the consolidated income statement during the financial period in which they are incurred.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Depreciation of property, plant and equipment is calculated using the straight-line method to allocate cost to their residual values over their estimated useful lives, as follows:

Buildings	20 years
Leasehold improvements	5–15 years or over the unexpired period of the lease,
	whichever is shorter
Plant and machinery	5–10 years
Furniture, fixtures and equipment	3–5 years
Motor vehicles	3–5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.9).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the consolidated income statement.

2.6 Construction-in-progress

Construction-in-progress represents buildings, plants and machinery under construction and pending installation and is stated at cost. Cost includes the costs of construction of buildings, the costs of plant and machinery and interest charges arising from borrowings used to finance these assets during the period of construction or installation and testing, if any. No provision for depreciation is made on construction-in-progress until such time as the relevant assets are completed and ready for intended use. When the assets concerned are brought into use, the costs are transferred to other property, plant and equipment and depreciated in accordance with the policy as stated in Note 2.5 in this Section.

2.7 Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Separately recognized goodwill is tested for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

The Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized exceeds the cost of the business combination is recognized immediately in the consolidated income statement.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

(b) Customer relationships

Customer relationships have definite useful lives and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method to allocate the cost of other intangible assets over its estimated useful life of 3 to 15 years.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2.8 Leasehold land and land use right

Land use rights are stated at less accumulated amortization and impairment losses. Cost represents consideration paid for the rights to use the land on which various plants and buildings are situated for periods varying from 10 to 50 years. Amortization of land use rights is calculated on a straight-line basis over the period of the land use right.

2.9 Impairment of investments in subsidiaries, associated companies, jointly controlled entities and nonfinancial assets

Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

2.10 Financial assets

2.10.1 Classification

The Group classifies its financial assets in the following categories: at fair value through profit or loss and loans and receivable. The classification depends on the purpose for which the financial assets were acquired. Management determine the classification of its financial assets at initial recognition.

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as noncurrent assets. The Group’s loans and receivables comprise ‘trade and other receivables’ in the balance sheet (Notes 2.12).

2.10.2 Recognition and measurement

Regular way purchases and sales of financial assets are recognized on the trade-date — the date on which the Group commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the consolidated income statement. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the consolidated income statement within ‘other (losses)/gains — net’, in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the consolidated income statement as part of other income when the Group’s right to receive payments is established.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group established fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets in impaired.

2.11 Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the firstin, first-out (FIFO) method. The cost of finished goods and work-in-progress comprises materials, direct labour and an appropriate proportion of all production overhead expenditure. It excludes borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

2.12 Trade and other receivables

Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The carrying amount of the assets is reduced through the use of an allowance account, and the amount of the loss is recognized in the income statement within selling and distribution expenses. When a receivable is uncollectible, it is written off against the allowance account for receivables. Subsequent recoveries of amounts previously written off are credited against selling and distribution expenses in the income statement.

2.13 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

2.14 Share capital

Ordinary shares are classified as equity.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2.15 Financial liabilities

• (i) Financial guarantee contracts

A financial guarantee contract is a contract that requires the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the original or modified terms of a debt instrument.

Financial guarantee contracts are initially recognized at fair value on the date the guarantee was given. Subsequently, the liabilities under such guarantees are measured at the higher of the best estimate of the expenditure required to settle any financial obligation arising at the balance sheet date and the initial measurement, less amortization calculated to recognize in the income statement the fee income earned on a straight line basis over the life of the guarantee. These estimates are determined based on experience of similar transactions and debtors’ payment history, supplemented by the judgement of management of the Group.

• (ii) Financial liabilities arising from the contractual obligation for the Group to purchase its own equity instruments

A contract that contains an obligation for the Group to purchase its own equity instruments for cash or another financial asset gives rise to a financial liability for the present value of the redemption amount. Such liability is classified as other payable and accruals or other long-term liabilities in the consolidated balance sheet. Such financial liability is initially recognized at fair value which is the present value of the redemption amount and is reclassified from equity. Subsequently, the financial liability is carried at amortized cost using the effective interest method. The accretion of the discount on the financial liability and any adjustments to estimated amounts of the final redemption amount are recognized as a finance charge in the consolidated income statement. If the contract expires without delivery, the carrying amount of the financial liability is reclassified to equity.

(iii) Trade and other payables

Trade and other payables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method.

2.16 Derivative financial instruments

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair values. Changes in the fair value of these derivative instruments are recognized immediately in the consolidated income statement within ‘other gains/(losses) — net’.

2.17 Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

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FINANCIAL INFORMATION OF THE GROUP

2.18 Current and deferred income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries and associates operate and generate taxable income.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax assets is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associated companies and jointly controlled entities, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

2.19 Employee benefits

(a) Pension obligations

Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the greater of 10% of the value of plan assets or 10% of the present value of the defined benefit obligation are expensed or credited to the income over the employees’ expected average remaining working lives.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Past-service costs are recognized immediately as income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortized on a straight-line basis over the vesting period.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.

(b) Long service payments

The Group’s net obligation in respect of long service payments to its employees upon the termination of their employment or retirement when the employee fulfills certain circumstances under the Hong Kong Employment Ordinance is the amount of future benefit that employees have earned in return for their service in the current and prior periods.

The obligation is calculated using the projected unit credit method, discounted to present value and reduced by entitlements accrued under the Group’s retirement plans that are attributable to contributions made by the Group. The discount rate is the yield at balance sheet date on high quality corporate bonds which have terms to maturity approximating the terms of the related liability.

(c) Share-based compensation

The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognized as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the entity revises its estimates of the number of options that are expected to vest. It recognizes the impact of the revision of original estimates, if any, in the income statement, with a corresponding adjustment to equity.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

(d) Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value.

2.20 Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognized for future operating losses.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

2.21 Contingent liabilities

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. It can also be a present obligation arising from past events that is not recognized because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognized but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognized as a provision.

2.22 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns and discounts and after eliminating sales within the Group.

The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is recognized as follows:

(i) Sale of goods

Sale of goods is recognized when products have been delivered to its customer, the customer has accepted the products and collectability of the related receivables is reasonably assured.

(ii) Freight forwarding and logistics services income

Freight forwarding and logistics services income are recognized when services are rendered.

(iii) Interest income

Interest income is recognized on a time-proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at original effective interest rate of the instrument, and continues unwinding the discount as interest income.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

• (iv) Rental income

Rental income is recognized on a straight-line basis over the lease periods.

• (v) Management and commission income

Management and commission income is recognized when services are rendered.

2.23 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

2.24 Dividend distribution

Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

3 FINANCIAL RISK MANAGEMENT

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: foreign exchange risk, credit risk, liquidity risk and cash flow and fair value interest rate risk. The ongoing global financial crisis has resulted in, among other things, a lower level of capital market funding, lower liquidity levels across the banking sector, and, at times, higher interbank lending rates and very high volatility in stock and currency markets. The uncertainties in the global financial markets have led to bank failures and bank rescues in the United States of America (‘‘USA’’), Western Europe and elsewhere. Indeed the full extent of the impact of the ongoing financial crisis is proving to be impossible to anticipate or completely guard against.

Risk management is carried out by a central treasury department (Group Treasury). Group Treasury identifies and evaluates financial risks in close co-operation with the Group’s operating units.

(a) Market risk

• (1) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Most of the Group’s operating activities are denominated in United State dollar (‘‘US$’’), Hong Kong dollar (‘‘HK$’’), Euro, Philippine Peso (‘‘Peso’’) and Chinese Renminbi (‘‘RMB’’). Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

To manage the foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, the Group enters into foreign exchange forward contracts with external financial institutions to partially hedge against such foreign exchange risk. The Group also mitigates this risk by maintaining HK$, Euro, Peso and RMB bank accounts which are used by the Group to pay for the transactions denominated in these currencies.

At 31 December 2008, if US$ had weakened/strengthened by 10% against the Euro with all other variables held constant, post-tax profit for the year would have been US$1,626,000 (2007: US$715,000) higher/lower, mainly as a result of foreign exchange gains/losses on translation of Euro-denominated trade receivables and payables, and cash and bank balances.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 31 December 2008, if US$ had weakened/strengthened by 5% against the RMB with all other variables held constant, post-tax profit for the year would have been US$131,000 (2007: US$781,000) lower/higher, mainly as a result of foreign exchange gains/losses on translation of RMB-denominated trade payables and cash and bank balances.

At 31 December 2008, if US$ had weakened/strengthened by 13% against the Peso with all other variables held constant, post-tax profit for the year would have been US$206,000 (2007: US$12,000) lower/higher, mainly as a result of foreign exchange gains/losses on translation of Peso-denominated trade payables and cash and bank balances.

The Group also has certain target redemption forward contracts as at 31 December 2008. Please refer to Note 22 for details.

At 31 December 2008, if US$ had strengthened by 13% against Peso with all other variables held constant, the Group’s post-tax profit would decrease by US$1,774,000 (2007: Nil) in connection with these outstanding target redemption forward contracts.

At 31 December 2008, if US$ had weakened by 13% against Peso with all other variables held constant, the Group’s post-tax profit would increase by US$341,000 (2007: Nil) in connection with these outstanding target redemption forward contracts.

(2) Cash flow and fair value interest rate risk

As the Group has no significant interest-bearing assets except for certain bank deposits, the Group’s income and operating cash flows are substantially independent of changes in market interest rates.

The Group’s interest rate risk arises from bank borrowings. As at 31 December 2008, borrowings were primarily at floating rates. The Group generally has not used financial derivatives to hedge its exposure to interest rate risk.

The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing. Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift.

At 31 December 2008, if interest rates on borrowings had been 1% higher/lower with all other variables held constant, post-tax profit for the year would have been US$700,000 (2007: US$597,000) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings.

(b) Credit risk

Credit risk of the Group mainly arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers such as trade receivables, amounts due from related companies, associated companies, jointly controlled entities and other receivables. The carrying amount of these balances in the balance sheet represents the Group’s maximum exposure to credit risk in relation to its financial assets.

Majority of the Group’s bank deposits are placed in those banks and financial institutions which are independently rated with a high credit rating. Management does not expect any losses from non-performance by these banks and financial institutions as they have no default history in the past.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Under the ongoing global financial crisis, debtors of the Group may be affected by the unfavorable economic conditions and the lower liquidity situation, which could in turn impact their ability to repay the amounts owed. Deterioration operating conditions for debtors may also have an impact on management’s cash flow forecasts and assessment of the impairment of receivables. To the extent that information is available, management has properly reflected revised estimate of expected future cash flows in their impairment assessments.

The credit quality of the customers is assessed based on its financial position, past experience and other factors, The Group has policies in place to ensure that sales of products are made to customers with appropriate credit histories.

As at 31 December 2008, the Group had a concentration of credit risk given that the top 5 customers account for 61% (2007: 63%) of the Group’s total year end trade receivable balance. However, the Group does not believe that the credit risk in relation to these customers is significant because they have no history of default in recent years.

The Group performs periodic credit evaluations of its customers. The Group’s historical experience in collection of trade and other receivables falls within the recorded allowances and management is of the opinion that provision for uncollectible receivables is not necessary.

Management considers the credit risk on amounts due from related companies, associated companies and jointly controlled entities, and other receivables is minimal after considering the financial conditions of these entities. Management has performed assessment over the recoverability of these balances and management does not expect any losses from non-performance by these companies.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of available credit facilities. The directors aim to maintain flexibility in funding by keeping credit lines available.

Management monitors rolling forecasts of the Group’s liquidity reserve which comprises undrawn borrowing facility (Note 18) and cash and cash equivalents (Note 15) on the basis of expected cash flow.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The table below analyses the Group’s financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant.

Group At 31 December 2008 Bank borrowings Loan from a minority shareholder of a subsidiary Trade and other payables Amounts due to related companies Amounts due to associated companies and jointly controlled entities Derivative financial instruments Consideration payable and long-term liabilities At 31 December 2007 Bank borrowings Trade and other payables Amounts due to related companies Amounts due to associated companies and jointly controlled entities Consideration payable and long-term liabilities	Less than 1 year US$’000 51,870 98 141,791 817 3,953 570 5,444 204,543 19,308 116,802 2,837 1,647 8,276 148,870	Between 1 and 2 years US$’000 8,786 98 — — — — — 8,884 4,731 — — — 5,758 10,489	Between 2 and 5 years US$’000 14,905 3,195 — — — — 38,018 56,118 15,787 — — — 12,519 28,306	Over 5 years US$’000 12,313 — — — — — — 12,313 19,387 — — — 13,596 32,983	Total US$’000 87,874 3,391 141,791 817 3,953 570 43,462
					281,858
					59,213 116,802 2,837 1,647 40,149
					220,648

As at 31 December 2008 and 2007, all financial liabilities of the Company are due within one year and equal their carrying balances as the impact of discounting is not significant.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The table below analyses the Group’s derivative financial instruments that will be settled on a gross basis into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date.

The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

	Less than	Between 1	Between 2	Over 5
	1 year	and 2 years	and 5 years	years
	US$’000	US$’000	US$’000	US$’000
At 31 December 2008
Target redemption forward contracts
Outflow (Note a)	10,000	—	—	—
Inflow (Note a)	9,295	—	—	—
Currency forward contracts
Outflow (Note b)	6,311	—	—	—
Inflow (Note b)	5,725	—	—	—

There was no target redemption forward contracts and currency forward contracts outstanding as at 31 December 2007.

Note a: Under the contracts, the Group will receive Peso against delivery of US$. The maximum deliverable outstanding amount to the Group under these contracts is Peso450,800,000 (equivalent to United States dollar of approximately US$9,295,000 using the exchange rate as of 31 December 2008) and a maximum amount of US$10,000,000 to be delivered out by the Group. It is deliverable in instalments up to May 2009. For details, please refer to Note 22.

Note b: Under the contracts, the Group will receive US$ against delivery of Euro. The notional amount of these contracts are to sell Euro4,518,000 (equivalent to US$ of approximately US$6,311,000 using the exchange rate as at 31 December 2008) for US$5,725,000. For details, please refer to Note 22.

3.2 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other shareholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital by maintaining a net cash position throughout the year.

3.3 Fair value estimation

The fair value of financial assets traded in active markets such as publicly traded securities is based on quoted market prices at balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price.

The fair values of the financial assets and derivative financial instruments not traded in an active market are determined by counterparty financial institutions using a variety of valuation methodologies, models and assumptions mainly based on market conditions existing at each balance sheet date.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The carrying value less impairment provision of trade receivables and payables are a reasonable approximation of their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Income taxes

The Group is subject to income taxes in various jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be required. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Please refer to Note 28 for details.

