Luye Pharma Group Limited — Proxy Solicitation & Information Statement 2005

Nov 11, 2005

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 or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisor.

If you have sold or transferred all your shares in Takson Holdings Limited , you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

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TAKSON HOLDINGS LIMITED 第一德勝控股有限公司 [*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 918)

MAJOR TRANSACTION

DISPOSAL OF PROPERTY

Financial Adviser

~~CENTURION CORPORATE FINANCE LIMITED~~

Independent and Qualified Valuer

Dudley Surveyors Limited

Hong Kong, 11th November, 2005

* for identification purpose only

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
The Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Reasons for the Disposal and use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Financial effects of the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Appendix I — Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . . . . .	9
Appendix II — Property Valuation Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
Appendix III — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42

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DEFINITIONS

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

“Board”	the board of Directors
“Company”	Takson Holdings Limited第一德勝控股有限公司*, a
	company incorporated in Bermuda with limited liability
	whose shares are listed on the main board of the Stock
	Exchange
“connected person”	has the meaning ascribed to it under the Listing Rules
“Director(s)”	the director(s) of the Company
“Disposal”	the disposal of the Property by the Vendor to the
	Purchaser pursuant to the Provisional Sale and Purchase
	Agreement
“Formal Agreement”	the formal sale and purchase agreement to be entered
	into between the Vendor and the Purchaser in relation to
	the sale and purchase of the Property pursuant to the
	Provisional Sale and Purchase Agreement
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC
“Latest Practicable Date”	9th November, 2005, being the latest practicable date
	prior to the printing of this circular for ascertaining
	certain information contained in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange
“PRC”	the People’s Republic of China
“Property”	Workshop Unit 06, 3rd Floor, Tower One, Harbour
	Centre, 1 Hok Cheung Street, Kowloon, Hong Kong

* for identification purpose only

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DEFINITIONS

“Provisional Sale and	the provisional sale and purchase agreement dated 29th
Purchase Agreement”	September, 2005 entered into between the Vendor and
	the Purchaser in relation to the sale and purchase of the
	Property
“Purchase Price”	the purchase price of HK$22,650,000 for the Property
“Purchaser”	Jetfull International Investment Limited, being a third
	party independent of the Company, its subsidiaries, their
	respective directors, chief executive and substantial
	shareholders or any of their respective associates, or its
	nominee
“SFO”	the Securities and Futures Ordinance (Chapter 571 of
	the Laws of Hong Kong)
“Shareholders”	holder(s) of the share(s) in the capital of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Valuer”	Dudley Surveyors Limited, an independent and qualified
	valuer
“Vendor”	Takson Properties Limited, a wholly-owned subsidiary
	of the Company
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.

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LETTER FROM THE BOARD

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TAKSON HOLDINGS LIMITED 第一德勝控股有限公司 [*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 918)

Executive Directors:

Mr. Wong Tek Sun, Takson (Chairman) Ms. Pang Shu Yuk, Adeline Rita

Independent Non-executive Directors:

Mr. Lee Kwok Cheung Mr. Chau Tsun Ming, Jimmy Mr. Zheng Jie

Non-executive Director:

Mr. Wong Tak Yuen

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

Head Office and Principal Place of Business in Hong Kong: 5th Floor, South Wing Harbour Centre Tower One 1 Hok Cheung Street Hunghom, Kowloon Hong Kong

11th November, 2005

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION DISPOSAL OF PROPERTY

INTRODUCTION

By an announcement dated 29th September, 2005 the Directors announced that the Vendor, a wholly-owned subsidiary of the Company, entered into the Provisional Sale and Purchase Agreement with the Purchaser to dispose of the Property at a consideration of HK$22,650,000.

* For identification purpose only

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LETTER FROM THE BOARD

As the relevant percentage ratios calculated under Chapter 14 of the Listing Rules in respect of the Disposal exceeds 25% but are less than 75%, the Disposal constitutes a major transaction of the Company under Chapter 14 of the Listing Rules.

The Company has obtained from Takson International Holdings Limited, which holds approximately 61% in nominal value of the securities giving the right to attend and vote at any general meeting of the Company, written approval of the Disposal. As none of the Shareholders is materially interested in the Disposal, no Shareholder would be required to abstain from voting if a general meeting of the Company were to be convened to approve the Disposal contemplated under the Provisional Sale and Purchase Agreement. Pursuant to Rule 14.44 of the Listing Rules, the Disposal which constitutes a major transaction has been approved by way of written shareholders’ approval in lieu of holding a general meeting of the Company.

The purpose of this circular is to provide the Shareholders with (i) further information on the Disposal; (ii) the Valuer’s report on the Property; and (iii) other information in compliance with the requirements of the Listing Rules.

THE DISPOSAL

Provisional Sale and Purchase Agreement

The principal terms of the Provisional Sale and Purchase Agreement are set out as follows:

Date : 29th September, 2005 Parties : (a) Vendor: Takson Properties Limited, a wholly-owned subsidiary of the Company.

• (b) Purchaser: Jetfull International Investment Limited or its nominee.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the Purchaser and its ultimate beneficial owners are third parties independent of the Company, its subsidiaries, their respective directors, chief executive, substantial shareholders and any of their respective associates.

Sale and Purchase

Pursuant to the Provisional Sale and Purchase Agreement, the Vendor agreed to sell and the Purchaser agreed to purchase the Property upon the terms contained therein. Pursuant to the Provisional Sale and Purchase Agreement, the Vendor and the Purchaser shall enter into the Formal Agreement on or before 7th October, 2005. The Provisional Sale and Purchase Agreement initially binds the parties to the sale and purchase of the Property upon agreement being reached, while the Formal Agreement will set out in full the terms and procedures for

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LETTER FROM THE BOARD

carrying out and completing the transaction and will also include certain representations and warranties in respect of the Property. In the event that the Purchaser fails to enter into the Formal Agreement or complete the sale and purchase of the Property, the Vendor shall be entitled to forfeit the deposit in the amount of HK$1,132,500 paid by the Purchaser.

Property

The Property comprises Workshop Unit 06, 3rd Floor, Tower One, Harbour Centre, 1 Hok Cheung Street, Kowloon, Hong Kong.

A valuation of the Property was carried out by Jones Lang LaSalle which assessed the value of the Property as at 31st March, 2005 at HK$20,200,000. Such assessed value is equal to the book value of the Property in the Group’s audited consolidated accounts for the year ended 31st March, 2005.

So far as the Directors are aware, Jones Lang LaSalle is independent of the Company, its subsidiaries, their respective directors, chief executive, substantial shareholders and any of their respective associates.

The latest valuation conducted by the Valuer as at 29th September, 2005 estimated that the prevailing market value of the Property was HK$22,650,000 and the Purchase Price is equal to such assessed value of the Property. So far as the Directors are aware, the Valuer is independent of the Company, its subsidiaries, their respective directors, chief executive and substantial shareholders or any of their respective associates.

Please refer to the valuation report prepared by the Valuer set out in Appendix II to this circular.

Consideration

The Purchase Price is HK$22,650,000.

The Purchase Price was determined after arm’s length negotiations between the Vendor and the Purchaser, with reference to prevailing market conditions of the property market in Hong Kong (which has overall been rising in the last two years), and comparable sales. The Purchase Price in respect of the Property is equivalent to HK$1,460 per square feet, and was considered against the selling prices of other properties in the same building in recent transactions at approximately HK$1,300 per square feet.

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LETTER FROM THE BOARD

Payment of the Purchase Price

• (a) an initial deposit of HK$1,132,500 was paid by the Purchaser to the Vendor on 29th September, 2005 upon signing of the Provisional Sale and Purchase Agreement;

• (b) a further deposit of HK$1,132,500 was paid by the Purchaser to the Vendor on 7th October, 2005; and

• (c) the balance of the Purchase Price of HK$20,385,000 was paid by the Purchaser on completion of the Disposal.

Formal Agreement and Completion

The further deposit of HK$1,132,500 had been paid by the Purchaser to the Vendor. As the Purchaser and the Vendor were unable to agree on the useable area of the Property, they were unable to finalise the terms of the Formal Agreement. The Purchaser and the Vendor thus agreed to dispense with the Formal Agreement and proceed directly to complete the sale and purchase of the Property. Completion of the Disposal took place on 4th November, 2005.

At the completion of the sale and purchase of the Property, the balance of the Purchase Price was paid by the Purchaser to the Vendor and the legal title of the Property was passed by the Vendor to the Purchaser. Upon completion, the Vendor delivered vacant possession of the Property to the Purchaser.