(b) Useful lives of property, plant and equipment and intangible assets (other than goodwill)

The Group’s management determines the estimated useful lives, and related depreciation and amortization charges for its property, plant and equipment and intangible assets (other than goodwill). This estimate is based on the historical experience of the actual useful lives of property, plant and equipment and intangible assets of similar nature and functions. Management will increase the depreciation and amortization charges where useful lives are less than previously estimated lives. It will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold. Actual economic lives may differ from estimated useful lives. Periodic review could result in a change in depreciable and amortization lives and therefore depreciation and amortization expense in future periods.

(c) Impairment of property, plant and equipment, leasehold land and land use rights and intangible assets (other than goodwill)

Property, plant and equipment, leasehold land and land use rights and intangible assets (other than goodwill) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts have been determined based on fair value less cost to sell calculations or market valuations. These calculations require the use of judgements and estimates.

Management judgement is required in the area of asset impairment particularly in assessing: (i) whether an event has occurred that may indicate that the related asset values may not be recoverable; (ii) whether the carrying value of an asset can be supported by the recoverable amount, being the higher of fair value less costs to sell or net present value of future cash flows which are estimated based upon the continue use of the asset in the business; and (iii) the appropriate key assumptions to be applied in preparing cash flow projections including whether these cash flow projections are discounted using an appropriate rate. Changing the assumptions selected by management in assessing impairment, including the discount rates or the growth rate assumptions in the cash flow projections, could affect the net present value used in the impairment test and as a result affect the Group’s financial position and results of operations.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(d) Impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment. For the purposes of impairment reviews, the recoverable amount of goodwill is determined based on fair value less cost to sell calculations. The fair value less cost to sell calculations primarily use cash flow projections based on one to two financial budgets approved by management and estimated terminal value at the end of the one to two-year periods. There are a number of assumptions and estimates involved in the preparation of cash flow projections for the period covered by the approved budgets. Key assumptions include the growth rates and selection of discount rates to reflect the risks involved. Management prepares the financial budgets reflecting actual and prior year performance and market development expectations. Judgement is required to determine key assumptions adopted in the cash flow projections and changes to key assumptions could affect these cash flow projections and therefore the results of the impairment reviews.

Management has performed sensitivity analysis based on the following revised assumptions:

			Trading &
	Sweater	Sleepwear	sourcing
	division	division	division
Growth rate beyond the budget period	2.0%	2.0%	2.0%
Discount rate	15.0%	15.0%	16.5%

Based on the above assumptions, the goodwill’s recoverable amounts would still be greater than their carrying values and no impairment is noted.

(e) Net realizable value of inventories

Net realizable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs of completion and variable selling expenses. These estimates are based on the current market condition and the historical experience of manufacturing and selling products of similar nature. It could change significantly as a result of changes in customer taste and competitor actions in response to severe industry cycle. Management reassesses these estimates at each balance sheet date.

(f) Trade, bills and other receivables

The Group’s management determines the provision for impairment of trade, bills and other receivables based on an assessment of the recoverability of the receivables. This assessment is based on the credit history of its customers and other debtors and the current market condition, and requires the use of judgements and estimates. Management reassesses the provision at each balance sheet date.

(g) Employee benefits — share-based payments

The determination of the fair value of the share options granted requires estimates in determining, among others, the expected volatility of the share price, the expected dividend yield, the risk-free interest rate for the life of the option, and the number of options that are expected to become exercisable as stated in Note 16. Where the outcome of the number of options that are exercisable is different, such difference will impact the income statement in the subsequent remaining vested period of the relevant share options.

(h) Business combinations

Contingent consideration involving post-acquisition performance of the purchased entities is included in the cost of acquisition if the contingent consideration is likely to become payable and can be measured reliably at the date of the acquisitions. Contingent consideration is estimated by the Company’s directors and the Group’s management after considering historical performance and anticipation of postacquisition growth and integration synergies expected to arise after the acquisitions. In making such

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

financial budgets, management considers uncertainties and that various outcomes have different chances of being realized. Judgement is required in determining key assumptions adopted in the budgets. Changes to these key judgement and estimates could significantly affect the related financial budgets and therefore the estimated consideration for acquisition.

(i) Financial liabilities arising from the contractual obligation for the Group to purchase its own equity instruments

Financial liabilities arising from the contractual obligation for the Group to purchase its own equity instruments are estimated by the Company’s directors and the Group’s management after considering historical performance and anticipation of growth and integration synergies expected to arise after the acquisitions. In making such financial budgets, management considers uncertainties and that various outcomes have different chances of being realized. Judgement is required in determining key assumptions adopted in the budgets. Changes to these key judgement and estimates could significantly affect the related financial budgets and therefore the estimated account of financial liabilities.

Management has performed sensitivity analysis assuming that the net average budget profit during the relevant years for the determination of the financial liabilities has increased/decreased by 10%. The post-tax profit for the year and the equity would have been US$2,406,000 (2007: US$2,277,000) and US$3,518,000 (2007: US$2,277,000) lower/higher, respectively, as a result of the increase/decrease of financial liabilities of US$3,518,000 (2007: US$2,277,000).

5 SEGMENT INFORMATION

(a) Primary reporting format — business segments

At 31 December 2008, the Group is principally engaged in the manufacturing and trading of garment, textile products and accessories, and the provision of freight forwarding and logistics services.

Turnover consists of sales from garment, textile products and accessories and the provision of freight forwarding and logistics services.

The segment results for the year ended 31 December 2008 are as follows:

Segment revenues Total segment revenue Inter-segment revenue Turnover Segment result Finance income Finance costs Share of losses of associated companies Share of profits of jointly controlled entities Profit before income tax Income tax credit/(expense) Profit for the year Minority interest Profit attributable to the equity holders of the Company	Garment/ textile products/ accessories US$’000 809,718 — 809,718 22,672 — 1,386 1,330 (11,265)	Freight forwarding/ logistics services US$’000 17,105 (1,250) 15,855 440 (16) — (117) (79)	Others US$’000 6,429 — 6,429 — — — — —	Group US$’000 833,252 (1,250) 832,002 23,112 2,087 (4,609) (16) 1,386 21,960 1,213 23,173 (11,344) 11,829

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The segment results for the year ended 31 December 2007 are as follows:

Segment revenues Total segment revenue Inter-segment revenue Turnover Segment result Finance income Finance costs Share of profits of associated companies Share of profits of jointly controlled entities Profit before income tax Income tax expense Profit for the year Minority interest Profit attributable to the equity holders of the Company	Garment/ textile products US$’000 777,227 — 777,227 22,420 — 1,592 (3,804) (7,757)	Freight forwarding/ logistics services US$’000 20,668 (3,407) 17,261 1,575 95 — (404) (133)	Others US$’000 6,389 — 6,389 — — — — —	Group US$’000 804,284 (3,407) 800,877 23,995 3,601 (4,670) 95 1,592 24,613 (4,208) 20,405 (7,890) 12,515

Other segment items included in the consolidated income statement are as follows:

Depreciation (Note 7) Amortization (Notes 6 and 8) Provision for/(write-back of) impairment of trade receivables Provision for/(write-back of) inventory obsolescence Provision for impairment of intangible assets Provision for impairment of property, plant and equipment	Year ended 31 December 2008 Garment/ textile products/ accessories Freight forwarding/ logistics services Group US$’000 US$’000 US$’000 14,614 1,055 15,669 2,315 — 2,315 198 327 525 345 — 345 — — — 719 — 719	Year ended 31 December 2007 Garment/ textile products Freight forwarding/ logistics services Group US$’000 US$’000 US$’000 13,383 1,053 14,436 2,145 — 2,145 595 (198) 397 (1,567) — (1,567) 758 — 758 — — —

Inter-segment transactions are entered into under the normal commercial terms and conditions that would also be available to third parties.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The segment assets and liabilities at 31 December 2008 and capital expenditure for the year then ended are as follows:

Segment assets Associated companies Jointly controlled entities Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure (Notes 6, 7 and 8)	Garment/ textile products/ accessories US$’000 500,062 8 9,531 509,601 221,593 43,055	Freight forwarding/ logistics services US$’000 28,143 369 — 28,512 8,136 1,069	Group US$’000 528,205 377 9,531
			538,113 3,683
			541,796
			229,729 65,607
			295,336
			44,124

The segment assets and liabilities at 31 December 2007 and capital expenditure for the year then ended are as follows:

Segment assets Associated companies Jointly controlled entities Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure (Notes 7 and 8)	Garment/ textile products US$’000 418,101 8 6,745 424,854 160,801 18,306	Freight forwarding/ logistics services US$’000 30,057 374 — 30,431 12,477 1,209	Group US$’000 448,158 382 6,745
			455,285 1,839
			457,124
			173,278 53,766
			227,044
			19,515

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Segment assets consist primarily of leasehold land and land use rights, property, plant and equipment, intangible assets, interests in associated companies and jointly controlled entities, inventories, receivables, cash and cash equivalents and other operating assets. Unallocated assets comprise deferred taxation and prepaid tax.

Segment liabilities comprise operating liabilities. They exclude items such as taxation and corporate borrowings.

Capital expenditure comprises additions to leasehold land and land use rights (Note 6), property, plant and equipment (Note 7) and intangible assets (Note 8), including additions resulting from acquisitions through business combinations (Notes 6, 7 and 8).

— (b) Secondary reporting segments geographical segments

The Group’s revenue is mainly derived from customers located in the United States of America (the ‘‘United States’’ or ‘‘USA’’), Europe and Asia, while the Group’s business activities are conducted predominantly in Hong Kong, the People’s Republic of China (the ‘‘PRC’’), Commonwealth of Northern Mariana Islands, the Philippines and the United States.

Revenue The United States Europe Japan The PRC Others	2008 US$’000 367,450 301,369 49,793 42,997 70,393 832,002	2007 US$’000 412,277 237,543 57,413 32,330 61,314
		800,877

Revenue is allocated based on the place/countries in which customers are located.

Total Assets Hong Kong The United States The PRC Commonwealth of Northern Mariana Islands The Philippines Others Associated companies Jointly controlled entities	2008 US$’000 281,911 26,924 175,829 11,863 30,708 4,653 531,888 377 9,531 541,796	2007 US$’000 233,690 42,902 118,158 11,257 40,540 3,450
		449,997 382 6,745
		457,124

Total assets are allocated based on where the assets are located.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Capital expenditure Hong Kong The United States The PRC Commonwealth of Northern Mariana Islands The Philippines Others	2008 US$’000 3,652 1,339 36,591 931 855 756 44,124	2007 US$’000 8,545 162 8,812 856 554 586
		19,515

Capital expenditure is allocated based on where the assets are located.

6 LEASEHOLD LAND AND LAND USE RIGHTS

The Group’s interests in leasehold land and land use rights represent prepaid operating lease payments and their net book values are analyzed as follows:

Outside Hong Kong held on: Leases of between 10 to 50 years Opening net book amount Acquisition of subsidiaries (Note 33) Amortization of prepaid operating lease payments (Note 25) Transfer to a related company Exchange differences Closing net book amount	2008 US$’000 10,644 4,476 5,892 (163) — 439 10,644	2007 US$’000 4,476
		4,286 — (91) (41) 322
		4,476

• (a) As of 31 December 2008, the Group has not yet obtained the land use right certificate of a piece of land located in the PRC with a carrying amount of US$1,073,000 (2007: Nil).

• (b) As at 31 December 2008, land use rights of US$1,301,000 (2007: US$ Nil) were pledged as collateral for the Group’s banking facilities (Note 18).

– 43 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

7 PROPERTY, PLANT AND EQUIPMENT — THE GROUP

Year ended 31 December 2007 Opening net book amount Additions Disposals Transfer from construction-in-progress Depreciation Exchange differences Closing net book amount At 31 December 2007 Cost Accumulated depreciation and impairment Net book amount Year ended 31 December 2008 Opening net book amount Acquisition of subsidiaries (Note 33) Additions Disposals Provision for impairment Transfer from construction-in-progress Depreciation Exchange differences Closing net book amount At 31 December 2008 Cost Accumulated depreciation and impairment Net book amount	Buildings US$’000 36,572 142 — 1,171 (2,045) 946 36,786 44,830 (8,044) 36,786 Buildings US$’000 36,786 20,083 1,325 (11) — 1,778 (2,834) 3,384 60,511 74,256 (13,745) 60,511	Leasehold improvements US$’000 6,548 1,463 (82) 1 (1,829) 1,168 7,269 17,560 (10,291) 7,269 Leasehold improvements US$’000 7,269 2,798 797 (281) — 286 (1,945) — 8,924 23,053 (14,129) 8,924	Plant and machinery US$’000 28,988 4,729 (667) 2,917 (5,816) 1,014 31,165 61,659 (30,494) 31,165 Plant and machinery US$’000 31,165 2,824 2,737 (863) (719) 617 (6,294) 1,949 31,416 74,874 (43,458) 31,416	Furniture, fixture and equipment US$’000 13,747 2,926 — — (4,122) 148 12,699 39,157 (26,458) 12,699 Furniture, fixture and equipment US$’000 12,699 1,367 2,214 (338) — 616 (3,977) 1 12,582 44,279 (31,697) 12,582	Motor vehicles US$’000 1,909 449 (74) — (624) 24 1,684 4,350 (2,666) 1,684 Motor vehicles US$’000 1,684 51 265 (89) — 25 (619) 15 1,332 4,671 (3,339) 1,332	Construction- in-progress US$’000 2,879 3,986 — (4,089) — 199 2,975 2,975 — 2,975 Construction- in-progress US$’000 2,975 — 3,062 — — (3,322) — 199 2,914 2,914 — 2,914	Total US$’000 90,643 13,695 (823) — (14,436) 3,499
							92,578
							170,531 (77,953)
							92,578
							Total US$’000 92,578 27,123 10,400 (1,582) (719) — (15,669) 5,548
							117,679
							224,047 (106,368)
							117,679

• (a) Depreciation expense of US$6,442,000 (2007: US$5,343,000) has been expensed in cost of sales, and US$9,227,000 (2007: US$9,093,000) has been expensed in the general and administrative expenses.

• (b) As at 31 December 2008, the Group has not yet obtained the building certificate for a building located in the PRC with the carrying amount of US$8,229,000 (2007: Nil).

• (c) As at 31 December 2008, buildings with net book value of US$11,309,000 (2007: Nil) were pledged as collateral for the Group’s building facilities. (Note 18)

• (d) The construction-in-progress mainly represented factories and office buildings under construction in the PRC. Upon completion, the accumulated cost under construction-in-progress will be transferred to other property, plant and equipment.