REASONS FOR THE DISPOSAL AND USE OF PROCEEDS

The Purchase Price represents an aggregate premium of approximately HK$2,450,000 to and approximately 112.1% of the book value/value of the Property as assessed by Jones Lang LaSalle as at 31st March, 2005 of HK$20,200,000. The Purchase Price also represents approximately 20.2% of the Group’s total assets value of HK$112,356,000 as at 31st March, 2005 according to its latest audited accounts. The Company expects to realise a net gain of approximately HK$2,283,000 from the Disposal (calculated by the Purchase Price minus the book value of the Property and the expenses incurred by the Vendor in the Disposal). The Property was used for rental purpose and has been vacant since the beginning of September 2005. According to the audited accounts of the Group, for the two years ended 31st March, 2004 and 31st March, 2005, the rentals received by the Group from the Property amounted to HK$936,000 and HK$936,000 respectively and accounted for approximately 0.4% and 0.8% respectively of the Group’s turnover. In view of the rising market prices of other properties in the vicinity of the Property (recorded transaction prices per square feet in the same building in December 2004 was at HK$984, April 2005 at $1,346 and June 2005 at HK$1,300), the Board considers that it is a profit-making opportunity for the Company to realise the Property. The Directors (including the independent non-executive Directors) are of the view that the terms of the Disposal are fair and reasonable and in the interests of the Group and the Shareholders as a whole.

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LETTER FROM THE BOARD

The Group is currently the exclusive licensee/distributor of HEAD[®] apparels and equipments as well as the exclusive licensee of Diadora apparels, footwear and accessories in Hong Kong, Macau and the PRC. The Company’s strategy is to grow the brands through rapid channel expansion and brand building, especially in the PRC market. The Company intends to use the net proceeds of HK$22,483,000 (equal to the Purchase Price minus the agency fee and the legal expenses for the Disposal) as working capital for expansion of the Group’s licensee businesses of the above brands in Hong Kong and the PRC through working with channel partners to open franchised shops, and a quarter each of such net proceeds will be used for purchasing inventory, operating expenses, opening of new shops, and marketing of the above brands respectively.

FINANCIAL EFFECTS OF THE DISPOSAL

The Property generated an audited rental income of HK$936,000 for the year ended 31st March, 2005 and an unaudited rental income of HK$390,000 from April to August 2005 in the current financial year ending 31st March, 2006 to the Group. According to the audited accounts of the Group for the year ended 31st March, 2005, the operating profit attributable to the Property was approximately HK$812,000, which accounted for 31% of the operating profit of the Group of approximately HK$2,615,000 for the year ended 31st March, 2005. After the Disposal, the future income of the rental which may be derived from the Property has been foregone. According to the audited accounts of the Group for the year ended 31st March, 2005, the book value of the Property as at 31st March, 2005 was HK$20,200,000 which accounted for 18% of the consolidated total asset of the Group of approximately HK$112,356,000 as at 31st March, 2005. After the Disposal, the fixed assets of the Group has been reduced by HK$20,200,000 and cash has increased by HK$22,465,000 (being the Purchase Price minus the agency fee and the legal expenses) while there will be no effect on the liabilities of the Group.

GENERAL

The principal business activities of the Group are the sourcing, subcontracting, marketing and selling of garments. The Vendor, being a wholly-owned subsidiary of the Company, is engaged in property holding business in Hong Kong.

To the best of the knowledge, information and belief of the Directors and having made all reasonable enquiries, the principal business activity of the Purchaser is investment holding.

As the relevant percentage ratios calculated under Chapter 14 of the Listing Rules in respect of Disposal exceeds 25% but less than 75%, the Disposal constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is subject to Shareholders’ approval.

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LETTER FROM THE BOARD

The Company has obtained from Takson International Holdings Limited, which holds 237,600,000 shares in the Company equivalent to approximately 61% in nominal value of the securities giving the right to attend and vote at any general meeting of the Company, written approval of the Disposal. Takson International Holdings Limited is a wholly-owned subsidiary of Wangkin Investments Inc, which in turn is owned as to 50% by Mr. Wong Tek Sun, Takson and as to 50% by Ms. Pang Shu Yuk, Adeline Rita, both of whom are executive Directors. As none of the Shareholders are materially interested in the Disposal, no Shareholder would be required to abstain from voting if a general meeting of the Company were to be convened to approve the Disposal contemplated under the Provisional Sale and Purchase Agreement. Pursuant to Rule 14.44 of the Listing Rules, the Disposal which constitutes a major transaction has been approved by way of written shareholders’ approval in lieu of holding a general meeting of the Company.

ADDITIONAL INFORMATION

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

Yours faithfully,

By order of the Board Wong Tek Sun, Takson Chairman

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. AUDITED FINANCIAL INFORMATION

Set out below are the audited consolidated income statements of the Group for each of the three years ended 31st March, 2003, 31st March, 2004 and 31st March, 2005 and the consolidated balance sheets as at 31st March, 2003, 31st March, 2004 and 31st March, 2005 together with the relevant notes thereto as extracted from the Group’s audited financial statements set out in the Company’s annual report for the year ended 31st March, 2005. The auditors of the Company issued unqualified opinions on the financial accounts of the Group for the last three financial years.

Consolidated Profit and Loss Account

For the year ended 31st March, 2003, 2004 and 2005

Notes Turnover 2 Cost of sales Gross profit Other revenues 2 Distribution costs Administrative expenses Reversal of impairment loss on leasehold land and buildings Operating profit/(loss) 3 Finance costs 5 Profit/(loss) before taxation Taxation charge 6 Profit/(loss) after taxation Minority interests Profit/(loss) attributable to shareholders 7 Basic earnings/(loss) per share 8	2005 HK$’000 110,608 (79,556) 31,052 4,040 (12,254) (39,588) 19,365 2,615 (2,280) 335 (2) 333 842 1,175 0.3 cents	2004 HK$’000 208,185 (187,704) 20,481 6,407 (7,838) (34,320) — (15,270) (2,461) (17,731) (243) (17,974) 502 (17,472) (4.5 cents)	2003 HK$’000 258,701 (215,700) 43,001 5,045 (7,273) (37,032) — 3,741 (2,661) 1,080 4 1,084 578 1,662 0.4 cents

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

As at 31st March, 2003, 2004 and 2005

Notes Non-current assets Intangible assets 11 Fixed assets 12 Deposits paid for purchase of other fixed assets/office premises Deferred tax assets 21 Other investment, at cost 14 Current assets Inventories 15 Trade receivables 16 Other receivables, prepayments and deposits Prepaid tax Pledged time deposits Cash and bank balances Current liabilities Trade payables 17 Accrued charges and other payables Trust receipts bank loans 23 Current portion of long-term liabilities 20 Taxation payable Director’s loan 24 Bank overdrafts — secured 23 Net current (liabilities)/assets Total assets less current liabilities	2005 HK$’000 628 85,107 2,385 448 600 89,168 --------------- 5,598 2,351 4,911 — — 10,328 23,188 --------------- 3,226 4,411 2,937 22,305 238 2,500 — 35,617 --------------- (12,429) --------------- 76,739	2004 HK$’000 498 37,431 5,147 621 600 44,297 --------------- 3,440 419 4,226 107 — 24,977 33,169 --------------- 1,079 4,599 1,657 13,596 — — 594 21,525 --------------- 11,644 --------------- 55,941	2003 HK$’000 665 36,010 — — —
			36,675 --------------- 6,566 1,609 10,428 — 2,035 33,140
			53,778 --------------- 1,821 4,757 — 11,469 89 — —
			18,136 ---------------
			35,642 ---------------
			72,317

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes Financed by: Share capital 18 Reserves 19 Shareholders’ funds Minority interests Non-current liabilities Long-term liabilities 20 Deferred tax liabilities 21	2005 HK$’000 38,950 25,493 64,443 1,975 9,758 563 76,739	2004 HK$’000 38,950 11,625 50,575 729 3,965 672 55,941	2003 HK$’000 38,950 26,623
			65,573 1,231 5,513 —
			72,317

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE ACCOUNTS

As at 31st March, 2005

1. Principal Accounting Policies

The principal accounting policies adopted in the preparation of these accounts are set out below:

(a) Basis of preparation

The accounts have been prepared in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). They have been prepared under the historical cost convention except that, as disclosed in the accounting policies below, investment properties are stated at fair value.