– 44 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

8 INTANGIBLE ASSETS — THE GROUP

Year ended 31 December 2007 Opening net book amount Acquisition of additional interests in subsidiaries from minority shareholders (Note i) Adjustment on contingent consideration (Note ii) Amortization (Note 25) Provision for impairment (Note 25) Closing net book amount At 31 December 2007 Cost Accumulated amortization and impairment Net book value Year ended 31 December 2008 Opening net book amount Acquisition of subsidiaries (Note iii) Adjustment on contingent consideration (Note ii) Amortization (Note 25) Closing net book amount At 31 December 2008 Cost Accumulated amortization and impairment Net book value Notes:	Goodwill US$’000 24,992 5,820 9,139 — (758) 39,193 40,778 (1,585) 39,193 39,193 — 5,309 — 44,502 46,087 (1,585) 44,502	Customer relationships US$’000 27,865 — — (2,054) — 25,811 29,419 (3,608) 25,811 25,811 709 — (2,152) 24,368 30,128 (5,760) 24,368	Total US$’000 52,857 5,820 9,139 (2,054) (758) 65,004 70,197 (5,193) 65,004 65,004 709 5,309 (2,152) 68,870 76,215 (7,345) 68,870

• (i) In April 2007, the Group exercised the call option to acquire an additional 10% interest in On Time International Limited, a subsidiary from the minority shareholder at an estimated consideration of approximately US$4,553,000 and consequently a goodwill of approximately US$2,308,000 has been recognized.

In August 2007, one of the minority shareholders of Partner Joy Limited, a subsidiary, exercised the put option to sell his 19% interest of Partner Joy Limited to the Group at a consideration of approximately US$5,967,000 and consequently goodwill of approximately US$3,512,000 has been recognized.

• (ii) The total purchase considerations for the acquisition of certain subsidiaries are determined with reference to the average of the consolidated net profits of those subsidiaries over certain specific periods. During the year, the goodwill in relation to the interest acquired increased by US$5,309,000 (2007: US$9,139,000) as a result of a change of such contingent consideration.

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (iii) In June 2008, the Group entered into a sale and purchase agreement to acquire 60% interest in Trinew Limited (‘‘Trinew’’) at an estimated consideration of approximately US$17,545,000. In connection with this acquisition, an intangible asset, representing customer relationships, of approximately US$709,000 has been recognized. In addition, the Group’s interest in the fair values of the identifiable net assets acquired exceeds the cost of such acquisition with an amount of US$1,303,000, which has been recognized immediately in the consolidated income statement. The above transaction was completed on 8 August 2008.

Amortization of US$2,152,000 (2007: US$2,054,000) is expensed in the general and administrative expenses.

Impairment tests for goodwill

Goodwill is allocated to the Group’s cash-generating units (‘‘CGUs’’) identified according to business division. A summary of the goodwill allocation to different CGUs is presented below:

Sweater division Sleepwear division Trading and sourcing division	2008 US$’000 15,473 2,380 26,649 44,502	2007 US$’000 15,473 2,380 21,340
		39,193

The recoverable amount of a CGU is determined based on fair value less cost to sell calculations. These calculations use cash flow projections based on financial budgets approved by management covering the one to two-year periods. Cash flows beyond the one to two-year periods are extrapolated using the estimated growth rates stated below. The growth rates do not exceed the long-term average growth rate of the business in which the CGUs operate.

The key assumptions other than the financial budgets covering the one to two-year periods used for fair value less cost to sell calculations are as follows:

			Trading and
	Sweater	Sleepwear	sourcing
	division	division	division
Gross margin (a)	14.4%	17.6%	17.3%
Growth rate (a)	3.0%	3.0%	3.0%
Discount rate (b)	14.0%	14.0%	15.5%

Notes:

• (a) Weighted average gross margin and growth rate used to extrapolate cash flows beyond the budget period.

• (b) Discount rate applied to the cash flow projections.

These assumptions have been used for the analysis of each CGU within the business division.

Management determined the financial budgets based on past performance and its expectations for the market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the relevant divisions.

The Group does not have to recognize an impairment loss for the year ended 31 December 2008 based on the impairment assessment performed.

– 46 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

9 INVESTMENTS IN SUBSIDIARIES — THE COMPANY

Unlisted shares, at cost Amounts due from subsidiaries	2008 US$’000 71,564 128,762 200,326	2007 US$’000 71,564 128,062
		199,626

Particulars of the principal subsidiaries as at 31 December 2008:

	Place of incorporation/	Principal activities and	Particulars of
Name	establishment	place of operations	issued share capital	Interest held
Best Uni Limited	Hong Kong	Garment trading and sourcing	10,000 ordinary share of	60%
		overseas/in Hong Kong	HK$1 each
Chelton Force Limited	British Virgin Islands	Investment holding in Hong	1 ordinary share of	100%
	(‘‘BVI’’)	Kong	US$1 each
Concorde Garment Manufacturing	Commonwealth of	Garment manufacturing in	1,510,000 ordinary	100%
Corporation	Northern Mariana	CNMI	shares of US$1 each
	Islands (‘‘CNMI’’)
Consolidated Transportation Services,	CNMI	Provision of freight forwarding	1,000,000 ordinary	100%
Inc.		and logistics services in	shares of US$1 each
		CNMI
Consolidated Transportation Services	Pohnpei	Provision of freight forwarding	100,000 ordinary shares	90%
(FSM), Inc		and logistics services in	of US$1 each
		Pohnpei
Consolidated Transportation Services,	Guam	Provision of freight forwarding	400,000 ordinary shares	100%
Incorporated (Guam)		and logistics services in	of US$1 each
		Guam
Consolidated Transportation Services,	Palau	Provision of freight forwarding	100,000 ordinary shares	80%
Inc. (Palau)		and logistics services in Palau	of US$1 each
CTSI Holdings Limited	BVI	Investment holding in the	1 ordinary share of	100%
		Philippines	US$1 each
CTSI Logistics, Inc.	U.S.A.	Provision of freight forwarding	10,000 ordinary shares	100%
		and logistics services in the	with total paid-in
		U.S.A.	capital of
			US$100,000
CTSI Logistics Inc.	Cambodia	Provision of freight forwarding	100 ordinary shares of	100%
		and logistics services in	Riels 380,000 each
		Cambodia
CTSI Logistics (Korea), Inc.	Korea	Provision of freight forwarding	60,000 ordinary shares	60%
		and logistics services in	of Won 5,000 each
		Korea
CTSI Logistics Limited	Hong Kong	Provision of freight forwarding	100,000 ordinary shares	100%
		and logistics services in Hong	of HK$10 each
		Kong
CTSI Logistics Phils., Inc.	The Philippines	Provision of freight forwarding	100,000 ordinary shares	100%
		and logistics services in the	of Peso 100 each
		Philippines

– 47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	Place of incorporation/	Principal activities and	Particulars of
Name	establishment	place of operations	issued share capital	Interest held
Desk Top Limited	Hong Kong	Trading and manufacturing of	23,206,000 ordinary	60%
		bags in Hong Kong	shares of HK$1 each
Desk Top Bags (Mfg) Limited	BVI	Provision of subcontracting	100 ordinary shares of	60%
		services in the PRC	US$1 each
Dongguan Luen Thai Garment Co., Ltd.	The PRC	Garment manufacturing in the	Registered capital of	100%
		PRC	HK$225,350,000
			with total paid-in
			capital of
			HK$225,350,000
Dongguan Quan Thai Garment Co., Ltd	The PRC	Sourcing and trading of garment	HK$8,000,000	100%
		products in the PRC
Dongguan Xingxi Handbags Factory Co.	The PRC	Manufacturing of bags in the	HK$20,000,000	60%
Ltd.		PRC
Dongguan Xing Hao Handbags Factory	The PRC	Manufacturing of bags in the	HK$54,000,000	60%
Co. Ltd.		PRC
East Talent Properties Limited	Hong Kong	Investment holding in Hong	10,000 ordinary shares	100%
		Kong	of HK$1 each
Fortune Investment Overseas Limited	BVI	Investment holding in Hong	1 ordinary share of	100%
		Kong	US$1 each
GJM (HK) Limited	Hong Kong	Sourcing and trading of garment	2 ordinary shares of	100%
		products in Hong Kong	HK$1 each
G.J.M. (H.K.) Manufacturing Limited	Hong Kong	Investment holding in Hong	2 ordinary shares of	100%
		Kong	HK$100 each
GJM (Qingyuan) Light Industrial	The PRC	Garment manufacturing in the	Registered capital of	100%
Development Limited		PRC	HK$120,500,000
			with total paid-in
			capital of
			HK$106,147,661
GJM (UK) Limited	United Kingdom	Garment distributor in the UK	1 ordinary share of GBP	100%
	(‘‘UK’’)		1 each
Golden Dragon Apparel, Inc.	The Philippines	Garment manufacturing in the	62,000 ordinary shares	100%
		Philippines	of Peso 100 each
Guangzhou G.J.M. Garment	The PRC	Garment manufacturing in the	Registered capital of	100%
Manufacturing Factory		PRC	US$7,200,000 with
			total paid-in capital
			of US$7,200,000
Hongquan Consulting Services	The PRC	Provision of consultancy services	HK$1,000,000	100%
(Shenzhen) Co., Ltd.		in the PRC
Kingsmere, Inc.	U.S.A.	Investment holding in the U.S.A.	100 ordinary shares with	100%
			total paid-in capital
			of US$310,000
L & T International Group Phils., Inc.	The Philippines	Garment manufacturing in the	20,000 ordinary shares	100%
		Philippines	of Peso 100 each
L & T Macao Garment Manufacturing	Macau	Garment manufacturing in	MOP$25,000	100%
Company Limited		Macau
Luen Thai International Group Limited	Hong Kong	Sourcing, manufacturing and	2 ordinary shares of	100%
		trading of garment and	HK$1 each
		textile products in Hong
		Kong

– 48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	Place of incorporation/	Principal activities and	Particulars of
Name	establishment	place of operations	issued share capital	Interest held
Luen Thai Macao Commercial Offshore	Macau	Sourcing, manufacturing and	MOP$25,000	100%
Company Limited		trading of garment and
		textile products in Macau
Luen Thai Overseas Limited	Bahamas	Investment holding in Hong	16,685,804 ordinary	100%
		Kong	shares of US$1 each
Manhattan Limited	Hong Kong	Garment trading and sourcing	10,000 ordinary shares	60%
		overseas/in Hong Kong	of HK$1 each
On Time International Limited	BVI	Investment holding in Hong	500 ordinary share of	60%
		Kong	US$1 each
Philippine Luen Thai Holdings	The Philippines	Investment holding in the	260,000 ordinary shares	100%
Corporation		Philippines	of Peso 100 each
Partner Joy Group Limited	BVI	Investment holding in Hong	1,000 ordinary shares of	90%
		Kong	US$1 each
Power Might Limited	BVI	Investment holding in Hong	12,207,164 ordinary	100%
		Kong	shares of US$1 each
Sino Venus Limited	Hong Kong	Investment holding in Hong	2 ordinary shares of	100%
		Kong	HK$1 each
Sunny Force Limited	BVI	Investment holding in Hong	1 ordinary share of	100%
		Kong	US$1 each
Tellas Ltd.	U.S.A.	Import and distribution of	100 ordinary shares with	100%
		garments in the U.S.A.	total paid-in capital
			of US$100,000
Tien-Hu Knitters Limited	Hong Kong	Trading of garment products in	1,000,000 ordinary	90%
		Hong Kong	shares of HK$1 each
Tien-Hu Trading (Hong Kong) Limited	Hong Kong	Trading of garment products in	1,000,000 ordinary	90%
		Hong Kong	shares of HK$1 each
Tien-Hu Knitting Factory (Hong Kong)	Hong Kong	Trading of garment products in	1,000,000 ordinary	90%
Limited		Hong Kong	shares of HK$1 each
TMS Fashion (H.K) Limited	Hong Kong	Garment trading and investment	3,000,000 shares of	60%
		holding in Hong Kong	HK$1 each
TMS International Limited	Hong Kong	Garment trading in Hong Kong	2,000 ordinary shares of	60%
			HK$500 each
Trinew Limited	BVI	Investment holding in Hong	1,000 ordinary shares of	60%
		Kong	US$1 each
Winley Industries Limited	Hong Kong	Investment holding in Hong	2 ordinary shares of	100%
		Kong	HK$1 each

All subsidiaries of the Company are indirectly held except for Luen Thai Overseas Limited.

Except for the amount of US$2,500,000 (2007: US$2,500,000) which is repayable within twelve months and non-interest bearing, amounts due from subsidiaries represent equity funding by the Company to the respective subsidiaries and are measured in accordance with the Company’s accounting policy for investments in subsidiaries.

– 49 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

10 INTERESTS IN ASSOCIATED COMPANIES — THE GROUP

Share of net assets Unlisted investments, at cost	2008 US$’000 377 156	2007 US$’000 382
		156

Particulars of the principal associated companies as at 31 December 2008:

	Place of incorporation/	Principal activities and	Particulars of
Name	establishment	place of operations	issued share capital	Interest held
CTSI Logistics (Taiwan), Inc.	Taiwan	Provision of freight forwarding	1,420,000 ordinary	49%
		and logistics services in	shares of TWD 10
		Taiwan	each
LT Investment Co. Ltd.	Cambodia	Property holding in Cambodia	25 ordinary shares of	49%
			US$8,000 each

11 INTERESTS IN JOINTLY CONTROLLED ENTITIES — THE GROUP

Share of net asset Loans to jointly controlled entities Unlisted investments, at cost	2008 US$’000 3,255 6,276 9,531 3,528	2007 US$’000 1,642 5,103
		6,745
		3,205

The loans to jointly controlled entities are unsecured, non-interest bearing and not repayable within the next twelve months.