The Group had net cash used in operating activities of HK$18,637,000 for the year ended 31st March, 2005, and as at 31st March, 2005 its current liabilities exceeded its current assets by HK$12,429,000. Notwithstanding these, the accounts have been prepared on a going concern basis as the directors, having considered the current operation and business plan of the Group as well as the currently available banking facilities, are of the opinion that the Group will have sufficient working capital to enable it to operate as a going concern.

The HKICPA has issued a number of new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards (“new HKFRSs”) which are effective for accounting periods beginning on or after 1st January, 2005. The Group has not early adopted these new HKFRSs in the accounts for the year ended 31st March, 2005. The Group has already commenced an assessment of the impact of these new HKFRSs but is not yet in a position to state whether these new HKFRSs would have a significant impact on its results of operations and financial position.

(b) Consolidation

The consolidated accounts include the accounts of the Company and its subsidiaries made up to 31st March.

Subsidiaries are those entities in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to govern the financial and operating policies; to appoint or remove the majority of the members of the board of directors; or to cast majority of votes at the meetings of the board of directors.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and loss account from the effective date of acquisition or up to the effective date of disposal, as appropriate. Subsidiaries established in the PRC adopt 31st December as their accounting year end date pursuant to local reporting regulations. Accordingly, the management accounts of these subsidiaries as at and for the twelve months ended 31st March have been incorporated in the consolidated accounts after making adjustments as the directors considered appropriate for compliance with accounting principles generally accepted in Hong Kong.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

All significant intercompany transactions and balances within the Group are eliminated on consolidation.

The gain or loss on the disposal of a subsidiary represents the difference between the proceeds of the sale and the Group’s share of its net assets together with any capital reserve or exchange differences which were not previously charged or recognised in the consolidated profit and loss account.

Minority interests represent the interests of outside shareholders in the results and net assets of subsidiaries.

In the Company’s balance sheet, the investments in subsidiaries are stated at cost less accumulated impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

(c) Intangible assets

(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets at the date of acquisition. Goodwill is recognised as an intangible asset and is amortised on a straight-line basis over its estimated useful life but not exceeding 20 years.

(ii) Trademarks

Trademarks are stated at cost less accumulated amortisation and accumulated impairment losses. Amortisation of trademarks is calculated to write off their costs on a straight-line basis over a period of 15 years.

Where an indication of impairment exists, the carrying amount of any intangible asset is assessed and written down immediately to its recoverable amount.

(d) Fixed assets

• (i) Investment properties

Investment properties are interests in land and buildings in respect of which construction work and development have been completed and which are held for their investment potential, any rental income being negotiated at arm’s length.

Investment properties held on leases with unexpired periods of greater than 20 years are valued annually by independent valuers. The valuations are on an open market value basis related to individual properties and separate values are not attributed to land and buildings. The valuations are incorporated in the annual accounts. Increases in valuation are credited to the investment properties revaluation reserve. Decreases in valuation are first set off against increases on earlier valuations on a portfolio basis and thereafter are debited to the profit and loss account. Any subsequent increases are credited to the profit and loss account up to the amount previously debited.

Investment properties held on leases with unexpired periods of 20 years or less are depreciated over the remaining terms of the leases.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Upon the disposal of an investment property, the relevant portion of the revaluation reserve realised, if any, in respect of previous valuations is released from the investment properties revaluation reserve to the profit and loss account.

(ii) Leasehold land and buildings

Leasehold land and buildings other than investment properties are stated at cost or valuation less accumulated amortisation or depreciation and accumulated impairment losses. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use.

(iii) Amortisation of leasehold land

Amortisation of leasehold land other than investment properties is calculated to write off its cost over the unexpired period of the lease on a straight-line basis. The principal annual rate used for this purpose is 2%.

(iv) Depreciation of leasehold buildings

Depreciation of leasehold buildings other than investment properties is calculated to write off their cost over the unexpired periods of the leases or their expected useful lives to the Group, whichever is shorter. The principal annual rate used for this purpose is 2%.

(v) Leasehold improvements and other tangible fixed assets

Leasehold improvements and other fixed assets are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation of leasehold improvements and other fixed assets is calculated to write off their cost over their expected useful lives to the Group on a reducing balance basis. The principal annual rates are as follows:

Leasehold improvements	10-15% or over the lease terms,
	whichever is shorter
Furniture and fixtures	10-15%
Machinery, equipment and tools	10-15%
Motor vehicles	10-15%
Office and computer equipment	10-33%

(vi) Impairment of fixed assets

At each balance sheet date, both internal and external sources of information are considered to assess whether there is any indication that assets included in fixed assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated and where relevant, an impairment loss is recognised to reduce the asset to its recoverable amount. Such impairment losses are recognised in the consolidated profit and loss account.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carry amount that would have been determined, net of depreciation or amortisation, if no impairment loss has been recognised.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(vii) Gain or loss on disposal of fixed assets

The gain or loss on disposal of a fixed asset other than investment properties is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the profit and loss account.

(viii) Cost of restoring and improving fixed assets

Major costs incurred in restoring fixed assets to their normal working condition are charged to the profit and loss account. Improvements are capitalised and depreciated over their expected useful lives to the Group.

(e) Assets under leases

(i) Finance leases

Leases or hire purchase contracts that substantially transfer to the Group all the risks and rewards of ownership of assets are accounted for as finance leases. Finance leases are capitalised at the inception of the leases at the lower of the fair value of the leased assets or the present value of the minimum lease payments. Each lease payment is allocated between the capital and finance charges so as to achieve a constant rate of return on the capital balances outstanding. The corresponding rental obligations, net of finance charges, are included in current liabilities or long-term liabilities, as appropriate, as obligations under finance leases. The finance charges are charged to the profit and loss account over the lease or hire purchase periods.

Assets held under finance leases are depreciated over the shorter of their estimated useful lives or lease periods.

(ii) Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases net of any incentives received from the leasing company are charged to the profit and loss account on a straight-line basis over the lease periods.

(f) Other investment

Other investment is stated at cost less any accumulated impairment loss.

The carrying amount of other investment is reviewed at each balance sheet date to assess whether the fair value has declined below the carrying amount. When a decline other than temporary has occurred, the carrying amount of other investment is reduced to its fair value. The impairment loss is recognised as an expense in the profit and loss account. This impairment loss is written back to the profit and loss account when the circumstances and events that led to the write-downs or write-offs cease to exist and there is persuasive evidence that new circumstances and events will persist for the foreseeable future.

(g) Inventories

Inventories comprise raw materials, work-in-progress and finished goods and are stated at the lower of cost and net realisable value.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Cost, calculated on the weighted average basis, comprises direct materials, shipment costs and subcontracting expenses.

Net realisable value is determined on the basis of anticipated sales proceeds less estimated selling expenses.

(h) Accounts receivable

Provision is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable in the balance sheet are stated net of such provision.

(i) Translation of foreign currencies

Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at the rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with in the profit and loss account.

The balance sheets of subsidiaries expressed in foreign currencies are translated at the rates of exchange ruling at the balance sheet date whilst the profit and loss accounts are translated at an average rate. Exchange differences arising are dealt with as a movement in reserves. Upon disposal of a foreign enterprise, the related cumulative exchange difference is included in the profit and loss account as part of the gain or loss on disposal.

(j) Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks and bank overdrafts.

(k) Provisions

Provisions are recognised 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 a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

(l) Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave is recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Pension obligations

The Group continues to operate an occupational retirement scheme which has been granted exemption pursuant to Section 5 of the Hong Kong Mandatory Provident Fund Schemes Ordinance. Under the scheme, both the employers and employees are

— 16 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

required to contribute an amount equal to 5% of the basic salary of the employees on a monthly basis. The Group’s contributions to the scheme may be reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions.

Besides, the Group continues to operate a mandatory provident fund scheme (“the MPF Scheme”) under which both the Group and staff are required to contribute 5% (subject to an aggregate maximum of HK$2,000 per month) of the employees’ relevant income. Contributions from the employer are 100% vested in the employees as soon as they are paid to the MPF Scheme.

Contributions for the above schemes are charged to the profit and loss account as they become payable in accordance with the rules of the schemes. The assets of the schemes are held separately from those of the Group and managed by independent professional fund managers.

(m) Deferred taxation

Deferred taxation 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 accounts. Taxation rates enacted or substantively enacted by the balance sheet date are used to determine deferred taxation.

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

Deferred taxation is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

(n) 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 Group. It can also be a present obligation arising from past events that is not recognised 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 recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so that the outflow becomes probable, it will then be recognised as a provision.