– 50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Particulars of the principal jointly controlled entities as at 31 December 2008:

	Place of
	incorporation/	Principal activities and	Particulars of				Profit/	Interest
Name	establishment	place of operations	issued share capital	Assets	Liabilities	Revenues	(loss)	held
				US$’000	US$’000	US$’000	US$’000
Shenzhen Guangthai	The PRC	Garment trading in the	HK$20,000,000	2,946	149	—	(271)	50%
International Co. Ltd.		PRC
Shenzhen Li Da Silk Garment	The PRC	Garment manufacturing	RMB2,400,000	468	388	3,460	(413)	25%
Company Limited		in the PRC
Wuxi Liantai Garments Co., Ltd.	The PRC	Garment manufacturing	Registered capital of	3,164	533	4,650	75	50%
		in the PRC	US$2,050,000
			with total paid-in
			capital of
			US$1,241,400
Yuen Thai Industrial Company	Hong Kong	Sourcing, manufacturing	2 ordinary shares of	31,413	30,718	64,557	(619)	50%
Limited		and trading of sports	HK$1 each
		and active wear in the
		PRC
Yuen Thai Holdings Limited	BVI	Investment holding	2 ordinary shares of	8,344	5,909	2,705	2,439	50%
			US$1 each
Yuenthai Philippines, Inc.	The Philippines	Garment manufacturing	Peso 4,000,000	8,038	8,412	9,915	2,987	50%
		in the Philippines
Hong Kong Guangthai	Hong Kong	Investment holding	2 ordinary shares of	9,602	11,434	1,269	(901)	50%
International Company			HK$1 each
Limited
New Sunshine Limited	Hong Kong	Investment holding and	5,000,000 ordinary	1,609	1,333	3,586	(375)	45%
		subcontracting	shares of HK$1
		services in the PRC	each

12 DEFERRED INCOME TAX — THE GROUP

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:

Deferred tax assets: — Deferred tax asset to be recovered after more than 12 months Deferred tax liabilities — Deferred tax liabilities to be settled after more than 12 months Deferred tax liabilities, net	2008 US$’000 (230) 5,075 4,845	2007 US$’000 (759) 3,769
		3,010

– 51 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The net movement on the deferred income tax account is as follows:

Beginning of the year Credited to the income statement (Note 28) Acquisition of a subsidiaries (Note 33) Exchange differences End of the year	2008 US$’000 3,010 (312) 2,147 — 4,845	2007 US$’000 3,538 (504) — (24)
		3,010

The movement in deferred tax assets and liabilities during the year is as follows:

At 1 January 2007 Charged/(credited) to the income statement Exchange difference At 31 December 2007 Charged/(credited) to the income statement Acquisition of subsidiaries (Note 33) At 31 December 2008	Provision US$’000 (38) 8 — (30) 41 — 11	Accelerated tax depreciation US$’000 565 (307) — 258 (79) 263 442	Intangible assets US$’000 3,350 (289) — 3,061 (355) 117 2,823	Others US$’000 (339) 84 (24) (279) 81 1,767 1,569	Total US$’000 3,538 (504) (24)
					3,010 (312) 2,147
					4,845

Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through the future taxable profits is probable. The Group did not recognize deferred income tax assets of US$5,558,000 (2007: US$7,814,000) in respect of losses amounting to US$21,570,000 (2007: US$23,752,000) that can be carried forward against future taxable income. These tax losses have an expiry date from 2009 to 2017.

13 INVENTORIES — THE GROUP

Raw materials Work-in-progress Finished goods	2008 US$’000 26,398 23,613 26,197 76,208	2007 US$’000 30,564 17,491 17,190
		65,245

The cost of inventories recognized as expense and included in cost of sales amounted to US$591,992,000 (2007: US$568,500,000).

As at 31 December 2008, certain inventories were held under trust receipts bank loan arrangement.

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14 TRADE AND BILLS RECEIVABLES — THE GROUP

Trade and bills receivables Less: provision for impairment of receivables Trade and bills receivables — net	2008 US$’000 109,831 (1,480) 108,351	2007 US$’000 101,712 (1,647)
		100,065

The carrying amount of trade and bills receivables approximates its fair value.

The Group normally grants credit terms to its customers ranging from 30 to 90 days. The ageing analysis by due date of trade debtors net of provision for impairment is as follows:

Current 1 to 30 days 31 to 60 days 61 to 90 days Over 91 days Amounts past due but not impaired	2008 US$’000 82,771 17,770 3,038 1,501 3,271 25,580 108,351	2007 US$’000 70,231
		19,326 3,123 2,126 5,259
		29,834
		100,065

The impairment provision was approximately US$1,480,000 as at 31 December 2008 (2007: US$1,647,000). The provision made during the year has been included in the general and administrative expenses in the consolidated income statement.

Movement in the provision for impairment of trade receivables are as follows:

At 1 January Provision for impairment of trade receivables Utilization of provision At 31 December	2008 US$’000 1,647 525 (692) 1,480	2007 US$’000 1,250 397 —
		1,647

– 53 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The carrying amounts of the Group’s trade and bills receivables are denominated in the following currencies:

US$ HK$ Euro RMB Philippines Peso Other currencies	2008 US$’000 82,352 436 16,854 5,859 2,401 449 108,351	2007 US$’000 62,914 7,229 18,472 8,437 2,559 454
		100,065

The maximum exposure to credit risk at the reporting date is the carrying amount of the receivable mentioned above.

15 CASH AND BANK BALANCES

Cash at bank and in hand Short-term bank deposits Bank deposit with a maturity period over 3 months Cash and bank balances in the balance sheets Less: Bank overdrafts (Note 18) Bank deposit with a maturity period over 3 months Cash and cash equivalents in the consolidated cash flow statement Pledged deposit	Group 2008 2007 US$’000 US$’000 75,783 52,398 38,463 44,270 3,593 — 117,839 96,668 (7,757) (5,863) (3,593) — 106,489 90,805 1,509 1,519	Company 2008 2007 US$’000 US$’000 435 167 — — — — 435 167	Company 2008 2007 US$’000 US$’000 435 167 — — — — 435 167
			167

The Group’s cash and cash equivalents and bank deposit are denominated in the following currencies:

The Group US$ HK$ Euro RMB Other currencies	2008 US$’000 63,845 22,306 12,997 16,362 3,838 119,348	2007 US$’000 77,193 3,604 7,739 5,439 4,212
		98,187

– 54 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Company US$ Other currencies	2008 US$’000 382 53 435	2007 US$’000 164 3
		167

The effective interest rate on short-term bank deposits was 1.34% (2007: 4.47%) per annum; these deposits have an average maturity of 67 days (2007: 50 days).

As at 31 December 2008, pledged bank deposits have a maturity period of 90 days. Certain of the Group’s banking facilities were pledged by such bank deposits of US$1,509,000 (2007: US$1,519,000) (See Note 18).

16 SHARE CAPITAL

Authorized — ordinary shares of US$0.01 each At 31 December 2007 and 2008 Issued and fully paid — ordinary shares of US$0.01 each At 31 December 2007 and 2008	Number of shares 1,500,000,000 992,500,000	Nominal value US$’000 15,000
		9,925

Share option

The Company has adopted a share option scheme (the ‘‘Scheme’’) which is effective for a period of 10 years commencing 27 June 2004 pursuant to a written resolution of the then sole shareholder of the Company on 27 June 2004.

Under the Scheme, the Company may grant options to selected full-time employees and directors of the Company and its subsidiaries to subscribe for shares in the Company. Additionally, the Company may, from time to time, grant share options to eligible advisors and consultants to the Company and its subsidiaries at the discretion of the Board of Directors.

The total number of shares in respect of which options may be granted under the Scheme is not permitted to exceed 10% of the shares of the Company in issue as at the date of the listing of the shares without prior approval from the Company’s shareholders. The number of shares issued and to be issued in respect of which options granted and may be granted to any individual in any one year is not permitted to exceed 1% of the shares of the Company in issue at the date of such grant, without prior approval from the Company’s shareholders.

Options may be exercised at any time within the relevant exercise period. The exercise price is determined by the highest of (i) the closing price of the Company’s shares on the date of grant; (ii) the average closing price of the shares for the five business days immediately preceding the date of grant; and (iii) the nominal value of the Company’s shares.

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Movements in the number of share options are as follows:

Date of grant Exercise period Subscription price per share 26 January 2006 From 26 January 2007 to 25 January 2011 HK$2.52 10 November 2006 From 10 November 2007 to 9 November 2011 HK$1.28 21 April 2008 From 21 April 2009 to 20 April 2013 HK$0.71	Beginning of year ’000 7,285 7,916 — 15,201	Number o Granted ’000 — — 13,350 13,350	f shares Lapsed ’000 — — — —	End of year ’000 7,285 7,916 13,350
				28,551

Share options outstanding at the end of the year have the following expiry dates and exercise prices:

Expiry date Exercise price 25 January 2011 HK$ 2.52 9 November 2011 HK$1.28 20 April 2013 HK$0.71	Number of share options 2008 2007 ’000 ’000 7,285 7,285 7,916 7,916 13,350 — 28,551 15,201	Number of share options 2008 2007 ’000 ’000 7,285 7,285 7,916 7,916 13,350 — 28,551 15,201
		15,201

The weighted average fair value of the options granted during the year of US$0.03 per option is determined using Binomial Lattice valuation model. The significant inputs into the model are as follows:

	Share options granted
	on 21 April 2008
Volatility	44.79%
Dividend yield	1.89%
Expected option life	2.8 to 4.9 years
Annual risk free interest rate	1.26% to 2.99%

During the year, the expense recognized in the consolidated income statement for share options granted to directors and employees amounted to US$425,000 (2007: US$563,000).

– 56 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

17 OTHER RESERVES

(a) Group

At 1 January 2007 Derecognition of financial liabilities upon acquisition of minority interest (Note (iii)) Share based compensation expense Exchange differences arising on translation of foreign subsidiaries As at 31 December 2007 At 1 January 2008 Acquisition of subsidiaries (Note 20) Share based compensation expense Exchange differences arising on translation of foreign subsidiaries As at 31 December 2008	Share premium US$’000 116,998 — — — 116,998 116,998 — — — 116,998	Capital reserve (Note (i)) US$’000 11,722 — — — 11,722 11,722 — — — 11,722	Other capital reserves (Note (ii)) US$’000 (28,761) 4,311 — — (24,450) (24,450) (11,122) — — (35,572)	Share based compensation reserve US$’000 539 — 563 — 1,102 1,102 — 425 — 1,527	Exchange reserve US$’000 (1,870) — — 4,550 2,680 2,680 — — 3,985 6,665	Total US$’000 98,628 4,311 563 4,550
						108,052
						108,052 (11,122 425 3,985
						101,340

• (b) Company

At 1 January 2007 Share based compensation expense At 31 December 2007 At 1 January 2008 Share based compensation expense At 31 December 2008	Share premium US$’000 116,998 — 116,998 116,998 — 116,998	Capital reserve (Note (iv)) US$’000 71,564 — 71,564 71,564 — 71,564	Share based compensation reserve US$’000 539 563 1,102 1,102 425 1,527	Total US$’000 189,101 563
				189,664
				189,664 425
				190,089

Notes:

• (i) The capital reserve of the Group represents the difference between the nominal value of the shares of the subsidiaries acquired pursuant to the Initial Public Offerings (‘‘IPO’’) reorganization and the nominal value of the Company’s shares issued in exchange thereof.

• (ii) Other capital reserves primarily represent the initial recognition of the financial liabilities in relation to the put options granted to the minority shareholders and the subsequent derecognition of such financial liabilities upon the put options are exercised or expired.

• (iii) In prior year, the Group derecognized financial liabilities of US$5,962,000 and the related reserve amount of US$4,311,000 when a minority shareholder of Partner Joy exercised the put option to sell his 19% interest in Partner Joy to the Group.

– 57 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

• (iv) The Company’s capital reserve represents the difference between the aggregate net asset values of the subsidiaries acquired and the nominal value of the Company’s shares issued for the acquisition of the subsidiaries through the share exchange under the Group’s IPO reorganization.

18 BANK BORROWINGS — THE GROUP

Non-current Bank loan Current Bank overdrafts Trust receipt bank loans Collateralized borrowings Short-term bank loans Current portion of long-term bank loans Total borrowings Non-current bank borrowings — Secured — Non-secured Current bank borrowings — Secured — Non-secured	2008 US$’000 33,259 7,757 24,651 3,630 7,359 6,884 50,281 83,540 2008 US$’000 4,009 29,250 6,841 43,440 83,540	2007 US$’000 33,750
		5,863 8,045 — — 4,500
		18,408
		52,158
		2007 US$’000 — 33,750 — 18,408
		52,158

At 31 December 2008, the Group’s borrowings are repayable as follows:

Within 1 year Between 1 and 2 years Between 2 and 5 years Wholly Repayable within 5 years Over 5 years	Bank ov 2008 US$’000 7,757 — — 7,757 — 7,757	erdrafts 2007 US$’000 5,863 — — 5,863 — 5,863	Trust receipt bank loans 2008 2007 US$’000 US$’000 24,651 8,045 — — — — 24,651 8,045 — — 24,651 8,045	Bank 2008 US$’000 14,243 8,509 13,500 36,252 11,250 47,502	loans 2007 US$’000 4,500 4,500 13,500 22,500 15,750 38,250	Collateralized borrowings 2008 2007 US$’000 US$’000 3,630 — — — — — 3,630 — — — 3,630 —	To 2008 US$’000 50,281 8,509 13,500 72,290 11,250 83,540	tal 2007 US$’000 18,408 4,500 13,500
								36,408 15,750
								52,158

– 58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The carrying amounts of the borrowings are denominated in the following currencies:

HK$ US$ RMB	2008 US$’000 31,456 46,717 5,367 83,540	2007 US$’000 12,075 40,083 —
		52,158

The effective interest rates at the balance sheet date are as follows:

			2008			2007
		US$	HK$	RMB	US$	HK$	RMB
Bank	loans	1.88%	4.27%	7.3%	4.89%	—	—
Trust	receipt bank loans	3.53%	3.53%	—	5.33%	3.62%	—
Bank	overdrafts	5.00%	5.00%	—	8.00%	8.00%	—

As at 31 December 2008, the Group had aggregate banking facilities of approximately US$293,362,000 (2007: US$227,274,000) for overdrafts, loans, trade financing and bank guarantees. Unused facilities as at the same date amounted to approximately US$200,057,000 (2007: US$163,978,000). These facilities are secured by:

• (i) Mortgages over the Group’s land use right and buildings with a total net book value of approximately US$12,610,000 (2007: Nil) (Notes 6 and 7);

• (ii) Pledge of the Group’s bank deposit of US$1,509,000 (2007: US$1,519,000);

• (iii) Floating charges over the Group’s inventories held under trust receipts bank loan arrangements (Note 13); and

• (iv) Corporate guarantee provided by the Company and a minority shareholder of a subsidiary (Note 35).

The carrying amounts of the borrowings approximately equal their fair values.

19 RETIREMENT BENEFIT OBLIGATIONS — THE GROUP

Balance sheet obligation for: Defined benefits plans Provision for long service payments Income statement charge for (Note 26) — Defined benefits plan — Provision for long service payment	2008 US$’000 1,961 470 2,431 885 135 1,020	2007 US$’000 2,746 389
		3,135
		793 73
		866

– 59 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The assets of the defined benefit plans are held independently of the Group’s assets in separate trustee administered funds. The Group’s major plans are valued by qualified actuaries annually using the projected unit credit method. Defined benefit plans in the Philippines are valued by Real Actuarial Consulting Limited, an independent qualified actuary valuer.

(a) Defined contribution plans

During the year, the Group maintained various defined contribution retirement schemes for its employees, which are managed by independent trustees. Employees’ and employer’s contributions are based on various percentages of employees’ gross salaries and length of service. The total contributions to the defined contribution retirement schemes were approximately US$1,130,000 for the year ended 31 December 2008 (2007: US$847,000).

(b) Defined benefit plans

The amounts recognized in the consolidated balance sheet are determined as follows:

Present value of unfunded obligations Unrecognized actuarial gains/(losses) Liability in the consolidated balance sheet	2008 US$’000 1,763 198 1,961	2007 US$’000 2,757 (11)
		2,746

The amounts recognized in the consolidated income statement are as follows:

Current service cost Interest cost Curtailment/settlement loss Total, included in staff costs (Note 26)	2008 US$’000 847 228 (190) 885	2007 US$’000 636 157 —
		793

The movements of the liability recognized in the consolidated balance sheet are as follows:

At 1 January Total expense — included in staff costs as shown above Contributions paid Exchange difference At 31 December	2008 US$’000 2,746 885 (1,691) 21 1,961	2007 US$’000 1,813 793 (26) 166
		2,746

The principal actuarial assumptions used are as follows:

Discount rate Future salary increases rate	2008 11% 9.5%	2007 8.5% 7.5%

– 60 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(c) Long service payments

Provision for long service payments represents the Group’s obligations for long service payments to its employees in Hong Kong on cessation of employment in certain circumstances under the Hong Kong Employment Ordinance.

The obligation is calculated using the projected unit credit method, discounted to its present value and reduced by entitlements accrued under the Group’s retirement plans that are attributable to contributions made by the Group. Such long service payment obligations are valued by Real Actuarial Consulting Limited, an independent qualified actuary valuer.

The amounts recognized in the consolidated balance sheet are determined as follows:

Present value of unfunded obligations Unrecognized actuarial losses Liability in the consolidated balance sheet	2008 US$’000 548 (78) 470	2007 US$’000 427 (38)
		389

The amounts recognized in the consolidated income statement are as follows:

Current service cost Interest cost Net actuarial losses recognized during the year Total, included in employee benefit expense (Note 26)	2008 US$’000 123 12 — 135	2007 US$’000 28 20 25
		73

The above charges were included in the general and administrative expenses.

Movements of the provision for long service payments of the Group are as follows:

At 1 January Total expenses — included in staff costs as shown above Contributions paid MPF refund received At 31 December	2008 US$’000 389 135 (414) 360 470	2007 US$’000 482 73 (286) 120
		389

The principal actuarial assumptions used are as follows:

Discount rate Future salary increases rate	2008 1.2% 1.0%	2007 3.1% 3.0%

– 61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20 CONSIDERATION PAYABLE AND OTHER LONG-TERM LIABILITIES — THE GROUP

Amounts comprise:

Consideration payable for acquisition of subsidiaries Financial liabilities in connection with the put options granted for the acquisition of subsidiaries	2008 US$’000 — 33,959 33,959	2007 US$’000 5,316 21,357
		26,673

The consideration payable represents the balance of consideration payable for the acquisition of 60% equity interest in On Time International Limited (‘‘On Time’’). The balance is included in other payable and accruals as at 31 December 2008.

Financial liabilities represents the amounts payable for the put options granted to the vendors of On Time, Partner Joy and Trinew to sell their 40%, 10% and 40% interests in On Time, Partner Joy and Trinew, respectively, to the Group.

The repayment schedule of the consideration payable and financial liabilities is as follows:

Consideration payable: — Within 1 year — Between 1 and 2 years Financial liabilities: — Within 1 year — Between 2 and 5 years — Later than 5 years Less: Amount representing interest element Present value of consideration payable and financial liabilities Less: Current portion included in other payables and accruals	2008 US$’000 2,613 — 2,831 38,018 — 43,462 (4,059) 39,403 (5,444) 33,959	2007 US$’000 5,433 5,758
		2,843 12,519 13,596
		40,149 (5,200)
		34,949 (8,276)
		26,673

During the year, the Group recognized additional financial liabilities of approximately US$11,122,000 in relation to the financial liabilities arising from the put options granted to the vendor of Trinew to sell his 40% interest in Trinew to the Group. Such financial liabilities of US$11,122,000 are initially recognized at their fair values, which are the present value of the estimated redemption amount and were reclassified from equity.

– 62 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The carrying amounts of the Group’s consideration payable and financial liabilities are denominated in the following currencies:

US$ HK$	2008 US$’000 22,837 11,122 33,959	2007 US$’000 26,673 —
		26,673

21 TRADE AND BILLS PAYABLES

At 31 December 2008, the ageing analysis of trade and bills payables are as follows:

0 to 30 days 31 to 60 days 61 to 90 days Over 91 days	2008 US$’000 33,411 19,398 7,069 6,318 66,196	2007 US$’000 43,387 8,224 706 3,438
		55,755

The carrying amounts of the Group’s trade and bills payables are denominated in the following currencies:

US$ HK$ Euro RMB Philippines Peso Other currencies DERIVATIVE FINANCIAL INSTRUMENTS Leveraged forward exchange contracts (Notes (i) and (ii)) Currency forward contracts (Note (iii))	2008 US$’000 23,172 23,785 9,416 8,625 671 527 66,196 2008 US$’000 1,574 625 2,199	2007 US$’000 18,059 24,213 11,864 279 987 353
		55,755
		2007 US$’000 — —
		—

22 DERIVATIVE FINANCIAL INSTRUMENTS

The fair values of the leveraged foreign forward exchange contracts are calculated using discounted cash flow analysis based on the applicable yield curves of interest rates and foreign exchange rates as determined by counterparty financial institutions.

– 63 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at 31 December 2008, the Group had the following material leveraged forward exchange contracts:

(i) Peso and US$

As at 31 December 2008, the Group has an outstanding Peso target redemption forward contract. Under this contract, the Group will receive Peso against delivery of US$ at exchange rates of US$: Peso pre-determined in the contract.

Each time when the contract is executed, if the spot market exchange rate (‘‘spot rate’’) of US$: Peso is lower than the strike rate pre-determined in the contract (‘‘strike rate’’), the Group will receive Peso against delivery of US$ at the pre-determined exchange rate by paying the monthly normal nominal US$ amount set in the contract.

Each time when the contract is executed, if however, the spot rate of US$: Peso is higher than the strike rate, the Group will receive Peso against delivery of US$ at the pre-determined exchange rate by paying a geared nominal US$ amount set in the contract, which would be twice of the nominal US$ amount of US$1,000,000.

The Peso amount is deliverable in monthly instalments up to May 2009. This contract has a strike rate of US$1: Peso45.08.

This contract will be knocked out (i.e. the obligation on either the Group or the bank cease) when the accumulated intrinsic value (i.e. strike rate minus spot rate) is first greater than or equal to US$1: Peso6.

Under this contract, the Group will receive Peso against delivery of US$. The maximum deliverable outstanding amount to the Group under these contracts is Peso450,800,000 (equivalent to US$9,295,000 using the exchange rate as at 31 December 2008) and a maximum amount of US$10,000,000 to be delivered out by the Group. It is deliverable in instalments up to May 2009.

The Group recognized a fair value loss of US$1,004,000 in relation to these Peso related target redemption forward contracts during the year ended 31 December 2008 (2007: Nil).

(ii) RMB and US$

As at 31 December 2008, the Group also has certain RMB outstanding target redemption forward contracts. These contracts are settled in US$ by reference to the gains and losses against certain predetermined US$: RMB exchange rates and are calculated by reference to a notional US$ amount.

Each time when the contracts are executed, if the spot market exchange rate of US$: RMB is lower than a pre-determined movement of the exchange rates in the contracts, the Group will receive payment from the bank at rates ranged from 4.58% to 8.00% on the nominal US$ amount.

Each time when the contracts are executed, if however, the spot market exchange rate of US$: RMB is higher than a pre-determined movement of the exchange rates in the contracts at all time during the contract periods, the Group will make payments to the bank at coupon rates ranged from 2.47% to 2.78% on the nominal US$ amount.

The Group recognized a fair value loss of US$570,000 in relation to these contracts during the year ended 31 December 2008 (2007: Nil).

– 64 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(iii) Currency forward contracts

Under the contracts, the Group will receive US$ against delivery of Euro. The notional amounts under these contracts are to sell Euro4,518,000 for US$5,725,000. These contracts will be matured by May 2009.

23 REVENUE

Sales of garment, textile products and accessories Freight forwarding and logistics service fee Management income from related companies and a jointly controlled entity Rental income from a related company Commission income from — a related company — third parties Sales of quota Others Turnover	2008 US$’000 809,718 15,855 343 148 1,350 3,505 157 926 832,002	2007 US$’000 777,227 17,261 410 210 1,728 646 767 2,628
		800,877

24 OTHER GAINS — NET

Fair value losses on derivative financial instruments — leveraged forward exchange contracts (Note 22) — net losses on currency forward contracts Net foreign exchange gains Excess of the Group’s interest in the fair values of identifiable net assets acquired over the cost of the acquisition (Note 33)	2008 US$’000 (1,574) (625) 3,609 1,303 2,713	2007 US$’000 — — 2,259 —
		2,259

– 65 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

25 EXPENSES BY NATURE

Raw materials and consumables used Changes in inventories of finished goods and work in progress Loss/(gain) on disposal of property, plant and equipment Auditors’ remuneration Amortization of leasehold land and land use rights (Note 6) Amortization of intangible assets (Note 8) Provision for impairment of intangible assets (Note 8) Depreciation of property, plant and equipment (Note 7) Provision for impairment of property, plant and equipment Provision for claims Provision for impairment of receivables Write-off of non-current assets Provision for/(write-back of) inventory obsolescence Operating leases — office premises and warehouses — plant and machinery Quota expenses Employee benefit expense (Note 26) Transportation Commission Legal and professional fee Communication, supplies and utilities Write-back of other payables Other expenses Representing: Cost of sales Selling and distribution expenses General and administrative expenses	2008 US$’000 607,121 (15,129) 261 927 163 2,152 — 15,669 719 6,155 525 — 345 8,135 391 1,687 123,149 5,053 6,055 4,351 24,124 — 19,750 811,603 677,713 23,306 110,584 811,603	2007 US$’000 568,835 (335) (16) 774 91 2,054 758 14,436 — 4,540 397 2,204 (1,567) 6,661 1,476 5,975 116,088 4,747 3,567 4,617 24,845 (2,681) 21,675 779,141 645,982 26,158 107,001 779,141

– 66 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

26 EMPLOYEE BENEFIT EXPENSE — INCLUDING DIRECTORS’ EMOLUMENTS

(a) Employee benefit expenses during the year are as follows:

Wages, salaries and allowances Termination benefits Share options granted to directors and employees Pension costs — Defined contribution plans (Note 19(a)) — Defined benefit plans (Note 19(b)) — Long service payments (Note 19(c)) Others	2008 US$’000 117,488 2,414 425 1,130 885 135 672 123,149	2007 US$’000 112,937 566 563 847 793 73 309
		116,088

(b) Directors’ and senior management

The remuneration of every Director for the year ended 31 December 2008 is set out below:

					Employer’s
					contribution
			Discretionary	Other	to pension
Name of Director	Fees	Salary	bonuses	benefits1	scheme	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
Executive directors
Mr. Tan Siu Lin	—	113	—	—	—	113
Mr. Tan Henry	—	332	51	6	2	391
Mr. Tan Cho Lung, Raymond	—	242	37	40	2	321
Ms. Mok Siu Wan, Anne	—	377	542	42	133	1,094
Mr. Tan Sunny	—	112	17	10	2	141
Non-executive directors
Mr. Tan Willie	150	—	—	5	—	155
Mr. Lu Chin Chu	15	—	—	—	—	15
Independent non-executive directors
Mr. Chan Henry	15	—	—	—	—	15
Mr. Cheung Siu Kee	15	—	—	—	—	15
Mr. Seing Nea Yie	15	—	—	—	—	15

– 67 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The remuneration of every Director for the year ended 31 December 2007 is set out below:

					Employer’s
					contribution
			Discretionary	Other	to pension
Name of Director	Fees	Salary	bonuses	benefits1	scheme	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
Executive directors
Mr. Tan Siu Lin	—	122	—	—	—	122
Mr. Tan Henry	—	332	—	17	2	351
Mr. Tan Cho Lung, Raymond	—	242	19	47	2	310
Ms. Mok Siu Wan, Anne	—	377	391	44	107	919
Mr. Tan Sunny	—	112	17	26	2	157
Non-executive directors
Mr. Tan Willie	150	—	—	11	—	161
Mr. Lu Chin Chu2	5	—	—	—	—	5
Independent non-executive directors
Mr. Chan Henry	15	—	—	—	—	15
Mr. Cheung Siu Kee	15	—	—	—	—	15
Mr. Seing Nea Yie	15	—	—	—	—	15

• 1 Other benefits mainly include share option.

• 2 Mr. Lu Chin Chu was appointed as non-executive director on 17 September 2007.

None of the directors of the Company waived any emoluments paid by the group companies during the year (2007: Nil).

(c) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year included one (2007: two) director whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining four individuals (2007: three) during the year are as follows:

Basic salaries, other allowances and benefit in kind Discretionary bonuses Pension scheme contributions Others	2008 US$’000 868 1,000 10 458 2,336	2007 US$’000 755 704 13 —
		1,472

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The emoluments fell within the following bands:

Emolument bands US$387,001 to US$452,000 (equivalent to HK$3,000,001 to HK$3,500,000) US$580,645 to US$645,161 (equivalent to HK$4,500,001 to HK$5,000,000) US$645,162 to US$709,677 (equivalent to HK$5,000,001 to HK$5,500,000)	Number of 2008 1 2 1 4	individuals 2007 2 1 —
		3

During the year, no emoluments have been paid to the directors of the Company or the five highest paid individuals as an inducement to join or as compensation for loss of office.

27 FINANCE INCOME AND COSTS

Interest expense on bank loans and overdrafts Change in estimates of financial liabilities Interest expense on financial liabilities carried at amortized costs Finance costs Finance income — Interest income Net finance costs	2008 US$’000 2,698 567 1,344 4,609 (2,087) 2,522	2007 US$’000 3,684 (195) 1,181
		4,670 (3,601)
		1,069

28 INCOME TAX (CREDIT)/EXPENSE

Hong Kong profits tax has been provided at the rate of 16.5% (2007: 17.5%) on the estimated assessable profit for the year. Taxation on overseas profits has been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the countries in which the Group operates.