(o) Borrowing costs

All borrowing costs are charged to the profit and loss account in the year in which they are incurred unless borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sales are capitalised as part of the cost of that asset.

(p) Segment reporting

In accordance with the Group’s internal financial reporting, the Group has determined that business segments be presented as the primary reporting format and geographical segments as the secondary reporting format.

— 17 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Segment assets consist primarily of intangible assets, fixed assets, inventories, receivables and operating cash, and exclude other investment. Segment liabilities comprise operating liabilities and exclude items such as taxation and certain corporate borrowings. Capital expenditure comprises additions to fixed assets.

In respect of geographical segment reporting, sales are based on the country in which the customer is located. The assets and capital expenditure are where the assets are located.

(q) Revenue recognition

Revenue from the sale of goods is recognised on the transfer of risks and rewards of ownership, which generally coincides with the time when the goods are delivered to customers and title has passed.

Income from sample sales is recognised when samples are approved by customers.

Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.

Operating lease rental income is recognised on a straight-line basis.

2. Turnover, Revenue and Segment Information

The Group is principally engaged in the sourcing, subcontracting, marketing and selling of garments. Revenues recognised during the year are as follows:

Turnover Sales of goods Other revenues Interest income Rental income Income from sample sales Total revenues	2005 HK$’000 110,608
	2,151 1,791 98
	4,040
	114,648

— 18 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Primary reporting format — business segments

Turnover Segment operating profit Interest income Rental income Unallocated costs Operating profit Finance costs Profit before taxation Taxation charge Profit after taxation Minority interests Profit attributable to shareholders Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure Depreciation Amortisation and impairment loss on trademarks Reversal of impairment loss on leasehold land and buildings

Year ended 31st March, 2005 Sales of outerwear Licensee garments business Total HK$’000 HK$’000 HK$’000 100,798 9,810 110,608 22,164 (11,960) 10,204 2,151 1,791 (11,531) 2,615 (2,280) 335 (2) (333) 842 1,175 66,552 16,104 82,656 29,700 112,356 19,507 16,502 36,009 9,929 45,938 15,545 2,585 18,130 1,527 816 2,343 498 — 498 19,365 — 19,365

(a) Export business mainly represents export sales of outerwear garments to overseas customer.

(b) Licensee business represents the retailing and distribution of HEAD[®] products in Greater China including Hong Kong, Taiwan and Macau.

— 19 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Secondary reporting format — geographical segments

United States of America Europe Canada Hong Kong Mainland China Others Interest income Rental income Unallocated costs Operating profit	Year ended 31st March, 2005 Segment Total Turnover operating profit assets HK$’000 HK$’000 HK$’000 76,075 5,913 1,692 23,012 2,630 91 1,410 94 3 4,234 14,496 76,732 5,576 (12,761) 33,115 301 (168) 723 110,608 10,204 112,356 2,151 1,791 (11,531) 2,615	Capital expenditure HK$’000 — — — 13,833 4,297 —
		18,130

3. Operating Profit

Operating profit is stated after crediting and charging the following:

	2005
	HK$’000
Crediting
Net exchange gain	324
Charging
Amortisation of trademarks	168
Amortisation of goodwill	33
Impairment loss on trademarks	330
Auditors’ remuneration	801
Depreciation
Owned fixed assets	2,144
Leased fixed assets	199
Net loss on disposal of fixed assets	170
Staff costs, including directors’ emoluments_(notes 4 & 10)_	22,176
Operating leases
Land and buildings	4,763
Outgoings in respect of investment properties	100
Provision for bad and doubtful debts	926
Provision for obsolete inventories	207

— 20 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. Staff Costs

Wages and salaries Pension costs — defined contribution plans Total staff costs, excluding directors’ emoluments 5. Finance Costs	2005 HK$’000 12,717 557
	13,274

Interest on bank loans and overdrafts Interest element of finance leases Total borrowing costs incurred 6. Taxation Charge	2005 HK$’000 2,234 46
	2,280

The amount of taxation charged to the consolidated profit and loss account represents:

Hong Kong profits tax Current tax_(note 6(i)) Overseas taxation Current tax(note 6(ii)) (Over) provision in previous years Deferred taxation relating to the origination and reversal of temporary differences(note 21)_ Taxation charge	2005 HK$’000 121 20 (203) 64
	2

(i) Hong Kong profits tax is calculated at the rate of 17.5% on the estimated assessable profit for the year.

(ii) Taxation on overseas profits is calculated on the estimated assessable profit at the tax rates prevailing in the countries in which the subsidiaries operate.

— 21 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The taxation on the Group’s profit before taxation differs from the theoretical amount that would arise using the profits tax rate of Hong Kong as follows:

Profit before taxation Calculated at a taxation rate of 17.5% Effect of different taxation rates in other countries Income not subject to taxation Expenses not deductible for taxation purposes Utilisation of previously unrecognised tax losses Unrecognised tax losses Temporary differences not previously recognised (Over) provision in previous years Taxation charge	2005 HK$’000 335 59 113 (3,457) 1,078 (51) 2,058 405 (203) 2

7. Profit/(Loss) Attributable to Shareholders

The loss attributable to shareholders is dealt with in the accounts of the Company to the extent of a loss of HK$13,492,000.

8. Earnings per Share

The calculation of basic earnings per share is based on the Group’s earnings attributable to shareholders of HK$1,175,000.

The basic earnings per share is based on 389,500,000 ordinary shares in issue during the year. No diluted earnings per share is presented as there are no dilutive potential ordinary shares for the years ended 31st March, 2005.

9. Retirement Benefit Costs

The retirement benefit costs charged to the consolidated profit and loss account represent gross contributions payable by the Group to the retirement scheme of HK$694,000 less forfeited contributions utilised of HK$86,000. Contributions of HK$107,000 were payable to the scheme at the year end and are included in current liabilities under accrued charges. As at 31st March, 2005, there were no unutilised forfeited contributions.

— 22 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. Directors’ and Senior Management’s Emoluments

(a) Directors’ emoluments

The aggregate amounts of emoluments payable to directors of the Company during the year are as follows:

Fees Other emoluments Basic salaries and housing benefits Contributions to defined contributions scheme	2005 HK$’000 580 8,268 54
	8,902

Directors’ fees disclosed above represent amount paid to the non-executive directors.

The emoluments of the directors fell within the following bands:

Emolument bands HK$1,000,000 or below HK$3,500,001 — HK$4,000,000 HK$4,000,001 — HK$4,500,000	2005 3 1 1
	5

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year include two directors whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining three individuals during the year are as follows:

Basic salaries Bonuses Pensions	2005 HK$’000 1,234 108 65
	1,407

The emoluments of each of the three individuals were below HK$1,000,000.

(c) No emolument have been paid by the Group to the directors or the five highest paid individuals as an inducement to join or upon joining the Group, or as compensation for loss of office. No directors or the five highest paid individuals waived or agreed to waive any emoluments during the year.

— 23 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. Intangible Assets

Opening net book amount Acquisition Impairment charges Amortization charges Closing net book amount At 31st March, 2005 Cost Accumulated amortisation and impairment losses Net book amount	Trademarks HK$’000 498 — (330) (168) — 2,521 (2,521) —	Group Goodwill HK$’000 — 661 — (33) 628 661 (33) 628	Total HK$’000 498 661 (330) (201) 628 3,182 (2,554) 628

In July 2004, the Group invested an additional amount of HK$2,822,000 to increase the equity interest by 24.5% in Wuhan Hande Sportswear Company Limited. The share of fair value of underlying net assets acquired was lower than the consideration, therefore giving rise to goodwill of HK$661,000.