Current income tax: — Hong Kong profits tax — Overseas taxation Over-provision in prior years Deferred income tax (Note 12)	2008 US$’000 (1,615) 7,938 (7,224) (312) (1,213)	2007 US$’000 2,015 9,168 (6,471) (504)
		4,208

– 69 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

Profit before income tax Tax calculated at domestic tax rates applicable to profits in the respective countries Income not subject to tax Expenses not deductible for taxation purposes Tax losses for which no deferred income tax asset was recognized Utilization of previously unrecognized tax losses Tax effect of share of results of associated companies and jointly controlled entities Remeasurement of deferred tax — change in tax rate Over-provision in prior years Tax (credit)/charge	2008 US$’000 21,960 5,862 (1,731) 1,231 593 64 190 (198) (7,224) (1,213)	2007 US$’000 24,613 11,086 (2,927) 1,569 880 50 21 — (6,471) 4,208

The weighted average applicable tax rate was 26.7% (2007: 45.0%). The decrease is caused by a change of profitability of the Group’s subsidiaries in the respective countries.

Notes:

• (i) In prior years, certain overseas subsidiaries had made provision for tax liabilities based on their estimated taxable profits arising from their respective operating countries outside Hong Kong. The Directors have undertaken a review of the Group’s tax provisions as at 31 December 2008 and have determined that a provision for tax of US$7,224,000 would no longer be required and should be derecognized. Consequently, the amount of US$7,224,000 was taken to the consolidated income statement for the year ended 31 December 2008.

• (ii) In prior years, a Hong Kong subsidiary has received notices of additional assessments/assessments from the Hong Kong Inland Revenue department (‘‘IRD’’) for the years of assessment 2000/01 to 2007/08 demanding for tax totalling US$3,843,000 in respect of certain income, which the management has regarded as not subject to Hong Kong Profits Tax. The management has thoroughly revisited the situations and has concluded that the subsidiary company has good grounds to defend that the relevant income are not subject to Hong Kong Profits Tax. In these circumstances, the management has filed objections to these additional assessments/assessments and has concluded that no provision for these assessments is necessary. The subsidiary company has paid the amount of US$3,453,000 in the form of Tax Reserve Certificates. The Tax Reserve Certificates amount paid was included in prepayments in the consolidated balance sheet as at 31 December 2008.

• (iii) Two subsidiaries newly acquired during the year were under tax audit conducted by the IRD. As at 31 December 2008, the IRD has issued additional assessments to these entities from years of assessments 2000/01 to 2006/07, demanding tax totalling US$6,113,000. These subsidiaries have lodged objections to these assessments. The directors consider that sufficient tax provision has been made in the financial statements in this regard.

29 PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

The profit attributable to equity holders of the Company is dealt with in the financial statements of the Company to the extent of US$4,304,000 (2007: US$3,662,000).

– 70 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

30 EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

Profit attributable to equity holders of the Company Weighted average number of ordinary shares in issue Basic earnings per share (US cents per share)	2008 US$’000 11,829 992,500,000 1.2	2007 US$’000 12,515
		992,500,000
		1.3

There was no dilutive effect on earnings per share since all outstanding share options were anti-dilutive.

31 DIVIDENDS

Interim dividend paid of US0.213 cent or equivalent to HK1.661 cents (2007: US0.205 cent) per ordinary share Proposed final dividend of US0.145 cent or equivalent to HK1.124 cents (2007: US0.174 cent) per ordinary share	2008 US$’000 2,114 1,439 3,553	2007 US$’000 2,035 1,727
		3,762

The directors recommend the payment of a final dividend of US cent of 0.145 per share, totalling US$1,439,000. Such dividend is to be approved by the shareholders at the forthcoming Annual General Meeting. These financial statements do not reflect this dividend payable.

– 71 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

32 CONSOLIDATED CASH FLOW STATEMENTS

Profit before income tax Adjustment for: Share of losses/(profits) of associated companies Share of profits of jointly controlled entities Finance income (Note 27) Finance costs (Note 27) Fair value losses on derivative financial instruments Excess of the Group’s interest in the fair values of identifiable net assets acquired over the cost of the acquisition Amortization of intangible assets (Note 8) Amortization of leasehold land and land use rights (Note 6) Depreciation of property, plant and equipment (Note 7) Provision for impairment of property, plant and equipment Impairment of intangible assets Loss/(gain) on disposal of property, plant and equipment, net Share based compensation expense Operating profit before working capital changes Changes in working capital: Inventories Trade and bills receivables Amounts due from related companies Amounts due from associated companies and jointly controlled entities Deposits, prepayments and other receivables Trade and bills payables Amounts due to related companies Amounts due to associated companies and jointly controlled entities Other payables and accruals Retirement benefit obligation Cash generated from operations	2008 US$’000 21,960 16 (1,386) (2,087) 4,609 2,199 (1,303) 2,152 163 15,669 719 — 261 425 43,397 13,056 27,440 (968) 3,543 (7,764) (17,951) (2,020) 2,306 6,324 (704) 66,659	2007 US$’000 24,613 (95) (1,592) (3,601) 4,670 — — 2,054 91 14,436 — 758 (16) 563
		41,881 87 (6,213) (778) 1,651 4,514 11,849 1,338 1,563 414 840
		57,146

In the cash flow statement, proceeds from sale of property, plant and equipment comprise:

Net book amount (Note 7) (Loss)/gain on disposal of property, plant and equipment Proceeds from disposal of property, plant and equipment	2008 US$’000 1,582 (261) 1,321	2007 US$’000 823 16
		839

33 BUSINESS COMBINATIONS

On 8 August 2008, the Group acquired 60% interest in Trinew. Trinew and its subsidiaries are engaged in manufacturing and trading of laptop bags, luxury and fashionable bags. The acquired group contributed revenues of US$62,798,000 and net profit of US$613,000 to the Group for the period from 8 August 2008 to 31 December 2008. If the acquisition had occurred on 1 January 2008, Group’s revenue would have been US$913,622,000, and net profit attributable to the equity holders of the Company before allocations would have been US$7,865,000. These amounts have been calculated using the Group’s accounting policies and by adjusting

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

the results of the subsidiaries to reflect the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had applied from 1 January 2008, together with the consequential tax effects.

Details of net assets acquired are as follows:

Purchase consideration: — Cash paid — Contingent consideration Total purchase consideration	US$’000 16,524 1,021
	17,545

The minority shareholder of Trinew undertakes to reimburse the Group for any uncollected receivable from a specific customer up to an amount of US$30,000,000 over a three-year period until 7 August 2011.

The assets and liabilities as of 8 August 2008 arising from the acquisition are as follows:

Leasehold land and land use rights Property, plant and equipment Intangible assets Inventories Cash and cash equivalents Trade and bill receivables Deposits, prepayments and other receivables Trade and bill payables Other payables and accrual Bank borrowings Bank overdraft Deferred tax liabilities Current tax liabilities Minority interests (40%) Fair value of net assets acquired Excess of the Group’s interest in the fair value of the identifiable net assets acquired over acquisition cost (Note 24) Total purchase consideration Purchase consideration settled in cash Cash and cash equivalents in subsidiary acquired Bank overdraft in subsidiary assumed Cash outflow on acquisition	Fair value US$’000 5,892 27,123 709 24,019 4,302 35,726 1,026 (28,392) (8,224) (23,274) (908) (2,147) (4,438) 31,414 (12,566) 18,848 (1,303) 17,545	Acquiree’s carrying amount US$’000 1,398 24,547 — 24,019 4,302 35,726 1,026 (28,392) (8,224) (23,274) (908) (263) (4,438) 16,524 (4,302) 908
		13,130

There was no business combination during the year ended 31 December 2007.

– 73 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

34 COMMITMENTS

• (a) Capital commitments

As at 31 December 2008, the group had the following capital commitments:

Property, plant and equipment Contracted but not provided for	2008 US$’000 7,566	2007 US$’000 1,012

(b) Operating lease commitments

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Land and buildings — No later than 1 year — Later than 1 year and no later than 5 years — Later than 5 years Plant and equipment — No later than 1 year — Later than 1 year and no later than 5 years	2008 US$’000 3,635 6,141 6,725 16,501 224 186 410	2007 US$’000 3,770 5,736 4,163
		13,669
		173 170
		343

– 74 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

35 SIGNIFICANT RELATED PARTY TRANSACTIONS

Capital Glory Limited, a company incorporated in the British Virgin Islands, owns 61.89% in the Company’s shares. The directors regard the ultimate holding company of the Company to be Helmsley Enterprises Limited, a company incorporated in Bahamas. The ultimate controlling party of the Group is Mr. Tan Siu Lin.

(a) Transactions with related parties

During the year, the Group had the following significant transactions with related companies, associated companies and jointly controlled entities. Related companies are companies which are beneficially owned, or controlled, by Mr. Tan Siu Lin, Mr. Tan Henry, Mr. Tan Cho Lung, Raymond and Mr. Tan Sunny, Executive Directors of the Company, individually, jointly or collectively, or together with their close family members (collectively referred to as the ‘‘Tan’s Family’’).

(i) Provisions of goods and services

Management fee income from — related companies — a jointly controlled entity Commission income from a related company Freight forwarding and logistics service income from — related companies — an associated company — a jointly controlled entity Sales to a jointly controlled entity Rental income from a related company Recharge of advance payment and administrative expenses from related companies Subcontracting income from a jointly controlled entity Recharge of material costs and other expenses from jointly controlled entities	2008 US$’000 — 343 343 1,350 350 1 130 481 3,481 148 117 1,258 3,209	2007 US$’000 16 394
		410
		1,728
		348 — 336
		684
		15,458
		210
		397
		—
		3,734

– 75 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(ii) Purchases of goods and services

Rental expenses for occupying office premises, warehouses and staff quarters charged by related companies Travelling related service fees charged by related companies Professional and technological support service fees to related companies Freight forwarding and logistics services charged by related companies Air ticket and hotel reservation services charged by related companies Administrative and support service fees charged by related companies Subcontracting fee charged by — a related company — jointly controlled entities Commission expense charged by jointly controlled entities Purchase of material costs to a jointly controlled entity Handling service fee paid/payable to PT. Best Indo1, a related company	2008 US$’000 1,585 260 2,117 — 200 — 3,459 2,158 5,617 6,065 7,085 —	2007 US$’000 1,439
		629
		1,980
		6
		—
		542
		1,405 2,328
		3,733
		2,833
		6,553
		1,030

The above related party transactions were carried out in accordance with the terms mutually agreed by the respective parties.

• 1 PT. Best Indo is company incorporated in Indonesia and owned by Mr. Frank Hermann Fleischer, a minority shareholder of On Time and his family member.

(b) Key management compensation

Basic salaries and allowance Bonus Pension scheme contributions Others	2008 US$’000 3,604 2,047 158 — 5,809	2007 US$’000 2,650 1,178 126 —
		3,954

– 76 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(c) Banking facilities

As at 31 December 2008, certain banking facilities of certain subsidiaries of the Group were secured by the corporate guarantees given by the Company and a minority shareholder of a subsidiary.

The Company also provided corporate guarantees to the extent of HK$90,000,000 to Yuen Thai Industrial Co. Ltd., a jointly controlled entity of the Group.

(d) Amount due from/(to) related companies, associated companies and jointly controlled entities

As at 31 December 2008, the outstanding balances with the related companies, jointly controlled entities and associated companies are unsecured, interest-free and repayable on demand.

The credit quality of these balances that are neither past due nor impaired can be assessed by reference to historical information about counter party default rates. None of them have defaults and been renegotiated in the past.

(e) Loan from a minority shareholder of a subsidiary

As at 31 December 2008, there was a loan from a minority shareholder of a subsidiary amounting to US$3,097,000 (2007: Nil). The loan is unsecured, interest bearing at HIBOR plus 1.25% and repayable on 8 August 2011.

36 CONTINGENT LIABILITIES AND LITIGATION

The Group is involved in various labour lawsuits and claims arising from the normal course of business. The Directors believe that the Group has substantial legal and factual bases for their position and are of the opinion that losses arising from these lawsuits, if any, will not have a material adverse impact on the results of the operations or the financial position of the Group. Accordingly, no provision for such liabilities has been made in the financial statements.

37 EVENTS AFTER THE BALANCE SHEET DATE

On 17 February 2009, a subsidiary of the Group has entered into a Sales and Purchase Agreement with Luen Thai Land Limited, to acquire the entire issued share capital of Victory Land Properties Limited (‘‘Victory’’). Luen Thai Land Limited is a related company and is beneficially owned by the Tan’s family. The major asset of Victory is a piece of land located in the PRC. The consideration for this transaction was approximately US$6,318,000 (equivalent to HK48,969,000).

– 77 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. STATEMENT OF INDEBTEDNESS

Borrowings

As at the close of business on 31 July 2009, being the latest practicable date for the purpose of this indebtedness statement, the Group had the following outstanding borrowings:

Secured

Bank loans US$’million

Short-term Repayable within 1 year Long-term Repayable between 1 and 2 years Repayable between 2 and 5 years Unsecured Bank overdraft US$’million Short-term Repayable within 1 year 8 Long-term Repayable between 1 and 2 years — Repayable between 2 and 5 years — Repayable after 5 years — — 8	Trust receipt bank loans US$’million 21 — — — — 21	Bank loans US$’million 10 4 14 9 27 37	7
			2 1
			3
			10
			Total US$’million 39
			4 14 9
			27
			66

– 78 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at 31 July 2009, the Group also had an unsecured loan of US$3 million from a minority shareholder of a subsidiary.

In addition, the remaining consideration payable and financial liabilities for the acquisitions of certain subsidiaries (the ‘‘Consideration Payable’’) amounted to approximately US$35 million as at 31 July 2009.

The Consideration Payable comprises the remaining consideration payable for the acquisition of a subsidiary and the amounts payable upon the exercise of the put options granted to the vendors of those subsidiaries for the remaining interests held by these minority shareholders.

Collateral

As at the close of business on 31 July 2009, being the latest practicable date for the purpose of this indebtedness statement, the outstanding secured bank borrowings of the Group were secured by:

• (a) a corporate guarantee from the Company and certain subsidiaries of the Group amounting to US$58 million;

• (b) certain properties of the Group with carrying value of US$11 million;

• (c) certain properties of a minority shareholder of a subsidiary of the Group;

• (d) a personal guarantee from a minority shareholder of a subsidiary amounting to US$10 million; and

• (e) certain bank deposits of the Group amounting to US$2 million.

Contingent liabilities, litigation and guarantee

• (a) At the close of business on 31 July 2009, the Group was involved in various labour lawsuits and claims arising from the normal course of business. The Directors believe that the Group has substantial legal and factual bases for their position and are of the opinion that losses arising from these lawsuits, if any, will not have a material adverse impact on the result of the operations or the financial position of the Group. Accordingly, no provision for loss has been made in the Group’s consolidated financial statements.

• (b) The Group provided corporate guarantees to the extent of HK$90,000,000 to Yuen Thai Industrial Co. Ltd. (‘‘Yuen Thai’’), a jointly controlled entity of the Group for the banking facilities available to Yuen Thai.

Save as aforesaid, the Group had no material contingent liabilities or guarantees as at 31 July 2009.

– 79 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Disclaimers

Save as aforesaid and apart from intra-group liabilities, as at the close of business on 31 July 2009, the Group did not have any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or similar indebtedness liabilities under acceptances (other than normal trade bills), acceptance credits, debentures, mortgages, charges, finance leases or hire purchases commitments, guarantees or other contingent liabilities.

For the purpose of the above statement of indebtedness, foreign currency amounts have been translated into US Dollars at the rates of exchange prevailing at the close of business on 31 July 2009.

4. WORKING CAPITAL

Taking into account the expected completion of the Transaction and the financial resources available to the Group, including the internally generated funds and the available banking facilities, the directors of the Company are of the opinion that the Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of this circular.

– 80 –

APPENDIX II

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. 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 herein misleading.

2. DISCLOSURE OF INTERESTS

(i) Interests of Directors in the Company and its associated corporations

• (a) As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company or its associated corporations which were required to be notified to the Company and the Stock Exchange (a) pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); (b) pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to be notified to the Company and the Stock Exchange, were as follows:

Long positions in the shares:

			Approximate
		Number of	percentage of
		ordinary	interest in
Name of Director	Capacity	shares	Company
Tan Siu Lin	Trustee (Note 1)	66,493,000	6.7%
	Interest of controlled	10,000,000	1.01%
	corporation
	(Note 1)
Tan Henry	Beneficiary (Note 1)	66,493,000	6.7%
	Beneficial owner	450,000	0.05%
	(Notes 3 and 4)
	Interest of controlled	614,250,000	61.89%
	corporation
	(Note 2)

– 81 –

APPENDIX II

GENERAL INFORMATION

			Approximate
		Number of	percentage of
		ordinary	interest in
Name of Director	Capacity	shares	Company
Tan Willie	Beneficiary (Note 1)	66,493,000	6.7%
	Beneficial owner	1,450,000	0.15%
	(Notes 3 and 6)
Tan Cho Lung,	Beneficiary (Note 1)	66,493,000	6.7%
Raymond
	Beneficial owner	749,000	0.08%
	(Notes 3, 4 and 7)
Tan Sunny	Beneficiary (Note 1)	66,493,000	6.7%
	Beneficial owner	1,022,000	0.1%
	(Notes 3, 4 and 8)
Mok Siu Wan,	Beneficial owner	3,200,000	0.32%
Anne	(Notes 3,4 and 5)

Notes:

1. Mr. Tan Siu Lin is the settlor and trustee of the Tan Family Trust of 2004,. As the settlor and trustee of the Tan Family Trust of 2004, which is a revocable discretionary trust, Mr. Tan Siu Lin is deemed under Part XV of the SFO to be interested in the aggregate shareholdings of Tan Holdings Corporation (‘‘Tan Holdings Corporation’’), a company incorporated in Commonwealth of Northern Mariana Islands, which in turn owns directly the entire issued capital of Union Bright Limited. Union Bright Limited holds directly 60,750,000 Shares (or approximately 6.12% of the issued share capital of the Company). The Tan Family Trust of 2004 also owns directly the entire issued share capital of Wincare International Company Limited, which in turn holds directly 5,743,000 Shares (or approximately 0.58% of the issued share capital of the Company). Mr. Tan Siu Lin also controls and is a subscriber and founding member of Tan Siu Lin Foundation Limited, which in turn owns directly 10,000,000 Shares (or approximately 1.01% of the issued share capital of the Company).

Each of Mr Tan Henry, Mr Tan Willie, Mr Tan Cho Lung, Raymond and Mr Tan Sunny is a beneficiary of the Tan Family Trust of 2004, and each of them is deemed under Part XV of the SFO to be interested in the shareholdings of Tan Holdings Corporation, Union Bright Limited and Wincare International Company Limited.

1. Mr. Tan Henry is the beneficial owner of 3,500 issued shares (representing 70% interest) in Helmsley Enterprises Limited (‘‘Helmsley’’), a company incorporated in the Commonwealth of the Bahamas. Helmsley wholly owns Capital Glory Limited, which in turn owns 614,250,000 Shares, or approximately 61.89% interest in the issued share capital of the Company.

– 82 –

APPENDIX II

GENERAL INFORMATION

1. Each of Mr. Tan Henry, Mr. Tan Willie, Mr. Tan Cho Lung, Raymond, Ms. Mok Siu Wan Anne and Mr. Tan Sunny is a grantee of the respective share options granted by the Company on 26 January 2006.

2. Each of Mr. Tan Henry, Mr. Tan Cho Lung, Raymond, Ms. Mok Siu Wan Anne and Mr. Tan Sunny is a grantee of the share options granted by the Company on 10 November 2006.

3. Ms. Mok Siu Wan, Anne is a grantee of the share options granted by the Company on 21 April 2008.

4. A total of 1,150,000 Shares were acquired by an associate of Mr. Tan Willie between 2005 and 2008. He is therefore deemed under Part XV of the SFO to be interested in all of the 1,150,000 Shares acquired by his associate.

5. A total of 449,000 Shares were acquired by an associate of Mr. Tan Cho Lung, Raymond in 2006 and 2008. He is therefore deemed under Part XV of the SFO to be interested in all of the 449,000 shares acquired by his associate.

6. Mr. Tan Sunny acquired a total of 322,000 Shares in 2006.

Long positions in the shares of associated corporations of the Company (as defined in the SFO)

				Approximate
				percentage of
			Number of	attributable
	Name of associated		ordinary	interest in
Name of Director	corporation	Capacity	shares	corporation
Tan Siu Lin	Helmsley (Note 1)	Trustee (Note 4)	1,500	30%
	Capital Glory Limited	Trustee (Note 4)	1	100%
	(Note 2)
	Justintime Development	Trustee (Note 4)	1	100%
	Limited (Note 3)
	Tripletrio International	Trustee (Note 4)	42,500	100%
	Limited (Note 3)
	Newtex International	Trustee (Note 4)	2	100%
	Limited (Note 3)
	Torpedo Management	Trustee (Note 4)	1	100%
	Limited (Note 3)
	Integrated Solutions	Trustee (Note 4)	1	100%
	Technology Inc.
	(a Cayman Islands
	corporation) (Note 3)
	Eldex Del Golfo,	Trustee (Note 4)	11,819	100%
	SA de CV (Note 3)

– 83 –

GENERAL INFORMATION

APPENDIX II

				Approximate
				percentage of
			Number of	attributable
	Name of associated		ordinary	interest in
Name of Director	corporation	Capacity	shares	corporation
	Servicios Textiles	Trustee (Note 4)	50	100%
	Mexicanos, SA
	(Note 3)
	Hanium Industries	Trustee (Note 4)	1	100%
	Limited (Note 3)
	Integrated Solutions	Trustee (Note 4)	2	100%
	Technology Inc. (a HK
	corporation) (Note 3)
	Integrated Solutions	Trustee (Note 4)	1	100%
	Technology Inc. (a BVI
	corporation) (Note 3)
	Integrated Solutions	Trustee (Note 4)	1	100%
	Technology Inc.
	(a Philippines
	corporation) (Note 3)
Tan Henry	Helmsley (Note 1)	Beneficial owner	3,500	100%
		Beneficiary	1,500
		(Note 5)
	Capital Glory Limited	Beneficiary	1	100%
	(Note 2)	(Note 5)
	Justintime Development	Beneficiary	1	100%
	Limited (Note 3)	(Note 5)
	Tripletrio International	Beneficiary	42,500	100%
	Limited (Note 3)	(Note 5)
	Newtex International	Beneficiary	2	100%
	Limited (Note 3)	(Note 5)
	Torpedo Management	Beneficiary	1	100%
	Limited (Note 3)	(Note 5)
	Integrated Solutions	Beneficiary	1	100%
	Technology Inc.	(Note 5)
	(a Cayman Islands
	corporation) (Note 3)
	Eldex Del Golfo,	Beneficiary	11,819	100%
	SA de CV (Note 3)	(Note 5)

– 84 –

GENERAL INFORMATION

APPENDIX II

				Approximate
				percentage of
			Number of	attributable
	Name of associated		ordinary	interest in
Name of Director	corporation	Capacity	shares	corporation
	Servicios Textiles	Beneficiary	50	100%
	Mexicanos, SA	(Note 5)
	(Note 3)
	Hanium Industries	Beneficiary	1	100%
	Limited (Note 3)	(Note 5)
	Integrated Solutions	Beneficiary	2	100%
	Technology Inc. (a HK	(Note 5)
	corporation) (Note 3)
	Integrated Solutions	Beneficiary	1	100%
	Technology Inc. (a BVI	(Note 5)
	corporation) (Note 3)
	Integrated Solutions	Beneficiary	1	100%
	Technology Inc.	(Note 5)
	(a Philippines
	corporation) (Note 3)
Tan Willie	Helmsley (Note 1)	Beneficiary	1,500	30%
		(Note 6)
	Capital Glory Limited	Beneficiary	1	100%
	(Note 2)	(Note 6)
	Justintime Development	Beneficiary	1	100%
	Limited (Note 3)	(Note 6)
	Tripletrio International	Beneficiary	42,500	100%
	Limited (Note 3)	(Note 6)
	Newtex International	Beneficiary	2	100%
	Limited (Note 3)	(Note 6)
	Torpedo Management	Beneficiary	1	100%
	Limited (Note 3)	(Note 6)
	Integrated Solutions	Beneficiary	1	100%
	Technology Inc.	(Note 6)
	(a Cayman Islands
	corporation) (Note 3)
	Eldex Del Golfo,	Beneficiary	11,819	100%
	SA de CV (Note 3)	(Note 6)

– 85 –

APPENDIX II

GENERAL INFORMATION

				Approximate
				percentage of
			Number of	attributable
	Name of associated		ordinary	interest in
Name of Director	corporation	Capacity	shares	corporation
	Servicios Textiles	Beneficiary	50	100%
	Mexicanos, SA	(Note 6)
	(Note 3)
	Hanium Industries	Beneficiary	1	100%
	Limited (Note 3)	(Note 6)
	Integrated Solutions	Beneficiary	2	100%
	Technology Inc.	(Note 6)
	(a HK corporation)
	(Note 3)
	Integrated Solutions	Beneficiary	1	100%
	Technology Inc.	(Note 6)
	(a BVI corporation)
	(Note 3)
	Integrated Solutions	Beneficiary	1	100%
	Technology Inc.	(Note 6)
	(a Philippines
	corporation) (Note 3)
Tan Cho Lung,	Helmsley (Note 1)	Beneficiary	1,500	30%
Raymond		(Note 6)
	Capital Glory Limited	Beneficiary	1	100%
	(Note 2)	(Note 6)
	Justintime Development	Beneficiary	1	100%
	Limited (Note 3)	(Note 6)
	Tripletrio International	Beneficiary	42,500	100%
	Limited (Note 3)	(Note 6)
	Newtex International	Beneficiary	2	100%
	Limited (Note 3)	(Note 6)
	Torpedo Management	Beneficiary	1	100%
	Limited (Note 3)	(Note 6)
	Integrated Solutions	Beneficiary	1	100%
	Technology Inc.	(Note 6)
	(a Cayman Islands
	corporation) (Note 3)
	Eldex Del Golfo,	Beneficiary	11,819	100%
	SA de CV (Note 3)	(Note 6)

– 86 –

APPENDIX II

GENERAL INFORMATION

				Approximate
				percentage of
			Number of	attributable
	Name of associated		ordinary	interest in
Name of Director	corporation	Capacity	shares	corporation
	Servicios Textiles	Beneficiary	50	100%
	Mexicanos, SA	(Note 6)
	(Note 3)
	Hanium Industries	Beneficiary	1	100%
	Limited (Note 3)	(Note 6)
	Integrated Solutions	Beneficiary	2	100%
	Technology Inc.	(Note 6)
	(a HK corporation)
	(Note 3)
	Integrated Solutions	Beneficiary	1	100%
	Technology Inc.	(Note 6)
	(a BVI corporation)
	(Note 3)
	Integrated Solutions	Beneficiary	1	100%
	Technology Inc.	(Note 6)
	(a Philippines
	corporation) (Note 3)
Tan Sunny	Helmsley (Note 1)	Beneficiary	1,500	30%
		(Note 6)
	Capital Glory Limited	Beneficiary	1	100%
	(Note 2)	(Note 6)
	Justintime Development	Beneficiary	1	100%
	Limited (Note 3)	(Note 6)
	Tripletrio International	Beneficiary	42,500	100%
	Limited (Note 3)	(Note 6)
	Newtex International	Beneficiary	2	100%
	Limited (Note 3)	(Note 6)
	Torpedo Management	Beneficiary	1	100%
	Limited (Note 3)	(Note 6)
	Integrated Solutions	Beneficiary	1	100%
	Technology Inc.	(Note 6)
	(a Cayman Islands
	corporation) (Note 3)
	Eldex Del Golfo,	Beneficiary	11,819	100%
	SA de CV (Note 3)	(Note 6)

– 87 –

APPENDIX II

GENERAL INFORMATION

						Approximate
						percentage of
					Number of	attributable
			Name of associated		ordinary	interest in
Name	of	Director	corporation	Capacity	shares	corporation
			Servicios Textiles	Beneficiary	50	100%
			Mexicanos, SA	(Note 6)
			(Note 3)
			Hanium Industries	Beneficiary	1	100%
			Limited (Note 3)	(Note 6)
			Integrated Solutions	Beneficiary	2	100%
			Technology Inc. (a HK	(Note 6)
			corporation) (Note 3)
			Integrated Solutions	Beneficiary	1	100%
			Technology Inc. (a BVI	(Note 6)
			corporation) (Note 3)
			Integrated Solutions	Beneficiary	1	100%
			Technology Inc.	(Note 6)
			(a Philippines
			corporation) (Note 3)

Notes:

1. Helmsley is the holding company of Capital Glory Limited, which is, in turn, the holding company of the Company. Helmsley is therefore an associated corporation of the Company as defined under Part XV of the SFO.