— 24 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. Fixed Assets

Investment properties HK$’000 Cost or valuation At 1st April, 2004 14,275 Additions — Revaluation surplus 12,694 Disposals — At 31st March, 2005 26,969 At cost — At valuation 26,969 26,969 Accumulated depreciation and impairment: At 1st April, 2004 — Charge for the year — Reversal of impairment loss previously made — Disposals — At 31st March, 2005 — Net book value At 31st March, 2005 26,969 At 31st March, 2004 14,275		Group	Group			Total HK$’000 76,274 18,130 12,694 (285
		Leasehold land and Leasehold Furniture buildings improvements and fixtures HK$’000 HK$’000 HK$’000 40,583 3,167 5,037 15,312 1,590 382 — — — — (285 ) — 55,895 4,472 5,419 55,895 4,472 5,419 — — — 55,895 4,472 5,419 23,908 2,014 3,614 579 715 267 (19,365 ) — — — (115 ) — 5,122 2,614 3,881 50,773 1,858 1,538 16,675 1,153 1,423	Machinery, equipment and tools HK$’000 439 182 — — 621 621 — 621 265 35 — — 300 321 174	Motor vehicles HK$’000 3,350 315 — — 3,665 3,665 — 3,665 1,303 334 — — 1,637 2,028 2,047	Office and computer equipment HK$’000 9,423 349 — — 9,772 9,772 — 9,772 7,739 413 — — 8,152 1,620 1,684
						106,813
						79,844 26,969
						106,813
						38,843 2,343 (19,365 (115
						(21,706
						85,107
						37,431

(a) The Group’s interests in investment properties and leasehold land and buildings at their net book values are analysed as follows:

In Hong Kong, held on: Leases of between 10 to 50 years Outside Hong Kong, held on: Leases of over 50 years	Group 2005 HK$’000 60,510 17,232
	77,742

— 25 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (b) Investment properties were revalued as at 31st March, 2005 on the basis of their open market value by Jones Lang LaSalle Limited, an independent firm of chartered surveyors. The revaluation surplus transferred to the property revaluation reserve amounted to HK$12,694,000 (note 19).

• (c) As at 31st March, 2005, the investment properties and leasehold land and buildings in Hong Kong and outside Hong Kong with the total carrying value of HK$75,618,000 were charged to certain banks to secure banking facilities granted to the Group (note 23).

• (d) Based on a valuation of the Group’s land and buildings in Hong Kong performed by Jones Lang LaSalle Limited as at 31st March, 2005, the Group reversed HK$19,365,000 for the year ended 31st March, 2005 in respect of impairment loss on land and buildings made in previous year.

• (e) As at 31st March, 2005, the net book value of motor vehicles includes assets held by the Group under finance leases amounted to HK$1,127,000.

• (f) Particulars of investment properties held by the Group at 31st March, 2005 are as follows:

Location	Gross area	Type	Tenure
	(sq. ft.)
Workshop Unit Nos. 5 and 6 on	6,664	Commercial	Medium Lease
5th Floor, Tower One,
Harbour Centre,
1 Hok Cheung Street,
Hunghom, Kowloon,
Hong Kong
Workshop Unit No. 7 on	2,897	Commercial	Medium Lease
5th Floor, Tower One,
Harbour Centre,
1 Hok Cheung Street,
Hunghom, Kowloon,
Hong Kong
Portion A of Workshop Unit No. 6	11,165	Commercial	Medium Lease
on 3rd Floor, Tower One,
Harbour Centre,
1 Hok Cheung Street,
Hunghom, Kowloon,
Hong Kong

— 26 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. Investments in Subsidiaries

Unlisted shares/investments, at cost Amounts due from subsidiaries_(note 13(b))_ _Less:_provision for impairment losses	Company 2005 HK$’000 68,192 74,377
	142,569 (86,374)
	56,195

• (a) Particulars of the Company’s subsidiaries are set out in note 29 to the accounts.

• (b) The amounts due from subsidiaries are unsecured, interest-free and not repayable within the next twelve months from the balance sheet date.

• (c) In February 2005, a new equity joint venture limited liability company, Takson (Suzhou) Garment Manufacturing Company Limited, was established between a subsidiary of the company and a third party in the PRC. The Group has a 55% equity in the joint venture company and controls the majority of its Board.

In March 2005, an initial capital contribution of HK$1,850,000 was made by the Group into the joint venture company which was funded by a director’s loan of HK$2,500,000 (note 24) made in the same month. The remaining capital injection of HK$2,700,000 was funded by the proceeds from the rights issues arranged after the year end.

14. Other Investment

Other investment represents a Corporate Nomination Right acquired from the Chinese International School Foundation Limited and will be used for the benefits of the senior management of the Group. It is non-interest bearing and unsecured but transferable at a charge of fee at 20% of the higher of the original issue price or the current issue upon the transfer and is redeemable at any time, at the sole discretion of the issuer, provided that no such redemption will take place until the relevant Corporate Nomination Right has been in issue for ten years. As at the date of approval of these accounts, no nomination right has been used by any senior management staff of the Group.

15. Inventories

Inventories
Raw materials Work-in-progress Finished goods	Group 2005 HK$’000 496 35 5,067
	5,598

At 31st March, 2005, the carrying amount of inventories that are carried at net realisable value amounted to HK$5,450,000. The inventories are stated after a provision for obsolete inventories of HK$1,325,000.

— 27 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. Trade Receivables

• (a) The aging analysis of the trade receivables was as follows:

Below 1 month 1 to 3 months 4 to 6 months Over 6 months _Less:_Provision for bad and doubtful debts	Group 2005 HK$’000 1,714 542 6 409
	2,671 (320)
	2,351

The majority of the Group’s sales are on letter of credit of 30 days. The remaining sales which were not covered by letter of credit are with credit terms of 30 days.

• (b) As at 31st March, 2005, trade receivables included amounts totalling HK$1,278,000 which were factored to a bank in the ordinary course of business.

17. Trade Payables

The aging analysis of trade payables was as follows:

Below 1 month 1 to 3 months 4 to 6 months 7 to 9 months 10 to 12 months Over 1 year	Group 2005 HK$’000 480 522 328 251 1,566 79
	3,226

18. Share Capital

Authorised: At 31st March, 2003, 31st March, 2004 and 31st March, 2005 Issued and fully paid: At 1st April and 31st March	Company Ordinary shares of HK$0.1 each 2005 No. of shares HK$’000 1,000,000,000 100,000 389,500,000 38,950	Company Ordinary shares of HK$0.1 each 2005 No. of shares HK$’000 1,000,000,000 100,000 389,500,000 38,950
		38,950

Subsequent to the year end, the Group raised approximately HK$7.2 million after expenses by issuing 77,900,000 rights shares at a price of HK$0.10 per rights share.

— 28 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19. Reserves

Share premium At 1st April and 31st March Contributed surplus_(note 19 (a)) At 1st April and 31st March Exchange fluctuation reserve At 1st April Exchange difference arising on translation of the accounts of overseas subsidiaries At 31st March Reserve on consolidation(note 19 (b)) At 1st April and 31st March Investment property revaluation reserve At 1st April Surplus on revaluation(note 12 (b)) At 31st March Accumulated losses(note 19 (c))_ At 1st April Profit/(loss) attributable to shareholders At 31st March Total reserves	Group 2005 HK$’000 42,032 — 8 (1) 7 2,214 2,471 12,694 15,165 (35,100) 1,175 (33,925) 25,493	Company 2005 HK’000 42,032 67,992 — — — — — — — (78,532) (13,492) (92,024) 18,000

(a) The contributed surplus represents the excess of the consolidated net asset value of Takson (B.V.I.) Limited on its merger with the Company over the nominal value of the Company’s shares issued in the exchange therefor. Under the Companies Act 1981 of Bermuda (as amended) and the Bye-laws of the Company, the contributed surplus is distributable to the sharesholders, unless there are reasonable grounds for believing that (i) the Company is, or would after the payment be, unable to pay its liabilities as they become due; (ii) the realisable value of the Company’s assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium account.

(b) Reserve on consolidation pursuant to the exchange of shares on group reorganisation represents the difference between the nominal value of the shares of the subsidiaries acquired and the nominal value of the shares issued by the Company as consideration thereof.

— 29 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20. Long-term Liabilities

			Group
			2005
		Notes	HK$’000
Bank	loans — secured	20 (a), 23	31,121
Obligations under finance leases		20 (b)	679
Post-employment benefits			263
			32,063
Less:	Current portion of long-term liabilities		(22,305)
			9,758
(a)	At 31st March, 2005, the Group’s bank loans	are repayable as follows:
			Group
			2005
			HK$’000
	Within one year		21,951
	In the second year		1,873
	In the third to fifth year inclusive		7,297
			31,121
(b)	At 31st March, 2005 the Group’s finance lease liabilities are repayable as follows:
			Group
			2005
			HK$’000
	Within one year		394
	In the second year		348
	In the third to fifth year		—
	Future finance charges on finance leases		742
			(63)
			679
	The present value of finance lease liabilities is as follows:
			Group
			2005
			HK$’000
	Within one year		355
	In the second year		324
	In the third to fifth year		—
			679

— 30 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. Deferred Taxation

Deferred taxation is calculated in full on temporary differences under the liability method using a principal taxation rate of 17.5% for subsidiaries operating in Hong Kong. Deferred taxation for subsidiaries operates in overseas is calculated at the rates of taxation prevailing in the countries in which the subsidiaries operate.