2. Capital Glory Limited is the holding company of the Company. It is therefore an associated corporation of the Company.

3. This is a subsidiary of Helmsley. It is therefore an associated corporation of the Company.

4. Mr. Tan Siu Lin is the settlor and trustee of the Tan Family Trust of 2004, which directly holds 1,500 issued shares (or 30% interest) in Helmsley. As the settlor and trustee of the Tan Family Trust of 2004, which is a revocable discretionary trust, Mr. Tan Siu Lin is deemed under Part XV of the SFO to be interested in the interests of the Tan Family Trust of 2004 in each of Helmsley and its subsidiaries respectively.

5. Mr. Tan Henry directly holds 3,500 issued shares (or 70% interest) in Helmsley. Mr. Tan Henry is also one of the beneficiaries of the Tan Family Trust of 2004, which directly holds 1,500 issued shares (or 30% interest) in Helmsley. He is therefore deemed under Part XV of the SFO to be interested in the interests of the Tan Family Trust of 2004 in each of Helmsley and its subsidiaries respectively.

– 88 –

GENERAL INFORMATION

APPENDIX II

1. Each of Mr. Tan Willie, Mr. Tan Cho Lung, Raymond and Mr. Tan Sunny is a beneficiary of the Tan Family Trust of 2004, which directly holds 1,500 issued shares (or 30% interest) in Helmsley. Each of them is therefore deemed under Part XV of the SFO to be interested in the interests of the Tan Family Trust of 2004 in each of Helmsley and its subsidiaries respectively.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and the chief executives of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company and its associated corporations which are required (a) 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 were taken or deemed to have under such provisions of the SFO); (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to be notified to the Company and Stock Exchange.

• (b) As at the Latest Practicable Date, none of the Directors had entered into any service agreement with any member of the Group which was not terminable by the employer within one year without payment of compensation other than statutory compensation.

(ii) Interests of Substantial Shareholders

• (a) As at the Latest Practicable Date, so far as was known to the Directors, the following persons, not being Directors or chief executive of the Company had, or were deemed to have, interests or short positions in the shares, underlying shares and debentures of the Company 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 was, 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 member of the Group or held any option in respect of such capital:

		Number of	Approximate
		ordinary	percentage of
Name	Capacity	shares	shareholding
Capital Glory	Beneficial owner	614,250,000	61.89%
Limited
(Note 1)
Helmsley	Interest of controlled	614,250,000	61.89%
Enterprises	corporation
Limited
(Note 1)

– 89 –

APPENDIX II

GENERAL INFORMATION

Notes:

1. Capital Glory Limited is a wholly-owned subsidiary of Helmsley. Helmsley is therefore deemed to be interested in the interests of Capital Glory Limited held in the Company.

2. (a) Both of Mr. Tan Siu Lin and Mr. Tan Henry are directors in each of Capital Glory Limited and Helmsley Enterprises Limited.

3. (b) Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other person, other than the Directors and the chief executives of the Company, who had, or was deemed to have, interests or short positions in the shares, underlying shares and debentures of the Company 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 was, 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 member of the Group or held any option in respect of such capital.

3. DIRECTORS’ INTERESTS IN COMPETING BUSINESSES

As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors or any of their respective associates had a controlling interest in a business which causes or may cause any significant direct or indirect competition with the business of the Group or any significant conflicts with the interests of the Group, save for Kardon International Worldwide Ltd. (‘‘Kardon’’). The particulars of such business of Kardon are as follows:

Kardon is a company incorporated in the British Virgin Islands, which manufactures knitted sweaters in Indonesia. A.M. International Manufacturing Company Limited (‘‘AMI’’) is a Connected Person of the Company and a wholly owned company of Kardon, which is a 42%-owned company of Luen Thai Direct Investment Limited (‘‘LTDI’’). Though LTDI is a shareholder of Kardon, Kardon is in fact a joint venture in which LTDI has no control, either at the shareholder or board levels. Kardon is owned as to the other 42% by an independent third party who is not a Connected Person of the Company and the remaining 16% by the management of Kardon who is also not a Connected Person of the Company. LTDI is wholly owned by Admirable Investment Holdings Limited, which in turn is indirectly owned by Mr. Tan Siu Lin, a Director.

As disclosed in the circular dated 15 December 2008 of the Company, Mr. Tan Siu Lin has a material interest in the master agreement dated 26 November 2008 (the ‘‘New Master Agreement’’) and the transactions as contemplated thereunder. The New Master Agreement was entered into between AMI and Partner Joy Group Limited (‘‘Partner Joy’’), an indirect 90%-owned subsidiary of the Company. Pursuant to the New Master Agreement, the Group, through Partner Joy, engaged AMI as its sub-contractor for the provision of garment manufacturing services. As disclosed above, AMI is a Connected Person of the Company by virtue of its shareholding relationship with Admirable Investment Holdings Limited, which is indirectly owned by Mr. Tan Siu Lin. Save as disclosed above, there are no contracts or arrangements subsisting as at the Latest Practicable Date in which a Director is materially interested or which is significant in relation to the business of the Group.

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APPENDIX II

GENERAL INFORMATION

As at the Latest Practicable Date, no Director has any interest, direct or indirect, in any assets which have been, since 31 December 2008, acquired or disposed of by or leased to any member of the Group or proposed to be acquired or disposed of by or leased to any member of the Group.

4. SERVICE CONTRACTS

Except for Ms Mok Siu Wan, Anne and Mr. Tan Sunny, each of the executive Directors has entered into a service agreement with the Company for an initial fixed period of three years commencing from 27 June 2007, and thereafter shall continue subject to termination by either the Company or the Director giving three months’ notice in writing to the other party.

The respective monthly salaries of the executive Directors are set out below:

Mr Tan Siu Lin HK$76,700 Mr Tan Henry HK$198,000 Mr Tan Cho Lung, Raymond HK$144,000 Ms Mok Siu Wan, Anne HK$224,584 Mr Tan Sunny HK$67,000

Pursuant to the letter of appointment dated 17 September 2007, Mr Lu Chin Chu was appointed as a non-executive Director for a fixed period of three years commencing from 17 September 2007. Mr Lu Chin Chu is entitled to an annual director’s fee of HK$120,000.

The directorship of Mr. Tan Willie was re-designated from an executive Director to a non-executive Director on 26 May 2006 with an annual salary of US$150,000 pursuant to a service agreement dated 26 May 2006 for a fixed period of three years commencing from 26 May 2006. The service contract was renewed on 26 May 2009 for a fixed period of three years commencing from 26 May 2009, with an annual salary of US$150,000.

Pursuant to the letter of re-appointment from the Company to each of Mr. Seing Nea Yie, Mr. Chan Henry and Mr. Cheung Siu Kee dated 28 January 2008, 4 April 2007 and 4 April 2007 respectively, the re-appointment of each of these independent non-executive Directors was for a term of three years commencing from 28 January 2008, 16 April 2007 and 16 April 2007 respectively. Each of these independent non-executive Directors shall be entitled to an annual fee of HK$120,000 with effect from 1 January 2007.

Save as disclosed in this circular, the Company has not entered into any service agreements of directors as at the Latest Practicable Date.

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APPENDIX II

GENERAL INFORMATION

5. MATERIAL CONTRACTS

As at the Latest Practicable Date, the following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Group within the two years immediately preceding the Latest Practicable Date which are or may be material:

• (a) the land disposal agreement dated 6 March 2008 entered into between GJM (Qingyuan) Light Industrial Development Limited (‘‘GJM’’), an indirect whollyowned subsidiary of the Company and the Qingyuan Land Reserves Centre, an unit of the Qingyuan City State-Owned Resources Bureau, in relation to the conversion of the Converted Land from industrial use to commercial/residential use. Pursuant to the land disposal agreement, the Converted Land was disposed of to the Qingyuan Land Reserves Centre for public auction in relation to the conversion. GJM re-acquired the Converted Land at the auction at the floor price, and the total land premium payable by the Group for the conversion is approximately RMB53,400,000;

• (b) a sale and purchase agreement dated 11 June 2008 and entered into among Ospella International Limited (‘‘Ospella’’) as the vendor, Owen John Inglis (‘‘Mr Inglis’’) as the guarantor of Ospella, Fortune Investment Overseas Limited (‘‘Fortune Investment’’), an indirect wholly-owned subsidiary of the Company, as the purchaser, and Luen Thai Overseas Limited, a wholly-owned subsidiary of the Company, as the guarantor of Fortune Investment in relation to the acquisition of 600 shares (or 60% interest) in the issued share capital of Trinew Limited (‘‘Trinew SPA’’) up to the maximum consideration of HK$488,160,000;

• (c) a supplemental letter agreement dated 16 June 2008 entered into among the parties to the Trinew SPA, which supplemented and amended certain terms of the Trinew SPA. Pursuant to the supplemental letter, the parties to the Trinew SPA agreed that the aggregate amount of consideration payable by Fortune Investment to Ospella for the acquisition of all the shares under the Trinew SPA and the First Option Deed and the Second Option Deed (both as defined in paragraphs 5(h) and (i) below) shall not exceed HK$900 million;

• (d) a shareholders agreement dated 8 August 2008 entered into among Ospella, Fortune Investment and Trinew Limited in relation to Trinew Limited;

• (e) a charge over account dated 8 August 2008 executed by Ospella in favour of Fortune Investment, under which certain cash deposits in the sum of HK$62,320,000 were charged as security for the obligations of Ospella and Mr Inglis under the Trinew SPA (‘‘Trinew Charge over Account’’);

• (f) a share charge dated 8 August 2008 entered into between Ospella and Fortune Investment pursuant to which Ospella charged in favour of Fortune Investment certain shares owned by Ospella in Trinew Limited as security for the obligations of Ospella and Mr Inglis under the Trinew SPA;

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APPENDIX II

GENERAL INFORMATION

• (g) a deed of tax indemnity dated 8 August 2008 entered into among Trinew Limited, Ospella, Mr Inglis, Fortune Investment and certain subsidiaries of Trinew Limited, namely Desk Top Limited, Desk Top Bags (Mfg) Ltd., Desk Top Manufacturacao Malas. Lda., DLuxe Bags Limited, Dongguan Xingxi Handbags Factory Co., Limited and Dongguan Xing Hao Handbags Factory Co., Limited in relation to the Trinew SPA;

• (h) an option deed dated 8 August 2008 entered into among Fortune Investment, Ospella and Mr Inglis in relation to the sale and purchase of the first 200 shares (or 20% interest) in Trinew Limited (‘‘First Option Deed’’);

• (i) an option deed dated 8 August 2008 entered into among Fortune Investment, Ospella and Mr Inglis in relation to the sale and purchase of the second 200 shares (or 20% interest) in Trinew Limited (‘‘Second Option Deed’’);

• (j) an agreement dated 12 December 2008 entered into between Consolidated Transaction Services Inc, a wholly-owned subsidiary of the Company, and Paxia Builders, Inc. for the construction of a warehouse in Guam at the consideration of approximately US$4,361,500;

• (k) a second supplemental agreement dated 29 December 2008 entered into among Ospella, Fortune Investment, Mr Inglis, Luen Thai Overseas Limited and Desk Top Limited for variation of the terms of the Trinew SPA;

• (l) a supplemental deed 29 December 2008 entered into between Ospella and Fortune Investment for variation of the terms of the Trinew Charge over Account, pursuant to which a sum of HK$24,000,000 was released from the Trinew Charge over Account;

• (m) a shareholders’ loan agreement dated 29 December 2008 entered into among Ospella, Fortune Investment and Desk Top Limited for the provision of the shareholders’ loans to Desk Top Limited in the aggregate sum of HK$60,000,000 in the following proportion: HK$36,000,000 thereof by Fortune Investment, and the remaining HK$24,000,000 by Ospella;

• (n) a charge over account receivables dated 29 December 2008 executed by Ospella in favour of Fortune Investment, under which certain account receivables were charged as security for the obligations of Ospella and Mr Inglis under the Trinew SPA;

• (o) a sale and purchase agreement dated 17 February 2009 and entered into between Luen Thai Land Limited, a Connected Person of the Company, and Sunny Force Limited, an indirect wholly-owned subsidiary of the Company, in relation to the acquisition by Sunny Force Limited of the entire issued share capital of Victory Land Properties Limited at the consideration of HK$32,468,000 and the shareholder’s loans at the consideration of HK$16.5 million, pursuant to which the Group acquired the Adjoining Land; and

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APPENDIX II

GENERAL INFORMATION

• (p) the Construction Contract.

6. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial position or trading position of the Group since 31 December 2008, being the date to which the latest published audited financial statements of the Group was made up.

7. LITIGATION

As at the Latest Practicable Date, the Group was involved in various labour lawsuits and claims arising from the normal course of business. The Directors believe that the Group has substantial legal and factual basis for their position and are of the opinion that losses arising from this lawsuits, if any, will not have material adverse impact on results of the operations or the financial position of the Group.

8. MISCELLANEOUS

• (a) The registered head office of the Company is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111 Cayman Islands.

• (b) The principal share registrar and transfer office of the Company is HSBC Trustee (Cayman) Limited at P.O. Box 484, HSBC House, 68 West Bay Road, Grand Cayman, KY1-1106, Cayman Islands.

• (c) The share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (d) The company secretary of the Company is Mr. Chiu Chi Cheung, Associate Member of The Hong Kong Institute of Certified Public Accountants.

• (e) In the event of any inconsistency, the English text of this circular shall prevail over the Chinese text.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the Company’s principal place of business in Hong Kong at 5/F, Nanyang Plaza, 57 Hung To Road, Kwun Tong, Kowloon, Hong Kong for a period of 14 days (except public holidays) from the date of this circular:

• (a) the letter from the Board, the text of which is set out on pages 3 to 9 of this circular;

• (b) the memorandum and articles of association of the Company;

• (c) this circular;

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APPENDIX II

GENERAL INFORMATION

• (d) the Construction Contract;

• (e) all the material contracts referred to in the paragraph 5 headed ‘‘Material Contracts’’ in this Appendix II;

• (f) all the service contracts referred to in the paragraph 4 headed ‘‘Service Contracts’’ in this Appendix II;

• (g) the annual reports of the Company for each of the two years ended 31 December 2007 and 2008;

• (h) circular issued by the Company dated 15 January 2009; and

• (i) circular issued by the Company dated 10 March 2009.

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