The movement on the deferred tax liabilities account is as follows:

At 1st April Deferred taxation charged to profit and loss account_(note 6)_ At 31st March	Group 2005 HK$’000 51 64
	115

Deferred income tax assets are recognised for tax loss carry forwards to the extent that realisation of the related tax benefit through the future taxable profits is probable. The Group has unrecognised tax losses of HK$53,288,000 to carry forward against future taxable income. The tax losses have no expiry date.

The movement in deferred tax assets and liabilities (prior to offsetting of balances within the same taxation jurisdiction) during the year is as follows:

Deferred tax liabilities

	Group
	Accelerated tax
	depreciation
	2005
	HK$’000
At 1st April	722
(Credited) to profit and loss account	(46)
At 31st March	676

Deferred tax assets

Group

Decelerated tax depreciation 2005 HK$’000 At 1st April (570) (Credited)/charged to profit and loss account 154 At 31st March (416)	Provisions 2005 HK$’000 (50) (95) (145)	Tax losses 2005 HK$’000 (51) — (51)	Total 2005 HK$’000 (671) 59
			(612)

— 31 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The following amounts, determined after appropriate offsetting, are shown in the consolidated balance sheet:

Deferred tax assets Deferred tax liabilities 22. Notes to the Consolidated Cash Flow Statement (a) Reconciliation of loss before taxation to net cash outflow from operations	Group 2005 HK$’000 (448) 563 115

Profit before taxation Amortisation of trademarks Amortization of goodwill Provision for impairment loss on trademark Depreciation of owned fixed assets Depreciation of fixed assets held under finance leases Net loss on disposal of fixed assets Reversal of impairment loss on leasehold land and buildings Provision for long service payments Interest income Interest on bank loans and overdrafts Interest element of finance leases Operating loss before working capital changes Increase in inventories Increase in trade, other receivables, prepayments and deposits Increase in trade payables, accrued charges and other payables Effect of foreign exchange rate changes Net cash outflow from operations

Group 2005 HK$’000 335 168 33 330 2,144 199 170 (19,365) (383) (2,151) 2,234 46 (16,240) (2,158) (2,617) 2,056 12 (18,947)

— 32 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Analysis of changes in financing during the year

Balance at 1st April Exchange rate differences Goodwill on consolidation Share of loss of a subsidiary Cash inflow/(outflow) from financing Balance at 31st March	Director’s loan 2005 HK$’000 — — — — 2,500 2,500	Share capital including share premium 2005 HK$’000 80,920 — — — — 80,920	Group Trust receipts and others bank loans 2005 HK$’000 17,567 — — — 16,491 34,058	Finance leases 2005 HK$’000 1,005 — — — (326) 679	Minority interests 2005 HK$’000 729 12 661 (842) 1,415
					1,975

(c) Analysis of the balances of cash and cash equivalents

Cash and bank balances	Group 2005 HK$’000 10,328
	10,328

23. Banking Facilities

As at 31st March, 2005, the Group’s banking facilities amounting to HK$186,051,000 were secured by the following:

• (a) first legal charge over investment properties and leasehold land and buildings in Hong Kong and PRC held by the Group with an aggregate carrying value of HK$75,618,000 (note 12) ;

• (b) corporate guarantees from the Company and certain subsidiaries of the Group; and

• (c) the directors are currently in discussion with a major creditor bank in Hong Kong to renew and maintain the existing facility amount. The directors are confident that the revised facilities would be granted by the bank in due course.

24. Director’s Loan

This represent an unsecured and interest free loan advanced by Mr. Takson Wong a director of the Company in March 2005. Subsequent to the financial year end, the director made an additional loan of HK$2,500,000 to the Group. In May 2005, the Group repaid HK$2,500,000 to him. The director has confirmed that the remaining balance is unsecured, interest-free and will not be demanded for repayment until the Group is in a position to do so.

— 33 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

25. Contingent Liabilities

The Group had no material contingent liabilities as at 31st March, 2005.

The Company has executed guarantees with respect to banking facilities made available to its subsidiaries. Such facilities utilised as at 31st March, 2005 amounted to HK$35,451,000.

26. Commitments

(a) Capital commitments

As at 31st March, 2005, the Group had capital commitments, which are contracted but not provided for in respect of the investment in joint venture and in fixed assets amounted to HK$3,350,000 and HK$896,000 respectively.

The company had no material capital commitments as at 31st March, 2005.

(b) Commitments under operating leases

• (i) At 31st March, 2005, future aggregate minimum lease payments under non-cancellable operating leases in respect of land and buildings are as follows:

Not later than one year Later than one year and not later than five years	Group HK$’000 2,827 4,105 6,932	Company HK$’000 1,334 1,001
		2,335

The balances above do not include operating lease payment obligation in respect of certain operating leases on properties of the Group with variable rentals which are calculated based on certain percentage of the gross revenues of the subsidiaries.

• (ii) At 31st March, 2005, the Group had future aggregate minimum lease receivables under non-cancellable operating leases in respect of land and buildings as follows:

Not later than one year Later than one year and not later than five years	Group 2005 HK$’000 1,244 110
	1,354

27. Subsequent Events

Except for those events as disclosed in notes 13, 18, 23(c) and 24, there are no other material subsequent events.

28. Ultimate Holding Company

The directors regard Wangkin Investments Inc., a company incorporated in the British Virgin Islands, as being the ultimate holding company.

— 34 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

29. Particulars of Subsidiaries

The subsidiaries of the Company at 31st March, 2005 are as follows:

		Principal activities
	Country/Place of	and place of operation	Particulars of issued
	incorporation/	(if different from place of	share capital/	Attributable
Name	establishment	incorporation/establishment)	registered capital	equity interest
Interest held directly
Global Sportswear Inc.	British Virgin Islands	Investment holding and	1 ordinary share of US$1	100%
	(“BVI”)	sales of sportswear
Takson (B.V.I.) Limited	BVI	Investment Holding	1,000 ordinary shares of	100%
			US$1 each
Interest held indirectly
^Nanjing Takson Meierzi	PRC	Inactive	Registered capital of	70%
Manufacturing Limited			US$1,200,000
			(Paid up capital of
			US$181,200)
Powderhorn Establishment	Liechtenstein	Holding of trademarks	Swiss Franc 30,000	100%
*Shanghai Global Sportswear	PRC	Manufacturing and	Registered capital of	100%
Inc.		sale of garments	US$200,000
Takson Down Manufacturing,	United States of	Trading of outerwear	200,000 ordinary shares	100%
Inc.	America	garments supplied	of US$1 each
		by a group company
Takson Garment Manufacturing	Labuan, Malaysia	Sourcing and sales of	1 ordinary share of US$1	100%
(Malaysia) Limited		outerwear garments
Takson Garment Manufacturing	Hong Kong	Sourcing and sales of	20 ordinary shares of	100%
Company, Limited		outerwear garments	HK$10,000 each
Takson Garment Services	BVI	Inactive	10 ordinary shares of	100%
Limited			US$1 each
Takson Properties Limited	BVI	Property holding in	1 ordinary share of US$1	100%
		Hong Kong
^Wuhan Hande Sportswear	PRC	Sales of sportswear	Registered capital of	75.5%
Co. Ltd.			RMB$6,000,000
^Takson (Suzhou) Garment	PRC	Manufacture, export and	Registered capital of	55%
Manufacturing Company		sale of garments	RMB$10,000,000
Limited

• Wholly Foreign-owned Enterprise

• ^ Sino-Foreign Equity Joint Venture Enterprise

30. Approval of Accounts

The accounts were approved by the board of directors on 25th July, 2005.

— 35 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. INDEBTEDNESS OF THE GROUP

As at the close of business on 30th September, 2005, being the latest practicable date for the purpose of ascertaining certain information relating to this indebtedness statement, the Group had outstanding indebtedness of HK$60,418,000. The indebtedness comprised of trust receipts loans of HK$12,678,000, bank loans of HK$35,861,000, hire purchase loans of HK$502,000, director’s loan of HK$2,500,000 and a mortgage loan of HK$8,877,000. A breakdown of the above indebtedness of the Company according to repayable date is set out below:

Trust Receipts loans Bank loans Hire purchase loans Director’s loan Mortgage loan Total	Repayable within 1 year HK$’000 12,678 30,722 358 — 445 44,203	Repayable more than 1 years HK$’000 — 5,139 144 2,500 8,432 16,215	Total HK$’000 12,678 35,861 502 2,500 8,877
			60,418

Save as aforesaid and apart from intra-group liabilities and normal trade payable, the Group did not, at the close of business on 30th September, 2005, have any outstanding mortgages and charges, debentures, loan capital, bank loans and overdrafts, debt securities or other similar indebtedness, finance lease or hire purchase commitment, liabilities under acceptances or acceptance credit, or any guarantees or other contingent liabilities.

3. FINANCIAL AND TRADING PROSPECTS

The export outerwear business continues to be the core business of the Group. Management has implemented the strategy of focusing on high margin customers that offered high prices for quality products and services. The gross margin for exports has significantly increased to 25% for the year ended 31st March, 2005 from 10% for the year ended 31st March, 2004.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

One key growth strategy of the Group is to expand the brand licensee business in PRC and Hong Kong. Since 2002, the Group has been the exclusive licensee in manufacturing, marketing and distribution of HEAD[®] apparel in PRC, Hong Kong and Macau. Effective from 1st July, 2005, the Group has also become the exclusive distributor of HEAD[®] rackets, accessories and winter sports equipment in the same territories. Besides HEAD[®] , the Group is also the exclusive licensee of Diadora for production and sales of apparel, footwear and accessories in PRC, Hong Kong and Macau.

The Group’s strategy for the brand licensee business is to work with channel partners to open franchised shops in order to achieve fast expansion, but without having the Group to invest in the fixed assets and operating costs. The Group would focus its resources in product sourcing, design, marketing and promotion, brand-building and channel management.

For HEAD[®] , with the full range of products, and in leveraging the world leading position of the brand in tennis rackets, the Group expects to bring HEAD[®] to the next level of growth in the PRC market.

For Diadora, it is already selling well in PRC. The Group believes that by re-launching the brand as an Italian brand with style, function and quality, there are a lot of opportunities for growth of Diadora in the PRC footwear and sportswear market.

As at 31st March, 2005, being the date to which the Group’s latest published audited consolidated financial statements were made up, the Group had a total shareholders’ funds of approximately HK$64 million. The Group’s net borrowings representing bank loans, overdrafts, obligations under finance leases and an interest-free director’s loan amounted to approximately HK$37 million as at 31st March, 2005. The ratio of current assets to current liabilities of the Group was 0.7 as at 31st March, 2005. The Group’s gearing ratio as at 31st March, 2005 was 0.7 which is calculated based on the Group’s total liabilities of approximately HK$46 million and the shareholders’ fund of approximately HK$64 million. As at 31st March, 2005, the Group’s cash and bank balances amounted to approximately HK$10 million. For the three years ended 31st March, 2005, the Company did not acquire any business or company. The Directors are not aware of any special trade factors or risks which could materially affect the profits of the Company.

4. WORKING CAPITAL

The Directors are of the opinion that, taking into account of the financial resources available to the Group including internally generated funds (including funds from the Disposal) and the available banking facilities, the Group has sufficient working capital to meet its present requirements.

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PROPERTY VALUATION REPORT

APPENDIX II

The following is the text of a letter and valuation certificate prepared for the purpose of incorporation in this circular received from Dudley Surveyors Limited, an independent valuer, in connection with its valuation as at 29th September, 2005 of the Property.

==> picture [150 x 54] intentionally omitted <==

14/F, Siu Ying Commercial Building, 153 Queen’s Road Central Hong Kong

11th November, 2005

The Directors Takson Holdings Limited 5th Floor, South Wing Harbour Centre, Tower One No. 1 Hok Cheung Street Hunghom, Kowloon Hong Kong

Dear Sirs,

Re: Workshop Unit No. 06 on 3rd Floor of Harbour Centre Tower 1, No. 1 Hok Cheung Street, Kowloon

In accordance with your instructions for us to assess the Market Value (as defined in the following paragraph) of the captioned property interest of Takson Holdings Limited (the “Company”) and its subsidiaries (together referred to as the “Group”) in the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”) as at 29th September, 2005 (“the relevant date”) for disposal purposes, we confirm that we have made relevant enquiries and obtained such further information as we consider necessary for providing you with our opinion of the property interest.

Our valuation of the concerned property has been based on the Market Value which is defined as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

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PROPERTY VALUATION REPORT

APPENDIX II

In forming our opinion of the Market Value of the property interest, we have arrived at the existing use value on “as is” basis of the subject property by adopting the direct comparison approach making reference to the recent transactions of similar premises in the proximity area where the property located.

Our valuation has been made on the assumption that the property interest can be sold in the open market in its existing state without the benefit of a deferred terms contracts, leasebacks, joint ventures, management agreement or any similar arrangement which could serve to affect the value of the property interest. In addition, no account has been taken of any option or right of pre-emption concerning or affecting the sale of the property interests and no forced sale situation in any manner is assumed in our valuations.

We have inspected the exteriors and where possible, the interiors of the property. However, no structural survey has been carried out, and we are not able to report that the property is free of rot, infestation or any other structural defects, nor were any tests carried out on any of the services.

We have not been provided with copies of title documents relating to the property but we have caused searches to be made at the Land Registry. However, we have not inspected the original documents to verify the ownership or to ascertain the exercise of any amendment which does not appear on the copies of title documents obtained by us.

We have relied to a considerable extent on any information given by the Group and have accepted advice given to us on such matters as statutory notices, easements, tenure, occupation and floor areas and all other relevant matters. Dimensions and areas included in the valuation certificate (see the valuation certificate as attached) are based on information contained in the document provided to us and are only approximations.

We have no reasons to doubt the truth and accuracy of the information provided to us by your company. Your company has also advised us that no material facts have been omitted from the information and documents supplied for us to reach an informed view. Based on the information supplied by your company, we consider that there are no other matters which may materially affect the value of the property.

No allowance has been made in our report for any charges, mortgages or amounts owing on the property nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property is free from encumbrances, restrictions and outgoings of an onerous nature which could affect the value.

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PROPERTY VALUATION REPORT

APPENDIX II

Our valuation is prepared in accordance with the Hong Kong Guidance Notes on the Valuation of Property Assets (2nd Edition) published by the Hong Kong Institute of Surveyors and in compliance with Chapter 5 of the Listing Rules published by The Stock Exchange of Hong Kong Limited.

Our valuation is shown in the Valuation Certificate as attached.

Yours faithfully, For and on behalf of Dudley Surveyors Limited

Ellen Y. T. LO

B.Sc. (Est. Man.), MRICS, MHKIS, RPS (GP), CIREA

Managing Director

Note: Ms. Ellen Y. T. Lo, who is a Chartered Surveyor who has 23 years’ experience in valuation of properties in Hong Kong and the PRC.

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PROPERTY VALUATION REPORT

APPENDIX II

VALUATION CERTIFICATE

Property

Description and tenure

Particulars of Occupancy

Market Value in existing state as at 29th September, 2005

Workshop Unit No. 06 on 3rd Floor of Harbour Centre Tower 1, No. 1 Hok Cheung Street, Kowloon.

The property comprises an industrial unit on the 3rd Floor of a 15-storey (including one-level of basement godown) industrial building which was of reinforced concrete construction completed in about 1989.

The property is HK$22,650,000.00 occupied by the Group for storage purposes.

The property has a saleable area of 1,118 sq.m. (12,029 sq.ft.) or thereabouts and a gross floor area of 1,441 sq.m. (15,511 sq.ft.) or thereabouts.

193/13, 205th shares of and in Sections F and H of Kowloon Marine Lot No. 113.

The property is held under Conditions of Exchange No. 11128 for a term of 75 years commencing from 15th September, 1972.

The Government rent payable for the subject lots is HK$18,426 per annum.

Notes:

1. The registered owner of the property is Takson Properties Limited, a wholly-owned subsidiary of Takson Holdings Limited, vide Memorial No. UB7028081 dated 25th March, 1997.

2. The property is subject to a Legal Charge/Mortgage in favour of Standard Chartered Bank, vide Memorial No. UB8029087 dated 16th March, 2000.

3. The property is subject to a Deed of Variation of Legal Charge in favour of Standard Chartered Bank vide Memorial No. UB9135629 dated 17th December, 2003.

4. The property is zoned as “Other Specified Uses (Business)” under Hung Hom Outline Zoning Plan No. S/ K9/18.

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GENERAL INFORMATION

APPENDIX III

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 not contained in this circular, the omission of which would make any statement herein misleading.

2. DISCLOSURE OF DIRECTOR’S INTERESTS

As at the Latest Practicable Date, the interests and short positions held by the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO); or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or which were required, 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:

Interest in shares of the Company (Note 1)

Number of shares in the Company held

					Approximate
					% of total
					issued shares
Name of	Personal	Family	Corporate		of the
Director	interests	interests	interests	Total	Company
Wong Tek Sun,	4,018,000	9,000,000	237,600,000	250,618,000	64.3%
Takson			(Note 2)
Pang Shu Yuk,	9,000,000	4,018,000	237,600,000	250,618,000	64.3%
Adeline Rita			(Note 2)

Notes:

1. These interests do not include those in the underlying shares of equity derivatives of the Company. These interests need to be aggregated with those set out in section 3 below (if applicable) to give the Directors’ total interest in shares comprised in the relevant share capital of the Company within the meaning of the SFO.

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GENERAL INFORMATION

APPENDIX III

1. The references to 237,600,000 shares relate to the same block of shares in the Company. Such shares are held by Takson International Holdings Limited, the entire issued share capital of which is held by Wangkin Investments Inc. (“WII”) as trustee of the Wangkin Investments Unit Trust (the “Unit Trust”). All issued and outstanding units in the Unit Trust are beneficially held by Guardian Trustee Limited as trustee of the Wang & Kin Family Trust (the “Family Trust”). The discretionary beneficiaries of the Family Trust are, inter alia, Ms. Pang Shu Yuk, Adeline Rita, Mr. Wong Chi Wang, Calvin, and Mr. Wong Chi Kin, Christopher, both are children of Mr. Wong Tek Sun, Takson and Ms. Pang Shu Yuk, Adeline Rita.

Mr. Wong Tek Sun, Takson, being an executive Director of the Company, owns 50% of the issued share capital of WII and his children as, inter alia, discretionary beneficiaries of the Family Trust have interests in the share capital of the Company. Accordingly, he is taken to be interested in the 237,600,000 shares in the Company under the SFO.

Ms. Pang Shu Yuk, Adeline Rita, being an executive Director of the Company, owns 50% of the issued share capital of WII and she and her children as, inter alia, discretionary beneficiaries of the Family Trust have interests in the share capital of the Company. Accordingly, she is taken to be interested in the 237,600,000 shares in the Company under the SFO.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short positions in any shares or underlying shares or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to be notified to the Company and the Stock Exchange.

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GENERAL INFORMATION

APPENDIX III

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, the parties (other than a Director or chief executive of the Company) who had an interest or short position in the shares or underlying shares 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 were as follows:

Interests in the shares of the Company

				Approximate
				% of total
Name of				issued Shares
substantial	Direct	Deemed		of the
shareholder	interests	interests	Total	Company
Wangkin	—	237,600,000	237,600,000	61.0%
Investments Inc.		(Note)
Takson	237,600,000	—	237,600,000	61.0%
International	(Note)
Holdings
Limited

• Note: Takson International Holdings Limited is a wholly-owned subsidiary of Wangkin Investments Inc, which in turn is owned as to 50% by Mr. Wong Tek Sun, Takson, and as to 50% by Ms. Pang Shu Yuk, Adeline Rita, both of whom are executive Directors of the Company. Therefore, all of these shares are entirely duplicated.

Mr. Wong Tek Sun, Takson and Ms. Pang Shu Yuk, Adeline Rita are the directors of both Takson International Holdings Limited and Wangkin Investments Inc.

Save as disclosed above, as at the Latest Practicable Date, the Directors or chief executive of the Company were not aware of any person (other than a Director or chief executive of the Company) who had an interest or short position in the shares or underlying shares 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 interested, directly or indirectly, in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

Save as disclosed above, there is no Directors or proposed directors of the Company who is an employee of a company which has interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Division 2 & 3 of Part XV of the SFO.

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GENERAL INFORMATION

APPENDIX III

4. DIRECTORS’ INTEREST IN ASSETS/CONTRACTS

• (a) None of the Directors was materially interested in any contract or arrangement subsisting as at the Latest Practicable Date which is significant in relation to the business of the Group.

• (b) As at the Latest Practicable Date, none of the Directors had any direct or indirect interests in any assets which had been acquired, or disposed of by, or leased to any member of the Group, or were proposed to be acquired, or disposed of by, or leased to any member of the Group since 31st March, 2005, being the date to which the latest published audited consolidated financial statements of the Group were made up.

5. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered, or proposed to enter into a service contract with the Group which does not expire or is not determinable by the relevant member of the Group within one year without payment of compensation (other than statutory compensation).

6. QUALIFICATION AND CONSENT OF EXPERT

The followings are the qualifications of the expert who has given opinion or advice, which are contained or referred to in this circular:

Name

Qualification

Dudley Surveyors Limited Property valuer

As at the Latest Practicable Date, the Valuer had no shareholding interest in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, the Valuer did not have any interest, direct or indirect, in any assets which had been acquired or disposed of by or leased to any member of the Group, or were proposed to be disposed of by or leased to any member of the Group since 31st March, 2005, being the date to which the latest published audited accounts of the Company were made up.

The Valuer has given and has not withdrawn its written consent to the issued of this circular with the inclusion of its letter and valuation certificate dated 11th November, 2005 and the references to its name in the form and context in which they respectively appear.

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GENERAL INFORMATION

APPENDIX III

7. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business, have been entered into by the Group within the two years preceding the date of this circular:

• (a) a provisional sale and purchase agreement dated 10th August, 2005 entered into between Takson Properties Limited, a wholly-owned subsidiary of the Company, as vendor and Fancy Country Limited as purchaser in relation to the disposal of Units 05 and 06, 5th Floor, Tower One, Harbour Centre, 1 Hok Cheung Street, Kowloon, Hong Kong, at a consideration of HK$10,250,000;

• (b) a formal sale and purchase agreement dated 24th August, 2005 entered into between Takson Properties Limited as vendor and Huge Shine Limited as purchaser in relation to the disposal of Unit 05, 5th Floor, Tower One, Harbour Centre, 1 Hok Cheung Street, Kowloon, Hong Kong, at a consideration of HK$5,125,000;

• (c) a formal sale and purchase agreement dated 24th August, 2005 entered into between Takson Properties Limited as vendor and Fancy Country Limited as purchaser in relation to the disposal of Unit 06, 5th Floor, Tower One, Harbour Centre, 1 Hok Cheung Street, Kowloon, Hong Kong, at a consideration of HK$5,125,000;

• (d) the Provisional Sale and Purchase Agreement; and

• (e) an assignment dated 4th November, 2005 entered into between the Vendor and the Purchaser in relation to the disposal of the Property.

8. LITIGATION

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

9. COMPETING INTEREST

As at the Latest Practicable Date, in so far as the Directors are aware, none of the Directors or their respective associates (as defined in the Listing Rules) had any interest in a business which competes or is likely to compete with the business of the Group.

10. GENERAL

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

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GENERAL INFORMATION

APPENDIX III

• (b) The head office and principal place of business of the Company in Hong Kong is at 5th Floor, South Wing, Harbour Centre, Tower One, 1 Hok Cheung Street, Hunghom, Kowloon, Hong Kong.

• (c) The transfer offices of the Company are Abacus Share Registrars Limited, Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong and Butterfield Fund Services (Bermuda) Limited, Rosebank Centre, 11 Bermudiana Road, Pembroke, Bermuda.

• (d) The secretary and qualified accountant of the Company is Mr. Hui Chong Ki, Lawrence CPA, FCCA .

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

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours up to and including 25th November, 2005 at the principal place of business of the Company at 5th Floor, South Wing, Harbour Centre, Tower One, 1 Hok Cheung Street, Hunghom, Kowloon, Hong Kong:

• (a) the memorandum of association and bye-laws of the Company;

• (b) the contracts referred to in the section headed “Material Contracts” in this Appendix III;

• (c) the property valuation report prepared by the Valuer in respect of the Property together with the valuation certificate, the text of which is set out in Appendix II to this circular;

• (d) the written consent of the Valuer referred to in the section headed “Qualification and Consent of Expert” in this Appendix III;

• (e) the annual reports of the Company for each of the two years ended 31st March, 2004 and 31st March, 2005; and

• (f) the circular of the Company dated 5th September, 2005 regarding the discloseable transaction in respect of a disposal of property.

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